Please see the following articles:

Sac Bee, Fri, 5/18: Energy plan generates debate: California in peril offered
'no relief,' governor says

Sac Bee, Fri, 5/18: Judge dims PG&E producers' shot at relief

Sac Bee, Fri, 5/18: Politicians try to stay plugged in:Fear that the power
crisis will short-circuit their jobs pushes leaders to foster an active image.

Sac Bee, Fri, 5/18: Bush's mixed message:  Fossil Fuels tomorrow don't solve
crisis now

SD Union, Fri, 5/18: Bush energy plan greeted with avalanche of praise,
criticism

SD Union, Fri, 5/18:  Bush warns country about California

SD Union, Fri, 5/18: Gov. Davis attacks Bush energy plan

SD Union, Fri, 5/18: Carter recalls an energy crisis that was far worse

SD Union, Fri, 5/18: Governor signs bill on energy authority

SD Union, Fri, 5/18: State to review Escondido power plant plan

LA Times, Fri,  5/18: PUC Chief alleges Price Collusion

LA Times, Fri, 5/18: Critics Say Bush Proposal Leaves California in the Dark

LA Times, Fri, 5/18: Wall St. Cautious Over Energy Sector's Outlook for Next
Year

LA Times, Fri, 5/18: Municipals Utilities Seek Exemptions From Blackouts

SF Chron, (AP) Fri, 5/18: Californians fault Bush energy proposal

SF Chron, Fri, 5/18: California utilities commission chief says power plants
shut down to
drive up prices

SF Chron, (AP) Fri, 5/18: Bush faces tough fight on energy strategy.
ANALYSIS:Californians must sweat out summer

SF Chron , Fri, 5/18: Probe finds 'artificial' shortages Unneeded plant
shutsdown drove up state electricity prices, PUC chief says

SF Chron, Fri, 5/18:  PG&E plans new plants outside California Higher profits
from building elsewhere

SF Chron, Fri, 5/18: Bush faces tough fight on energy strategy
REACTION: Criticism from environmentalists

SF Chron, Fri, 5/18:Presidential power
The energy problem has tested the mettle of many U.S. leaders

SF Chron, Fri, 5/18:Making a case for WASTE
President's tax credits for biomass energy development could be boon for two
of the state's thriving industries

Mercury News, Fri, 5/18:Today's energy shortages far less ominous than in
frantic '70s

Mercury News, Fri, 5/18: Bush points to California as a warning

Mercury News, Fri, 5/18: Californians fault Bush Energy proposal

Mercury News, Fri, 5/18:  Bush says the Right Stuff (editorial)

Individual.com, Fri, 5/18: Bush Energy Plan Will Make California Crisis
Worse; Taxpayer Boondoggles, More Deregulation Equals Higher Prices, Taxes

Individual.com, Fri, 5/18: PG&E's CEO faces off with angry shareholders at
company's annual meeting

NY Times, Fri, 5/18:THE ENERGY PLAN: THE OVERVIEW
BUSH, PUSHING ENERGY PLAN, OFFERS SCORES OF PROPOSALS TO FIND NEW POWER
SOURCES

WSJ, Fri, 5/18: Power Politics:n Era of Deregulation,
Enron Woos Regulators More Avidly Than Ever

WASH Post, Fri, 5/18: Bush Issues Energy Warning; President Unveils New
Policy, to Praise and Attacks on Party Lines

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Energy plan generates debate: California in peril offered 'no relief,'
governor says
By Emily Bazar and Carrie Peyton
Bee Staff Writers
(Published May 18, 2001)
Gov. Gray Davis on Thursday declared President Bush's newly unveiled power
plan an inadequate proposal that turns "a blind eye to the bleeding and
hemorrhaging that exists in this state."
The Democratic governor, who addressed reporters in Sacramento after Bush
formally unveiled his proposal in St. Paul, Minn., said California will not
conquer its power crisis unless the Federal Energy Regulatory Commission
temporarily caps the price of wholesale electricity.
The Bush plan -- which calls for opening more public lands to oil and gas
exploration and tax credits for the purchase of fuel-efficient cars -- would
do little for the state in the short term, when it needs help the most, Davis
said.
"For those of us who are already in immediate peril, it offers no relief," he
said. "If those (federal) commissioners don't do anything to solve the
problem ... then there will be a lot of blood on the floor and a lot of
corpses along the way."
In Washington, D.C., GOP congressional leaders vowed to speed key parts of
the energy package to Bush's desk. But the strong and conflicting response to
the 163-page report, crafted over four months by a task force led by Vice
President Dick Cheney, presaged an extensive debate on Capitol Hill.
"We're going to have a crisis on our hands in the next two or three months,"
said Rep. Robert Matsui, a Sacramento Democrat. "I just wish the president
had attempted to address that. If he doesn't like our idea of rate caps and
price stability, then at least he should come up with an alternative to try
to get us through the next 18 months."
But Republicans like North Carolina Rep. Richard Burr, vice chairman of the
House Energy and Commerce Committee, were quick to praise the package.
"This is the most aggressive, long-term energy policy our country has seen
from an administration in a generation," Burr said.
As in Washington, California lawmakers split down party lines in response to
the president's energy plan. Democrats said the proposal would do little to
help California in the short term, while Republicans applauded its focus on
increasing the power supply through expanded reliance on nuclear energy and
other sources.
While environmentalists found several aspects of the blueprint troubling,
utilities including Pacific Gas and Electric Co. and power generating
companies said they were encouraged by the president's call to speed the
process of building new power plants, transmission lines and natural gas
pipelines.
"It appears at first glance to be a very balanced document with combinations
of conservation as well as the need to create new ... sources of energy,"
said Keith Bailey, chairman of Williams Co., which markets electricity from
Southern California power plants owned by AES.
PG&E, however, which is mired in bankruptcy proceedings because of runaway
wholesale power prices, repeated its call for federally imposed price caps on
wholesale electricity, something Bush has specifically rejected.
On that one point, at least, the utility has found allies in Davis and other
California Democrats.
"I'm calling on you (Bush) to find some creative way to give us temporary
price relief while our new plants come on line," Davis said.
State Sen. Debra Bowen, D-Marina del Rey and chairwoman of the Senate Energy
Committee, echoed the governor's plea.
"We can't just focus on the long term here," she said. "The patient will be
dead before we get the life-support systems in place."
Republican Secretary of State Bill Jones, who is running for governor, also
commended the president for proposing a "comprehensive" plan with long-term
vision.
"What President Bush understands that Gray Davis does not, is that the time
to propose solutions is not in the middle of a crisis, but before, when you
see the warning signs and have time to plan a thoughtful course of action,"
he said.
In one of more than 100 specific proposals, Bush urged the FERC to strengthen
its role in electric grid reliability, partly through new laws that would let
it oversee mandatory industry standards.
Such a move could strip away some of the benefits of Davis' proposal to buy
the state's transmission grid, because it could extend federal control to
transmission lines owned by public agencies, said Michael Shames, head of the
San Diego-based Utility Consumers' Action Network.
It could also threaten the autonomy of municipal utilities such as the
Sacramento Municipal Utility District and the Los Angeles Department of Water
and Power, and would face a vigorous fight in Congress, Shames said.
Other specifics of the plan, such as its recommendation to reassess offshore
oil drilling, troubled environmental groups.
The president is probably too realistic to move immediately to reinstate
drilling off California's coast, but opponents will have to stay vigilant to
prevent it, said Warner Chabot, a vice president of the Center for Marine
Conservation.
The plan was also blasted by the California Public Interest Research Group
for over-reliance on new power plants, drilling on public lands and increased
subsidies for coal and nuclear power, while the Sierra Club faulted the lack
of proposals to raise fuel economy standards for cars and sport-utility
vehicles. Sierra Club Executive Director Carl Pope said such standards are
"the biggest single step President Bush could have taken to cut our oil
dependence and curb global warming."

The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com.
James Rosen of The Bee's Washington Bureau contributed to this report.

Judge dims PG&E producers' shot at relief
By Claire Cooper
Bee Legal Affairs Writer
(Published May 18, 2001)
SAN FRANCISCO -- U.S. Bankruptcy Judge Dennis Montali delivered a sharp blow
to a large number of small energy generators, signaling in an opinion
released Thursday that he'll probably require them to continue selling power
within California and at state-regulated rates.
The tentative ruling in the Pacific Gas and Electric Co. bankruptcy case
denied most of the relief requested by the first four generators to have
their cases decided. The Central Valley power-generating plants have warned
that financial pressures may force them to shut down in June, cutting into
the power needed to avoid rolling blackouts this summer.
They asked to be released from their contracts with PG&E or for higher prices
for the power they sell to the utility.
Montali responded by sweeping beyond the technical confines of bankruptcy
law, saying, "The court cannot and will not ignore other considerations,"
such as "the need to keep (the generators) on-line, producing power for
California."
While the four facilities provide less than 1 percent of the utility's
electricity, the tentative opinion sent out a broad message to scores of
small power producers -- which together provide more than 20 percent of
PG&E's electricity -- that Montali will give them just enough relief to keep
them generating.
Montali, however, said he isn't likely to release them from contracts to PG&E
that stand in the way of selling their electricity on the spot market --
possibly to the state Department of Water Resources -- at "potentially
extreme prices."
Montali's decision, posted Thursday, was dated Wednesday, the same day the
Federal Energy Regulatory Commission issued an order ensuring energy
producers the right to sell to the highest bidder if they can get out of
their contractual obligations.
Montali also declined to raise the price PG&E must pay under current
contracts. While conceding the energy producers are entitled to a reasonable
rate, he cited FERC findings that under certain conditions, spot market rates
in the California market have been "unjust and unreasonable."
Instead, Montali held out the likelihood of far more modest relief. He
ordered immediate negotiations to increase the cash flow sufficiently at the
four Central Valley power facilities -- Mid-set Cogeneration, Coalinga
Cogeneration, Salinas River Cogeneration and Sargent Canyon Cogeneration --
with the goal of ensuring they will be able to "perform when needed."
The four generators had warned in court documents of "June shutdown
scenario," which would have cut into the power needed to avoid rolling
blackouts this summer.
They are owed $58 million out of a total $1 billion PG&E debt to 300
producers of wind and solar energy, cogeneration and biomass that provide
roughly 13 percent to 22 percent of the electricity distributed by the
utility.
Most, including a plant that generates energy from rice hulls, are small or
mid-sized, but several are owned by some of the nation's largest
corporations, including Texaco. They're paid on the basis of various formulas
set by contracts or a formula set by the Public Utilities Commission.
Ed Feo, a lawyer representing the creditors' committee, which will be
included in the negotiations, said Montali's tentative ruling "will probably
be the template" for the way he deals with all of the small producers
operating at PUC-approved rates that don't cover their costs.
The committee represents thousands of businesses and individuals who are owed
money by PG&E. It had asked in a hearing a week ago that all of the small
generator cases be consolidated for a single ruling because of the likely
impact.
Montali refused, saying the complications would be "more than I can
comprehend" because each case presents different facts.
About two dozen facilities have petitioned Montali for relief so far,
including 15 that have curtailed or ceased operations at times this spring,
claiming PG&E's payments were insufficient to keep them on-line.
Several have hearings scheduled within the next three weeks, but at least two
-- Berry Petroleum and Crockett Cogeneration -- have reached settlement
agreements with the utility.
In response to Montali's tentative ruling on the four Central Valley
generators, PG&E spokesman Ron Low said only that the utility "will meet with
them and try to resolve the issues."
Lawyers representing the generators did not return phone calls.

Politicians try to stay plugged in: Fear that the power crisis will
short-circuit their jobs pushes leaders to foster an active image.
By Emily Bazar
Bee Capitol Bureau
(Published May 18, 2001)
Rising unemployment is one of the many dire predictions spawned by the
state's worsening energy crisis.
Among those worried about losing their jobs: California politicians.
Fearing for their hides, state leaders are moving forcefully into the energy
fray, hoping both to fend off irritated voters and emerge from their
typically low-profile posts.
Lt. Gov. Cruz Bustamante recently filed suit against five energy generators.
Attorney General Bill Lockyer offered rewards of at least $50 million to
informants who could help prove market manipulation by power sellers. And
state Treasurer Phil Angelides has aggressively pushed for a state-run power
authority.
"We're seeing among a range of officeholders on the Democratic and Republican
side that they want to be seen as being out front of this issue," said Mark
Baldassare, a senior fellow at the Public Policy Institute of California. "As
they go through this re-election year coming up, they don't want to be
accused by people who are competing for office of not doing anything."
Since January, legislators have introduced at least 211 energy-related bills,
including a proposal to finance the construction of an Auburn dam and another
to exempt farmers from paying sales and use taxes on diesel fuel during the
last half of this year.
Whenever possible, Gov. Gray Davis schedules news conferences at power
plants, which provide optimal backgrounds for photo opportunities.
Power plants also are the focus of the state's latest television and radio
ads encouraging energy conservation, which boast that California is "working
aggressively" to build 13 major new plants.
Although Davis' chief political adviser, Garry South, says it's a
coincidence, the Democratic governor's political consultants recently tested
a spot that also touts the state's record on power generation.
The energy crisis has led lower-profile politicians to increase their
visibility.
Republican Secretary of State Bill Jones, who is running for governor, and
Democratic state Controller Kathleen Connell, who ran for Los Angeles mayor,
have both used the crisis to criticize Davis' leadership.
As lieutenant governor, Bustamante generally remains out of the public eye
and struggling for attention.
But the Democrat sponsored a bill that would make energy price gouging a
felony and filed a civil lawsuit against five out-of-state generators,
alleging a price-fixing conspiracy.
Bustamante said he is merely stepping up to calls from constituents who are
clamoring for him to act.
Political consultant Richie Ross, who works for Bustamante and other
Democrats, is convinced the energy crisis will have political consequences
and could ultimately ruin careers.
He believes those lawmakers who take action to "defend the public" will have
a better chance of political survival than those who don't.
"The public is looking for who is on their side," he said. "They're not
interested in all the complexity."
Republican political consultant Wayne Johnson recommends that all politicians
who want to be re-elected engage themselves and get to know the power issue
"backward and forward."
Consultants say pollsters are busier than usual, as politicians rush to
determine their standing -- and that of their opponents -- with voters.
So far, those who have seen the results say Republicans and Democrats are
taking an equal beating.
"Every politician in the state's popularity rating is lower than it once
was," said Davis pollster Paul Maslin.
Though lawmakers like to say they inherited the crisis from the previous
administration and Legislature, that explanation doesn't resonate with
Californians, who are more interested in solutions.
Many voters are saying they don't care who was in power at the time
deregulation was conceived and they don't care who is in power now, South
said. They just want it to be over.
"This is not a partisan thing. It's a pox on everybody's house," said David
Townsend, a Democratic political consultant. "People are basically saying,
'Fix it.' "
The public's level of frustration is expected to escalate in the coming
months, when the effects of the power crisis multiply.
Baldassare is in the midst of surveying Californians on the energy crisis and
has dropped in on a number of focus groups. Many participants reported that
they're generally unhappy with the situation but still aren't sure whom to
blame.
According to Sherry Bebitch Jeffe, a political scientist at the University of
Southern California, politicians are doing what they can to make sure it's
not them.
"Each legislator out there is trying to insulate himself or herself from the
worst blame for the energy crisis," she said. "They're ... attempting to
inoculate themselves from inevitable attacks from opponents."

The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com.

Bush's mixed message: Fossil fuels tomorrow don't solve crisis now

(Published May 18, 2001)

President Bush seeks to focus public attention on tomorrow's energy challenge
while doing little to prevent a looming electricity crisis that may start in
California this summer and spread to other parts of the country.
The existing crisis is so serious, and so neglected by the president, it will
be hard for Californians to focus on his glossy new energy blueprint, which
he unveiled Thursday with campaign-style fanfare. Documents such as these
(this one has more than 100 specific recommendations), when successful, end
up serving the broader purpose of launching public discussion and political
debate.
This time, though, the president has no choice but to enter this debate in
the present, not the future. California waits, wonders and bleeds as billions
of dollars in excess electricity profits go to generating companies and
traders.
What's so perplexing about this president is the emerging philosophical
inconsistency between how he sees the energy future and the present. Line by
line, recommendation by recommendation, Bush's long-term energy strategy
proposes to fully insert the government as a guiding hand of tomorrow's
energy marketplace. Rather than leave the market to itself, Bush seeks to
shape it via direct subsidies, tax incentives or new fossil-fuel
opportunities on public lands.
Yet today for California, the president sticks to a hands-off approach,
rejecting intervention in a horribly distorted electricity marketplace. Why?
Viewed as an a-la-carte menu, Bush's energy strategy offers something for
everyone. Appetizers range from tax breaks to fuel-conscious motorists who
want to buy hybrid cars to billions of dollars in new research to burn coal
more cleanly. The main course, however, is more fossil fuels and more nuclear
power plants. And some cutting-edge stuff, such as new funds for alternative
fuels research, are tied to one controversial source -- royalties from new
gas and oil development in Alaska's Arctic National Wildlife Refuge.
The charts and graphs all speak to matching future supply with demand, as if
the challenge is two dimensional. It is not. The third piece, barely
mentioned by Bush, is global warming. Energy policy must address, not avoid,
the compelling evidence that our fossil-fuel consumption is dangerously
warming the planet. Bush's plan doesn't mandate improvements in any vehicle's
fuel efficiency by a single mile per gallon. Viewed by other countries that
take global warming more seriously, Bush's energy plan will be the equivalent
of political gasoline.
We need to have a serious discussion about the nation's long-term energy
future. Bush's plan, whatever its shortcomings, started the debate. But even
more than talk, California and the West need federal action to curb runaway
wholesale electricity prices this summer. Bush yesterday failed to step up to
the challenge.

