Please see the following articles:

Sac Bee, Fri, 5/4:  "Expect prices to shoot up, analysts say"

Sac Bee, Fri, 5/4:  "GOP: Shrink plan for bonds"

Sac Bee, Fri, 5/4:  "FERC chief defends plan for state"

Sac Bee, Fri, 5/4:  "PG&E to judge: ISO, $1 billion tab will drain us"

Sac Bee, Fri, 5/4:  "Jack Sirard: PG&E's woes a warning to utility investors"

SD Union (AP), Fri, 5/4:  "Legislature sends power authority bill to governor"

LA Times, Fri, 5/4:  "GOP Tries to Force Its Dramatically Different Energy
Plan on Governor"

LA Times, Fri, 5/4:  "Secretary of Energy, Davis Meet on U.S. Plan to Boost
Conservation"

LA Times, Fri, 5/4:  "PG&E Seeks Relief From High-Priced Power Purchases"

LA Times, Fri, 5/4:  "SDG&E Blackout Plan Would Pay Firms to Use Generators"

SF Chron, Fri, 5/4:  "Been there, done that
Bay Area finds little new in Bush's ideas "

SF Chron, Fri, 5/4:  "Bush calls power supply the solution
He says conservation useful but secondary "

SF Chron (AP), Fri, 5/4:  "SDG&E unveils plan to contend with rolling
blackouts"

SF Chron (AP), Fri, 5/4:  "California crisis brings new talk of energy
conservation"

SF Chron (AP), Fri, 5/4:  "Developments in California's energy crisis"

SF Chron, Fri, 5/4:  "Energy at a glance"

SF Chron, Fri, 5/4:  "Ships would help during blackouts
Ready reserve fleet has power to provide"

SF Chron, Fri, 5/4:  "PG&E chairman wants to keep power lines"

Mercury News, Fri, 5/4:  "Bush shifts policy on conservation after meeting
with GOP"

Mercury News, Fri, 5/4:  "Senate plans public power"

Mercury News, Fri, 5/4:  "All Caps Hed"

OC Register, Fri, 5/4:  "Energy notebook
Vote delayed on $12 billion state bond for power"

OC Register, Fri, 5/4:  "US conservation order called Bush's best effort"

Individual.com (Bridgenews), Fri, 5/4:  "[B] POWER UPDATE/ Bush directs feds
to save energy in California"

Individual.com (AP), Fri, 5/4:  "Judge Dismisses $10B PG&E Suit"

Individual.com (Business wire), Fri, 5/4:  "Bankruptcy Update/ PG&E Files
Motion to Require CAISO to Follow Federal Law"
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Expect prices to shoot up, analysts say
By Dale Kasler
Bee Staff Writer
(Published May 4, 2001)
Gov. Gray Davis' plan for solving the energy crisis relies partly on a
striking assumption: that the state's power expenditures will drop
dramatically this summer.
But energy-market analysts believe Davis is underestimating the cost of
electricity and say the state should brace for a significant run-up in prices
during what is likely to be a summer of chronic shortages.
In particular, analysts question Davis' prediction the state will pay an
average of $195 a megawatt-hour on the spot market from July to September, a
44 percent reduction from the projected average price for April through June.
"One hundred and ninety-five dollars? Boy, I wish it were true," said Severin
Borenstein of the University of California Energy Institute. "My estimate is
substantially higher."
Yet Davis' advisers are sticking by their projection of the state's power
costs, released Monday to a skeptical Legislature by private consultants to
the governor. They say the lower cost estimates reflect expected increases in
supplies, the projected impact of California's new conservation program and
the state's growing ability to wean itself from the ultra-expensive spot
market and buy much of its power through cheaper long-term contracts.
Prices may rise, but spending by the state will decline, starting this
summer, they insist.
"This is a very credible plan," said Joseph Fichera, a Wall Street financier
advising the governor. "We have done things to mitigate our exposure (to the
spot market)."
The credibility of the projections is crucial to the state's plan to sell $10
billion worth of bonds -- a key element of Davis' rescue plan. The bonds
would compensate the state for past and future power purchases made on behalf
of moribund Southern California Edison and Pacific Gas and Electric Co., with
ratepayers ultimately footing the bill. Davis expects the state to spend
$18.7 billion on power by June 2002.
But if electricity costs go higher than Davis expects, the strain on the
state's budget could worsen, complicating the bond sale. Republican
lawmakers, wary of higher costs and distrustful of Davis' projections, have
been threatening to block the sale.
Higher-than-expected costs also would increase the likelihood of blackouts;
Davis acknowledged last week that the state might stop purchasing electricity
at times when prices go out of sight.
And many private-sector experts believe prices will surely rise.
"I see no reason, given what's happened the past six months, that the next
six months is going to be dramatically different," said Keith Bailey, chief
executive of generator Williams Cos., which sells power to California.
One great unknown is the impact of a "price mitigation" plan approved last
week by the Federal Energy Regulatory Commission. Price caps would kick in
when California's power reserves are less than 7 percent of demand -- the
so-called "power alert" days.
Bailey said the plan would have "a very real effect," but state officials
called it inadequate. "More holes than Swiss cheese," Davis said this week.
In Washington, Sen. Dianne Feinstein, D-Calif., and other Western senators
tore into FERC Chairman Curtis Hebert Jr. at a hearing on the price
mitigation plan. Feinstein wondered aloud why the FERC didn't simply
establish a firm ceiling on prices.
As it stands now, California officials have been spending upward of $50
million a day for Edison and PG&E; the tab can fluctuate wildly from day to
day as prices shoot up and down. On Thursday, prices in California ranged
between $214 and $240 a megawatt-hour, depending on location, for peak-time
power, according to industry newsletter Enerfax Daily.
Because summertime demand is typically about 50 percent higher than it is in
spring, most analysts expect prices to rise. California electricity futures
prices, considered by many to be a decent gauge of where prices are going,
are trading at $375 a megawatt-hour for July and $525 for August, Enerfax
said.
"I would trust the traders," said Gary Ackerman of the Western Power Trading
Forum, an association of power generators. "They've been right more often
than the Davis administration."
The Northwest drought, robbing California of cheap hydropower, is a key
reason many analysts believe costs won't drop.
"What it all adds up to is much less imported hydroelectric power than we're
used to," said Arthur O'Donnell, editor of the California Energy Markets
newsletter.
But Davis' consultants say new power is coming from other sources this
summer, easing prices. New power plants, scheduled to begin operations this
summer, will add 4,500 megawatts of power to California's energy-starved
grid, Davis said.
O'Donnell, though, said the new plants won't provide immediate relief. "Power
plants, in their start-up phase, frequently have problems," he said.
Another unknown quantity is the fate of hundreds of cogenerators, wind farms
and other alternative-energy providers that deliver more than 20 percent of
the state's electricity under contract to the utilities.
After going months without payment from PG&E and Edison, scores of these
producers shut down in February and March, depriving the state of an
estimated 3,000 megawatts of power and contributing mightily to two days of
blackouts in March.
About 800 megawatts of power returned to service in April, after PG&E and
Edison were ordered to resume paying the generators, the two utilities said.
And Fichera said more will come back starting June 1, when their contracts
say they must operate or face financial penalties.
But some generators say they won't produce full throttle this summer. Angered
at a new payment schedule that substantially cuts their income, they'll run
"the absolute bare minimum" to fulfill their contracts, said Hal Dittmer of
Wellhead Electric Co., a small generator that's been shut down.
Representatives of the small generators met with Davis on Thursday, with
Davis agreeing to work with them on the possibility of increasing their
payments, said generators' attorney Jerry Bloom.
Davis, meanwhile, also is betting that energy usage will fall. Recently
approved rate hikes will create "sticker shock" that will cut demand 3
percent, Fichera said. The state's conservation program will contribute an
additional 4 percent, he said.
"If we buy less than what (generators) expect, prices drop," Davis said.
Above all, the state has completed or is in final negotiations on a slew of
long-term contracts with major generators -- deals that will substantially
cut the state's dependence on the spot market and reduce its overall power
bill, said Ron Nichols of Navigant Consulting Inc., which developed the
power-cost estimates for Davis.

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.
David Whitney of The Bee's Washington Bureau contributed to this report.

GOP: Shrink plan for bonds
By John Hill
Bee Capitol Bureau
(Published May 4, 2001)
The state should bite the bullet and use $5 billion of its surplus to pay for
electricity instead of borrowing the money and prolonging the fiscal agony,
Assembly Republicans said Thursday.
Paying up front is preferable to a Democratic plan that would "saddle
electric customers with higher utility rates to pay the state back with
interest," said Assemblyman Bill Leonard of San Bernardino, one of 30 members
of the Assembly Republican Caucus.
But the caucus's plan drew fire from state Treasurer Phil Angelides, a
Democrat in charge of putting together the bond deal. He said a GOP block of
the bond deal would cut into this year's spending for education and
transportation and "take the state toward fiscal insolvency."
Angelides said the Republican stance will force the Legislature to pass the
bill authorizing bonds with a simple majority, needing no GOP votes but
requiring a 90-day wait for the bill to become law. By that time, he said,
the state will be perilously close to running out of money.
"It is to me, from a business perspective, one of the most irresponsible acts
I've witnessed," he said.
The Assembly Republican plan calls for the state to sell $8 billion in bonds,
instead of the $12.5 billion proposed by Gov. Gray Davis. This move would
relieve pressure for more electricity rate increases, Leonard said.
The Republicans would make up the difference by taking $5 billion from the
state's general fund. That's money the Democratic governor proposed in
January would go to one-time expenditures on a variety of projects, from
clean beaches to housing, as well as new spending on schools.
The Republican plan calls for rate rebates for people whose electric
utilities are publicly owned, such as the Sacramento Municipal Utility
District. Some argue that these ratepayers are getting a bad deal because
their tax money is subsidizing ratepayers whose utilities are in financial
trouble.
It also includes past Republican proposals that have stagnated in the
Legislature, such as allowing residential customers to make deals with
independent electricity providers and encouraging quick building of power
plants.
Although the Republicans are in the minority, they wield leverage in the
energy debate because a bill that would authorize a bond sale requires a
two-thirds vote. At least five of the 30 Assembly Republicans would have to
vote for it.
The Republicans say they are uncomfortable with the size of the bond deal
proposed by Davis, which combined with other energy bond sales could top $20
billion. "It's too much to swallow," said James Fisfis, a spokesman for the
caucus.
Fisfis said the plan represents a preliminary response to Democratic
proposals -- a "starting point in negotiations and a vision of Republicans
and what they would do if they were governing."
"We don't want those phony messages that everything's fine and hunky-dory,
and it's not," he said. "This is a time for financial restraint."
The Republican proposal blasts as "expensive gimmickry" a plan by Angelides
to get a $4.1 billion bridge loan from three major lenders to keep the state
flush until the bonds are sold.
Angelides said such loans are routine when California and other states sell
bonds. The loan in this case, he said, provides "momentum" for what's likely
to be the biggest bond sale in U.S. history. "It's three of the most powerful
investment banks in the country side by side with us, signalling to the world
marketplace that they believe in this transaction," he said.
The fees to the investment banks of several million dollars represent a
fraction of one day of the state's power costs, he said.
Legislative Analyst Elizabeth Hill said the proposal would require all $2.3
billion in one-time expenditures in the governor's budget to be axed, as well
as $2.7 billion of proposed year-to-year spending.
In addition, state revenues for the fiscal year starting July 1 appear to be
lower than anticipated, so the Republican plan might force even more cuts,
she said.
The Republican caucus plan came the same day that Secretary of State Bill
Jones, the lone Republican statewide officeholder and a GOP candidate for
governor next year, released his own ideas on the energy crisis.
Jones, in a letter to Vice President Dick Cheney, said the state "is on the
brink of fiscal insolvency" because of Davis' efforts to buy power.
Instead of selling bonds or negotiating to buy the utility companies'
transmission lines or other assets, the state should ask power generators to
forgive some of the nearly $14 billion they're owed in exchange for immediate
payment, Jones said.
In addition, the state should offer low-interest loans to utilities to help
them repay their debt, using the power lines as collateral. Finally, he said,
the utilities' parent companies should help reduce the debt.
While Jones said the Davis plan is "socializing the delivery of power," the
state Senate on Thursday sent the governor a bill that will likely drive the
state further into the energy business by allowing a public power authority
to run its own power plants.
The authorizing bill, SB 6x by state Senate President Pro Tem John Burton,
D-San Francisco, passed the Senate on a 24-14 party-line vote.
The agency would have access to $5 billion in bond money with which it could
build, run and seize power facilities and institute conservation programs.

