Please see the following articles:

Sac Bee, Thurs. 6/14:  Getting turned on over a turn-off

Sac Bee, Thurs. 6/14:  New pacts could ease blackouts:Edison crafts five-year
deals to help relieve the fiscal burden on its alternative energy suppliers

Sac Bee, Thurs. 6/14:  Lockyer to seek grand jury probe of power players

Sac Bee, Thurs. 6/14:  Energy Digest: PUC: Edison must pay some QF debts

SD Union, Wed. 6/13:  New price restrictions for electricity said to be
coming

SD Union, Wed. 6/13:  Governor plans to release details on state's power
purchases

SD Union, Wed. 6/13:  Draft of blackout plan offers forecasts instead of
warnings

SD Union, Wed. 6/13:  California governor to release details of state's power
purchases
SD Union, Wed. 6/13:  Report: Energy executives selling stock for millions
(Ken Lay and Jeff Skilling mentioned)

SD Union, Wed. 6/13:  News briefs on California's power crisis

SD Union, Thurs. 6/14:  Customers of SDG&E may not get back $300 million
Money might be a part of state deal to buy electric grid

SD Union, Wed. 6/13:  Vallejo City Council votes to switch work hours to save
power

SD Union, Thurs. 6/14:  Davis announces deal to boost summer power supply

SD Union, Thurs. 6/14:  FERC appears set to expand its price curbs

SD Union, Thurs. 6/14:  State must bare secret energy deals
Judge orders release of pacts with suppliers

LA Times, Thurs. 6/14:  Senate Democrats to use power to illuminate Bush
energy plan

LA Times, Thurs. 6/14:  US invites private funding for grid expansion
Bush plan targeting Path 15, a key transmission point in the central valley,
sets up a showdown with the state

LA Times, Thurs. 6/14: Blackouts and businesses: Dying for an exemption?

LA Times, Thurs. 6/14: Price for more megawatts is more smog
Pollution: relaxed rules for "peaker" plants could push Ventura County over
ozone limits.  The effect elsewhere may prove minimal

LA Times, Thurs. 6/14: PUC acts to aid alternative energy suppliers
Regulators permit utilities to modify contracts with small power providers to
maximize production

LA Times, Thurs. 6/14: State still seeks to veil portions of power pacts

SF Chron, Thurs. 6/14:  Plan would allow private energy companies to own grid
rights

SF Chron, Thurs. 6/14:  News briefs on the California power crisis

SF Chron, Thurs. 6/14:  Refineries may keep chugging in outages PUC looks to
grant blackout exemption

SF Chron, Thurs. 6/14:  FERC set to extend power caps
Government sources say price controls will be round-the-clock

SF Chron, Thurs. 6/14:  Judge orders contact disclosures
State told to release edited versions of energy agreements tomorrow

SF Chron, Wed. 6/13:  Energy Report

SF Chron, Wed. 6/13:  EPA rejects state waiver on fuel additive
Refusal could cost 50 cents a gallon at pump, Davis says

SF Chron, Wed. 6/13:  Governor set to reveal terms of power deals
Court must decide confidentiality issue

Mercury News, Thurs. 6/14:  Price caps elicit fierce debate in congress

Mercury News, Thurs. 6/14:  PUC commissioner issues draft decision to exempt
refineries from blackouts

OC Register, Wed. 6/13:  FERC may expand cap
Senators say regulators are set to extend price controls throughout the West

OC Register, Wed. 6/13:  Political heat triggers FERC's switch
The panel seems more responsive to the voice of public officials

OC Register, Wed. 6/13:  Davis to air details about power buys
He had refused to divulge the contract terms

OC Register, Wed. 6/13:  Energy notebook
Edison makes deal to pay generators of renewable power

Getting turned on over a turn-off
By Carrie Peyton
Bee Staff Writer
(Published June 14, 2001)
Political action doesn't get much easier than this: Pull a plug. Flip a
switch.
If you dislike utilities, like the environment or know anyone who does you
might already have received an e-mail call to "Roll Your Own Blackout" for
three hours next week on the day of the summer solstice.
Flocks of anonymous e-mails have been swooping across the Internet for weeks
promoting the hand-rolled, voluntary blackout aimed at fostering
conservation.
It is a phenomenon that points out just how deeply energy issues have wormed
into the national consciousness, as well as how much the Internet has become
the world's water cooler and its bulletin board.
The messages urge people everywhere to turn out their lights and unplug what
they can from 7 to 10 p.m. Thursday, creating a dip in energy use that would
roll across time zones -- part protest and part party.
"Talk to your kids. Watch the stars come out. Cuddle. Pretend the TV's
broken. Think what can happen when tens of thousands join this peaceful
protest against price-gouging and environmental irresponsibility," exhorts a
Web page devoted to the idea.
Marilyn Nyborg of Grass Valley says she's thinking about flipping a circuit
breaker to cut off all power to her house Thursday night, but at the very
least her lights and television will be off.
"It's beautiful outside now. It's nice to sit on the porch. As it gets darker
I don't mind using a flashlight to read and spend some time with my partner
and our new kitties," she said.
Nyborg, 62, a high-tech recruiter who calls herself a "quiet activist," said
she'll be taking part to demonstrate that people can come together to
conserve.
"I take great offense at (President) Bush's comment that it's our right as
Americans to waste fuel. I don't think it is. We're also stewards of the
planet," she said.
David Aragon, a Berkeley engineer who says he coined the phrase "Roll Your
Own Blackout" online for a similar protest, said the idea had its roots in
politics but is nonpartisan.
He said he just learned this week that Los Angeles artist Monica Rex was the
one who expanded his notion, scheduled it for the first day of summer and
sent it out into the world.
Rex said she e-mailed a few paragraphs to about 50 friends in mid-April and
posted them on a handful of Web sites to make people aware that they have the
power over how energy is used.
She thought so little of it at the time that she didn't keep a copy.
"I didn't know it would get anywhere, actually," she said. But it took off.
By mid-May, multiple copies were landing in e-mail boxes of nearly everyone
with environmental or energy interests. An organic farming public relations
firm publicized it further, saying "millions" of people had been alerted.
Newspapers from Seattle to Denver began writing about the anonymous
upswelling. Web pages sprang up dedicated to it.
"Everyone I know has seen it. This has swept the globe," said Jeff Softley, a
West Hollywood bartender and longtime environmentalist who has tried for more
than a decade to promote the idea of an "Energy Fast" on Earth Day.
Softley, who knows a little about stirring up community action, was so struck
by how quickly the message moved that he speculated a big environmental group
was probably behind it, trying to appear grass-roots.
"I just think it caught people's imagination," said Rex. "I am just amazed at
how things move around the Internet." She theorizes that her name was
stripped off early in the forwarding process, making it appear anonymous when
she had no particular interest in either hiding from the idea or in promoting
it.
It really doesn't take much to bring a single idea to millions of people,
said David Goff, a University of Southern Mississippi professor who co-edited
the book "Understanding the Web."
"When you get it in the hands of like-minded people, it doesn't take long for
that multiplier effect to operate, and it will go very far very fast," he
said.
E-mail- and Web-driven protests have triggered fuel boycotts in Great Britain
and Internet boycotts in France, Goff said, and "we're in the early stages of
this."
The whimsical blackout message -- circulated in several versions -- calls on
people turn off what they can, then "light a candle to the sun god, kiss and
tell, make love, tell ghost stories, do something instead of watching
television, have fun in the dark."
Many versions say the voluntary blackout -- "a simple protest and a symbolic
act" -- is being held to protest Bush's disdain for conservation, energy
efficiency and alternative fuels.
Some variants direct people to books on alternative energy and energy
efficiency. Some say the candle should burn for the sun goddess. Some add a
gentle caution, to unplug only what can be "safely" dispensed with.
Michael Straus of Point Reyes said he plans to take part by having a
candlelight dinner with his parents. Straus, whose "Beyond Organic" PR firm
helped tout the idea, said he put the message out over a public interest and
academic news wire after it kept landing in his mailbox.
The message has zinged from state to state and reportedly reached Europe and
Asia. It has hit e-mail lists devoted to everything from feminism to
used-book sellers. A Texas newspaper credited it to a river protection group
called American Rivers, something the flattered but bemused organization
denied.
Millions of people would have to be involved for their efforts to show up on
the computers of the California Independent System Operator in Folsom, which
constantly monitors electricity use to match demand with supply.
If 10 million households turned off a single 100 watt light bulb at once, 100
megawatts would drop off the state's electric grid -- probably not noticeable
amid 30,000 or so megawatts of early evening demand, said Jim Detmers, an ISO
vice president.
But 200 to 300 megawatts of reduced demand might be detectable under the
right conditions, if sudden changes in wind or temperatures or cloud cover
don't obscure the effect, he said.
Computer engineer Aragon said he has no idea how many people will turn off
and tune out June 21.
"That's almost like speculating on the spot price of electricity," he said.
"I wouldn't touch it."

The Bee's Carrie Peyton can be reached at (916) 321-1086 or
cpeyton@sacbee.com.

		New pacts could ease blackouts: Edison crafts five-year deals to help relieve
the fiscal burden on its alternative energy suppliers.
		By Jim Sanders
Bee Capitol Bureau
(Published June 14, 2001)
		In a move that could help ease blackouts this summer, Southern California
Edison has negotiated five-year deals designed to relieve the financial
burden on its alternative energy suppliers.
		Gov. Gray Davis hailed the pacts, which state officials helped negotiate, as
an important step toward stabilizing the energy market and ending litigation
over about $1.3 billion owed by Edison.
		The move also could help taxpayers, cutting up to $100 million off the
state's energy tab this year by reducing the amount of power needed from the
expensive spot market, officials said.
		The agreements apply specifically to Edison's suppliers, however, and do not
resolve similar disputes involving Pacific Gas and Electric Co.
		The pacts also add a new twist to an ongoing dispute over Davis' bid to save
Edison from bankruptcy by buying its transmission lines for $2.76 billion and
providing other financial incentives.
		Davis warned at a press conference Wednesday that rates promised in the pacts
are tied to legislative approval of the rescue plan.
		"I believe, given the changed circumstances, that legislators will take a
different look at the (plan)," he said. "I'm not saying it's a certainty, but
I'm saying there's now renewed interest."
		Senate President John Burton ridiculed the governor's assertion and made it
clear he won't be pressured.
		"There are an awful lot of questions here, and I think it ill behooves the
governor, who has not always moved with alacrity, to say that the Legislature
is dragging its hands on this issue," Burton said.
		Legislators currently are crafting one or more alternatives to the governor's
rescue plan, which they say has little support in the Assembly or Senate.
		Southern California Edison, a massive private utility, declined comment
Wednesday on the QF -- "qualified facilities" -- agreements or the governor's
rescue plan.
		California taxpayers have spent billions of dollars since January buying
power on behalf of Edison and another financially strapped private utility,
PG&E.
		One major problem for Edison has been the $1.3 billion debt owed to firms
that generate alternative energy from wind, geothermal, solar, biomass and
gas-fired cogeneration facilities.
		As debts rose each week, some QFs were forced to quit producing electricity,
thus exacerbating the energy crisis and forcing California to buy more power
on the spot market.
		Statewide, most of the alternative energy providers, though still financially
strapped, have resumed production.
		The new Edison pacts would add 100 to 300 megawatts of new electricity by
enticing suppliers to exceed existing contracts.
		They would provide a mechanism for repaying Edison's debts to the alternative
energy firms. They also promise separate rates for electricity from renewable
sources and gas-fired facilities.
		Key parts of the deal include:
		Rates for electricity produced by gas-fired plants would vary based on the
cost of natural gas at the California-Arizona border.
		Edison would pay 5.37 cents per kilowatt-hour, plus a capacity charge, for
energy produced by wind, solar and other renewable energy sources.
		The firm would pay an estimated 4 to 9 cents per kilowatt-hour, depending on
natural gas costs, for electricity produced by gas-fired plants.
		The pacts give Edison and the owners of gas-fired cogeneration facilities the
ability to renegotiate if market conditions change dramatically.
		"The initial reaction from a number of (firms) has been favorable," said
Steven Kelly of Independent Energy Producers, an association of wholesalers.
		"We're hopeful this can be implemented in PG&E territory, too," said Joe
Ronan, an official of the Calpine energy firm and chairman of Independent
Energy Producers.

		The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sacbee.com
.
		Bee Staff Writer Kevin Yamamura contributed to this report.

		Lockyer to seek grand jury probe of power players
		By Dan Smith
Bee Deputy Capitol Bureau Chief
(Published June 14, 2001)
		Attorney General Bill Lockyer said Wednesday that he will ask the Sacramento
County grand jury to look into potential criminal actions by power generators
and natural gas companies that have led to skyrocketing wholesale power
prices.
		Lockyer said he has reached no conclusions about possible criminal acts by "a
dozen or so" companies his office is investigating, but is hopeful grand jury
testimony will assist in the probe.
		"I just want to make sure that we thoroughly investigate every possibility,"
Lockyer said. "Some people conclude that we don't have evidence. That's not
what I'm saying either. I'm saying we're in the middle of evaluating the
evidence."
		Lockyer will take the investigation to the grand jury after July 1, when 19
jurors convene for the new fiscal year. He would not predict how long the
process would last.
		He said many of the 80 lawyers in his office assigned to the energy crisis
are looking at possible civil violations relating to market manipulation and
other allegations against power players.
		Possible criminal violations involve the state's racketeering, unfair
business practices, fraud and antitrust statutes, Lockyer said.
		Power companies have consistently denied allegations that they have violated
any civil or criminal statutes.
		Besides Lockyer's probe, several legislative committees are investigating
power interests' actions in California's energy crisis.

		The Bee's Dan Smith can be reached at (916) 321-5249 or smith@sacbee.com.