Bush energy plan greeted with avalanche of praise, criticism

By Toby Eckert
COPLEY NEWS SERVICE
May 17, 2001
WASHINGTON ) Battle lines hardened Thursday over President Bush's energy
policy, leaving little apparent room for compromise.
House Democrats began the day with a high-tech assault on the plan that
featured three San Diego-area residents pleading via satellite for immediate
relief from soaring utility bills and blackouts. An environmental group
staged a more low-tech stunt, dumping five tons of coal in front of Vice
President Dick Cheney's residence.
Republicans, meanwhile, embraced the plan. But some cautioned that its
legislative elements were likely to be tinkered with and that some relief for
consumers may have to come quicker than Bush envisions.

Much of the Democratic criticism centered on Bush's failure to offer
immediate help for the power crisis rocking California and the high gas
prices plaguing motorists. They also repeated their accusation that, by
stressing more use of oil, coal and nuclear power, Bush was sacrificing the
environment for the sake of energy industry profits.
To dramatize those arguments, Reps. Susan Davis and Bob Filner, both San
Diego Democrats, used a satellite broadcast to beam three constituents into a
packed news conference on Capitol Hill. The lawmakers have been pressing for
price controls on wholesale power sold in California, a strategy Bush has
rejected.
"We need help now," said Patti Finnegan, who runs Niederfrank's Ice Cream in
National City. "I understand that we need more supply, but in the meantime, I
don't think thieves should be out legally taking our money like this."
Finnegan said the business' power bills had quadrupled and that "rolling
blackouts have the potential to put me out of business" by melting her
inventory.
Michael Brucker, executive director of San Diego's Jackie Robinson YMCA, and
San Diego resident Jaime Salazar told similar tales of soaring power bills
and sacrifice.
"It's a really great plan if you're a seller of energy. But if you're a
consumer of energy ... this is not a good energy plan," said Davis.
"It was crafted behind closed doors with a lot of input from energy
executives and in a highly secretive way that doesn't serve the public
interest," added House Minority Leader Richard Gephardt, D-Mo. "... It really
looks like the Exxon-Mobil annual report, and maybe that's really what it
is."
Republicans countered that the proposal was balanced. They cited Bush's call
for tax credits for energy conservation and efficiency and his promise to
take environmental impacts into account as domestic oil drilling is expanded.
Rep. Randy "Duke" Cunnigham, R-Escondido, called the blueprint "comprehensive
and mindful of the environment." While Bush "didn't talk about it in the
plan," the administration has taken several steps to aid to California,
Cunningham said, including expediting permits for new power plants.
"We've got to throw out the extremists on both side of this and solve the
problem," he said.
Republican leaders said they would start hearings on the plan as early as
next week and hope to have a bill finished by mid-summer.
Fearing a voter backlash if they appear to be ignoring consumer complaints
about high energy costs, some GOP lawmakers are advocating short-term
measures like immediate tax incentives for home energy conservation and
suspension of the federal gasoline tax.
"Congress will be working with the president to enhance his plan. ... I will
be offering some amendments," said Sen. Kay Bailey Hutchison, R-Texas.
Despite the heated rhetoric from the Democrats, Senate Majority Leader Tom
Daschle, D-S.D., refused to declare the Bush plan "dead-on-arrival."
"Obviously, there is a lot there ... that we can work together on. We're
hopeful that we can do that," Daschle said.
Outside interest groups will have a big influence on how the debate unfolds
and on molding public perceptions of the Bush plan.
Environmentalists vowed to join Democrats in a sustained attack that includes
rallies, advertising and attention-grabbing stunts like the coal dumping at
Cheney's residence, which was orchestrated by Greenpeace.
Cheney led the White House task force that developed the energy policy.
"We are going to continue keeping up the pressure on the Bush-Cheney
administration over the summer because we think this is going to be a hot
issue," said Greenpeace spokesman Gary Skulnik.
Supporters of the Bush plan in the business community, including energy
companies, have organized the Alliance for Energy and Economic Growth to
counter the environmentalists' message and lobby for the Bush plan.
"What this country needs to do is diversify its energy portfolio. We've got a
huge challenge in front of us," said Bruce Josten, executive vice president
for government affairs at the U.S. Chamber of Commerce.

Bush warns country about California

By Finlay Lewis
COPLEY NEWS SERVICE
May 17, 2001
ST. PAUL, Minn. ) President Bush took to the road Thursday to sound dire
warnings about "a darker future" for the nation if it fails to follow his
path of more oil drilling and nuclear plants.
After touring a power plant fired with new technology, the president urged
the country to rally around his just-unveiled energy plan or risk seeing
power problems now plaguing California spread.
"If we fail to act, this great country could face a darker future: a future
that is unfortunately being previewed in rising prices at the gas pump and
rolling blackouts in California," he said.
"If we fail to act, Americans will face more and more widespread blackouts.
If we fail to act, our country will become more reliant on foreign crude oil,
putting our national energy security into the hands of foreign nations, some
of whom do not share our interests.
"And," he added, "if we fail to act, our environment will suffer, as
government officials struggle to prevent blackouts in the only way possible )
by calling on more polluting emergency backup generators, and by running less
efficient, old power plants too long and too hard."
But, trying to build support for the report previewed the night before by
White House officials ) and to stay ahead of the criticism of some of its
politically controversial recommendations ) the president also sounded an
optimistic note that stressed technology and conservation as the keys to
avoiding California's missteps.
Bush called for "a new harmony between our energy needs and our environmental
concerns," arguing that energy development and environmental protection were
not at odds.
He made only passing references to the report's proposals to drill in an
Arctic wildlife refuge, bury the nuclear power industry's waste and
commandeer private lands in order to expand interstate electricity
transmission grids.
Proposals such as those have aroused the ire of many Democrats and
environmentalists who charge Bush and Vice President Dick Cheney, the
report's main author, with using the energy situation as a pretext to give an
economic boost to the energy industry that made them wealthy.
Meanwhile, Bush cited his own roster of villains ) President Clinton, Iraq's
Saddam Hussein and California.
He noted pointedly that the nation, beginning in the early 1970s, made
strides in energy efficiency, but declared that "this improvement slowed in
the 1990s" ) during the Clinton administration.
He also defended his proposal to drill in Alaska's Arctic National Wildlife
Refuge by noting that doing so would produce 600,000 barrels a day "for the
next 47 years."
He added, "That happens to be exactly the amount we import from Saddam
Hussein's Iraq."
Bush started his visit here by dropping by a power facility that combines
innovative heat and power technologies to burn coal, natural gas, oil, and
renewable wood biomass to provide low-cost heating to 146 large buildings and
298 single-family residences in downtown St. Paul, Minn., and adjacent areas.
In his speech, Bush referred to the facility and noted other technological
advances that have led to a solar powered house that produces more energy
than it uses and to "hybrid cars" that can convert to battery power to reduce
emissions and get up to 70 miles per gallon.
"These are our early glimpses of a future in which Americans will meet our
energy needs in ways that are efficient, clean, convenient and affordable.
That future is achievable ) if we make the right choices now."
Later, he praised the state as an "impressive conservation leader," but
added, "California has not built a major new power plant in a decade. And not
even the most admirable conservation effort could keep up with the state's
demand."
Bush argued that his plan "will speed up progress on conservation where it
has slowed and restart it where it has faltered."
At the same time, he described the report as an effort to cut through the
federal government's regulatory regime to make it possible for Americans to
reap conservation's rewards.
Warning that the country's growing dependence on foreign oil sources poses a
national security threat, Bush described technology as a way out of the
dilemma and added, "New technology makes drilling for oil more productive as
well as environmentally friendly than it was 30 or 40 years ago."
Bush argued that the renewal and expansion of existing nuclear facilities
"can generate tens of thousands of megawatts of electricity at a reasonable
cost without pumping a gram of greenhouse gas into the atmosphere."
Reprising one of his signature campaign promises, Bush said, "Just as we need
a new tone in Washington, we also need a new tone in discussing energy and
the environment ) one that is less suspicious, less punitive, less rancorous.
We've yelled at each other enough."

Gov. Davis attacks Bush energy plan

By Alexa Haussler
ASSOCIATED PRESS
May 17, 2001
SACRAMENTO ) Gov. Gray Davis attacked President Bush's energy plan Thursday,
accusing the administration of "turning a blind eye to the bleeding and
hemorrhaging that exists in this state."
The Democratic governor said Bush's pledge to speed up power plant permits
and conserve at federal facilities offers no short-term relief for
California's rolling blackouts and record power bills.
By not doing anything Bush is "allowing the price gouging energy companies,
many of whom reside in Texas, to get away with murder," Davis said.
"Californians wants to know if (Bush) is going to be on their side," Davis
said.
Davis repeated his plea for the federal government to impose caps on
wholesale energy prices that he says have driven the state's largest
investor-owned utility into bankruptcy and two others on the brink of
collapse.
"If he wants to be helpful to California, he could send a strong signal that
the Federal Energy Regulatory Commission should grant some kind of relief,"
he said.
California has been struck by six days of rolling blackouts since January,
and officials predict more as temperatures rise this summer. With little
notice, the outages have swept through the state snapping off power to homes
and businesses from San Francisco to San Diego.
Bush announced his long-term energy plan Thursday in St. Paul, Minn., and he
has yet to visit California, the state in the grips of the nation's worst
energy crisis.
But shortly into the speech, Bush warned that California is previewing the
power troubles the nation could face if it doesn't boost its energy supply
and cut demand.
"Californians are learning, regrettably, that sometimes when you flick on the
light switch, the light does not come on at any price," Bush said.
He said his 163-page energy plan provides solutions that will help ease the
state's power woes.
"I'm deeply concerned about the impact of blackouts on the daily lives of the
good people of the state of California, and my administration is committed to
helping California," Bush said.
Davis agreed that California is likely only the first state to experience a
power crisis.
"We're the first one in line to suffer. We want to look out for the interests
of other states that could be affected in a year or two," he said.
He urged the president to look at "creative solutions," such as ordering the
power generators to refund some of the recent high wholesale power prices.
"His long term approach is basically on-track, but for those of us who are in
immediate peril, it offers no relief," Davis said.
California is in danger of spiraling into a recession because of the high
wholesale energy costs are "literally dragging down our economy," he said.
California Senate Republican Leader Jim Brulte said he thinks the president's
plan will help California, particularly in helping to speed construction of
new power plants.
Brulte said it's a mistake for California to blame Bush and the federal
government for its problems.
"Gov. Davis and his administration made significant mistakes on this energy
issue and rather than trying to find a solution, he's playing the political
blame game," Brulte said.

Carter recalls an energy crisis that was far worse

By Calvin Woodward
ASSOCIATED PRESS
May 17, 2001
WASHINGTON ) Less than two weeks into his presidency, Jimmy Carter donned a
sweater and went on TV to tell Americans they should turn down their
thermostats and learn to live thriftily.
Now, nearly a quarter century after the energy crisis that dogged him, Carter
says Thursday's problems are not so bad.
"No energy crisis exists now that equates in any way with those we faced in
1973 and 1979," Carter said Thursday in an article in The Washington Post.
He noted that world energy supplies are adequate and stable, and "automobiles
aren't waiting in line at service stations."
President Bush released his energy plan Thursday, emphasizing the need to
increase production and proposing incentives for energy to be used more
efficiently.
He is not proposing the tough efficiency standards or penalties for energy
waste that Carter fought for. But the former Democratic president said Bush
does not have as big a problem on his hands.
Two major oil crises struck the U.S. economy in the 1970s ) first in 1973 and
then in the late 1970s, during Carter's presidency ) as major oil exporters
reacted to the Iran hostage crisis, causing gas station lineups and high
prices. Carter was defeated in 1980, partly because of fallout from the
energy crisis.
Now, he says Bush should seek a balance between conservation and new energy
production, just as he did.
Although Carter's plan was known mostly for its push to curb demand, he also
acted to spur coal production and speed the approval of nuclear power plants,
as well as encourage alternative energy.
Carter, in his column, also renewed his opposition to Bush's plans to drill
in Alaska's Arctic National Wildlife Refuge. In 1980, Carter signed a law
that protected the refuge's 1.5 million-acre coastal plain, where the oil is,
while opening 95 percent of Alaska's coastal areas to oil exploration.
Carter wrote that "some officials are using misinformation and scare tactics
to justify such environmental atrocities as drilling in the Arctic National
Wildlife Refuge."
He added that drilling advocates "are careful to conceal the facts that
almost none of the electricity in energy-troubled California is generated
from oil."
In his February 1977 address to the nation, Carter said the energy shortages
could be dealt with "if we all cooperate and make modest sacrifices, if we
learn to live thriftily and remember the importance of helping our
neighbors."
Then, in April, he declared "the moral equivalent of war" on the energy
crisis and outlined tough measures, including a tax on gas-guzzling cars.

Governor signs bill on energy authority

Legislation allows state to build plants
By Bill Ainsworth and Ed Mendel
UNION-TRIBUNE STAFF WRITERS
May 17, 2001
SACRAMENTO -- Declaring California at war with price-gouging energy
producers, Gov. Gray Davis signed legislation yesterday that he said would
allow the state to fight back by building its own power plants.
"We're retaking control of our own energy destiny," Davis said. "The power
will be generated here. It will stay here, and it will be made available to
the people of California at reasonable prices."
The bill is the most far-reaching legislation sparked by the energy crisis.
Many cities, including Los Angeles and Sacramento, have publicly owned
utility districts, but the state has never owned or operated plants on a
large scale.
The legislation, which takes effect in 90 days, creates a state power
authority that can finance, build or seize plants and is controlled by four
appointees of the governor and the state treasurer. It's modeled on a New
York agency that operates 10 power plants.
California's new authority could issue up to $5 billion in bonds to pay for
the construction of new plants. The bonds would be paid off by revenue from
the power produced by the plants.
The goal of the new state authority is to break the state's dependence on
electricity imports controlled largely by out-of-state companies. California
imports 20 percent of its electricity.
Davis said he believes the authority could start building peaker plants by
September. Such plants operate when power demand is at its highest.
Senate President Pro Tempore John Burton, D-San Francisco, who authored
Senate Bill 6X, said it would have the "longest and most lasting impact" on
California's ability to reduce electricity prices and end rolling blackouts.
State Treasurer Philip Angelides, who sponsored the bill, said it "will help
ensure that California is never again held hostage by an unregulated private
energy market run amok."
Assembly Republican Leader Dave Cox of Fair Oaks has derided the plan as
"socialism."
Davis said he was disappointed that no Republicans supported the bill, saying
it's a sign that they have retreated to their "ideological point of view and
refuse to be problem-solvers."
At the news conference, Davis said a California Energy Commission report
shows huge increases in the number of power plants out of service in the
first four months of 2001 over a similar period last year.
"To me, this is strong evidence that people are manipulating the market by
withholding the power to drive up prices," he said.
Energy producers have denied withholding power, saying they are maintaining
their aging plants because they have to operate them longer and harder to
provide California with more power.
Davis called on power companies to run their plants during the summer when
blackouts are expected routinely or face the penalties.
"If they don't act responsibly and do everything in their power to help us
get through the summer, which means operating at full capacity, then I'll
have no choice but to sign a windfall profits tax and seize a plant," he
said.
To curb soaring power costs, two Assembly members introduced a resolution
urging Davis to form a buyers' cartel with Oregon and Washington to limit the
price the three states will pay for power.
Assemblymen Fred Keeley, D-Boulder Creek, and Paul Koretz, D-West Hollywood,
said the buyers of power must act because federal regulators have refused to
cap the wholesale prices that generators can charge.
"We will pay these power generators a fair price, but we will no longer allow
ourselves to be cash cows," Koretz said.
Davis said he would consider the plan.
The formation of a buyers cartel was proposed last month by a San Diego
consumer group, the Utility Consumers' Action Network, which also said the
state should consider planned blackouts to give consumers time to prepare.
A generator spokesman said state officials should have begun planning earlier
for choosing between paying high prices for power and more blackouts.
"In a crisis I think this kind of decision has to be made," said Gary
Ackerman of the Western Power Trading Forum. "It's economic triage."
Meanwhile, federal energy regulators, whose reaction to California's problem
has been criticized by state officials, waded into the dispute over the role
of small-capacity generators yesterday.
The Federal Energy Regulatory Commission allowed operators of the plants to
sell electricity to third parties if they have more power than they need to
meet their contracts.
But FERC did not approve a plan releasing the generators, known as
"qualifying facilities," from long-term contracts with the state's two
biggest utilities, which have had trouble paying their bills.
California Governor Gray Davis had urged FERC to stay out of the issue,
saying state officials were working with small power producers and
cogeneration plants to solve the problem.

State to review Escondido power plant plan

UNION-TRIBUNE
May 17, 2001
ESCONDIDO -- The California Energy Commission was expected to start the
21-day review period today for a 49-megawatt power plant proposed for
Enterprise Street.
Jonathan Brindle, the assistant planning director, told the City Council
yesterday that CalPeak Power of San Diego had supplied all the necessary
paperwork to the commission.
The commission has scheduled a public hearing for 6 p.m. May 24 in the City
Council chambers.
To the dismay of Escondido officials, CalPeak withdrew its application with
the city recently and is seeking a state permit.
Escondido officials maintain that CalPeak will still have to obtain city
approval, but the commission has said it will have final say under an
executive order signed by Gov. Gray Davis.

PUC Chief Alleges Price Collusion
Power: She cites evidence that plants were shut down to create "artificial
shortages." An industry spokesman calls the accusation "idiocy."

