GIVING ENERGY UTILITY A CHARGE; INCOMING GENERAL MANAGER TO BRING MAVERICK STYLE TO TRANSFORMING DEBT-BURDENED DWP INTO COMPETITOR.

Byline: Richard Nemec

ADVOCATES for keeping alive government-controlled utilities in today's rapidly changing energy industry received some good news with the selection of S. David Freeman, 71, as the new general manager of the nation's largest municipal utility, the Los Angeles Department of Water and Power.

Freeman has devoted his entire professional career over five decades to steering some of the nation's largest public sector utilities, from the Tennessee Valley Authority in his native state to the New York State Power Authority and the Sacramento Municipal Utility District.

Over the years Freeman has carved out a reputation for making news as somewhat of a maverick in an industry that historically has been about as exciting as watching grass grow.

It is more than a little ironic that this public-sector power legend has been chosen for the top DWP spot by a big city mayor, Richard Riordan, who has made a reputation in his own short public-sector stint as an advocate for privatization and/or applying private-sector techniques to address public-sector problems.

It is further ironic that part of the panel reviewing candidates and making the final selection with the mayor was the DWP union's top leader because Freeman already has indicated - even before assuming the helm - that he will search long and hard for more cost cutting at the $2.5 billion proprietary department before he advocates rate increases that already have been advocated by the utility's governing board in past decisions over the past 12 to 18 months.

At this early stage, Freeman is saying all the right things for the city's political leaders. (He still has to be confirmed by the City Council, with whom he has been meeting, some time in July.) Local elected officials usually want to talk about anything but utility rate increases for the city's residents and small businesses, even though that group currently enjoys rates about 20 percent below those of the same customers in neighboring Southern California Edison's service area. (The catch is that the DWP's largest, most competitively vulnerable customers are paying about the same percentage more than their counterparts served by Edison and the state's other two major investor-owned utilities.) Eventually, the situation needs to be addressed or DWP could lose some of its largest and most lucrative customers which could mean even greater increases for the voters in the longer term.

For elected officials, or course, the ``long term'' equals the time between now and their next election campaign.

What no one, however, can really predict with any certainty is whether Freeman will succeed, and what exactly he will do.

If anything is a sure thing it is that Freeman will not act ``predictably.'' Throughout his career he has tended to keep politicians and critics alike off balance. Dave Freeman is his own man.

``He may be just the right person at just the right time,'' said a former senior official at DWP who is an admirer of Freeman's going back to his days at the Lower Colorado River Authority where he was credited with stopping a major coal power plant from being built and saving an older nuclear one from being mothballed prematurely, although he has never been viewed as pro-nuke.

Freeman appropriately has seized on the giant city utility's almost $8 billion in debt as its major hurdle to being able to charge competitive electric rates in the new competitive era that will begin next year. He emphasizes that he will look long and hard at first to slash costs. However, what Freeman and some of the local political-energy observers are not saying is the fact the DWP has been cutting its operating costs quite severely over the past two years, including a 20 percent drop in the size of its work force.

Nevertheless, a consultant that completed a two-year assignment last February already has noted that an additional 1,000 to 1,500 jobs still need to be eliminated. So, in effect, Freeman is just jumping on a bandwagon that is already rolling past the North Hope Street headquarters of this massive city institution.

Further, no one talks about the water side of the DWP business. Freeman has experience here.

But what sort of synergies - if any - are there in examining those operating costs? An 11-member joint powers authority of which the DWP is the largest member, Southern California Public Power Authority, is already a long way down the road of totally restructuring its members' debt on the massive Palo Verde nuclear plant west of Phoenix. DWP owns the largest single portion of that SCPPA project. That leaves a huge coal-fired plant in Utah in which DWP has a typical 1980s structured deal in which it is obligated to take a lot of high-cost, uncompetitively priced power that looked like a good deal when it was first conceived in the energy shortage times of the late 1970s.

If Freeman has some magic left it will be in renegotiating that deal and greatly reducing the mountain of debt weighing down his soon-to-be new employer. But that won't solve the longer-term problems of employee morale, customer service innovations and antiquated computer systems that are all critical, too, in the newly competitive electric industry.

Like it or not, public power is going to have to transform itself into something other than what it has been historically if it is to continue to provide value to citizens in the new century.

David Freeman should understand that as well as anyone in the public power industry, but at the outset he is not talking like he does.

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Photo: no caption (S. David Freeman)