		Energy Digest: PUC: Edison must pay some QF debts

(Published June 14, 2001)
		Southern California Edison should pay at least 15 percent of its back debts
to any alternative power producer, called a "qualifying facility," that needs
the money to get back into operation this summer, utility regulators agreed
Wednesday.
		The 5-0 decision by the state Public Utilities Commission also endorsed
agreements reached Tuesday between Edison and some key qualifying facilities
that call for incentive payments for increased production and a price of $54
a megawatt-hour for five years for some producers.
		Ensuring that every power plant is up and running at maximum levels this
summer will be critical to keeping prices low and blackouts rare,
commissioners said. However, several added that they supported the revised
contracts reluctantly because of long-term costs.
		"California consumers have overpaid billions of dollars to QFs" already, said
Commissioner Carl Wood. He warned that as more new plants are built, "we may
not need this power, and yet we will be obligated to purchase it at prices
that are vastly higher than other power that will be available."
		--Carrie Peyton
		New members rock FERC
		WASHINGTON -- The arrival of two new members is showing signs of shaking up
the Federal Energy Regulatory Commission, a once-obscure agency that may be
the best hope for controlling wholesale electricity prices in power-starved
California.
		Patrick Wood III, former chairman of the Texas Public Utility Commission, and
Nora Mead Brownell, a former member of the Pennsylvania Public Utility
Commission, will participate in their first meeting Monday when the panel
meets in an unusual session on California rates.
		Among those most heartened to see the new members was William Massey, a
Democrat and frequent dissenter on the five-member panel who strongly favors
price controls to head off what he has described as a looming economic
catastrophe for the state this summer.
		"I never thought I would be so thrilled to see two Republicans coming over
the horizon," Massey said.
		Massey's enthusiasm is shared by many California Democrats who believe Wood
and Brownell will tilt the balance toward stronger action in their crusade
for lower wholesale rates.
		--David Whitney

		New price restrictions for electricity said to be coming

		By H. Josef Hebert
ASSOCIATED PRESS
		June 13, 2001
		WASHINGTON ) Under growing political pressure, federal regulators are
preparing new but still limited price restrictions for electricity in
California and other Western states, according to government officials.
		Congressional and private industry sources said the Federal Energy Regulatory
Commission is almost certain, at a meeting next week, to expand a price
mitigation directive to cover all transactions in California and expand it to
other states, including the Pacific Northwest.
		The limited price caps, announced in April, now apply only to California and
only to periods when a supply emergency is in effect because power reserves
have fallen below 7.5 percent. California Gov. Gray Davis has called them
inadequate and full of loopholes for power generators to skirt controls.
		Sen. Dianne Feinstein, D-Calif., told a Senate hearing "it now appears" that
the April order will be broadened. She said it was "another step forward" but
far short of the cost-based price caps she and other congressional Democrats
have sought.
		Several other sources, speaking on condition of anonymity, also said they
expected the FERC to broaden the April order.
		The commission chairman, Curtis Hebert, said price mitigation issues will be
discussed at its Monday meeting.
		The five-member commission of three Republicans and two Democrats has come
under attack from Democrats in Congress and from Davis. They contend the
agency has been far too timid in curtailing price gouging in the wholesale
Western power markets.
		The commission regulates wholesale electricity markets and interstate natural
gas pipelines. Under a 1934 law, it is required to ensure prices are just and
reasonable.
		Hebert, a Republican named as chairman by President Bush in January, defended
the agency at an energy forum Wednesday.
		"Our price mitigation plan is working," said Hebert, citing recent declines
in electricity and natural gas prices in California and elsewhere in the
West. Acknowledging the criticism, he said of the FERC: "We're not the most
popular people in town right now."
		This week, electricity prices on the spot market in California fell to below
$100 a megawatt-hour for the first time this year. Natural gas prices also
eased. Earlier year price have frequently surpassed $300 a megawatt hour, ten
times what they were in pre-crisis 1999.
		A megawatt is enough electricity to serve about 600 homes.
		California officials have said it is too early to tell how the FERC's April
order has affected prices.
		The reason for the price drops is unclear, Feinstein said. She noted that
California's attorney general this week announced plans for a grand jury to
consider criminal charges against some power generators and marketers.
		Also Wednesday, several economists told a Senate hearing that temporary price
controls, if structured properly, should not impede electricity investments
and supplies as Republican lawmakers and the administration repeatedly have
argued.
		"It is incorrect that regulation necessarily interferes with supplies,"
Cornell economist Alfred Kahn, a prominent deregulation advocate, told the
Senate Governmental Affairs Committee.
		It was the Senate's first hearing on California's energy crisis since
Democrats recently took power.
		Kahn said that if price caps were temporary, exempted new power plants, and
provided sufficient profits, "there will be no shortage of people interested
and willing to build new power plants."
		"The greatest danger is continued chaos," said Paul Joskow, an economist at
the Massachusetts Institute of Technology. He, too, urged some price controls
based on costs of production.
		Sen. Fred Thompson, R-Tenn., said the economists were painting " a rosy
picture." He read letters from several Wall Street analysts who insisted that
price controls would be a "recipe for disaster" and make investors reluctant
to enter the California power market.
		Senate Democrats have promised to move forward with legislation to require
the FERC to act unless the commission takes additional steps to address
allegations of price gouging in California.
		"If we ignore these problems, we put our economy at risk," said Sen. Joseph
Lieberman, D-Conn.
		??

		On the Net:
		FERC: www.ferc.gov/
		Senate committee witness list: www.senate.gov/(tilde)gov)
affairs/061301witness)list.htm

Governor plans to release details on state's power purchases

By Don Thompson
ASSOCIATED PRESS
June 13, 2001
SACRAMENTO ) California signed long-term electricity contracts at prices
higher than those now available on the daily spot market, Gov. Gray Davis
acknowledged Wednesday as a judge ordered him to release the pacts' details.
But Davis said the long-term contracts between the state and power generators
helped break the price spiral that had driven electricity prices to record
heights.
Critics said other factors played a larger role in what they warned is a
temporary price drop, and said Davis foolishly locked in long-term rates at
the market's peak.
"The price, the spot market on electricity is coming down because we've
locked in long-term contracts," Davis said. "This is Economics 101. ... We
were paying a lot more in January and February than we are now on the spot
market because we have dramatically shrunk the spot market, providing
reliable power for California at affordable rates."
By next month, the state will have to buy less than half the power it needs
on the daily market, making the generators compete for a smaller share of the
market and forcing prices down, he said.
Davis said that will stabilize a wildly fluctuating market for the long term,
although the cost may exceed market costs in years to come.
The contracts, along with new plants, more conservation, criminal and
regulatory investigations into price gouging and possible price caps have
combined to cut costs, Davis said.
Saying "there will be a day of accounting" for price gougers, Davis also said
a "pincer effort from Sacramento and Washington" forced energy producers to
lower prices.
Davis appeared Wednesday as a San Diego superior court judge ordered the
state to release the contract details by noon Friday.
Several news organizations and Republican Assemblyman Tony Strickland,
R-Thousand Oaks, sued Davis, saying the contracts used state money and should
be open to the public.
For months, Davis had refused to do so, saying that would hurt the state's
negotiating position. Earlier this week, however, he asked San Diego Superior
Court Judge Linda B. Quinn to lift the confidentiality clauses in the 38
contracts, because the secrecy was no longer that important.
The contracts, worth almost $43 billion, could keep long-term rates
relatively high for years if the recent decline in prices remains in place.
Contract records obtained by the Los Angeles Times showed the state is
committed to buying power at prices up to $154 a megawatt-hour during peak
demand periods and more than $95 for power at times when demand is low.
By comparison, the state recently bought peak power for less than $100 an
hour and less than $20 an hour at night when demand is less.
Wholesale prices have dropped recently, but they could rise this summer when
temperatures and air conditioning use climb.
Energy analysts agreed with Davis that a convergence of factors led to lower
prices, not just the long-term contracts.
Severin Borenstein, director of the University of California Energy
Institute, called the prices in the state's contracts "disturbingly high"
compared to those available a few years ago, but the state didn't have much
choice.
In essence, Borenstein said, the contracts mean California now pays its high
power bill "on an installment plan" in which generators agree to string out
their profits over years instead of recouping them now.
But Peter Navarro, an economist at the University of California, Irvine, said
the Davis administration negotiated "from a position of severe weakness. They
(generators) had us over a barrel and they stuck it to us."
Davis, Navarro said, "adopted a long-term strategy to fight a short-term
crisis."
The administration will look particularly foolish if the Federal Energy
Regulatory Commission acts next week to rein in higher power prices after
months of refusing to intervene, Navarro said.
"This is a huge mistake that's been made by the state and what's being shown
here is the depth of it," said Assemblyman David Cogdill, R-Modesto, who
supported Strickland's suit.
"In effect, we locked in an energy crisis for the next 10 years," said Harvey
Rosenfield of the Foundation for Taxpayer and Consumer Rights. He called for
Attorney General Bill Lockyer to toss out any contracts he determines
overcharge the state.
Davis energy adviser S. David Freeman, former head of the Los Angeles
Department of Water and Power, said the contracts altered the marketplace and
freed the state from its nearly total reliance on the volatile spot market.
"The war ain't over," Freeman said, "but we have landed on enemy territory
and we are rolling them back."

Draft of blackout plan offers forecasts instead of warnings

By Jennifer Coleman
ASSOCIATED PRESS
June 13, 2001
SACRAMENTO ) In May, Gov. Gray Davis announced a plan to give Californians
detailed warnings of rolling blackouts to help businesses and residents plan
for outages.
But a draft of the plan, obtained by The Associated Press, has changed the
proposed one-hour "blackout warning" to a "probability forecast," which one
utility official called a "vague warning that's wrong more often than it's
right."
The one-hour notice is expected to be wrong two-thirds of the time, because
the Independent System Operator will continue to look for power to keep the
lights on, said several people who participated in meetings to plan the
blackout notifications.
Under Davis' plan, the ISO, manager of the state's power grid, will also
issue a 48-hour rolling blackout forecast and the 24-hour location
notification.
Peter Navarro, an economist with University of California, Irvine who works
on energy issues, called the one-hour blackout notice "a very blunt
instrument."
"It's going to be like the typical California forecast ) sunny, hot and dry
with a chance of rolling blackouts," Navarro said. "How do you prepare for
that?"
The Governor's Office of Emergency Services coordinated the plan to implement
Davis' order by consulting private and municipal utilities, the ISO and the
Public Utilities Commission. The plan will be presented to Davis by Friday.
Even after the issuing the 60-minute blackout notice, the state will keep
looking for last-minute power, said ISO spokeswoman Stephanie McCorkle. "The
public knows the ISO doesn't have a crystal ball, but it can provide
information to help them make critical decisions."
A utility official, who participated in the calls and who spoke on the
condition of anonymity, said the one-hour blackout probability forecast
"doesn't come anywhere close to what's been promised to the public.
"Instead of a real one-hour notice of an outage that people can rely on and
make plans for, they're just going to get another vague warning that's going
to be wrong far more often than it's right," the executive said.
The utilities will make the biggest differences in handling blackouts, said
Steve Conroy, a spokesman for Southern California Edison, which participated
in one of the conference calls.
"There is more advance notice from the utilities to our customers," Conroy
said.
Edison and San Diego Gas and Electric Co. have joined Pacific Gas and
Electric Co. in assigning customers a "block number" so they will know what
neighborhood are next to be hit by a blackout.
"The newest element that's required is to make geographic information
available to the public. It was already available to public safety offices,"
said John Nelson, spokesman for PG&E.
Blackout forecasts, Conroy said, are "very much like a weather forecast" and
subject to change. McCorkle said forecasts will also encourage power
conservation and further lessen the chance of blackouts.
Eric Lamoureux, an emergency services spokesman, said the plan isn't intended
to predict a blackout but give a sense of when they're likely.
Utility customers don't need a guarantee, just a warning that blackouts could
occur, said Michael Shames, executive director of Utility Consumers' Action
Network.
"The objective here is to allow customers to prepare for the eventuality of
blackouts," he said. "The people will not rebel if the lights stay on. What
we do need is more than 30 minutes notice."
Jennifer Ng, the owner of Moonlight Cleaners in Elk Grove, said she'd welcome
two days' notice for blackout. It took her more than a week to catch up on
work that a couple hours of blackouts halted at the dry cleaners, she said.
"It affects businesses more than people think," Ng said. "If I had more
warning, I would be able to stay late the night before or bring in more
people."
To really give a true blackout warning, Shames said, the ISO must "draw the
line" and stop shopping for electricity to keep the lights on.
Plus, Shames added, repeated false alarms could lose their effectiveness.
"That's why they shouldn't be issued cavalierly."
Shames and Navarro have called for a price ceiling for last-minute power buys
and a willingness to suffer blackouts in prices don't come down. The
Legislature is now considering a bill to allow state power buyers to stop
shopping for power.

California governor to release details of state's power purchases

By Alexa Haussler
ASSOCIATED PRESS
June 13, 2001
SACRAMENTO ) Gov. Gray Davis is close to releasing details of 38 long-term
contracts between the state and power generators, a move that would end a
lengthy battle over whether the agreements should remain confidential.
Davis for months had refused to release information on the contracts, but his
aides said Tuesday the disclosure was expected this week.
The Los Angeles Times reported Wednesday that confidential government records
show state officials agreed to contracts at prices higher than those now
being paid in the daily spot market.
The contracts, which total nearly $43 billion, could burden consumers with
relatively high utility rates if the recent trend toward lower electricity
and natural gas prices continues.
Records obtained by the Times show the state is committed to buying power at
prices up to $154 a megawatt-hour during peak demand periods and more than
$95 for power at times when demand is low. In comparison, the state recently
purchased peak power for less than $100 an hour and less than $20 an hour at
night when demand dropped.
The recent purchases reflect a drop in wholesale prices, which could rise
again this summer when temperatures climb and air conditioning use surges.
"The theme here is the governor embarked on a long-term strategy for a
short-term crisis," Peter Navarro, an economist at University of California
Irvine, told the Times. "They pretty much got this exactly wrong."
State officials defended the long-term contracts, crediting the agreements
with altering the marketplace. The contracts also have freed the state from
its nearly total reliance on the volatile spot market.
"This was all a well thought-through plan of action," said Davis energy
adviser S. David Freeman, former head of the Los Angeles Department of Water
and Power. "The war ain't over. But we have landed on enemy territory and we
are rolling them back."
Republican lawmakers and several news organizations, including The Associated
Press, sued Davis in March, saying his refusal to release the contracts'
details violated the California Public Records Act.
Still, Davis refused, saying that revealing the details would put the state
at a competitive disadvantage in other contract talks.
Oklahoma-based Williams Energy, one of the generators with a state contract,
opposes the release of the contract details.
"Information contained in those is proprietary information that allows us to
be competitive and to bid competitively," said spokeswoman Paula
Hall-Collins.
Raymond Hart, Department of Water Resources deputy director, wrote power
generators Monday saying the department would ask a judge Wednesday to throw
out a confidentiality provision in the contracts.
Meanwhile, the Times also reported Wednesday that executives and board
directors from power companies gained millions of dollars through stock sales
last year.
State officials accuse them of profiteering from the energy crisis, but some
executives netted upwards of $123 million in option transactions in 2000,
according to a filing with the Securities and Exchange Commission. Stock
prices for energy companies enjoyed robust growth last year.