By RICH CONNELL and ROBERT LOPEZ, Times Staff Writers

?????State investigators have uncovered evidence that a "cartel" of power
companies shut down plants for unnecessary maintenance to ratchet up prices,
the head of the California Public Utilities Commission asserted Thursday.
?????PUC President Loretta Lynch said her agency, working with the state
attorney general's office, is probing patterns of plant outages that have
created "artificial shortages," particularly when the state has issued
emergency alerts because of seriously low levels of electricity.
?????"There are instances where plants could have produced, and they chose
not to," Lynch said in an interview at The Times.
?????"And it is clear that there are instances that plants, when called to
produce, chose not to produce," even when they were obligated to do so under
special contracts with the state and utility companies.
?????Lynch said the ongoing investigation has already produced enough
information for the PUC and attorney general's office to take legal action
against the generators next month. The exact nature of that action, she said,
is still under review.
?????Lynch, who is an attorney, did not name specific suppliers or provide
documentation of her assertions. She said that information will remain
confidential until court proceedings are undertaken.
?????Generators have long denied any attempt at manipulating the power market
in any unlawful way, including orchestrating plant shutdowns. They say the
facilities are so old and have been run so hard during the power crisis that
breakdowns are a recurring problem.
?????Lynch and Gov. Gray Davis, who has been particularly critical of
out-of-state generators, have not suggested that every plant shutdown has
been unwarranted.
?????In fact, the governor's top advisor on power plants released a statement
last week saying inspectors determined that a Bay Area plant shutdown was
justified and that the company's officials were "accommodating."
?????State Atty. Gen. Bill Lockyer was not available for comment on his joint
investigation with the PUC. A spokesman would only confirm that Lockyer's
office is investigating plant shutdowns as part of a wide-ranging probe of
possible civil and criminal violations.
?????So far, the attorney general's office has subpoenaed documents in 91
categories from generators, including records of plant operations, pricing
practices and information the merchants may have shared with one another
about California's power market.
?????"We're looking for behavior that would violate antitrust or unfair
business practice laws," Lockyer has told The Times.
?????Although he has not provided details of his office's findings, he
recently said the inquiry is "beginning to get interesting."
?????Lynch said evidence of allegedly unnecessary plant shutdowns was amassed
during interviews by investigators and in a review of the voluminous
subpoenaed records, obtained after intense legal battles with the power
companies.
?????In addition, investigators have been entering plants where unplanned
shutdowns have occurred to examine operations and maintenance records, Lynch
said. At times, the investigators have been denied access and have had to
exert legal pressure to get in, she said.
?????The plant shutdowns are a key factor in the soaring power prices, which
have gone from $200 a megawatt-hour in December to as high as $1,900 last
week.
?????"I would argue it's no accident," Lynch said of the high prices. "That
in fact it's [due to] the coordinated behavior of a cartel."
?????The power generators have repeatedly said they have acted within the
rules of California's flawed deregulation program, which allowed them to buy
power plants formerly run by the state's three largest utilities.
?????Gary Ackerman, a spokesman for a trade association of large power
producers, said Lynch's allegations were "the height of idiocy."
?????The reason many plants have been down in recent months, he said, is that
power producers must perform maintenance now in anticipation of heavy summer
demand.
?????He said he doubted that state investigators could prove wrongdoing
because there was no conspiracy to turn off supplies.
?????"My members do not make money by shutting down their plants so their
competitors can make money," said Ackerman, executive director of the Western
Power Trading Forum.
?????State analysts have argued, however, that power traders can reap
extraordinary profits by withholding power because the prices for the power
that is sold are so high.
?????According to Lynch, investigators have found that some companies were
more aggressive than others in allegedly using plant shutdowns to manipulate
the state's power market.
?????She said investigators have also found a suspicious pattern: When
operators of the state electricity grid declare a Stage 1 alert--meaning that
electricity reserves have dropped below 7%--plants that do not need repairs
suddenly are yanked offline. That, she said, aggravates the shortages, and
the cost of wholesale electricity soars.
?????Before December, state analysts alleged that power traders had driven up
prices primarily through bidding. At the time, the market was designed to pay
all power suppliers the highest amount accepted by the state's grid operator.
?????That changed in December, when new federal regulations restructured
California's wholesale power market to loosen price controls, Lynch said.
Since then, a new pattern of plant shutdowns has emerged--"not coincidentally
in my view," she said. Now, she added, the state has endured "historically
high levels of unplanned plant outages."
?????The investigation is not focusing on power plants still operated by
utility companies because they have not been "going off [line] at record
levels," Lynch said.
?????The California Energy Commission reported last week that the state's
electrical grid has been sorely tested by plant shutdowns at a rate several
times higher than in the last two years.
?????A Times analysis of state data found that, throughout the last two
months, about 12,000 megawatts of production was offline, more than a third
of the peak power used in California on a typical day. That has been about
evenly divided between scheduled and sudden plant shutdowns.
?????By contrast, shutdowns in the same period of 1999 and 2000 took only
3,300 to 5,700 megawatts offline.
?????Last month, the Federal Energy Regulatory Commission ordered electricity
supplier Williams Energy Marketing and Trading to pay $8 million in
connection with allegations that plants were improperly shut down to raise
prices. The company agreed to settle the case without admitting any
wrongdoing.
?????However, FERC released a study in February of closures at three other
California plants that it concluded were not undertaken to create a scarcity
of power.
?????After talking to plant operators by telephone, reviewing documents and
visiting the three plants, federal inspectors concluded that "the companies
appeared to have taken whatever steps were necessary to bring the generating
facilities back online as soon as possible by accelerating maintenance and
incurring additional expenses."
---
?????Times staff writer Nancy Vogel in Sacramento contributed to this story.

Critics Say Bush Proposal Leaves California in the Dark
Effect: President's energy plan may not even offer a silver lining for the
power-deprived Golden State.

By JENIFER WARREN and ROBIN FIELDS, Times Staff Writers

?????California lawmakers, analysts and others waist-deep in the state's
power crisis reached a single conclusion Thursday about the White House
energy plan:
?????By the time many of President Bush's proposals kick in, it will be too
late to do the Golden State much good.
?????"This plan does absolutely nothing to help California get through the
next critical 18 months," groused state Sen. Debra Bowen (D-Marina del Rey).
"You can't focus just on the long term here. Because the patient will be dead
before we get the life-support systems in place."
?????Gov. Gray Davis and others say the single best step Bush could take to
help the state is to impose controls on runaway electricity prices that are
draining California's treasury and forcing massive utility rate increases.
?????Instead, the president has offered an energy blueprint anchored by an
expansion in drilling for natural gas and oil, increased reliance on nuclear
power and more than $10 billion in tax credits for conservation and energy
development.
?????Most of Bush's proposals, however, are slow-acting remedies, and many
others already are being applied in California, which was hit by energy woes
far ahead of other states.
?????The plan's dozens of incentive programs designed to boost output or
promote conservation cannot be ramped up in time to protect the state from
blackouts and painful spikes in electricity prices, experts say.
?????"Overall, the message in this plan is, 'Drop dead, California,' " said
Eric Heitz of the Energy Foundation, a San Francisco-based research and
advocacy group.
?????"I don't think it delivers another megawatt to California," added
Loretta Lynch, president of the California Public Utilities Commission.
?????State economic analysts say the plan fails California by viewing the
power crisis as an ongoing emergency, rather than a temporary one.
California's supply crunch should ease dramatically by summer 2003, once 27
new power plants--15 of them licensed, 12 in the pipeline--start churning.
?????"It's not that we don't have long-term problems," said Stephen Levy,
director of the Palo Alto-based Center for Continuing Study of the California
Economy. "It's just that energy isn't among them."
?????Others, including many environmentalists, say Bush could have made a
noticeable impact by, for example, beefing up energy efficiency programs--a
quick, clean and relatively inexpensive way to cut demand.
?????"Why not provide aggressive incentives [rebates] to get people to
purchase more efficient air conditioners?" asked Dan Reicher, assistant
Energy secretary in the Clinton administration. "Over the course of the year,
a program like that can make a dramatic difference" because air conditioning
consumes nearly one-third of California's peak energy supply.
?????Instead, Reicher noted, Bush earlier this year rolled back efficiency
standards for air conditioners, a move that critics say will require the
country to build 43 new power plants.
?????Even the few elements of the plan that looked promising for California
were clouded by doubt.
?????Bush, for example, directed the Energy secretary to explore ways to
relieve a key transmission bottleneck, known as "Path 15," between Northern
and Southern California. But he specified that the upgrade, which requires
building a 90-mile line at an estimated cost of $225 million, be funded by
"nonfederal contributions"--meaning the financially strapped utilities might
be expected to bear the cost.
?????Gov. Davis, who lately has stepped up his pleas for help from
Washington, said the Bush plan offers too little too late for California and
criticized the president for allowing "the price-gouging energy companies,
many of which reside in Texas, to get away with murder."
?????Davis said the state is "doing everything possible to build and conserve
our way out of the problem," but it desperately needs federal price controls
on energy costs. In 1999, California energy users spent about $7 billion;
this year, even with consumption down 5%, the bill could top $50 billion.
?????But Bush and Vice President Dick Cheney, who led the task force that
prepared the plan, are opposed to price caps, preferring to let market forces
reign.
?????Davis said that laissez faire approach puts California's economy in
peril.
?????"Just saying, over the long haul, everything will work out is turning a
blind eye to the bleeding and hemorrhaging that exist in this state," Davis
said. "Small businesses . . . literally will go out of business because they
can't afford these rates."
?????Analysts who studied the Bush plan say they are particularly
disappointed because it covers a lot of ground already plowed by California.
?????Bush recommends building 1,900 power plants over the next 20
years--about eight plants a month. But California is already on a
plant-building spree that will give it a comfortable supply within two years.
?????The president also wants to streamline approval of plants and is pushing
for a renewed commitment to nuclear power. The California governor, however,
has already ordered expedited licensing of new plants under an executive
order issued in February.
?????There is little evidence, meanwhile, that Californians are eager to
approve an expansion in nuclear power. Nationwide, not one new nuclear plant
has been licensed in more than 20 years. And a Times Poll in February found
that 60% of Californians oppose more nuclear reactors in the state.
?????"You can barely build clean-burning gas plants here, let alone nuclear
plants," said Edward Kahn, a San Francisco-based energy consultant with
Analysis Group/Economics.
?????Among other elements of the plan that could affect California is a
proposal to allow federal authorities to take private land for power lines.
Currently, the U.S. government's power to forcibly acquire private property
applies only to highways and gas pipelines. Expanding that power is likely to
enrage property owners and property-rights advocates, who typically expect
backing from Bush-style conservatives.
?????"I'm just surprised that this administration would want to preempt the
state's [authority] over its own land," said Lynch of the PUC.
?????The issue is already heated in California. Communities in southwestern
Riverside County have mobilized to resist San Diego Gas & Electric's attempts
to use eminent domain to obtain private land for 31 miles of transmission
lines. The Legislature is considering a bill that would require state energy
officials and utilities to grab public land first before reaching for private
acreage.
?????Bush also proposed a unified, private national electricity grid, an idea
that seems at odds with Southern California Edison's effort to sell its
transmission lines to the state. But Edison officials said they hope to have
their deal worked out long before the president's idea comes to fruition--if
it ever does.
?????Unveiling his energy program in St. Paul, Minn., Bush said he is "deeply
concerned about the impact of blackouts on the daily lives of the good people
of the state of California."
?????But S. Davis Freeman, the former Los Angeles Department of Water and
Power chief who is now the governor's energy advisor, said Bush has let down
the state by failing to "answer the 911 call."
?????"It's like your house is on fire," Freeman said. "You call the fire
department, and they say, 'No, we're not coming, but we're building a
super-duper firetruck that will be ready five years from now.' "
---
?????Times staff writers Dan Morain and Richard Simon and researcher Patti
Williams contributed to this story.

Wall St. Cautious Over Energy Sector's Outlook for Next Year
Stocks: Earnings for many oil and natural gas producers are expected to top
out in 2001 as prices stabilize.

By JOSH FRIEDMAN and TOM PETRUNO, Times Staff Writers

?????President Bush's energy plan, unveiled Thursday, helped spark a broad
rally across the energy sector and among firms that stand to benefit by
selling equipment and services to oil and natural gas companies.
?????Yet Wall Street has been taking a cautious stance toward energy shares
in recent months, and Thursday's rally doesn't change much, some analysts and
money managers say.
?????Despite the long-term earnings boost the sector could get under Bush's
plan, many oil and gas companies are expected to post lower earnings in 2002
than in 2001, analysts estimate.
?????That reflects expectations that crude oil and natural gas prices will at
best stabilize at current levels--which are down sharply from their 2000
peaks--or head lower.
?????Thus, after heady gains in 1999 and 2000 as oil and gas prices rocketed,
many energy stocks have stalled this year.
?????The American Stock Exchange index of 15 major natural-gas-related
stocks, for example, is down 4% year to date. The Standard & Poor's index of
six large oil and gas exploration and production companies has lost 5.3%.
?????Schlumberger (ticker symbol: SLB), a leading oil-field services company,
has seen its shares pull back 15% since Jan. 1, even with a gain of $1.78 to
$67.99 on Thursday.
?????By contrast, the blue-chip S&P 500 index is down 2.4% this year.
?????Craig T. Callahan, manager of Icon Energy stock mutual fund and chief
investment officer at the Icon Funds group, said investors need to be choosy
to find good buys today in the energy sector.
?????"We're leaning more toward the refiners than the drillers because
they're the better bargains," he said. "And at this point the good news looks
fully priced into the services and equipment group."
?????After betting big on the energy sector in early-1999, Callahan took
profits earlier this year. "We just don't see energy as a leader anymore--its
leadership days are done," he said.
?????Callahan shrugged off any potential windfalls from Bush's proposal. "We
look at these companies from the bottom up and pretty much ignore the macro
trends," he said.
?????For the near term, investors have to cope with the prospect that
earnings at many energy companies will decline in 2002.
?????Chevron (CHV), for example, is expected to earn $7.20 a share this year,
according to analysts' consensus estimate as tracked by IBES/Thomson
Financial. But next year the company's earnings are expected to fall to $6.20.
?????At the stock's current price--it rose 41 cents to $95.66 Thursday--the
price-to-earnings ratio based on estimated 2002 results is 15. That is lower
than the average blue-chip stock P/E of 21, but experts note that energy
stocks generally have lower P/Es because of the inherently cyclical nature of
the business.
?????Still, some analysts believe the Bush energy plan could revive interest
in many energy shares, if investors take a longer-term view.
?????Companies that explore for, produce and refine oil and gas could be
among the biggest beneficiaries of Bush's initiatives, said Corey McElveen,
stock analyst at Morningstar Inc. In particular, he cites Phillips Petroleum
(P) and Exxon Mobil (XOM), which already have operations in energy-rich
Alaska. Phillips rose $1.72 to $65.87 on Thursday, while Exxon Mobil eased 77
cents to $88.73.
?????Callahan, however, favors companies that focus on refining. Ashland
(ASH), Pennzoil-Quaker State (PZL) and Sunoco (SUN) are among the refining
stocks with reasonable valuations and plenty of upside, he said.
?????Ashland eased 17 cents to $43.50 Thursday, Pennzoil-Quaker added 5 cents
to $15.96 and Sunoco rose 98 cents to $41.45.
?????Some money managers prefer to leave the traditional oil and gas stocks
for others--in favor of alternative energy issues.
?????John Hammerschmidt, manager of Turner New Energy & Power Technology
Fund, likes the potential of companies such as Energy Conversion (ENER),
which is seeking to develop cheaper and sturdier solar panels, and AstroPower
(APWR), another solar firm.
?????Energy Conversion jumped $3.53 to $31.28 on Thursday while AstroPower
leaped $3.38 to $54.93.
?????In the fuel cell industry, Hammerschmidt pointed to Ballard Power
Systems (BLDP), whose products are being used in clean-running buses in Los
Angeles and elsewhere, and FuelCell Energy (FCEL). A tax credit for fuel-cell
vehicles, as proposed by Bush, "could be huge" for such firms, he said.
?????Ballard jumped $8.37 to $57.60 and FuelCell rose $4.98 to $85.28.
?????But fuel cell companies, are, for the most part, far away from
profitability, Hammerschmidt warned, so they may make for an especially
speculative and risky investment.
?????Many alternative-energy shares also rallied strongly in 2000--only to
tumble.

Municipal Utilities Seek Exemptions From Blackouts
Power: Those connected to state grid, L.A. not among them, say their
customers should not be deprived to aid others.

By SCOTT GOLD, Times Staff Writer

?????A group of California cities that run their own electric utilities and
have plenty of power to weather the energy crunch this summer will ask the
federal government today to exempt them from blackouts.
?????Their quiet campaign challenges the very foundation of the power grid in
California, and could change the dynamics of how electricity is doled
out--just as the state is bracing for a summer of rolling outages.
?????Most Californians pay large, investor-owned utilities like Southern
California Edison Co. for power. But about a quarter of households, from the
tiny desert city of Needles to the state capital, are billed for electricity
by cities, counties or local districts that run their own nonprofit
utilities. There are 30 "municipal" utilities.
?????Four of them--serving Los Angeles, Burbank, Glendale and the Imperial
Valley, east of San Diego--are independent of the state power grid and do not
face any outages. But the others are required by contract to give electricity
back to the California Independent System Operator, which runs the grid, by
participating in rolling blackouts--although they have plenty of power to
serve their customers.
?????"It makes them wonder why they went out and did their jobs," said
California Municipal Utilities Assn. attorney Tony Braun.
?????These utilities argue that they are suffering for the myopic decisions
behind the deregulation of California's electricity market and the power
shortage.
?????"We believe our power was purchased for the citizens of Riverside and
that we don't have the right--nor does anyone else--to take it away from them
when they need it," said Riverside Utilities Director Tom Evans. "Our
customers are being denied something that they are fundamentally entitled to."
?????Leading the campaign is the tiny Los Angeles County city of Vernon,
which filed a complaint last week asking the Federal Energy Regulatory
Commission to exempt it from rolling blackouts.
?????Vernon's public utility has 2,000 customers, all but 30 of which are
industrial operations such as glass manufacturers and meatpacking plants. The
city launched its own distribution system primarily to lure industry with
electric rates that are typically among the lowest in the state, said Jorge
Somoano, Vernon's assistant director of resource management.
?????FERC set a deadline today for other municipal utilities to support the
campaign. Up to half, including Riverside, are expected to either file their
own complaints or file documents supporting Vernon, said Washington attorney
Bonnie Blair, who represents municipal utilities in Azusa, Banning and Colton.
?????Even the campaign's supporters are unsure whether it will succeed. Blair
acknowledged that there is no precedent for presenting this type of legal
challenge to FERC, which is expected to decide on the issue by mid-June. And,
she said, municipal utilities might have a tough time proving they have done
enough to insulate themselves from the energy crisis.
?????Some cities with municipal utilities, such as Anaheim, are not planning
to join the campaign.
?????Marcie Edwards, general manager of Anaheim Public Utilities, said the
relationships between municipal utilities and Cal-ISO are too complicated to
make a clean break. She said it is rare that a power shortage can be blamed
entirely on the large investor-owned utilities--including this summer's
energy crunch. And until that can be proved, she said, municipal utilities
still have an obligation to support California's power grid.
?????"It's not right to go either way 100%," she said. "The fact remains that
municipals still have an obligation to serve."
?????Most of the municipal utilities are linked to the grid through
agreements with Cal-ISO that call for them to share electricity in an
emergency.
?????Those utilities tend to believe that the agreements were reserved for
natural disasters, such as earthquakes, or other sudden and monumental
problems, such as a plane running into a transmission line.
?????"The failure or inability of other utilities to schedule sufficient
supplies," Vernon contended wryly in its papers filed with FERC, does not
constitute an emergency.
?????"The obligation to share in [rolling blackouts] did not contemplate
situations where some utilities were not meeting their basic obligation to
provide resources to serve their customers," Blair said. "If they are forced
to participate in rolling blackouts, the effect is that the ISO is taking
energy that has been bought and paid for by some customers and effectively
giving it to somebody else that has been unable to buy it."
?????Jim Detmers, Cal-ISO's vice president of operations, said the
organization plans to fight the campaign. He said emergency provisions of
Cal-ISO's agreements with the municipal utilities cover the current energy
crunch.
?????Detmers said that exempting municipal utilities from blackouts would
increase the share of those events shouldered by communities that do not have
their own electricity distribution. He compared the exemption request to a
homeowner declining to fight a fire at a neighbor's because he wants to keep
his water for himself.
?????"What we're dealing with is an overall shortage," Detmers said. "We want
to make sure that we are making the right choices when everyone's lives are
at risk."
?????Ronald Nunnally, Edison's director of federal regulations and contracts,
said the municipal utilities have an obligation to uphold the integrity of
the power grid to which they are connected.
?????"The ability to use the grid requires to keep it whole, if you will,
under all circumstances," he said.
?????Blair said those arguments don't hold up. Indeed, she said the municipal
utilities will argue that the California Constitution expressly prohibits
giving public property, such as electricity bought by a municipal utility, to
a private enterprise, such as investor-owned electric companies.
?????"Our customers are paying for it," she said. "That's the bottom line."

