Please see the following articles:

Sac Bee, Wed, 3/28:  "State backs rate hike: But increase still may not
resolve crisis"

Sac Bee, Wed, 3/28:  "Batten down: Electric storm brews "

Sac Bee, Wed, 3/28:  "Use more energy, pay higher rates "

San Diego Union, Wed, 3/28:  "Regulators prescribe biggest rate increase in
state history"

San Diego Union, Wed, 3/28:  "City leaders in East County schedule forum on
energy woes"

San Diego Union, Wed, 3/28:  "Developments in California's power crisis"

San Diego Union, Wed, 3/28:  "Congressman eyes nuclear vessels as source of
power"

San Diego Union, Wed, 3/28:  "Bush calls California energy crisis 'ominous' "

San Diego Union, Wed, 3/28:  "Rate hike means new political heat for
California governor"

LA Times, Wed, 3/28:  "PUC Approves Largest Electricity Rate Increase in
State's History"

LA Times, Wed, 3/28:  "With Energy Crisis Far From Over, Experts Say More
Hikes Possible "

LA Times, Wed, 3/28:  "Davis Keeps His Distance From Utility Rate Hikes"

LA Times, Wed, 3/28:  "Federal Energy Agency Unlikely to Order Refunds"

LA Times, Wed, 3/28:  "A Painful Step"   (Commentary)

SF Chron, Wed, 3/28:  "PUC Votes To Jack Up Power Rates
Tiered increases approved as protests disrupt meeting"

SF Chron, Wed, 3/28:  "Developments in California's power crisis"

SF Chron, Wed, 3/28:  "Energy Nominees Would Give GOP Majority on Panel"

SF Chron, Wed, 3/28: "Megawatt Foolish
Strike a Pose for Energy Conservation"

SF Chron, Wed, 3/28:  "New York mayor calls for cap on power prices "

SF Chron, Wed, 3/28:  "Power regulators approve rate hikes of up to 46
percent "

Mercury News, Tues, 3/27:  "No explanation given after officials approve 27
percent rate hike "

Mercury News, Tues, 3/27:  "Impact of increases will vary greatly"

Orange County, Wed, 3/28:  "PUC raises power rates"

Orange County, Wed, 3/28:  "Energy payments not enough, gas-using generators
say"
Orange County, Wed, 3/28:  "Bush to nominate 2 who favor free markets for
energy panel"

Orange County, Wed, 3/28:  "Davis backs power rate hikes if 'necessary' "

Orange County, Wed, 3/28:  "Cheney says state's on its own"

Orange County, Wed, 3/28:  "Highest rate hike in state history raises
consumer anger"

Orange County, Wed, 3/28:  "Lighten up...it's just a California thing"

Orange County, Wed, 3/28:  "Conserve and Save"

NY Times, Wed, 3/28:  "RECORD RATE HIKE SET IN CALIFORNIA"

Individual.com, Wed, 3/28:  "Calif. Regulators Raise Power Rates "

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State backs rate hike: But increase still may not resolve crisis
By Carrie Peyton and Dale Kasler
Bee Staff Writers
(Published March 28, 2001)
SAN FRANCISCO - Brushing aside the shouts and hisses of outraged protesters,
state regulators approved a $4.8 billion-a-year utility rate hike Tuesday but
couldn't guarantee that the increases will remedy California's electricity
crisis.
With activists chanting "rate hikes no way" and utility executives branding
the decision as inadequate, the Public Utilities Commission voted 5-0 to
raise rates about 30 percent for customers of Pacific Gas and Electric Co.
and Southern California Edison. The rate hike took effect immediately but
probably won't show up in customer bills until May.
But while PUC commissioners said they were taking a bold step, major holes
remain in the state's patchwork effort to save the two beleaguered utilities
and ensure reliable energy supplies during what promises to be a long, hot
summer:
The higher rates won't pay off billions in old utility debts, leaving PG&E
and Edison under the continued threat of a bankruptcy filing by power
generators, bondholders or other creditors.
The increases will likely curtail energy consumption, but it's unlikely the
cutbacks will be enough to stave off rolling blackouts this summer. The PUC
put off a crucial decision on how to allocate the rate hikes across customer
categories, and the final rate design could determine how much Californians
will conserve.
The vote may not achieve one of its key goals: reviving the wind farms,
cogenerators and other
alternative-energy producers that provide more than 20 percent of
California's electricity. Hundreds have shut down in recent weeks because of
nonpayment by PG&E and Edison, contributing to rolling blackouts March 19 and
20.
After months of prodding, the PUC approved what may well be the largest
utility rate increase in California's history, saying it had no choice if it
was to shore up utility finances and lessen the risk of blackouts. It raised
rates just under 30 percent in addition to making permanent a 9 percent
surcharge approved in January.
The increased revenue will go to pay for the state Department of Water
Resources' power purchases on the utilities' behalf, and to
alternative-energy producers that supply a major chunk of the utilities'
power.
The PUC's move could make utility bankruptcies more palatable to state
officials because it ensures payment for future power supplies. "Now, if we
have a bankruptcy, a lot of bad things will probably happen, but there's less
risk to the general public of mass power disruptions," said state Sen. Debra
Bowen, D-Marina del Rey, chairwoman of the Senate Energy Committee.
PG&E, arguing that the PUC didn't go nearly far enough, said it will demand
the panel reconsider.
"Today's ( actions, while providing a welcome dose of realism in the energy
policy debate, unfortunately do not resolve any of the key issues facing
California's policymakers," PG&E President Gordon Smith said.
Smith said the decision could worsen California's energy problems by forcing
the utilities to pay the state Department of Water Resources, which is buying
power on the utilities' behalf, ahead of other creditors.
An Edison vice president, Bruce Foster, said the rate increase "is a step in
the right direction" but added, "Only time will tell if it's enough." The
company announced it will start making interest payments on defaulted bond
and bank debts.
Edison and PG&E both criticized the commission for sharply lowering the PUC's
estimates of the utilities' debts.
PUC commissioners acknowledged they have more work to do to resolve
California's energy mess - and some hinted that additional rate hikes may be
in the offing.
"Have we gotten the number right? I don't know," said Commissioner Henry
Duque. But PUC President Loretta Lynch said the $4.8 billion will be enough
to pay California's ongoing power bills.
Meanwhile, Gov. Gray Davis repeated his opposition to rate hikes.
"We do not have all the appropriate financial numbers necessary to make a
decision," Davis said. "Until we do, I cannot support any rate increase. (
While I have opposed rate increases, if it becomes clear that a rate increase
is absolutely necessary for the good of the state, I will support one that is
fair and do my duty to convince Californians of its necessity."
Yet most observers believe the PUC acted with Davis' approval - three of its
members are Davis appointees - and last Friday his aides shared data with
business lobbyists indicating rates would rise substantially, said Jack
Stewart, president of the California Manufacturers & Technology Association.
Consumer advocates blasted rate increases as a surrender to the power
generators that control much of California's electricity.
Noting that the state's grid operator has accused the generators of
overcharging Californians by $6.2 billion, they urged the PUC to focus its
firepower on those "robber barons on steroids," as Berkeley activist Barbara
George put it.
"It's like dealing with the mob," said Doug Heller of the Foundation for
Taxpayer and Consumer Rights. "Instead of breaking our fingers, they're going
to turn the lights out again."
Jamming the PUC's auditorium to near capacity, activists said the state
should seize the generators' power plants. They razzed the commissioners with
taunts of "blood money!" and "it's a sham," prompting guards to escort some
protesters out.
PUC President Lynch partially agreed with the protesters, saying the
generators are "the real culprits in our energy crisis." But she said the
commission had to approve rate hikes.
The PUC ordered the utilities to help state officials fight the power
generators to refund some of their profits. Lynch said the rate hikes would
be refunded to customers if generators are forced to surrender money.
The higher rates will generate $2.51 billion in additional yearly revenue for
Edison and $2.28 billion for PG&E, according to PUC estimates.
But with most of the money going to reimburse the state Department of Water
Resources for current and future power purchases, the PUC action doesn't
repay the billions the utilities owe to generators and other creditors.
"You still have $14 billion, maybe more, of costs that haven't been paid for,
and that's still a problem," said Gary Ackerman of the Western Power Trading
Forum, an association of power generators. "I don't believe creditors are
going to be infinitely patient."
The two utilities have defaulted on billions of debts and face a daily threat
of bankruptcy.
"That's still an issue that ultimately has to be addressed," said Senior Vice
President John Stout of Reliant Energy Inc., a generator that's owed $370
million.
Davis is negotiating to buy the transmission grid from Edison, PG&E and San
Diego Gas & Electric Co. as a means of paying off the utilities' existing
debts. But Bowen, the Energy Committee chair, said she doubts the deal will
go through.
Beyond complaining the PUC didn't solve the existing-debt issue, the
utilities were dismayed by a change in PUC accounting that sharply lowers
estimates of their debts and could have major impacts on how much control
regulators keep over their operations for months to come. Even though rates
keep going up, a state ordered rate freeze remains technically in effect, and
that freeze gives regulators ammunition to argue that utilities can't pass
all their costs on to customers.
PG&E's Smith called it the "most egregious" commission action. Edison called
it "illegal."
The board voted to raise rates 3 cents a kilowatt-hour - and make permanent a
1-cent increase approved in January. Documents from Lynch's office said rates
would rise on average 29 percent, but Lynch later described it as 26 percent.
The PUC put off a decision on how the higher rates will affect each customer
category, other than to say it's leaning toward a system that will charge
more for electricity consumed above a certain threshold. The PUC estimated
that 45 percent of residential ratepayers - those who use less than that
threshold - will see no rise at all. Lynch proposed some businesses would see
rate hikes of as much as 87 percent.
"How much conservation will this get us? It will depend very much on how it's
designed," said Severin Borenstein of the University of California Energy
Institute.
The rate hikes won't affect customers of municipal utilities such as
Sacramento Municipal Utility District. SMUD is planning a 16 percent rate
hike.
The PUC vote may do little to help the hundreds of alternative-energy
producers known as "qualifying facilities," many of which have shut down for
nonpayment.
The PUC on Tuesday ordered PG&E and Edison to start paying these producers in
April, but some of the producers say the PUC's new pricing mechanism doesn't
get them back on their feet financially. Many, following the lead of one
Imperial Valley producer, may choose to sever their contracts with the two
utilities and sell their power elsewhere, even out of state.
"This is not a solution," cogenerators' lawyer Jerry Bloom said of the PUC
vote. "It will drive additional (plants) off the system."
California can ill afford to lose suppliers. On Tuesday, the Independent
System Operator, which runs the power grid, declared a Stage 2 alert, meaning
reserve supplies had dipped to less than 5 percent of demand.
And many experts believe California won't be able to avoid blackouts this
summer. The severe drought hitting the Pacific Northwest will deprive
California of a critical source of hydroelectricity.
Utility stocks, which shot up Monday in anticipation of the PUC's vote,
retreated slightly on Tuesday. PG&E Corp. shares dropped 44 cents to $13.20;
Edison International fell 39 cents to $14.16.
Bee staff writers Dan Smith, Emily Bazar and Kevin Yamamura, and Reuters news
service contributed to this report.
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Batten down: Electric storm brews
By Gilbert Chan and Andrew LePage
Bee Staff Writers
(Published March 28, 2001)
First higher gasoline prices hit Dust-Tex Service Inc. Then skyrocketing
natural gas bills socked the Sacramento industrial laundry service. Now a
third financial blow looms - higher electricity bills.
"It's become a real nightmare. It's pretty scary. You have to find money to
pay these bills," said Sylvia Compton, co-owner of the longtime family-owned
south Sacramento business.
It could be worse for Compton, whose business is served by the Sacramento
Municipal Utility District. It will be for customers of Pacific Gas and
Electric Co., who face rate hikes averaging 30 percent in addition to a 9
percent rate increase already approved.
The California Public Utilities Commission gave PG&E and Southern California
Edison permission to raise electric rates by $4.8 billion a year. How the
burden will fall on various customer groups hasn't been decided.
Although SMUD customers aren't affected by the PUC's decision to sharply
raise rates, they aren't likely to be immune. SMUD, also facing skyrocketing
energy costs, is considering rate increases ranging from 13 percent to 25
percent.
For Dust-Tex and scores of other California companies, any rate hike would be
another unwelcome increase in the cost of doing business. It will hit at a
time the U.S. economy is slowing and employer costs such as health benefits
are soaring.
For consumers, it will mean a double blow, higher electricity bills at home
and higher prices for goods and services.
Raley's, the West Sacramento-based supermarket chain, for example, uses huge
amounts of electricity not only for lights and refrigeration at its stores,
but also to cool food at its distribution centers. Given the thin profit
margins of the grocery business, it has little choice but to raise prices.
"We are doing all we can at Raley's to conserve energy. But as rates go up we
will have to pass those increases on to our customers in the cost of goods,"
said Michael Teel, Raley's president and chief executive officer.
The higher electric bills approved by the PUC - aimed at keeping the state's
two biggest utilities from bankruptcy - mean California businesses and
consumers will have almost $5 billion less to spend each year on other
things.
While that amount represents a huge bite out of consumer spending, by itself,
it won't necessarily lead to a recession, said Brad Williams, senior
economist at the state Legislative Analyst's Office.
"What we're really talking about is less economic growth," Williams said.
"Some households will feel this, and it will pinch their budgets and affect
how much income they have for purchasing goods and services."
The state estimates that spending on electricity last year averaged between 2
and 3 percent of both business production costs and household budgets.
Some business owners and economists welcomed the boost in electricity rates,
saying in the long run, they will spur energy conservation efforts, boost
power generating capacity and prevent rolling blackouts and their devastating
effect on business productivity.
"It's much worse for us if we have these damn blackouts. We have 100
employees, and if there's a blackout they're all sitting around twiddling
their thumbs and I've still got to pay them," said Norm Rogers, president of
Z-World Inc. in Davis, which designs and builds miniature special-purpose
computers.
Many economists and business experts believe rolling blackouts, not higher
electricity rates, are the biggest threat to the economy.
"It's better to have higher rates and secure power than lower rates and
blackouts," said Stephen Levy, senior economist at the Center for Continuing
Study of the California Economy. The state can work through the higher power
costs - just as it did when gasoline and diesel prices soared last year, Levy
said.
In reaction to the higher power rates, a small number of businesses may leave
California, expand out of state, or fail, though most will be able to weather
the short run, said Robert Smiley, dean of the Graduate School of Management
at the University of California, Davis.
Most firms will give the state just six to 18 months to solve the energy
crisis before "they'll start looking elsewhere," Smiley said.
David Molinaro, owner of Yolo Ice and Creamery Inc., a Woodland-based ice
cream, dairy and ice distributor, can't pick up and leave. He absorbed higher
diesel fuel costs for his 11 delivery trucks for six months before levying a
surcharge in January. There's just no way his company can eat the higher
electricity costs, he said.
"It's frustrating. People are thinking you are getting rich by raising
prices," Molinaro said.
Other businesses may have little choice but to swallow the higher utility
costs.
"We compete with global suppliers for almost every product. It's virtually
impossible for us to pass these costs on," said Jeff Boese of the California
League of Food Processors. "If we don't get a handle on energy costs very
quickly I would suspect a significant number of food processors to leave the
state."
In past months, the rocketing energy costs have forced companies to take
dramatic steps to shave expenses.
Dust-Tex, for example, has scrapped pay raises, raised prices 10 percent, cut
hours for some workers, put a freeze on hiring and changed auto insurance
coverage for its truck fleet. At the same time, it invested $60,000 for a new
energy-efficient dryer.
California Family Health & Fitness, which has eight health clubs in the
capital region, has tabled plans for two additional gyms until it gets a
better handle on future energy costs, according to co-owner Larry Gury. But
Gury and his partner are looking at spending $150,000 to $200,000 at each of
four gyms to install solar panels for heating the pools and running the
lights.
Some impacts might not be seen for some time. In the health care industry,
for example, the energy crisis has only added to existing financial
pressures, said Larry Levitt, vice president of the Henry J. Kaiser Family
Foundation.
Pressed by higher bills, some employers may opt to trim or eliminate health
benefits for workers, Levitt said.
Bee staff writer Lisa Rapaport contributed to this report.
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Use more energy, pay higher rates
By Edie Lau
Bee Science Writer
(Published March 28, 2001)
For all the talk of electricity rates going up across the state, there's a
way every resident of California can avoid the price hit altogether: Just use
electricity sparingly.
A rate increase approved by the state Public Utilities Commission on Tuesday
does not affect households that use less than 130 percent of a baseline
amount of power.
Forty-five percent of households already stay within that limit, according to
PUC President Loretta Lynch. The proportion is slightly less in Pacific Gas
and Electric's territory - 42 percent, utility spokeswoman Jann Tabor said.
The baseline amount differs from region to region and from season to season.
The Sacramento Municipal Utility District is not affected by the PUC-approved
increase but is planning to raise rates this spring, as well. It, too,
proposes to protect the thriftiest customers by raising the price only of
kilowatt-hours used over baseline. District rate administrator Alan Wilcox
said roughly half of SMUD households consume only baseline amounts of power.
Everyone else has the opportunity to dodge rate increases by scaling back
their electricity use.
How difficult might that be? If you're accustomed to using a central air
conditioner all summer and unwilling to turn up the thermostat, it could be
difficult, by Wilcox's reckoning.
"If you're running an air-conditioning load in the Valley, you could probably
expect to get into that second tier (above baseline) a little bit," he said.
"There are a lot of people who do not use their air conditioning a lot or
have swamp coolers or just go without."
In SMUD territory, the baseline is 700 kilowatt-hours per month in summer,
and 620 kwh in winter for most customers. (Households that do not use gas and
are powered entirely by electricity get a higher baseline allowance.)
Wilcox said the baseline is based upon average consumption - at least, it was
the average when the baseline was set in the early 1990s. Consumption has
crept up a bit since, to 752 kwh a month last year.
Under SMUD's rate-increase proposal, the summertime rate would remain at
8.058 cents per kilowatt-hour for the first 700 kwh. The price would rise by
10 cents a kilowatt-hour for the next 300 kwh used, up to 1,000 kwh.
Big energy consumers would pay more than 16 cents for each kwh used over
1,000 kwh.
Bottom line: The biggest users pay the most.
Details of the rate increase approved by the PUC - which will affect PG&E
customers, as well as those served by Southern California Edison and San
Diego Gas & Electric - have yet to be worked out, but the rates are expected
to be structured in a similar tiered fashion.
Currently, PG&E customers year-around pay 11.4 cents per kilowatt-hour up to
the baseline limit, and 13 cents for every kilowatt-hour over baseline. The
average baseline throughout the territory is between 300 and 400 kwh, Tabor
said; it varies from region to region to account for climate.
Tabor said the PG&E baseline amounts to between 50 percent and 60 percent of
the average electricity use per household in a given territory. That
proportion, she said, was taken from a "Lifeline" program in effect from 1976
to 1984 that was meant to provide a minimum necessary quantity of electricity
and gas at a lower cost.
Tabor said 31 percent of PG&E's 4,017,000 residential customers use only
baseline amounts of electricity.
Bee staff writer Carrie Peyton contributed to this report.
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Regulators prescribe biggest rate increase in state history