Report: Energy executives selling stock for millions

ASSOCIATED PRESS
June 13, 2001
LOS ANGELES ) Executives and board directors from power companies that state
officials accuse of profiteering from the energy crisis have gained millions
of dollars through stock sales, according to a newspaper report.
The Los Angeles Times reported Wednesday that these executives exercised
options and sold stock for double, triple and even 10 times the level of
prior years. The newspaper based its findings on trading data supplied by
First Call/Thomson Financial and federal regulatory findings.
Kenneth L. Lay, chairman of Enron, netted $123 million in option transactions
in 2000, according to a filing with the Securities and Exchange Commission.
The amount was triple his 1999 level and nearly 10 times what he made in
1998.
Lay also has made stock sales since November that have been worth nearly $23
million.
Lay and other power company executives have shown a knack for timing their
stock sales near the top of the market. Many of the companies' shares have
fallen since the bulk of the stock sales, the Times reported.
Critics claim corporate profits for the power companies have been driven up
by the energy crisis in California and the West. The crisis created a bull
market for publicly traded power companies, making the shares held by the
executives particularly lucrative.
State officials were outraged, but not surprised by the transactions.
"It is part of a pattern of smart trading by these guys," said state Sen.
Debra Bowen, D-Marina del Rey, who chairs the Senate Energy, Utilities and
Communications Committee. "The mentality is to get everything that you can
and then ride out the bust.
"I think they are figuring that by this time next year the party will be over
and they will be left sitting in a room with plastic cups half-filled with
stale beer," Bowen added.
The stock sales seemed logical to Loretta Lynch, president of the California
Public Utilities Commission.
"It stands to reason that if the companies are making exorbitant profits,
then the individuals who run the companies are also making exorbitant
profits," she said.
The power executives who sold stock dealt shares of the following companies:
Virginia-based AES Corp.; Duke Energy Corp. of North Carolina, the
Houston-based energy firms of Enron Corp. and El Paso Corp. and San
Jose-based Calpine Corp.
Jeffrey K. Skilling, CEO of Enron, filed regulatory documents in May
announcing his intention to sell 140,000 shares of Enron stock for $7.98
million. Skilling in 2000 netted more than $62 million in similar
transactions.
Harvey Padewer, president of Duke Energy's Energy Services division, sold
Duke stock for $12.26 million in February, netting $2.99 million.
State and federal agencies are investigating several large energy companies
to determine if they conspired to boost prices either by limiting the
construction of power plants or by manipulating the supply of natural gas
needed to run power plants.
No one is claiming the stock trades were illegal, but critics have linked the
transactions to the profits gained in California.
"The generators have no shame," said Steve Maviglio, a spokesman for Gov.
Gray Davis. "It speaks to how there has been a massive transfer of wealth
from California and the West to Texas and the Southeast."
Lay and Enron officials declined to comment on stock trading by executives
and a spokesman for AES also declined to comment on the matter.
A spokesman for Duke Energy said many of the sellers at Duke continue to hold
large amounts of the company's stock and sold the their stock to capitalize
on a healthy market.
"Many of these people have a lot of stock, and this 7/16is 3/8 an opportunity
to diversify their personal portfolios at an opportune time when Duke's stock
is up," said Terry Francisco, a spokesman for Duke Energy.

News briefs on California's power crisis

ASSOCIATED PRESS
June 13, 2001
HUNTINGTON BEACH ) An energy company says a restriction prohibiting it from
selling power generated at its California plants out-of-state violates
interstate commerce laws.
AES Corp. filed a petition Monday with the California Energy Commission
claiming the restriction should be withdrawn because it hinders the company's
efforts to negotiate a contract with the state Department of Water Resources,
which brokers power deals for the state.
AES spokesman Aaron Thomas said Tuesday that the two sides are close to an
agreement and filing the petition was a backup if negotiations fail.
The Arlington, Va.-based company recently won approval from the state's
Energy Commission to restart two idle generators in Huntington Beach, but
were told it could only sell the 450 megawatts produced at the Orange County
plant to California utilities.
The 40-year-old units, which will reopen in August, will generate 10 percent
of the 5,000 megawatts needed by the state to avoid rolling blackouts this
summer.

Customers of SDG&E may not get back $300 million

Money might be part of state deal to buy electric grid
By Jeff McDonald
UNION-TRIBUNE STAFF WRITER
June 14, 2001
Talks to allow state ownership of the poles and wires that push electricity
across San Diego County have dragged on in numbing detail for months.
But with the deal between Gov. Gray Davis and Sempra Energy "extremely
close," local politicians and a consumer advocate fear its price will include
hundreds of millions of dollars that had been headed for ratepayers' pockets.
San Diego city and county officials took the unusual step yesterday of
criticizing regulators and the parent company of SDG&E for excluding them
from secret negotiations.

State must bare secret energy deals
FERC appears set to expand its price curbs
Davis announces deal to boost summer power supply
Continuing coverage: California's Power Crisis
?

Mayor Dick Murphy, meanwhile, dispatched a letter to the president of the
California Public Utilities Commission pleading to be invited to the table.
"I need your assurance that the city will be permitted to actively
participate in the formation of any proposed settlement," the San Diego mayor
wrote. "The ratepayers of San Diego city and county deserve no less."
At stake: more than $300 million paid to SDG&E by its 1.2 million customers
over recent months.
Utility company executives claim the cash should go to shareholders, while
local elected officials, consumer advocates and even state regulators say the
money belongs to customers.
The disputed windfall accumulated over several months, as SDG&E used
long-term contracts to buy power at one price then sell the electricity to
consumers at a much higher rate.
Customers were billed the larger of the two costs, a practice SDG&E parent
Sempra Energy said was appropriate even though SDG&E has insisted for months
that under deregulation it merely distributes power.
"Shareholders deserve to make money on contracts that they took the risk
for," said company spokesman Ed Van Herik, who was unable to specify how much
electricity is bought and sold under the agreements.
SDG&E may still be benefiting from the long-term deals it reached with
Louisville Gas and Electricand Pacificorp.
The agreements ran between 1997 and the end of this year, according to San
Diego City Attorney Casey Gwinn. Because of the litigation, he was allowed to
review the contracts but is not permitted to disclose their value.
"There is a fundamental fairness principle that is at issue here," Gwinn
said.
Earlier this year, state regulators ruled that the value of the contracts
should help pay down a so-called balancing account -- some $750 million SDG&E
says it spent on power but hasn't been allowed to collect from customers.
Utility company lawyers appealed that ruling and the case remains locked in
litigation.
But in an apparent policy reversal, the PUC last week joined Sempra in asking
the appeals court to delay considering the claim while the governor's office
deals for the network of SDG&E power poles and transmission lines. Gwinn's
office was served notice of that filing Tuesday.
The value of the long-term contracts has become a critical issue in those
executive-level discussions, which San Diego area politicians say is unfair.
"It's a slap in the face," county Supervisor Dianne Jacob said. "They charged
us more and now they're making a big profit."
Michael Shames of the Utility Consumers' Action Network said a closed-door
deal between Davis and Sempra could undermine the PUC ruling that the SDG&E
contracts are ratepayer assets.
"The PUC will never hear it, the city of San Diego and UCAN will never get a
chance to argue it" in court, he said.
Davis spokesman Steve Maviglio said the governor is carefully weighing the
plight of San Diego consumers as he pushes ahead with negotiations to buy the
SDG&E electric grid.
"We're extremely close to an agreement with the utility, and first and
foremost in the governor's mind are the interests of San Diego ratepayers,"
he said. "The deal is going to be a balanced business transaction."
Acquiring the poles and wires that move power across the state is a key piece
of the governor's plan to resolve the electricity crisis in California. Davis
struck a deal with Southern California Edison, but Pacific Gas and Electric
declared bankruptcy in April, so those assets are in dispute.
Even though transmission lines make money for the three investor-owned
utilities, critics worry that buying the electric grid may not be wise
because the system is old and in need of more than $1 billion in upgrades.
PUC attorney Gary Cohen said he sympathizes with the San Diego County elected
officials who first brought the complaint over the SDG&E contracts to his
office. But ending the power struggle in California is more important.
"If there's a deal, those contracts are just one part of it," Cohen said. "I
understand their frustration. The contracts are up on appeal and they won.
But in fairness, everybody needs to wait and see what the whole resolution
will be."
Discussions include not only talk of a price for SDG&E transmission lines --
likely around $1 billion, according to Shames -- but also whether the utility
adequately hedged its power purchases against rising costs and the
reasonableness of other buying practices.
"There's a bunch of issues on the table," Cohen said. "It's difficult and
conceivably impossible to settle cases where you have a whole bunch of
parties if everybody is insisting they're part of the negotiations."
State Sen. Dede Alpert, whose September legislation established the
"balancing account" now in dispute, said she doesn't care who receives public
accolades for steering the value of the SDG&E contracts to ratepayers.
"I certainly expect this needs to be something that benefits the people of
San Diego," the Coronado Democrat said. "But whether the credit goes to the
city of San Diego, the PUC or the governor I don't think matters."
?

Vallejo City Council votes to switch work hours to save power

ASSOCIATED PRESS
June 13, 2001
VALLEJO ) In an effort to save an estimated $11,000 in electricity costs,
City Council members unanimously voted to switch city hall workers to a
four-day workweek.
The 7-0 vote came Tuesday as a result of the city's increased energy bills.
Since the Association of Bay Area Governments suspended its electricity
purchasing program, which allowed participants to buy power cheaper than
other cities, Vallejo has seen an increase from 9.5 cents a kilowatt hour to
20 cents per kilowatt hour.
The switch to 10-hour days begins July 9 and will continue through Nov. 9.
City Hall will be open 7:30 a.m. to 7 p.m. Monday through Thursday. The
current hours are 8:30 a.m. to 5:15 p.m. Monday through Friday.
Police and fire departments will be unaffected by the change.
City officials also recently negotiated with O'Hara Energy Corp. to install
special meters to monitor and control energy use at City Hall. That program
is expected to save $50,000.

Davis announces deal to boost summer power supply

By Ed Mendel
UNION-TRIBUNE STAFF WRITER
June 14, 2001
SACRAMENTO -- Gov. Gray Davis, claiming momentum toward solving the
electricity crisis, announced an agreement yesterday to keep unpaid small
generators on line this summer.
Davis said a pincers movement from Washington, D.C., and Sacramento is
telling energy price-gougers that "the days of figuratively raping and
pillaging California are over and there will be an accounting."
Attorney General Bill Lockyer announced that a criminal grand jury will begin
meeting in Sacramento early next month to investigate whether the state's
electricity and natural gas markets were manipulated and whether illegal
profits were made.
Davis also said he was optimistic about getting legislative approval of some
variation of his long-stalled plan to keep Southern California Edison out of
bankruptcy.
"I'm not saying it's a certainty," Davis said. "But I am saying there is now
a renewed interest in ratifying something like the memorandum of
understanding that we have worked out with Edison."
Davis said the Legislature can change the proposal, but the amendments must
be acceptable to him and to Edison. The Senate is planning to begin hearings
on the Edison plan in a few weeks.
The governor said pressure on electricity suppliers is coming from
investigations, long-term contracts that have lowered spot market prices and
increased energy conservation by Californians.
Davis said pressure in Washington is coming from congressional hearings and
the possibility that the Federal Energy Regulatory Commission will order
regional price limits or refunds for overcharges in California.
The governor also said three new power plants could begin operating in the
next 30 days, an apparent reference to Calpine's 500-megawatt plant near Yuba
City and its 559-megawatt plant at Pittsburg and a 320-megawatt Mission
Energy-Texaco plant in Kern County.
The small non-utility generators that operate as "qualifying facilities"
under a federal program are capable of providing about a quarter of the power
needed by the state.
In March, blackouts during two days were said to have resulted, in part, from
small generators who were not operating because they had not been paid. Davis
announced an agreement yesterday between Edison and its QF contractors.
The Davis administration thinks the agreement could produce an additional 100
to 300 megawatts of power (a megawatt is enough for 750 to 1,000 homes) this
summer because some generators had previously contracted to sell less power
than they are capable of producing.
Richard Katz, a former assemblyman from Van Nuys asked by Davis to negotiate
the agreement, said the QF contractors will receive an average of about 11
cents per kilowatt-hour during the five-year contracts.
Katz said generators who use renewable energy sources -- such as solar, wind,
geothermal, and biomass -- will be paid an average of about 7.37 cents per
kilowatt-hour.
He said that co-generators, who use natural gas and sell the excess heat to
businesses, will receive an average of 15 cents to 16 cents per
kilowatt-hour.
The generators will receive 10 percent of the money they are owed when the
contracts are signed, and the full debt eventually will be paid with
interest.
Katz said the new rates for the small contractors are tied to legislative
approval of the Edison rescue plan. But Senate President Pro Tempore John
Burton, D-San Francisco, disagreed, saying action by the Public Utilities
Commission yesterday implemented the agreement between Edison and the small
contractors.
?

FERC appears set to expand its price curbs

By Joe Cantlupe
COPLEY NEWS SERVICE
June 14, 2001
WASHINGTON -- Facing mounting political pressure, the Federal Energy
Regulatory Commission seems poised next week to greatly expand existing
energy price restrictions that now kick in only during emergencies.
Hints of the move surfaced yesterday as a Senate committee started
investigating FERC's response to the California power crisis.
The current order limits prices only when the state's power reserves dip
below 7.5 percent, the level at which a Stage 1 alert is called.
Critics, including Gov. Gray Davis, say that order is full of loopholes
because any price can be charged when no emergency has been declared, which
is most of the time.
Sen. Dianne Feinstein, D-Calif., told the Governmental Affairs Committee
yesterday that "it now appears that on Monday, FERC may extend this order to
the entire Western energy market and may ensure that the order stays in place
at all times."
"This sounds good on the face of it, and it may well be," added Feinstein.
"However, this situation is ripe for manipulation, as I believe they have
been doing," she said of power generators in the state.
She said that FERC is essentially considering a "flexible price cap" that,
like the existing order, sets the price on the cost of producing electricity
at the most-costly, least-efficient power plant.
FERC officials declined to discuss the agency's possible action next week, or
Feinstein's remarks.
FERC's previous "price mitigation" order went into effect May 29 and some
federal regulators say it caused wholesale electricity prices to plummet in
California. Megawatts that once cost an average of more than $300 -- and
sometimes several thousand dollars -- recently dropped to below $100 during
peak usage. A megawatt powers about 750 homes.
But some observers say that many factors are responsible for the sudden price
drop, including cooler weather, conservation and state long-term electricity
contracts.
At a meeting of the California Public Utilities Commission in San Francisco
yesterday, Chairwoman Loretta Lynch said she is "very encouraged" that FERC
is reconsidering its earlier decision, but said the result would be
"absolutely inadequate" because FERC would cap prices at a relatively high
rate, according to The Associated Press.
Yesterday's Washington hearing by the Governmental Affairs Committee was the
Democratic-controlled Senate's first foray into California's emotionally
charged power crisis and seemed a harbinger of intensified partisan wrangling
to come.
Feinstein and Sen. Barbara Boxer, D-Calif., used the hearing to make pleas
for immediate action on price caps and to complain about FERC.
"Today, we see no semblance of really meaningful regulation," Feinstein said.
Committee Chairman Joseph Lieberman agreed.
"The fact of the matter is that the California market is not even
functional," said Lieberman, D-Conn. "I think it's fair to say if the federal
government doesn't step in and provide temporary price relief, the natural
trend toward deregulation will come to a halt."
California officials have sought price caps to rein in what they term
outrageous electricity costs charged by out-of-state companies.
But the Bush administration has vehemently opposed caps, saying they would
discourage investment in new power plants.
In recent weeks, however, some key congressional Republicans have softened
their position, saying they would not oppose limited controls.
FERC itself -- heavily criticized by Davis and others as a do-nothing agency
-- appears to be showing a new face, with two new members appointed by Bush
promising more aggressive monitoring of the power industry.
Feinstein and Rep. Henry Waxman, D-Los Angeles, have sponsored bills that
would enact tougher price caps. The legislation is expected to be debated
later this month.
Sen. Fred Thompson, R-Tenn., the ranking Republican on the committee, opposed
Boxer and Feinstein's calls for price caps and said that California officials
were partly to blame for the state's problems for acting "too late."
?