Californians fault Bush energy proposal
GARY GENTILE, AP Business Writer
Friday, May 18, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/18/state0
301EDT0100.DTL&type=news
(05-18) 00:01 PDT LOS ANGELES (AP) --
Government officials, environmental groups and many energy consumers found
little comfort in President Bush's national energy plan released Thursday.
The plan, which includes a pledge to speed up power plant permits and
conserve at federal facilities, was sharply criticized by Gov. Gray Davis,
who accused the administration of "turning a blind eye to the bleeding and
hemorrhaging that exists in this state."
Davis repeated his plea for the federal government to impose caps on
wholesale energy prices that he says have driven the state's largest
investor-owned utility into bankruptcy and two others to the brink of
collapse.
"If he wants to be helpful to California, he could send a strong signal that
the Federal Energy Regulatory Commission should grant some kind of relief,"
he said.
California has been struck by six days of rolling blackouts since January,
and officials predict more as temperatures rise this summer. Customers of the
state's two largest private utilities, Pacific Gas and Electric Co. and
Southern California Edison, will see unprecedented rate increases soon.
In announcing his plan Thursday, Bush warned that California is previewing
the power troubles the nation could face if it doesn't boost its energy
supply and cut demand.
"Californians are learning, regrettably, that sometimes when you flick on the
light switch, the light does not come on at any price," Bush said.
He said his energy plan provides solutions that will help ease the state's
power woes.
"I'm deeply concerned about the impact of blackouts on the daily lives of the
good people of the state of California, and my administration is committed to
helping California," Bush said.
Some consumers didn't see the president's sympathy.
"I don't really think he has my concerns as his priority," said Jodi
Reynolds, 38, a Culver City legal secretary. "I can already see that I need
to conserve energy. I don't need the president to tell me that."
Others gave Bush credit for addressing the nation's long-term energy needs,
but faulted the president for not doing more for California now.
"We give him kudos for addressing the supply issue," said Brian Bennett, vice
president of external affairs for Southern California Edison, one of the
state's cash-strapped electric utilities.
"However, when it comes to addressing the California crisis, the Bush
administration has chosen to ignore what they could have done to help lessen
the crisis here -- impose on a short-term basis cost-based pricing on the
wholesale market."
That theme ran through some of the comments by the state's environmental and
consumer groups.
"In the last energy crisis, a handful of nations in the Middle East had us
over a barrel," said Harvey Rosenfield, head of the Foundation for Taxpayer
and Consumer Rights in Santa Monica. "Now it's a handful of energy companies
in the Southern United States. The only solution is to bust the Texas-based
OPEC."
Environmentalists said Bush's energy policy lacks proposals that could offer
short-term relief from higher electricity and gasoline prices, such as power
price controls, incentives for more efficient appliances and tighter
fuel-efficiency requirements for vehicles.
The Bush plan also steps away from assurances he made during the campaign
that he would not rescind a moratorium on new offshore oil leases created by
his father and extended until 2012 by President Clinton. The plan calls for
the secretaries of commerce and the interior to re-examine the moratorium.
"We are concerned what he is stepping toward," said Allison Detmer, manager
of the ocean and resources unit of the state Coastal Commission, which is
suing the federal government over the existing leases. "This might be the
first step toward opening up the coast again."
Some utility and government officials said Bush correctly focused on
expanding the nation's energy infrastructure, building more natural gas
pipelines and strengthening the electricity transmission grid.
But the president's support for new nuclear power plants won little support.
"The political realities in California are we're not going to see an
increased reliance to nuclear power in the near future," said Carl Wood, a
member of the California Public Utilities Commission.
Perhaps predictably, state Democrats found little to like in Bush's plan,
while Republicans found much to praise.
"The president's plan will help California this summer by expediting new
power plants and ordering state agencies to conserve," said Rep. Randy
Cunningham, R-Escondido.
"There's nothing in there for California. Nothing," said Rep. Brad Sherman,
D-Los Angeles. "The headline is: Bush to California, drop dead."

California utilties commission chief says power plants shut down to drive up
prices
Friday, May 18, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/18/nation
al0842EDT0531.DTL&type=news
(05-18) 05:42 PDT LOS ANGELES (AP) --
There is evidence that a "cartel" of power companies shut down plants for
unnecessary maintenance to increase energy prices, the head of the California
Public Utilities Commission said. An energy official called the allegation
"idiocy."
PUC President Loretta Lynch told the Los Angeles Times on Thursday that her
agency and the state attorney general's office are probing plant outages that
she said created "artificial shortages" that contributed to skyrocketing
power prices.
"There are instances where plants could have produced, and they chose not
to," Lynch said. "And it is clear that there are instances that plants, when
called to produce, chose not to produce." She said that happened even when
plants were obligated to do so under special contracts with utility companies
and the state.
Gary Ackerman, executive director of the Western Power Trading Forum,
dismissed Lynch's allegations as "the height of idiocy."
Power generators have repeatedly said they have been acting within the rules
of the state's deregulation system. The reason many plants have been down in
recent months, Ackerman said, is that power producers must perform
maintenance now in anticipation of heavy summer demand.
"My members do not make money by shutting down their plants so their
competitors can make money," said Ackerman, who represents a trade
association of large power producers.
But Lynch said the probe has produced enough information for the PUC and
attorney general to take legal action next month against some power
generators. She did not identify them, and the exact nature of the legal
action is still under review, she said.
Investigators conducted interviews and reviewed subpoenaed records, obtained
after legal battles with the power companies, to gather evidence of allegedly
unnecessary plant shutdowns, Lynch said.
Power plants where unplanned shutdowns have happened also were visited to
examine operations and maintenance records, Lynch said.
Power prices have gone from $200 a megawatt hour in December to as much as
$1,900 last week, and plant shutdowns have been a key factor in the soaring
prices.
"I would argue it's no accident," Lynch said. "That in fact it's due to the
coordinated behavior of a cartel."
Lynch said one suspicious pattern has emerged: When operators of the state's
electricity grid declared a Stage 1 alert, which means that electricity
reserves had dipped below 7 percent, plants that didn't need repairs were
suddenly pulled off-line.
,2001 Associated Press ?

Bush faces tough fight on energy strategy
ANALYSIS: Californians must sweat out summer
Marc Sandalow, Washington Bureau Chief
Friday, May 18, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/18/M
N71543.DTL&type=news
Washington -- The White House's reluctance to bail California out of its
electricity woes was made plain by President Bush's decision to release his
energy plan 1, 425 miles from the state border.
Traveling as far west as the Mississippi River, Bush spoke sympathetically of
California's well-known energy shortage, saying he is "deeply concerned about
the impact of blackouts on the daily lives of the good people of the state."
Yet the 163-page report he distributed bluntly acknowledges that its 105
recommendations will do little to prevent rolling blackouts or lower gas
prices this summer.
"Unfortunately, there are no short-term solutions to long-term neglect,"
states a section on "California's Energy Challenge," generously illustrated
with pictures of the Golden Gate Bridge and other California landscapes.
"Our energy crisis has been years in the making, and will take years to put
fully behind us."
Several provisions may make electricity more plentiful for California years
into the future, including one to allow the government to seize private land
to build transmission lines and another to speed the permit process for power
generators.
That will be cold comfort to millions of Californians whose lights and
laptops go dark this spring as they confront staggering increases in utility
bills.
TOUGH-LOVE APPROACH
As California faces the prospect of a long energy-deprived summer, the
administration has clung to a tough-love approach, insisting that short-term
fixes -- like the price limits advocated by Democrats -- will compound the
problem down the road.
Warned by California Republicans that such an approach could have politically
disastrous consequences, the administration in recent days has softened its
language, speaking more sympathetically about California's plight.
Bush aides suggest that some immediate price relief might come from the
"psychological" effect of knowing that more energy supplies are on the way.
"The quicker you implement this policy, the quicker we're going to get rid of
some of the problems like California (is experiencing)," a senior
administration told reporters at a briefing.
Pressed specifically on what recommendations would ease the state's current
troubles, the official pointed to a plan to speed the permit process for
power plants, something he acknowledged has been going on for months.
"You've got to look at this from the perspective that it's been neglected for
a long time," the official said of California's problems. "It's going to take
some time."
DEMOCRATS SPEAK OUT
California Democrats -- some who feel the outrage of their constituents, and
others who sense a political opening -- would have nothing of it.
"Mr. President, you didn't create this problem, but you are the only one who
can solve it," Gov. Gray Davis said. "With all due respect, Californians want
to know Mr. President, whether you're going to be on their side."
Davis, who has predicted that the state will have enough power to be out of
the mess by the end of the year, said the White House's laissez faire
attitude carries a human toll.
"The president can say the problem will correct itself, and that's true --
but there will be a lot of blood on the floor along the way," Davis said. "I
do not think he wants Californians to suffer, however, by doing nothing."
Many Democrats have hinted that Bush's hands-off policy toward California
might be different if it wasn't benefiting oil interests from his home state
of Texas.
"This lengthy document will not provide one more kilowatt to California this
summer, prevent one less minute of blackouts, or keep one less dollar from
being transferred from California into the hands of the Texas-based energy
producers," said California Sen. Dianne Feinstein.
Her colleague and fellow Democrat, California Sen. Barbara Boxer, added, "The
president's energy plan does nothing to ease California's energy pain."
Even non-Californians joined the assault.
'DROP DEAD'
"George Bush's message to California from day one has been, 'Drop dead,' "
Democratic Party Chair Terry McAuliffe said on ABC's "Good Morning America."
To showcase the frustration of Californians, Democrats led by House Minority
Leader Dick Gephardt, D-Mo., will conduct an energy hearing in the Bay Area
at the end of the month.
Bush, who has yet to visit the state as president, plans to travel to
Southern California at the end of the month.
A hard line on California, which voted overwhelmingly for Democratic former
Vice President Al Gore in November, may not be as big a political risk
outside the Golden State.
"For much of America, California is a land of fruits and nuts, and they
deserve whatever they get," said Stuart Rothenberg, author of a political
newsletter in Washington.
But Rothenberg warned that there is danger "if there is a perception that he
doesn't have a policy that helps California, then he might not have a policy
that helps Michigan, or any place else, and that could be alarming."
In fact, Bush's popularity has sunk in places like Michigan, according to
independent pollster Ed Sarpolous.
"People in Michigan may not be as sympathetic to (California's) plight as
Californians, but not coming up with answers isn't helping his stature."
Chronicle staff writer Lynda Gledhill contributed to this report. / E-mail
Marc Sandalow at msandalow@sfchronicle.com.

Probe finds 'artificial' shortages
Unneeded plant shutdowns drove up state electricity prices, PUC chief says
Chuck Squatriglia, Chronicle Staff Writer
Friday, May 18, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/18/M
N226948.DTL&type=news
State energy regulators have uncovered evidence that some electric power
companies drove up prices by repeatedly shutting down generating plants for
unnecessary maintenance, it was disclosed yesterday.
Investigators with the California Public Utilities Commission and the state
attorney general's office have found patterns of plant closings that created
"artificial shortages," said commission president Loretta Lynch.
What's more, many of those unnecessary plant shutdowns came when California's
power supplies were critically low, causing exorbitant prices. Since January,
the state has spent $6 billion buying electricity on behalf of cash-strapped
utilities, Lynch said.
"We are talking about individual acts (of wrongdoing)," Lynch told The
Chronicle last night. "I believe those acts, taken together, drove up
prices."
In some cases, the generators, whom Lynch declined to name, refused to
produce power even when required to do so under contracts with the state and
utility companies, Lynch said.
"There are instances where plants could have produced and they chose not to,
" she charged. "And it is clear that there are instances that plants, when
called to produce, chose not to."
Gary Ackerman, executive director of the Western Power Trading Forum, denied
any effort by the power generators to ratchet up prices.
'SMALLER AND SMALLER WINDOW'
"Generators have a smaller and smaller window in which to perform maintanence
to prepare for summer," he said. "It's always going to look like an untimely
decision, but you have to do it."
Power companies make money by running their plants, not by shutting them down
and giving competitors the advantage, he said.
Lynch said the joint investigation by the PUC and Attorney General Bill
Lockyer's office has uncovered sufficient evidence to take legal action, but
she declined to say what penalties the power generators could face.
"That's not within the PUC's bailiwick," Lynch said last night.
Lockyer could not be reached for comment.
Although Lynch said investigators have evidence that several companies shut
down plants to ratchet up prices, there is no evidence at this point of
collusion. She declined to provide specifics of the the investigation, which
she said would be completed within 60 says, and would not name the generators
that are targets.
INVESTIGATION BEGAN IN AUGUST
Lockyer's office began investigating last August whether power companies have
been manipulating prices to maximize profits as California struggles with a
deepening energy shortage.
But even if investigators prove that electricity generators are "gaming" the
market with a variety of price-influencing techniques, it remains to be seen
whether their actions violate the law.
Meanwhile, the PUC has been investigating why so many plants are down
simultaneously for maintenance. The plant shutdowns are a key factor in the
soaring power prices, which have gone from $200 in December to as high as $1,
900 a megawatt hour last week.
Lynch said investigators amassed their evidence during interviews and a
review of subpoenaed records obtained from the power companies. Moreover,
inspectors have visited plants that have seen unscheduled shutdowns to
examine maintenance records and other documents, she said.
BOTCHED DEREGULATION PLAN
Power generators have consistently argued that they are acting within the
rules of California's botched deregulation plan, which required the state's
three largest utilities to sell off their plants.
Lynch's disclosure was news to Gov. Gray Davis, whose office has been working
closely with Lockyer during the attorney general's probe.
"This is news to me," Davis spokesman Steve Maviglio said last night. "It
wouldn't be surprising, but we will reserve judgment until we see what they
have."
The Los Angeles Times contributed to this report. / E-mail Chuck Squatriglia
at csquatriglia@sfchronicle.com.