The Bee's John Hill can be reached at (916) 326-5543 or jhill@sacbee.com.
Kevin Yamamura of The Bee Capitol Bureau contributed to this report.

FERC chief defends plan for state
By David Whitney and David Westphal
Bee Washington Bureau
(Published May 4, 2001)
WASHINGTON -- The chairman of the Federal Energy Regulatory Commission
sternly defended the panel's new plan for controlling California electricity
prices Thursday amid mounting criticism that it is too little and too late to
do much good.
The criticism came from Democrats and one Republican, Oregon Sen. Gordon
Smith, at a hastily arranged hearing of the Senate Energy and Natural
Resources Committee that was intended to be a forum for FERC Chairman Curt
Hebert Jr. to dispel concerns that the plan won't protect consumers from
price-gouging electricity marketers.
The order, approved last week by a 2-1 vote, is supposed to dampen prices
without rigid price controls by ordering generators to sell all the power
they produce and setting a benchmark price based on the highest-cost,
least-efficient plant operating during periods of emergency shortages.
"FERC is acting," Hebert said. "FERC is acting responsibly. ... We're doing
what we can do."
But the commission's lone dissenter on last week's order, William Massey,
charged that the measures to control skyrocketing prices would be in effect
only during power emergencies when supplies were tightest. And while that
might be as much as 40 percent or 45 percent of the time during the long hot
summer, he said, that still leaves most of the time when power marketers are
free to sell at whatever price they can get.
"I have no confidence that prices will be fair and just at all times this
summer," Massey said.
Sen. Dianne Feinstein, D-Calif., continued on that theme. She produced what
was described as a "megawatt laundering" blueprint she had received detailing
how FERC's order could be used to trade power back and forth between
marketers to bid up wholesale prices in a way that would be outside FERC
monitoring.
The contentious hearing came as the FERC is about to publish notice in the
Federal Register to expand the price monitoring plan to Oregon, Washington
and other Western states.
But Smith said he thought the commission was misreading the political
firestorm brewing throughout the West if it thought its plan would quell
outrage over rising prices.
"Are you aware of the head of steam that is building up?" asked Smith, who
said prices in his region are 10 or 12 times what they were a year ago. "This
is unsustainable, for this administration, for this Congress."
Smith and Feinstein have introduced legislation that would temporarily cap
wholesale power rates at the cost of production plus a fixed profit margin.
Feinstein, who was more supportive of the FERC order after its release last
week, said after the hearing that she now believes it is flawed by too many
loopholes and problems.
"I can't understand why they are doing this," she said.
Meanwhile, one of California's biggest power customers, the U.S. military,
vowed Thursday to reduce its peak-hours electricity use by 10 percent this
summer as President Bush expressed new concern about the state's looming
season of blackouts.
"We're worried about blackouts that may occur this summer and we want to be
part of any solutions," said Bush, who gave federal officials 30 days to
implement electricity-reducing plans.
Gov. Gray Davis welcomed the president's comments, but said the plan falls
short. "Surely the federal government can do more and match California's 20
percent savings at all state buildings," he said.
Vice President Dick Cheney, in a speech earlier this week, spoke dismissively
of conservation efforts in the 1970s, and warned that the nation won't be
able to "simply conserve or ration our way out of the situation we're in."
But Bush spoke repeatedly Thursday of the importance of conserving. "We've
got to do both," he said. "We must conserve, but we've also got to find new
sources of energy."
The administration set no target for reducing federal power use, but
recommended actions such as turning off escalators and raising thermostats to
78 degrees when state reserves fall below 5 percent.
"We're not trying to pick a figure arbitrarily out of the sky," said Energy
Secretary Spencer Abraham.
Earlier, in a letter to Congress, Davis excoriated federal inaction on
soaring electricity rates as he prepared to meet in Sacramento with Abraham
on Thursday evening.
"With all our actions in California, it is a travesty that on the one issue
over which the federal government has exclusive jurisdiction -- wholesale
energy prices -- it has utterly failed to discharge its responsibility,"
Davis said.

The Bee's David Whitney can be reached at (202) 383-0004 or
dwhitney@mcclatchydc.com.

PG&E to judge: ISO, $1 billion tab will drain us
By Claire Cooper
Bee Legal Affairs Writer
(Published May 4, 2001)
SAN FRANCISCO -- Pacific Gas and Electric Co. asked a federal bankruptcy
judge Thursday to bar the operator of California's power grid from buying
electricity for the utility or collecting almost $1 billion now due for past
wholesale purchases.
PG&E's bankruptcy estate would be depleted by paying the high prices passed
on by the California Independent System Operator, the utility said in asking
U.S. Bankruptcy Judge Dennis Montali to issue an injunction.
PG&E filed for Chapter 11 bankruptcy reorganization April 6. The utility's
corporate parent, San Francisco-based PG&E Corp., is not part of the
bankruptcy proceedings.
The ISO buys electricity from independent wholesalers to supplement whatever
power the utilities can send to the grid, matching supply with demand on a
daily basis. Throughout the past year it has provided as much as 30 percent
of the state's electricity and as little as 10 percent on any given day, said
ISO spokesman Patrick Dorinson.
ISO Vice President Elena Schmid said Thursday that the ISO stopped buying
electricity for PG&E after being told to do so April 6 by the Federal Energy
Regulatory Commission because the utility no longer was creditworthy.
But the PG&E legal complaint said the ISO continued making purchases through
April 30 at an average cost almost six times as high as the frozen retail
rates that PG&E can charge its customers.
Even with an upcoming rate increase, said the complaint, PG&E could lose $228
million a month if it depended on the ISO for 25 percent of its electricity.
Since mid-January, the California Department of Water Resources also has been
buying electricity for PG&E and Southern California Edison, under AB 1x,
legislation that authorized state power purchases and rate increases if
necessary to repay the state.
PG&E said in the complaint that the state water department has limited its
purchases to power it can buy at rates it deems reasonable, leaving it to the
ISO to obtain "at extremely high rates" the remainder of the electricity PG&E
needed to balance supply and demand.
PG&E has been able to generate or has contracts for between 50 percent and 60
percent of its retail electricity demand.
PG&E spokesman Ron Low said the DWR has been buying about 85 percent of the
balance, but the company doesn't know how much the ISO is buying until it
receives the bills.
ISO's Schmid said no decision had been reached concerning the effect of the
bankruptcy proceedings on PG&E's outstanding billion-dollar bill for
electricity purchases in January and February.
"We're certainly going to live by whatever terms the Bankruptcy Court puts on
it," she said.
Two weeks ago, ISO advised PG&E that ISO's January and February invoices, to
the extent they conflicted with the bankruptcy process, were submitted only
for record-keeping purposes.
But PG&E said ISO still plans to hold the company responsible for the bills.
A hearing has been set for June 4.

The Bee's Claire Cooper can be reached at (415) 551-7701 or
ccooper@sacbee.com.

Jack Sirard: PG&E's woes a warning to utility investors

(Published May 4, 2001)
Q: Like so many other investors, I bailed out of my Pacific Gas and Electric
shares. I am now looking at Con Ed. It looks fairly priced with a great
yield. Would it be wise to take the money I got from PG&E and buy Con Ed?
My biggest concern is that Con Ed could suffer a fate similar to the one that
devastated PG&E. What do you think?
--Robert A., Carmichael
A: Consolidated Edison (ticker symbol ED) is one of the nation's largest
investor-owned energy companies. The company provides a wide range of
energy-related services to customers in New York, New Jersey and
Pennsylvania.
For the three months ended March 31, revenues increased 24 percent to $2.89
billion while its net income declined 5 percent to $179.1 million.
The company's stock closed Thursday at $36.26, near its 52-week high of
$39.50 and well above its low of $29.61. The company pays a generous annual
dividend of $2.20 a share, giving it a current yield of 6.04 percent.
Last week the company said it would spend $483 million this year as part of a
program to prepare for the summer of 2001, enhance reliability and improve
infrastructure. And over the next five years, Con Ed plans to invest $2.4
billion to upgrade its electric delivery system, which serves New York City
and Westchester County.
You're certainly right to be concerned about any utility's plans to deal with
the energy crisis.
Here's what I found about Con Ed. The company sold most of its power plants
and, like California utilities, failed to lock in multiyear contracts with
suppliers to protect its customers against rising wholesale prices. But Con
Ed can pass wholesale electricity price increases through to consumers. Last
summer, a spike in wholesale prices briefly pushed Con Ed electric rates up
43 percent and that could happen again this summer.
Value Line says Con Ed stock is expected to lag the market but says
income-oriented investors might want to build a stake. The company has been
increasing its dividend slowly but surely over the years. If you buy the
stock, keep a close eye on it. Utilities, unfortunately, no longer can be
bought and tucked away.
Q: Our gross income is $100,000 a year and, other than our house payment, we
have no outstanding debt except a car payment of $250 a month. We have about
$175,000 in investments including our stocks, mutual funds and 401(k), which
we are adding about $1,000 a month to.
We have two kids, age 10 and 12, and hope to retire from our jobs with the
state in about seven years at age 53 to 55 and convert our investments to 25
percent CDs, 25 percent bond funds, 25 percent stocks and 25 percent mutual
funds. What do you think?
--Jim R., Sacramento
A: After looking at the stocks (down 74 percent) and mutual funds (down 51
percent) that you have bought on your own, I'd suggest that you need
professional help with your investing. Admittedly, you have taken a hit by
being heavily invested in technology components. By comparison, your 401(k)
is down only 23 percent.
Instead of being concerned about how to invest once you retired, if I were
you, I'd focus my attention on whether I had enough money to retire. Because
you and your spouse both work for the state, your retirement benefits should
be solid, but I think you need to get a professional review of your financial
situation to see if all the numbers add up. At first glance, it doesn't look
to me that they do.
You're at the age when you need to have a financial game plan in place that
can pay for college for the children and your own retirement. In your case --
as with many others -- spending some time and money now with a professional
will pay off in the future.

The Bee's Jack Sirard can be reached at (916)321-1041 or jsirard@sacbee.com

Legislature sends power authority bill to governor

By Audrey Cooper
ASSOCIATED PRESS
May 3, 2001
SACRAMENTO ) California is poised to enter the power business after the state
Senate approved the creation of a public power authority and sent its bill to
Gov. Gray Davis Thursday.
A power authority, supporters said, will give the state more control over its
wholesale electricity market by building and operating its own power plants.
State-owned plants could charge lower prices, and building new plants could
increase supply and ease wholesale prices.
If signed by the Davis, the bill creates a California Consumer Power and
Conservation Financing Authority that could issue up to $5 billion in revenue
bonds to pay for power plants, natural gas storage and additional pipelines
and conservation programs.
Davis has said he supports creating a public power authority similar to one
in New York. The New York authority has 10 power plants, 1,400 miles of
transmission lines and produces about 25 percent of the state's power.
Nebraska also has a power authority, which created a market in which
residents pay 22 percent less than the national average, said Sen. John
Burton, D-San Francisco, who wrote the bill.
A Davis spokesman said Thursday that although the governor has supported the
concept of a power authority, he has not decided whether or not to sign the
legislation.
The authority would be run by the state treasurer and four other members
appointed by the governor.
Opponents of the plan, most of them Republicans, have said an authority
thrusts the state into a power market in which it doesn't belong and could
obstruct private interests' efforts to build and operate power plants.
The new board would also be able to seize plants by eminent domain, a power
the governor also has under an emergency order issued in January.
Sen. Steve Peace, D-El Cajon, said California needs the authority because the
1996 deregulation law didn't create real competition and the Federal Energy
Regulatory Commission refuses to control rising wholesale prices.
The state's deregulation is "the economic equivalent to the World Wrestling
Federation," Peace said. "The wrestlers follow a script and the referee,
FERC, ensures it is entertaining. It is not real competition."
The authority won't help the state escape blackouts this summer, but will
help restore reliable and affordable electricity in the future, said consumer
advocate Harvey Rosenfield with the Foundation for Taxpayer and Consumer
Rights.
"The agency is California's key to survival and independence from the energy
cartel," he said.
Davis and state lawmakers are also considering purchasing Southern California
Edison's transmission system, which would be governed by a separate public
authority. Negotiations with San Diego Gas & Electric Co. are continuing. The
Legislature would have to approve those buys.
The authority's main power would be over generator construction, said
Stanford University economist Frank Wolak. Energy companies would likely be
hired to build the plants, something the companies are already pursuing.
"As far as operating power plants, we're not as good as these other guys
are," he said.
However, the authority may speed the siting of power plants, an approval
process mostly anchored in state agencies. Centering the approval process in
the state government could speed the process, he said.
Richard Sklar, the governor's new energy czar, said the goal of the state's
power authority will be to balance the energy market in California and keep
private companies from controlling the prices.
"The power authority is a sensible long-term strategy," Sklar said. "It's not
a bad idea for the state, if the private sector will not build it, to build
plants so supply won't fall short of demand and this game won't be able to be
played."
Opponents said California should create total deregulation of the electricity
market, not a government solution.
The 24-14 vote on the bill, written by San Francisco Democratic Sen. John
Burton, was split down party lines.
Some of the most "feared words in the English language are 'I'm from the
government and I'm here to help you,'" said Sen. Bill Morrow, R-Oceanside.
The state Assembly passed the bill last week in a 47-28 vote split along
party lines.
Pacific Gas and Electric Co. spokesman Ron Low declined comment on the
legislation. Officials from San Diego Gas and Electric Co. didn't return
calls seeking comment.
??