State must bare secret energy deals

Judge orders release of pacts with suppliers
By Karen Kucher and Craig D. Rose
UNION-TRIBUNE STAFF WRITERS
June 14, 2001
The state's secret energy deals won't be secret much longer.
Even as some details about California's long-term power contracts began to
emerge, a Superior Court judge yesterday ordered the almost-full release of
the state's agreements with power suppliers by noon tomorrow to attorneys
representing news organizations and a dozen state lawmakers.
Judge Linda B. Quinn also set a hearing for June 27 to decide whether to
order the state to release information about its costly spot-market
electricity purchases, something the state only wants to do six months after
the transactions are completed.
The news organizations and legislators filed suit under the Public Records
Act, seeking the contracts that bind the state to more than $40 billion in
power purchases over the next decade.
Revelations that California has contracted to pay as much as $154 per
megawatt-hour to Constellation Energy Group Inc. quickly brought complaints
that the state had overpaid for electricity. The price of the commodity is
now plunging.
The Los Angeles Times? and at least one other newspaper, which obtained some
of the long-term state contracts, reported that power costs ranged to as low
as $58, and down to about $22 when the state supplies fuel to generating
plants.
By comparison, spot prices yesterday for power were from $55 to $65 per
megawatt-hour, far below levels earlier this year when prices averaged more
than $250 for several months and reached a high of nearly $3,900.
Until last June, prices rarely exceeded $50 per megawatt-hour. Deregulation
advocates said prices would decline as the market was opened up.
Gov. Gray Davis' strategy in dealing with budget-busting costs over the past
year has been to sign long-term deals to avoid buying in daily markets.
Yesterday, he said comparing contracted electricity costs to spot prices is
unfair.
"The price of spot market electricity is coming down because we have locked
in long-term contracts," Davis said. "We knew this going in. The purpose of
getting long-term contracts is to wean ourselves away from a spot market."
The governor referred to the often-cited criticism that California's soaring
power prices were caused partly by an excessive dependence on buying power in
daily markets, as opposed to under longer contracts.
Severin Borenstein, an expert in electrical deregulation from the University
of California Energy Institute, agreed that comparing current spot prices
with contract prices was unfair.
Speaking at a news conference yesterday hosted by the governor's press
secretary, Borenstein said the deals should be analyzed in the context of
conditions that existed as they were negotiated.
Spot prices during the first three months of this year, for example, averaged
about $285 per megawatt hour.
But a prominent critic of deregulation said that neither buying strategy
presented an acceptable option for consumers.
"They gouge you with spot prices or they gouge with term contracts," said
Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer
Rights in Santa Monica, which is expected to lead a ballot initiative next
year over deregulation.
"We have to get out of this deregulation disaster."
Parts censored
For months, Davis refused to make public details about the contracts, saying
that revealing information about the deals would put the state at a
disadvantage in contract negotiations.
The state became a major electricity buyer after the near-bankrupt utility
companies were unable to make purchases on their own.
This week, however, Davis agreed to release the contracts, with certain
portions censored. The governor's change of heart came as the newspaper
reports emerged and critics alleged that the state was overpaying.
A spokesman for Enron Corp. said yesterday that the state had many
opportunities to secure power at lower prices than it appears to have paid
under the contracts. Enron, however, declined to sell any power to the state
under contract.
Outside of court yesterday, Deputy Attorney General Tim Muscat said that the
state has secured enough contracts in the past month to feel comfortable
releasing long-term contract details.
The state has signed 61 contracts or agreements in principle that cover much
of the state's unmet electricity needs, he said.
"We have finally reached critical mass and now we think we can disclose the
contracts and still protect the public's interest in getting the best deal
and going forward with negotiating agreements," Muscat said.
But he added that the state wants to keep private some technical contract
information that could harm the state's contract partners.
Media opposed
"You are going to be looking at a contract that has 98 to 99 percent of the
content in it," Muscat told reporters gathered outside Quinn's San Diego
courtroom. "The only thing that could be removed are some technical issues."
Alonzo Wickers, an attorney representing the coalition of media
organizations, said he will oppose allowing the state to omit portions of the
contracts and will seek full information about spot market buys.
Wicker said that having complete access to the documents "is essential to the
public's full understanding of the contracts."
Wickers is representing the Copley Press, which publishes The San Diego
Union-Tribune; the Los Angeles Times; the San Jose Mercury News; the San
Francisco Chronicle; Dow Jones; the McClatchy newspapers; The Orange County
Register; Bloomberg, and The Associated Press.
Muscat had unsuccessfully sought 14 days to provide the documents to
plaintiffs. He said the state's business partners needed to have the
opportunity to raise objections to releasing the information. The contracts
contain confidentiality clauses.
Among those seeking a delay in the judge's ruling yesterday was an attorney
representing Morgan Stanley, a marketer in power transactions, who said he
had just learned of the litigation this week.
"Once the contracts are publicly disclosed, the eggs cannot be unscrambled,"
said attorney Eric Landau, who said his client's competitive position could
be hurt by the release of information.
Staff writer Ed Mendel contributed to this report.

NEWS ANALYSIS
Senate Democrats to Use Power to Illuminate Bush Energy Plan

By RONALD BROWNSTEIN, Times Political Writer

?????WASHINGTON--It was a sign of things to come when Sen. Joseph I.
Lieberman (D-Conn.) bounded into the chairman's seat Wednesday to convene a
hearing on electricity price controls in the Senate Governmental Affairs
Committee.
?????With their sudden ascension into the Senate majority, Democrats have
regained control of one of Congress' most effective weapons: the power to
summon witnesses to investigative hearings, backed by the authority to
subpoena documents. And that could signal a major shift in the debate on a
broad range of issues--energy policy foremost among them.
?????Though the Democrats lack a coordinated strategy, several committees
plan hearings through the summer and fall that will shine a sustained
spotlight on Bush administration energy policy decisions, and the role of
energy companies in rising gasoline and electricity prices. Through these
hearings, the Democrats hope to reshape the climate of public opinion around
the energy debate, pressure both federal regulatory agencies and private
companies to change their behavior--and score some political points by
painting President Bush's policies as a boon to the energy industry.
?????"What this allows us to do is continue some of the unpleasant
conversations that Bush is trying to avoid and that Bush could avoid in the
more controlled atmosphere when Republicans held the Senate," said one
Democratic strategist.
?????That prospect presents obvious problems for Bush, who already is
battling the perception in opinion polls that he favors producers over
consumers in the energy debate. But these inquiries also carry dangers for
Democrats, who spent six years charging that congressional Republicans
misused their investigative authority through repeated hearings into alleged
ethical misdeeds by the Clinton administration.
?????"The public doesn't want to see a party that's out for blood. If they go
down that path, the public will turn off just like it turned off on the
Republicans," said John Podesta, President Clinton's White House chief of
staff. "But what these investigations and oversight hearings can do is really
help tell a story about whose side this White House is on . . . and what the
impact is on real people's lives."
?????Senate Republicans wasted no time denouncing the hearings as a waste of
time. "Let me tell you what the name of the game is now: It's pure politics,"
said Sen. Frank H. Murkowski (R-Alaska), who chaired the Energy and Natural
Resources panel until the Democratic takeover.
?????Asked about Wednesday's proceedings, he replied: "Is that going to
produce any more energy?"
?????Conscious of both the opportunities and risks, Democrats are moving
cautiously to exercise their new clout. Lieberman has not issued any
subpoenas in his investigation into California's power crisis, and his first
hearing Wednesday was a sedate affair that broke no new ground.
?????Still, the authority to investigate has always been one of Congress'
most potent tools, particularly when Capitol Hill and the White House are
held by different parties.
?????Over the last century, congressional hearings have largely divided into
three categories. One tradition centers on allegations of ethical wrongdoing
in the executive branch--such as the probes that unearthed the Teapot Dome
oil scandal during Warren G. Harding's presidency, vetted the Watergate
burglary that led to President Nixon's downfall or examined the Whitewater
land deal and campaign fund-raising during Clinton's presidency.
?????Hearings also have been used to look for misbehavior in the private
sector, usually as an attempt to lay the groundwork for reform legislation,
such as the Depression-era hearings on the stock market crash that led to the
creation of the Securities and Exchange Commission.
?????And, finally, legislators have used the hearing forum as a competitor to
the president's bully pulpit--as a means to draw attention to ideas the White
House opposes. Probably the most successful example of that occurred in the
1960s, when nationally televised hearings by Sen. William Fulbright (D-Ark.)
on Vietnam crystallized opposition to the war.
?????During Clinton's presidency, Republicans emphasized ethics
investigations. So far, in the energy debate, Democrats are focusing on the
second and third categories.
?????"Hearings of the sort Lieberman is conducting aren't designed to disrupt
[like the hearings during the Clinton administration]; they are designed to
force new issues in the debate," said Johns Hopkins University political
scientist Benjamin Ginsberg, who has written extensively on the process. "As
long as the energy debate was conducted only inside the Republican Party, it
was a debate between proponents of free markets and proponents of freer
markets."
?????At Wednesday's hearing, Lieberman summoned half a dozen economists to
make the case for the price caps on electricity rates that California Gov.
Gray Davis supports and Bush adamantly opposes. Next Wednesday, Lieberman
will convene a second hearing that will give Davis a national forum to make
his case for price controls--then summon officials from the Federal Energy
Regulatory Commission to explain why they have rebuffed that request.
?????Sources say Lieberman is considering a third hearing that would summon
electricity producers, whom Davis has accused of "gouging" California.
?????As Lieberman proceeds, Sen. Jeff Bingaman (D-N.M.), the Energy
Committee's new chairman, is scheduling hearings next week on electricity
prices and the Environmental Protection Agency's decision to continue
requiring the use of ethanol as a fuel additive in California.
?????Sen. Carl Levin (D-Mich.) is advancing on a slower but potentially
broader track as he examines rising gas prices. The subcommittee he heads
intends to ask major oil companies to voluntarily produce various documents
on the issue, a request aides expect will be followed up with a subpoena
during the summer. The aides say Levin is not likely to require oil company
executives to publicly testify until late fall.
?????Sen. Larry E. Craig (R-Idaho) predicted Democrats will have a difficult
time attacking Republicans on energy. "They're going to try to make politics
out of a crisis," he said. But "for eight years [under Clinton], there has
been this silent echo of nothing in the area of production. . . . Under their
watch, little to nothing has been done, and many forms of energy have been
discouraged."
?????Even inside Democratic ranks, opinion varies on what the hearings might
accomplish.
?????Davis aides believe the forums could create momentum for price-cap
legislation sponsored by Sens. Dianne Feinstein (D-Calif.) and Gordon Smith
(R-Ore.). But that bill faces difficult odds in the Senate; the more
practical benefit of the hearings, one source close to Lieberman said, may be
to increase pressure on FERC to act. That may already be happening: Senior
FERC officials told The Times on Tuesday that in response to the growing
political heat, the agency is considering a significant expansion of the
price limits it has already ordered.
?????Likewise, Levin believes that the prospect of subpoenas and compelled
public testimony later this year "will have a moderating quality" on gasoline
price and supply decisions that oil executives make this summer, as one aide
put it.
?????More broadly, Democrats believe any evidence that either oil or
electricity producing companies have manipulated price increases will make it
tougher for Bush to sell an energy agenda that stresses increased production.
And during the hearings, Democrats see an opportunity to solidify their
contention that the administration has given the energy industry too loud a
voice in setting policy.
?????"One of the things these hearings can do is begin to pull back the
curtain on . . . who is in the room," Podesta said. "Who is giving the
advice? Who is calling the shots?"
?????Yet Democrats also appear acutely conscious of the danger of appearing
overly partisan, particularly Lieberman, who has meticulously cultivated a
reputation for working across party lines. Tellingly, sources close to both
Davis and Lieberman say that the governor's appearance at next week's hearing
was more his idea than the senator's. "The goal here isn't to get Bush,"
insisted one close Lieberman advisor. "It's to crystallize some of the
differences in terms of policy approaches."
---
?????Times staff writer Richard Simon contributed to this story.

U.S. Invites Private Funding for Grid Expansion
Bush plan targeting Path 15, a key transmission point in the Central Valley,
sets up a showdown with the state.

By NANCY VOGEL, Times Staff Writer

?????SACRAMENTO--Private energy companies could own rights to a key piece of
California's electrical transmission grid, thereby gaining influence over the
flow of electricity and its price, under a plan launched Wednesday by the
federal government.
?????At the direction of President Bush, a federal power agency Wednesday
invited "outside parties" to help pay for the expansion of Path 15, an
85-mile stretch of high-voltage wires in the Central Valley that constrains
the flow of power.
?????Pacific Gas & Electric owns the original wires, which can move about
3,000 megawatts of power, but the financial backers of an expansion would win
the rights to move an additional 800 megawatts on the new lines.
?????Any company or utility hoping to move electricity through that choke
point would have to pay the owners of the transmission rights a fee and abide
by their rules.
?????The federal solicitation for investment sets up a showdown with
California, which is urging Pacific Gas & Electric to expand its existing
lines at Path 15. Gov. Gray Davis also is pursuing outright purchase of the
transmission grids owned by PG&E, Southern California Edison and San Diego
Gas & Electric.
?????"What you have is two processes on two different tracks," said Jim Pope,
president of a group of municipal utilities eager to expand Path 15.
?????He said the hope of his organization, called the Transmission Agency of
Northern California, is that "we don't go down different tracks and end up in
a train wreck at Path 15."
?????The federal government has power of eminent domain, like PG&E, but would
not have to go through a state Public Utilities Commission review process to
expand Path 15.
?????Path 15 will become increasingly important to the state as the dozens of
long-term contracts recently signed with power producers take effect. Many of
those contracts are for power generated in Southern California, which must be
squeezed up Path 15 to meet demand in the Silicon Valley and San Francisco.
?????Ray Hart, deputy director of the state Department of Water Resources,
which signed the power contracts, called the federal effort to attract
partners on a Path 15 expansion project "disconcerting."
?????"I think the governor's plan to acquire the transmission [grid] is good
for the people of California," said Hart. "I think it protects them from
marketers that would have a tendency to want to lock it up and jack the rates
up."
?????Federal law mandates that transmission grid owners offer fair fees and
open access. But owners of transmission rights can sell that ability to move
electricity in a secondary market, and experts say that in the complicated
rules that govern transmission rights, there is room for manipulation.
Transmission constraints can influence price by barring some buyers and
sellers from reaching one another.
?????"If you're going to pay for 25% of the line, then you're going to want
25% of the line for your own use," said Armando Perez, director of grid
planning for the California Independent System Operator, which manages much
of California's electron highway system. "It makes less transmission
available" for others.
?????The Path 15 power lines near Los Banos have been eyed for expansion for
at least a decade. As California's demand for electricity swung upward in the
last five years and the state opened its electric industry to competition,
the congestion at Path 15 worsened. The choke point was a culprit, grid
operators say, in the mid-January blackouts in Northern California.
?????As part of his national energy plan announced last month, Bush directed
the U.S. Department of Energy to investigate outside interest in financing a
fix for Path 15.
?????U.S. Energy Secretary Spencer Abraham put the federal effort in the
hands of the Western Area Power Administration, which sells the electricity
produced at 55 powerhouses on federally built reservoirs in the West.
?????"Western Area Power Administration wants you," states a news release the
agency issued Wednesday. "That is, if you are interested in partnering to
finance and co-own necessary improvements to relieve a transmission
bottleneck in California."
?????Just how much transmission capacity the backers of the project would win
title to is up for negotiation, said power administration spokesman Dave
Christy.
?????Energy industry officials said they expect interest from both
electricity and natural gas companies. Companies have until July 12 to
indicate how much they would be willing to finance of a job expected to cost
$200 million to $300 million and take at least two years.
?????Representatives of several power generators and marketers said Wednesday
that it was too early to know whether their companies would seek to gain
transmission rights on Path 15.
?????But Trans-Elect, a company based in Washington, D.C., is definitely
interested, said Executive Vice President Robert L. Mitchell.
?????He said he intends to send a letter next week to Southern California
Edison chief John Bryson, offering to buy the utility's transmission grid for
$1.8 billion. Trans-Elect aims to create a national network of independently
owned electrical grids, with profits coming from transmission fees.
?????Davis has offered Edison $2.76 billion as part of a complicated plan to
restore the utility's financial health. Edison officials had no comment
Wednesday on Mitchell's offer.