Davis calls ruling for PG&E, Edison premature; consumer groups push for
seizure of plants
By Ed Mendel
UNION-TRIBUNE STAFF WRITER
March 28, 2001
SAN FRANCISCO -- State regulators yesterday approved the biggest rate
increase in California history for the customers of Pacific Gas and Electric
and Southern California Edison, but Gov. Gray Davis said the increase is
premature.
The governor, appearing to soften his long-standing opposition, said he would
support a rate increase only if financial information shows that a rate
increase is "necessary for the good of the state."
The Public Utilities Commission, controlled by Davis appointees, voted 5-0
for an immediate rate increase. A statement from Davis, who usually demands
that appointees reflect his policy, did not say whether he would ask the PUC
or the Legislature for a rollback if he concludes the increase is unneeded.

Developments in California's power crisis
Congressman eyes nuclear vessels as source of power
Bush calls California energy crisis 'ominous'
Rate hike means new political heat for California governor
?

"He can ask," said Steve Maviglio, Davis' press secretary. "That is one of
many options. But now we are waiting for the numbers to plug in the data and
see if a rate increase is necessary."
The PUC has not yet acted on the request of San Diego Gas and Electric for a
rate increase. SDG&E has a debt of $681 million but has been paying all of
its bills, unlike PG&E and Edison. Those companies say they have debt of $13
billion.
SDG&E is in a different situation because its rates were capped by
legislation in September that guarantees payment of its debt, allowing the
utility to borrow. The bills of SDG&E customers soared last summer when the
utility became the first to be deregulated.
"Since the PUC has approved rate hikes for Edison and PG&E, we would hope
they give an expedited review to our request for an increase of 2.3 cents per
kilowatt hour," said Ed Van Herik, a SDG&E spokesman.
Consumer groups warned that out-of-state generators, who have been ordered by
FERC to make some rebates for overcharging, will make even more money under
the rate increase. Some are urging Davis to seize California power plants
owned by the generators.
"These people are war criminals," said Mike Florio, an attorney for The
Utility Reform Network in San Francisco.
The PUC meeting, which occurred on a day when the state was hit by a Stage 2
alert because of reduced imports from the Northwest, was interrupted by
shouts from demonstrators who want a state-owned power system. They chanted,
"Public power now, we won't pay" and "Rate hikes no way, make the energy
companies pay."
Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa
Monica, which is threatening to put a public power initiative on the ballot
next year, said some attorneys think the abrupt rate increase can be
challenged in court.
Assemblyman Rod Pacheco, R-Riverside, announced that he will introduce
legislation to repeal the rate increase. He said a decision should be made
not by appointees but by elected officials who are accountable to the public.
Democratic legislative leaders, who have large majorities in both houses,
said Monday that they have reluctantly concluded a rate increase is
necessary. Davis is scheduled to meet with Assembly Democrats this afternoon.
The rate increase approved for PG&E and Edison yesterday is 3 cents per
kilowatt hour. The PUC president, Loretta Lynch, said media reports of the
increase amounting to a 40 percent rise are inaccurate.
Lynch said the increase in the monthly bills of ratepayers would be about 26
percent if applied across the board. She bases her figure on the total bill
that includes electricity, transmission, distribution and other costs.
The media's characterization of the rate increase as 40 percent is based on
only the cost of electricity, not the total bill. The electricity costs
before the increase were 7.2 cents per kilowatt hour for Edison and 6.7 cents
for PG&E. SDG&E's rate is 6.5 cents.
Lynch proposed the rate increase after a report issued last week showed that
the state, which was forced to begin buying power for the utilities in
mid-January, will have to spend more than expected. A state plan to lower
costs through long-term contracts will fall short this summer.
The state has been spending about $1.5 billion a month to buy power. The PUC
also voted unanimously yesterday to give the state a share of the monthly
bill collected by utilities, which will be used to finance a bond of $10
billion or more to repay the state general fund for the power purchases.
The state was jolted last week by rolling blackouts that few expected before
summer, when heat drives up the demand for electricity. A number of small
generators that provide a quarter of the state's power are not operating
because they have not been paid by utilities.
The PUC voted yesterday to order Edison and PG&E to begin paying the small
generators under a new formula that links their payments to the price of
natural gas at the Oregon border, rather than at the Southern California
border with Arizona. Prices at the Arizona border have been 50 percent
higher.
David Fogarty of the Western States Petroleum Association, which represents
50 small generators, said many of the small plants in Southern California
will have to continue to buy their natural gas at the higher price on the
Arizona border.
"Many of them will find it uneconomic to continue to operate," Fogarty
warned.
Edison has not paid the small generators in the federal "qualifying
facilities" program since November. PG&E has been paying them only about 15
percent.
The PUC did not order the utilities to pay off the $1.5 billion they owe to
the small generators. Jan Smutny-Jones of the Independent Energy Producers
said some of the small generators will not be able to buy gas until they can
pay their debts.
Many of the small generators produce power from "renewable" sources such as
solar, wind, geothermal and biomass. But most of the small generators use
natural gas turbines that also produce heat for commercial purposes.
Whether Lynch acted on her own when she proposed the increase or was prompted
by the Davis administration is a topic of speculation. Davis aides told
reporters during a background briefing yesterday that they did not learn of
Lynch's proposal until Sunday night.
They said the governor was briefed Monday morning and that he did not urge
his PUC appointees to delay the increase. An Edison official said the utility
received the proposal late Monday morning and had little time to prepare for
a hasty PUC hearing on the increase that afternoon.
The two commissioners appointed by former Gov. Pete Wilson, Richard Bilas and
Henry Duque, said they have been urging a rate increase. But both complained
of the short notice and the lack of time to study the complex proposals
approved yesterday.
Davis aides said they do not understand how Lynch arrived at an increase of 3
cents per kilowatt hour. The governor is waiting for estimates of state power
purchases this summer, available generation, the effect of conservation, the
potential for federally ordered refunds from generators, and other data
before he makes a rate decision.
The Davis appointees on the commission, Geoffrey Brown and Carl Wood, praised
Lynch for showing courageous leadership.
The increase approved yesterday, which utility spokesmen said was the largest
in their history, comes on top of a 9 percent residential increase for Edison
and PG&E imposed in January and a scheduled 10 percent increase next March,
when a "rate reduction" paid for by a $6 billion bond expires.
Lynch said the rate increase approved yesterday takes effect immediately but
will not show up on customer bills until May or later. The PUC is working on
a plan to design the increase to encourage conservation, giving the biggest
increases to those that use the most electricity.
About 45 percent of the utilities' residential customers will have no
increase because of legislation exempting households that use 130 percent or
less of the "baseline," a minimum amount of electricity use that varies with
climate zones around the state.
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City leaders in East County schedule forum on energy woes

UNION-TRIBUNE
March 28, 2001
Members of the four East County city councils will hold a workshop tomorrow
to talk about ways to deal with the energy crisis.
The meeting is scheduled to begin at 7 p.m. at the La Mesa Community Center,
4975 Memorial Drive, La Mesa.
Council members from La Mesa, Santee, El Cajon and Lemon Grove will discuss
energy-saving policies and ordinances they could enact.
Cities might look at having energy-efficient traffic lights installed or
requiring new houses to use alternative energy sources, said La Mesa Mayor
Art Madrid.
"It's acknowledging that we have a problem and coming up with a solution,"
Madrid said.
Kurt Kammerer of the San Diego Regional Energy Office is scheduled to give a
presentation to the group. Members of the audience will have an opportunity
to make comments.
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Developments in California's power crisis

ASSOCIATED PRESS
March 28, 2001
Here is a look at developments in California's electricity crisis:
WEDNESDAY:
) The state remains free of power alerts in the early morning as power
reserves stay above 7 percent.
) The Assembly resumes hearings on California's high natural gas prices.
) The Assembly is expected to try again to pass a bill that would let the
state Public Utilities Commission order Southern California Edison Co. and
Pacific Gas & Electric Co. to pay alternative-energy plants.
TUESDAY:
) The PUC votes unanimously to approve electricity rate hikes of up to 46
percent for customers of California's two largest utilities. The board votes
5-0 to increase rates immediately for PG&E and Edison despite yells from
protesters. The increases are the largest in California history.
) Stock in both utilities suffer slight losses after expectations of the rate
hikes Monday caused shares in PG&E Corp. to surge 29 percent and Edison
International's stock to gain 30 percent. Edison International closed down 39
cents at $14.16 a share. PG&E Holding Corp., parent of Pacific Gas &
Electric, closed down 55 cents at $13.20.
) In a Tuesday afternoon conference call, Southern California Edison says it
will begin paying interest to its bondholders after weeks of failure to pay.
Company authorities say they have not heard whether the news will boost their
credit rating and do not specify a dollar amount for monthly interest
payments.
) The Los Angeles Department of Water and Power, which is not attached to the
state power grid and is not affected by deregulation, issues a statement
Tuesday assuring that customer rates "will continue to remain stable."
) Standard & Poors retains California's cautionary credit rating despite
state regulators' decision to raise electricity rates. The state has been on
a credit watch "with negative implications" since it began spending $45
million a day to buy electricity for customers of two nearly bankrupt
utilities. The crediw watch will remain in effect despite a rate increase
state regulators approved Tuesday.
) President Bush says the electricity price caps sought by California's Gray
Davis and other Western governors would worsen the region's energy crisis
instead of helping cure it. In a speech to the Kalamazoo Chamber of Commerce,
Bush says price controls helped cause the gasoline crisis of the 1970s, and
he won't make the same mistake.
) Joseph Fichera, the governor's chief negotiator on the purchase of
transmission lines, says he is exchanging drafts of proposed agreements with
Edison officials but won't say how soon a final agreement may be reached. He
says negotiations are continuing with PG&E and San Diego Gas & Electric.
) State agencies announce a March 29 workshop in Ontario for developers who
hope to build peaking power plants in time for this summer. The event is
similar to one held two weeks ago in Sacramento. Peaking plants are used for
short periods when power supplies run low.
) California's Independent System Operator declares a Stage 2 alert when
electricity reserves were approaching only 5 percent of available power. ISO
spokeswoman Stephanie McCorkle says the alert was triggered when 1,000
megawatts was unexpectedly lost from the Pacific Northwest. WHAT'S NEXT:
) The Davis administration continues negotiations with Edison, PG&E and San
Diego Gas & Electric Co. over state acquisition of their transmission lines.
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices that the state's electricity deregulation law bars them from
passing onto ratepayers, and are close to bankruptcy.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers.
------------------------------------------------------------------

Congressman eyes nuclear vessels as source of power

By Toby Eckert
COPLEY NEWS SERVICE
March 28, 2001
WASHINGTON -- As California braces for more blackouts this summer, a key
House Republican has floated a plan that includes mobilizing a federal
disaster agency, waiving some environmental regulations and exploring whether
nuclear reactors aboard Navy ships could be connected to the power grid.
Several Democrats immediately attacked the plan for not including electricity
price controls sought by Gov. Gray Davis and other California officials. They
also charged that it would undermine clean air laws.
The 17-point plan was drafted by Rep. Joe Barton, R-Texas, chairman of the
House Commerce Committee's energy and air quality subcommittee. Copies were
obtained by Copley News Service.
Samantha Jordan, a spokeswoman for Barton, confirmed that he had circulated
some proposals for responding to the Western power crisis among subcommittee
members late last week. Some of the ideas were deleted before the list was
forwarded to the White House, Jordan added, but she would not say which ones.
Barton has presided over several hearings on the power crunch and has said
that he is "more than prepared" to draft legislation to help California. A
White House task force, headed by Vice President Dick Cheney, is also
developing a national energy policy.
President Bush has repeatedly stated his opposition to caps on wholesale
power prices. He has called for a concerted effort to increase energy
production.
The list of ideas Barton sent to subcommittee members was aimed at boosting
power generation and transmission in the West, increasing conservation and
preparing for blackouts.
Some of the production and transmission measures called for quickly expanding
a crucial power conduit in the Central Valley known as Path 15, using federal
funds for all or part of the project; allowing small power generators to sell
electricity to buyers other than the state's cash-strapped utilities; and
establishing standards for allowing businesses with on-site electricity
generation to send surplus supplies to the power grid.
Other steps, sure to be unpopular with environmentalists, could be taken if a
state declares an "electricity emergency." In addition to the idea of
harnessing the energy from nuclear-powered Navy ships and submarines, they
include temporarily waiving nitrogen oxide emission limits at power plants,
allowing the construction of generating plants on federal and Indian lands,
restarting mothballed nuclear reactors and delaying for a year a plan to
divert water in California's Trinity River from power generation to
environmental restoration.
On the conservation side, Barton proposed allowing states to lengthen
daylight savings time and requiring federal facilities to reduce energy use
by 10 percent.
Finally, the Federal Emergency Management Agency would be directed to open an
office in California, conduct an educational campaign to prepare the public
for blackouts and have a plan ready to provide assistance during power
outages.
Barton has been skeptical of the idea of having the federal government limit
the cost of wholesale power in the West and did not include that among his
proposals. Instead, he said the Federal Energy Regulatory Commission should
investigate whether wholesale prices are "unjust and unreasonable" -- a
finding FERC already has made once.
That drew the criticism of four California Democrats -- Reps. Henry Waxman of
Los Angeles, Anna Eshoo of Atherton, Jane Harman of Torrance and Lois Capps
of Santa Barbara -- who sit on the House Commerce Committee. They sent a
letter to Barton on Friday spelling out their objections.
"He's left off the 10-ton gorilla solution, which is directing the FERC to
.?.?. impose a reasonable cap on the price of wholesale electricity," Harman
said.
The Democrats also said that Barton's proposals would "undermine the Clean
Air Act" and that there is "widespread agreement among those directly
involved in California's electricity system that clean air rules are not
responsible for electricity shortages."
-----------------------------------------------------------------

Bush calls California energy crisis 'ominous'