Read Burton's SB6X www.leginfo.ca.gov

GOP Tries to Force Its Dramatically Different Energy Plan on Governor
By MIGUEL BUSTILLO, Times Staff Writer

?????SACRAMENTO--Republican lawmakers are trying to force Gov. Gray Davis
into a dramatically different exit strategy for the energy crisis: writing
off the $5 billion the state has already spent on electricity and borrowing
billions less to finance future power purchases.
?????GOP lawmakers are holding up emergency legislation needed to replenish
the budget for power costs, because they don't think the Democratic
governor's plan to get California out of the power business will work. They
say the plan is full of dangerously optimistic assumptions, such as estimates
that 90% of the state's alternative energy producers will be generating
electricity this summer--only two-thirds are now--and that Californians will
use 7% less electricity.
?????Although Republicans don't control either house, the emergency
legislation requires a two-thirds vote, which gives the GOP significant sway.
?????The plan from the Republican leadership would commit taxpayer money for
the first time to an electricity problem that has only affected customers of
private utilities. Because the plan is sure to draw strong opposition from
politicians in Los Angeles and other areas served by public power agencies,
Republicans have included a complex, $1.5-billion proposal to provide refunds
to those served by municipal utilities.
?????By blocking the emergency legislation, Republicans may stop state
Treasurer Phil Angelides from securing a $4.13-billion loan to repay state
coffers for electricity purchases--a failure that would reduce the money
available to Davis for his next budget and possibly delay his plan to resolve
the energy crisis. Angelides needs the bill to guarantee repayment for the
loan.
?????If Angelides does not obtain legislative approval by Monday, he will
miss a Tuesday deadline lenders had given him to close the loan. That would
clearly leave Davis with less money for new education, police and
road-building programs as he begins planning his next budget this month.
?????Moreover, failure to pass the bill could delay a record bond issue that
Davis promised would replenish the budget and shield it from further energy
drains by summer. And it could harm sagging confidence on Wall Street that
California can deliver on its plans to manage the energy crisis, Angelides
said.
?????California's credit rating has already been downgraded by one credit
agency, Standard & Poor's, largely because of concerns about the effect of
electricity purchases on state finances.

?????Negotiations Are Continuing
?????"The Republicans appear to be digging in and playing a dangerous game of
financial roulette with the state. This is really ludicrous to me," Angelides
said. "Standard & Poor's has already downgraded us. The other credit rating
agencies are watching. I just don't understand what the Republicans are
thinking."
?????Said Assembly Republican leader Dave Cox (R-Fair Oaks): "We're not
prepared to give the governor a blank check."
?????Democrats threatened Thursday to test the Republicans' resolve by
bringing the bill to a vote in the Assembly, but backed down. Negotiations
among legislative leaders continue.
?????To avoid widespread blackouts, the state government entered the
electricity-buying business in January after the private utilities became too
burdened with debt to continue purchasing power on the expensive wholesale
market.
?????Under a plan approved by the Legislature and signed into law by Davis,
the state budget is to be repaid for the power purchases through a massive
municipal bond issue, expected to be the largest in American history. The
bonds, in turn, are to be paid off by utility ratepayers through a slice of
their monthly bills.
?????However, the plan was based on the premise that the state would quickly
bring down power costs by entering into long-term contracts with suppliers--a
scenario that has yet to materialize.
?????In fact, California's power costs have gone up since January. Lawmakers
initially estimated that $10 billion in bonds would allow the budget to be
repaid and cover future power purchases. Davis is now proposing $12.5 billion
in bonds--and higher electric bills--to finance the state's costs until 2003.
?????Republicans are convinced that it will not be enough. They say the
Angelides bridge loan is not needed because the state has money in various
funds that could cover power purchases well into the fall.
?????They also confess to political considerations. Republican legislators
believe that by allowing Angelides to obtain his loan now, they will be
powerless to oppose further borrowing later. The loan Angelides set up with
J.P. Morgan Chase and several other financial services companies is to be
repaid with the bond issue. If the loan is not repaid by the end of the
summer, the interest rate will rise dramatically, a situation that would make
it hard for the minority Republicans to oppose more bonds.
?????The strong GOP views were shaped in part by Democratic state Controller
Kathleen Connell, who met with Republican legislators earlier this week and
shared a highly critical appraisal of Davis' plan.
?????Connell told the Republicans that the governor's strategy was based on a
series of assumptions about electricity market conditions in California this
summer that, in her view, are highly improbable.
?????"It is almost impossible for all these hypothetical situations
envisioned in their scenario to occur at once," Connell said.
?????But even if all the assumptions came to pass, she predicted that
California would still need to secure another source of financing by next
spring to continue energy purchases. Davis administration officials have
rebutted her claim.
?????"I am deeply troubled by this incremental approach to this financing
that is long-term in nature and is going to burden the state for many years,"
Connell said, in what appeared to be a reference to Davis' reputation as a
plodder.

?????Using Surplus to Pay for Electricity
?????Republicans, who have traditionally been opposed to financing public
programs with large bond issues, contend that Davis needs to reevaluate his
plan. By proposing to essentially forget the $5 billion the state has spent
so far on power, they are advocating using up the state's projected budget
surplus on electricity costs, even if it means cutting new government
programs.
?????"If Gov. Davis continues down this path, he could bankrupt the state,"
said Assemblyman Dennis Mountjoy (R-Monrovia). "That would have a far greater
impact on education."
?????Democrats, who strongly believe that the surplus should be invested in
roads, schools and to meet other long-term future needs, are unlikely to ever
support the idea. Lawmakers are already discussing outflanking the
Republicans by drafting a bill to repay the budget on a nonemergency basis,
which would only require a majority vote.
?????That, however, would probably delay the financing until at least August,
since nonemergency measures do not take effect for 90 days--giving California
only about six weeks to cut the largest municipal bond deal ever before state
coffers begin to empty, according to Angelides.
?????There is another potential consequence: Many of the long-term contracts
the Davis administration has reached to purchase electricity contain clauses
that may make them void if the state does not obtain financing by July.
?????"This is a very dangerous game," Angelides said.
?????In other electricity developments Thursday:
?????* Over Republican objections, Democrats in the state Senate approved and
sent to Davis a far-reaching bill that would put state government in the
business of operating its own power plants and selling electricity at cheaper
rates than private companies. The bill, SB 6x by Senate leader John Burton
(D-San Francisco), would create a state power authority with the ability to
finance, buy, own and build generation plants and sell the energy at
cost-based rates.
?????on likened the proposed government body to the New York Power Authority,
approved by GOP Gov. George Pataki, which brought about a 10% reduction in
rates.
?????The difference from the current situation is that "the people of
California, the ratepayers, would benefit, and not the corporate officers and
not the shareholders" of private energy companies, Burton said.
?????But Republicans attacked the power authority as "more government" that
would impose itself on an enterprise better suited for private operators with
years of expertise.
?????"This is a horrific mistake and one that California ratepayers will be
paying for many years to come," said state Sen. Tom McClintock (R-Thousand
Oaks.)
?????* California Secretary of State Bill Jones, a GOP gubernatorial hopeful,
released his plan to address the electricity crisis, criticizing Davis'
efforts as a state takeover of the power industry.
?????Jones called on the utilities' parent companies to help bail out their
troubled subsidiaries and said creditors should accept lower payments on back
debts. He also called for creation of a state-federal emergency management
plan to deal with any blackouts this summer. Jones made his three-page
proposal in a letter to Vice President Dick Cheney, head of the Bush
administration's energy task force.
---
?????Times staff writers Carl Ingram in Sacramento and Mark Z. Barabak in Los
Angeles contributed to this story.

Copyright 2001 Los Angeles Times

Secretary of Energy, Davis Meet on U.S. Plan to Boost Conservation
Crisis: Federal buildings and military bases, accounting for 1.5% of state's
usage, will cut back.

By RICHARD SIMON and DAN MORAIN, Times Staff Writers

?????SACRAMENTO--In a visit meant to underscore the Bush administration's
heightened concern about the California electricity crisis, Secretary of
Energy Spencer Abraham met Thursday with Gov. Gray Davis in Sacramento to
discuss federal energy conservation plans.
?????"I think we have an approach that can result in significant savings,"
Abraham told Davis. The energy secretary said he was in California "to gauge
what we can do to add to what California is already doing."
?????The trip came after President Bush revealed plans for a series of
conservation measures for federal buildings and military bases nationwide.
Those facilities in California account for 1.5% of the state's total energy
use. Today, Abraham is scheduled to meet with federal officials in San
Francisco to work out details of the nationwide program for more than 500,000
federal buildings.
?????After meeting with Abraham at the White House earlier Thursday, Bush
said: "We're worried about blackouts that may occur this summer, and we want
to be a part of any solutions. This administration is deeply concerned about
California and its citizens."
?????Defending his response to the California crisis, Bush said, "As I said
from the very beginning of my administration, we'll work to help California
in any way we can."
?????Also Thursday, Davis met with alternative energy producers in an attempt
to persuade them to continue operations, despite being owed more than $1
billion by California's private utilities.
?????Alternative energy producers, including oil companies that generate
electricity as a byproduct of their operations, account for about 27% of the
electricity consumed in California. Several have stopped producing after the
utilities could no long afford to pay soaring prices for their power.
?????Davis assigned S. David Freeman and former Assemblyman Richard Katz, a
Davis appointee to a state water board, to be in charge of negotiations.
Davis said he hoped that the talks could be completed within a week.
?????And in a sign that major energy companies may get more involved in the
California crisis, Kenneth Lay, CEO of the Houston-based energy giant Enron
Corp., met Thursday with Davis, Assembly Speaker Bob Hertzberg (D-Sherman
Oaks) and Senate President Pro Tem John Burton (D-San Francisco).
?????Meanwhile, Bush on Thursday directed federal agencies to "take
appropriate actions to conserve energy use at their facilities."
?????In California, such measures could include setting thermostats to 78
degrees, lowering lighting and turning off escalators during Stage 2 and
Stage 3 power emergencies, administration officials said. Those occur when
the state's electricity reserves fall below 5% and 1.5%, respectively, and
can trigger interruptions in service.
?????Bush did not set an energy-saving target. But the Defense Department,
one of the state's single largest energy consumers--using about 1% of peak
demand--pledged to reduce peak use by 10% this summer and an additional 5% by
summer 2002. That would make available 200 megawatts, officials said, enough
to provide electricity to about 150,000 homes during the summer.
?????The federal government accounts for about 1.5% of total energy use
across the country, making it one of the nation's largest energy consumers,
according to the Energy Department.
?????Bush also offered to make available to the state power-generating units
owned by the federal government.
?????But his efforts failed to mollify Democratic critics, who renewed calls
for the administration to impose price controls on wholesale electricity.
?????"The generating companies are gouging California consumers while the
president turns his back on us," Sen. Barbara Boxer (D-Calif.) said in a
statement.
?????Rep. Sam Farr (D-Carmel), leader of the California Democratic
congressional delegation, sent a letter to Vice President Dick Cheney
protesting Democrats' exclusion from Cheney's meeting this week with
California GOP lawmakers.
?????"As we head into the high summer demand months, it is unfortunate that
you have decided to keep Democrats in the dark about the administration's
plans to deal with the crisis," Farr said.
?????Bush's conservation initiative comes after Cheney, who is heading a task
force on national energy policy, was assailed by some critics for emphasizing
production over conservation.
?????"Conservation has got to be an integral part of making sure we've got a
reasonable energy policy," Bush said Thursday. "But what the vice president
was saying is we can't conserve our way to energy independence, nor can we
conserve our way to having enough energy available. We've got to do both. We
must conserve, but we've also got to find new sources of energy."
?????David M. Nemtzow, president of the Alliance to Save Energy, called the
directive an "emergency answer to a long-term problem."
?????"We need to fix the underlying problem by investing in energy-efficient
lighting, cooling and controls," he said. "We hope that this crisis will
encourage the president to increase the budget for energy management rather
than cut it by 48% as previously proposed."
?????Political analysts said the effort was driven by concerns for not only
electrons but also elections.
?????"It's all about political conservation," said Marshall Wittmann, senior
fellow at the conservative Hudson Institute.
?????Thomas E. Mann, senior fellow at the nonpartisan Brookings Institution,
agreed: "The administration has come to the view that just because they can't
win California in a presidential election doesn't mean the Republican Party
can afford to kiss off the largest state in the Union."
?????Analysts speculated that the administration came under pressure from
California Republicans in Congress who worried about perceptions that the
White House was not being aggressive enough in responding to the crisis.
?????As federal officials search for ways that California can avoid blackouts
this summer, a Woodland Hills-based advocacy group, More Power to You, has
suggested that the Navy hook its nuclear-powered ships to the state power
grid to provide energy while in port.
?????The Navy has nuclear-powered aircraft carriers and submarines in San
Diego and Washington state.
?????But Navy officials said it is not technologically feasible to use the
nuclear reactors aboard the ships to provide power for the grid because most
of that power goes directly to the propulsion systems.
?????Even to "capture" power not used for propulsion would require extensive
construction on shore and retrofitting aboard ship, officials said. Also,
using ships to provide onshore power could disrupt training and deployment
schedules, they said.
---
?????Times staff writer Tony Perry contributed to this report.

