S. David Freeman: The TT Interview

A decade into the deregulation of the Texas electricity market, the notion of giant public power companies may seem like a relic of a bygone age. But public power remains very much alive in the form of the Lower Colorado River Authority, the Tennessee Valley Authority and others.

David Freeman, now in his 80s, says he has probably "run more public power agencies than anyone in history" — including both the TVA, where he was chairman of the board from 1978 to 1984, and the LCRA. He became the LCRA's general manager in 1986 in the wake of a sex scandal called Trailergate and worked to clean the place up and scuttle plans for a lignite mine. Throughout his long career, which included several energy positions in California, he became known for his opposition to nuclear power and for championing energy-saving measures.

Freeman is now retired and living in Washington, D.C. He was in Austin last week en route to Corpus Christi to offer advice on cleaning up pollution in that city's port. He spoke with The Texas Tribune about his thoughts on energy in Texas and shared his memories of the LCRA. This interview has been edited and condensed.

TT: What do you make of the Texas versus the Environmental Protection Agency flare-ups?

Freeman: There is no Texas versus EPA. Texas is part of America, and EPA is a part of the law in America. It's like saying, "My momma makes me do my homework, and I don't want to do it." Well, you know, your momma's in control of you, and she's going to make you do your homework whether you like it or not. The federal laws to protect the quality of the air — they're just the law. You don't have to like every law, but you have to obey them. So this is a kind of a almost childish reaction to something you've got to do that people are now saying they don't want to do. We have gone from 1970 to 2010 with people recognizing that the most precious, the most finite, the thinnest resource we have is this thin layer of air around the earth in which we have to breathe, and we have been steadily trying to put less and less poison into the air. Now, all of a sudden in 2011, because there's a recession and people are hurting economically, folks are trying to blame the environmental laws. Well, that's almost like blaming your momma for making you go to church. I mean, this is something we've got to do. There's no debate about it. The federal law controls in Texas.

TT: Did you see seeds of this during your time here?

Freeman: I lived through an era when the electric power industry took out full-page ads in the paper saying, "We don't know how to build a scrubber," at the same time the engineers were learning how to build a scrubber [a piece of pollution control equipment]. And we've built scrubbers and we've installed them. The electric power industry has bellyached about the environmental laws while obeying them for the last 40 years. ...

The air we breathe is our most precious resource, and we've got to steadily keep trying to make it cleaner so we can live longer and live healthier. This is not a debate about climate change. This is based upon hard facts coming out of hospitals and reports that have been made again and again and again about the health damage from air pollution. And all the EPA is doing is continuing to do what it's been doing since the 1970s.

I was there at the creation. I was working for [President] Richard Nixon when John Ehrlichman [his domestic policy chief] got all these law passed, together with Ed Muskie and Scoop Jackson and others. They were passed unanimously by a Republican president, and they got amended on a bipartisan basis. There isn't anybody that has resisted the enactment of these laws successfully. They have the support of people generally. This is just bellyaching by polluters, and that has been going on since year one. ... You have to recognize what it is.

TT: But those polluters now have more of a voice. Why do you think that has changed?

Freeman: Because we're in a recession. And they're playing on a public that is fearful. And when people are fearful, they will tend to believe that somebody else is at fault. I think that we are in a situation where the economic problems are just overshadowing everything else. But I still think that if you do a poll in the U.S., there is a sizable majority that support what the EPA is doing. And listen, it doesn't take a lot of political skill to fan the flames of opposition to any governmental regulation. I think that, quite frankly, there are a lot of people in public office that are fanning that flame. But these are not Texas laws that Texas can change. ...

The interesting thing is that, I'm not sure that the current public is quite as familiar with what's going on as we were in the 1970s and 1980s, because back then the Cuyahoga River was on fire and you couldn't breathe in Los Angeles or Houston. But because of the EPA, and only because of the EPA, the air quality has gotten a lot better. It's still not healthy. And so this is a march of progress that has gone on for a long time, and at every step of the road there have been affected industries. ...

Now, I do think that the money in politics is a whole lot worse than it used to be, and the electric power industry has learned to give. Let me tell you why I say that. I worked for Nixon, and John Ehrlichman [Nixon's domestic policy guru]. I was still there — they kept me on because I was the energy guy. But John Ehrlichman asked me to chair the meetings when the electric power industry came in. And I said, "Why? You know those guys hate me." He says, "I know that. That's the reason I'm putting you in charge, because they didn't give any money to the campaign, and we're punishing them." Well, the utility industry has gotten a lot smarter than that. They give. And they have influence.

