Posted February 18, 2009
S. David Freeman: This basic ideal of the [Los Angeles Department of Water and Power] being a solar utility -- that piece of the total solar package, which is what we're talking about this morning, which is the piece on the ballot -- was a thought that I expressed in my book years ago. I don't have to tell this crowd about global warming and AB 32 and the 20% renewable standard; I mean, we all are dedicated -- and your editorials have recognized – we're dedicated to moving off of fossil fuels onto renewable energy.
So the issue is, is this a cost-effective, sensible way of doing it? And if you just take a broad view of things, what renewable energy do we have that we can harness? Well, here in Los Angeles, by God we have the sun….
Quite frankly, I started a solar program at DWP 10 years ago. If you count on consumers finding the money with all the incentives -- and [DWP General Manager H. David Nahai's] incentives are far more generous than mine were -- one house at a time, four kilowatts at a time, all these years it's added up to, what, 13 kilowatts? You don't take the largest carbon footprint -- I mean, I hope David will forgive me because I'm talking about myself too -- we are Bigfoot in terms of carbon footprint. We're over 40% coal plus all this natural gas, so the only way that we're going to comply with the lectures that we get from everyone, including your page, is to deploy renewable energy….
And don't tell me we don't have enough roof space, but if we don't, there's 4,000 acres out there in Palmdale just lying there flat that we can put solar on. So think about this as building a 400-megawatt power plant in Los Angeles to create jobs in Los Angeles, and also to replace these gas-fired plants that I built without any hearings, without telling anybody anything. I mean, this guy here --
Brian D'Arcy: You didn't build them; you repowered them. Let's be clear about that.
Freeman: Well, we rebuilt them. We did all of this without any public hearings. This man [Nahai] is taking DWP out into the sunshine as no one ever has. And what's he getting for it? Getting beaten up pretty well.
But basically, we're asking the people to buy into the idea of DWP being a solar utility and using, first of all, the wherewithal that brought us low-priced electricity in this town, namely DWP ownership of the power plant, the use of low-cost municipal bond financing, the elimination of profit. I mean, I realize that people don't like to talk about this bluntly, but these solar companies are charging $9 a watt; we're going to put this stuff in for $4 a watt or less, and don't tell me that those numbers are not solid. The Edison Company is doing virtually a similar thing right now. I'm not representing the department or anyone else; I'm still in this ballgame, been in it for 20 years and I talk to people. You can get the panels for less than $3 a watt with the new thin-film technology and putting them in one megawatt at a time, not on houses one at a time, the labor costs go tumbling down. And the $4 number is a very solid number; that's with today's technology, and these costs are going down.
So this is a chance to help reach the 20% goal and get 50 megawatts done by 2010, which he badly needs to make the goal, and create jobs here in L.A. and actually displace some of the natural gas. Because unlike the wind -- which is mostly at odd hours, a lot at night -- there is a very high correlation, and you don't need to be an expert to figure this out, when the sun is real hot is when the air conditioners are on, and that's when the solar power is there. The solar power is more valuable to the utility than the wind power, and with the utility owning it, we can put it in massively and take advantage of getting it done in time to meet some of the deadlines that the law imposes on us. There are no other options.
He wants to build solar thermal plants, he's got to find a way to build a transmission line, and it's tough, as David knows; it ain't going to happen in '09 or '10. And the wind power is a resource that, as a utility guy I tell you, you have to back it up with something else because the solar, when it's on, it's on steady. It's off, it's off, but when it's on, it's really on. The wind power, it's kind of shaky all the time and mostly when you don't need it. And it's not here.
If Obama has something going in terms of green power jobs, we're the living laboratory…. We don't need it to verify our costs, but we do need it -- it might come in handy or might even lower the cost. I'm not promising that. All I know is that this program fits with the new president of the United States is saying we have to do as a nation.
I know something about this. I go back to the most successful example of green power jobs in America, and that was the Tennessee Valley Authority. Back in the '30s, we harnessed the Tennessee River and made renewable energy to replace coal that used to heat my home, contaminate my lungs, and basically we're talking about the same thing -- to use the power of the sun here.
And as far as why it's on the ballot, it seems to me that if you're going to do something as innovative as this, it's really not a bad idea to let the people have a voice in it. We would not be sitting here today getting your attention if it weren't put on the ballot, because DWP has done everything from stealing the water of the Owens Valley to building aqueducts to building power plants, and the people have never had a chance to vote on any one thing. I think it's a good thing, what David and Brian and everyone is doing and getting a vote on this. It's a healthy discussion we're having, and I appreciate The Times taking this much of an interest in it.
