Energy Consortium Makes Pitch to District

A group of power companies that hopes to install, service and supply the energy for air conditioning at 301 Los Angeles schools released a proposal Wednesday offering a $1.5-million annual power credit but adding 15% to the construction cost.

The Energy Alliance, an association of utilities including the Los Angeles Department of Water and Power, proposes to install air conditioners at all the schools in 15 months, considerably less time than it would take the Los Angeles Unified School District to do the work.

The 38-page bound proposal was delivered Tuesday to Deputy Supt. Ruben Zacarias and made public Wednesday.

It calls for the district to pay a 15% management fee in addition to the estimated $176-million cost for the installation, which will be funded by the $2.4-billion Proposition BB school bond approved by the voters in April.

An incentive plan would pay the partnership 20% of any savings if it completes the work for less than the agreed-upon price and 5% of the base contract for every month it finishes ahead of schedule. Penalties would be assessed at the same rate for finishing late or over budget.

The $1.5-million annual energy credit appears to address criticism raised after a preview of the proposal was released last month.

Although Mayor Richard Riordan praised the preliminary offer as “a very innovative way to get the best out of the public and the private sectors,” others saw a potential trap for the district in an energy contract extending beyond the deregulation of public utilities at the end of this year.

A spokesman for the alliance said the $1.5-million credit was calculated as a percentage of the extra cost the district would incur for the new air conditioners at 301 schools.

“We wanted to help reduce the impact of that cost,” said Mike Mizrahi, a spokesman for Energy Pacific, which is teaming with the DWP in the Alliance.

Mizrahi said, however, he could not release the anticipated energy costs for competitive reasons.

The proposal calls for a three-year energy contract that could be extended twice, each time by one year. The alliance intends to negotiate a clause allowing the district the option of getting out of the contract after deregulation, Mizrahi said.

A spokesman for the district said Wednesday that Zacarias, who is making preparations for assuming the superintendent’s job next month, had not yet reviewed the proposal, but that staff members found it “intriguing.”

“Initial reaction was the 15% management fee seemed somewhat high, compared to other groups that do the same kind of thing,” said the spokesman, Brad Sales. “But we have to study the proposal in depth to see how the economics pencil out.”

Sales said he anticipated that the district would invite others to bid on the project before it could consider accepting the Energy Alliance proposal.

Energy Pacific is a Los Angeles-based joint venture of Pacific Enterprises and Enova Corp. Pacific Enterprises, the parent company of the Gas Co., and Enova, the parent of San Diego Gas & Electric, are in the process of merging.