But he foresees no quick relief, opposes controls
By George E. Condon Jr.
COPLEY NEWS SERVICE
March 28, 2001
KALAMAZOO, Mich. -- President Bush yesterday made his most extensive remarks
yet on the energy crisis in California, calling the situation "ominous" and
proclaiming that "the time to act is now."
Despite that pledge, though, he held out little hope of any speedy relief for
the hard-hit state. He also restated his opposition to energy price controls.
The president, who has previously addressed the energy crunch only in answers
to reporters' questions, used a "state of the economy" speech to a business
group at Western Michigan University to elaborate on his still-evolving
energy policy.
He broke no new ground in his remarks, but seemed to be reacting to West
Coast criticism that the federal government should be more aggressive in
finding a solution to the rolling blackouts plaguing the nation's most
populous state.
"The energy problem wasn't created overnight and we won't solve the problem
overnight," he said. "But we will at least start down the right road so that
the shortages we face today will not recur year after year."
He said a task force headed by Vice President Dick Cheney will come up with a
long-term strategy, but he ruled out any move by his administration that
would remedy the crisis quickly.
"We'll not solve the energy problem by running the energy market from out of
Washington, D.C.," he said. "We will solve the energy problem by freeing the
creativity of the American people to find new sources of energy and to
develop the new technologies that use energy better, more efficiently and
more cleanly."
He singled out for criticism any call that Washington cap energy prices.
"This administration does not, and will not, support energy price controls,"
he said to applause from the business-oriented audience. "Price controls do
not increase supply, and they do not encourage conservation. Price controls
contributed to the gas lines of the 1970s. And the United States will not
repeat the mistake again."
He portrayed the energy crisis as a clear threat to his hopes of revitalizing
the national economy.
And he signaled that he understands Californians are facing hardships.
"The lights are dimming in California. Consumers and businesses in California
are paying sharply higher energy bills. And as we compare our future energy
needs to the currently projected domestic energy supply, we see an ominous
growing gap," he said.
He said the blame for the problem belongs to previous decision-makers.
"Our people are paying a high price for years of neglect. And the time to act
is now," he said.
Meanwhile, Bush said he would nominate utility regulators from Texas and
Pennsylvania to fill vacancies at the Federal Energy Regulatory Commission,
or FERC, the agency that has played a pivotal role in the California crisis.
However, Bush stopped short of replacing the chairman of the commission,
Curtis Hebert, who has drawn fire from Gov. Gray Davis and other California
officials for his outspoken faith in open power markets and staunch
opposition to federal controls on the soaring price of wholesale power sold
in the West.
There was widespread speculation that Hebert, a Republican, was on his way
out as chairman.
A White House spokeswoman would not say whether Bush has ruled out naming
another commissioner to the top job at a later date.
Bush nominated Patrick Henry Wood III and Nora Mead Brownell to round out the
five-member commission.
Wood is chairman of the Texas Public Utility Commission and was an adviser to
Bush on energy issues during the presidential transition. Many observers had
expected Bush to name him chairman of FERC.
Brownell is a member of the Pennsylvania Public Utility Commission.
Both nominees, who face Senate confirmation, were praised by power industry
officials and consumer groups. They have helped steer deregulation plans in
their states that are thought to be on sounder footing than California's
failed experiment.
------------------------------------------------------------------

Rate hike means new political heat for California governor

By Alexa Haussler
ASSOCIATED PRESS
March 28, 2001
SACRAMENTO ) Rolling blackouts and a record increase in electricity rates are
putting the political squeeze on Gov. Gray Davis just as he prepares for his
re-election campaign.
The Democratic governor took a hit Tuesday when the Public Utilities
Commission ) three of its five members appointed by Davis ) approved the very
rate hikes he has repeatedly said would not be needed.
The power crunch is just the weakness political foes are looking for; it
could leave everyone from business owners to consumers looking for someone to
blame at the polls next year.
"He's the face of the problem right now and so he is going to be the target,"
said Nancy Snow, a political scientist at the University of California, Los
Angeles.
Davis already has been criticized as having a leadership style that is a
"little bit too much in the mushy, middle-of-the-road area," Snow said.
"That's something that he is going to have to overcome in order to
politically survive this crisis."
California Republicans blame the first-term governor for four widespread
power outages this year that they call "Gray-outs." His first major
challenger in 2002, GOP Secretary of State Bill Jones, is making energy a
campaign centerpiece.
A top state financial official and fellow Democrat, Controller Kathleen
Connell, says Davis' decision to buy power for Southern California Edison and
Pacific Gas and Electric is putting the state in financial danger.
And Democratic lawmakers are privately grumbling about Davis' handling of the
crisis as consumer groups threaten a revolt on the 2002 ballot. With up to 25
million Californians affected by the rate hikes, consumer activists hope to
attract millions of rebels to the polls.
The PUC voted unanimously to immediately raise rates up to 46 percent for
Edison and PG&E customers, saying that would reduce power use this summer and
help keep the cash-starved utilities in business.
The increases ) which come on top of already-approved hikes of 9 to 15
percent and a 10 percent increase planned next year ) are the biggest in
state history.
Davis issued a written statement Tuesday easing his ardent opposition to a
rate hike.
"While I have opposed rate increases, if it becomes clear that a rate
increase is absolutely necessary for the good of the state, I will support
one that is fair and do my duty to convince Californians of its necessity,"
Davis said.
Davis' aides are frantically trying to deflect criticism surrounding the
increase and assure voters the governor is working to build more power plants
and boost conservation to avert blackouts during the hot summer months.
Davis spokesman Steve Maviglio said the governor opposes a rate increase but
has no power to order the PUC to maintain current rates.
"They are an independent body, they can do what they want," Maviglio said.
He insisted the governor wasn't informed of PUC Chairwoman Loretta Lynch's
plan to announce a rate increase Monday, declaring to reporters: "It's not a
story ) it's the truth."
Still, some Republicans and Democrats have said the governor has been
inconsistent about his pull with the commission.
He announced last week at a dinner with state labor leaders that he had
directed the PUC to order utilities to start paying overdue bills to
facilities that produce renewable energy.
In addition, Davis administration officials informed several key Assembly
members Friday that the state's power-buying for Edison and PG&E could cost
far more than the $10 billion lawmakers and Davis estimated when they
approved legislation authorizing the power purchases, making a rate increase
of 50 percent or more necessary.
"He is fully dedicated to solving this thing, he doesn't just want to lay it
on the lap of a ratepayer or a taxpayer, and he's trying to come up with ways
to do that," Maviglio said.
The national attention the power problems draw is raising Davis' name
recognition around the country ) for better or worse ) as he considers
whether to make a presidential run in 2004.
Davis has been making the rounds on the national TV news and Sunday morning
talk shows to explain to the nation why the lights have been going out in
California.
He has attempted to shield himself by continually commenting that he
inherited the energy problems; then-Republican Gov. Pete Wilson signed the
1996 utility deregulation bill largely blamed for the crisis, and California
went years with no new power plants, Davis says.
Republicans turn the criticism back at him. The state GOP has already run
radio ads criticizing Davis' handling of the power problems and are launching
an all-out effort to blame him for the rate increases.
"It's a colossal failure of mismanagement on the part of the governor's PUC,"
said Assemblyman Keith Richman, R-Northridge.
But even with the energy crisis, Republicans have their work cut out for them
in 2002.
The state GOP ) long shackled by infighting between moderates and
conservatives ) is in the minority in the Legislature, holds just one
statewide office, Jones', and must come up with millions to match the nearly
$26 million Davis had raised nearly two years before the election.
And polls have shown residents growing increasingly frustrated with the
energy crisis, but not blaming Davis. Those surveys were taken before
Tuesday's rate hike and before California was hit last week with rolling
blackouts from San Diego to the Oregon border.
The governor's political campaign isn't taking any chances, moving quickly to
bite back at critics.
Garry South, Davis' chief political adviser, issued a statement Tuesday
saying Jones has failed to put forth his own solution.
"Put your megawatts where your mouth is," South said.
------------------------------------------------------------------
PUC Approves Largest Electricity Rate Increase in State's History

Regulation: Some customers will pay up to 46% more. Commissioners, facing
strong opposition before their unanimous vote, say they are trying to avert
blackouts. Critics say move won't solve the crisis.

By NANCY VOGEL and TIM REITERMAN, Times Staff Writers

PUC President Loretta Lynch and Commissioner Richard Bilas show strain of the
meeting at which the panel announced a rate hike. "We maintain the
responsibility to keep the lights on," Lynch said
ROBERT DURELL / Los Angeles Times

?????SAN FRANCISCO--With protesters jeering their disapproval, besieged
utility regulators Tuesday adopted the largest electricity rate hike in the
state's history and defended the action as the only way to keep the lights on
for millions of customers.
?????The California Public Utilities Commission unanimously approved an
increase of 3 cents per kilowatt-hour. That will boost rates by as much as
42% for some Southern California Edison customers and up to 46% for some
served by Pacific Gas & Electric Co.
?????The rate increase, which will cost customers nearly $5 billion a year,
takes effect immediately but will not show up on utility bills until at least
May.
?????The rate hike is the most far-reaching and politically volatile action
the state has taken thus far to ease an 11-month-old power crisis that has
nearly bankrupted the two largest utilities and triggered blackouts. But
critics say it does not solve the fundamental problem of runaway wholesale
electricity prices.
?????"The PUC has done all it can do to fight wholesale energy prices that
are unjust and unreasonable," said commission President Loretta Lynch. "We
maintain the responsibility to keep the lights on. . . . I believe that
adding another 3 cents will comprehensively address the need for revenues."
?????The commission took steps to have utilities begin paying the state
Department of Water Resources for the nearly $3 billion in power it has
purchased for them since mid-January.
?????The PUC also ordered utilities to start paying for future power from
alternative energy producers who are starved for cash and struggling to
operate. The blackouts last Monday and Tuesday were precipitated in part by
loss of power from such companies.
?????But it was the rate increase proposal that packed the auditorium at PUC
headquarters. And the drama of the vote--and the vocal opposition--spurred
each of the five commissioners to forcefully defend the unpopular action.
?????"These are extraordinary moments in California's history," declared
Commissioner Geoffrey Brown, a recent appointee of Gov. Gray Davis. "And
extraordinary moments require extraordinary courage. Loretta Lynch has taken
a lot of bad hits. But it was she who stepped up to the role of leader in
California."

?????Rate Increase Lacked Support
?????Lynch proposed the rate increase, even though an administrative law
judge at the PUC concluded that an increase was unnecessary and the PUC's own
consumer protection arm, the Office of Ratepayer Advocates, opposed it. She
also did not have the public support of Davis, who appointed her and two
other commissioners.
?????Davis has distanced himself from the PUC's action, saying the commission
was acting independently and that he remains unconvinced that a rate increase
is necessary.
?????Commissioners Henry Duque and Richard Bilas--who were appointed by
Republican Gov. Pete Wilson--called the rate hikes long overdue.
?????"Unless ratepayers want to face substantial rolling blackouts this
summer, we have to start paying our power bills," Duque said. "It cannot be
done with the current rates."
?????Saying "there is just no blood left in the turnip," Bilas warned that
"absent an immediate rate increase, the utilities will be in Bankruptcy
Court."
?????Before the vote, sign-carrying protesters chanted, "Rate hikes, no way,
make the energy companies pay." And the commission heard a parade of
witnesses, most opposing the rate increase. Some called on the state to use
eminent domain to seize power plants, as Davis said he might do as a last
resort.
?????Doug Heller, of the Foundation for Taxpayer and Consumer Rights in Santa
Monica, told the commission, "Go to these power pirates and tell them the
state treasury is not their money orchard."
?????Barbara George, of Women's Energy Matters, said, "We should give the
generators 24 hours to sign their plants over to the state and leave." George
was one of several people ejected for repeatedly disrupting the meeting.
?????At a hearing Monday, representatives of agriculture and manufacturing
industries warned that the increase would hurt their members and the
California economy.
?????The rate hike is the state's largest, according to the Office of
Ratepayer Advocates, which researched the issue.
?????Because the electricity rate is just one of many charges on a monthly
utility bill, the overall effect will be about a 28% increase in monthly
bills, said PUC staff.
?????Before the PUC action, homeowners and renters in Edison territory paid
7.2 cents per kilowatt-hour for electricity and another 5.3 cents per
kilowatt-hour for other services. The new rate, totaling 15.5 cents per
kilowatt-hour, boosts the overall bill by about 24%. The increase is about
26% for PG&E residential customers. But under Lynch's proposal, those
increases would not be applied equally.
?????To encourage conservation, she seeks a tiered system that would charge
miserly consumers of energy no more than current rates but would impose the
new higher rates on bigger users.
?????The proposal aims the rate increase at those customers who use 30% or
more beyond a so-called baseline amount, which is about half of the average
residential use per month and varies by region.
?????Exactly who will pay the higher electricity rate will be determined by
the PUC in hearings over the next month. Under Lynch's proposal, nearly half
of all residential customers would be spared rate increases.

?????Tiered Rates to Encourage Saving
?????Energy experts say tiered rates would encourage conservation, but they
disagree about how much.
?????Davis energy advisor S. David Freeman, general manager of the Los
Angeles Department of Water and Power, said utilities have long used tiered
rates when charging low-income customers. "So this is not brand new. It's
just a more aggressive use of it," he said.
?????UC Irvine economist Peter Navarro said he doubted that tiered rates
would do much to stave off blackouts. The greatest conservation gains come
from investment in efficient appliances, he said, and that's why tiered rates
are "no magic bullet."
?????The increase will not show up in utility bills until May at the
earliest, said Paul Clanon, chief of the PUC's energy division.
?????The higher charges for electricity consumed between now and whenever the
new rate structure is incorporated in monthly bills will be calculated
retroactively and charged to future bills, Clanon said.
?????Utility executives and consumer advocates all threw up their hands at
the question of whether the rate hike will be enough.
?????"Have we gotten the number right?" Duque said. "I don't know. I hope we
have. But this is a step in the right direction, and we'll return any money
not used to buy power."
?????Bruce Foster, a Southern California Edison vice president, also said the
rate increase is a step in the right direction. "Only time will tell," he
said, "if it is sufficient to meet the need."
?????In a statement, PG&E welcomed the PUC action as a "dose of realism," but
said the commission left unresolved a host of issues, including how much
money the utility will have to pay for power that the state purchases for
PG&E customers.
?????The PUC estimates that the increase will bring in an additional $4.8
billion annually from the 24 million people served by Edison and PG&E.
?????But that amount doesn't go far in today's California wholesale
electricity market.
?????The state and utilities spent $5.2 billion in January buying
electricity. The state, through the Department of Water Resources, has spent
nearly $3 billion in taxpayer money to buy electricity on behalf of the
utilities since Jan. 19 because power generators refused to sell to the
cash-strapped utilities.
?????Money utilities collect from their customers, even with the new rate
hike, is expected to cover a wide array of expenses, including payments on
$10 billion or more in revenue bonds that the state hopes to sell this spring
to cover the state's cost of buying power.
?????"The numbers don't add up," said Jason Zeller, an attorney with the
Office of Ratepayer Advocates. "Massive [additional rate] increases are my
concern. We are sticking a finger in the dike unless wholesale prices come
down."
---
?????Times staff writer Mitchell Landsberg in Los Angeles contributed to this
story.
--------------------------------------------------------------------------
With Energy Crisis Far From Over, Experts Say More Hikes Possible

Power: PUC action leaves questions unanswered, such as how to handle
utilities' debts, whether to buy grid.