Robert Greene, Los Angeles Times: On the ballot question, there are three distinct portions of the DWP's solar plan, and the two that are not on the ballot -- I'm no expert, none of us are real experts on this -- but they appear on the surface to be sound, well thought-out, if perhaps aggressive. And part of the question is why this particular one of the three is carved out separately for approval by the voters when that's not necessary or appropriate for the other two?
Freeman: My answer is, we're already doing one piece of it; it's just an enlargement of what we've been trying to do otherwise, namely, customers putting solar on their roof. David's got a variety of new approaches to that…. But it's a program that's already underway that's just being massively enlarged. The idea of building a power plant out in the desert is something that they've been negotiating with trying to find the site, trying to find transmission. It's not a new thing for the DWP to have a power plant. We've got a bunch up in Utah, one in the Navajo plant. That's been the pattern. This is the new initiative and of course if they had not gone public with this and brought it to the people, you know good and well that all the solar contractors in town would be raising hell about it and there would be a discussion of it, but it would not go to a vote of the people. I guess I would say that I think David and Brian are to be congratulated for going as public with this as they have because it is innovative, it is a new -- it's taking an old idea but applying it in new way.
H. David Nahai: I would also offer a couple additional thoughts on what David just said. It is part of the solar plan, but it is appropriate for this part of the solar plan to be submitted to the voters and to have the level of scrutiny that it is being subjected to. Why? Because it's a city program. All of the other parts of the solar plan are going to involve direct contracting with the private sector…. This is a DWP program, and it is an undertaking of some size. It's appropriate that the people of Los Angeles have an opportunity to consider it in all of its various aspects.
But there are other reasons why it needs to be put on the ballot and endorsed by the voters. Because once it is approved by the voters, it will become a program; it will have a solid basis. And it will not be subject to changes in composition at the board, for instance, or changes in leadership in the city.
And why is that important? That's important because we are with this program, inviting in an entire industry, and we're asking them, we're telling them, we're going to give them big preferences if they locate to Los Angeles, if they will produce solar facilities and equipment here in Los Angeles, if they will employ our children and our young people. And when you're -- one thing that we learned coming from the private sector is that certainty is one of the most important things. And this is what this will convey to the manufacturing world, that this is a program that will be solid, that is going to be established, that won't be readily changeable, that won't be abandoned, even though there are in the ordinance itself, language that builds in flexibility that enables the department to go back to the City Council to make changes. So I think those are some additional thoughts as to why I think it's a positive thing that this is going before the voters.
The other parts of the program -- feed-in tariffs, for instance -- that … involves a transaction between the department and private solar installers. And I don't think anybody would think that is something that should be put on the ballot.
Dan Turner, L.A. Times: What if it fails? Even if this fails, you could still do a plan like this. It may not be exactly the same, but you could still put these panels up.
Nahai: I have to say, I don't believe it will fail…. Let's stack up on one side, for a second, the advantages of what this offers to Los Angeles and then stack up on the other side the disadvantages and take a look. This is the discussion that your page is going to be having with your readers. So on the one hand we have renewable portfolio standard programs that we have to meet -- 20% by 2010, 25% by 2020 -- this will definitely help with that. We have mandates under AB 32 to cut down on our greenhouse gases; this would definitely help do that. We've got changing energy patterns in this city. We've got peaking that happens on hot days. Solar is perfect to deal with that. We've got strain on the distribution system; this is what the power reliability program is all about. Having a robust solar component will alleviate the strain on the system.
Healey: I'm sorry, how does the robust solar program alleviate the strain? In terms of having more peak capacity?
Brian D'Arcy: You're confused about power supply versus distribution, and the problem is not with power supply. Los Angeles has 7,000 megawatts of capacity that it owns or has a piece of outright. The peak load in Los Angeles is around 5,900 megawatts everyday. But the problem is not the power supply; the problem is that the circuits are overloaded. We've built out in every station. You can't -- simply changing our transformers isn't going to fix the problem.
