Council hears DWP plan to prepay Intermountain Power Project debt

Department of Water and Power officials briefed the Los Angeles City Council on a plan to prepay a portion of the stranded debt related to the Intermountain Power Project, a 1,600‑megawatt coal-fired plant serving several Southern California cities.

Bob Rozanski, assistant chief financial officer for DWP, told the council that participants in the project remain obligated to take the plant’s output "on a take or pay basis through 2027," and that about $4.4 billion of project debt remains outstanding. Rozanski said the department’s share of that debt is approximately 67 percent — roughly $2.97 billion — and described a voluntary prepayment agreement that would allow each participant to prepay its share independently. "The agreement is voluntary and does not commit the city, or the department to accelerate the payment of debt," Rozanski said, adding that three of six participating agencies had already approved the agreement.

Councilmembers pressed staff on how prepayment would be financed and whether it would require bondholder consent. Rozanski said DWP would use excess cash generated through operations and proceeds from asset sales rather than float new bonds, and that discussions with underwriters indicated sufficient bondholder support for the covenant changes. Staff also said the department anticipates rate relief at the end of the transition period, including a planned residential reduction in 2002 of about 5 percent; specific industrial and commercial reductions remained undetermined. The council approved the committee action related to this item by recorded vote.