Blackouts and Businesses: Dying for an Exemption?

By JOSEPH MENN, Times Staff Writer

?????Never mind getting stuck in an elevator. Next time there's a power
outage, pray you're not at La Scala.
?????The upscale Beverly Hills eatery says that 26 to 100 of its patrons are
likely to die, "depending upon how many guests are in the restaurant during a
blackout, and how many guests are subjected to contaminated food."
?????If "likely to die" sounds a little harsh, that prognosis is surprisingly
common.
?????La Scala is one of more than 10,000 businesses and public agencies that
filed applications in the last few weeks to be spared from an anticipated 20
to 200 hours of rolling blackouts once temperatures start rising this summer
and electricity gets more scarce.
?????Dental offices, cemeteries, churches, beauty salons, hotels, law firms
and at least one dance studio are vying for the expected handful of
exemptions, all arguing that members of the public could hurt themselves in
the dark or have heart attacks in a panic.
?????Food poisoning is just the beginning. Applicants raise the specter of
chemical spills, heavy-machinery failures, medical emergencies and even civil
unrest.
?????Because the Public Utilities Commission has declared that only health
and safety concerns--and not economic hardship--will qualify businesses for
the new round of discretionary exemptions--some companies are letting their
imaginations flourish.
?????Evidently reluctant to simply throw away spoiled food, the restaurant
and catering industries alone could be responsible for scores of
bacteria-related massacres, were one to accept at face value the applications
made public this week on a PUC computer terminal.
?????La Scala Vice President Wendy Ham declined to be interviewed about the
restaurant's filing with the commission. Other businesses were more
forthcoming.
?????Santa Ana catering firm A Perfect Affair, for example, says in its
application that it is likely to serve last meals to some 100 to 1,000 souls.
?????"I didn't fudge that at all," said owner Stephen Server. "It was
basically my opinion. . . . I'm not a soothsayer."
?????Galley Catering of Long Beach, more modestly, foresees one to three
deaths and 100 to 1,000 minor health problems resulting from "food-based
bacteria issues." Of course, business there could be slow.
?????The PUC recently extended the filing deadline to Friday for applications
via a Web site, www .rotating-outages.com. The agency hired Menlo Park
engineering consultant Exponent Inc. to rank the sometimes apocalyptic
visions--all submitted under penalty of perjury--and plans to vote on them
Aug. 2.
?????Public Utilities Commissioner Carl Wood said the exaggeration is
regrettable but not surprising.
?????"It doesn't make it easier when people stretch the law of probability,
but it's to be expected," Wood said. "We understood we could get people
trying to make their best case."
?????Such apparent self-interest is nothing new, said James C. Williams,
author of "Energy and the Making of Modern California" (1997).
?????"People just don't care a whit about the larger society as long as they
make money," said Williams, a professor at De Anza College.
?????Exponent's project manager, Subodh Medhekam, estimates that more than
300 companies say they each will lay waste to at least 1,000 lives in the
event of a blackout. Hundreds more claim they will cause at least one human
being to pass on.
?????"There are some people who may not have been all that truthful,"
Medhekam said. "You can see our problems here." He said Exponent isn't
blindly accepting anyone's predictions.
?????Among those that say they pose the most dire threats in the event of
blackouts are broadcasters, factories handling noxious chemicals and those in
the ordinarily nonthreatening world of food service.
?????With the latter, size is no obstacle. At tiny but apparently potent J&W
Liquor in Blythe, owner Joyce Wong said in her filing that she sells
perishable foods to more than 100 customers a day, and that at least that
many are likely to expire if the power is off for more than two hours.
?????Many key public safety operations already are exempt from conservation
blackouts, including hospitals, defense outposts, utilities, air and sea
transport communications, trains and other mass transit, and radio and
television broadcasters that carry emergency information.
?????Then there are the lucky homes and businesses that share the same piece
of the electric network as providers of essential services, bringing the
total amount of protected power to 50% of the peak load. The PUC says it can
exempt a maximum of an additional 10% through the new program.
?????Some of those already exempt have applied again, either because they
don't know they are protected or because the utilities can knock them off
that list if they have enough backup power.
?????KSON-AM radio in San Diego said more than 1,000 people would probably
die if it couldn't broadcast emergency news. Cocola Broadcasting Cos. of
Fresno said that if its 20 television stations lost power, as many as 100
people would perish.
?????Cocola President Gary Cocola conceded that some viewers might just turn
to another channel to get emergency information.
?????"Maybe the guy who filled that form out got a little ambitious," he said
in an interview. But some who watch his stations' broadcasts of the Home
Shopping Network are more at risk, he said.
?????"The women who watch our station put that on and leave it on. They
become addicts," Cocola said. "If the channel goes off the air, they may not
be switching around."
?????Other applicants make a more persuasive case, such as dialysis centers
and medical offices.
?????But even some health-care providers may be stretching the point.
?????Daly City's Home Sweet Home is licensed to care for 57 elderly residents
with dementia, all of whom wear sensors to alert the staff if they wander off
the grounds.
?????In the event of a blackout, administrator Carlene Burton said in an
interview, the home would have to station a staff member at every door.
?????Not ideal, certainly, but a far cry from the 26-plus deaths predicted in
the company's application. No one was hurt during the last blackout, owner
Yelka Matijas said. But the next time, she said, "I don't want to think about
it."
?????Another set of applicants took advantage of the electronic form's
failure to specify that the potential deaths must be human. Several
veterinary clinics complained that patients could die on the operating table.
?????Nightclub owners also applied in droves.
?????The House of Blues in West Hollywood wrote that, even though it has an
emergency lighting system, severe health effects were "somewhat likely" if a
show were suddenly forced to go acoustic.
?????"People who have consumed alcohol can become overheated very quickly, as
well as [fail to use] good judgment in remaining calm," the club wrote. It
added, a bit cryptically, that this is true "especially depending on the
demographic for that show."
?????Many retailers realize they face long odds of winning exemption. Yet
Gibson Jewelers in Escondido said that as many as 10 deaths are "somewhat
likely" in a brief outage because it anticipates an armed robbery.
?????Interestingly, most of those predicting horrific consequences
simultaneously admit they have no backup generators--providing plaintiffs
lawyers with the documentary equivalent of a smoking gun, should someone
actually get hurt.
?????Others have complained that sudden blackouts would cut power to workers
operating heavy machinery, but they conceded in interviews that they hadn't
mentioned such risks to the workers themselves.
?????Commissioner Wood said that as an application nears approval, the
business must sign a statement supporting its claims. He wouldn't rule out
penalties for misstatements but said they wouldn't be a high priority.
?????"We're not playing 'gotcha!' " he said.
?????Alongside those with more creative applications, small businesses from
the Gardena Bowling Center to Gucci America in Beverly Hills said that no one
was likely to be harmed if the lights went out but asked to be spared anyway.
(A Los Angeles Times printing plant in Costa Mesa falls in that category.)
?????"People are treating it like a lottery," said PUC consultant Medhekam.
?????One thing that might have made his task easier, he said, would have been
simple: a $100 application fee.
?????"That would have weeded out some frivolous applications," he said. "And
the state would have made a lot of money."

Price for More Megawatts Is More Smog
Pollution: Relaxed rules for "peaker" plants could push Ventura County over
ozone limits. The effect elsewhere may prove minimal.

By GARY POLAKOVIC, Times Environmental Writer

?????Gov. Gray Davis' decision this week to relax emission controls at power
plants will help keep the juice flowing, but will also retard progress
against smog.
?????The changes are bound to cause mischief for some California areas on the
cusp of achieving healthful air after more than 30 years of effort. Even a
little extra pollution could be enough to thwart attainment of the national
health-based ozone standards in the Bay Area, San Diego and Ventura County,
officials say.
?????Moreover, in case the governor's strategy doesn't work, he has left open
the option of tapping the dirtiest power source available--legions of backup
diesel generators. Those 12,000 engines would provide a few hundred more
megawatts, but at a terrible price for air quality, because they lack
controls and can spew about 10 times more pollutants than the very dirty
"peakers" that Davis exempted from emissions controls Monday.
?????"We're trying to make the best of a bad thing, but in the short term, we
are getting rolled. Air quality is going to suffer more this year, and there
will be some impacts," said Dick Baldwin, executive officer for the Ventura
County Air Pollution Control District.
?????Across most of Southern California, however, the energy crisis is not
likely to lead to dirtier air this year, air quality officials say.
?????The reason is that California's power plants, some of the cleanest in
the nation, contribute just 5% of the smog-forming emissions during summer
and half as much the rest of the year. The lion's share of the Southland's
air pollution comes from cars and trucks. Two-thirds of the 16 power plants
in the region will be equipped with devices to render them 90% cleaner by
summer, according to the South Coast Air Quality Management District, which
regulates air pollution in Los Angeles, Orange and parts of Riverside and San
Bernardino counties.
?????Those improvements should reduce overall power plant emissions about a
third this year, although pollution from individual generators may be higher,
according to the state Air Resources Board.
?????For the most part, California air quality officials say the challenges
they will face because of the energy crisis are temporary and surmountable,
but they acknowledge that they are under intense pressure from politicians,
energy companies and manufacturers to relax regulations. California has more
smog than any other state and the world's most stringent and comprehensive
program to tame it, although progress toward a healthy environment is still
slow.
?????On the other hand, officials are attempting to balance the need for a
clean environment with the need to keep the economy humming. The power
crisis, too, can be hazardous to people when blackouts knock out traffic
signals or cause heavy equipment to malfunction in the workplace.
?????An executive order that Davis issued Monday lifts emissions limits on
heavily polluting power plants, allowing municipalities and energy companies
to produce as much power, and smog, as necessary.
?????The decision was reached after utilities such as the Los Angeles
Department of Water and Power noted that operating restrictions on so-called
"peaker" plants were leaving hundreds of megawatts of capacity unused.
Peakers are typically run by gas-fired turbines, similar to jet engines. They
produce limited power, but lots of pollution, which is why their use was
strictly controlled in the first place.
?????Under the governor's plan, power producers will pay $15,000 per ton of
extra smog produced by the turbines. The money will go into a fund to pay for
cleaning up dirty trucks, buses, boats and farm equipment to offset the
pollution from the power plants. Government estimates show that the plan
could provide up to 1,200 megawatts of additional electricity, but an
additional 500 tons of pollutants this summer.
?????Meanwhile, emissions from cars, trucks, buses and consumer products
continue to decline. Air quality is dramatically better today in the
Southland than it was a decade ago. Credit rigorous controls on everything
from lighter fluid to paint, oil refineries to autos, bakeries to landfills.
?????The trend of improving air quality should accelerate as power companies
pay the millions of dollars in fees and penalties to help fund smog-cutting
programs. The funds will be used to switch vehicles, farm equipment and boats
to clean fuels, many of which can be converted this year to help offset power
plant emissions, said Catherine Witherspoon, policy advisor for the state air
board.
?????"On the whole, there's not going to be a lot more smog. We expect
declining emissions from power plants," Witherspoon said.
?????Across Southern California, power plant emissions are up this year while
smog levels remain largely unchanged. Boilers and turbines have released more
than 2,045 tons of pollutants so far--twice as much as they had by this time
last year. Yet just 11 days of unhealthful ozone levels have been recorded
anywhere in the region so far this year. The peak ozone reading has been 0.18
parts per million, a level comparable to last year's, said Joe Cassmassi,
senior meteorologist for the AQMD.
?????Smog levels are strongly influenced by weather, and in the approaching
summer ozone season, Cassmassi said, conditions this year should be no worse
than last year. In fact, he forecasts that by August tropical storms from the
Gulf of California will bring unsettled air, which tends to reduce smog. He
said that by year's end the region can expect a gradual return to El Nio
conditions, which portends an early end to smog season.
?????"The way the weather is lining up, it will be a typical year in a
long-term trend and the trend is toward improving air quality," he said.
?????The increased emissions from power plants, however, might be just enough
to add one or two smoggy days to some communities with little margin for
error. San Diego, the Bay Area and Ventura are close to meeting the federal
one-hour ozone standard--the benchmark for healthful air and the culmination
of a multibillion-dollar cleanup effort spanning decades. Those communities
are racing against Clean Air Act deadlines that, if not met, could trigger
federal sanctions and restrictions on highway funds.
?????"If we can make it through November without having two more violations
this year, we would be in attainment," said Dick Smith of the San Diego
County Air Pollution Control District. "That means the air quality is not
being exceeded, and it would allow certain onerous and burdensome regulations
to go away."
?????The margin is even closer in Ventura County, which was once one of the
smoggiest places in the nation. Now the county is almost in compliance with
air quality standards, but just one day of unhealthy ozone would push it over
the line, Baldwin said. A 132-megawatt Reliant Energy Co. peaker plant in
Oxnard may be the deciding factor; it might produce up to 12 tons daily of
smog-forming nitrogen dioxide this summer, a 25% increase in those emissions
in the county, Baldwin said.
?????Air quality officials opposed the governor's decision, but acquiesced
with an understanding that an alternative plan to press into service backup
diesel generators would be delayed.
?????"In the short term, there may be some negative impacts on air quality,
but if it avoids use of diesel backup generators, it's a small price to pay,"
said Barbara Lee, president of the California Air Pollution Control Officers
Assn

PUC Acts to Aid Alternative Energy Suppliers
Regulators permit utilities to modify contracts with small power providers to
maximize production.