The problem is the same problem as anything else in Los Angeles: It's NIMBYism. You can't build out a station because these stations are built in people's neighborhoods. So the way that you solve the circuit problem is to -- and only the utility can do this, by the way -- which is to target where these solar units are going to go. If they go where the spot that is going to be the worst on the hottest day and you reduce the load at the load center. And that's one of the major, as an architect of this, that was one of the major points in this. I know that it gets lost in the process nonsense, but it's one of the main components, and it needs to be addressed. And some of this stuff in unfixable; you can't fix it. You can change out transformers, but you can't build out stations.
Freeman: Well let me just say this thought, as someone that bore the responsibility of keeping the lights on and the rates stable during the energy crisis when I was the head of DWP. I think people have forgotten that when I came on as general manager, there was a mood in this city to turn our utility generation capacity over to private companies. There was the Duke/Louis Dreyfus scheme; if that had happened, we'd had gone down deregulation road. Our rates would be up there the way Edison's rates are, and it would have been an economic disaster for the city. We avoided all that for the simple reason that the DWP has traditionally owned its own power plants and as they depreciate them because the service goes down, but not in the fossil plants because of the fuel that's gone up. I'm a great believer in diversity, and it's great to have a lot of deals where the customer owns the solar plants and this-that. But if we're moving into a renewable era, we've got to have some sizable amount of capacity that the department itself owns, because that's the cheapest deal for the customer, especially in a renewable plant. Think of these solar panels as little dams, and every one of them once they're built, the fuel is free. This is a hedge against runaway natural gas prices and runaway prices of coal in the future.
D'Arcy: It's important, David, to point out to these gentlemen that what we have here is the only vertically integrated utility left in California, which means that it owns the generation, transmission and distribution…. That's the issue. And for there to be an argument about this is befuddling to me at best, because you have Edison, who was deregulated essentially, has lost 40% of its generation. And it's doing this because it's not bringing back the concept of a utility owned generation. This is an ideological battle….
Freeman: We are engaged in competitive bidding for the solar product. This may be a city plan as David describes it, but the heart of it is competition among solar manufacturers. And the plan here to assemble the part that the DWP is providing is what it does on every other power plant: It does the operating costs, job. Its employees will simply lay the finished product on the roof and provide that part, which in this scheme with large-scale installations amounts to 10, 15% of the cost.
Nahai: Let me also say this, and it's a point well made, which is that in this case, the fuel itself doesn't cost us anything. We engage in very elaborate hedging plans. Why? Because 30% of our power, of our energy use is from natural gas and the vagaries of the natural gas market have played havoc with utilities. And we engage in all kinds very intricate hedging programs in order to try to blunt those vacillations. Here, the fuel itself doesn't cost us anything. It's been available all of this time, and now that we have the technology, now that we can do it bulk, now that we have a report after 450 hours of research that tells us that the time is right to go into that market and to take advantage of it, we really shouldn't be hesitating.
Jim Newton, L.A. Times: Here's the argument that comes to us just bluntly on the other side, is that this is a deal that is good for labor, good for Brian and his members, but that it comes deceptively presented to voters, selectively presented to voters; that the underlying material about price and cost is unavailable, and to the extent that it's available, it's indecipherable; and that you're essentially engaged in a deal that's good for labor but of uncertain consequence to the city.
D'Arcy: All of pricing for the identical program is on the Public Utility Commission's Web site, because they have to do -- you know, the difference between a municipal utility regardless of how everybody seems to get involved is that in the Public Utility Commission, the investor-owned utilities have to file to do anything that could deal with a rate. And they have very intensive filing and hearings, and administrative law judges can issue decisions and propose decisions; it's like a cottage industry of lobbyists and lawyers who deal with that. All of this, exactly what we said, was going to be the price range, which was about a billion-two, or between 3 and $4 a watt, is what Edison filed in front of the Public Utilities Commission six months ago. And for people, including some consulting firms that have pretty sketchy ways of getting to numbers -- I mean, how can you not go to that filing and use it as a form of reference? They are actually out there, doing this, with [International Brotherhood of Electrical Workers] members who work at Southern California Edison for that price. So if people are saying they can't do that, then either we should get into another business because we're totally incompetent, or somebody is just simply not talking about what the truth is. And David took a very structured point -- he took 90 days, he made a consultant go through 10,000 simulations to get back to this point -- and somehow that's still confusing to people because some people just don't want to take yes for an answer, apparently.
But this is not rocket science. It's out there. Go look it up. It's there; they're doing it. The price is going down. Talk to the manufacturers who are actually providing the thin film. They're telling everybody, and I'm sure they will tell you the same thing, that the number is going down. They think it goes down to $2.50 a watt.