Copyright 2001 Los Angeles Times

PG&E Seeks Relief From High-Priced Power Purchases
Bankruptcy: Utility asks judge to order grid operator to stop buying
electricity on its behalf at prices beyond its means.

By TIM REITERMAN, Times Staff Writer

?????SAN FRANCISCO--Pacific Gas & Electric Co. asked a federal bankruptcy
judge Thursday to order the state's power grid operator to stop buying
electricity for its customers on the sky-high spot market, unless the utility
can recover the full cost.
?????The move represents PG&E's latest attempt in Bankruptcy Court to get
relief from actions that the company says are driving it deeper into debt.
?????PG&E asked Judge Dennis Montali to enjoin the California Independent
System Operator from making the company pay the costs of power purchased on
the utility's behalf. The company said it recently received a $1-billion bill
for such purchases in January and February.
?????"By purchasing wholesale power at a cost higher than the retail rates
and sending us the bill, [Cal-ISO] . . . could be reducing the value of our
assets by hundreds of millions of dollars a month," said PG&E spokesman Ron
Low.
?????In its motion, the company argued that Cal-ISO is violating bankruptcy
law by requiring the utility to pay more for power than it can collect from
state-regulated rates frozen under California's deregulation plan. PG&E said
Cal-ISO's actions would force the utility to seek credit on onerous terms.
?????The motion also contended Cal-ISO is violating an April 6 order by the
Federal Energy Regulatory Commission that said the grid operator could only
buy power on behalf of credit-worthy entities.
?????That same day, PG&E sought Chapter 11 protection from creditors, saying
it was $9 billion in debt. It later filed a motion seeking to halt an
accounting change ordered by the California Public Utilities Commission,
which the company says is prolonging the rate freeze and preventing it from
recouping the cost of power.
?????Elena Schmid, Cal-ISO's vice president of corporate and strategic
development, said she has not seen the motion and could not fully comment.
?????But she said Cal-ISO has been discussing billings with PG&E in hopes of
determining which payments fall within the FERC ruling and which are subject
to the bankruptcy case.
?????"We will live by the FERC ruling and whatever constraints the Bankruptcy
Court places on us," Schmid said. "We have indicated to them (PG&E) that we
are sending the bill . . . and they should treat it as information, until we
can work it through."
?????PG&E listed Cal-ISO as one of its biggest creditors, with $1.1 million
owed for power purchased from third parties.

Copyright 2001 Los Angeles Times

SDG&E Blackout Plan Would Pay Firms to Use Generators
Utilities: Program in which large customers produce their own power is
forecast to cut demand by as much as 50 megawatts, save $1.6 billion.

By NANCY RIVERA BROOKS, Times Staff Writer

?????San Diego Gas & Electric unveiled a novel plan Thursday to pay customers
to fire up their backup generators when blackouts threaten.
?????The utility said the program could cut demand on the power grid by 50
megawatts--enough to serve about 37,500 homes--allowing it to avoid or
minimize blackouts this summer in San Diego and southern Orange County.
?????"California needs an infusion of new power supplies, but in the interim,
we hope this unique program will help shield San Diego from some of the
devastating effects of rolling blackouts this summer, including the increased
risks to public safety and health," SDG&E President Debra L. Reed said.
?????The Rolling Blackout Reduction Program, as the Sempra Energy subsidiary
has dubbed it, would cost $15 million to implement but could save the region
as much as $1.6 billion in lost revenue, reduced productivity and property
damage, the utility has estimated.
?????Energy experts are forecasting a dark summer for California, with
blackout totals ranging between 20 hours and 1,100 hours. The California
Independent System Operator, which runs the electricity transmission grid for
most of the state, has said residents face 34 days of rotating outages if
they use the same amount of electricity this summer as they did last summer.
?????The state and utilities have been working feverishly to develop programs
that will reduce electricity use this summer.
?????SDG&E, Edison International's Southern California Edison and PG&E
Corp.'s Pacific Gas & Electric have programs that grant large customers lower
electricity rates in exchange for cutting electricity use when Cal-ISO
declares a Stage 2 emergency as power reserves dip below 5%. But
participation in those programs has dropped sharply because of repeated power
interruptions.
?????SDG&E's "interruptible" program represents 49 megawatts of demand, half
of what it was in October, spokesman Ed Van Herik said.
?????The new SDG&E program, which must be approved by the California Public
Utilities Commission, would kick in whenever Cal-ISO declares a Stage 3
emergency, indicating that power reserves are down to 1.5% of demand and that
rolling blackouts are imminent.
?????SDG&E hopes to sign up 50 megawatts of backup generation, representing
about 40 large commercial and industrial customers, but believes customers
capable of generating a total of 200 megawatts may be eligible for the
program, Van Herik said.
?????"We found a lot of customers are interested in this program," he said.
"This is an opportunity for San Diego to become involved."
?????During a Stage 3 order, program participants would be asked to start
their backup generators and then reduce the electricity they receive from
SDG&E by the same amount.
?????Participants would be paid a monthly fee of $7 per kilowatt of
generation capacity. On top of that, they would receive 35 cents for every
kilowatt-hour of power they generate for their own use. That price is about
what power plant owners have been commanding in California's pricey
electricity market.
?????"We think the fees we are proposing are fair," Van Herik said. "These
aren't people who are in the generation business, and undoubtedly there will
be wear and tear on equipment and increased personnel and fuel costs."
?????The program, which SDG&E wants to implement by June 1, would operate in
compliance with air pollution regulations, the utility said.

Copyright 2001 Los Angeles Times

Been there, done that
Bay Area finds little new in Bush's ideas
Joe Garofoli, Bob Egelko, Matthew Yi, Chronicle Staff Writers
Friday, May 4, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/04/MN236123.DTL

Californians who have been sweating for months to cut their home energy usage
20 percent didn't blink yesterday at President Bush's suggestion that federal
offices conserve half that much.
Sure, some might nod off at their desks this summer, when thermostats at
federal buildings will be set at 78 degrees during power shortages. And some
will get an aerobic workout, when the escalators at those same buildings are
turned off.
But civilians and federal employees alike yawned at yesterday's conservation
suggestions such as "unplug unused coffee pots" after doing everything short
of burning their shoelaces for wattage during the past few months.
Conservation tips are so December to any Californian worth his baseline.
"I don't think it's frustrating to (us) because most people know what's going
on, that we're in an energy crisis," said Ansara Johnson, 40, revenue officer
at the Internal Revenue Service in Oakland.
The Bush administration may be setting the pace in the moving-stair
department, however. BART, whose escalators don't run so great in the best of
times, said yesterday it is looking at operating escalators with an automatic
stop-start system to save power this summer. The escalators would be dormant
until passengers activated them.
"It is kind of ironic, considering we just spent $20 million to fix the
escalators," BART spokesman Ron Rodriguez said.
Just don't turn them off during peak hours, Ingrid Severson pleaded while
pulling her massage chair onto an escalator at the 12th Street BART station
in downtown Oakland.
"That would suck," said the 23-year-old massage therapist. "There are certain
things that shouldn't be sacrificed."
San Francisco International Airport already is turning off escalators during
down times, though the long, long moving sidewalks are going to keep going no
matter what, spokesman Ron Wilson said.
Those with customers to serve, however, embraced the Bush energy plan as
warmly as a meter-reader.
While federal employees will be working up a sweat this summer hiking up
stairs to work, shoppers at Concord's Sunvalley Mall will be coolly cruising
down the moving stairs to Victoria's Secret.
"We have no plans to shut down our escalators," said Sunvalley general
manager Tom McCracken. "How else would people get from floor to floor?"
FASHION VICTIMS
The new guidelines could have an unintended effect. They may provoke a
fashion revolution among federal employees, not a group traditionally known
for its couture choices.
It's not their fault. There's only so much you can do with postal blue or
judicial black. But with Bush's directive that thermostats be set at 78
degrees, many employees said, something has to change. Like their wardrobes.
Start with the long-suffering post office sales associates -- the clerks
behind the counter -- whom government regulations have shackled in long wool-
blend pants.
"I still have not heard a clear-cut reason why we're not allowed to wear
shorts and the mail carriers are," said Steve Wellington, a postal sales
associate in Concord. The former postal union leader said the
shorts-vs.-pants debate has been a hot one for a long time.
"Look at these pants," Wellington said, offering a visitor a touch of his
trousers. "These get real warm in the summer."
While postal officials were happy to point out that their San Francisco
offices have used 17 percent less electricity than last year, they wouldn't
touch the shorts issue. "I don't think we need to comment on that," said
Horace Hinshaw, a spokesman for the U.S. Postal Service.
JUDGES GET EXEMPTION
Then there are judges. Attorneys and court employees said the bench needs to
take the lead in the casual attire revolution. Ditch those heavy black robes
in favor of, say, a black polo shirt.
"Black really magnifies the heat," said Napa attorney Paul Carey. "They
should allow judges to wear lighter colors, like yellow or chartreuse. If the
judges would allow it, every attorney I know would love to wear a T-shirt,
shorts and sandals into court."
However, there was one indication that judges may be thermostat-exempt, at
least at the Phillip Burton Federal Building, a 20-story tower at 450 Golden
Gate Ave. in San Francisco that houses federal courts and numerous agencies.
A contractor who was working yesterday to install new thermostat controls in
the building said two areas were excluded: computer rooms, to protect the
equipment, and courtrooms.
"That was the mandate," said Erik Ahrens, vice president of Syserco, which
has a contract for heating and vent control. "Courtrooms are on separate
units. "
At the Ronald V. Dellums Federal Building in downtown Oakland, lights already
have been dimmed in hallways, and workers have been encouraged to turn off
unneeded lights and computers since early this year. Cynthia Mackey, 38, a
revenue officer for the Internal Revenue Service, wasn't happy to hear the
thermostat would be going up.
"Oh, no. I guess I'll just work at home," where Mackey said the thermostat is
set at 68 degrees. "If it's set at 78, and with all the employees and all the
computers, it would be hot."
Then it will be time to change -- habits and clothes.
E-mail the reporters at jgarofoli@sfchronicle.com, begelko@sfchronicle.com or
myi@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Bush calls power supply the solution
He says conservation useful but secondary
Marc Sandalow, Washington Bureau Chief
Friday, May 4, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/04/MN234937.DTL
Even as he ordered a new conservation effort in California, President Bush
insisted yesterday that finding new sources of energy -- not cutting back on
consumption -- is the long-term answer to the nation's energy woes.
"You cannot conserve your way to energy independence," Bush said. "We can do
a better job in conservation, but we darn sure have to do a better job of
finding more supply."
Bush's comments, his most extensive to date on California's energy crisis,
called on all federal managers to conserve energy "to the maximum extent
consistent with the effective discharge of public responsibilities."
As part of that effort, the Defense Department -- one of California's largest
consumers of energy -- announced plans to curtail electrical use by at least
10 percent by this summer.
"This administration is deeply concerned about California and its citizens, "
Bush said after a meeting with his top energy advisers. "We're worried about
blackouts that may occur this summer, and we want to be a part of any
solution. "
While touting the value of conservation, Bush repeatedly identified the
limits to that approach. In response to questions from reporters, Bush made
clear that he would not be confused with former President Jimmy Carter, who
donned a cardigan sweater and preached the virtues of conservation two
decades ago.
"It is naive for the American people and its leaders . . . to say that we can
be OK from an energy perspective by only focusing on conservation," Bush
said. "We've got to find additional supplies of energy."
Bush has called for oil drilling in Alaska, as well as exploratory drilling
in other parts of the West. Members of his administration also have touted
the expanded use of coal and have floated the idea of building new nuclear
power plants.
SUPPLY-SIDE PLAN
There have been repeated signals that the comprehensive energy plan being
developed by a White House task force -- which is expected to be released in
two weeks -- will focus less on conservation than on boosting energy
supplies.
Energy Secretary Spencer Abraham, speaking to reporters after meeting with
the president, said conservation plays an important role in helping
California through its immediate crisis. Yet developing new sources of energy
is important to prevent the rest of the nation from experiencing California's
shortages.
"We have a crisis and an emergency this summer (in California) that will
result in 30 to 35 days of blackouts," Abraham said from the White House
driveway. "We don't have the time between now and those occasions to develop
new (energy) sources sufficient to meet the challenge."
By the middle of the month, the White House will release "a national energy
plan that will be more comprehensive and more far reaching, that will offer a
new vision that addresses Americans long-term supply security," Abraham said.
MEETING WITH DAVIS
The energy secretary traveled to Sacramento last night where he planned to
meet with Gov. Gray Davis and other state officials. He is scheduled to hold
a public conservation event this morning in San Francisco and to discuss with
federal officials how they can reduce energy consumption.
An action plan distributed by the Department of Energy calls for federal
workers across the country to develop conservation plans within the next 30
days.
In addition, it calls for specific actions during Stage 2 or Stage 3 power
emergencies, when supplies are within 5 percent of demand. Some experts warn
that California will be in such a state for much of the summer.
Among the steps called for in an energy emergency are setting thermostats in
federal buildings no lower than 78 degrees, turning off escalators and
hallway lights, and unplugging coffee pots, computers and any nonessential
appliances.
The plan suggests that employees be notified when temperatures might be warm,
so they can wear more casual clothing to make the heat more bearable.
Meanwhile, the Pentagon announced it will reduce its consumption during peak
demand hours by 10 percent, and perhaps by as much as 15 percent by next
summer. It will also hook up wind generation facilities at Edwards Air Force
Base.
Paul Wolfowitz, deputy secretary of defense, said the steps will save the
state's power grid about 200 megawatts of power, enough electricity for 200,
000 homes.
Energy officials have explored many options, including the use of nuclear
submarines to provide energy during shortages and firing up the generators on
the Navy's mothball fleet in Suisun Bay, near Benicia. Both ideas have been
rejected as unfeasible, energy officials said.
Democrats cheered Bush's call for conservation, though several said it did
not go far enough.
IRONIC PRAISE
"I am very happy the president and Secretary Abraham recognized that
conservation matters," said Richard Sklar, Gov. Davis' top energy adviser.
"We thank the president for catching up with the train."
Republican governors meeting in San Jose suggested that Davis could do more
on his own and in concert with other Western states to help California ease
its energy crunch.
It's time, Montana Gov. Judy Martz argued, that California "met its
responsibility to build an adequate power supply and stop looking to
Washington for a bailout."
Others, however, called on Bush to go further and impose price caps on
wholesale electricity prices to guarantee a steady flow of electricity and
keep prices down for consumers.
Chronicle staff writers Lynda Gledhill and Bill Workman contributed to this
report. / E-mail Marc Sandalow at msandalow@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