...

It used to be that power shortages affected large industries. And if it affected the consumer at your home — you weren't home all day long and it was a minor inconvenience. But the general public wasn't dramatically affected. It was industries that were going to shut down. But today every home is a business. Every home has a computer. And it's not just that your television is out — people can put up with that. What really aggravates folks is when their computer won't run. And a lot of people work at home. I remember at a town meeting once, I got educated by a consumer. I was talking about reliability in the business district, and he says, "Everywhere is a business district now, Mr. Freeman." And I learned that lesson.

So you get a special kind of outrage when the lights go out now, because you are disrupting the working life of just about everybody. And people who are housewives are still using their computer. And we're just a whole lot more electrified than we ever were. And the information technology is just so vital to us. So your cellphone runs out and you want to recharge the battery and the lights are out? You are really pissed off.

...

If I were in charge of Texas right now, I would make sure that we initiated the load management [i.e., demand response] program immediately. ... I would do on-bill [energy] efficiency. And I would pick up the phone and call First Solar or one of these major solar companies and say, "I got a bunch of land in West Texas, near substations. How many megawatts can you put in between now and June?" This is Texas. It's not California. We give permits here. We build shit. You can buy this stuff for $1 a watt. What kind of deal can you make me? And I'd put in a bunch of solar between now and next summer.

...

Water, more than anything else, is the limiting factor on power production. It's time that we start, in a practical state like Texas, beginning to face the fact that electricity that can be generated without heating up or consuming water is far more practical than large nuclear, coal or even gas-fired plants. They don't consume water; they just heat it up and it evaporates, and it does in fact consume some water. And the limits on the nearby waterway poses a limit on how much you can use. So we don't have all the power capacity we think we have, looking at the future. And therefore it puts a whole new look on the value of wind and solar and storage. You don't have to take a position on air quality or climate change or any of those controversial issues. You can just look at the practical question of how do you stay out of hot water. And that's with waterproof power.

TT: I was hoping to take you back to the LCRA days. You came in at a kind of crazy time with the "Trailergate" scandal.

Freeman: Oh, it's the best time to take over an outfit when it's at rock bottom. I was the only honest person in the whole outfit because they had hired a former district attorney who had written a report that said they were all crooked. Well, the contractors had what we called Trailergate. They were offering sexual favors to the employees. And the management had tried to persuade the board to give a contract to somebody and not told them the truth. I had the job of cleaning the place up. I remember I felt so alone that I used to stay in my home ... and just work on what I was going to do at home, for fear that it would leak out, and I couldn't trust anybody.

But basically we had to fire a bunch of people and we had to shut down one of the lignite mines. But the biggest problem I had was that they had already bought the mining equipment for a huge lignite mine in Fayette County that would have turned Fayette County upside down and ruined all these beautiful farms. But not only that, it was the worst lignite in Texas. And the [energy value of the lignite was about half that of coal], and twice the pollution of coal. And I had a board that had already bought the equipment, and the damn cranes were so big you could see them from 50, 60 miles away. The day I took over, they were going down to get the permit to start the mine, and I stopped it.

The fact that I was able, over a period of a few years, to persuade enough board members to cancel it was probably the most important thing I did the whole time I was at LCRA. Because if that had gone forward, you wouldn't just have this problem of Wyoming coal, which is bad enough — I'm not bragging about that — but that lignite mine, it would have just been awful. There was a lot of Texas civic pride behind it — you know, "our lignite." So it as not an easy thing to do politically. ...

One of my best helpers was Lt. Gov. [Bill] Hobby. He told me, candidly, he says, "Dave, I don't really know a lot about this, but my wife loves our summer home in Fayette County, and she doesn't want that lignite mine in Fayette County. ... So I don't want it and you don't want it." And I said, "I already don't want it, I just need your help." And he says, "What can I do to help you?" And in his own quiet way, he was helpful.

The other vivid memory was that the customers were about to leave, and Lyndon Johnson's old outfit, Pedernales Electric Cooperative, was so mad at LCRA that they had started building their own power plant. They had made a fair amount of investment in a separate power plant, and they were going to leave the system, they and Bluebonnet [Electric Cooperative]. I had the job of talking these customers into staying. And it's not easy.

...