Healey: How does 3 or $4 a watt compare to natural gas versus when you'll be producing your own?
D'Arcy: Look, it's not going to be competitive with natural gas or coal. But the cost of the carbon footprint at some point -- there are going to be carbon taxes. There are going to be some form of [requirements], cap-and-trade market; that's coming. But you all know what that means. Cap and trade is simply a money market, and as soon as somebody figures out how they can make money on it, it's coming. But that doesn't mean that the air your kids or my kids breathe is going to change.
Freeman: Let me see if I can get the right issue on the table. We all agree that we have got to move off of fossil fuels under renewables; there's no debate about that. The City Council has adopted a 20% goal; this page talks about the dangers of global warming periodically and very effectively. The issue, is this a cost-effective renewable product that we ought to go forward with, and it is. The consumers today in L.A. are paying 8 or $9 a watt for the retail version of this. We're telling you that the department can get it done for $4 a watt. I'm not saying that we should stop the consumer program; I'm in favor of all the things that David has in enlarging that part of it, which is 500 megawatts.
D'Arcy: But if you have a private sector or residential program, you can't -- from a utility planning point of view -- you can't target where that goes. And it takes away the part about reliability.
Nahai: The result of it is that under that program, we have right now 13 megawatts -- that's it….
Freeman: As a guy that ran this department, there's a more fundamental thing: At the end of the contract, the department and its consumers have nothing, absolutely nothing. Here, you have a renewable resource that as you depreciate the first cost, with no fuel cost, is a hedge against all the other -- and at the end of 20 years, there isn't a solar panel that's ever worn out yet. I had a megawatt plant when I ran the Sacramento Municipal Utility District in 1990; it's still going strong. There's no moving parts. This stuff will last kind of like other plants.
The reason we have low-cost electricity is we depreciate our first investment on dams and on power plants, and we only have the operating costs. On this plan, the operating costs are nearly zero -- we have to replace an inverter every seven or eight years -- so it's a hedge. Nobody knows for sure what the rates are going to be five years from now. We don't know what the price of gas is going to be. But this is a hedge against the fossil fuel costs going up, and once you make the investment, it gets cheaper every year if the DWP owns it because it depreciates -- an investment in a plant that has virtually no operating cost.
The utility ownership of renewables is a better deal long term for the customer than purchase power agreements….
Nahai: Let me respond to Jim's point. I think the first thing I would say is that anybody wanting to do some kind of back-room, secret deal would be truly ill-advised to put it on the ballot in Los Angeles, for good reason.
Newton: Well, there's no better place to hide something than on the ballot in Los Angeles.
Freeman: We make a Jeffersonian look like a Hamiltonian in this town. We carry grass-roots democracy to the nth degree.
Nahai: That's the first thing I would offer. Let's look at the evidence before us. The second thing is that, I find -- I was talking to another reporter earlier on today who asked me questions about whether we would hire people to do this program. And I said, "Well of course." And I'm trying to think, what is wrong with that? We are trying, I mean, here are all the benefits that we have sorted out, and it's going to take people to do it. And it's going to take people in the midst of horrific economic doldrums.
D'Arcy: And there are requirements in the ordinance, by the way, that require that the people that are hired come from the underserved communities in this city, which gets somehow muted by all the rhetoric. That's a pretty big deal for the city, for people who are actually in this city, where the differences between being in a gang and not is usually a job. And that's right in the middle of this.
Nahai: I would also argue the point that yes, this is good for labor because we're going to be hiring people. But it's a lot better for business because we're going to open a 400 megawatt market to the [photovoltaic] manufacturing industry. There is no such opportunity like that, certainly nowhere in the United States. The entirety of California right now only has 200 megawatts, and that's only the DWP piece. I think in the whole of the United States, what is it now, 700 megawatts?
Freeman: Something like that.
Nahai: The entirety of the U.S. And we're talking about doing maybe 1,300 megawatts generated from the City of Los Angeles, and two-thirds of that direct private-sector involvement. So where is all this -- this is like some kind of pro-labor, secret back room. To use your word, befuddled, I'm befuddled.
Newton: Certainly, it is not reason to oppose it, that it would be good for labor and jobs. The question it raises, is it being designed principally as a jobs program, or is it being designed as an energy program? And if it's an energy program, is this the best way to get to the goal that we all agree on I think at this table of increasing maximally the city's solar capacity?