PG&E plans new plants outside California
Higher profits from building elsewhere
David Lazarus, Chronicle Staff Writer
Friday, May 18, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/18/M
N222441.DTL&type=news
PG&E Corp., which insists that California's energy woes will end only when
new power plants are built, will begin construction of five generating
facilities this year and has at least four others on the drawing board.
Unfortunately for California, not one of these plants will be in the state.
Rather, PG&E will build more than 9,000 megawatts of new generation -- enough
power to light about 9 million homes -- in New York, New Jersey, Wisconsin,
Michigan, Arizona, Illinois, Oregon and Nevada.
PG&E may talk about the importance of building power plants in California,
but the simple fact is that the company generally can construct generating
facilities more quickly and cheaply elsewhere -- and still benefit from high
electricity prices.
The company's ambitious building boom was outlined this week at PG&E's annual
shareholder meeting in San Francisco.
"It is not perceived as advantageous for them to build their plants in
California," Keith Hannigan, a Chicago lawyer specializing in power plants,
said yesterday. "It's naive to think that PG&E will behave in any way except
to maximize its returns."
PG&E Corp. has only one major plant under way in its home state: the 1,000-
megawatt La Paloma facility near Bakersfield, due to begin operating by the
middle of next year.
The company received approval from state authorities last month for a 510-
megawatt plant in San Diego, but it plans to sell the project to San Jose's
Calpine Corp.
"The businesses that we have outside California are designed to grow
shareholder value," PG&E Chairman Robert Glynn told shareholders on
Wednesday.
Indeed, PG&E's National Energy Group, which oversees the company's power
plants, is the corporation's fastest-growing division -- a marked contrast to
PG&E's cash-strapped utility operations.
The National Energy Group saw operating earnings skyrocket by 165 percent
last year, compared with just 2 percent for the utility and 13 percent for
the corporation overall.
Operating earnings exclude one-time charges related to California's current
energy crisis.
While state officials expressed disappointment that PG&E would build its
plants elsewhere, they quickly noted that nothing can be done to change the
situation.
"What the holding company does is different from the regulated utility," said
Richard Bilas, a member of the California Public Utilities Commission. "The
holding company is able to do things that ain't right for California, but
that's what they do."
Under California's 1996 deregulation of the state's electricity market, PG&E
sold off most of its power plants to out-of-state energy companies -- the
same companies that PG&E now says are gouging California consumers and
driving its utility deeper into debt.
Meanwhile, PG&E Corp. owns, or holds stakes in, more than 30 power plants in
11 states and has been especially aggressive in the New England area, where
the company now has 21 generating facilities.
The largest investor-owned utility in Massachusetts asked federal regulators
this week to block PG&E Corp. from raising electricity prices during power
shortages.
PG&E countered that the rates it charges customers in the Boston area are
"fair and reasonable."
Most power companies say the same about what they are charging California
consumer these days. Supply and demand, they say, means that prices go up
when inventories go down.
The situation in California is gradually changing. Four new plants,
accounting for almost 2,000 megawatts, will begin operating this summer,
according to the California Energy Commission.
Another four should be online by next year, and seven others are scheduled to
be up and running by 2004.
Total production from all 15 new plants will be about 9,800 megawatts.
Yet California's demand for electricity will continue to grow during that
same period, and the state is expected to continue purchasing power from out-
of-state sources.
One of those sources could be PG&E. The company is in the final stages of
securing permits for a 1,000-megawatt plant near Las Vegas -- one of nearly a
dozen generating facilities being fast-tracked by Nevada authorities to make
the state the energy hub of the West.
Nevada's primary goal is to secure enough electricity for the state's glitzy
gaming palaces. But it also wants to have enough power on hand to be able to
export electricity elsewhere.
"We're obviously very interested in the Nevada market," said PG&E spokeswoman
Sandra McDonough. "It's a fast-growing market and we want to be in it. To the
extent that power is not needed there, we would sell it elsewhere in the
West."
In other words, to California -- potentially at the same sky-high prices that
Pacific Gas and Electric Co. is now being charged and wants to pass along to
customers.
"The new power plants are trying to get on line as quickly as possible," said
Don Soderberg, chairman of the Nevada Public Utilities Commission. "These
superhigh electricity prices are artificial and won't last forever."
PG&E's Glynn seems to understand this.
"There are many challenges in the future," he said. "But there is also a
solid foundation on which to move forward and grow."
Presumably, he wasn't referring to his bankrupt utility.
E-mail David Lazarus at dlazarus@sfchronicle.com.

Bush faces tough fight on energy strategy
REACTION: Criticism from environmentalists
Carolyn Lochhead, Chronicle Washington Bureau
Friday, May 18, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/18/M
N191563.DTL&type=news

Washington -- President Bush warned yesterday that California's blackouts are
a "preview" for the rest of the nation if it fails to increase energy
supplies, but his plan to do so met with a hail of ridicule from
environmental groups and Democrats.
So quick and fierce were the attacks that the Bush plan may do less to ease
public concerns about energy than to set off an all-out political war with
environmentalists and their Democratic allies.
"If we fail to act, this great country could face a darker future, a future
that is unfortunately being previewed in rising prices at the gas pump and
rolling blackouts in the great state of California," Bush said at a St. Paul,
Minn., utility where he revealed his 163-page energy plan.
"Californians are learning, regrettably, that sometimes when you flick on the
light switch, the light does not come on at any price."
Bush insisted that by exploiting new technologies, energy production and
environmental protection can go hand in hand, urging "a new tone in
discussing energy and the environment, one that is less suspicious, less
punitive, less rancorous."
"We've yelled at each other enough," Bush said. "Now it's time to listen to
each other and to act."
But no sooner did Bush release his plan than it met a barrage of criticism
from environmental groups and Democrats who set up "war rooms" in the
basement of the Capitol and derided the plan as a payoff to the energy
industry.
Greenpeace activists dumped a heap of coal and oil drums outside Vice
President Dick Cheney's residence. Opponents previewed television commercials
depicting the administration as an auctioneer selling off public lands and
clean air.
Gov. Gray Davis joined the fray from Sacramento. "By not doing anything,
(Bush) is allowing price gouging by the energy companies -- many of whom
reside in Texas," Davis said. He urged Bush to tell federal regulators to
impose price controls on wholesale electricity.
House Minority Leader Dick Gephardt, D-Mo., mocked the report as full of
pretty colored pictures. "It really looks like the Exxon Mobil annual report,
and maybe that's really what it is."
BUSH HAS TOUGH ROW TO HOE
White House press secretary Ari Fleischer acknowledged that Bush has a
difficult selling job ahead. "If presidents lead by polls when it comes to
energy, America's lights will slowly go out," Fleischer said.
Bush's plan calls for easing regulatory barriers to more nuclear power, more
natural gas and oil drilling on public lands, more pipelines and a total
overhaul of the nation's electricity grid.
Environmental regulations have "created a Catch-22," Bush said, that has "too
often blocked environmental progress by discouraging companies from
installing newer and cleaner equipment."
Attempting to soften his policy's strong tilt toward fossil fuels, Bush
called for a basket of tax credits for solar, biomass, wind, geothermal and
other "green" fuels, along with a hefty consumer subsidy for hybrid cars that
run on gasoline and electricity.
But he said energy-efficient California proves that "not even the most
admirable conservation effort could keep up with the state's demand for
electricity. . . . Even the sleekest laptop needs to plug into an electrical
outlet from time to time."
CALL FOR NATIONWIDE GRID
Citing California's infamous "Path 15" transmission bottleneck that keeps
electricity from moving freely south to north, Bush called for the creation
of a national grid, condemning private property if necessary to make way for
new transmission lines.
"Highways connect Miami with Seattle, phone lines link Los Angeles and New
York," Bush said. "It is time to match our interstate highway and phone
systems with an interstate electrical grid."
While promising no quick relief for high gasoline prices, Bush said his plan
to review the dozen different "boutique" fuel blends required by varying
environmental rules would help ease limitations on refinery production.
And he vowed that new technologies can make conservation painless.
"Conservation does not mean doing without," Bush said, citing such things as
"smart" electric meters on homes and sensors that switch off lights when
people leave a room. "Wise regulation and American innovation will make this
country the world's leader in energy efficiency and conservation in the 21st
century."
Bush's conciliatory language was a twist on former President Bill Clinton's
oft-used rhetoric to fend off criticism from the right that environmental
protection would cost jobs.
GREEN GROUPS MOBILIZE
While Bush is trying to keep those on the left at bay, environmental groups
promised an intense effort to kill the president's plan.
Bush "creates a thin veil of energy efficiency to hide a cesspool of
political giveaways" to the energy industry, said Dan Becker of the Sierra
Club.
Sen. Dianne Feinstein and nearly every other Democrat in the California
delegation attacked the plan as doing nothing to aid California, urging
electricity price controls instead.
"For Big Oil and other suppliers, the Bush energy plan is a dream come true,
" Feinstein said. "But among those most left behind are the people and
businesses of California who have been under siege by electricity and natural
gas marketers bent on gouging every cent they can."
Environmentalists said the plan offered only a sorry sop to conservation and
avoided calling for higher fuel-efficiency standards on sport utility
vehicles.
Yet like both political parties, environmental leaders also avoided pressing
for public sacrifices.
"Most people didn't buy an SUV because they wanted to spend a lot of money on
gasoline," said Philip Clapp, president of the National Environmental Trust.
"It is not a consumer choice to buy inefficient SUVs."
PLAN'S PROSPECTS IN CONGRESS
The Bush plan is likely to ignite a free-for-all in Congress to divvy up
benefits among competing energy sources ranging from coal and nuclear power
to wind and biomass. Tax credits for "green fuels" such as solar and
geothermal are wildly popular in both parties.
Regional interests split the parties on other issues, from greater use of
coal and oil, to higher auto fuel-efficiency standards -- opposed by many
representatives in automaking states but favored by New England Republicans.
Both parties agree with Bush on encouraging construction of a huge pipeline
to bring natural gas from Prudhoe Bay in Alaska to the lower 48 states.
Alliances are likely between Democrats and moderate Republicans on more
conservation and higher efficiency standards, which have broad support.
Bush's controversial proposal to drill in the Arctic National Wildlife Refuge
faces a rough road, with nearly united Democratic opposition and possibly
enough Republican resistance to quash it.
Energy proposal
For the complete report of the National Energy Policy Development Group, go
to whitehouse.gov/energy. For the full text of President Bush's energy
speech, go to sfgate.com/energy.
PRODUCTION
-- Ease restrictions on oil and gas development on public lands.
-- Open part of the Arctic National Wildlife Refuge in Alaska to drilling.
-- Ease the permit process for refinery expansion and construction.
-- Provide $2 billion over 10 years for developing clean coal technologies.
POWER PLANTS
-- Give government authority to take property through eminent domain for
power lines to create a national electricity grid connecting the isolated
grids existing now.
-- Ease regulatory barriers, including clean air rules, to make plants more
efficient.
NUCLEAR POWER
-- Pursue a national nuclear waste repository.
-- Give tax breaks for purchase of nuclear plants.
-- Reauthorize law that limits industry liability from a nuclear accident.
RENEWABLE ENERGY
-- As part of $6.3 billion in new spending, provide tax credits to encourage
development of energy plants that use organic waste, or biomass.
-- Continue tax credits for wind energy generation.
-- Give tax credit of 15 percent, up to $2,000, for homeowners who purchase
solar panels.
-- Ease permits for geothermal, wind and other renewable-fuel plants on
public lands.
-- Extend tax credits to landfill methane projects.
-- Increase funding for hydrogen and fusion research, which hope to produce
energy by fusing atoms.
CONSERVATION
-- Tax credits for high-mileage, gas-electric hybrid vehicles.
-- Promote "smart meters" on homes and businesses to monitor electricity use
throughout the day.
-- Review auto fuel-efficiency, or CAFE, standards, pending a study by the
National Academy of Sciences due in July.
Source: National Energy Policy Development Group
E-mail Carolyn Lochhead at clochhead@sfchronicle.com.

Presidential power
The energy problem has tested the mettle of many U.S. leaders
Carl Nolte, Chronicle Staff Writer
Friday, May 18, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/18/M
N115683.DTL&type=news
President Bush compared his new energy policy yesterday to President
Eisenhower's vision of an interstate highway program, but presidents have
been down the energy road many times before.
In the days when American resources seemed limitless, the federal government
had a limited role in energy policy.
This started to change in the 1930s, when President Franklin D. Roosevelt's
New Deal developed the Tennessee Valley Authority, which built dams and
generated 100 billion kilowatt hours of electricity, and the Bonneville power
project on the Columbia River, which supplies the Pacific Northwest - and
California - with electricity.
New energy policies and debates about national resources seem to come and go
like the tide. Here is a look at presidents and their policies: .
Dwight Eisenhower
In World War II, the United States developed the most fearsome of all energy
sources: nuclear fission. Nuclear weapons killed at least 280,000 people
in Hiroshima and Nagasaki and held the world under the threat of destruction.
In December of 1953, President Eisenhower in his famous "Atoms for Peace"
speech at the United Nations, proposed an international pool for the
development of the peaceful uses of nuclear power.
One result: Congress passed the Atomic Energy Act of 1954, for a public-
private development of nuclear power. The Navy developed nuclear submarines,
but only one nuclear civilian ship, the freighter Savannah, was ever built.
It was not a success. .
Lyndon Johnson
The Johnson years are more remembered for his Great Society programs and the
war in Vietnam, but it was also a boom time for commercial nuclear power.
However, there were growing questions about safety, and disposal of waste.
In 1965 came the great blackout - a massive power failure on the East Coast,
the first sign of a major energy problem. .
Richard Nixon
Nixon was the first president to send an energy message to Congress. His 1971
message sounds eerily familiar: He said the country could not take its energy
supply for granted. He wanted a department of natural resources, but the plan
went nowhere, since gas was cheap and so was electricity.
In 1973, Nixon asked for a department of energy. An Arab oil boycott spurred
the launch of a new energy program, called Project Independence. Nixon wanted
Americans to lower their thermostats, drive their cars more slowly, turn down
the lights. There were long lines at gas stations. Nixon compared his program
to save energy to other great projects, like landing men on the moon.
Nixon, who was being overwhelmed by the Watergate crisis, announced that the
energy crisis had been solved in March, 1974. In August, he resigned. .
Jimmy Carter
The energy problem was one of the overwhelming factors that spoiled Carter's
presidency. Carter, who had emphasized his role as a nuclear engineer,
announced an era of limits on American energy use. He asked Americans to save
energy, and to turn down the heat. His famous television address on energy,
which showed the President wearing a coat, sweater and looking grim, was a
defining negative image of his administration. .
Ronald Reagan
The new president's solution to the energy crisis was to abolish the
cabinet-level Department of Energy - but he never succeeded. He also
rescinded Carter's order to turn down government building thermostats. Energy
policy, he thought, was best made by the free market.
James Watt, his secretary of the Interior, urged development of federally
protected natural resources for energy use. The policy backfired as the
environmental movement used Watt's words against him.
Meanwhile, Secretary of Energy James Edwards proclaimed that the energy
crisis was over. .
George H.W. Bush
On July 26, 1989, President Bush announced a new comprehensive energy
strategy. The country would rely on market forces, environmental protections,
and fairly priced energy. It was one of the administration's top priorities.
In the meantime, in August, 1990, the policy was overtaken by events, when
Iraq invaded Kuwait and threatened Saudi Arabia. Had the Iraqis taken the
Saudi oil fields, they would have controlled 40 percent of the world's oil
supply. The result was an ultimatum to force Iraq to withdraw from Kuwait.
When that was ignored, the Gulf War followed. .
Bill Clinton
Among Clinton's pledges was one to "Reinvent government." While the elder
President Bush's secretary of energy claimed he had overhauled the department
and made it the finest in the government, Hazel O'Leary, Clinton's choice for
secretary of energy, found it was "a mess."
The Department of Energy, Clinton said, had been "sorely underutilized." For
decades, Clinton said, energy was "the Achilles' heel" of the economy. He
pledged a change. Then came the winter of 2000-2001.
Chronicle researcher Johnny Miller contributed to this report. / E-mail Carl
Nolte at cnolte@sfchronicle.com

Making a case for WASTE
President's tax credits for biomass energy development could be boon for two
of the state's thriving industries Tom Abate, Chronicle Staff Writer
Friday, May 18, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/18/B
U196463.DTL&type=news

Included in the Bush administration's 163-page energy plan is a call for tax
credits to spur the development of biomass, a form of energy generation that
spans everything from old-style wood burning to futuristic processes such as
extracting ethanol from agricultural waste.
Although Bush envisions biomass playing a tiny role in solving the nation's
immediate energy woes, high-level support for the technology could be
important for two California industries: biotechnology and agriculture.
Sharon Shoemaker, director of the California Institute of Food and
Agricultural Research at the University of California at Davis, is a
proponent of using biotechnology to reinvent biomass as an industry. The aim
is to extract clean energy and mineral byproducts from plant waste, while
giving distressed farmers a new market for harvest leftovers.
"There's no commercial (biomass) plant like this out there yet, but we're
just on the verge of making it happen," said Shoemaker, who will hold a
biomass conference at Davis in June.
California's biomass industry, which contributes about 1.5 percent of the
state's electricity, is based primarily on burning waste wood from sawmills,
forests and orchards.
The keys to reinventing biomass are genetically engineered bacteria and
bioengineered enzymes that can turn cellulose -- the material that gives
plants their strength -- into ethanol in a process similar to fermenting
grain or grapes into alcohol.
In addition to producing ethanol to blend with gasoline, new biomass
breweries would extract valuable minerals from plants and even convert the
cellulose in plant waste into plastic substitutes.
"Some of our members are making shirts that feel like polyester, but they're
made from corn, not oil," said Megan Smith with the American Bioenergy
Association, a Washington, D.C., lobby whose members include the Palo Alto
biotech firm Genencor International.
After ethanol and mineral byproducts have been extracted from plant waste,
biomass plants would burn the remaining material, called lignin -- the
substance found in peat bogs. Left alone over geologic time, lignin would
compress and turn into coal.
Evidence of Bush's interest in biomass surfaced earlier this year, when the
administration slashed research budgets for alternative energy sources such
as wind and solar power, but barely touched biomass research. Some of that
money came to Northern California biotech firms. Genencor and Novozymes
Biotech in Davis each recently won competing $15 million research contracts
to cut the expense of turning cellulose into ethanol.
"Today the enzymes used in the process cost 45 cents per gallon of ethanol
produced," Novozymes President Glenn Nedwin said. "We want to get it down to
5 cents a gallon."
From political and policy viewpoints, Bush's affinity for biomass is clear.
Gregg Morris, director of the Green Power Institute -- a Berkeley nonprofit
that performs alternative energy research -- recalled a recent ethanol
conference in Las Vegas.
"One of the agricultural lobby guys said that whenever he visits
administration officials, he brings a map that shows which states voted for
Bush," Morris said. The map showed solid Republican support in the farm-belt
states that would benefit most from biomass techniques that provide new
markets for field waste.
The policy rationale for biomass energy was laid out in a 1999 article titled
"The New Petroleum" that appeared in the influential journal Foreign Affairs.
The authors, Sen. Richard Lugar, R-Ind., and former CIA Director James
Woolsey, warned that America was headed for economic disaster and another
Gulf War unless it reduced oil imports. The vehicle, they said, was to use
biotechnology to turn abundant farm waste into ethanol.
"If genetically engineered biocatalysts and advanced processing technologies
can make a transition from fossil fuels to biofuels affordable, the world's
security picture could be different in many ways," they said, making another
oil embargo or Mideast war less likely.
The nation annually consumes about 120 billion gallons of gasoline and
produces about 1.9 billion gallons of ethanol.
The new biomass fever must be tempered by recognition that today's biomass
industry is controversial and subsidized, and the futuristic processing
plants envisioned by boosters exist only in the pilot stage.
California, for instance, has 29 biomass plants in operation, fueled
primarily by wood waste, Morris said. An equal number of biomass plants has
been idled or dismantled for a variety of reasons, including a lack of wood
for fuel. The fastest way to ramp up the wood supply would be thinning the
state's forests, but that could stir environmental opposition, Morris said.
In the Midwest, biomass has a different, though no less controversial,
meaning. In the grain-producing states, biomass means turning corn kernels
into ethanol. The same kernels that might get popped in the movie theater or
fed to the livestock are instead put through an ethanol conversion plant.
Two factors make this possible. First, corn kernels are rich in starch, which
is relatively easy to ferment. The stalks and the cobs -- which contain the
cellulose so valued in biomass dreams -- are thrown away because they aren't
economical to convert.
Second -- and steeped in controversy -- is a 53-cent-per-gallon federal
subsidy that helps put it on par with competing petroleum products. Free
market groups, such as the Cato Institute in Washington, D.C., have attacked
this as a handout to the corn belt that primarily benefits one company --
Archer Daniels Midland -- the nation's leading ethanol producer.
Backers of the new biomass are counting on that subsidy to help support the
challenging task of taking ethanol from cellulose waste. "Without the
53-cent- a-gallon subsidy, the corn ethanol industry wouldn't be here today,"
said Mike Bryan of BBI Associates, a Colorado firm that conducts feasibility
studies for ethanol plants. "The cellulose ethanol industry will need similar
support for a while."
Although much of the talk about biomass centers on futuristic applications,
the newest aspect of the Bush energy plan benefits the oldest form of biomass
- - burning waste to generate power.
Smith, the Bioenergy Association lobbyist, said Bush has proposed giving
biomass power generators access to an existing, but unused, tax credit of 1.7
cents per kilowatt hour.
When Congress enacted the credit in 1992, it was intended for biomass
generators who burned plant matter specifically grown to harvest as fuel.
"This has cost the treasury nothing, because nobody does it," said Morris,
the Green Power expert in Berkeley.
Bush has proposed making this credit available to biomass furnaces that burn
waste wood, something that would benefit California biomass generators.
Seeking a renewable resource
President Bush's energy plan calls for tax credits to promote the development
of biomass-based fuels. Biomass systems use bacteria or heat to convert farm
waste into energy and products. The Iowa Energy Center project is using
cornstalks. Here's a look inside the demonstration facility that President
Bush visited in Nevada, Iowa yesterday.
President Bush unveiled his energy plan yesterday. The plan outlines broad
changes in the national energy policy and proposes increasing the production
of conventional fuels, encouraging conservation and the development of
renewable energy.
What goes in
Cornstalks are passed through a grinder and mixed with water.
Fertilizer
What comes out
Animal feed
Chemicals used in cosmetics and plastics.
Ethanol that can be burned to run electrical generators or vehicles.
Water and carbon dioxide
Plant residue
The waste is fermented for several days in 1,500-gallon tanks. Bacteria
produce enzymes that break down cellulose into needed products.
Methane
The fermentation residue is mixed with other plant waste. .
Energy
Fuel cells could produce all the electricity and heat needed to run the
facility. Fuel cells work like a battery, using chemicals to generate
electricity cleanly and efficiently. Source: Iowa Energy Center Associated
Press Graphic
Email Tom Abate at tabate@sfchronicle.com