By JENIFER WARREN and MIGUEL BUSTILLO, Times Staff Writers

?????As painful as Tuesday's electricity rate increase will be for some
consumers, power experts across the ideological spectrum say California is
not yet close to being free of the energy crisis that has engulfed it and
threatened its economy.
?????Because of that, still more rate hikes are possible, they say.
?????Consumer advocates, power company officials, legislators and regulators
disagree widely on the causes of and cures for the state's problems. But they
agree that California's energy woes are dizzyingly complex. And the rate hike
makes nary a dent in many dimensions of the problem.
?????"Is it over? Heavens no!" said Assemblywoman Jackie Goldberg (D-Los
Angeles), who heads a state Assembly panel investigating summertime power
supply issues. "It's a necessary step, but we're certainly not out of the
woods yet."
?????The increase, along with another important action Tuesday by the PUC,
did resolve two major issues--how the state will continue to buy electricity
that the financially shaky utility companies cannot purchase and how
electricity consumers will repay California's treasury for those purchases.
?????But the commission left unresolved a host of other questions: what to do
with the roughly $14 billion in debt the state's two biggest utility
companies racked up in recent months buying expensive power; whether the
state will buy the electricity transmission grid those utilities own; where
to find about $1.5 billion the utilities owe to producers of alternative
energy, many of whom have not been paid in months; and how to wrap up
negotiations to sign long-term contracts with generators to supply power in
years to come.
?????Said PUC President Loretta Lynch: "Until we can get wholesale prices
under control and get folks to conserve, we're going to be in this pickle for
a while."
?????Resolving the issue of repaying the treasury for power purchases was
crucial because the state is spending $45 million to $55 million a day to buy
electricity. To cover those costs, the state is supposed to float bonds,
which would be repaid from electricity bills. But without the higher rates,
officials feared there would be no way to cover the bond payments. And
without the bonds, all state taxpayers--and not just customers of the private
utilities--would be on the hook for the debt.
?????In addition to raising rates, the PUC on Tuesday approved a formula that
will determine the size of the bond issue, expected to be the largest of its
kind in U.S. history.
?????The formula allows for $12 billion in bonds. The state's three major
private utilities, Southern California Edison, Pacific Gas & Electric and San
Diego Gas & Electric, will have to determine how much power the state is
buying for them--the figure is roughly 30%--and use a proportionate amount of
the money they collect from customers to pay the state back.
?????A $12-billion bond issue is significantly larger than earlier estimates
that pegged it at $10 billion. But even the larger number is far less than
some believe will eventually be needed to cover the cost of power the state
is buying.
?????Unless prices are stabilized, state Treasurer Phil Angelides and others
have warned, further bond issues may be needed. Those, in turn, could require
more rate increases.
?????"It's possible that, with the rate increase and if we do a good job with
conservation, it's possible that [the bonds] may be less," said state Sen.
Debra Bowen (D-Marina del Ray). "It's also possible that, given the situation
this summer, where we have not been able to secure anything close to our
power needs . . . we could be paying significantly more."
?????The rate increase, which kicks in only for customers who use
significantly more power than a "baseline" amount, is intended to ease the
situation by inducing conservation and thereby cutting demand--forcing
"energy hogs" to switch off spa pumps or pay the price, as Lynch put it.
?????But no one can predict how the "hogs" will respond or whether the rate
hike--plus conservation incentives moving through the Legislature and the
completion of several new power plants this summer--will be enough to spare
the state from forced outages.
?????Tuesday did little to fuel optimism. Despite temperatures far milder
than on a typical summer day, another Stage 2 energy alert was declared by
the state's Independent System Operator after imports dropped sharply. The
state avoided blackouts, "but it was really close," a Cal-ISO spokeswoman
said.
?????Some state forecasts have California squeaking through the hot months
with no outages, but private forecasters see at least 20 hours of blackouts.
And Reliant Energy, one of the power plant owners, predicts 1,100 hours of
blackouts in the state this year.
?????Beyond the problems of supply, the state has still not resolved the
question of the utilities' debt. Edison and PG&E say they've lost nearly $14
billion since June because they have had to pay high wholesale power prices
that the state's deregulation law bars them from passing on to ratepayers.
?????Although the PUC estimates that the rate increase will generate an
additional $4.8 billion in revenue annually, most of that will go to paying
off bonds and other expenses. None is earmarked to relieve the utilities'
debt.
?????"When you do the math, the amount of money just doesn't get you very
far," said Assemblyman Fred Keeley (D-Boulder Creek).
?????That is where buying the transmission lines is supposed to enter the
picture. Gov. Gray Davis wants the state to pay $7 billion for the lines.
PG&E and Edison could then use the infusion of cash to pay off their bills
and become credit-worthy once more.
?????But negotiations over sale of the transmission grid seem to have bogged
down. Meanwhile, support for the deal in the Legislature appears to be
slipping. Republicans have long been opposed, but now support among Democrats
is waning.
?????Keeley, a critic of the transmission purchase all along, believes that
the state should instead buy the utilities' hydro-electric generators,
contending that they would bring in revenue from the power generated at the
dams.
?????"We're just going to sink dough into that [transmission system]," Keeley
said, adding that the grid needs an estimated $1 billion in repairs. The
hydro system, by contrast, would be a revenue-producing asset that could help
lower rates, he said.
?????A related question--still unresolved--is the fate of the state's nearly
700 producers of alternative and renewable energy, which supply more than a
quarter of the electricity used by California consumers. In a separate action
Tuesday, the PUC ordered utilities to begin paying the producers--whose
megawatts are desperately needed and who, in many instances, have not been
paid since November.
?????On Tuesday, the small producers delivered a little more than half of
their usual supplies to the utilities--a trend that has dragged on for
several weeks and last week helped nudge the state into blackouts.
?????Producers welcomed the PUC's order that they start getting paid. But,
they said, the move failed to address back payments, estimated at $1.5
billion, owed by Edison and PG&E.
?????"Generators find it more predictable and less risky to operate in Third
World countries than they do in the state of California," griped Marty Quinn,
executive vice president and chief operating officer of Ridgewood Power LLC,
which owns three small gas-fired generators.
?????Any move to resolve that issue, of course, would increase the debt owed
by the utilities.
?????On another front, state negotiators are finding it difficult to seal
long-term electricity contracts at rates more favorable than those on the
volatile spot market.
?????So far, only 22 contracts have been signed, in part because generators
are reluctant to commit to lower prices while they're still owed billions of
dollars by the near-bankrupt utilities. Experts say the power secured by the
current contracts will supply less than half of what the state will need this
summer.
?????Despite all the unsettled questions, at least one utility analyst, Dan
Ford of the Lehman Bros. investment firm, said the PUC's actions should
remove the immediate threat of utility bankruptcy and begin to lift the
"California cloud" over electricity generators.
?????But in a sign that the energy crisis is still causing concern on Wall
Street, Standard & Poor's said it would continue to carry a cautionary credit
rating for the state.
?????The rating agency, which placed California on a "credit watch" after the
state government began spending millions to purchase electricity, said in a
news release that it was not clear whether the rate hike would be enough.
?????Hovering in the background, meanwhile, is the threat of a ballot
initiative that could unravel whatever solutions state officials ultimately
craft. Leaders of the Foundation for Taxpayer and Consumer Rights have vowed
that any utility "bailout" would likely trigger a "voter revolt."
?????"The rate increase certainly makes an initiative more likely," the
foundation's lobbyist, Doug Heller, said Tuesday. If Gov. Davis does not
protect the public from "profiteers," Heller said, his group is ready to push
forward with an initiative in 2002.
---
?????Times staff writers Virginia Ellis, Dan Morain, Tim Reiterman, Nancy
Rivera-Brooks, Julie Tamaki, Nancy Vogel and Rone Tempest contributed to this
story.
--------------------------------------------------------------------------
NEWS ANALYSIS
Davis Keeps His Distance From Utility Rate Hikes

By DAN MORAIN, Times Staff Writer

?????SACRAMENTO--Gov. Gray Davis, convinced that he can't win votes by
delivering bad news, avoided the task of telling Californians what virtually
all experts have been saying for months--that electricity bills are going up.
?????Indeed, on Tuesday, the Democratic governor quickly moved to distance
himself from a rate hike of as much as 46% that was approved by the
California Public Utilities Commission, led by his appointee Loretta Lynch.
?????That and other recent moves have thrown Davis' credibility into
question--even in his own Democratic Party.
?????"If you're the governor," said political consultant Darry Sragow, "you
don't want to take the blame for a massive rate increase that is not going to
sit well with a lot of voters. You want to be in a position where you can
say, 'I didn't have a choice; my back was against the wall.' "
?????Davis describes his view of the situation as "optimistic." He has called
it an "energy challenge," not a crisis, even as the state's two largest
utilities border on bankruptcy, and the state experienced blackouts a week
ago, in mid-March, when electricity use was 50% less than it will be in the
summer, when demand is highest.
?????Davis and his aides say the governor is fully engaged in the problem,
understands its many dimensions and is working long hours to solve it. But
the crisis wears on, and an increasing number of lawmakers, including fellow
Democrats, are alarmed.
?????"It's an energy crisis, not an energy challenge," said Senate Energy
Committee Chairwoman Debra Bowen (D-Marina del Rey), who began warning of a
coming energy shortage 13 months ago.
?????"This is a major crisis," Sen. Don Perata (D-Alameda) said, "and it
would appear he is overwhelmed by it."
?????"If you don't face reality," said Sen. John Vasconcellos (D-Santa
Clara), "you can't possibly improve it. His posture has been baffling. I
lament what is going on. This is my beloved state, and we're in serious
peril, and it scares me."
?????Many academics, utility executives, Wall Street analysts and legislators
concluded weeks and months ago that rate hikes were necessary, given the
soaring wholesale price of electricity. Even Davis has acknowledged that a
rate hike might solve the situation.
?????"Believe me," Davis said Feb. 16, "if I wanted to raise rates, I could
have solved this problem in 20 minutes."
?????But in a reaction that added to lawmakers' bewilderment, Davis said in a
statement Tuesday that the PUC action was "premature because we do not have
all the appropriate finance numbers necessary to make a decision."
?????"Until we do," the statement continued, "I cannot support any rate
increase."
?????In taking steps to raise rates, Lynch may well end up taking substantial
flak for her governor.
?????"Recent polls show the PUC is very unpopular in this state," Sragow
said. "Gray Davis is still popular. Voters clearly don't see a connection
between the governor and the PUC."
?????Davis' aides say the governor didn't talk to Lynch before she acted.
Lynch, a frequent visitor to the Capitol, was in Sacramento late last week
and again Tuesday. She may not have spoken to Davis, but she did make other
top administration officials aware of her plans.
?????Lynch could have decided to act on her own. The state Constitution gives
the commission authority to raise utility rates. But the governor is well
known as a micro-manager, involved in the most minute details of state
governance. Davis repeatedly has said he expects all his appointees to "think
like I think," and not to act on their own.
?????As recently as last week, Davis directed that the PUC take specific
actions to help ensure that alternative energy producers get paid.
?????Davis has said the Legislature's job is to implement his vision. He has
said judges he appoints who later break from him on major issues should
resign. His appointees "should not be free agents."
?????So he strained his credibility by saying he was unaware that Lynch would
move to raise rates Tuesday, particularly given events that occurred late
last week.
?????On Friday, Davis Finance Director Tim Gage and Susan Kennedy, one of his
top aides, met with Assembly leaders behind closed doors. At the meeting, a
participant warned that rates might have to rise 50% to 100%.
?????Also Friday, a top aide to Davis told The Times that Davis' staff was
convinced that a rate hike was necessary, even as Davis continued to publicly
oppose it. On Sunday, a top Davis aide referred reporters to Lynch, who
confirmed that she would move to raise rates Tuesday.
?????Two months ago, Harry Snyder of Consumers Union was defending Davis.
Now, Snyder, who has worked with Davis on various issues for decades, is,
like many others, raising questions about the governor's credibility, his
penchant for secrecy and his competence.
?????"Something is wrong," Snyder said. "Either he is over his depth, or it
is hubris, or it is the great river in Egypt, 'Denial.' "
?????Here are some of the governor's statements and actions, since called
into question:
?????* Davis held a news conference Feb. 23 to say he had reached an
agreement on a rescue plan with Southern California Edison that included a
deal to buy its massive transmission system for $2.76 billion. A final
package, he said, would be announced within a week, not only with Edison but
with San Diego Gas and Electric.
?????A month later, a top utility executive described the talks as
"dreadfully slow." Negotiations over a similar deal with Pacific Gas &
Electric, which he said back in February would be completed by now, are even
further behind.
?????* Davis has refused to release details about contracts he signed with
independent generators to buy power. He said, however, that the contracts
accounted for 6,000 to 7,000 megawatts of electricity this summer, a
significant amount that would help protect the state from having to buy much
of its power on the far more costly spot market.
?????Last week, when he released some scant details in a report on the
contracts, experts who read it concluded that California would be forced to
buy half or more of its electricity on the expensive spot market.
?????* Davis brushed aside reporters' questions last week about the blackouts
that rolled across the state. He remained cloistered as the outages continued
for a second day, emerging only after they ended to announce a plan to ensure
that alternative energy producers would be paid. A week after he called on
lawmakers to quickly approve a bill that would help get them paid, the
legislation remains stalled.
?????"It is inept at all levels and doesn't encourage any confidence that he
can handle it," Snyder said. "Moreover, it doesn't encourage us that he is
going to tell the truth."
?????The energy crisis is perilous for Davis' reelection effort next year.
But the governor's strategy of being unremittingly optimistic and going to
great lengths to maintain his opposition to rate hikes, could be to his
benefit when he faces voters.
?????"Ethically," said UC Berkeley political scientist Bruce Cain, "not being
forthcoming is worse. Politically, the more he can obfuscate, the more likely
it is some people will buy the obfuscation. . . . The reason we see
obfuscation is that obfuscation works."
?????Not all politicians follow that maxim.
?????Davis' predecessor, Republican Gov. Pete Wilson, held a news conference
in 1991, as California plunged into a recession, to announce that he was
pushing for what became the largest tax increase in state history, calling it
necessary to help erase a $14-billion deficit. Top advisors had urged him to
leave the delivery of such bad news to others.
?????"Any time you deliver bad news to voters you're taking a risk," said Dan
Schnur, who was Wilson's spokesman. "But it is a much bigger risk to allow a
situation to fester, without preparing voters for decisions that have to be
made.
?????"Nobody likes pain," Schnur said. "But they are much more willing to
tolerate it if they understand why it is necessary."
--------------------------------------------------------------------------

Federal Energy Agency Unlikely to Order Refunds

Power: Regulatory panel says much of the overcharge alleged by Cal-ISO is
beyond its jurisdiction, and questions whether the rest is "excessive."

By MEGAN GARVEY and RICHARD SIMON, Times Staff Writers

?????WASHINGTON--What are the chances that federal regulators will order
electricity wholesalers to refund $6.3 billion in alleged overcharges?
?????Zero.
?????Officials of the Federal Energy Regulatory Commission have
already made clear that nearly $3 billion--almost half the total that
California's grid operator said last week was excessive--is off the table
because a statute of limitations puts alleged overcharges that took place
before Oct. 2 beyond their reach.
?????As for the rest, lawyers familiar with the agency and industry observers
note that FERC has consistently hesitated to use its full legal authority to
enforce "fair and reasonable" rates because of difficulty in defining that
phrase. Some within FERC question how much of the "excessive" rates
documented by the California Independent System Operator fall beyond FERC's
jurisdiction--for example, rates charged by municipal power suppliers that
are not regulated by the federal agency.
?????So far, FERC has ordered electricity wholesalers to justify or refund
only $124 million in alleged overcharges--just 5% of the amount that the
Cal-ISO has identified. That sum deals only with rates charged in January and
February 2001 during Stage 3 alerts--periods when electricity reserves fall
below 1.5%.
?????FERC's approach to the alleged California overcharges will probably not
become any more aggressive as a result of the two new members it will soon
have. President Bush has picked two state utility regulators to fill
vacancies on the five-member commission, the White House announced Tuesday.
?????The president plans to nominate Pat Wood III, chairman of the Texas
Utility Commission and a Bush ally, and Nora Mead Brownell, a member of the
Pennsylvania Public Utility Commission, to the FERC governing board.
?????Administration officials have indicated that Wood, 38, would assume the
FERC chairmanship, a position now held by Curt Hebert Jr., a staunch advocate
of energy deregulation.

?????Shake-Up at FERC Was Expected
?????The shake-up has been expected because of continuing complaints that
FERC has not been aggressive enough in dealing with high energy prices and
electricity shortages in California and elsewhere in the West. Hebert in
particular has angered California officials with his opposition to price
controls on wholesale electricity sales.
?????Although the administration wants to appear sympathetic to California's
plight, replacing Hebert has been a problem because he is a protege of Senate
Majority Leader Trent Lott (R-Miss.).
?????Cal-ISO officials--who pointed out that their $6.3-billion figure was
part of a study calling for stronger market controls, not for refunds--may
still formally ask FERC to augment the refund order for January and February.
FERC ordered wholesalers to justify $124 million worth of charges shortly
after Cal-ISO asked for $550 million in refunds for December and January.
?????FERC's refund process reflects the ambiguities facing federal regulators
who oversee an electricity market that was designed to follow the law of
supply and demand. At stake may be the final bill for electricity used to
date in California as well as future rates.
?????And the debate over the role refunds should play in addressing
skyrocketing wholesale electricity prices underscores diverging philosophies
of what went wrong in the California market and how to fix it. What role
should the government--specifically FERC, an agency with a mandate to ensure
"fair and reasonable" rates--play?
?????"The whole notion that there's such a thing as a just price is kind of
an anachronism from New Deal days," said Pietro Nivola, a Brookings Institute
scholar who studies regulatory politics. "Especially as we move closer to
some form of deregulation, we've come to understand that the price is what
the traffic will bear. In this case, utilities simply have to be able to get
higher rates at the retail end."
?????But others say FERC has failed to assert its authority, allowing the
wholesalers to operate with impunity.
?????"The message FERC has sent so far is, as long as you leave 10 cents of
every dollar in the bank we won't pull the alarm," said Mark Cooper, director
of research for the Consumer Federation of America.
?????Some on Capitol Hill say a massive refund order by FERC--while highly
unlikely--would go a long way toward reining in wholesale prices. But FERC
officials and many economists say that view is myopic and may do more harm
than good, potentially discouraging new suppliers from entering a market
already too tight. The memory of the 1970s oil crisis and a prevalent view
among economists that government intervention made matters worse has informed
the views of some longtime government officials and observers.