Turner: That's my question, that's everybody's question. There's this way of doing it; is this the best way of doing it? Is it the most cost-effective way of doing it, or is there another way of doing it that might be better? I haven't seen that analysis, and that's what makes it more difficult.
Freeman: Well, I'm trying to explain, if I may, you can hire consultants. But my knowledge is based on the bitter teaching of experience. I have run just about every large public power agency in this country over the last 25 or 30 years, and I've dealt with solar in great depth since 1990. It is just fundamental that if a public power owns the solar panels, then that is a long-term better deal for the customers than if someone else owns them. Because with a purchase power agreement, say it's 15 years in length. First of all, these contracts almost all have some escalation in them. They tend to price the product on the basis of what the market will be. If you own the plant and you're a public agency and there's no profit and you're funding it essentially as DWP does, with municipal bond taxes, you have a lower cost base than a private company does. You can argue that we should not have public power, but it is as old America. It goes all the way back to Edison. We've had it here in L.A. all of our lives, and this is applying that concept, which has brought us low-cost electricity, to solar power.
Now, if we're going to go for a 1.2 gigawatt solar program, it is prudent to at least have 400 megawatts of it in that hands of something that the people of L.A. will own and as the years go by it becomes lower in cost. One thing you know for sure is there will be no escalation in the fuel cost, which is the main ingredient of costs in these power plants. So I don't understand why --
D'Arcy: Well, let's answer his question; let's try that, Dave, just for shits and grins or whatever. I know this is your idea, but I have had a lot to do with the architecture of it. And I designed it, we designed it, everyone involved designed it around a four-legged stool. None of the legs is any more important than the other leg, and the first leg was the jobs issue. Why is labor involved? OK, we're going to get jobs -- I'm not going to apologize for that.
The next thing is, it's going to be solar -- it's got to be the right thing for global warming. So the first question that comes up, can you get enough materials. This is an ongoing argument in the industry -- big project, can you get the materials. So we put a manufacturing leg in there.
The third leg is that -- and this is an issue that the union has been out front publicly, we've e-mailed DVDs, I know The Times ignored us pretty much -- but we were out in the communities, raising the issue of the infrastructure. Now everybody talks about it, but two years ago nobody was talking about it except us. And the issue of the reliability, the way you solve that is bring the generation to the load centers. That's the third leg.
The last leg, not any more important but certainly not any less important than the other three legs, is that it's renewable. It's renewable energy, the ratepayers get to invest in it, it helps on the [Renewable Portfolio Standard], which is an ongoing dispute -- both Davids will tell you that I argue with them endlessly about whether RPS is really a policy that is working for California or the renewable energy industry, to be honest -- and it also, because the utility does it, drives the cost down. Now there's going to be a lot of people in the private sector that don't like the idea that the utility does it, because A) they don't like the utility-owned generation, the free marketers, and the other half is that the entrepreneurial side of this doesn't like the fact that the utility is doing it for $3 a watt, and they're charging people 8 or $11 a watt. So this is a game changer, and there's going to be people unhappy about that.
But those are the four legs: Jobs, manufacturing, reliability and green. That's the way it was designed, that's the way it reads, and the jobs are going to go right into the communities where people live that have been underserved in city service for the last 50 years. We're going to change that.
You say, well, these jobs, can we hire that many people. We have for 100 years -- Local 18 goes back over 100 years in this city. We built the Hoover Dam, and we've had dispatch for construction electricians for 100 years. We have helper classes; these are daily rate, exempt from civil service. When the job is over, they can be laid off. Their rates are lower based on the contractor's cost. We can do this cost effectively. We can put kids with not a lot of experience; they'll be under the supervision of journeypersons. And because we have at Water and Power 800 to 1,000 funded and unfilled positions that we can't ever get out of our own way to fill, this is an opportunity to bring kids in from the community, teach them the basic things about having a job, which is show up on time, do what you're told, take your break for 15 minutes, get over there, grab that, all I want to see is elbows and butts in the air. That's what this is designed to do, and it gives the department a chance to look at these kids and say, "With this one, we can put him in that program, we'll teach him how to take the test for that." And they're working. They get a paycheck; it provides a paycheck and benefits that actually they can support a family on.