By TIM REITERMAN and DAN MORAIN, Times Staff Writers

?????SAN FRANCISCO--Moving to end disputes that have threatened to increase
blackouts, state regulators Wednesday took steps to stabilize prices paid to
hundreds of alternative-energy producers, while encouraging them to increase
the amount of power they provide to California utilities this summer and
beyond.
?????The Public Utilities Commission gave permission for the utilities to
change their contracts to make them more attractive to the generators, which
supply more than a quarter of the state's electricity.
?????PUC President Loretta Lynch said that such contracts would provide long-
term stability and reasonable prices for generators that rely on expensive
natural gas and for producers of renewable energy such as solar and wind
power.
?????"It means the maximum amount of power will be available this summer,"
she said.
?????The disputes between the energy producers and the utilities that owe
them hundreds of millions of dollars have erupted in state courts, U.S.
Bankruptcy Court, the PUC and the state Capitol. Although the vast majority
of the generators are delivering power, many have said they are in financial
difficulty and want out of their contracts with the utilities.
?????The commission specifically encouraged the utilities to adopt five-year
contracts at fixed prices proposed by the Independent Energy Producers and
incentive payments to induce generators to produce more power than their
contracts currently require.
?????The PUC also unanimously ratified settlements reached Tuesday between
Southern California Edison and dozens of small power producers, but the
agreements are tied to Gov. Gray Davis' controversial deal to rescue the
Rosemead-based utility from near-bankruptcy.
?????"It is a substantial move forward," Davis said.
?????Jerry Bloom of the California Cogeneration Council also praised the
PUC's action as a step forward for the state's 600 small generators. But he
cautioned that 300 of the companies providing power to Pacific Gas & Electric
and San Diego Gas & Electric still do not have contracts that provide a fair
return.
?????"That leaves half of them operating at a loss, and the possibility of
severe blackouts still hovers over the state," Bloom said.
?????Before the Southern California Edison agreements can be consummated,
Davis said, the state Legislature must approve the complex deal he struck
with the utility in April to allow it to pay off its debts and regain
financial stability. The deal calls for the state to buy Edison's
transmission lines for nearly $2.8 billion and issue up to $3.5 billion in
ratepayer-secured bonds to allow the utility to pay off debts from
electricity purchases.
?????Davis' Edison rescue plan has stalled, with virtually no support in
either house, and the governor urged that lawmakers begin hearings on it.
Otherwise, he warned, the Southern California utility could go bankrupt.
?????Senate leader John Burton (D-San Francisco) said many lawmakers from
both parties are convinced that Davis is trying to place the Legislature in a
position to take political heat if the Edison deal goes sour and the utility
follows PG&E into filing for bankruptcy protection.
?????In a filing with the PUC, Edison said its agreements with the generators
will provide significant benefits to the utility and its ratepayers, the
alternative-energy producers and the state "by providing for stable and
reasonable . . . pricing over the next five years at a time when both pricing
and supply are highly uncertain."
?????The agreements--reached Tuesday after months of negotiations that were
facilitated by the governor's office--address the issues of repaying debts to
generators while establishing prices for future sales.
?????Edison stopped paying those generators in November and resumed in late
March only under orders from the PUC. PG&E, which also resumed payments in
March, had been paying 15 cents of each dollar owed its alternative producers.
?????By the time the PUC ordered continuing payments to the alternative
energy producers, which Edison owes as much as $1.3 billion, the small
companies were running out of cash and some had stopped operating, helping to
cause two days of statewide rolling blackouts in March.
?????Under terms worked out with key representatives of the
alternative-energy producers, Edison would pay 10% of what it owes the
generators for electricity produced between last Nov. 1 and March 27. In
addition, Edison would pay 7% annual interest on the debt.
?????A second 10% payment would be made when Edison is restored to
credit-worthiness through approval of the rescue deal by the PUC and the
state Legislature or by some other solution, Edison said. Full payment would
be made to the generators five days after Edison receives funds to pay off
its own debts. Edison also agreed to pay producers of renewable energy a
fixed rate of $53.70 a megawatt-hour for five years.
?????The PUC, meanwhile, failed to meet a deadline of last Friday for acting
on aspects of Davis' deal with Edison. "I have urged them to move more
quickly," the governor said.
---
?????Reiterman reported from San Francisco, Morain from Sacramento. Times
staff writers Nancy Rivera Brooks in Los Angeles and Miguel Bustillo in
Sacramento contributed to this story.

State Still Seeks to Veil Portions of Power Pacts

By TONY PERRY, Times Staff Writer

?????SAN DIEGO--Despite statements from Gov. Gray Davis that full disclosure
of the state's long-term power contracts was imminent, attorneys for the
state balked Wednesday at disclosing the contracts until key details are
removed.
?????The attorneys also opposed making public any short-term "spot market"
contracts for at least six months, warning that to divulge those contracts
now would undercut the state's negotiating stance and ensure summer blackouts.
?????Attorneys for several news organizations and Republican state
legislators accused the governor's attorneys of stalling and making the issue
needlessly complex.
?????On Tuesday, Davis dropped his earlier opposition to making long-term
contracts public and indicated that the contracts might be made public as
early as Wednesday.
?????But Deputy Atty. Gen. Tim Muscat, representing Davis, asked Superior
Court Judge Linda Quinn for two weeks to prepare redacted versions of the 38
long-term contracts that total nearly $43 billion.
?????Opposing attorneys, who had sued to make the contracts public,
complained that the facts that Davis wants to keep secret are key to
understanding the contracts and to determining whether the governor has
obligated taxpayers to pay inflated prices.
?????"They've conceded the public interest [in disclosure] and no matter how
thin they slice the baloney, that concession is really deafening," said
Sacramento attorney Charles Bell, representing 10 legislators who assert that
keeping the contracts secret violates the California Public Records Act.
?????Quinn ruled that the long-term contracts must be made public by noon
Friday although she will allow the governor to keep certain portions secret
at least until June 27 while she considers legal arguments from both sides.
?????She expressed annoyance at the slow pace of negotiations between the two
sides and the apparent slowness of the attorney general's efforts to alert
private companies that their contracts with the state might be made public.
?????"This is an amazing situation," Quinn said.
?????Eric Landau, Orange County attorney for Morgan Stanley Dean Witter &
Co., the Wall Street brokerage firm that serves as an energy marketer, said
he had only recently learned that the contracts might become public. "All we
are asking for is the ability to review the proceedings," he said.
?????Muscat said the governor wants to avoid details including indexes that
would link the price of electricity to natural gas prices, delivery points
and transaction costs.
?????Disclosure of those terms, he said, would provide information to
competitors of the companies that have signed agreements with the state and
allow for market manipulation.
?????The Times reported Wednesday that the state has committed to buying
power at prices up to $154 a megawatt-hour during peak demand periods and
more than $95 for power at times when demand is low.
?????By comparison, the state recently purchased peak power for less than
$100 an hour and less than $20 an hour at night.

Plan would allow private energy companies to own grid rights

Thursday, June 14, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/14/state0
930EDT0157.DTL&type=news
(06-14) 06:30 PDT SACRAMENTO (AP) --
The federal government has endorsed a plan that calls for private energy
companies to purchase the rights of a key piece of California's transmission
grid.
The plan would allow those private companies to control the flow of
electricity and charge transmission fees to any agency or utility wanting to
move power on the lines.
The U.S. Department of Energy on Wednesday invited private energy companies
to help pay for the expansion of the transmission grid known as Path 15 -- an
85-mile stretch of high-tension wires in the Central Valley. The wires can
move about 3,000 megawatts of power between Southern California and Silicon
Valley and San Francisco.
Pacific Gas & Electric owns the original lines and has been urged by state
officials to expand the grid's capacity.
The wires may become increasingly important this summer when rolling
blackouts are expected. Long-term contracts recently signed by the state and
power wholesalers are for electricity produced in Southern California but
transported to Northern California through Path 15.
Gov. Gray Davis has sought to outright purchase transmission grids owned by
PG&E, Southern California Edison and San Diego Gas & Electric.
Several power generators said Wednesday they didn't know whether they would
pursue rights to the Path 15 grid. Expanding the grid will cost between $200
and $300 million and take two years to complete. Companies have until July 12
to express their interest to the federal government.
One company based in Washington, D.C., has shown interest in Southern
California Edison's grid. Trans-Elect executive vice president Robert L.
Mitchell said he plans to send a letter next week to Edison chief John Bryson
offering to buy the grid for $1.8 billion.
,2001 Associated Press ?

News briefs on the California power crisis
The Associated Press
Thursday, June 14, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/14/state0
624EDT0135.DTL&type=news
(06-14) 03:24 PDT CARLSBAD, Calif. (AP) --
San Diego Gas & Electric officials told a group of business leaders that
customers can expect about 150 hours of rolling blackouts this summer.
The figure was the utility's latest estimate and was announced Wednesday at a
workshop that drew about 100 people.
"For the summer, that means about 35 days with interruptions if (the
temperatures and power generation) conditions we foresee present themselves,"
said Mike Manry, emergency services manager for SDG&E. "As business owners,
get prepared for multiple days in a row of interruptions."
Customers can sign up to receive either an e-mail warning or a page if a
blackout should occur in their neighborhood. The blackouts are expected to
last up to 90 minutes.
CHULA VISTA, Calif. (AP) -- The state's Energy Commission has paved the way
for a new power plant to be built in Chula Vista despite city opposition.
The commission Wednesday approved plans submitted by Ramco Inc. for a natural
gas-fired generator that can produce up to 62 megawatts during peak usage.
The company will begin construction June 25 and the plant must be operational
by Sept. 30.
The site already is home to a 44-megawatt plant.
The commission has approved 10 licenses for new energy sources after Gov.
Gray Davis gave it the authority to fast-track plant production.
City officials opposed Ramco's additional plant because they fear it would
contribute to air pollution and noise. The commission said Ramco must extend
a sound wall on the 3-acre site to curb noise.
,2001 Associated Press ?

Refineries may keep chugging in outages
PUC looks to grant blackout exemption
Kelly St. John, Chronicle Staff Writer
Thursday, June 14, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/14/M
N58088.DTL&type=news
Demands by the state's oil refineries for protection from rolling blackouts
should be met, a member of the state Public Utilities Commission said
yesterday in releasing a draft decision to grant the exemption.
While the recommendation from PUC Commissioner Carl Wood still faces a full
hearing by the five-member PUC later this month, oil industry officials
consider it a promising development in their intense lobbying campaign to
keep refineries running.
"This is a very good step," said Scott Folwarkow, spokesman for the Valero
refinery in Benicia, which has no backup generators to use in blackouts. "We
do play an essential role, and (the refinery) needs to be protected."
The industry has repeatedly issued warnings that gasoline prices would soar
if refineries were hit by rolling power blackouts. Power interruptions of
just an hour can send refineries out of commission for days, shrinking gas
supplies and leading to higher prices.
Earlier this month, San Francisco-based Chevron Corp. warned that it would
reduce gasoline production at its two California refineries unless it was
exempted from power outages.
Gov. Gray Davis has also urged the PUC to designate petroleum refineries as
"essential-use customers" who are exempt from blackouts because their
services are needed for public health and safety.
A Davis spokesman declined comment on the draft decision last night.
Skilled-nursing facilities and water agencies have joined oil refineries in
intense lobbying for the "essential-use" designation. But the PUC has a
limited number of exemptions it can offer to businesses.
By the agency's own standard, at least 40 percent of the electrical load must
be exposed to blackouts. Today, half of the load is already exempt, leaving
just a 10 percent margin to divide between facilities.
Yesterday, a PUC administrative law judge issued a companion ruling asking
energy producers, the California Energy Commission and electric utilities to
provide additional information on fossil fuel production.
The PUC will consider that information, along with public comment, when it
votes on Wood's draft decision June 28.
"While the economic impacts caused by disruption of fossil fuel production
are potentially devastating," Wood said, "the commission must balance these
economic impacts against the potential impacts on public health and safety
asserted by applicants in our other exemption process."
Last January, the Bay Area got a glimpse of what can arise when refineries
are hit by power outages.
Pacific Gas and Electric Co. interrupted power for Kinder Morgan Energy
Partners, a pipeline company servicing local refineries, for four consecutive
days. The curtailments threatened to cause a fuel shortage at San Francisco
International Airport before politicians -- including Mayor Willie Brown --
intervened.
E-mail Kelly St. John at kstjohn@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 17