?????Refunds Called 'Inferior Remedy'
?????A clear sign of FERC's reluctance to call for refunds came late last
year, when the commission issued its initial proposition for remedies for the
California price increases. FERC officials said at the time, "Refunds may be
an inferior remedy from a market perspective and not the fundamental solution
to any problems occurring in California markets."
?????The decision by FERC to scrutinize electricity charges only during Stage
3 alerts in January and February was harshly criticized earlier this month by
some lawmakers and utility company officials. They complained that the narrow
focus eliminated tens of millions of dollars in charges some observers
believed were outrageous.
?????But even the $124 million questioned by FERC has been defended by the
wholesale companies. In briefs filed with the agency last week, they said
rates exceeding $430 per megawatt-hour--compared with a pre-crisis average of
$30 per megawatt-hour--were justified by the increased credit risk
wholesalers took in selling to near-bankrupt utilities that have billions of
dollars in outstanding debts.
?????Duke Energy, which FERC has said overcharged California by $20 million,
signaled some room for compromise in its compliance filing.
?????"We would be willing to forgo collection of credit premiums for these
months provided we were paid the FERC clearing price," company president Jim
Donnell said this week. "If we are not assured payment, the credit premiums
are obviously appropriate, and we would reserve our right to collect the
entire amount of the bids that are subject to the FERC order."
?????Both of Bush's Republican nominees to the commission are expected to win
Senate confirmation. But they can expect a grilling from Sen. Dianne
Feinstein (D-Calif.), who has accused power suppliers of price-gouging and
FERC of doing little to stop it.
?????"Certainly, my vote would be dependent on whether they're going to be
responsive to the present situation," Feinstein said Tuesday, grousing that
the administration has been "recalcitrant to the point of arrogance."
?????Feinstein met Tuesday with Vice President Dick Cheney, head of a White
House energy task force, but she described the meeting as "disappointing."
Feinstein also sent a letter to Bush asking to meet with him on the
California crisis, and adding a hand-written note: "The West needs your help."
?????A spokesman for Gov. Gray Davis said he hoped the new commissioners
would have a "more sympathetic ear" for the concerns of the Western states.
?????But word of the nominations came as Bush reiterated his opposition to
price controls. "Price controls contributed to the gas lines of the 1970s,
and the United States will not repeat the mistake again," he said in a speech
in Kalamazoo, Mich.
?????The nominees drew praise from the Electric Power Supply Assn. The group
expressed confidence that they would be "strong proponents of completing the
much-needed transition to truly competitive and vibrant power markets all
across the country."
?????Neither Wood nor Brownell could be reached for comment. Wood said in a
statement: "On our best day as regulators, we cannot deliver benefits to
customers as well as a functional market can. But the market must work right
first."
------------------------------------------------------------------------------
-----------------------------------------------

Wednesday, March 28, 2001
A Painful Step
Electricity rate increase may help, but Gov. Davis is yet to offer an
understandable plan to end the crisis.

?????By approving a whopping rate hike for big power users, the state Public
Utilities Commission finally has recognized the grim reality of the
electricity market in California, even if Gov. Gray Davis has not.
Electricity costs more these days, even aside from the piratical rates
charged by big generating companies at times during this emergency.
?????The increase, while probably necessary, will not by itself solve the
crisis or prevent rolling blackouts this summer. The two biggest private
utilities, Southern California Edison and Pacific Gas & Electric, still are
saddled with as much as $13 billion in debt for past power purchases. State
government still is shelling out some $50 million in daily power purchases
and has committed as much as $40 billion to future power contracts. Davis
continues to negotiate a takeover of the utilities' share of the state power
transmission grid in exchange for paying off some of the utilities' debts.
?????Despite all the hand-wringing and arm-waving, nothing that state
government has done since January has provided any significant new power
generation or conservation. Consumers are right to wonder what happened to a
promised statewide conservation campaign. After first ducking the power
problem, Davis launched a flurry of initiatives early in the year, most of
them still works in progress. But he still has not given the people an
understandable, coherent plan for getting out of this fix. Worse, he refuses
even to say how much the state is spending on power even as he plunges
Sacramento into the power business for decades into the future.
?????The irony of Tuesday's rate increase is that the state might have dodged
much of the mess if it had raised rates three months ago. But Davis, seeking
reelection next year, insisted that the crisis be solved "within the existing
rate structure." Late last week he attended a political fund-raiser at a Palm
Springs golf club while his staff was being briefed on the need for higher
rates, literally distancing himself from the act.
?????The rate increase, which will be drafted over the next 30 days, affects
customers of Edison and PG&E but not residents of Los Angeles or other cities
with full municipal power systems. The stated intent is that bigger users,
particularly businesses, will pay higher rates and be encouraged to save
major amounts of power during the summer. Under one scenario, nearly half of
households--low and medium users--would pay no more than they do now. The
boost is also intended to compensate taxpayers for the state's daily power
purchases, although there is no assurance yet that the new rates will meet
the full cost. The increase should be structured to give ratepayers some
relief if lawsuits against power generators' exorbitant pricing are
successful in winning refunds.
?????Those skeptical ratepayers who believe that the crisis is just a big
rip-off by the utilities and the energy companies will consider the increase
more of the same. You can't blame them, considering the lack of straight talk
from the governor, including his dodging of the rate issue.
?????However, most state experts, including Davis' own utilities
commissioners, say the rate increase is a critical first step in solving
California's power problems. If Davis has a plan to fix the problem some
other way, he should present it in detail to the people of California now.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
---------------------------------
PUC Votes To Jack Up Power Rates
Tiered increases approved as protests disrupt meeting
David Lazarus, Chronicle Staff Writer
Wednesday, March 28, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/28/M
N231034.DTL
The bill finally came due for California's experiment with electricity
deregulation as consumers were hit yesterday with the largest rate increase
in state history, an average 40 percent jump in monthly power costs.
The immediate rate hike was unanimously approved by the Public Utilities
Commission during a rowdy meeting that was repeatedly interrupted by chanting
and jeers from protesters.
Highway Patrol officers were directed by PUC President Loretta Lynch to
remove several demonstrators from the packed San Francisco auditorium.
"These are extraordinary moments in California's history, and extraordinary
moments demand extraordinary courage," PUC member Geoffrey Brown said before
the rate increase was passed.
The commissioners approved a new 30 percent increase and made permanent a
"temporary" 10 percent increase adopted in January. This will allow the
state's two largest utilities to charge customers an extra $4.8 billion a
year.
PUC members said higher rates will help overcome the wide disparity between
skyrocketing costs charged by power companies for electricity and the
relatively low amount paid by consumers under California's 1996 deregulation
law.
However, consumers' bills will not go up until a "tiered" rate system can be
introduced, requiring those who use more power to pay higher fees. That
system is expected to be in place by May.
Gov. Gray Davis, who has tried to distance himself from the PUC's move since
it was unveiled Monday, said in a statement yesterday that the rate increase
was "premature" and that he did not support the decision.
"While I have opposed rate increases, if it becomes clear that a rate
increase is absolutely necessary for the good of the state, I will support
one that is fair and do my duty to convince Californians of its necessity,"
he said.
Several PUC members acknowledged that such a huge rate increase might not
have been necessary had the commission acted sooner to remedy California's
power woes.
"We should have done this in January," Brown said, "but we didn't have enough
information."
"This rate increase is long overdue," said Richard Bilas, who also sits on
the commission. "We are finally transfusing some blood."
CONSUMERS PROTEST
If so, the donor -- ratepayers -- did not go willingly to the operating
theater. A number of citizens rose to speak at yesterday's meeting, and not
one was in favor of higher power rates.
"This is being shoved down the people's throats," said Dorothy Diez, an
elderly San Francisco resident. "Why don't they put the bills where they
belong and not on my back?"
She and others called on state officials to take a harder line with out-of-
state power generators, which have reaped windfall profits by charging sky-
high wholesale prices for their electricity.
Consumer groups urged the PUC to support special taxes on the generators'
earnings or even seizure of the companies' California power plants.
"Your actions are reprehensible," Ross Mirkarimi, a public-power supporter,
told the commission. "Do not do Gov. Davis' dirty work."
The governor did not attend yesterday's meeting, but his presence nonetheless
loomed large over the proceedings.
Consumer advocates derided Davis' claims this week that he played no role in
the decision to raise rates. They noted that the governor's appointees hold a
majority on the PUC and worked closely with Davis on a variety of past
issues.
Davis' staff was briefed on the rate hike before the PUC publicized its
decision.
'DAVIS CONTROLS PUC'
"Gov. Davis controls the PUC," said Doug Heller, assistant organizing
director of the Foundation for Taxpayer and Consumer Rights. "He is
responsible for the rate hike. We are paying more because of the failure of
his leadership."
"It seems absurd that Gov. Davis is saying his own agency is acting without
his consent," said Susannah Churchill, head of energy policy for the
California Public Interest Research Group. "He's just looking for political
cover."
The PUC decision was made on a day when California's grid operators declared
a Stage 2 alert, the first in a week, indicating that power reserves had
dropped below 5 percent.
When tiered rates are implemented, customers of Pacific Gas and Electric Co.
will see rates go up between 9 percent for "medium" power users and 36
percent for "heavy" users.
Those who can keep power consumption to within 130 percent of pre-
established limits will see no increase beyond the 10 percent rate hike
adopted in January.
Customers of Southern California Edison will see rates increase between 8 and
27 percent.
Bruce Foster, an Edison vice president, called the rate increase "a step in
the right direction," but said further increases may be needed to defray
soaring power costs this summer.
PG&E spokesman Ron Low said the San Francisco utility needs to study the
PUC's decision more closely before determining whether a 40 percent rate hike
will be sufficient.
"The PUC has done all it can," said Lynch, the PUC president. "We have fought
back hard in every venue possible against unjust energy prices."
NO FEDERAL HELP
In the end, though, she said state regulators were forced to admit that no
help would be forthcoming from federal authorities in capping wholesale power
rates, and that generators would continue exploiting California's chronic
electricity shortage.
"We maintain a responsibility to keep the lights on," Lynch said.
Along the same lines, the PUC approved a requirement that PG&E and Edison
repay the state Department of Water Resources for about $4 billion in power
purchases made on the cash-strapped utilities' behalf.
The commission also passed a motion forcing PG&E and Edison to pay smaller
power generators for their output. Half of all such generators were shut down
during last week's blackouts because they had not been paid by the utilities.
However, the PUC is only requiring that utilities pay for future electricity
purchases, and did not address the millions of dollars in payments still owed
the power companies.
Ann MacLeod, executive director of the California Cogeneration Council, an
association of smaller generators, said that by avoiding the question of back
debt, the PUC's move will do nothing to restore plants to operation.
"These generators will not come back online as a result of this decision,"
she said. "In fact, a greater number likely will have to drop offline."
Protesters chanting, "Hell no, we won't pay," urged consumers after the PUC
meeting to not include the higher fees in upcoming bills.
"This is just the beginning," said Medea Benjamin, who was among the
demonstrators evicted from the earlier proceedings. "Rates will go up and up
and up."
What's Next
The McCain-Feingold campaign finance reform bill faces several more tests,
among them:
- An amendment by Sen. Fred Thompson, R-Tenn., that would double the
contributions that donors may make to candidates, PACs and some other
organizations. A vote is expected today.
- Sen. Mitch McConnell, the measure's chief foe, refused yesterday to agree
to allow a final vote on the legislation tomorrow. McConnell, R-Ky., left
open the possibility of using parliamentary maneuvers to block a final vote.
Chronicle News Services

THE ENERGY CRUNCH
Low to Medium Users
(up to 130% of baseline)
0%
Medium Users
(130% to 200% of baseline)
9%
Heavy Users
(more than 200% of baseline)
36%