Healey: Can I interject here? One big difference in my mind between a jobs program and this is that when the government proposes the new jobs program, you know what it's going to cost. The big missing piece here is that. Maybe I missed it somewhere, but we've asked a couple of times what this ends up costing, and you said, "Well, it's 3 to $4 per kilowatt, and yeah, that's higher than natural gas --"
D'Arcy: Plus around $1.2 billion. But you have to look at it in relation to what you're doing. Take the jobs and all the other questions out of it and say, "What are you really doing." What you're doing here is you're siting -- assuming you can site anything in Los Angeles -- you're siting a 400 megawatt power plant in the city proper of Los Angeles. To build anything -- ask David, he knows -- they're building a wind plant out there in Barren Ridge. The cost on that, just repowering these gas plants, was 400 or 500 million, and that was five years ago. The cost on any of this stuff is on the billion-dollar range.
So here you are, siting a plant for about a billion two, putting people to work, and dealing with the other legs in the stool in this scenario, which isn't going to go away. So the cost is, it's about a $1.2 billion siting of a plant.
Nahai: But it's also not a missing piece. It really isn't. If it was a number of months ago, with the work that Huron has done, it's not anymore. Here we have a highly reputable, impeccably credentialed consultant that spent 450 hours look at discretional cost. [Huron] did 50 interviews, looked at 40 industry and academic reports, ran their models through 10,000 simulations and came up with what it is. In the middling range, it's about $3.30 a watt, which translates into [$1.2 billion]. And that's before tax credits, which this ordinance enables us also to secure various financial structures.
But in response to your question earlier: There are those who maintain, I believe, with a great deal of justification that -- just as Haynes power plant or Scattergood or [Intermountain Power Project in Utah], these are LADWP power plants, these are city owned, they're run by city personnel -- that the sun that shines on the city is a city asset and should be owned, developed and operated by the city as well.
And remember, DWP in terms of this thing between the private sector and public sector, I wonder how is this, then, that DWP is able to provide electricity between 30 to 40% lower than that of Edison. Part of it is that we don't have shareholders to pay. But part of it is because we're vertically integrated. So all of this stuff about government inefficiency, which is at kind of the core of some of the arguments, starts to evaporate again when you take a look at the evidence that's on the table.
But notwithstanding that, this program is designed in way to provide a third of it as a DWP program, with the city owning, developing, operating its own asset, providing electricity as it has been now for a century to its people. And two-thirds of it gets opened up to the private sector as well.
I think part of the question to be pondered here is whether we end up being able to provide the electricity by DWP cheaper than the private sector. Because A) we don't need a profit, B) we don't need to pay lease fees or other things to private property owners to get their rooftops and their properties to put this stuff on.
Greene: Well, won't you need to pay?
Nahai: No, we're going to start with, like, 40 DWP properties that have already been identified.
Greene: But to get your 400 megawatts, you need more than just city property, right?
Nahai: No, I don't think so. I think, again, in the ordinance there was a great deal of flexibility that was built in: Flexibility as to how we ramp up so that the first 50 megawatts doesn't have to be done until the end of 2010; flexibility as to technology, so it isn't just rooftop [photovoltaic], you can go underground, you can use thin film; flexibility as to area -- it's just not within the city, you can go on city-owned properties; flexibility as to the financial structure, so you can structure it in a way as to take advantage of tax credits, which will bring the cost down below $1 billion. There's a lot of flexibility in there.
So I don't believe we're going to get to a place, looking at it now, I don't believe we're going to get to a place where we're going to be competing with the private sector….
Newton: So you don't anticipate using this program to put panels on roofs of private buildings....
Nahai: No. What I'm saying is that we will start with DWP and city facilities. But the opportunities are vast for us to go on city-owned properties and DWP properties. Palmdale Airport has been mentioned a number of times now; there's the possibility of siting 100 megawatts just at Palmdale Airport.
D'Arcy: You have to consider this the way that we're currently -- and the L.A. Times is a perfect example. If you down in your basement, there is what is called an industrial station that's maintained, installed and on the DWP side of the meter. And this is all we're saying: We're changing the technology. It's on a rooftop. It's on our side of the meter, so we own it and we maintain it and we make sure that it's doing what it's supposed to be doing. It's no different than the industrial station in your basement.
Freeman: I want to get back to a fundamental question that was raised, and I think there's an answer to it that hasn't been explained. You questioned, rightfully, the cost of this. Well, look at the cost of any power plant that's been built in recent years by anybody. I would bet my financial reputation on the fact that we have a better idea, a more accurate idea of what this solar power plant will cost than we had of the wind project that was built in the Tehachapis or any of this solar-thermal stuff, which is first-of-a-kind technology, where the first big plant has never been built yet. We've got 20 years of experience with the kind of solar technology we're talking about….
