L.A. DEFENDS ENERGY CHARGES TO STATE.

Los Angeles officials on Monday defended the amount the city's Department of Water and Power charged the state for electricity during this year's energy crisis, saying the DWP provided a reliable source of power at a reasonable price.

Although an audit showed that profits on sales to the California Power Exchange were 56 percent, it also showed that sales to other state agencies and utilities sometimes showed a loss and resulted in an overall profit margin of 16 percent during the one-year period that ended in May.

Mayor James Hahn was on a lobbying trip in Washington, D.C., and his top aide said he believes the DWP acted properly.

``We do not believe the DWP engaged in price-gouging,'' Deputy Mayor Tim McOsker said. ``The way the mayor sees it, the city of Los Angeles was a good neighbor to the state at a time in need. We provided reliable energy at a reasonable price, and we find ourselves, today, still owed $180 million.

``What this audit shows is the city provided a substantial amount of power to the state at a critical time.''

Chief Legislative Analyst Ron Deaton also defended the city's actions during the power crisis.

``The city was not trying to make a lot of money,'' Deaton said. ``We were basically looking to cover our costs, and there was a lot of speculation on the (natural) gas prices that were going up and down. Because of the higher gas prices, our costs were higher for that period. There was no gouging.

``The state asked us to begin generating at all our plants, so we had every generator going - even the more expensive ones. Did we sell the more efficient cheaper power to city residents? Yes. But that's our obligation. We sold the more expensive power to the state.''

City officials have adopted a policy to limit DWP profits to 15 percent above costs, a figure developed by S. David Freeman, the former DWP general manager who is now Gov. Gray Davis' chief energy adviser.

Freeman did not return telephone calls Monday, but he has been quoted as defending the DWP's actions at the time and disputing the audit's findings.

Davis spokesman Steve Maviglio, however, said the audit continued to raise questions about whether municipal utilities were profiting at the state's expense.

The governor, at one point, threatened to take over municipal utilities because of the amounts they were charging the state for energy. His administration has submitted a request to federal authorities to seek refunds of some $4.8 billion from private and public energy suppliers for what Davis has claimed was overcharging.

``The governor has been extremely aggressive with municipal utilities,'' Maviglio said. ``Early on, the governor was complaining that public utilities were charging more per megawatt than private utilities.''

The audit by PriceWaterhouseCoopers was ordered by DWP General Manager David Wiggs to resolve questions on the pricing by the agency.

It showed the DWP had a profit margin of 56 percent with the California Power Exchange, 21 percent with the Independent System Operator and 22 percent with the state Department of Water Resources, while experiencing a 19 percent loss in sales to other utilities for an overall profit margin of 16 percent.

The DWP now is in the process of negotiating with the state to provide power at no profit.