Today's energy shortages far less ominous than in frantic '70s
Posted at 10:49 p.m. PDT Thursday, May 17, 2001
KEN MORITSUGU
WASHINGTON -- As President Bush unveiled his energy plan Thursday, nearly 200
new power plants were under construction across the United States and 1,000
drilling rigs were burrowing for new sources of natural gas.
Today's high energy prices and shortages are driving massive energy-industry
investments that over time -- with or without government intervention -- will
bring supplies up and prices down.
To call the current situation a crisis is an exaggeration, with the exception
of the severe electricity shortage in California that all but guarantees
temporary blackouts this summer and possibly next. It pales in comparison
with the 1970s crises that forced motorists to line up for limited gasoline
supplies and drove the U.S. economy into recession.
``There's an electricity crisis in California,'' said Paul Krugman, a
Princeton University economist. ``Nothing else out there justifies talking
about a crisis. Energy demand surged in the late 1990s and the capacity for
delivering and refining the stuff didn't keep up, basically because producers
were caught by surprise. So we have high prices by recent standards, but all
that will solve itself.''
That does not mean there are not serious energy issues facing the nation,
including bottlenecks in making gasoline from crude oil, and delivering
electricity over heavily burdened transmission lines and natural gas through
nearly full pipelines.
But even today's high gasoline prices, when adjusted for inflation, are 30
percent lower than their historic peak in 1980.
Consumers enjoyed a period of extremely low energy prices for most of the
1990s. Such depressed prices won't return anytime soon. Instead, homeowners
and drivers are likely to be saddled with higher prices for gasoline, heating
oil and natural gas for months and maybe a few years.
While higher energy costs always pose a threat to the overall economy, it's a
much more distant one today than in the 1970s. Then, oil prices soared 200
percent in a year, and the impact rippled through gasoline and electricity
markets.
By comparison, energy costs rose 35 percent last year and are projected to
rise an additional 9 percent this year, according to DRI-WEFA, a Lexington,
Mass., economic-forecasting firm.
``We're better off today, because we have a much more diversified energy
supply,'' said Jim Osten, chief energy economist at DRI-WEFA.
The country is much less dependent on oil, particularly for electricity
generation, where the use of coal, nuclear and more recently natural gas has
expanded. Also, conservation has helped contain -- though it hasn't stopped
-- the growth in energy use.
The one risk is California.
``In the end, disaster probably will be avoided, but it's going to be
nasty,'' Krugman said.
Outside California, the outlook is much less bleak. Power companies have
built or significantly expanded 123 power plants in the past 14 months,
according to Resource Data International, a Boulder, Colo.-based
energy-information and -consulting firm. An additional 197 are under
construction, up from 121 this time a year ago.
That pace of construction is enough to meet the upper end of the Bush
administration's estimate that the country will need 1,300 to 1,900 new power
plants over the next 20 years.
``We are on the right road and we are building up front a lot of what is
needed over the 20-year period,'' said Judah Rose, managing director of
wholesale power at ICF Consulting, a Fairfax, Va.-based energy-consulting
firm.
Richmond, Va.-based Dominion sees no power shortages in its markets in North
Carolina, Ohio, Pennsylvania, Virginia and West Virginia, said Thomas Capps,
the company's president.
Likewise, the natural-gas market is adjusting to recent supply shortages that
drove up prices last winter when the weather turned unusually cold. As of
last week, there were 994 rigs drilling for gas in the United States, up from
up from 634 a year ago and 365 two years ago, according to a weekly survey by
Baker Hughes Inc., a Houston-based maker of drilling equipment.
``As the price rises, there's economic incentive to drill more,'' said Gary
Flaharty, director of investor relations for Baker Hughes. ``Eventually
you'll drill to the point where there is enough gas on the market and the
price will come down.''
Still, future gas supply will have to keep up with new demand from the
construction boom in power plants, the vast majority of which are powered by
natural gas.
To meet that expected demand, most analysts support construction of a
proposed pipeline to bring in new supplies of natural gas from Alaska.
Bush also has proposed opening previously restricted federal lands in the
Rockies to exploration for natural gas. While environmental concerns surround
these areas, economists say there is enough of a projected need for natural
gas that they should not be written off without review.
``We need a coherent set of policies for deciding on when and how access to
federal lands will be opened up to gas and oil exploration and development,''
said Paul Joskow, director of the Center for Energy and Environmental Policy
Research at the Massachusetts Institute of Technology. ``This inevitably
involves a careful assessment of the environmental consequences of
exploration and development in particular areas and research and development
on ways to minimize environmental damage.''
Ultimately, the problem may not be finding natural gas or generating
electricity, but getting those products to where they are needed.
New pipelines and electric transmission lines need to be built to keep up
with the nation's growing appetite for power. In many cases, local opposition
has blocked construction. Also, uncertainty surrounding what the rules will
be for electricity deregulation has reduced the incentives to build
transmission lines while increasing the risks.
``I think the power plants will get built, but moving the power around and
moving the gas to them is going to be problematic,'' Dominion's Capps said.

Seth Borenstein contributed to this report. Contact Ken Moritsugu at
kmoritsugu@krwashington.com.

Bush points to California as a warning
Posted at 10:55 p.m. PDT Thursday, May 17, 2001
BY RON HUTCHESON AND SETH BORENSTEIN

Mercury News Washington Bureau

ST. PAUL, Minn. -- President Bush warned Thursday that America could suffer
widespread power blackouts, skyrocketing fuel costs and more dependence on
foreign oil unless the nation follows his energy strategy.
``America cannot allow that to be our future. And we will not,'' Bush said,
as he formally presented his energy program at a fuel-efficient plant in St.
Paul.
The president's 163-page plan seeks to increase supplies of virtually all
fuels by easing federal regulations and encouraging production. It also
encourages energy efficiency and calls for constructing more and better
energy-delivery systems, such as pipelines, power lines and refineries.
In California, Democratic leaders criticized Bush for doing little to further
regulate an energy market that is daily sucking up tens of millions of
dollars from the state's treasury.
``I want to commend President Bush for facing up to America's energy crisis.
I agree with him that we need more supply,'' Gov. Gray Davis said Thursday in
Sacramento. ``But I fault the president for not providing California with any
immediate relief.''
Davis has asked the federal government to cap wholesale electricity prices.
``We are literally in a war with energy companies who are price-gouging us
.?.?. and the only person who can give us relief is the president,'' Davis
said. ``I have no legal authority -- none -- over the price of wholesale
electricity.''
The Bush administration has consistently opposed price caps and the energy
policy announced Thursday offered little to deal with California's immediate
electricity crisis.
Sen. Dianne Feinstein, D-Calif., called the energy plan ``a bible for
long-term energy production and not even a pamphlet for the urgent short-term
actions needed to help us get out of the crisis'' in her home state. She
particularly criticized Bush's refusal to call for price caps on electricity
in California.
Stage set for battles
Congressional leaders promised swift action to turn Bush's proposals into
law, but hard fights lie ahead. Democrats and environmentalists condemn the
plan as a sellout to Big Oil. Many of the proposals pit powerful interest
groups against each other along lines they have fought over bitterly for
decades. And energy politics typically split the nation by region, as
fuel-producing Sun Belt states are often in conflict with price-sensitive
consumers in Frost Belt states.
Even Bush's allies concede that Congress is likely to reject his proposal to
drill for oil and gas in Alaska's Arctic National Wildlife Refuge.
Other flash points of controversy include his proposals:
?To give the federal government authority to erect power lines on private
land.
?To consider easing clean-air restrictions on old coal-fired electric plants.
?To possibly pursue energy exploration in federal lands in the Rocky
Mountains and coastal waters that are now off limits.
?To boost reliance on nuclear power.
The president said his 105 recommendations would head off a potentially bleak
future by seeking ``a new harmony between our energy needs and environmental
protection. .?.?. But if we fail to act, this great country could face a
darker future: a future that is unfortunately being previewed in rising
prices at the gas pump and rolling blackouts in California.''
Republicans blame Democratic neglect in the Clinton years for the nation's
energy woes.
``If you look at the tin-cup diplomacies of the Clinton administration, where
they had to send the secretary of energy over to beg OPEC for more
production, and what did OPEC do? They tightened production and increased the
price. .?.?. That was the kind of energy policy we had yesterday,'' said Sen.
Frank Murkowski, R-Alaska, chair of the Senate Energy Committee.
``We have denied ourselves sources all over this country -- offshore,
nuclear, coal -- all of these have been under the attack,'' said Sen. Jeff
Sessions, R-Ala.
Democrats, in turn, cast Bush and Vice President Dick Cheney, the plan's
chief architect, as lackeys for the energy industry that they once worked in.
House Minority Leader Richard Gephardt, D-Mo., mocked Bush's plan as a sop to
Big Oil. ``It's slick,'' Gephardt said. ``It looks like the annual report of
ExxonMobil. And maybe that's what it is.''
Business groups hailed Bush's plan, and environmental groups panned it.
``Clearly a long-term energy strategy is needed, and we applaud the
administration for putting forward this opening salvo,'' said Michael E.
Baroody of the National Association of Manufacturers.
A coalition of the nation's top environmental groups unleashed a harsh
attack. It is ``dirty, dangerous and doesn't deliver for consumers,'' said
Gene Karpinski, executive director of the U.S. Public Interest Research Group
in Washington. ``It's a recipe for more drilling, more spilling, more asthma
attacks, more nuclear waste and more global warming.''
Attacks via TV
Environmental groups will sponsor a TV ad that portrays America being
auctioned off to oil and gas interests. The ad will be shown in 12 markets,
including Philadelphia, Tallahassee and Tampa, Fla., and Bismarck, N.D. The
environmental groups, which chastise industry spending on lobbying, would not
reveal how much they are spending on their ad campaign.
Bush sought to calm passions Thursday, saying environmentalists and energy
producers can find common ground.
``The truth is, energy production and environmental protection are not
competing priorities. They are dual aspects of a single purpose: to live well
and wisely upon the Earth,'' he said. ``We've yelled at each other long
enough. Now, it's time to listen to each other -- and to act.''
Sensitive to criticism that he is anti-environment, Bush and his aides
emphasized Earth-friendly proposals in presenting their plan. His glossy
energy report is filled with photographs of majestic mountain peaks, pristine
woodlands and other natural wonders.
Bush formally unveiled his proposal in St. Paul after touring an innovative
energy plant that uses steam from the production of electricity to generate
heat. The president will continue to promote his plan today during a visit to
a Pennsylvania hydroelectric plant that has taken steps to protect fish.
If the Bush plan were implemented in full, it would potentially double what
the administration had planned to spend over 10 years for renewable-energy
research and for tax incentives for people and companies that purchase
energy-efficient products, like hybrid cars.
But the estimated $10 billion commitment over that period is below what the
Clinton administration had projected spending for roughly the same period,
and well below what energy experts say would be required to make some new
energy technologies commonplace.
Bush's energy plan includes new or expanded tax breaks for home solar
projects, cars that rely on electricity or other alternative fuels, solar and
wind power, and projects that produce methane gas from landfills. It also
directs the Energy Department to consider tougher efficiency standards for
home appliances.

Mercury News staff writer Noam Levey and wire services contributed to this
report. Ron Hutcheson reported from St. Paul, Seth Borenstein from
Washington. Jackie Koszczuk and James Kuhnhenn of the Mercury News Washington
Bureau also contributed.

Contact Ron Hutcheson at rhutcheson@krwashington.com or Seth Borenstein at
sborenstein@krwashington.com.

Californians fault Bush energy proposal
Posted at 6:27 a.m. PDT Friday, May 18, 2001
BY GARY GENTILE

AP Business Writer

LOS ANGELES (AP) -- Government officials, environmental groups and many
energy consumers found little comfort in President Bush's national energy
plan released Thursday.
The plan, which includes a pledge to speed up power plant permits and
conserve at federal facilities, was sharply criticized by Gov. Gray Davis,
who accused the administration of ``turning a blind eye to the bleeding and
hemorrhaging that exists in this state.''
Davis repeated his plea for the federal government to impose caps on
wholesale energy prices that he says have driven the state's largest
investor-owned utility into bankruptcy and two others to the brink of
collapse.
``If he wants to be helpful to California, he could send a strong signal that
the Federal Energy Regulatory Commission should grant some kind of relief,''
he said.
California has been struck by six days of rolling blackouts since January,
and officials predict more as temperatures rise this summer. Customers of the
state's two largest private utilities, Pacific Gas and Electric Co. and
Southern California Edison, will see unprecedented rate increases soon.
In announcing his plan Thursday, Bush warned that California is previewing
the power troubles the nation could face if it doesn't boost its energy
supply and cut demand.
``Californians are learning, regrettably, that sometimes when you flick on
the light switch, the light does not come on at any price,'' Bush said.
He said his energy plan provides solutions that will help ease the state's
power woes.
``I'm deeply concerned about the impact of blackouts on the daily lives of
the good people of the state of California, and my administration is
committed to helping California,'' Bush said.
Some consumers didn't see the president's sympathy.
``I don't really think he has my concerns as his priority,'' said Jodi
Reynolds, 38, a Culver City legal secretary. ``I can already see that I need
to conserve energy. I don't need the president to tell me that.''
Others gave Bush credit for addressing the nation's long-term energy needs,
but faulted the president for not doing more for California now.
``We give him kudos for addressing the supply issue,'' said Brian Bennett,
vice president of external affairs for Southern California Edison, one of the
state's cash-strapped electric utilities.
``However, when it comes to addressing the California crisis, the Bush
administration has chosen to ignore what they could have done to help lessen
the crisis here -- impose on a short-term basis cost-based pricing on the
wholesale market.''
That theme ran through some of the comments by the state's environmental and
consumer groups.
``In the last energy crisis, a handful of nations in the Middle East had us
over a barrel,'' said Harvey Rosenfield, head of the Foundation for Taxpayer
and Consumer Rights in Santa Monica. ``Now it's a handful of energy companies
in the Southern United States. The only solution is to bust the Texas-based
OPEC.''
Environmentalists said Bush's energy policy lacks proposals that could offer
short-term relief from higher electricity and gasoline prices, such as power
price controls, incentives for more efficient appliances and tighter
fuel-efficiency requirements for vehicles.
The Bush plan also steps away from assurances he made during the campaign
that he would not rescind a moratorium on new offshore oil leases created by
his father and extended until 2012 by President Clinton. The plan calls for
the secretaries of commerce and the interior to re-examine the moratorium.
``We are concerned what he is stepping toward,'' said Allison Detmer, manager
of the ocean and resources unit of the state Coastal Commission, which is
suing the federal government over the existing leases. ``This might be the
first step toward opening up the coast again.''
Some utility and government officials said Bush correctly focused on
expanding the nation's energy infrastructure, building more natural gas
pipelines and strengthening the electricity transmission grid.
But the president's support for new nuclear power plants won little support.
``The political realities in California are we're not going to see an
increased reliance to nuclear power in the near future,'' said Carl Wood, a
member of the California Public Utilities Commission.
Perhaps predictably, state Democrats found little to like in Bush's plan,
while Republicans found much to praise.
``The president's plan will help California this summer by expediting new
power plants and ordering state agencies to conserve,'' said Rep. Randy
Cunningham, R-Escondido.
``There's nothing in there for California. Nothing,'' said Rep. Brad Sherman,
D-Los Angeles. ``The headline is: Bush to California, drop dead.''