SDG&E unveils plan to contend with rolling blackouts

Friday, May 4, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/04/state0
957EDT0155.DTL&type=news
(05-04) 06:57 PDT SAN DIEGO (AP) -- San Diego Gas & Electric has unveiled a
plan that would pay customers who fire up their emergency generators when
rolling blackouts loom.
The utility is seeking approval from the state Public Utilities Commission to
place about 40 companies under contract to generate a total of 50 megawatts
during statewide power alerts. The backup power would be enough to serve
about 37,500 homes.
``These businesses would actually be sharing their backup generation with the
San Diego region,'' Debra Reed, president of SDG&E, said Thursday.
The Rolling Blackout Reduction Program would cost the utility an estimated
$15 million to implement, but could save the regions as much as $1.6 billion
in lost revenue, property damage and reduced productivity caused by
blackouts, utility officials said.
The California Independent System Operator, which manages the transmission
grid for most of the state, has estimated that residents face up to 200 hours
of blackouts over 30 to 35 days this summer due to high demand and
insufficient energy supplies.
The use of emergency generators will lead to more air pollution, but Reed
said the ``social benefit'' of the trade-off would be worth it, because
residents and businesses would not have to deal with the safety risks and
hazards of blackouts.
SDG&E officials want the Public Utilities Commission to act on its request
within a week and hope to have the program in effect by June 1.
The program would go into effect whenever Cal-ISO declares a Stage 3
emergency, which indicates that power reserves are down to 1.5 percent and
rolling blackouts are imminent. Program participants would be asked to start
their emergency generators and then reduce the electricity they receive from
SDG&E by the same amount.
Participants would be paid a monthly fee of $7 per kilowatt of generation
capacity, plus receive an additional 35 cents for every kilowatt-hour of
power generated for their own use.
``We think the fees we are proposing are fair,'' said SDG&E spokesman Ed Van
Herik. ``These aren't people who are in the generation business, and
undoubtedly there will be wear and tear on equipment and increased personnel
and fuel costs.''
,2001 Associated Press ?

California crisis brings new talk of energy conservation.
DEB RIECHMANN, Associated Press Writer
Friday, May 4, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/04/state0
945EDT0153.DTL&type=news
(05-04) 06:45 PDT WASHINGTON (AP) -- In the 1970s, energy conservation was
Jimmy Carter in a cardigan telling people to bundle up and turn down the
heat. Today, it's about using energy-efficient fluorescent bulbs,
computerized thermostats and motion sensors.
To many Americans, California's energy crisis is a problem isolated on the
West Coast. Yet it has resurrected interest in conservation that hasn't been
heard since gas lines and the OPEC oil embargo more than two decades ago.
President Bush on Thursday ordered federal agencies to cut power use in
California where rolling blackouts have catapulted the debate over future
energy supplies to the top of the national agenda.
Bush's conservation message came just days after Vice President Dick Cheney,
who claims the whole nation could face blackouts like those in California
unless it finds more oil, natural gas and coal, said America cannot ``simply
conserve or ration our way out of the situation we're in.''
Environmentalists maintain the Bush administration is using California's
electricity crisis -- largely due to a failed attempt at electricity
deregulation -- to push through a broader energy plan to drill for oil and
natural gas in now off-limits areas of Alaska and the West. Hardly any power
plants run on oil, they note.
And energy-conservation groups say if everybody made better use of the energy
already being generated, America would not need many of the 1,300-plus power
plants that Bush and Cheney say demand will require over the next 20 years.
Nobody will have to sit in the dark, they say, if it were made easier for
Americans to use less energy through more fuel efficient light bulbs, motors,
automobiles, office buildings and homes.
``In today's world we are not asking people to not use their (air
conditioning) -- that is not today's message of conservation,'' said Rozanne
Weissman, a spokeswoman for the Alliance to Save Energy, a Washington-based
nonprofit group. ``What we need to do is look at using our energy more
efficiently and using today's technologies to help do it for us.''
According to the alliance:
--If each household in the United States replaced four regular 100-watt bulbs
with energy-efficient compact fluorescent bulbs, the output of 30
medium-sized power plants (each with a 300-megawatt capacity) would not be
needed.
--If the Bush administration's new efficiency standards for air conditioners
and heat pumps improved energy use by 30 percent instead of 20 percent, the
output of 138 of these power plants would not been needed during peak use
times.
Americans could even unplug idle appliances -- TVs, VCRs, cable boxes, CD
players and microwaves -- when they go out of town. Some of these appliances
continue to consume energy when switched off. The power keeps display clocks
lighted and memory chips and remote controls working. The alliance says these
electric leaks cost consumers more than $3 billion a year.
Conservation does help, according to Alexandra von Meier, director of the
Environmental Technology Center at Sonoma State University in California. She
told a House energy subcommittee on Thursday that residential and commercial
buildings use about 35 percent of the energy -- electricity and fuels -- in
the United States.
``This amount of energy can be cut in half, if not more, by implementing the
things we already know about how to make buildings more energy efficient and,
at the same time, more comfortable,'' she said, explaining how Venetian
blinds hung on the outside of the technology center keeps the glass from
transferring heat.
Howard Geller, former executive director of the American Council for an
Energy Efficient Economy, told the committee about an Energy Department study
in November 2000 that said increasing energy efficiency throughout the
economy could cut national energy use by at least 10 percent by 2010 and by
20 percent in 2020.
``Even though the United States is much more energy-efficient today than it
was 25 years ago, there is still enormous potential for additional
cost-effective energy savings,'' said Geller.
Associated Press reporter H. Josef Hebert contributed to this report.
,2001 Associated Press ?

Developments in California's energy crisis
The Associated Press
Friday, May 4, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/04/state0
410EDT0127.DTL&type=news
, , -- (05-04) 01:10 PDT Developments in California's energy crisis:
FRIDAY:< ?--No power stage alerts are reported as of early Friday morning. ?THURSDAY:<
-- Gov. Gray Davis meets with representatives of the qualifying facilities in
Sacramento to discuss their concerns and the possibility of getting their
plants online during all peak periods.
-- The state Senate sends a bill to the governor that would create a state
public power authority. Supporters say the bill will ease the energy crisis
by allowing the state to build and buy power plants that could provide
cheaper wholesale electricity.
-- State Treasurer Phil Angelides says Assembly Republicans are ``holding
their own state hostage'' by not approving a bill to authorize up to $12.5
billion in bonds for power purchases. Republicans put their own plan forward
Wednesday, saying they'd rather use $5 billion of the state's surplus and
finance less.
-- Energy Secretary Spencer Abraham travels to the Capitol to discuss the
state's power woes with Davis. Abraham meets with state Republican leaders in
San Francisco following the meeting with the governor.
-- The new special counsel to the Senate Select Committee to Investigate
Price Manipulation of the Wholesale Energy Market says ``it is likely there
was some criminal activity'' in driving up electricity prices. Laurence
Drivon, a private plaintiff's attorney from Stockton, will work for the
committee for free, spending about four days a week on the job initially. His
review of thousands of power-related documents leads him to believe there was
criminal collusion; he would not elaborate.
-- The San Joaquin County District Attorney is joining the Senate Select
Committee in its power investigation. Supervising Deputy District Attorney
Franklin Stephenson says three experienced investigators will help the
committee decide if there was illegal price-fixing, antitrust violations, or
theft of public funds by public or private electric generators.
-- Pacific Gas and Electric Co. asks a federal bankruptcy judge to stop the
state's power grid manager from charging the utility for expensive,
last-minute electricity. PG&E has applied for bankruptcy protection and says
that the ISO's bills ``could be reducing the value of the company's assets by
potentially hundreds of millions of dollars per month.''
-- Secretary of State Bill Jones, a Republican candidate for governor,
proposes a utility rescue plan that would take the state out of the
electricity business. The plan calls for utility creditors to accept
less-than-full payments; more cash flow from the utilities' parent companies;
and low-interest state loans to help the utilities pay off their debts.
-- The California Association of Health Care Facilities says it expects the
state Public Utilities Commission to exempt nursing homes from blackouts. The
group says many nursing home residents depend on electric life support
machines. A PUC decision is expected by May 14.
-- The California Immigrant Welfare Collaborative said they are worried that
state's power purchases could threaten two assistance programs that pay for
food stamps and cash benefits. The programs, which help recent immigrants,
expire Sept. 30 unless they get renewed during budget negotiations.
-- The state auditor will look into the California Energy Commission's
process for siting new power plants and allowing defunct plants to return to
service. The audit was requested by Assemblyman Jay La Suer, R-La Mesa, and
is expected in August.
-- Edison International stock closes at $9.28, down 9 cents. PG&E Corp.
dropped 10 cents to close at $8.86.
-- The state remains free of power alerts as electricity reserves stay above
7 percent.
WHAT'S NEXT:<
-- The governor meets Wednesday with the CEOs of several major energy
suppliers to discuss the money their owed by the state's two largest
utilities, the state's creditworthiness and how wholesalers can help the
state during the energy crisis. Davis says he won't be discussing any of the
investigations into price manipulation in the wholesale market.
-- Davis' representatives continue negotiating with Sempra, the parent
company of San Diego Gas and Electric Co., to buy the utility's transmission
lines.
THE PROBLEM:<
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices the state's electricity deregulation law bars them from
passing on to consumers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers. The state is also buying power for a third investor-owned
utility, San Diego Gas & Electric, which is in better financial shape than
much larger Edison and PG&E but also struggling with high wholesale power
costs.
The Public Utilities Commission has raised rates as much as 46 percent to
help finance the state's multibillion-dollar power buys.
,2001 Associated Press ?