We're talking about a solar-thermal plant out in the desert, and you're talking about something as new as nuclear power was 20 or 30 years ago. Even on our gas repowering, Brian, our cost estimates turned out to be 30, 40, 50% low. We have really a very, very good idea of what these costs are going to be, and it's the most cost-effective approach we have to helping meet what we all agree, which is getting our carbon footprint reduced and getting some jobs….
Jim, where is the meat in this conspiracy argument? Where is the meat in this stuff?
Eddy Hartenstein, L.A. Times: It's not a conspiracy argument as much as it being a transparency – this thing came up. This [Huron] report is available sort of simultaneously when, you know, absentee ballots were mailed. None of us sitting at this table are non-science believers; we believe in this. I spent a good number of years in my career knowing the virtues of photovoltaic and all of the improvements that have come from that.
It's how it's presented, and with all due respect, the four-legged stool is not a good analogy, because everybody knows that a four-legged stool is inherently going to wobble. You need three legs. And the problem is --
D'Arcy: I'll work on my analogies.
Hartenstein: The sponsor of this -- while, yes it's the DWP, and you guys have a lot history in, great, you can produce power cheaper than Edison and this and that and the other thing -- you're nevertheless branded as being a government entity. And so, when you present something and the facts aren't made available until the ballots have been mailed, it raises all kinds of questions. That's all I'm saying.
Freeman: And we're just trying to answer them.
Hartenstein: I understand … and we've got an obligation at this board to try and synthesize everything, and we're scrambling to try to do that. We appreciate you coming in, but please understand where we're coming from.
Freeman: You're doing your job; we're just trying to do ours.
Hartenstein: Look, as a report card, in terms of having done your homework and all that, if we had time to analyze it, you'd probably get a high grade. But as it was presented, and as we viewed it, you get about a D-minus….
Nahai: Let me respond to that. I understand what you are saying, and this is what is floating around in the consciousness out there too. And I think it needs to be responded to directly. When the City Council was considering this for a ballot measure, we were asked to provide some preliminary numbers as to what we thought the effects would be. And we came up with a range at the time that was between a billion dollars with tax credits, taking into account economies of scale and bulk buying and so on to [$1.5 billion] in the middle to a really outside case of -- based upon the $7.50 a watt, which was a historical [figure] -- which would have pushed it to the $3 billion figure…. But we thought that in the interest of complete disclosure, you have to put those numbers before the City Council. But we committed at the time that we would also have a thorough analysis done within a 90-day period….
What ended up for City Council approval was different in some very important ways from what started. What started was a program which would be 100 megawatts per annum without the ramp-up, only roof-top photovoltaics, no possibility of tax credits being obtained. And I think to the credit of working Californians and everybody who was in this process, the kind of discussions to get more leeway, more flexibility woven into the program so that we could all really be able to reinforce the likelihood of its success, was actually a very smooth program going forward.
So what would we have analyzed before there was an ordinance with terms and conditions clear, on the books, adopted by the City Council? Whatever we would have done before that would have been meaningless. It's only when we had a final, approved ordinance with black-and-white terms and conditions that we could say, "Here is what we have." And the truth is, we've done it in 90 days -- well within 90 days -- we've done it using an outside company that nobody can fault, and if you only take a look at what they've done, you will see that it really is . . . very reliable, and I believe this is the definitive work on what the cost will be. And what does it say? It says at the end of it, we're going to have a 1% impact….
Newton: Let me just conclude my saying that I think what you're hearing from us in our questioning, again, is not disagreement about the underlying objective of all of this, but just that process you described of the council approving it for the ballot, and then the DWP figuring out what the ballot measure would do, is one that naturally I think gives some people pause. It does mean that the council moved forward with putting it on the ballot before they knew what they were doing.
Nahai: But let's just say, for some reason, this very hot spot that's on that report weren't there, and people didn't see the $1.2 billion figure or the under-$1 billion after tax credits, what would they have? They would have surely the information we gave at the time that we gave preliminary estimates to the City Council, right? And back then, it was $1 billion the low case, 1.5 being the middling case, to this outside number which isn't even on the horizon any more. So the picture has improved. So if anybody is going to be paying attention to what Huron has done, they would be more favorably inclined to endorse Measure B.