Bush says the right stuff
Published Friday, May 18, 2001, in the San Jose Mercury News
PRESIDENT Bush may tour innovative power plants and put conservation first in
his energy speeches, but until the money and the regulations back up the
rhetoric, we'll suspect him of being a fossil-fuel kind of guy.
Bush covered the spectrum of energy options in the much-awaited plan he
released Thursday: more conservation, more supply, more wires and pipes to
get the power to the people.
All must play a part. But Bush's background in the oil business and the role
of energy producers in drafting the plan foster the impression that he's most
enthusiastic about loosening the environmental leash on the oil, coal and
nuclear industries.
A failure to act, Bush repeatedly implied, would leave the nation in the same
straits as California now finds itself.
The comparison is inexact. California would have benefited from better energy
planning five years ago. But the current shortage has little to do with
environmental obstacles to new plants or a lack of fuel. It's caused by a
dysfunctional market.
On that score, Bush continued to reject the one federal action -- wholesale
price controls -- that might help California get through the summer without
paying a king's ransom for electricity.
California would benefit, in the years to come, from Bush's call for
improvements in the transmission system for gas and electricity. Retrofitting
and expanding an aging network would provide both more energy and greater
flexibility in its distribution.
Underlying Bush's plan is the thesis that fossil fuels will remain central to
America's energy supply for decades to come. That may be true. But the role
of national energy policy is not primarily to augment the supply of fuels the
free market already easily provides.
Burning fossil fuels creates smog and global warming. The government ought to
be leading the search for ways to squeeze more energy from fossil fuels and
for alternatives to them.
Whether from conviction or from the backlash over Vice President Cheney's
recent disparagement of living with less, Bush offered some plans to improve
efficiency and conservation. He'd spend $4 billion on tax credits for the
purchase of gasoline/electric hybrid cars. In all, $10 billion in tax credits
would stimulate conservation.
Drafting the federal budget for next year, however, Bush cut research on
energy efficiency by a third and on renewable fuels by half.
On one obvious target for greater efficiency, mileage standards for cars,
Bush's energy plan is far too timid, proposing only to study them. America
has been backsliding on fuel-efficiency; stricter standards are overdue.
Bush seeks, instead, to find more fuel to put in the tank. He'd drill in the
Arctic Wildlife Refuge, a needless environmental insult that Congress,
thankfully, is unlikely to countenance. With revisions in a host of
environmental regulations, Bush would make it easier to extract oil or
natural gas from public lands or under coastal waters.
Exploitation of natural resources is last century's energy policy. The
domestic resource Bush should be exploiting more energetically is America's
ingenuity, to use energy more wisely.

FTCR/ Bush Energy Plan Will Make California Crisis Worse; Taxpayer
Boondoggles, More Deregulation Equals Higher Prices, Taxes

LOS ANGELES, May 17, 2001 (U.S. Newswire via COMTEX)  via NewsEdge
Corporation  - The Bush-Cheney energy
plan will make things worse for beleaguered Californians, who are facing an
economic and public health catastrophe this summer as a result of
deregulation,
a California-based citizen group said today.

"California's facing a catastrophe because a handful of energy companies have
seized control of our electricity supply under deregulation, and have been
manipulating the supply of electricity to create artificial shortages and
maximize their profits," said Harvey Rosenfield, president of the non-profit
Foundation for Taxpayer and Consumer Rights. "The federal government could
stop
this assault and order rate reductions and refunds of overcharges. Instead,
the
Bush-Cheney plan calls for more deregulation, massive tax breaks for energy
companies and the construction of multi-billion dollar boondoggles like
nuclear
power, all of which will benefit the same energy companies that are holding
California hostage."

With Bush-Cheney Plan, Crisis History Repeats Itself

FTCR noted that the last energy "crisis" to strike America was inspired not by
supply shortages but by greed -- of the OPEC nations, which in the 1970s used
their control of petroleum supplies to create shortages and massive price
hikes.
American energy companies took advantage to profit from their resources as
well.
In response, the U.S. Congress passed a then-staggering multi-billion dollar
billion package of tax breaks and grants to the energy industry to build power
plants that would manufacture "synthetic fuels." These plants ultimately
became
taxpayer-funded boondoggles, while nuclear power, hailed by the energy
industry
as a source of clean energy, turned out to be prohibitively expensive and a
public health threat.

Ironically, California's 1996 deregulation law required ratepayers to pay off
over $20 billion of the California utility companies' bad debts, most of which
were incurred by the utilities as cost-overruns in construction of nuclear
power
plants in the 1970s.

"California's economy, health and safety, and the quality of life in the
Golden
State are threatened by the skyrocketing energy prices inspired by
deregulation.
The Bush-Cheney plan not only does nothing to protect us against the energy
cartel, it calls for more deregulation, higher taxes and prices," said
Rosenfield.

"In the last energy crisis, a handful of nations in the Middle East created a
cartel to exploit their control over energy supplies; two decades later, a
handful of energy companies from the Southern United States have created a
cartel to exploit their control over our electricity supply," said Rosenfield.
"The only solution to the current crisis is to break the cartel: to bust the
Texas-based OPEC."

CONTACT:          Doug Heller of the Foundation for Taxpayer and Consumer
                  Rights, 310-392-0522, ext. 30

Copyright (C) 2001, U.S. Newswire

PG&E's CEO faces off with angry shareholders at company's annual meeting

meeting<

AP Photos FX103-104<

By MICHAEL LIEDTKE=

AP Business Writer=

SAN FRANCISCO (AP) _ PG&E Corp. chief executive Robert Glynn
brushed off the scorn of shareholders burned by the company's
bankrupt utility during a prickly annual meeting that ended with
three consumer activists being dragged out of the auditorium by
security officers.

Throughout out the two-hour meeting, Glynn repeatedly sought to
reassure the sometimes hostile audience of nearly 500 people that
the San Francisco-based company remained a solid long-term
investment despite the bankruptcy of its main revenue source,
Pacific Gas and Electric.

He repeated previous promises that the company intends to
recover most, if not all, of its dlrs 9 billion in unreimbursed
electricity expenses accumulated since May 2000, allowing the
utility to regain its financial footing and repay its more than
150,000 creditors.

The company is seeking rulings in bankruptcy court and other
legal venues that might open the door for the utility to
retroactively charge its customers for above-market electricity
bought from June 2000 through February of this year.

``We are not seeking a bailout, a rescue or a handout,'' Glynn
said.

Glynn's arguments didn't seem to win over many shareholders,
some of whom worried that it would take 10 years for the company's
shares to climb back above dlrs 30 _ the stock's value less than
nine months ago. PG&E's stock closed Wednesday at dlrs 11, down 55
cents.

Shareholders this year also missed out on their first quarterly
dividend since World War I.

Several investors lambasted PG&E's nine-member board of
directors and the company's auditors, Deloitte and Touche, but most
shareholders saved their harshest words for Glynn and his executive
team.

``The truth of the matter is you all should be fired for
incompetence,'' Orinda resident Clyde Vaughn, 79, told Glynn.

PG&E agreed to an electricity rate freeze beginning in 1998 as
part of California's electricity deregulation. From January 1998
through May 2000, PG&E's utility made a dlrs 2.7 billion operating
profit on electricity because the frozen customer rates were
usually much higher than the prices on the wholesale market until
last summer.

Power Politics:
In Era of Deregulation,
Enron Woos Regulators
More Avidly Than Ever
---
CEO Lay Leaves an Imprint
On Bush Energy Plan,
Seeks Friends at FERC
---
An Interstate for Electricity
By Bob Davis and Rebecca Smith
?
05/18/2001
The Wall Street Journal
Page A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)
WASHINGTON -- Every energy executive in America would have liked a half-hour
with Vice President Dick Cheney as he fashioned the Bush administration's
national energy program. Enron Corp. Chairman Kenneth Lay got it.
Mr. Lay used the time to set out an eight-point agenda intended, among other
things, to head off price controls on wholesale electricity, provide Enron
and other energy traders with unfettered access to the nation's
electricity-transmission system and remove regulatory obstacles to building
new generating plants and power lines. The energy plan President Bush
unveiled yesterday reflected many of those same priorities.
In an interview last week, the vice president said he also met with other
energy executives, but Mr. Lay was the only one he named. Mr. Cheney says he
sought Mr. Lay's advice because "Enron has a different take than most energy
companies."
Indeed, Enron Corp. is a modern paradox. It has transformed itself over the
past 15 years from a stodgy gas-pipeline operator into the nation's largest
trader of gas and electricity and a formidable player in newer markets such
as telecommunications services and emissions-reduction credits. Today, it's
the quintessential model of a company dedicated to free markets.
Yet as much as any company in the U.S., it has cultivated close ties with
government. Since the late 1980s, the Houston-based company, which was
President George W. Bush's biggest corporate campaign donor, has beefed up
its lobbying staff, boosted its political contributions and sought out
friends in the world of politics. Now, with Mr. Bush in the White House, it
is in a unique position to see whether those efforts will pay off.
Enron's lobbying blitz reflects one of the ironies of the era of
deregulation. Just as government created immense telephone, electric and gas
monopolies early in the last century, Enron and other players feel they need
the government's help in opening up those monopolies and gaining access to
once-closed markets.
In particular, Enron wants the Federal Energy Regulatory Commission to ensure
that energy is deregulated on terms favorable to the company. Rather than
having the nation's transmission lines controlled by the utilities, it wants
those lines to provide open access for new entrants such as Enron eager to
buy and sell power.
Mr. Lay is on a first-name basis with a half-dozen members of the Bush
cabinet and knows many senior White House staffers from their days in the
Texas governor's mansion with Mr. Bush. Before joining the administration,
both White House economist Lawrence Lindsey and U.S. Trade Representative
Robert Zoellick were on Enron's advisory board, which pays members an annual
stipend of $50,000.
Under Mr. Lay, Enron has donated nearly $2 million to Mr. Bush during his
political career. Since the start of the 2000 campaign, Enron and its
employees have contributed $1.3 million to the Bush presidential drive, the
Republican Party and the presidential inauguration, says the Center for
Responsive Politics. Enron also accounted for $461,000 in contributions
during Mr. Bush's two runs for governor, according to the Center for Public
Integrity.
Mr. Lay, who holds a doctorate in economics, says all he wants from
government is a fair shake. Enron supports candidates "you believe in," he
says. "You believe in their value system, you believe in their philosophy and
you believe they'll do the right things as leaders."
But it's clear that Mr. Lay wants more than that from government. For now, he
is focusing on FERC, where he worked in the early 1970s when the agency was
known as the Federal Power Commission. He hopes to make FERC his ally in
beating back the power of utilities. Long dismissed as a regulatory backwater
overseeing wholesale transactions by electric and gas utilities, the
commission has emerged as the chief navigator of the nation's transition to a
fully deregulated energy marketplace.
Even before Mr. Bush took office, FERC had begun to rein in the market power
of utilities. In December, FERC told the nation's utilities that it wanted
them to voluntarily surrender their high-voltage lines -- those that can
dispatch electricity across state lines -- to independent grid operators,
such as those already in place in California and the Northeast, which would
provide open access to the lines. Although it told the utilities to submit
plans for doing so, many of them have been reluctant to relinquish control of
their lines to such independent organizations.
Mr. Lay wants FERC to go further, forcing the utilities to cede direct
control of their lines. He also is seeking rules that would end what he calls
energy "balkanization" and create "seamless" interstate electricity markets.
"Enron is the biggest gas and electric company entirely dependent on the
competitive side of the business," says Andre Meade, an analyst for
Commerzbank. "To the extent deregulation slows down, their business slows
down."
Right now it's a lucrative strategy. Enron typically targets tightly
controlled markets just as they are opening up, using its financial clout and
risk-management savvy to gain a dominant market position. In doing so, it
frequently portrays itself as an insurgent taking on entrenched interests.
In electricity, for instance, Enron buys the output of generating plants,
sometimes days, weeks or years before the power is actually produced. Using
sophisticated weather data, it determines the most lucrative market for the
power, finds a buyer and then arranges delivery via transmission lines owned
by others. It hedges its positions with other contracts. Its wholesale
trading volume climbed 55% for natural gas and more than doubled for
electricity in the first quarter alone. Such growth pushed Enron's wholesale
energy-trading income, before taxes and interest, up more than threefold to
$785 million during the first quarter.
Between 1996 and 2000, Enron's yearly net income nearly doubled to $979
million and its revenue increased almost eightfold to $100.8 billion. Over
the same period, Enron's stock price, adjusted for splits, rose more than
fourfold.
At the start of the Bush administration, FERC's future was very much up for
grabs. Two of the five seats on the commission were vacant, and Enron quickly
sought to fill them with activist Republicans. President Bush named a friend
of his and Enron's to one of those seats: Texas utility-regulator Pat Wood.
Mr. Wood had worked closely with Enron during a six-year effort to open
Texas' retail electricity market. Mr. Wood also had shown the kind of
backbone Enron wanted in a separate fight over telephone deregulation when he
insisted on closely monitoring phone utilities to make sure they opened their
networks to competitors.
For the second slot, Enron backed Nora Mead Brownell, a Pennsylvania utility
regulator. She had come to Enron's aid in 1997 when she voted to block an
electricity-market restructuring plan backed by Philadelphia's utility and by
GOP Gov. Tom Ridge. Enron argued that the plan would have locked it out of
the Philadelphia market.
Enron worked to raise Ms. Brownell's visibility by lobbying the House
Commerce Committee to include her as an expert witness on energy issues and
as a member of an informal advisory group, say Enron and congressional aides.
Mr. Lay provided heavyweight support. He says Enron included Ms. Brownell's
name on its "priority list" of a half-dozen prospective FERC nominees. And
when her candidacy ran into opposition from Pennsylvania officials with
bitter memories of her 1997 decision, Mr. Lay says he phoned Karl Rove, the
White House's top political strategist, to tell him that "she was a strong
force in getting the right outcome" in Pennsylvania."
A White House spokeswoman says that a number of individuals and industry
groups weighed in in favor of Ms. Brownell, but she declined to name any. Ms.
Brownell says she was unaware of any concerted Enron campaign on her behalf.
She didn't ask the White House who had supported her because, she says, "I
didn't want to be beholden."
Meanwhile, Enron was using its Democratic contacts to strengthen its ties
with Linda Breathitt, a Kentucky Democrat on the commission. Earlier this
spring, the company hired two of former Vice President Al Gore's closest
friends as lobbyists: Nashville lawyer Charles Bones and Mr. Gore's
campaign-finance director, Johnny Hayes. Both had come to know Ms. Breathitt
through Democratic politics.
Ms. Breathitt says she wasn't very familiar with Enron's interests, but that
she accepted when Mr. Hayes invited her to dinner at a Washington restaurant
in April to meet Richard Shapiro, Enron's managing director for government
affairs. "Everyone likes to get to know the FERC commissioners," Ms.
Breathitt says, adding that she always pays for her own meals.
Enron has long played this kind of insider's game. Mr. Lay has been friendly
with both Democratic and Republican administrations over the past 25 years,
sharing time on the links with Presidents Bill Clinton and Gerald Ford. He's
been a particularly close friend of the Bush family. In the late 1980s, he
ran then-Vice President George H.W. Bush's fund-raising drives in Texas.
After the younger Bush became governor, he appointed Mr. Lay to run the
influential Governor's Business Council. Mr. Lay also made Enron's fleet of
corporate jets available to the new governor and won his help in lobbying
officials considering Enron projects.
In March 1997, Mr. Lay wrote Gov. Bush to ask that he lobby the Texas
congressional delegation to support export-finance credits critical to Enron,
according to letters released by the Texas State Archivist's office. In April
1997, when Enron was negotiating a $2 billion natural-gas joint venture in
Uzbekistan, Mr. Lay wrote to thank the governor for meeting with the
Uzbekistani ambassador to the U.S. Six months later, another Lay thank-you
note concerned a phone call Mr. Bush made to Pennsylvania Gov. Ridge to
support Enron's plan to enter the Philadelphia electricity market. "I am
certain it will have a positive impact," Mr. Lay wrote.
Mr. Lay says he hasn't sought Mr. Bush's aid directly since Mr. Bush won the
presidency. Last month, he talked with the president briefly at a Houston
benefit for the Barbara Bush Foundation for Family Literacy, on which Mr. Lay
serves as co-chairman. "It's not a matter of us going off hunting or fishing
or sitting around and having drinks," he says.
Not all Mr. Lay's initiatives have been successful. When Mr. Bush reneged in
March on a campaign pledge to fight global warming by requiring reductions in
carbon-dioxide levels produced by burning hydrocarbons, Mr. Lay says he
telephoned Mr. Cheney to complain. "The scientific evidence, although
certainly not conclusive, is pretty compelling that there could be a
climate-change problem," he says he told the vice president. "The
administration should still look very seriously at it."
Around the same time, Mr. Lay also called Mr. Rove, the White House political
adviser, to urge him to talk to Fred Krupp, the head of the moderate
Environmental Defense Fund. Messrs. Krupp and Rove spoke briefly but found
little common ground. Later, Enron, which has plans to add emission credits
to the commodities it trades, joined a coalition urging mandatory reductions
in carbon-dioxide levels.
But Enron saved its main lobbying push for Mr. Cheney's energy task force. In
April, Mr. Lay met with the panel's staff director, Andrew Lundquist, and
later, with Mr. Cheney, whom Mr. Lay had come to know well when the vice
president was chief of Halliburton Co., a Dallas construction company. "We
built Enron Field together," says Mr. Lay, referring to Houston's new
ballpark.
In both meetings, say Enron and White House officials, Mr. Lay presented a
broad agenda for opening up the nation's electrical system and used the
gas-transmission system as a point of comparison. In both cases, he argues,
pipelines and transmission lines should be like the federal highway system
that offers easy access to all.
The Cheney report uses similar language, describing the electrical grid as
"the highway for interstate commerce in electricity." As Enron sought, the
report directs the energy secretary to determine by the end of the year
whether it makes sense to establish a national grid, and to identify
bottlenecks in the transmission system as well as how to remove them. An
effort to make the grid national would enhance FERC's power, as Enron has
urged.
The report is mum on some Enron concerns, such as requiring utilities to join
regional transmission organizations, an idea strongly opposed by the utility
industry. A White House aide says the task force didn't want to get involved
in such battles between industries.
As solid as its support in the White House has turned out to be, Enron is
worried about the backlash against electricity deregulation in Western states
and possibly in New York, should electricity rates surge this summer. Nevada
repealed its deregulation law last month, spooked by the way skyrocketing
wholesale-electricity prices in neighboring California were undermining the
Golden State's economy. California and Oregon are contemplating
state-government purchases of major utility assets.
Enron's biggest fear is that the political pressure will lead the states, or
perhaps Congress, to control prices, which could undermine Enron's business.
In response, Enron has formed a coalition with eight other energy marketers
in New York, who each have pledged $50,000 to pay for a media and lobbying
campaign. It also has hired former Montana Gov. Marc Racicot and dispatched
him to court Western politicians. Two weeks ago, Mr. Racicot had breakfast
with an old colleague, Oregon's Democratic Gov. John Kitzhaber. After the two
chatted about fly-fishing, says Mr. Kitzhaber, "Marc did say he was working
to re-energize the discussion about energy and had some ideas for a framework
the governors might want to consider."
Though Mr. Kitzhaber says he knew that Mr. Racicot had joined the Washington,
D.C., lobbying firm Bracewell & Patterson, Mr. Racicot didn't disclose that
he was on retainer to Enron -- and the star of Enron's Western states
"advocacy team." For his part, Mr. Racicot says he was working "not at
Enron's direction but with their knowledge" to advance positions that he,
too, feels are important.
---
Jeffrey White contributed to this article.