FERC set to extend power caps
Government sources say price controls will be round-the-clock
Carolyn Lochhead, Chronicle Washington Bureau
Thursday, June 14, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/14/M
N215916.DTL&type=news
Washington -- Federal regulators are poised to impose round-the-clock price
restrictions on wholesale electricity sold to California, a move short of
what Democrats have urged but far stronger than what the Bush administration
has for months indicated it was willing to do.
The Federal Energy Regulatory Commission is expected Monday to extend its
April 26 order -- which limits prices generators can charge during power
emergencies -- to apply at all times and across the entire Western region,
sources inside the agency confirmed yesterday.
FERC also is expected to increase market monitoring, expand refunds for
overcharges by generators during power emergencies and order generators to
sell into the Western grid during power emergencies, among other things.
FERC Commissioner William Massey, a Democratic appointee who strongly
dissented from the April order because he believed it was too narrow, would
not comment on the expected action other than to say he had been urging
greater intervention relentlessly for some time.
Although power prices are plunging for the first time since the crisis began,
Massey said it was "too soon to declare victory."
"We don't know what's going to happen in the next hour or tomorrow or the
next month," Massey said. "We are certain this is a market short of power
plants. Supply and demand are not in reasonable equilibrium, and, when that
is true, prices can soar at the drop of a hat and the wealth transfer can be
exorbitant."
Massey said that until supply and demand came into "reasonable balance" in
California, which he expects to occur in 18 months to two years as new power
plants come on line, "there has got to be 24-hours-a-day, seven-days-a-week
price mitigation in effect to protect consumers, period."
The expected FERC action coincides with rising political pressure on the
agency from Democrats and increasing numbers of Republicans to intervene more
forcefully in California's power market despite fierce resistance to price
controls from the Bush administration.
REINFORCEMENTS
That pressure ratcheted up sharply when Democrats assumed control of the
Senate and began scheduling legislation to order FERC to impose price caps.
The agency's move also coincides with the arrival of two new Bush appointees,
Patrick Wood III and Nora Mead Brownell, who are widely viewed as more
receptive to intervention than the current chairman, Curt Hebert, a
Republican appointed by former President Bill Clinton and named chairman by
President Bush.
The agency's April order, which took effect May 26, puts a ceiling on prices
pegged to the least efficient power plant. It has been applied during two
power emergencies so far. Experts are divided on how much, if any, effect the
order has contributed to the recent sharp drop in prices. Many factors, from
cool weather to increased conservation to the return of several nuclear
generators that were down for maintenance, are also at work.
Rep. Doug Ose, a Sacramento Republican who first pushed FERC to expand its
April order, said yesterday he believed the expected new action would provide
"a pretty good middle ground" between Democrats' call for a specific maximum
price -- or cap -- the generators can charge and the Bush administration's
opposition to price controls.
Rep. Darryl Issa, an Oceanside Republican, added that the agency's action was
part of "a pattern of escalating engagement" by the administration and "a
more activist FERC."
'AS LONG AS IT WORKS'
Sen. Dianne Feinstein said the action expected Monday was likely to fall
short of what she wanted, although she called it "another step forward."
While FERC is likely to avoid using the words "price caps" to describe its
plan (it called its original order "price mitigation"), Feinstein said, "I
don't care what you call it as long as it works."
Feinstein, testifying yesterday at a Government Affairs Committee hearing on
energy, said she believed the new order would still permit price manipulation
because the caps are set at the price charged by the least- efficient --
therefore highest cost and most polluting -- generators.
Feinstein's bill to force FERC to impose price caps until 2003 is scheduled
for committee action this month. She wants firm price caps based on each
generator's costs, much like the regulatory regime in place before
California's electricity restructuring.
Some economists argue, however, that the type of price controls FERC is
expected to use more closely correspond to the price that a functioning
market would produce.
Price caps have become the nexus of the entire Washington debate over
California's electricity crisis. The Bush administration contends that price
controls would make blackouts worse by discouraging electricity sales and
investment, while Democrats, led by Feinstein and California Gov. Gray Davis,
contend that generators are deliberately withholding power to jack up prices.
OBJECTIONS TO CONTROLS WITHER
Republicans on Capitol Hill, many of whom face re-election next year, have
shown less resistance to price controls, and that resistance melted even more
yesterday after a letter from several House Republicans urged FERC to
intervene more forcefully.
Still, most of the Republicans now urging greater federal regulation of
electricity markets hail from California. Republicans from outside the state
yesterday blasted Davis for mishandling the crisis and blaming the Bush
administration for not helping.
"The efforts to place the blame on the current administration or hire $30,
000 a month consultants to spin the issue . . . do not help," said Sen. Fred
Thompson, R-Tenn., referring to two high-priced political aides Davis has
hired.
"Some suggest temporary price controls through 2003," Thompson said. "While
that may get us through the next election, temporary price controls have
rarely stayed temporary."
Sen. Larry Craig, an Idaho Republican, argued there were a host of reasons
for California's blackouts, from a drought in the Northwest to a shortage of
power plant construction across the West.
"Leave it to politicians running scared and looking for scapegoats to
obfuscate this otherwise obvious reality," Craig said. "Put simply and
bluntly,
this reality does not suit the political needs of Gov. Davis and his
compatriots."
Energy at a glance
Energy-related developments yesterday:
-- PUC TELLS EDISON TO PAY 15% OF BILL OWED TO SMALL FIRMS
Small companies that need cash to continue generating power will be paid 15
percent of their back bills by Southern California Edison under an order
passed yesterday by the state Public Utilities Commission.
The measure is one of the remedies designed to ensure that 680 small power
plants stick with their contracts to sell electricity to California's three
cash-strapped utilities. Pacific Gas and Electric Co. has already been
ordered by a bankruptcy judge to pay 20 percent of its back debt to its small
generators. San Diego Gas and Electric Co. had no outstanding bills.
The commission also opened the door to higher rates for small suppliers that
can prove their operating costs are not being covered by a state payment
formula. Others can opt for a new fixed-rate contract. All can earn higher
rates if they boost their power output.
DAVIS SAYS PRICES FALLING ON SPOT MARKET
Gov. Gray Davis released new figures yesterday showing that the state has
been able to secure lower prices on the spot market for electricity.
Davis released figures that show the average price for power on the day-
ahead spot market was $275 per megawatt hour Jan. 17-31. The price was $236
in February, $212 in March, $262 in April, $243 in May and $121 so far in
June.
Davis credits the state's long-term contracts with shrinking the amount of
power that has to purchased on the spot market. -- Chronicle staff reports
E-mail Carolyn Lochhead at clochhead@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Judge orders contract disclosures
State told to release edited versions of energy agreements tomorrow
Bob Egelko, Chronicle Staff Writer
Thursday, June 14, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/14/M
N183457.DTL&type=news
A day after Gov. Gray Davis agreed to release previously withheld details of
the state's long-term energy contracts, his attorney asked for a two-week
delay. But a judge ordered the state to disclose edited versions of the
contracts tomorrow.
San Diego Superior Court Judge Linda Quinn scheduled another hearing for June
27 to decide whether more details of the long-term deals should be disclosed
and whether short-term energy contracts should be released over Davis'
opposition.
Since the state started buying power for customers of California's reeling
utilities in January, Davis has refused to make the contracts public, saying
disclosure would reveal the state's negotiating strategies, give power
sellers an advantage and drive prices up. In court documents, the governor's
lawyers said the information should remain secret until January 2003, when
the state's current power purchasing authority expires.
News organizations, including The Chronicle, and eight Republican legislators
sued for disclosure, saying the documents were public records that would let
Californians evaluate the spending of billions of tax dollars.
On Tuesday, Davis reversed course and said he was willing to make public
immediately the details of $42.8 billion in long-term contracts with 18
suppliers if the judge released the state from confidentiality agreements in
the contracts. The governor said that market conditions had improved and that
enough contracts had been signed that disclosure would not seriously damage
the state's bargaining position.
He gave reporters a few more details yesterday, acknowledging that the state
was locked into some long-term contracts at prices above those now available
on the spot market.
"We were paying a lot more in January and February than we are now on the
spot market because we have dramatically shrunk the spot market, providing
reliable power for California at affordable rates," Davis said.
In court yesterday, however, Deputy Attorney General Timothy Muscat sought to
delay contract disclosure two weeks to give the energy sellers -- who are not
parties to the lawsuit -- time to comment.
But the judge said the state's failure to keep contracting companies abreast
of the suit did not justify delaying disclosure. Quinn ordered the long-term
contracts released Friday after the state deletes details that would reveal
suppliers' trade secrets and other proprietary information.
Muscat said the state would edit out several categories of information he
described as technical, including energy delivery points and data on
suppliers' efficiency in converting natural gas to electricity. News media
lawyer Alonzo Wickers IV protested any deletions.
"Keeping those so-called technical issues secret thwarts the public's
understanding of the contracts," he said.
Quinn said she would consider objections to the deletions at the June 27
hearing. Muscat, the state's lawyer, contended secrecy was essential for
deal- making in the volatile short-term market.
"We are heading into a hot, long summer," he said. "If we have to reveal our
negotiation strategy . . . we are going to have blackouts."
Tell us what you think -- What are your suggestions for saving energy? Send
your best tips to Energy Desk, San Francisco Chronicle, 901 Mission St., San
Francisco, CA 94103; or put your ideas in an energy-efficient e-mail to
energysaver@sfchronicle.com.
Correspondent Valerie Alvord contributed to this report from San Diego. /
E-mail Bob Egelko at begelko@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 17

ENERGY REPORT
Chronicle Staff and News Services
Wednesday, June 13, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/13/M
N226095.DTL&type=news
Burton bills on stoplights, price hike Senate President Pro Tem John Burton,
D-San Francisco, introduced two energy bills. One would pay for back-up
batteries at key intersections so they could continue operating in a
blackout; the other would order the Public Utilities Commission not to
automatically raise rates 10 percent next March, as part of the original
deregulation law approved in 1996.
Burton also introduced a resolution saying the state Senate supports Gov.
Gray Davis seizing energy plants under his emergency powers authority. Davis
has threatened in the past to do so but now says such action could cost the
state expensive legal fees. The resolution is unlikely to sway the Democratic
governor.
Alternative generators,
Edison reach accord
Southern California Edison Co. said it reached an agreement with alternative
power generators that could give California a critical source of energy this
summer and ease the bankruptcy threat the utility is facing. The utility
agreed to make partial back payments to the generators, many of which have
sued the utility and curtailed power production. The California Public
Utilities Commission is expected to approve the plan today.
Hearings set on plan
to bail out Edison
The state Senate scheduled a series of hearings, beginning next week, on the
governor's deal to bail out Southern California Edison.
Judge allows trading
by PG&E's creditors
Stipulating that the companies involved must set up procedures to guard
against misuse of confidential information, U.S. Bankruptcy Judge Dennis
Montali yesterday allowed members of PG&E's creditors' committee to trade in
the utility's securities without risking their debt claims. Montali also said
he would probably allow a larger group of committee members, including Enron
Corp. and Dynergy, to make energy deals that could have an impact on PG&E.
The city of San Francisco, which has sued Enron, Dynergy and other energy
dealers, claims the trading would invite conflicts of interest.
,2001 San Francisco Chronicle ? Page?A - 16

EPA rejects state waiver on fuel additive
Refusal could cost 50 cents a gallon at pump, Davis says
Jane Kay, Chronicle Environment Writer
Wednesday, June 13, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/13/M
N175671.DTL&type=news
The Environmental Protection Agency turned down Calfifornia's request for a
waiver of a clean-air law yesterday, forcing the state to begin using ethanol
in gasoline as it phases out another additive that has polluted groundwater.
State officials have argued that ethanol, which reduces smog-producing
chemicals, is not needed to meet the state's air pollution requirements.
Gov. Gray Davis reacted angrily to the EPA's decision, saying it would raise
gas prices significantly and expose the state to shortages.
"Their refusal will probably cost Californians 50 cents a gallon at the
pump," Davis said yesterday while visiting a community health center in San
Francisco. "It will do nothing to clean up the air, and it is the triumph of
politics over good science.
"The consumers of California once again get the shaft. The Bush
administration once again sides with special interests. I'm not going to take
it."
The EPA's denial is the latest sign of friction between the White House and
Davis, who have been battling over electricity prices.
The California Energy Commission estimates that consumers will pay $450
million more a year for gasoline if refineries have to convert to ethanol.
That translates to an increase of 3 to 6 cents for each gallon of gas.
If ethanol supplies are inadequate or if refineries encounter problems,
consumers could see gas shortages and price spikes as high as 50 cent a
gallon, according to the commission.
But EPA Administrator Christie Whitman said that the state had failed to show
that a waiver of a federal Clean Air Act provision would not reduce air
quality. The law requires regions of the country with the worst air to use
oxygen additives in gas to reduce smog.
California requested the waiver because it is phasing out the additive MTBE,
or methyl tertiary butyl ether, which has polluted groundwater throughout the
state. Ethanol is the only other additive approved under the federal Clean
Air Act.
DIFFICULTIES ADMITTED
Whitman acknowledged that California faced a dilemma in keeping MTBE out of
its drinking water while satisfying the federal law. However, she said,
oxygen- adding substances such as MTBE and ethanol in gasoline do reduce
smog-forming chemicals and should be used in urban areas with the worst air
quality.
MTBE DILEMMA
"The administration is concerned about the risks of MTBE in drinking water in
California and other states," Whitman said. "Clean air and clean water are
equally important. We do not want to pursue one at the expense of the other."
Since the widespread use of MTBE in 1997, it has become a major problem in
California and other states, tainting groundwater and threatening the
drinking water supplies of some areas.
Winston Hickox, secretary of the California EPA, said yesterday that the
planned ban might be delayed if the state Energy Commission decided there
were unsurmountable problems with converting to ethanol. But he didn't
believe California would back off on its efforts to rid gas of MTBE.
Sen. Dianne Feinstein yesterday accused President Bush of turning "a blind
eye to California," and Sen. Barbara Boxer said the decision was another
example of Bush's insensitivity to Californians. Feinstein has introduced a
bill that would give governors the authority to waive the additive
requirement if their gas met other standards.
OIL INDUSTRY DISMAYED
Oil industry officials in California, who have argued that refiners could
make an additive-free gas that qualified with federal and state requirements
to reduce smog, also said they were disappointed with the decision.
"Over the last four years, we've made more than 2 billion gallons of
cleaner-burning gas that had no added oxygen -- no MTBE, no ethanol," said
Fred Gorell, spokesman for Chevron Corp. "The gas meets all the requirements.
But we can't sell it in Southern California and Sacramento because of the
federal requirement."
BOON TO FARMERS
If MTBE is banned in 2003, and there's an oxygen additive requirement, there
would be no other choice than to use ethanol, Gorell said.
Ethanol is made primarily from corn, and the EPA decision is a boon to
Midwestern corn growers and lawmakers from states such as Illinois, Iowa,
Minnesota and South Dakota, who had lobbied the Bush administration heavily
to deny the waiver. The decision would create a substantial market for
ethanol.
According to the Renewable Fuels Association, an ethanol industry group,
California would need about 580 million gallons a year to use as an additive
in gas. In 2001, the industry expects to produce 2.1 billion gallons, and is
gearing up to make 300 million gallons more with the addition of 34 plants.
BIG INITIAL COSTS
Adding ethanol to California's gas supply would require a major investment in
infrastructure, Gorell said. Some of the costs would go to modify refineries
as well as terminals where the ethanol blending would be done.
Costs of transporting ethanol from Midwestern states would not be the biggest
problem, Gorell said. Ethanol can be brought by ships and barges, just as
most of the MTBE is brought now. Ethanol also can be brought by railcars,
which are prohibited from carrying MTBE.
But refiners can work with ethanol, he said. Even if the waiver were granted,
there would a new market for ethanol in Los Angeles to combat carbon monoxide
in the winter anyway.
Environmental groups welcomed the EPA's decision yesterday. Bluewater Network
of San Francisco said a coalition of 93 groups supported maintaining the
additive requirement to protect the air and the use of renewable ethanol in
gas.
The requirement could also be a boon to the state's agricultural industry.
The state has only two plants that make about 10 million gallons of ethanol a
year from cheese whey and the sugar and starch from outdated soda pop. Six
new California plants are planned for next year.
The boost in ethanol would help farmers who are suffering from global
competition and other problems, said Cynthia Cory, director of environmental
affairs for the California Farm Bureau.
Chronicle Staff Writers Lynda Gledhill and David Baker contributed to this
report.
E-mail Jane Kay at jkay@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Governor set to reveal terms of power deals
Court must decide confidentiality issue
Lynda Gledhill, Chronicle Sacramento Bureau
Wednesday, June 13, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/13/M
N156901.DTL&type=news
Sacramento -- Gov. Gray Davis reversed course yesterday on the secrecy of
long-term energy contracts, saying he now wants to make public details of the
deals the state has signed with electricity generators.
Davis and his advisers said they have signed enough contracts that releasing
the information will not seriously jeopardize the state's bargaining
position. Administration officials, however, said the contracts contain
confidentiality clauses and they will ask a judge today to release the state
from those provisions.
Republican lawmakers and several media organizations, including The
Chronicle, have filed suit against Davis, demanding that the contracts be
made public.
"We now believe that the balance tips in favor of disclosure rather than
continuing to withhold the contracts," said Davis senior adviser Nancy
McFadden.
In San Francisco yesterday, Davis said he always intended to release the
information six months after the contracts were signed.
"Obviously, the market conditions are a little more favorable now," he said.
"On balance, we think it's the appropriate time to release the information."
Davis' request will be heard at a court hearing today in San Diego on the
suits filed by the media and GOP lawmakers against Davis.
But it is unclear whether the judge will go along with the administration's
request or how the Davis administration will be able to proceed if it is
denied.
Paula Hall-Collins, a spokeswoman for Williams Co., said the energy company
will monitor the court hearing.
"We maintain that the contracts contain proprietary information," she said.
Patrick Dorinson, a spokesman for Mirant, also expressed concern about what
information might be released.
"We think it is important for the people of California to have information on
revenue and capacity information, but we are sensitive to specific terms
being released that could be misused by our competitors in the marketplace,"
he said.
The state has been purchasing power since Jan. 17. While much of that has
been on the expensive spot market, state officials have also locked in 38
contracts for long-term deals.
However, no information on the terms of the contracts or how much the state
is committed to spend has been released.
Ray Hart, Department of Water Resources deputy director, sent letters to
power generators yesterday saying the department will ask a judge to throw
out the confidentiality provision in the contracts.
The letter states that there will be some redactions on information that is
considered proprietary.
McFadden said the move was not made because the state was concerned about
losing its lawsuits.
She said she expected the court to release the state from the confidentiality
agreement. The governor's office then would release the documents as early as
this week, she said.
Lawmakers also have been demanding the release of the information so that
they can proceed on a plan to keep Southern California Edison out of
bankruptcy.
If the judge refuses to release the state from the confidentiality clause,
the administration will negotiate with the generators individually to allow
the contracts to be made public, McFadden said.
But Terry Francke, general counsel with the California First Amendment
Coalition, said he would be surprised if a judge allowed the request.
"I don't believe the court would simply absolve a party from a contractual
agreement at a proceeding where the other party is not present," he said.
Francke also questioned whether the state had the right to sign contracts
containing a confidentiality clause.
"There is a very serious question as to whether the state of California can
legally in effect promise to ignore the Public Records Act," he said.
Roger Myers, an attorney for The Chronicle, said there is good case law in
the state supporting the releasing of the information.
"You can't enter into an agreement and convert public information into
confidential information," he said.
E-mail Lynda Gledhill at lgledhill@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 15