UNDERSTANDING YOUR BILL
1. Total Electric Charges: The electric usage multiplied by the rate in
dollars and cents.
2. Legislated 10% Reduction: 10 percent reduction, financed with bond sale,
mandated by state law that set deregulation in motion. Remains in effect
until no later than March 31, 2002.
3. Net charges: The cost of electricity service after 10 percent reduction.
Breakdown of electric charges
4. Electric Energy Charge: Average cost of buying electricity during billing
period.
5. Transmission: Cost of moving electricity from plants to distribution
centers.
6. Distribution: Cost of moving electricity from distribution centers to
homes.
7. Public Purpose Programs: Funds benefit programs such as affordable service
for low-income families and conservation programs.
8. Nuclear Decommissioning: Fee to restore plant sites to original condition
once shut down.
9. Competition Transition Charge: Originally built into rates as a charge
above the cost of providing power. Called "headroom," it was essentially an
extra fee to pay back utilities for their investments in power plants. At the
moment, it's a negative number because the cost of buying power on the
wholesale market is so much higher than the rate customers can be charged by
law.
10. Trust Transfer Amount: Fee to pay off bonds that financed 10 percent rate
reduction.
Baseline Information Box
11. Baseline Quantities: The maximum amount of usage that can be billed at
the regular rate; varies by season, climate zone and heat source.
12. Baseline Usage: Amount of electricity usage up to baseline quantity
level, billed at regular rate.
13. Over Baseline Usage: Amount of electricity used above baseline
quantities, at a higher rate.
HOW THINGS WOULD CHANGE
The primary areas in which a customer bill would change under the new system
would be:
1. The creation of a new line item in the Baseline Information box for
electricity used 130 percent above the baseline. The line would reflect how
much was used at that level and the rate for that usage.
2. A higher dollar amount in the Electric Energy Charge line item reflecting
the increase cost from the rate hike. .
SOURCE: PG&E Web site; interviews.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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-----------
Developments in California's power crisis
The Associated Press
Wednesday, March 28, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/03/28/state0
859EST0138.DTL
, , -- (03-28) 05:59 PST Here is a look at developments in California's
electricity crisis:<
WEDNESDAY:< ?-- The state remains free of power alerts in the early morning as power ?reserves stay above 7 percent. ?-- The Assembly resumes hearings on California's high natural gas prices. ?-- The Assembly is expected to try again to pass a bill that would let the ?state Public Utilities Commission order Southern California Edison Co. and ?Pacific Gas & Electric Co. to pay alternative-energy plants. ?TUESDAY:<
-- The PUC votes unanimously to approve electricity rate hikes of up to 46
percent for customers of California's two largest utilities. The board votes
5-0 to increase rates immediately for PG&E and Edison despite yells from
protesters. The increases are the largest in California history.
-- Stock in both utilities suffer slight losses after expectations of the
rate hikes Monday caused shares in PG&E Corp. to surge 29 percent and Edison
International's stock to gain 30 percent. Edison International closed down 39
cents at $14.16 a share. PG&E Holding Corp., parent of Pacific Gas &
Electric, closed down 55 cents at $13.20.
-- In a Tuesday afternoon conference call, Southern California Edison says it
will begin paying interest to its bondholders after weeks of failure to pay.
Company authorities say they have not heard whether the news will boost their
credit rating and do not specify a dollar amount for monthly interest
payments.
-- The Los Angeles Department of Water and Power, which is not attached to
the state power grid and is not affected by deregulation, issues a statement
Tuesday assuring that customer rates ``will continue to remain stable.''
-- Standard & Poors retains California's cautionary credit rating despite
state regulators' decision to raise electricity rates. The state has been on
a credit watch ``with negative implications'' since it began spending $45
million a day to buy electricity for customers of two nearly bankrupt
utilities. The crediw watch will remain in effect despite a rate increase
state regulators approved Tuesday.
-- President Bush says the electricity price caps sought by California's Gray
Davis and other Western governors would worsen the region's energy crisis
instead of helping cure it. In a speech to the Kalamazoo Chamber of Commerce,
Bush says price controls helped cause the gasoline crisis of the 1970s, and
he won't make the same mistake.
-- Joseph Fichera, the governor's chief negotiator on the purchase of
transmission lines, says he is exchanging drafts of proposed agreements with
Edison officials but won't say how soon a final agreement may be reached. He
says negotiations are continuing with PG&E and San Diego Gas & Electric.
-- State agencies announce a March 29 workshop in Ontario for developers who
hope to build peaking power plants in time for this summer. The event is
similar to one held two weeks ago in Sacramento. Peaking plants are used for
short periods when power supplies run low.
-- California's Independent System Operator declares a Stage 2 alert when
electricity reserves were approaching only 5 percent of available power. ISO
spokeswoman Stephanie McCorkle says the alert was triggered when 1,000
megawatts was unexpectedly lost from the Pacific Northwest. WHAT'S NEXT:< ?-- The Davis administration continues negotiations with Edison, PG&E and San ?Diego Gas & Electric Co. over state acquisition of their transmission lines.< ?THE PROBLEM:<
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices that the state's electricity deregulation law bars them from
passing onto ratepayers, and are close to bankruptcy.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers.
,2001 Associated Press ?
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Energy Nominees Would Give GOP Majority on Panel
Carolyn Lochhead, Chronicle Washington Bureau
Wednesday, March 28, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/28/M
N139149.DTL
Washington -- President Bush nominated two new commissioners to the nation's
top energy regulatory body yesterday, retaining the current chairman who has
criticized California's handling of its energy crisis.
Bush tapped a fellow Texan, Patrick Henry Wood III, chairman of the Texas
Public Utilities Commission, and Nora Mead Brownell, a Pennsylvania public
utility commissioner, to fill two vacancies on the five-member Federal Energy
Regulatory Commission.
The appointments would give Republicans a 3-to-2 majority on FERC, as the
commission is known, and probably solidify the agency's opposition to
imposing wholesale energy price caps sought by California Gov. Gray Davis and
Sen. Dianne Feinstein, both Democrats.
Both nominations require Senate confirmation, and Feinstein indicated
yesterday that she might oppose the nominations.
"I would hope they would come in and talk with me," she said. "Certainly my
vote would be dependent on whether they would be responsive to the present
situation. Up to this point, the administration has been recalcitrant to the
point of arrogance. If that is the case with these new appointees as well,
they won't have my vote."
FERC regulates wholesale power markets and interstate natural gas pipelines.
Curt Hebert, named chairman by Bush earlier this year, will remain in his
post. Although Hebert's outspoken free-market views are in sync with the
administration's, there had been speculation that Bush would tap Wood for the
top job. Some thought Bush might want a familiar ally to head an agency that
used to be a regulatory backwater but now is among the most politically
sensitive spots in the administration.
Wood has overseen electric utility deregulation in Texas, which is scheduled
to open its market to competition Jan. 1, 2002, but based on a model that
differs significantly from California's scheme. Texas has attracted ample new
power generation since 1995, and is experimenting with partial retail
competition for commercial users.
Brownell helped oversee Pennsylvania's electricity deregulation, which is
cited as a successful contrast to California's experiment.
FERC has come under heavy political fire from California Democrats for not
cracking down hard enough on alleged price gouging of California utilities by
out-of-state energy producers.
Hebert has been sharply critical of California's response to its electricity
mess, once describing Davis' plan to take over the utilities' transmission
lines as "nationalization." He is adamantly opposed to price controls and
enjoys the strong backing of fellow Mississippian and Senate Majority Leader
Trent Lott, who pressured the White House to keep him.
Hebert and Energy Secretary Spencer Abraham have voiced strong opposition to
price controls on wholesale electricity, arguing that would worsen
California's blackouts by discouraging electricity sales from outside the
state.
Vice President Dick Cheney, who met informally with about 10 senators in his
Senate office yesterday, also restated the administration's opposition to
price caps, telling Feinstein price controls would not work and citing their
failure in the Nixon administration.
Feinstein, who has said she equates helping California with the willingness
to impose federal price caps, called Cheney's response "very disappointing."
"There was really no overture," Feinstein said. "There was very little
willingness to help. Not even an offer of help. It is truly amazing to me,
because this crisis is not going to be confined to California. . . . What we
really need is a period of price stability . . . and they keep going back to
Nixon and price controls and saying they don't work. We all know that, but
what we are seeking is an interim period of stability until we can increase
supply."
Tell Us What You Think -- Can you save 20 percent on your energy usage? Gov.
Gray Davis' administration is offering rebates to Californians who save on
power starting in June, and if you've got a strategy for conserving, The
Chronicle wants to hear it. We'll be writing about the hardest-working energy
savers in a future story. To get involved, write to the Energy Desk, San
Francisco Chronicle, 901 Mission St., San Francisco, CA 94103; or send e-mail
to energysaver@sfchronicle.com.
E-mail Carolyn Lochhead at clochhead@sfchronicle.com
,2001 San Francisco Chronicle ? Page?A - 13
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Megawatt Foolish
Strike a Pose for Energy Conservation
Arrol Gellner
Wednesday, March 28, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/28/H
O179614.DTL
"Spare at the spigot," admonishes an old proverb, "and let out the bunghole."
That rather tidily sums up America's haphazard attitude toward energy
conservation. We gladly rally to trim our energy use by a few percent,
whether at home, at work or in our cars, but we ultimately feel little
urgency to change the overwhelming wastefulness of our built environment.
During the past two decades, we've done plenty of "sparing at the spigot,"
and that can only be applauded.
We've passed minimal building energy standards such as California's Title 24
but then wiped out much of the savings by building the sort of needlessly
bloated, energy-guzzling homes that now sprawl across acre after acre of once
pastoral landscape.
We've enacted minimum standards for gas mileage -- excepting SUVs, but you
don't drive one of those, do you? -- yet we've made little headway in curbing
our reliance on the automobile itself.
How did we get into this jam? A fair share of the blame for our disastrous
land-use policies belongs at the feet of the very people who insisted they
knew better: the postwar city planners.
They've left us our current legacy of hyperorganized zoning ordinances that
encourage -- in fact practically mandate -- urban sprawl. These in turn have
produced a national reliance upon the automobile that has only increased.
ON THE ROAD AGAIN, AND AGAIN
Flying in the face of all we've learned about the environment during the past
decades, the year 2000 set the all-time record for U.S. automobile sales,
with some 17.4 million cars and trucks sold.
And no wonder Americans remain auto-centered. Too many planners and state
transportation departments still consider freeway expansion programs the
solution to our mass transportation woes, even though it's been demonstrated
time and again that bigger highways merely invite more traffic instead of
reducing it.
We consumers are to blame as well, for buying into the idea that a
snowballing trend of consumption is the very embodiment of success. We're
hooked on big houses; but because housing prices are so high in the Bay Area,
we're willing to move out to less populated areas so we can afford them.
We willingly drive an hour or even two to get to work -- a commute that would
have been considered perfectly absurd even 20 years ago. Pretty soon, of
course, the new community is as choked with cars and asphalt as the old one.
The real pity is that we've recognized the folly of these trends for decades,
and we've done next to nothing to even protest them, let alone change them.
PLANNING FOR THE PAST
And thanks to the hidebound attitudes of so many civic planning departments,
little of substance has changed in our land use policy since the 1950s: Our
hyperorganized zoning ordinances still jealously guard the outdated postwar
ideal of the single-family home surrounded by largely useless strips of
"setback" land, and continue to frown on more intelligent arrangements such
as zero-lot-line construction, courtyard homes and mixed commercial and
residential planning.
By all means, save all the energy you can. But while any move toward
conservation is commendable, it's America's fundamental building practices
that really need changing, not the position of the light switch in your
hallway.
Arrol Gellner is an Emeryville architect who also teaches at Chabot College,
Las Positas College and the Building Education Center. Write to him at
home@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?WB - 1
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New York mayor calls for cap on power prices

Wednesday, March 28, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/03/28/nation
al0701EST0506.DTL
(03-28) 04:01 PST NEW YORK (AP) -- Mayor Rudolph Giuliani is urging federal
regulators to set price controls on wholesale power producers to protect
consumers from rate hikes this summer.
In a speech Tuesday to Wall Street and utility executives, Giuliani said a
surge in electricity prices last summer and an imminent shortage of power
supplies demand government intervention. Electricity bills rose an average 43
percent for New Yorkers last July.
``The double-digit price increases that New Yorkers had to pay last summer
are just unacceptable,'' Giuliani said.
Giuliani said the move toward deregulation in the early 1990s was done
hastily and needs to be adjusted. Until more power plants are constructed, a
temporary price cap would protect consumers, he said.
A spokesman for KeySpan, a major New York-area energy producer, said such
price caps would likely discourage the construction of new power plants.
In California, deregulation, power plant maintenance and scarce
hydroelectricity have been blamed for an extended power crisis that has led
to rolling blackouts four times this year. On Tuesday, California regulators
approved rate increases of up to 46 percent for customers of that state's two
largest utilities.
,2001 Associated Press ?
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Power regulators approve rate hikes of up to 46 percent
KAREN GAUDETTE, Associated Press Writer
Wednesday, March 28, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/03/28/state0
302EST0101.DTL
(03-28) 05:53 PST SAN FRANCISCO (AP) -- Sam Sahouria owns a small downtown
grocery and deli, a few blocks from the offices of the state Public Utilities
Commission. He now fears a decision by the PUC could force him to lose the
store he has run for the past 15 years.
Amid the jeers of protesters yelling ``Hell, no, we won't pay,'' the PUC
voted unanimously Tuesday to approve electricity rate hikes of up to 46
percent for customers of California's two largest utilities.
The increases for Pacific Gas and Electric Co. and Southern California Edison
Co., which take effect immediately, are the largest in California history.
``It's terrible, we will probably go out of business,'' Sahouria said. ``It's
very simple -- we cannot afford any rate increases.''
PUC commissioners, who voted 5-0 for the rate hikes, said they were necessary
to head off blackouts this summer and to keep the cash-starved utilities from
going under.
However, the PUC simultaneously ordered the nearly bankrupt utilities to pay
the state for billions of dollars of electricity it has bought on behalf of
their customers, and to pay producers of renewable energy for future
electricity deliveries.
``The PUC has done all it can,'' commission president Loretta Lynch said.
``We have fought back hard in every venue possible against these unjust
energy prices.''
Not all PG&E and Edison customers will face higher bills. The PUC said it
would create a tiered system that will protect low-income customers and
penalize those customers who use the most electricity.
Ratepayers have labeled the plan a ``rip-off'' that could hit as many as 10
million homes and businesses fighting to stay cool amid rolling blackouts and
spiraling energy costs. The rate hikes could effect as many as 25 million
Californians.
The increase is on top of a 9 percent to 15 percent rate hike the PUC
approved in January and made permanent Tuesday. An additional 10 percent
increase already is scheduled for next year.
``Our bills have gone from $26 to $70 for a stinking studio apartment and we
don't have a heater, we use the oven to heat up the studio,'' said Belinda
Lazzerini, 40, who serves fruit smoothies at Jitters & Shakes in downtown San
Francisco. ``The laundromat has gone up from $1.50 to $3, so now we will have
to clean our clothes by hand and dry them in the basement. It's crazy.''
Though utilities still cannot set their own rates for electricity because of
a rate freeze mandated by the state's 1996 attempt at deregulation, the PUC
has the authority to increase rates. The rate freeze must end by March 2002.
The PUC meeting was disrupted at least five times by screaming protesters.
Before the meeting, a group led by former Green Party senatorial candidate
Medea Benjamin stood in the PUC chambers with yellow signs saying ``We Won't
Pay.''
``We don't need increases in our bills, we need increases in law enforcement
so our governor can protect us from these modern-day robber barons,'' said
Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa
Monica.
Meanwhile, the state remained free of power alerts Wednesday morning as power
reserves stayed above 7 percent.
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No explanation given after officials approve 27 percent rate hike
Posted at 10:00 p.m. PST Tuesday, March 27, 2001
BY STEVE JOHNSON

Mercury News

After months of waiting for the state's elected leaders to act, California's
Public Utilities Commission on Tuesday unanimously approved the largest
electricity rate increase in at least two decades, and offered no assurances
that more hikes won't be needed soon.
The 3-cent per kilowatt-hour increase would boost average rates for all
customers by 27 percent, although the precise residential and business rates
have yet to be determined. It is effective immediately and will show up on
bills in May.
The commission's vote in San Francisco played out against an odd political
backdrop: Gov. Gray Davis, who appointed three of its five members, said he
wasn't consulted about the planned rate hike and that he does not favor it.
But Davis, after learning Sunday night about the plan, apparently did not
seek to block the commission's action. Instead, he issued a statement
immediately after the vote that called it ``premature because we do not have
all the appropriate financial numbers necessary to make a decision. Until we
do, I cannot support any rate increase.''
The commission, however, said it had no alternative but to raise rates,
considering that the state in recent weeks has been forced to spend billions
in taxpayer funds on power because its cash-strapped utilities are no longer
credit-worthy.
But even some commissioners were uneasy. Davis' most recent appointee on the
commission, Geoffrey Brown, acknowledged during the Tuesday meeting that ``we
as commissioners had very little time to review this.''
In fact, an administrative law judge -- using much the same evidence that was
included in the decision to raise rates -- had concluded recently that no
such increase was justified.
The commission did not explain how it arrived at the increase of 3 cents per
kilowatt-hour. Previously, officials with Pacific Gas & Electric Co. and
Southern California Edison had only sought a 2-cent per kilowatt-hour
increase.
Experts pointed to a number of unanswered questions that make it uncertain
whether a 3-cent hike will bring in sufficient revenue to cover the enormous
cost the state has incurred since it began buying power.
The state still doesn't know how much its effort to bail out PG&E and Edison
-- which involves a state purchase of the utilities' high-voltage lines --
will cost. It's also unclear how much the state might wind up spending on the
expensive electricity spot market this summer, and whether an additional rate
increase would be needed to cover that.
``Have we got the number right?'' asked Commissioner Henry Duque, in
reference to the 3-cent increase. ``I don't know. But I hope we have.''
Roderick Wright, D-Los Angeles, who chairs the Assembly Utilities Committee,
told the commission that he opposed the idea of approving any rate hike now,
until the state has a better idea of the total amount that consumers
ultimately will have to bear.
By establishing a 3-cent increase now, ``we'll be back in a short time,
potentially doing it again,'' he said. ``To be nickeled and dimed to death as
we're doing here, I don't think that does anybody any good.''
Signs of confusion
Utility officials sounded similarly unimpressed and confused.
``While providing a welcome dose of realism,'' PG&E president Gordon Smith
said in a prepared statement, the rate hike and other actions taken by the
commission Tuesday ``do not offer a comprehensive solution, fail to resolve
the uncertainty of the crisis and may even create more instability.''
Among PG&E's major concerns is whether the utilities will be compensated for
their debts -- which they claim total about $13 billion -- and whether PG&E
or the state will be responsible for the cost of power purchased on the spot
market.
Bruce Foster, an Edison vice president, offered a similar lukewarm
endorsement of the increase. ``I'm not saying that it will do it,'' he said,
acknowledging the possibility of more increases down the road, but he called
the hike ``a step in the right direction.''
Rate hike vs. bankruptcy
Commissioner Richard Bilas said he feared that if the utilities were forced
into bankruptcy, the judge overseeing such a case could order much bigger
rate hikes to stabilize the companies' finances.
``A rate increase designed by this commission is far better than one designed
by a bankruptcy judge,'' Bilas said, adding that he also was concerned about
how the state appeared to be buying electricity ``like a drunken sailor.''
But others reacted angrily to the commission's decision. Several protesters
hoisted signs at the meeting that read, ``we won't pay'' and chanted, ``rate
hikes go away, make the energy companies pay.'' Police later escorted them
out of the meeting after commission President Loretta Lynch became annoyed at
their noisy interruptions.
Instead of raising rates, they and other consumer advocates urged Davis to
use the state's power of eminent domain to take over the power plants
operated by companies accused of gouging the public.
``The governor should start seizing plants until these crooks start playing
by the rules of society,'' said Mike Florio, senior attorney with The Utility
Reform Network in San Francisco. ``They're economic war criminals.''
Officials in Davis' office said Tuesday that they intend to review the
commission's action and decide over the next few weeks whether to support it
or seek changes. But to some people, the governor's claim of ignorance about
the commission's plan -- and his seeming inability to do anything to stop the
rate hike from being approved -- severely strained credulity.
``Give me a break,'' said Sen. John Vasconcellos, D-San Jose. ``Who appointed
them and who's been giving orders all along?''
Davis did say for the first time Tuesday that he might be willing to consider
having consumers pay more for electricity. ``If it becomes clear that a rate
increase is absolutely necessary for the good of the state,'' he said, ``I
will support one that is fair.''

Dion Nissenbaum and Hallye Jordan contributed to this report.