National Desk; Section A
THE ENERGY PLAN: THE OVERVIEW
BUSH, PUSHING ENERGY PLAN, OFFERS SCORES OF PROPOSALS TO FIND NEW POWER
SOURCES
By DAVID E. SANGER with JOSEPH KAHN
?
05/18/2001
The New York Times
Page 1, Column 6
c. 2001 New York Times Company
NEVADA, Iowa, May 17 -- President Bush began an intensive effort today to
sell his plan for developing new sources of energy to Congress and the
American people, arguing that the country had a future of ''energy
abundance'' if it could break free of the traditional antagonism between
energy producers and environmental advocates.
Mr. Bush's plea for a new dialogue came as his administration published the
report of an energy task force containing scores of specific proposals --
many that he can impose by executive order -- for finding new sources of
power and encouraging a range of new energy technologies.
His critics swarmed over the specifics, noting that the plan set no targets
for improved energy efficiency, offered no short-term relief for
out-of-control electricity prices in the West and provided only modest
financing for research into clean energy technology.
The president appeared at a highly efficient heating and cooling plant near
St. Paul that burns a variety of fuels, including oil, coal and waste wood,
to sound a theme he plans to repeat day after day. The parties in the energy
debate have ''yelled at each other enough,'' Mr. Bush said. ''Now it's time
to listen to each other.'' [Excerpts, Page A14.]
''Too often Americans are asked to take sides between energy production and
environmental protection,'' Mr. Bush added, before flying here, to a farming
town north of Des Moines, to continue his argument at a small biomass plant
that makes power by burning materials derived from animal waste and plants.
''As if people who revere the Alaskan wilderness do not also care about
America's energy future; as if the people who produce America's energy do not
care about the planet their children will inherit.''
Mr. Bush appeared to be weaving a careful political thread, arguing that if
America failed to act now, ''this great country could face a darker future, a
future that is, unfortunately, being previewed in rising prices at the gas
pump and rolling blackouts in the great state of California.''
Mr. Bush also said rising energy prices had put an intolerable burden on
families and farmers. But some of the statistics in his own report seemed to
undercut that claim. One chart showed that the share of disposable household
income spent on energy had declined to less than 5 percent today from 8
percent during the early days of the Reagan administration. (That percentage
has begun to rise again, but only to the levels of the mid-1990's, before a
sharp drop in energy prices.)
Mr. Bush talked not only of blackouts but of blackmail, raising the specter
of a future in which the United States is increasingly vulnerable to foreign
oil suppliers. He argued, for example, that the Arctic National Wildlife
Reserve, which he wants to open to drilling, can produce 600,000 barrels of
oil a day for the next 47 years. ''That happens to be exactly the amount the
United States now imports from Iraq,'' he said.
Opening the Alaskan refuge to drilling is just one source of contention with
Democrats and some moderate Republicans, many of whom argue that the Bush
administration has put undue emphasis on increasing supplies of fossil fuels
at the expense of the environment.
Critics say that although the report seems designed to suggest a balanced
approach, it minimizes the potential role of alternative sources of energy
and the possibility of reducing future demand through efficiency and
conservation.
''America must embrace the promise offered by new technologies,'' said
Senator Joseph I. Lieberman, Democrat of Connecticut. ''The energy crisis is
not an excuse for creating an environmental crisis.''
Republicans offered far more support for the president. Senator Frank H.
Murkowski of Alaska, chairman of the Senate Energy Committee, said he planned
hearings next week to begin consideration of 25 recommendations in the Bush
report that require legislative action.
''Not everyone is going to like this plan,'' Mr. Murkowski said, ''but at
least now we have a plan to kick around.''
He said the previous administration had failed to grapple with the nation's
energy sources through a comprehensive plan. Clinton administration officials
disputed the assertion and blamed Congress for failing to enact energy
legislation.
Yet even Mr. Murkowski sounded a note of caution about Mr. Bush's approach.
He said the report offered few immediate remedies for California's
electricity crisis or for rising gasoline prices. He said Republicans might
have to consider a gas-tax rollback or the temporary suspension of some
environmental provisions to address supply bottlenecks.
Mr. Bush was praised by many groups for laying out a long-term energy policy.
His report contained 105 initiatives -- although many of them are
endorsements of actions already in place. And while in his public comments he
always started with talk of conservation, the report itself was much more
specific when it came to tapping new supplies.
''No matter how much we conserve, we're still going to need more energy,'' he
said here this afternoon. ''The State of California is the second best state
at conservation, and yet they are still running out of energy.''
Among those who took a different view was former president Jimmy Carter, who
wrote in The Washington Post this morning that the United States did not
confront an energy crisis comparable to those of 1973 and 1979.
''World supplies are adequate and reasonably stable, price fluctuations are
cyclical, reserves are plentiful,'' he argued. Mr. Carter said ''exaggerated
claims seem designed to promote some long-frustrated ambitions of the oil
industry at the expense of environmental quality.''
Some chapters of the energy plan resemble the annual reports issued by energy
companies, with color photos of bears living happily in the wilderness,
forests that can absorb carbon dioxide and fly-fishermen wading in pristine
water, practicing the favorite sport of the report's main author, Vice
President Dick Cheney.
While the report clinically assessed all the available sources of energy and
promised to encourage development of those that do the least environmental
damage, it fell far short of describing the moon-shot approach to efficiency
and renewable energy that was an ambition of the Carter years.
In fact, federal spending on research and development of wind, solar,
geothermal and biomass energy sources, as well as on energy efficiency
technology, has never equaled the $3 billion spent in 1980, Mr. Carter's
final year in office, even after adjustments for inflation.
If the Bush plan were fully put into effect, it would potentially double what
the administration had planned to spend over 10 years for renewable energy
research and for tax incentives for people and companies that purchase
energy-efficient products, like hybrid cars.
But the estimated $10 billion commitment over that period is below what the
Clinton administration had projected spending for roughly the same period,
and well below what energy experts say would be required to make some
cutting-edge energy technologies commonplace.
''Americans spend $600 billion a year on energy,'' said John Holdren, an
energy and environmental policy expert at Harvard who helped draft a Clinton
administration study of clean energy sources. ''The Bush people are proposing
to change habits by incentives that amount to about one-tenth of one percent
of that amount each year. It's not very significant.''
Though the report devotes more chapters and more recommendations to measures
related to the environment, conservation and renewable energy than those
related to traditional sources the impact of what the administration intends
to do to increase traditional energy supplies greatly outweighs what it
aspires to do to diminish demand.
The report notes that efficiency in homes and offices could help reduce the
need for new power plants, which it says must total at least 1,300 by 2020.
But it adopts no goal for such improvements.
In the same manner, addressing auto efficiency standards, the report reviews
how Corporate Average Fuel Economy mandates improved the performance of
combustion engines in the 1980's. But it puts off any decision on whether to
raise those standards now, saying the administration would wait for a study
to be completed.
The report is far less tentative in the area regulations it identifies as
hindering the oil, gas, nuclear and utility industries.
It mentions about a dozen areas -- including land-use restrictions in the
Rockies, lease stipulations on offshore areas attractive to oil companies,
the vetting of locations for nuclear plants, environmental reviews to upgrade
power plants and refineries -- that could be streamlined or eliminated to
help industry find more oil and gas and produce more electricity and
gasoline.
California, where soaring electricity prices and rolling blackouts have been
the main contributor to the idea that the nation faces on energy crisis, gets
little in the Bush plan. The report notes that federal agencies have been
asked to reduce peak power use in California in coming months, but that is
far less than California officials want.
Senator Dianne Feinstein, Democrat of California, called the plan ''a bible
for long-term energy production and not even a pamphlet for the urgent
short-term actions needed to help us get out of the crisis'' in her home
state. She particularly criticized Mr. Bush's refusal to call for electricity
price caps in California.
In what seems likely to be one of its most contested recommendations, the
Bush team recommends creating a national electricity grid, akin to the
interstate highway system, and giving federal agencies the right to take land
for electricity transmission by eminent domain. That proposal has already
come under attack by Western governors and is sure to be a battle in
Congress.

Photos: President Bush, Christie Whitman, head of the Environmental
Protection Agency, and Mayor Norm Coleman of St. Paul, second from right,
with officials of a power plant that burns wood chips as well as oil.
(Associated Press)(pg. A1); President Bush toured an efficient heating and
cooling plant, District Energy, yesterday near St. Paul, with the company's
vice president, Michael Burns. The plant burns fuels like oil, coal and waste
wood. The parties in the energy debate have ''yelled at each other enough,''
Mr. Bush said. (Associated Press)(pg. A14) Chart: ''STATUS REPORT -- A
Lighter Burden'' The percentage of personal income spent on energy has risen
recently, but it is still much lower than during the energy crisis of the
1980's. Graph tracks percentage of income spent on energy from 1981 to 2000.
(Sources: U.S. Bureau of Economic Analysis)(pg. A14)

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A Section
Bush Issues Energy Warning; President Unveils New Policy, to Praise and
Attacks on Party Lines
Mike Allen and Dana Milbank
?
05/18/2001
The Washington Post
FINAL
Page A01
Copyright 2001, The Washington Post Co. All Rights Reserved
	ST. PAUL, Minn., May 17 -- President Bush unveiled his much-anticipated
energy policy to the nation today from the banks of the Mississippi River,
warning of widespread misery if Congress resists his plan to increase the
country's power production.
	Bush flew to a convention center here to announce his proposals after four
months of deliberations, winning acclaim from Republicans and the energy
industry, which stands to make billions of dollars from his ideas, and
complaints from Democrats and environmentalists, who hope to exploit the
policy as a way to portray the president -- a former Texas oilman -- as a
captive of industry.
	"If we fail to act, Americans will face more, and more widespread,
blackouts," Bush said. "America cannot allow that to be our future, and we
will not." The president, adding a tone of urgency to his long-term
proposals, said a future without new sources of energy "is unfortunately
being previewed in rising prices at the gas pump and rolling blackouts in the
great state of California."
	In California, Gov. Gray Davis (D) accused the administration of "turning a
blind eye to the bleeding and hemorrhaging that exists in this state." He
excoriated Bush for refusing to cap wholesale energy prices. "We are
literally in a war with energy companies, many of which reside in Texas,"
Davis said.
	The White House today released the full 170-page report, which provides more
detail but follows closely the outline Bush advisers introduced Wednesday
night. Bush seeks reduced regulations to encourage more oil, gas and nuclear
production, tax incentives to boost coal output, and other tax incentives
aimed at conservation and renewable fuels. The president said the nation
needs 1,300 to 1,900 new power plants over the next 20 years, and 38,000
additional miles of natural gas pipelines and 263,000 miles of distribution
lines.
	Some of the proposals, notably the call to drill in Alaska's Arctic National
Wildlife Refuge, are considered nonstarters in Congress, where the plan is
likely to be amended with more short-term solutions to the California energy
squeeze. But the bulk of the recommendations are in executive orders and
regulatory changes, which the administration can do with little resistance.
Bush plans to sign an order next week directing federal agencies to expedite
permits for new energy plants.
	The president's allies in Congress vowed swift action. House Resources
Committee Chairman James V. Hansen (R-Utah) said his panel would work quickly
to accommodate the plan by opening up protected areas for oil drilling and
coal mining.
	The thrust of the energy recommendations could be seen today in the initial
reactions: satisfaction from industry, consternation from conservationists.
	"It's balanced -- I think it has something for everybody and it addresses the
problems that should be addressed," said Thomas E. Capps, chairman of
Dominion Resources Inc., the Richmond energy company that is Virginia's
largest electricity supplier. "California has an energy crisis now. The rest
of the country is going to have one unless something is done."
	Industry representatives voiced few if any objections; at a White House
briefing, an administration official took a lengthy pause when asked if any
part of the report would disappoint industry. "That's a good point," he said,
noting tax credits that go to conservation rather than oil and gas.
	Leading environmental groups held a joint news conference in Washington to
denounce Bush's proposal, which they said would spoil natural resources but
do little to ease the short-term energy shortage. They unveiled a television
ad featuring a mock auctioneer selling the nation's resources to the highest
bidder. And they argued that Bush's plan, by increasing reliance on fossil
fuels, would increase global warming emissions by 35 percent over 20 years.
	Environmentalists were particularly miffed that the plan ties the few
benefits conservationists sought to more controversial elements such as
expanding drilling on public land. "In what is a truly cruel joke, the Bush
plan would also use oil revenues from the Arctic refuge to pay for land
protection and renewable energy programs," said William H. Meadows, president
of the Wilderness Society. "That's like burning your furniture to heat your
home."
	Objections came from government watchdogs too. The libertarian Cato Institute
argued that the administration "is simply positioning itself to take credit
for what the market is already busily accomplishing." Cato analyst Jerry
Taylor said the nation is in a power plant construction boom, with 90,000
megawatts of new capacity to be available by 2002 and as much as 200,000
megawatts by 2004. "This will not only burst the electricity price bubble but
will probably produce an electricity glut in the near future," Taylor said.
He decried a "smorgasbord of handouts and subsidies for virtually every
energy lobby in Washington."
	On Capitol Hill, reactions to Bush's proposals fell predictably along party
lines. House Speaker J. Dennis Hastert (R-Ill.) pledged to start hearings
immediately on the plan, which he praised as well-balanced. "I believe it
meets the goals most important to the American people by increasing our
energy supplies, providing price stability and protecting our precious
environment," he said in a statement.
	House Minority Leader Richard A. Gephardt (D-Mo.), on the other hand, held an
elaborate news conference in the Capitol with other Democrats that featured a
satellite connection to three San Diego residents facing rising energy
prices. "We think the president's plan makes the wrong choices for America
and the American people," Gephardt declared in front of projected images of a
gas pump and the Arctic National Wildlife Refuge. "It was crafted behind
closed doors with a lot of input from energy executives, and in a highly
secretive way that doesn't serve the public interest." Democrats say they
view the issue as one of the GOP's top vulnerabilities in the months to come.
	Senate Majority Leader Trent Lott (R-Miss.) said he wants to begin hearings
on one big energy policy bill next week. House Energy and Commerce Committee
Chairman W.J. "Billy" Tauzin (R-La.), whose panel will move much of the
energy-related legislation, predicted his committee would take up
conservation measures first and then move to the question of supply. In the
coming months, Tauzin said, Congress will take steps to allow consumers to
sell power back to their local energy grids, urge the auto industry to adopt
stricter fuel efficiency standards and promote better transmission
technologies.
	Bush is the first president since Jimmy Carter in 1979 to ask Americans to
think about their energy supply, and the tones were as different as the
times. Carter proposed a windfall profits tax for oil companies and asked
citizens to follow the speed limit, drive 15 fewer miles a week and carpool
once a week. Bush declared, "Conservation doesn't have to mean doing without.
Thanks to technology, it can mean doing better and smarter and cheaper."
	The plan leaves many issues to be hashed out. For instance, it directs Energy
Secretary Spencer Abraham to "propose comprehensive electricity legislation"
that promotes competition while protecting consumers. It directs
Transportation Secretary Norman Y. Mineta to consider higher fuel-economy
standards for new vehicles, but said they must "increase efficiency without
negatively impacting the U.S. automotive industry."
	Before Bush's speech, he toured a power plant that runs off natural gas,
low-sulfur coal and wood waste. In his energy report, the page with a message
from Vice President Cheney is stamped "Printed on Recyclable Paper," and the
plan is larded with color photos that include an oil derrick bathed by a
fiery sunset, a fly-fisherman in a red plaid shirt with a snow-capped
mountain behind him, and a farm family bounding through a hayfield toward a
combine.
	Bush drew applause from the crowd, which had been selected by a local
business group, when he called on his critics to work with him. "Just as we
need a new tone in Washington, we also need a new tone in discussing energy
and the environment -- one that is less suspicious, less punitive, less
rancorous," he said. "We've yelled at each other enough. Now it's time to
listen to each other, and act."
	Still, Bush could see signs of the struggle to come in the energy debate
between industry and environmentalists. He was met here by demonstrators with
signs saying, "I Breathe and I Vote," and "Got Oil?"
	Milbank reported from Washington. Staff writers Juliet Eilperin and Peter
Behr contributed to this report.

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