Energy at a glance

Friday, May 4, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/04/M
N225908.DTL&type=news
In other energy-related developments yesterday:
STATE POWER AUTHORITY
On a partisan vote, the Legislature sent Gov. Davis a bill creating a state
public power authority that can sell as much as $5 billion in bonds to build
or buy power plants, beef up conservation and renewable energy programs and
retrofit older plants to make them less polluting. Davis is expected to sign
the bill by state Senate President Pro Tem John Burton, D-San Francisco, next
week.
STATE SENATE INVESTIGATION
A special Senate committee investigating allegations of antitrust violations
and price-fixing by electricity generators announced that Larry Drivon, a
Stockton trial lawyer, would serve as the committee's general counsel. Drivon
said that from documents he has seen, there is "some indication there very
well may have been criminal aspects to this."
PG&E COMPLAINTS
PG&E, usually the target of complaints about electricity bills, made its own
gripe about high bills to a federal bankruptcy judge yesterday. PG&E said the
California Independent System Operator, which manages the state's power grid,
charged the utility nearly $1 billion for power that the ISO bought above
retail prices in January and February and reduced the assets available in
bankruptcy. The company asked the judge to tell the ISO to back off. ISO
spokeswoman Lorie O'Donnelly said her agency has stopped buying power for
PG&E -- a task now handled by the state -- and will await the outcome of the
bankruptcy proceedings to see how much of its bill it can collect.
ALTERNATIVE ENERGY
Gov. Davis met with producers of alternative energy, such as solar panels and
wind farms, a third of whom have shuttered their operations because the
utilities they have contracts with have paid them pennies on the dollar since
November. The generators going offline have contributed to recent rolling
blackouts. Davis said the meeting's purpose was to resolve any remaining
disputes between the energy producers and the utilities so more electricity
can be produced this summer. The participants said they made progress and
agreed to meet again next week.
,2001 San Francisco Chronicle ? Page?A - 17

Ships would help during blackouts
Ready reserve fleet has power to provide
Carl Nolte, Chronicle Staff Writer
Friday, May 4, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/04/M
N182291.DTL&type=news

San Francisco -- A fleet of 13 gray government cargo ships tied up on the San
Francisco waterfront and at Alameda is ready and able to provide emergency
electric power if rolling blackouts hit this summer.
"We'd be more than willing to help," said Capt. Frank Johnston, Western
region administrator for the U.S. Maritime Administration, which manages the
ships. The vessels are part of the country's ready reserve fleet, have crews
aboard 24 hours a day and are prepared to sail anywhere in the world on five
days' notice.
The offer comes a day after the Bush administration suggested using ships in
the so-called mothball fleet in Suisun Bay near Benicia to provide power.
However, the officer in charge of the old ships there said yesterday he
thought his vessels could not make much of a contribution.
"Nobody has contacted us about that," said Joseph Pecoraro, superintendent of
the reserve fleet.
Unlike the ready reserve ships, the mothball vessels are neither modern nor
set to sail anytime soon.
Pecoraro said the equipment on most of the ships has not been used in years.
To use them to supply civilian power, he said, "is not real simple."
"It's feasible," he said, but probably not practical.
On the other hand, using the ready reserve ships also has some drawbacks --
crewing the ships, paying for fuel, and more seriously, the amount of
pollution produced by running the ship's diesel generators.
Johnston said the ships meet Environmental Protection Agency standards, but
some environmental activists have grave misgivings. "Nothing could be a
bigger disaster for air quality," said Russell Long, executive director of
the Bluewater Network in San Francisco, which has been highly critical of air
pollution caused by marine engines. "These are very highly polluting engines.
They produce a hundred times more pollution per kilowatt hour than modern
generators," he said.
Long says EPA standards for ships "are pathetic."
"Ships are the worst polluters on the planet."
Several of the ready reserve ships are in highly visible berths in San
Francisco. One of them, the cargo ship Cape Henry, is at Pier 27 at the foot
of Telegraph Hill, and another, the Cape Orlando, is at Pier 50, on the
southern waterfront, not far from Pacific Bell Park. The ship is visible from
the stands and is a kind of floating backdrop to the right-field wall.
Nine of the ships are tied up at the former Alameda Naval Air Station, but
any or all of them could be easily moved.
The ships have civilian crews, but are often confused with Navy ships because
they are painted battleship gray. They are intended for use in time of
international crisis or other incident.
All of them have the capacity to generate electricity. Johnston said he was
not sure exactly how much power his ships could supply, but it would be
enough for emergency services.
"We could supply fire stations, or police stations, or hospitals, or the 911
network," he said. "There are all kinds of possibilities and we are more than
willing to consider any proposal," Johnston said.
"It is better to plan now than to wait until the power goes out and then work
by flashlight," he said.
Johnston said he did not have the authority to conclude an agreement with
local officials himself, but he would be glad "to run a plan up the flagpole
in Washington."
Power from ships has been used in the past in emergency situations. Many
years ago, said Capt. Patrick Moloney, executive director of the California
Pilot Commission, power from the aircraft carrier Saratoga was used to supply
the city of Tacoma, Wa., during an emergency.
However, he said, because of the complexity of connecting ship's power with
the civilian grid, such applications are rare. "It is a nice idea," he said,
"but ships are not configured for it."
E-mail Carl Nolte at cnolte@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 19

PG&E chairman wants to keep power lines
David Lazarus, Chronicle Staff Writer
Friday, May 4, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/04/B
U162707.DTL&type=news
Pacific Gas and Electric Co. may be more amenable to selling off its dams
rather than its power lines if required to part with assets as part of the
utility's bankruptcy proceedings, PG&E Chairman Robert Glynn said yesterday.
In a meeting with Chronicle editors and writers, Glynn stressed that he still
hopes to get through the bankruptcy process without selling any of PG&E's
resources to pay off creditors.
"But if there is an asset to be sold, it's not clear that the power lines is
it," he said. "Our hydro assets actually have a higher value."
Glynn's comments may signal challenges down the road for Gov. Gray Davis'
efforts to acquire the transmission systems of all three of California's
investor-owned utilities.
Southern California Edison already has agreed to sell its lines to the state
for $2.7 billion. A similar accord is expected to be reached with San Diego
Gas & Electric.
However, critics have said Davis would be purchasing a white elephant if he
manages to buy only about a third of the statewide electricity grid. Without
PG&E's lines, the Edison and San Diego systems would be of lesser value.
Glynn noted that he had tentatively agreed to sell off PG&E's power lines for
an undisclosed sum before the utility's negotiations with the state collapsed
in March.
"But I've said pretty clearly that I don't want to sell off any part of our
business," he said.
Glynn defended his decision to file for bankruptcy by saying it was the most
efficient way to restore cash-strapped PG&E to credit-worthiness. The utility
has racked up about $9 billion in debt because of runaway wholesale power
prices.
"The company's got to be able to pay its bills," Glynn said. "We expect to
pay all of our valid debts."
He said PG&E will submit a proposed reorganization plan to the bankruptcy
court in San Francisco by early August. That plan may include aspects of the
bailout accord reached between Davis and Edison.
"If an element of it makes sense for us, we would be comfortable including
it," Glynn said.
He said it appears likely that an average 40 percent rate increase already
approved by state regulators will cover current energy purchases and that no
further rate hikes may be required.
Under this plan, the current average monthly PG&E electricity bill of $60
will rise by about $18.
However, Glynn said the need for higher power bills will not be clear until
the Public Utilities Commission decides how it will divide existing rates
between PG&E and the state Department of Water Resources, which is spending
about $50 million a day to keep California's lights on.
"If the state wants to take all the money, then a solution does not exist,"
he said.
Glynn said that despite recent progress in getting Californians to conserve
energy, he believes the only way the state will solve its long-term power
woes will be to build more generating facilities.
"It is my personal belief that it's not possible to conserve our way back to
a stable supply-and-demand balance," he said. "We've got to get back to the
point where we have enough supply to meet demand every day of the year."
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?B - 1

Bush shifts policy on conservation after meeting with GOP
Posted at 10:06 p.m. PDT Thursday, May 3, 2001
BY JIM PUZZANGHERA

Mercury News Washington Bureau

WASHINGTON -- On Monday, Vice President Dick Cheney used a major speech to
largely dismiss energy conservation as an outdated notion from the 1970s. On
Thursday, President George W. Bush announced a major initiative to force
federal facilities in California and nationwide to conserve energy to try to
avoid blackouts.
What happened in those three days?
The impetus for the shift appears to have been a one-hour meeting Tuesday
between Cheney and 18 Republican members of Congress from California on
Capitol Hill.
An energy conservation plan for federal agencies was brought up by
congressional Republicans, according to two participants. And the political
ramifications on the party of appearing to do nothing to ease the crisis were
discussed . No Democrats were invited, even though they outnumber Republicans
in the state's congressional delegation 32 to 20 and the meeting was supposed
to look at federal help for the California crisis.
Some California Republicans have been griping that the White House has not
been showing enough concern for the state as it continues to struggle through
its energy crisis. Bush, who lost California by 1.3 million votes in
November, and top members of his administration have consistently stressed
that the crisis is largely California's to solve.
``I think there was a need for the administration to begin to weigh in on
this thing especially because there's been so much finger-pointing. Democrats
have been trying to divert the real blame away from'' Gov. Gray Davis, said
Rep. George Radanovich, R-Fresno, who attended the meeting. ``I mentioned to
the vice president that politically speaking we don't want that to happen. We
want the blame to rest where it deserves to rest, with the governor. And they
need to be concerned about that for politics in California.''
Damage control
Democrats, like Rep. Sam Farr, D-Salinas, said Thursday it's obvious the
White House got the message and the conservation plan is an attempt at damage
control.
The president is ``worried the blackouts may be known as the `Bush Blackouts'
and he wants them to be known as the `Davis Blackouts,'? '' said Farr, head
of the state's Democratic congressional delegation. He wrote to Cheney on
Thursday expressing ``extreme disappointment'' that the vice president had
excluded Democrats from the Tuesday meeting. Despite several requests, Farr
and his Democratic colleagues have yet to meet with Cheney or any other top
administration officials on the issue.
Bush on Thursday denied there was any change in policy.
``What the vice president and I understand is that you cannot conserve your
way to energy independence,'' Bush said Thursday after meeting with Energy
Secretary Spencer Abraham and Deputy Defense Secretary Paul Wolfowitz. ``We
can do a better job in conservation, but we darn sure have to do a better job
of finding more supply.''
A task force headed by Cheney is finalizing a national energy plan that is
expected to put is major emphasis on increasing supply through more drilling
for oil and natural gas and greater use of coal and nuclear power.
Bush emphasized that ``this administration is deeply concerned about
California and its citizens'' as he instructed federal agencies to reduce
their energy usage during Stage 2 or 3 power emergencies in California. The
directive will extend to other states that find themselves facing blackouts
this summer, such as those in the Pacific Northwest and the Northeast.
Steps to conserve
Among the measures, administration officials said, will be turning up
thermostats to 78 degrees, darkening interior hallways and pre-cooling
buildings at night. Wolfowitz said the Defense Department expected to reduce
its usage in California by 10 percent over last year and plans to hook up an
idle wind-powered generating facility at Edwards Air Force Base. All told,
the Defense Department hopes to make about 200 megawatts of power available
to the state this summer through reduced usage and added generation.
The presidential directive follows one issued by former President Clinton
late last year to federal facilities in California and the Pacific Northwest
to conserve energy. The Bush administration said its move was more extensive
because it directs all facilities nationwide to conserve and requires
agencies to report back their actions within 30 days.
Rep. Dana Rohrabacher, R-Huntington Beach, said he and others at Tuesday's
meeting urged that Bush travel to California. Bush has yet to visit the state
despite traveling extensively through the country during his first three
months.
``We suggested the president come out, the vice president come out, and any
members of the administration come out so that the people know we're
engaged,'' Rohrabacher said.
California clearly was the main impetus for the Bush directive, and the
president dispatched Abraham to California on Thursday to discuss the plan
with Davis and the regional heads of federal agencies. Dan Schnur, a
Republican consultant, said that was a good move for the White House.
``Substantively, the Bush administration has been doing the right things, but
because they haven't been out here making their case in person, it makes it
much tougher for their case to be heard.,'' Schnur said. ``After the
Northridge earthquake, Clinton had half his Cabinet out here. None of them
had anything official to do, but you couldn't turn around without seeing one
of them on local television talking about Clinton's commitment to rebuilding
after the earthquake.''
Abraham said the White House has responded to nearly every request the state
made regarding the electricity crisis. But the administration has not
delivered the regionwide caps on electricity prices officials from California
and the Pacific Northwest have pressed for.
The administration even looked into bringing nuclear submarines or aircraft
carriers to the California coast and hooking up their generators to the
state's electricity grid. The idea was scrapped after federal officials
realized only a small amount of power could be supplied and that safety
issues could not be overcome, Abraham said.