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Impact of increases will vary greatly
Posted at 9:44 p.m. PST Tuesday, March 27, 2001
BY JOHN WOOLFOLK

Mercury News

The rate increases approved Tuesday will hit Californians in very different
ways: The heaviest users of electricity will probably pay the most, and
nearly half of residential users will likely see no increase at all.
Although the details aren't yet final, state regulators say they intend to
fashion a ``tiered structure'' to implement the higher rates. Here's how the
proposal will affect your bill:
When do the higher rates kick in?
Regulators consider the increase effective immediately but say it won't
appear on bills until May. While regulators agreed that rates will rise, they
still have to approve a structure for how customers will share the cost.
Hearings are expected next month. Once the structure is approved, regulators
say, utilities can apply it retroactively to Tuesday's rate approval.
Do the new rates affect all Californians?
No. The Public Utilities Commission, which approved the rate increase, has
authority over only investor-owned utilities: Pacific Gas & Electric Co.,
Southern California Edison and San Diego Gas & Electric, which together serve
about 10 million homes and businesses. The increase affects PG&E and Edison,
but not San Diego. Municipal utilities, including Santa Clara, Palo Alto,
Alameda, Sacramento and Los Angeles are governed independently and exempt.
How will the new rates work?
Regulators are planning a tiered rate structure in which large commercial and
power-guzzling residential customers pay a greater share. Residential
customers would pay more according to how much they exceed their ``baseline''
amount.
What is the baseline?
The baseline is considered the average household usage. It was established
years ago to encourage conservation by charging a higher rate for electricity
usage over that amount.
Does everybody have the same baseline?
No. Customers are assigned different baselines to account for variations in
electricity needs caused by regional climate, household type and season.
How many baselines are there?
PG&E residential customers in the San Francisco Bay Area are divided among
three climatic baseline territories: the coastal areas including San
Francisco and the Peninsula, the East Bay and South Bay, and the Santa Cruz
Mountains.
Within those territories, there are separate baselines for single-family
homes and multifamily apartment complexes, as well as for homes with only
electric appliances instead of both gas and electric.
In addition, baseline rates are adjusted for summer and winter usage. Summer
rates begin May 1, and winter rates begin Nov. 1.
How do I find out my baseline?
Your electric bill shows the baseline amount in kilowatt-hours and the rate
you are billed for that amount. It also shows how much power you used over
the baseline and the rate you were billed for it.
How does the baseline affect my bill?
Customers already pay about 14 percent more for power they use over their
baseline. Under the proposed tiered rates, PG&E customers who use no more
than 130 percent of their baseline amount wouldn't pay any more than they do
now. PG&E customers who use up to twice their baseline would see an average 9
percent increase in monthly bills. Those who use more than twice their
baseline would see an average increase of 36 percent. Edison customers would
have similar rates. Almost half of the utilities' customers don't exceed 130
percent of their baseline.
Why am I hearing different reports about the size of the rate increase?
The increase can be calculated many ways. The commission approved an increase
of 3 cents a kilowatt-hour, three times the 1-cent surcharge approved in
January, which was made permanent Tuesday. Because the 1-cent increase
averaged 10 percent, some have said that, plus the 3 cents, amounts to a
40-percent increase.
Others have added 3 cents to the amount the utilities charge just for
electricity, which for PG&E is now 6.4 cents, and come up with a 47-percent
increase.
Because total rates include transmission and maintenance surcharges, others
have added 3 cents to the average total rate of 11.14 cents for all
customers, a 27-percent increase. Under the tiered proposal, the average
residential rate would rise 20.8 percent from 12.46 cents to 15.05 cents.
But average bills for residents' bills would increase up to 36 percent,
depending on electricity use.
Can my business avoid the rate hike by saving energy?
The proposed tiered rate structure based on the baseline use doesn't apply to
commercial and industrial businesses. In fact, the proposal calls for a
proportionately greater increase for businesses, which pay lower rates than
residential customers. Commercial customers would see a 22.6-percent
increase. Industrial customers, generally over 500 kilowatt-hours a month,
would see a 41-percent increase.
But businesses can still get a discount on summer bills by saving power. Gov.
Gray Davis this month ordered 20-percent rebates for all customers who reduce
electricity usage 20 percent over last year between June and September.
Residential and small commercial rebates will be based on 20 percent
reduction of total consumption, while commercial and industrial rebates will
be based on 20 percent reduction of peak load.
If I qualify for assistance in paying my bills now, will I have to pay more?
Possibly. The proposal calls for exempting customers in the California
Alternative Rates for Energy program, and expanding eligibility from 150
percent to 175 percent of federal poverty guidelines. But commissioners
aren't ruling out tiered rates for those customers to encourage them to save
electricity.

Contact John Woolfolk at (408) 278-3410 or at jwoolfolk@sjmercury.com
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PUC raises power rates
Edison customers could see monthly bills go up by 27%. The agency plans to
build a tiered system costing more for heavy users.
March 28, 2001
From Register staff
and news service reports

Dorothy Kascak, 82, of Cypress holds her dog, Baron. Kascak needs oxygen full
time. She's afraid power rate hikes will make air conditioning too costly
Photo: Bruce Chambers / The Register
?
?

SAN FRANCISCO Amid the jeers of protesters yelling "Hell no, we won't pay,"
the state Public Utilities Commission voted unanimously Tuesday to approve
electricity rate increases of as high as 36 percent for customers of
California's two largest power utilities.
The rate increases for Pacific Gas & Electric Co. and Southern California
Edison Co., which take effect immediately, are the largest in California
history, totaling $4.8 billion a year.
PUC commissioners said the increases were necessary to head off blackouts
this summer and to keep the cash-starved utilities from going under.
The PUC simultaneously ordered the utilities to pay the state for billions of
dollars of electricity it has bought on behalf of their customers, and to pay
producers of renewable energy for future supplies.
Commission President Loretta Lynch said the PUC had tried to avoid rate
increases but saw no other option.
The commission voted to boost rates by 3 cents a kilowatt-hour. PG&E rates
would rise by as much as 36 percent and Edison rates by as much as 27
percent.
Not all PG&E and Edison customers will face higher bills.
The PUC said it would create a tiered system that will protect customers who
don't use much electricity and penalize those who use more.
Dorothy Kascak, 82, of Cypress is on 24-hour oxygen supplied by a machine in
her home that runs on electricity.
Her bill is already $135 a month despite the fact that she gets a reduction
for being on life support.
"They say we're going to have to go without air conditioning in the summer,"
she said.
"I can't live without air conditioning. I have a bad heart, bad lungs and I'm
a diabetic."
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Energy payments not enough, gas-using generators say
March 28, 2001
By HANH KIM QUACH
The Orange County Register
Natural-gas-dependent alternative generators say that even if the major
utilities begin paying them for energy, it won't be enough cash.
State regulators at the Public Utilities Commission on Tuesday ordered
Southern California Edison and Pacific Gas & Electric to start paying
alternative-energy producers $79 per megawatt-hour. But alternative
generators that use natural gas say that's at least $20 below what it costs
to produce the energy.
"On the short run, we can't generate,'' said David Lloyd of NRG Energy Inc.,
which this month shut down its 260- megawatt plant in the Bay area that sells
steam to the C&H sugar factory next door. "It just costs so much for
electricity.''
Alternative generators have been paid little, or nothing, the past four
months and are now collectively owed more than $1 billion by the utilities.
The situation has prompted many of the small generators to scale back or shut
down their plants, resulting in a 2,900-megawatt loss to California - enough
to power 2.9 million homes. That was a factor in blackouts last week and the
state's Stage 2 energy alert Tuesday.
There are two classes of alternative generators: renewables, which use solar,
wind or clean-burning technologies to produce energy, and co-generators,
which use natural gas to produce energy but share the heat output with a
manufacturer. Renewables, which make up half of the 10,000 alternative-energy
megawatts, say they're likely to continue producing but would like to be paid
what they've been owed the past four months.
PUC spokeswoman Kyle Devine said $79 per megawatt-hour should work for
generators if the natural gas is transported through an Oregon pipeline - a
cheaper route - rather than through a pipeline from the Southwest.
But a gas proposal that Ken Ross of Delta Energy Co. in Santa Ana received
Tuesday showed the transportation price to be just as expensive.
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Bush to nominate 2 who favor free markets for energy panel
March 28, 2001
By DENA BUNIS
The Orange County Register
WASHINGTON President George W. Bush will nominate two new federal energy
regulators whose history indicates that, like him, they favor free markets
and don't favor price controls.
Bush said Tuesday that he will ask the Senate to confirm Patrick Wood,
chairman of the Texas Public Utility Commission, and Nora Mead Brownell, a
commissioner with the Pennsylvania PUC, to the five-member Federal Energy
Regulatory Commission.
Both Republican nominees have presided over the deregulation of their state's
energy markets, so far with more success than California.
Sen. Dianne Feinstein, D-Calif., who sits on the Energy and Natural Resources
Committee, which will hold hearings on the FERC appointees, issued an early
warning.
"Certainly my vote would be dependent on whether they would be responsive to
the present situation,'' Feinstein said. "Up to this point, the
administration has been recalcitrant to the point of arrogance. If that is
the case with these new appointees as well, they won't have my vote."
However, neither is expected to have trouble getting confirmation.
Wood, PUC chairman since 1995, has said Texas' deregulation climate is
different from California's.
Unlike California, the Texas deregulation encourages long-term contracts.
Texas has more power reserves and it's easier to get a permit to build a
plant there.
Brownell has been on the Pennsylvania PUC since 1997.
Pennsylvania's market also differs greatly from California's in several ways.
The state is a net exporter of power while California is an importer, and
Pennsylvania's deregulation plan did not force utilities to sell their
plants.
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Davis backs power rate hikes if 'necessary'
He says PUC approval of hikes Tuesday is 'premature.' S&P is unsure how
conservation will affect revenue.
March 28, 2001
By JOHN HOWARD
The Orange County Register
SACRAMENTO Gov. Gray Davis shifted his position opposing electricity rate
hikes, saying he would support them "if it becomes clear it is absolutely
necessary for the good of the state."
The governor's statement Tuesday came just hours after the Public Utilities
Commission, a panel controlled by Davis' appointees, endorsed a plan to raise
monthly bills by as much 36 percent. The increase eventually would be tied to
a flexible rating plan in which light users will pay a little more, medium
users (those who conserve energy) will pay moderately more, and heavy users
will pay a lot more. Details of the plan are not yet set.
Davis called the PUC's decision "premature," saying scant information was
available to justify increases.
"While I have opposed rate increases, if it becomes clear a rate increase is
absolutely necessary for the good of the state, I will support one that is
fair and do my duty to convince Californians of its necessity," Davis said.
Boosting electricity rates to help resolve California's energy crisis is
likely to increase the state's $10 billion revenue bond sale to $12 billion
or more, entailing more interest charges and a longer payback.
Standard and Poor's, the Wall Street credit-rating agency, called the rating
plan "a complicated formula that will only increase rates on heavy users of
electricity."
"It is unclear exactly how many users will be affected, and whether revenues
will slip under the rate-raising formula as consumers respond by conserving
electricity," S&P said.
Also unclear is how the money from increased rates would be divided. The
state, which has been buying power on behalf of the utilities, says it has
first rights to the money. The utilities have challenged that.
California hopes to borrow $10 billion by selling revenue bonds in May to
cover its costs of purchasing emergency electricity since December. Through
April 7, those costs are expected to total $4.2 billion.
The bond money also will be used to pay for power under long-term contracts,
which is much cheaper than power bought just before it is used.
Critics have questioned whether $10 billion will be sufficient. PUC President
Loretta Lynch said the increased rates would support at least a $12 billion
bond sale. Davis spokesman Steve Maviglio and Joseph Fichera, a Davis fiscal
adviser, declined to discuss a specific amount.
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Cheney says state's on its own
March 28, 2001
By DENA BUNIS
The Orange County Register
WASHINGTON Sen. Dianne Feinstein says Vice President Dick Cheney on Tuesday
offered no hope of federal help for California's electricity crisis, and she
is once again appealing to the president to meet with her.
"It was very disappointing,'' Feinstein said in an interview after a
45-minute meeting Cheney had with a group of 10 senators. "I practically
begged for a period of reliability and stability so we could get through the
summer, and I didn't get any feeling back that there was going to be any
help.''
Cheney insisted, Feinstein said, that California has to "straighten itself
out'' and was not moved by the fact that the Public Utility Commission was
poised to increase rates nearly 40 percent.
After the meeting, Feinstein sent President George W. Bush a two-page letter.
"Your administration has not yet offered any constructive solution to this
problem,'' she wrote. "If the federal government continues to ignore the
situation, the result may very well be economic disaster for millions of
small businesses and residents.''
Feinstein wrote a final plea that Bush meet with her and Sen. Gordon Smith,
R-Ore., who is co-sponsoring a bill authorizing short-term regional price
caps.
Bush on Tuesday reiterated his position against price caps in a speech in
Michigan.
Feinstein has heard little sympathy for her state from colleagues, who have
repeatedly said Californians have not felt any real pain. Rep. Jennifer Dunn,
R-Wash., recently complained that Californians were turning on their hot tubs
without worrying about paying higher costs.
Feinstein said such criticism is exaggerated. But she said she hopes the rate
increase approved by the PUC will show critics the state "is doing the right
thing.''
Sen. Barbara Boxer, D-Calif., who said she was not invited to meet with
Cheney, said she was concerned that the rate increase would be "making
consumers bear the brunt" of the electricity crisis.
Before a rate increase is considered, Boxer said, the PUC should make sure
average residential consumers and small businesses are protected and take
whatever legal action is available against "those generating companies who
colluded and unlawfully manipulated prices.
"We should get something in return, some assets," Boxer added, also calling
on the utilities to contribute some of the money they diverted to their
parent companies.
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Highest rate hike in state history raises consumer anger
O.C. residents and businesses resent 'energy hog' label.
March 28, 2001
By KATE BERRY
The Orange County Register
Helen Lewis, a Villa Park homemaker, believes the rate hike unfairly targets
families with children.
Dorothy Kascak, an 82-year-old Cypress resident who uses an oxygen machine
24-hours a day, is furious at being called an "energy hog.''
And Vic Peterson, a homebuilder in Corona del Mar, has angry words for Gov.
Gray Davis for allowing the energy crisis to escalate, potentially
endangering the economy.
Throughout Orange County, residents and businesses responded angrily to the
approval Tuesday of a 3-cent-a-kilowatt-hour rate increase by the California
Public Utilities Commission.
"There are a lot of handicapped citizens that are on fixed incomes,'' said
Kascak, who has been on an oxygen machine for eight years. "If they raise our
rates 40 percent, what am I going to do?''
Though oxygen users typically receive a discount on their electricity rates,
they will be subject to the rate increase like everyone else, said Bruce
Foster, vice president of regulatory affairs at Southern California Edison.
Many businesses are concerned that higher power costs could push California
and the nation into a recession.
"It's upsetting,'' said Peterson, who owns Peterson Construction & Design
Inc. "Less money coming into California means less people purchasing. Who are
we going to sell homes to?''
At Panama Joe's Hair Design in Irvine, owner Joe Gayle said he has no choice
but to pay the higher rates. He's got hair dryers, electric hair clippers,
lights, a refrigerator, a microwave and computer to run a nine-station hair
salon.
Last month Gayle's bill was $234. A year ago it was $183. Now he expects it
to top $300 a month.
"They jack it up because they know there is nothing we can do," he said.
Then there's the effect on families, especially those who live in large
houses.
The PUC will debate in the next month how to implement a tiered-rate plan,
with large users paying the highest rates. A plan proposed Monday by PUC
President Loretta Lynch targets what she called "energy hogs" by increasing
rates on usage over 130 percent of a consumer's minimum "baseline"
allocation, which varies by neighborhood.
For Lewis, the Villa Park homemaker, conservation will barely put a dent in
her electric bill. The 4,300-square-foot house she shares with her husband
and three children has a monthly baseline of 267 kilowatt-hours, while the
family's energy consumption routinely runs from 1,200 to 1,500
kilowatts-hours.
"It's not as if we're leaving the lights on,'' said Lewis. "But they are
taking people that have houses and have washers and dryers, and penalizing
them. Families will be hit very hard.''
Register staff writer Elizabeth Aguilera contributed to this report.