But I also remember that there was no political interference. I never had to meet with Gov. [Mark] White or Gov. [Bill] Clements. [They] appointed board members, and it was a privilege-and-prestige appointment. We had the leaders of the community from the whole area on that 15-person board, and I remember Judge Miller from part of the Hill Country got up one day, and he said: "I just want to tell you board members — you're not supposed to even make a phone call to Mr. Freeman or his staff. Your job is to come here once a month, read the material that's prepared, and vote on it. And confer with each other. But we're not going to have any micro-management, we're not going to have any political interference. These are the trained people. They prepare the papers. They present the issues to us. And you don't call them up and ask them for special information because everybody needs to have the same information." It was one of the most beautiful speeches ever made by a board member about the true way a board should function.

So I had fond memories. Also, they gave me a shotgun at Christmas, which was kind of embarrassing. But that was a token of love in Texas, I gather.

TT: Do you have a sense of how the LCRA has changed since that time?

Freeman: Well, we went over and chatted with Becky [Motal, the LCRA's new general manager]. And Becky reminded me that she was a clean person of integrity because I had hired her. She was part of the clean team. She still remembered that. She's a smart gal, and I think she's running it in a fairly business-like manner. She said that — I think it's public information — that they were having to cut back [water use by 20 percent next year if lake levels keep dropping]. And [if lake levels stay low] there will be no water for the rice farmers [next] year, for the first time in history. So she's taking the water shortage pretty seriously. ...

...

TT: What did you make of the rice farmer-city tensions back then?

Freeman: Oh, I can tell you, I had a come-to-Jesus meeting with [the rice farmers]. I went down there in person, and we imposed just a small fee to cover the cost of maintaining the canals. They got their water free, but all I wanted was enough money for maintaining the off-river canals that brought water to their farms. And they were resisting it. They just were opposed to it. And on the spot there, I said finally, "Well folks, let me just remind you of something. We can give those canals back to you. We took them over just so we could get the maintenance done. ... They're your canals. And it looks like if you're not willing to pay the small amount of money it takes to keep them up, then maybe you just need to keep them up yourself? And I'm just going to go back to the board and I'm going to just tell them, 'I failed. I couldn't get the money we needed. We don't have the money.'" And you could have heard a pin drop in the room, and they agreed to the increase.

They were a bunch of people cussing the government with their hand stuck out. And they were hypocrites. Quite frankly, they were the most violently anti-government group that I met in Texas. They got a subsidy for their rice, they got a subsidy for exporting their rice, and they got a subsidy from the LCRA. They were not only not gracious about it — not grateful — [but] arrogant about it. ... I didn't leave with any feeling that they represented the best in America. ...

TT: In your interview with the Texas Legacy project, you said that you'd come to the view that public power was a "gross failure." What did you mean by that?

Freeman: Because we missed the environmental boat. You see, public power served a terrific purpose in the 1940s and 1950s as a yardstick for low-cost electricity. It was competition by comparison. And then the environmental movement came along, and public power fought the environment even harder than private companies, because they had a Wal-Mart-type religious belief in low-cost electricity, and they could not change.

TT: Which would be coal.

Freeman: Which would be coal. And TVA initially opposed the strip-mine law. They opposed every environmental measure. I remember when I was appointed to the TVA board, [Michigan Congressman] John Dingell, who's not exactly the most environmentally active person in the world today, he says to me, "Dave, if there was an Environmental Serial Killer Act, TVA would be guilty." He says, "They disobeyed my endangered species law; they disobeyed the air quality law. They think they're above the law. All they care about is low-priced electricity." And I kept making speeches and speeches and trying to get the public power industry to set an example of showing that you could be environmentally sensitive and still provide electricity. ... [But] they wouldn't buy it.

So they're like a bunch of old Communists — they still believe in their gospel even though their gospel is no longer what is needed. So that is my problem with them. And I ran the father of TVA, the New York Power Authority. I ran TVA. I ran the grandson, the LCRA. I probably have run more public power agencies than anyone in history. And I'm proud of my record. But the public power movement as a whole — I mean, I just fought city hall on this issue. I've been considered an out-of-touch maverick. And they think of me as an environmentalist pretending to be a utility executive. But I think that I set the example, but unfortunately it hasn't been followed.

TT: What do you think about deregulation?

Freeman: I think it's a huge mistake. I think your big problem in Texas today is that the generating sector has every incentive to keep you on tight rations, so they can get more for their money, and it's contrary to the public interest in having an adequate supply to keep the price down. So you've screwed yourself, plain and simple. And I don't think there is any fix short of vertically integrated companies.