Contact Jim Puzzanghera at (202) 383-6043 or at jpuzzanghera@krwashington.com

Senate plans public power
Published Friday, May 4, 2001, in the San Jose Mercury News
BY AUDREY COOPER

Associated Press

SACRAMENTO -- California is poised to enter the power business after the
state Senate on Thursday approved creation of a public power authority and
sent its bill to Gov. Gray Davis.
A power authority, supporters said, will give the state more control over its
wholesale electricity market by building and operating its own power plants.
State-owned plants could charge lower prices, and building new plants could
increase supply and ease wholesale prices.
If signed by Davis, the bill would create a California Consumer Power and
Conservation Financing Authority that could issue up to $5 billion in revenue
bonds to pay for power plants, natural gas storage and additional pipelines
and conservation programs.
Also Thursday, state Treasurer Phil Angelides blasted a Republican plan to
use $5 billion of the state's surplus toward buying power, rather than
financing the entire amount with $12.5 billion in bonds.
Lawmakers ``are playing a dangerous game of financial roulette, putting in
jeopardy the state's fiscal integrity and solvency,'' Angelides said.
Angelides has been pushing the Legislature to pass a bill that spells out a
limit on the bonds by May 8. The bonds must be approved by then so the state
can get a bridge loan to replenish the state's general fund until the bonds
are sold.
In a letter to Assembly Speaker Robert Hertzberg late Wednesday, the
Republicans laid out an alternative plan. The bonds are to repay the state
for $5 billion in power purchased since January for customers of Pacific Gas
& Electric Co., Southern California Edison and San Diego Gas & Electric. The
remainder of the bond issue would pay for future power for those customers.
Assembly Republican Leader Dave Cox, Sacramento, said taxpayers have the
surplus funds and should use that to get out of the crisis, rather than
financing the total bill.
``There's no need for the bridge loan,'' Cox said. ``This is about fiscal
responsibility, not borrowing money you don't have to borrow. The state of
California needs to tighten its belt, just like California ratepayers and
taxpayers had to.''
Davis has not decided whether to sign the power authority bill, the spokesman
said. But Davis has said he supports creating an authority similar to one in
New York. The New York authority has 10 power plants and 1,400 miles of
transmission lines and produces about 25 percent of the state's power.
The 24-14 vote on the bill was split down party lines.

ALL CAPS HED
Published Friday, May 4, 2001, in the San Jose Mercury News
Developments Thursday in California's energy crisis:
The state Senate sends a bill to the governor that would create a state
public power authority to build and buy power plants.
Secretary of State Bill Jones, a Republican candidate for governor, proposes
a utility rescue plan that would take the state out of the electricity
business.
State Treasurer Phil Angelides says Assembly Republicans are ``holding their
own state hostage'' by not approving a bond-authorization bill for power
purchases.
Energy Secretary Spencer Abraham meets in the Capitol with Gov. Gray Davis.
Source:?Associated Press

Energy notebook
Vote delayed on $12 billion state bond for power.
May 4, 2001
SACRAMENTO - California lawmakers delayed voting on a $12 billion bond sale
for power purchases after Republicans proposed to reduce the size of the sale
and use part of the state's surplus to cut electric rates.
Assembly Republican leader Dave Cox of Sacramento proposed reducing the bond
sale to $8 billion and using $5 billion of California's budget surplus to cut
rates for consumers.
California began buying power for its cash-strapped utilities this year and
has spent $5.6 billion so far. The state expects to spend about $15.1 billion
on power this year, according to a report released this week by Gov. Gray
Davis.
Lawyer hired to probe possible price-gouging
SACRAMENTO - A lawyer who won big verdicts against Ford Motor Co. and the
Roman Catholic Church was appointed Wednesday to lead a state Senate
investigation into possible price-gouging and antitrust violations by
electricity producers.
Laurence Drivon, a Stockton lawyer, has taken a temporary leave from his
practice and will work in the office of Sen. Joe Dunn, D-Santa Ana.
Dunn chairs the committee that is looking into why California's energy prices
have skyrocketed, what legislative action must be taken to remedy the
problem, and whether there is any proof of criminal misconduct on the part of
the power producers.
Drivon is credited as co-counsel for $295 million verdict in a 1999 case
against Ford for a rollover accident that killed three passengers in a 1978
Bronco. Drivon also won a $30 million verdict against the Roman Catholic
Diocese of Stockton in 1998 after he showed the church knew a parish priest
had molested two children but failed to intervene.
Dunn also announced the formation of a statewide coalition of district
attorneys to look into the allegations.
PG&E wants ISO to cease trying to bill it for power
SAN FRANCISCO - Pacific Gas & Electric Co. has asked a federal bankruptcy
judge to stop the state's power grid manager from charging the utility for
expensive last-minute electricity it has bought.
California's largest utility filed the motion Thursday, asking that the
Independent System Operator "comply with bankruptcy law ... and stop billing
the utility for wholesale power purchased."
The utility is barred from repaying debts incurred before its bankruptcy
filing without permission from U.S. Bankruptcy Judge Dennis Montali. PG&E
also wants to stop paying the bill for any future ISO buys on its behalf.
Jones floats plan to try to rescue utilities, state
SACRAMENTO - Saying power purchases will drive California deeply into debt,
Secretary of State Bill Jones proposed a utility rescue plan Thursday that
would take the state out of the electricity business.
"The state of California must get out of the power business immediately to
avoid mortgaging our children's future," said Jones, a Republican candidate
for governor.
"If the governor doesn't change course, it will take decades for California's
budget and economy to recover."
Jones' four-part plan calls for:
Utility creditors to accept less than full payment in exchange for immediate
partial compensation.
A "significant infusion" of cash from the utilities' parent companies to help
pay off the debts.
The utilities to accept less than full payment for money they owe themselves
for power they generated and sold to themselves at high prices through the
state power pool.
The state would make low-interest loans to the utilities to cover the rest of
their debts.
Instead of the state buying the utilities' transmission lines, as Davis has
proposed, the utilities would retain them as loan collateral.
PG&E suit for $10 billion from ratepayers dismissed
SAN FRANCISCO - A federal judge has dismissed as premature a lawsuit filed
against the state's Public Utilities Commission by California's largest
utility, Pacific Gas & Electric Co., that sought $10 billion from California
ratepayers.
PG&E had asked the U.S. District Court in Los Angeles to overrule PUC
decisions that the utility was not entitled to the money, which the utility
spent buying electricity on the increasingly expensive wholesale market.
District Judge Ronald S.W. Lew dismissed the suit Wednesday, saying "PG&E's
claims are not yet ripe for review." He said PG&E may refile once the
commission's interim orders become final, and a PG&E statement afterwards
said that "allows us to continue to pursue the merits of the case."
State weighed connecting power grid to nuclear ships
SAN DIEGO - California officials considered tapping nuclear-powered warships
to supplement power during peak demand this summer, but dropped the idea
after deciding it wasn't worth the effort, Pentagon officials said Thursday.
Linking nuclear-powered submarines and aircraft carriers to the state power
grid is possible but would yield little electricity for the extensive
modifications that would be required, Pentagon spokesman Rear Adm. Craig
Quigley said.
"It would not be much of an advantage ... to go through that engineering,"
Quigley said.
Davis to ask generators for profit concessions
SACRAMENTO - Gov. Gray Davis asked the chief executives of the largest U.S.
energy producers and traders to meet with him next week, when he will ask
them to forgo some profit from selling power in the state.
The meeting is set for Wednesday in Sacramento.
The Associated Press, Bloomberg News and Register staff writer Kimberly Kindy
contributed to this report.

U.S. conservation order called Bush's best effort
The energy chief says there's not enough time for other action.
May 4, 2001
By DENA BUNIS
The Orange County Register
WASHINGTON - President George W. Bush's order that federal agencies conserve
every megawatt they can is the best way he can help California live through a
hot summer of expected blackouts, the nation's energy chief said Thursday.
"We have a crisis and an emergency this summer that could result in 30 to 35
days of some form of blackouts taking place in California,'' Energy Secretary
Spencer Abraham said after a White House meeting of the president's energy
team. "We don't have time between now and those occasions to develop new-
generation sources sufficient to meet that challenge.''
Bush's order directs all agencies to report to Abraham within 30 days on
their plans for conserving power during peak demand and particularly in
California during electricity emergencies.
"We're worried about blackouts that may occur this summer,'' Bush said after
his meeting. "And we want to be a part of any solutions."
When California reaches a Stage 2 emergency, which means electricity reserves
fall below 5 percent, federal facilities will implement a conservation plan
that includes setting thermostats at 78 degrees. Other measures under
consideration include installing more efficient lighting, closing off
unneeded space, and doing some work at off-peak times.
Off the table, Abraham said, were suggestions that the federal government
transfer power to the state from nuclear submarines or aircraft carriers.
They would yield little power and the potential for safety problems was
great.
Federal power usage amounts to a little less than 2 percent of California's
electricity needs. About 1 percent of that is at military installations.
Deputy Defense Secretary Paul Wolfowitz said his department's goal is a 10
percent reduction in electricity use this summer and an additional 5 percent
by next summer.
"We are going to do our part to try to mitigate the energy shortage through a
combination of conservation, power generation an investment in energy
efficient methods,'' Wolfowitz said.
Abraham said there is no firm figure for nonmilitary conservation.
He flew to California on Thursday afternoon, another effort to blunt
criticism of the administration's inaction during the crisis.
He met with Gov. Gray Davis and was to meet today in San Francisco with
federal officials to talk about the conservation plan.
Davis on Wednesday had criticized the impending order as not enough. The
state has cut usage by 20 percent.
"Every time we take an action there's someone somewhere who says we should do
something different,'' Abraham said. "We think this is the most constructive
action we can take in this time.''
And while Sen. Dianne Feinstein, D-Calif., said of the president's action
that "every little bit helps,'' she and other Western senators Thursday
continued to criticize federal regulators for not going further to curb
prices.
"This is unsustainable politically for this administration, for this
Congress," said Republican Sen. Gordon Smith of Oregon. Smith and Feinstein
have authored a bill to allow much deeper price controls than those approved
by the Federal Energy Regulatory Commission last week.
On the long-range front, Bush met with Mexican President Vicente Fox on
Thursday. They talked generally about the U.S. importing energy from Mexico
and Canada, countries with large oil and gas reserves.

[B] POWER UPDATE/ Bush directs feds to save energy in California

(BridgeNews) May 3, 1952 GMT/1552 ET

.................................................................