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Lighten up ... it's just a California thing
Outside the state, there is almost a smug satisfaction in our energy
failures. But most here remain optimistic.
March 28, 2001
By TERI SFORZA
The Orange County Register

Beckie Boyden of Irvine Orthopedics and Physical Medicine tends to her
receptionist duties by candlelight during a recent rolling blackout
Photo: Bruce Chambers / The Register
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California. Global trendsetter. High-tech nexus. Crucible for creativity.
The Golden State is raw fiscal muscle, with an economy bigger than China's
and twice the size of Canada's. But alas. California can't keep the lights
on.
"It's amazing to think that we have the world's seventh-largest economy - and
a Third World power system," said Fred Smoller, chairman of the
political-science department at Chapman University. "It's certainly a blow to
our collective ego."
Rolling blackouts finally hit Orange County last week. Workers were plunged
into darkness. Children studied by candlelight. Cars crawled through lawless
intersections. Elevators halted between floors, libraries checked out books
by hand, and portable generators were rushed to sewer-lift stations to keep
raw sewage from spilling into the ocean.
Outsiders scoff. Californians are a gaggle of goofy tree-huggers guilty of
"mass myopia" and "willful energy abnegation," charged Charles Krauthammer,
columnist for the New York Daily News.
"Californians refuse to acknowledge that in the real world, their desire for
one good (an unsullied environment) might actually conflict with another
desire (hot water in their Jacuzzis)."
Sensing weakness, other states are pouncing.
Glow-in-the-dark mouse pads saying "Michigan. We never leave you in the dark"
are landing in the mailboxes of California CEOs. Alongside flashlights
boasting "The lights are always on in Tennessee." And nine-volt batteries,
courtesy of the Greater Raleigh (N.C.) Chamber of Commerce ("In the dark
about where to grow your business?").
"Our CEO got the flashlight pitch," said David Sonksen, executive vice
president and chief financial officer of Microsemi Corp. in Santa Ana. "But
he threw it away. It would take 10 years of exorbitant power costs to even
make a dent in the costs associated with moving."
Clever ambulance chasing, Orange County Business Council Vice President Bill
Carney calls it. And while some companies say they'll think seriously about
expanding, it doesn't seem like anyone intends to leave.
"California has it all over everywhere else. Sorry!" said Lisa Green, a vice
president for Entridia Corp. "The power thing is a little bit of a pain, but
not that much of a pain."
"I'll take sweltering on a summer day over a Michigan winter any time," said
Laer Pearce, a public relations consultant in Laguna Hills.
Which is not to dismiss the seriousness of the crisis. "I'm concerned about
what it means for our economy," said Naomi Vine, director of the Orange
County Museum of Art, whose offices went dark without warning one day last
week. "If businesses can't be productive, what does that mean for the year
ahead?"
"It's really scary," said Pearce, who held his breath as the lights went out
in buildings across the street last week. "This is one that, when they were
studying California's infrastructure, nobody even predicted. What's going to
happen with the sewers and roads and airports and everything else?"
Indeed, the crisis may be exposing the weak spots in California's go-go
economy.
One concern is that production shifted this year from California to more
energy-reliable areas might never return, Carney said. And if, even for the
short term, California businesses are perceived as being unreliable suppliers
because they have unreliable power, the effects could be lasting, he said.
Others worry about the effect of outages on people themselves. As a culture,
we've becoming utterly dependent upon electricity to work, to play, to
communicate. "Everything we do is electric," said Pearce. "We just couldn't
go back to knocking it out on a manual typewriter anymore."
And it's starting to sink in that things will get worse before they get
better, said Al Milo, director at the Fullerton Public Library, which lost
power briefly last week.
But things will get better, the stubborn optimists say.
"This is a great thing that's happening," said Gerran Brown of Brown Colonial
Mortuary in Santa Ana. "Energy prices may go up temporarily, but people will
learn to turn lights off and not drive gas-guzzling SUVs, and eventually
we'll have a truly free market where the consumer will win."
California will emerge from this darkness stronger than ever, with new
technologies, a new conservation ethic and a new emphasis on alternative,
renewable forms of energy. "It's a new opportunity for us to be an
international leader," Carney said.
Carney was hosting two Korean businessmen last week when there was a great,
sudden click and lights went out at the Business Council's office. "They told
me politely, to make me feel better I'm sure, that they have blackouts in
Korea, too," Carney said.
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Conserve and save
A proposed tiered-billing format is designed to spare low power users from
the rate increases. Baseline is the bottom line.
March 28, 2001
By ANNE C. MULKERN
and KATE BERRY
The Orange County Register
The state's power crisis hit your wallet Tuesday when state regulators hiked
electricity rates as much as 36 percent.
Your bill could be headed up as a result. Here are answers to some of your
questions about the rate hike:
Q: How much more will I pay?
A: Details of the plan haven't been finalized. But the idea is to create a
three-level rate structure. Those who use more electricity will pay the
highest rates and those who conserve will save.
Consumers who use less than l30 percent of their baseline power allocation
will escape any increase. (We explain baseline below.)
The rate increase will be distributed across the two higher tiers. The Public
Utilities Commission over the next 30 days will come up with a plan to
determine exact rates for the two higher levels, as well as for different
types of customers, such as residential and small business.
Q: So what is baseline?
A: Baseline is the portion of your usage considered necessary for essentials.
To encourage conservation, it's set below the amount most people use.
The percentage of Edison customers who use less than 130 percent of baseline
is roughly 48 percent in winter months and 45 percent in the summer.
Because baseline is set based on the average household's use, it means a
single person living in an apartment can have the same baseline as a
homeowner with four children.
Baseline varies depending on where you live. Warmer areas get higher
baselines. There are different baselines for the summer and winter. People
who use medical equipment in their homes can get higher baseline allocations.
All-electric homes get higher baselines.
Q: What's the reason for this rate hike? Are they really doing this to get
people to conserve?
A: Conservation is a side benefit. The primary motivation is money.
The state has already shelled out $3 billion buying power in the last three
months for customers of the near-insolvent utilities.
The state plans to issue bonds, which will be paid for by consumers, to cover
the power purchases. But Wall Street bankers must have proof of a steady
revenue stream - a rate increase - to convince them the bonds can be repaid.
However, people inevitably will conserve if they are paying more for their
power, so the plan will also help reduce demand.
Q: I'm already conserving. How can I cut my bill further?
A: It's nitty-gritty time. Replace your incandescent light bulbs with
fluorescent bulbs. Clean those coils at the back of your refrigerator. Turn
your air conditioner down or off. Reduce the amount of time you use your pool
pump.
Many items in your house use electricity when they are plugged in, even if
they're not in use. You can cut consumption by unplugging your television,
computer, coffeepot, toaster and blow dryer.
Q. When will I pay the increase?
A: The rate hike takes effect immediately. But it could take Southern
California Edison a month to 45 days to implement it, so you could face
retroactive charges on a follow-up bill.
Q. I live in south Orange County and buy electricity from San Diego Gas &
Electric Co. Does this plan affect me?
A: No. SDG&E has applied for a rate increase, but state regulators have not
yet voted on that request.
Q. I'm outraged. We didn't ask for deregulation and now we're paying more.
How can I protest?
A: Call or write you state lawmakers and the governor. You can also join one
of the consumer groups fighting the rate hike, such as the Foundation for
Taxpayer and Consumer Rights. It is at (310) 392-0522. The Utility Reform
Network is at (415) 929-8876.
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National Desk; Section A
RECORD RATE HIKE SET IN CALIFORNIA
By EVELYN NIEVES
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03/28/2001
The New York Times
Page 1, Column 1
c. 2001 New York Times Company
SAN FRANCISCO, March 27 -- California's power regulators approved the largest
utility rate increases in state history today in an effort to avert more
rolling blackouts and keep the state's principal electricity producers from
collapsing in bankruptcy.
Despite Gov. Gray Davis's repeated statements that no new rate increases
would be needed to keep the state's two largest utilities solvent, the State
Public Utilities Commission said today that it had no choice but to raise
rates by up to 46 percent for customers of the two utilities to avoid a
greater catastrophe if the companies went bankrupt.
''We have fought back hard in every venue possible against these unjust
energy prices,'' said Loretta Lynch, the commission president and a Davis
appointee, who had proposed the increases on Monday.
Ms. Lynch said that under a tiered rate system that would be hammered out
within the next 30 days, heavy power users would face the greatest increases
while light users would face little or no increases. Customers will see the
rate increases in their May utility bills.
Perhaps 45 percent of consumers under this system -- including the poorest
residents, who would be exempt -- will face no increase at all, Ms. Lynch
said. Heavy users will face increases of about 36 percent, she said.
Coupled with the average 10 percent temporary rate increase in January that
the commission made permanent today, those consumers will pay 46 percent more
for utilities than they did in December.
But even people who use small amounts of power and do not see their rates
increase could feel the impact if commercial power customers, from small
businesses to megastores, pass on their higher electricity costs through
price increases.
Before the rate increases, power costs in California were slightly higher
than the national average, but lower than the prices paid in New York and
other Northeastern States. Residential electricity users already pay an
average of about $65 a month, state officials say. In addition, under a
previous commission decision, rates will go up an additional 10 percent next
year.
The commission, which approved the rate increase 5 to 0, also voted to
require that the two large utilities, the Pacific Gas and Electric Company
and Southern California Edison, reimburse the state's Department of Water
Resources $4 billion spent on their behalf and begin paying alternative
energy generators, which account for more than a quarter of the state's daily
energy needs. The two utilities have not paid their bills for months, saying
they are nearly bankrupt because under deregulation of the power industry,
wholesalers have been allowed to float prices while retail rates were capped.
The Department of Water Resources has spent $45 million a day since January
buying power on the utilities' behalf. Small alternative energy producers had
not been paid at all for months, with dire consequences. For two days last
week, the state's power managers were forced to order rolling blackouts
across parts of the state, in part because the small energy producers shut
down half their capacity because they had not been paid.
The rate increases will make the payoff more feasible, Ms. Lynch said, while
encouraging energy conservation. But a representative of the state's
alternative-energy generators, known as qualifying facilities, complained
that the commission did nothing to address the roughly $1.5 billion the
utilities owed producers.
''I'm not sure what our options are at this point if the state wants the
qualified facilities to be a part of the solution,'' said David Fogarty, a
spokesman for the Western States Petroleum Association and alternative-energy
co-generators, representing about 50 alternative-energy producers in
California.
For those on all sides, the commission seemed to raise as many questions as
it answered. Consumer advocates, who interrupted the hearing five times,
questioned why the commission had decided on the vote so abruptly, with only
24-hour notice to the public. Spokesmen for each of the utility companies
said they had no idea what the rate increases would mean to the average
customer until the tiered system was determined. They also said they did not
know whether these new rates would mean the end of rolling blackouts.
''They may know something that I don't know,'' said Bruce Foster, vice
president of regulatory affairs at Southern California Edison, speaking of
the commission's vote outside the hearing room.
Mr. Foster also complained that the commission's directive to begin paying
bills to the state and the alternative energy producers -- or face a penalty
equal to the amount owed -- might be illegal and said that the company would
look into appealing it.
Ron Low, a spokesman for Pacific Gas and Electric, also complained that the
commission's actions seemed rushed and lacked specifics.
The rate increase will generate about $2.5 billion a year for Pacific Gas and
Electric, unit of PG&E and $2.3 billion for Southern California Edison, a
unit of Edison International. While those revenues will help the utilities
buy power on the wholesale market in the future, the commission made no
provision for paying off about $13 billion in debt accumulated by the
utilities as a result of past wholesale costs. That issue would be left to
the governor and state legislators.
The commission heard public comment before the vote, but did not answer
questions afterward. Consumer advocates were furious, many blaming Governor
Davis.
The governor today issued a statement calling the commission's move
premature. ''From the beginning, I've said that my main goal was to solve
this problem while protecting the consumer from undue rate hikes,'' Mr. Davis
said. ''The P.U.C.'s action today was premature because we do not have all
the appropriate financial numbers necessary to make a decision.''
Mr. Davis's statement seemed to reflect the awareness he and his aides feel
about the potential political backlash from big rate increases. Even as other
politicians warned that such increases would be necessary, Mr. Davis has
vowed to avoid them. On Monday he insisted that he had not spoken to any
members of the commission about the rate increase proposal and that he had no
control over its actions.
But Mr. Davis appointed three of the body's five members, and since taking
office two years ago he has been emphatic in saying that he expects his
appointees to state boards and commissions to reflect his policies.
He also did not hesitate to complain that he could not control the previous
members of the commission, because they were Republican appointees, and his
aides acknowledged that top gubernatorial advisers had consulted with Ms.
Lynch and approved her plans.
Politicians in both parties said Mr. Davis was trying to shift blame for any
rate increase to the commission while claiming that increases were approved
over his objections. They predicted that that effort could backfire by making
Mr. Davis look both timorous and calculating.

Chart: ''THE COST -- The Price of Power'' Average cost per kilowatt-hour for
residential customers for 2000. Chart shows costs for following states:
Connecticut ... Maine ... Massachusetts ... Rhode Island ... Vermont ... New
Jersey ... New York ... Pennsylvania ... Illinois ... Indiana ... Michigan
... Ohio ... Wisconsin ... Iowa ... Kansas ... Minnesota ... Missouri ...
Nebraska ... South Dakota ... Delaware ... D.C. ... Georgia ... Maryland ...
North Carolina ... South Carolina ... Virginia ... West Virginia ... Alabama
... Kentucky ... Mississippi ... Tennessee ... Arkansas ... Louisiana ...
Oklahoma ... Texas ... Arizona ... Colorado ... Idaho ... Montana ... Nevada
... New Mexico ... Utah ... California ... Oregon ... Washington ... Alaska
... Hawaii ... Wyoming ... Florida ... New Hampshire ... North Dakota
(Source: U.S. Department of Energy) (pg. A14)

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Calif. Regulators Raise Power Rates

By KAREN GAUDETTE
Associated Press Writer
SAN FRANCISCO (AP) _ As protesters jeered ``Hell, no, we won't pay!''
California regulators approved electricity rate increases of up to 46 percent
Tuesday to head off blackouts this summer and keep the state's two biggest
utilities from going under.
The increases _ approved 5-0 by the Public Utilities Commission _ are the
biggest in California history and take effect immediately for the 25 million
people served by Pacific Gas and Electric Co. and Southern California Edison
Co.
``The PUC has done all it can,'' commission president Loretta Lynch said.
``We have fought back hard in every venue possible against these unjust
energy prices.''
The PUC also ordered the utilities to pay the state for billions of dollars
of electricity it has bought on behalf of their customers. Just how much
wasn't known; the state has not disclosed how much it has spent on various
long- and short-term power contracts.
For the rate increase, the commission said it will create a tiered system
that will protect poor people and penalize customers who use the most
electricity.
Lynch proposed the higher rates as a way to force ``electricity hogs'' to
conserve and to help keep SoCal Edison and PG&E solvent.
The plan is also seen as a way to protect California's budget surplus, which
is being drained of $40 million to $50 million a day as the state buys power
for the cash-strapped utilities. Since the crisis began, more than $4.2
billion in taxpayer money has been spent to keep the lights on.
SoCal Edison and PG&E say they have lost more than $13 billion since last
summer because of high wholesale electricity prices and because California's
1996 deregulation law prevents the utilities from passing those costs on to
their customers.
Both have urged the PUC to raise rates. Following the PUC meeting, SoCal
Edison said it will begin paying interest to bondholders after weeks of
missing payments.
The rate increase will be on top of the 9 percent to 15 percent hike approved
by the PUC in January, and a 10 percent increase already scheduled for next
year.
Ratepayers and consumer groups branded the latest plan a rip-off.
``We are being held hostage by a handful of energy companies that, under
deregulation, got control of our electricity supply,'' said Harvey
Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in
Santa Monica. ``Until our elected officials start acting to protect us, we
are going to be at their mercy, at the mercy of this ripoff.''
Democratic Gov. Gray Davis has said that he opposes rate increases but that
he has no power over the PUC. However, three of the PUC members are his
appointees. And his aides have told lawmakers that rates have to rise.
Residents already pay about $65 per month for electricity _ 7.2 cents per
kilowatt hour to SoCal Edison and 6.5 cents per kwh to PG&E.
The latest rate hike would mean a 42 percent increase for SoCal Edison
customers and 46 percent for PG&E customers for electricity alone. Since the
rates are bundled with other fees, the average price of a kilowatt hour is
closer to 12.5 cents for SoCal Edison customers and 10.5 cents for PG&E
customers.
Spokesmen for both utilities said it is impossible to calculate how much the
plan will cost customers because the effects of the tiered system are not
known.
The PUC meeting was disrupted at least five times by screaming protesters,
and dismay over the plan was seen elsewhere.
Sam Sahouria, owner of the Fox Plaza Grocery and Deli in San Francisco, said
rate hikes could be too much for his family-run store to bear. ``It's
terrible. We will probably go out of business,'' he said.
Belinda Lazzerini, 40, who serves fruit smoothies at Jitters & Shakes in San
Francisco, said her electric bills have jumped to $70 for her studio
apartment.
``The Laundromat has gone up from $1.50 to $3, so now we will have to clean
our clothes by hand and dry them in the basement,'' she said. ``It's crazy.''
The state has pledged to issue at least $10 billion in revenue bonds to buy
power for SoCal Edison and PG&E _ bonds that would be repaid by the
utilities' customers. However, state officials have told lawmakers that state
efforts to help the utilities could hit $23 billion by 2003.
California's Independent System Operator declared a Stage 2 alert Tuesday as
electricity reserves dropped to about 5 percent.
The alert follows two days of statewide rolling blackouts last week and two
others in January. ISO spokeswoman Stephanie McCorkle said many power plants
that use alternative sources of energy remained down, in part because haven't
been paid by the utilities.