TOP STORIES:

Bush directs federal government to save energy in California

Washington, May 3 (AP) - President Bush on Thursday ordered all federal
agencies in California to cut power use, saying  "we want to be a part of any
solutions"  to an energy crunch that could cripple the largest state.

( Story .19646 )

Air emissions exemptions in House energy bill criticized

Santa Fe, N.M., May 3 (BridgeNews) - Legislation to temporarily exempt new
power plants from air emissions limits isn't needed because state and federal
regulations are flexible enough to allow for maximum output, Michael Kenney,
an
executive of the California Air Resources Board, said Thursday, testifying
before a U.S. House Energy and Air Quality subcommittee. Others argued
provisions of the bill allowing businesses to generate and sell their own
power
are harmful to the environment and unfair to certain consumers.

( Story .19200 )

Pacificorp calls for region-wide US West power price cap

Santa Fe, N.M., May 3 (BridgeNews) - Pacificorp wants region-wide price
caps in U.S. western power markets with all market participants under the same
price mitigation rules, a company representative told a U.S. House energy
subcommittee Thursday. The company is one of the few investor-owned utilities
outside of California to adopt such a position.

( Story .18379 )

Repeats: Duke Energy: Will pay to end Calif. power price probe

Santa Fe, N.M., May 2 (BridgeNews) - Duke Energy North America said
Wednesday it will build new generation in California, sell power on a
long-term
basis, forgive some unpaid bills by state utilities and repay alleged
overcharges for wholesale power if all investigations into alleged
price-gouging by state and federal authorities are resolved at the same time.
Duke admitted no wrongdoing.

( Story .16332 )

.................................................................

OF INTEREST:

--AMERICAS--

US Northeast real-time power prices high on warm weather

Toms River, N.J., May 3 (BridgeNews) - Real time power prices in the
Northeast U.S. were relatively strong early Thursday as above-normal
temperatures swept through the region. However, most daily prices slipped as
lower temperatures are forecast to move in on Friday.

( Story .17034 )

Calif. Gov. Davis says 50 Mw power plant licensed for summer

New York, May 3 (BridgeNews) - California Governor Gray Davis announced
Wednesday the licensing on a 50 Mw King City power project. This makes the
fifth summer reliability power plant that has been permitted under the
California Energy Commission's expedited emergency review process.

( Story .18775 )

FOCUS: Natgas distributors ready for possible summer price spike

New York, May 3 (BridgeNews) - Local distribution companies (LDCs) do not
plan to get caught short if warmer temperatures drive up the price of natural
gas this summer. LDCs say they are ready for the possibility and are using
various strategies, including hedging gas costs and entering into long-term
supply pacts, to avoid having to buy in an extremely volatile spot market.

( Story .18313 )

Fund companies see US energy policy benefiting power sector

New York, May 3 (BridgeNews) - As the U.S. flirts with an energy shortage
and dramatic fuel and power price hikes, mutual funds are salivating over the

prospects for companies like Duke Energy Corp., Calpine Corp., and Dynegy Inc.
Alternative energy companies like Capstone Turbine Corp. and Ballard Power
Systems Inc., however, are being left out in the cold as federal energy policy
has shifted from emphasizing conservation to feeding supply.

( Story .15998 )

FULL: Allegheny Energy unit closes buy of Midwest gas-fired oprs

New York, May 3 (BridgeNews) - Allegheny Energy Inc.'s Allegheny Energy
Supply Co. LLC unit completed the acquisition of 1,710 megawatts of natural
gas-fired merchant generating capacity in three Midwest states from Enron
Corp.'s Enron North America. --Rajesh S. Kurup, BridgeNews

( Story .17696 )

US Press: Bush to order energy conservation at Calif. govt buildings

New York, May 3 (BridgeNews) - President George Bush is expected Thursday
to order federal office buildings in California to conserve energy this summer
as a way of helping to address the state's power crises and deflect criticism
that the administration's energy policy is focusing solely on increased
production, the New York Times reported Thursday.

( Story .16906 )

--EUROPE--

Nuclear reactor shut down in central Russia due to minor glitch

Moscow, May 3 (BridgeNews) - A nuclear reactor was automatically shut down
Thursday at the Balakovo nuclear power plant in Central Russia due to a minor
glitch in its electricity system, state utility Rosenergoatom said. The
electricity fault presented no threat to the plant's safe operation and the
radiation level at the site remained normal, Rosenergoatom added.

( Story .12186 )

Shell Q1 adj profits up 23% at $3.855 bln, beating forecasts

London, May 3 (BridgeNews) - Royal Dutch/Shell on Thursday reported
adjusted earnings on a current cost of supplies (CCS) basis for the first
quarter of 2001 of $3.86 billion, up 23% from $3.13 billion for the same
quarter last year. Net income for the quarter was $3.89 billion, up 17% from
$3.34 billion in the three months of 2000, the company said. The figures were
above the top end of analysts' forecasts, which had pointed to adjusted CCS
earnings of between $3.1-3.6 billion.

( Story .12297 )

FOCUS: Scottish Power rides west U.S. crisis; no clues on S. Water

London, May 3 (BridgeNews) - Scottish Power is focussing on consolidating
its position in the U.S. since its purchase of Pacificorp and amid the ongoing
power crisis in the Western U.S., chief executive Ian Russell told reporters
at
a conference Thursday. Russell said that Scottish Power had not yet made a
decision on the future of Southern Water and would not be drawn into
speculation over the likelihood of a sale to Italy's Enel.

( Story .16660 )

--ASIA/PACIFIC--

Taiwan to accept bids for new power plants around May-end

Taipei, May 3 (BridgeNews) - Taiwan authorities plans to open a new round
of bidding around the end of May for independent power producers (IPPs) to
generate a total of 4,200 megawatts (MW) of electricity commencing in
2007-2009, an official at the Energy Commission under the Ministry of Economic
Affairs (MOEA) said Thursday. The invitation for IPP projects will be the
fourth of its kind.

( Story .10571 )

.................................................................

SPOT NEWS LINKS:

Media://NewsSearch::/source=mar/category=n-eny/go/search

.................................................................

THE MARKETS:

US FUTURES:                           UK FUTURES

.1908  NY Natural Gas Pre-Opg         .1795  IPE Nat Gas Review

.1906  NY Natural Gas Review          .1794  IPE Nat Gas Midday

.1747  NY Natural Gas

US/CANADA CASH NATURAL GAS            UK/EUROPE CASH NATURAL GAS

.1894  Henry Hub natural gas          .1807  UK Spot Gas

.1884  US/Canada Spot Natural Gas

US CASH ELECTRICITY                   UK/EUROPE CASH ELECTRICITY

.8575  California PX: Next day        .1892  UK Power Index

0.0

.8576 .8577 WSCC Forwards (AM/PM)     .1889  Nordic Power Market

.8585 .8586 PJM Forwards (AM/PM)      .1890  Spanish Power Market

.8593 .8594 Cinergy Forwards (AM/PM)  .1844  UK EFA Power Market

.8597 .8598 Entergy Forwards (AM/PM)  CANADA CASH ELECTRICITY

.8601 .8602 ERCOT Forwards (AM/PM)    .5637  Canadian Power Market

.8603  New England Forwards

.8587 .8600 TVA Forwards (AM/PM)

OTHER

.1873  US Nuclear Plants Operating Status

.2029  BRIDGE CALENDAR: US POWER: Key events to watch

.2030  US Utility Deregulation Digest

.1704  US Utility M&A Digest

.................................................................

SYMBOL LINKS:

Click below for adamb chart in Athena  NATURAL GAS

NYMEX - Media://Chart:NYMEX:/symbol=US@NG.1

IPE - Media://Chart:IPE:/symbol=GB@NGP.1  NYMEX ELECTRICITY

Palo Verde electricity - Media://Chart:PaloVerde:/symbol=US@VK.1

COB electricity- Media://Chart:COB:/symbol=US@OW.1

Cinergy electricity - Media://Chart:Cinergy:/symbol=US@CN.1

Entergy electricity - Media://Chart:Entergy:/symbol=US@NT.1

PJM electricity - Media://Chart:PJM:/symbol=US@QJ.1

.................................................................

BridgeNews

Send comments to gennews@bridge.com

Judge Dismisses $10B PG&E Suit

By KAREN GAUDETTE
Associated Press Writer
SAN FRANCISCO (AP) via NewsEdge Corporation  -
A federal judge has dismissed a lawsuit
filed against the California Public Utilities Commission by the
state's largest utility, which sought $10 billion from ratepayers.

PG&E had asked the U.S. District Court in Los Angeles to
overrule PUC decisions that the utility was not entitled to the
money, which the utility spent buying electricity on the
increasingly expensive wholesale market.

In dismissing the lawsuit Wednesday, Judge Ronald S.W. Lew said
``PG&E's claims are not yet ripe for review,'' meaning the case
wasn't ready for trial.

Steve Maviglio, spokesman for Gov. Gray Davis, declared the
decision a win for California ratepayers.

``PG&E was banking on winning this case and using it as one of
their excuses for not negotiating with the governor. It appears at
least for now they failed,'' Maviglio said.

But because the case was dismissed on procedural grounds rather
than merit, PG&E said the door was left open for the utility to
refile its action once the commission makes final its interim
orders on PG&E's requested rate increase.

``The court determined that our lawsuit was premature because
the CPUC had not yet finalized its various decisions on PG&E's
request for recovery of its costs to purchase wholesale power,''
PG&E said in a statement. ``Today's action allows us to continue to
pursue the merits of the case on a timely basis.''

A similar federal case filed by Southern California Edison is on
hold, said company spokeswoman Clara Potes-Fellow.

Edison, the state's second-largest utility, would drop that case
as part of a rescue plan negotiated by Davis, which also includes
the state buying the utility's transmission lines for $2.7 billion.

Since last June, the two utilities say they have lost more than
$14 billion.

California's 1996 deregulation law froze electricity prices for
customers of the state's three investor-owned utilities. When
prices rose to record levels over the past year, PG&E was unable to
recoup the higher costs from its customers' bills. The
undercollection, along with a failed deal to sell its transmission
lines to the state, drove PG&E to file for federal Chapter 11
bankruptcy protection on April 6, the company argued.

On Wednesday, the parent company, PG&E Corp., reported a
first-quarter loss of $951 million, or $2.62 per share. The
first-quarter loss follows a fourth-quarter loss of $4.1 billion
that also stemmed from continuing costs in California's power
crisis.

Bankruptcy Update/ PG&E Files Motion to Require CAISO to Follow Federal Law

SAN FRANCISCO--(BUSINESS WIRE)--May 3, 2001 via NewsEdge Corporation  -
Pacific Gas and
Electric Company has filed a motion in the U.S. Bankruptcy Court
asking the court to direct the California Independent System Operator
(CAISO) to comply with bankruptcy law, its Tariff, and a recent
Federal Energy Regulatory Commission (FERC) ruling, and stop billing
the utility for wholesale power purchased.

Pacific Gas and Electric Company's motion, which includes a
request for a preliminary injunction, asks the court to enjoin the
CAISO from requiring the utility to pay costs the CAISO has incurred
and continues to incur to purchase wholesale power on its behalf,
unless the utility can fully recover these costs.

Bankruptcy law imposes an automatic stay to prevent parties from
making certain claims or taking certain actions that would interfere
with the estate or property of the estate of a Chapter 11 debtor. By
purchasing power at costs higher than existing retail prices, and then
sending the bill to the utility, the CAISO is violating the automatic
stay provision and could be reducing the value of the company's assets
by potentially hundreds of millions of dollars per month, depending on
the average retail rate, the wholesale price, and the amount of power
purchased by the CAISO. Recently, the CAISO sent Pacific Gas and
Electric Company a bill for January and February spot market purchases
that totaled nearly $1 billion.

The action alleges that requiring the utility to pay more than it
can collect in its existing generation-related rates would be improper
under federal Bankruptcy Code because it is not in the best interest
of the estate, would be an unauthorized post-petition use of Pacific
Gas and Electric Company's property, and would force the utility to
undertake credit on onerous terms.

In addition, on April 6, 2001, FERC ordered the CAISO to comply
with its February 14 order, in which FERC ordered that the CAISO could
only buy power on behalf of creditworthy entities. Both Pacific Gas
and Electric Company and Southern California Edison Company are no
longer creditworthy companies. By continuing to purchase power on
behalf of Pacific Gas and Electric Company, the CAISO is in violation
of its own Tariff, FERC orders, and federal law.

CONTACT: Pacific Gas and Electric Company |              News Department,
415/973-5930