Price caps elicit fierce debate in Congress
BY JIM PUZZANGHERA
Mercury News Washington Bureau
WASHINGTON -- California moved to political center stage Wednesday as
Democrats and Republicans clashed in Congress over how to solve the state's
electricity problems.
Wielding the new power gained since the Senate shifted from Republican
control last week, Sen. Joseph Lieberman, D-Conn. held the first of two
hearings into the response of federal regulators to California's energy
crisis. The Democrats are focusing their pressure on members of the Federal
Energy Regulatory Commission who are poised Monday to consider a major
expansion of limited electricity price controls enacted in April.
``The heat is on and it's going to produce some light at the end of the
tunnel,'' predicted Sen. Dianne Feinstein, D-Calif.
Feinstein has sponsored legislation to force the commission to set temporary
price caps. The bill is scheduled to be considered by the Senate Energy and
Natural Resources Committee on June 27 after wallowing for months while
Republicans controlled the Senate.
Republicans assailed the Democrats for failing to address the problem of
increasing the supply of energy, in favor of short-term fixes such as price
caps. ``Let me tell you what the name of the game is now: It's pure
politics,'' said Sen. Frank Murkowski, R-Alaska, the leading Republican on
the energy committee. ``And the Democratic plan is to try to cement in the
minds of voters that President Bush favors corporate interests at the expense
of consumers.''
But in a nod to the growing pressure for some federal action, Murkowski, an
ardent opponent of price caps, said he would support a 90-day ceiling on
electricity prices in California set at $1,000 a megawatt-hour throughout the
West.
The idea would be to prevent the sharp spikes in prices during emergency
periods that have led to power suppliers' selling electricity to California
at short-term prices of as much as $3,800 a megawatt-hour. Governors of
Western states could opt out of the plan, and the limits could be extended as
much as 90 more days in one-month increments.
Such high-price limits are also known as ``circuit breakers'' and have been
put in place in Texas, Pennsylvania and in New England in the past. It could
emerge as a Republican alternative to Feinstein's bill, which would set
harder price caps for 18 months, based on each supplier's cost to produce the
energy plus a built-in profit level.
But Feinstein and California Gov. Gray Davis would not support the $1,000
ceiling. ``This proposal says `Go ahead, gouge us all the time except for a
few hours during periods of extreme peak demand,'?'' said Davis media
representative Steve Maviglio. ``It's toothless and provides no real
temporary relief.''
There was no consensus on price caps from a group of six leading energy
experts convened by Lieberman before his Senate Governmental Affairs
Committee on Wednesday. Four invited by Lieberman, including Severin
Borenstein, director of the Energy Institute at the University of
California-Berkeley, supported price caps. Two experts invited by the
Republicans -- Lawrence Makovich, senior director at Cambridge Energy
Research Associated and William Hogan, of Harvard University's Kennedy School
of Government -- did not.
But Alfred Kahn, a retired Cornell University economics professor who helped
deregulate U.S. airlines in the 1970s, said temporary price relief is
necessary, and failure to help California could lead other states to halt
their electricity deregulation plans. And rather than discouraging investment
in new power plants, electricity regulation through the years encouraged such
high spending on infrastructure that Kahn referred to it as ``gold-plating of
circuits.''
``With electric power, we have not had the problem of shortages under
regulation,'' he said.
All the experts agreed that the Federal Energy Regulatory Commission needs
more resources and should become more vigilant in the way it monitors
electricity.
``They have some very good people at FERC, but they don't have enough,''
Hogan said. Paul Joskow, the director of the Center for Energy and
Environmental Policy Research at the Massachusetts Institute of Technology,
said the commission must become more like the Securities and Exchange
Commission in actively monitoring possible electricity markets.
All five commissioners, along with Davis, will testify at a hearing Wednesday
by Lieberman's committee regarding whether FERC has fulfilled its obligations
to ensure ``just and reasonable'' electricity rates in California.
Curt H,bert, the FERC chair, Wednesday defended the commission and said its
California price mitigation plan put in place in April has helped lower
prices in California in recent days.
``There is no doubt the plan is working to bring down prices'' and making
generation capacity available, H,bert said. He would not say whether the
commission would expand its plan around-the-clock and to other Western
states, as a commission source told the Mercury News is being considered.
FERC has been urged to do that by some key Republicans in Congress.
On the same day, Energy Secretary Spencer Abraham went before a House
subcommittee to push for action on the administration's national energy plan,
which calls for increasing domestic supplies through more oil and natural-gas
drilling and greater use of coal and nuclear power.
``Every step we take toward wiser use of energy and more diverse supplies at
home will make us that much less dependent on overseas suppliers and less
vulnerable to supply shocks imposed on us from abroad,'' Vice President Dick
Cheney, who headed the task force that drafted the plan, said in a speech
before the United States Energy Association's Efficiency Forum Wednesday.
Wednesday, congressional Republicans, charging that Democrats had tried to
derail the plan, threatened to use parliamentary stalling tactics unless
Democrats set a date in the near future to consider Bush's proposals.

PUC commissioner issues draft decision to exempt refineries from blackouts
SAN FRANCISCO (AP) -- A state power regulator has issued a draft decision
that would exempt oil refineries from rolling blackouts and keep California's
gasoline prices from potentially skyrocketing.
The California Public Utilities Commission will consider commissioner Carl
Wood's proposal on June 28. Administrative Law Judge Burton Mattson issued a
companion ruling Wednesday requesting a coalition of energy producers, PUC
commissioners and electric utilities to provide more information about fossil
fuel production to help the PUC decide whether to grant more exemptions.
Gov. Gray Davis has asked the PUC to come up with a plan to minimize
disruption of fossil fuel production this summer. A rolling blackout is
capable of causing refineries to lose up to a week of production, which could
create gasoline shortages and drive up prices at the pump.
``While the economic impacts caused by disruption of fossil fuel production
are potentially devastating, the commission must balance these economic
impacts against the potential impacts on public health and safety asserted by
applicants in our other exemption process,'' Wood said in a written
statement.
Four oil refiners -- Valero Energy, Tosco, Exxon Mobil and Equilon
Enterprises-- are petitioning the PUC for blackout exemptions at facilities
that produce about one-fourth of the state's refining capacity of 2.3 million
barrels per day.
Meanwhile, California's biggest refiner, Chevron Corp., has taken its
exemption case directly to Davis. The San Francisco-based company, which
controls about 18 percent of the state's refining capacity, told Davis the
company will curtail production unless regulators or state lawmakers protect
its two California refineries from blackouts.
Davis sent a letter last week to the PUC supporting the oil industry's
request for a blackout exemption, said his spokesman, Steve Maviglio.

FERC may expand cap
Senators say regulators are set to extend price controls throughout the West.
June 13, 2001
By DENA BUNIS
The Orange County Register
WASHINGTON Federal energy regulators are poised Monday to extend limited
price controls on the electricity market to 24 hours a day, seven days a week
throughout the Western states, California's senators said Tuesday.
If the Federal Energy Regulatory Commission does what Democratic Sens.
Barbara Boxer and Dianne Feinstein have heard it plans to do, it would
represent a further softening by FERC in the face of mounting political
pressure. FERC had adamantly opposed limits on a free electricity market
until April, when it approved its first limited controls.
Experts believe such a move could moderate wholesale prices, but to what
extent and what the effect could be on ratepayers is uncertain.
"It would be a step in the right direction," Boxer said Tuesday after she,
Feinstein and 40 California House members from both parties met with Vice
President Dick Cheney. "It still doesn't give us the kind of help with price
gouging that we need."
Cheney, who reiterated the administration's opposition to firm price caps,
told members who pressed him for a California-specific solution to watch what
FERC does at its meeting next Monday.
Two new FERC commissioners, recently appointed by President George W. Bush,
could be voting Monday. Energy watchers say their presence could turn FERC
into a more activist agency.
In April, FERC ordered a price-control plan based on a complicated formula of
what it costs generators to produce a kilowatt of electricity. But critics,
particularly FERC Commissioner Richard Massey, called it meaningless because
it only applied during shortages and did not extend beyond California.

Political heat triggers FERC's switch
The panel seems more responsive to the voice of public officials.
June 13, 2001
By DENA BUNIS and KATE BERRY
The Orange County Register
WASHINGTON The Federal Energy Regulatory Commission may be an independent
body. But its members sure can feel a political sledgehammer coming at them.
For months, the pro-open markets majority on the commission has resisted
pleadings by California officials to put price caps on wholesale electricity
prices.
They broke down somewhat in April and put limited controls on the market only
during electricity emergencies and only in California.
Since then, the political heat has become intense.
And it's come to a head this week as:
The new Democratic-controlled U.S. Senate begins hearings today on the
electricity crisis in California.
The two new FERC commissioners - Nora Mead Brownell and Patrick Wood - have
been sworn in and will begin attending meetings. Brownell, who was sworn on
as the fifth commissioner on Tuesday, said she and Wood were planning a trip
to California soon after next week's second Senate hearing, at which they
will testify.
Key Republicans -- House Energy and Commerce Committee Chairman Rep. Billy
Tauzin, R-La., and energy subcommittee chairman Rep. Joe Barton, R-Texas,
sent a letter to FERC urging it to expand its limited controls this summer to
cover all the western states all the time.
"I think there is a growing political consensus in Congress, in California,
most everywhere, that an effective price mitigation plan in this California
market has to cover all hours,'' Richard Massey, a FERC commissioner who has
been critical of what he calls "half a loaf" measures his colleagues have
taken thus far, said Tuesday.
Massey would not confirm that the commission plans on Monday to expand price
controls to 24 hours a day and to other Western states.
But even if it does, it's unclear how far such an action will go toward
solving California's problem and whether it could open up new problems.
Stephanie McCorkle, a spokeswoman for the California Independent System
Operator, which manages most of the state's electric grid, said the plan
would have some effect on prices in California.
"But it may not go far enough,'' she said. "We welcome any decision to move
forward with round-the-clock mitigation, which is something we've called for
from the beginning.''
Energy experts and some lawmakers worry that the method the FERC plan uses -
which sets cost-based wholesale rates based on the least-efficient power
plants operating in California - could lead to market manipulation.
"The minute prices are linked to the cost of operating the least efficient
plant, an incentive for plants to be inefficient is created,'' said Sen.
Dianne Feinstein, D-Calif. "I am concerned that this order will continue to
provide energy generators the opportunity to manipulate prices, as I believe
they have been doing.''
Democrats in California and on Capitol Hill have been calling for firm price
caps. That's the only way, they say, that the generators can be prevented
from gouging the state's ratepayers.
But Gov. Gray Davis is ready to be convinced this latest possibility will
work.
"The devil's in the details, of course'' Davis said in a statement. "Mark me
down as a doubting Thomas. The FERC has been on a sit-down strike, but if
they are finally for price relief, hallelujah."
Wholesale power prices have dropped dramatically in the state in the past two
weeks. But Feinstein said so far it's unclear what has caused the decline -
the earlier FERC action, the possibility that generators are worried about
investigations into alleged price manipulation or the increased pressure from
Congress.
There is some evidence that the April FERC action had an effect.
Two weeks ago, during a Stage 2 alert, California's Independent System
Operator imposed FERC's pricing plan and bought power at $108 a megawatt,
about one-third the price offered earlier that day, said Nettie Hoge,
executive director of The Utility Reform Network, a consumer advocacy group
in San Francisco.
But Hoge said even it FERC expands controls on Monday, California has already
paid too high a price. The state has already spent more than $6 billion too
much on electricity in the past year, said Hoge.
Register staff writer John Howard contributed to this report.

Davis to air details about power buys
He had refused to divulge the contract terms.
June 13, 2001
By ALEXA HAUSSLER
The Associated Press
SACRAMENTO -- After fighting off demands for information for months, Gov.
Gray Davis plans to release this week the much-sought details of 38 long-term
contracts between the state and power generators, aides said Tuesday.
At issue are details of contracts with 18 companies, worth $42.8 billion over
the next 20 years for the purchase of nearly 600 million megawatt-hours of
electricity, Davis administration officials said.
The contracts' fine print was not immediately disclosed. The average price
was about $71 per megawatt-hour. In recent months, the cost of wholesale
electricity in California has fluctuated widely, from less than $100 per
megawatt-hour to $3,880. Early last year, before California's energy crisis
exploded, power cost $20 to $40 per megawatt.
Republican lawmakers and several news organizations, including The Orange
County Register, sued Davis in March, saying his refusal to release the
contracts' details violates the California Public Records Act.
Davis still refused, saying that revealing the details would put the state at
a competitive disadvantage in other contract talks.
Raymond Hart, Department of Water Resources deputy director, wrote power
generators Monday saying the department will ask a judge today to void a
confidentiality provision in the contracts.
Oklahoma-based Williams Energy, one of the generators with a state contract,
opposes the release of the contract details, a spokeswoman said.

Energy notebook
Edison makes deal to pay generators of renewable power.
June 13, 2001
ROSEMEAD Southern California Edison has reached an agreement with small power
generators that could ease the bankruptcy threat the utility is facing and
ensure Californians a critical source of power through the summer.
The California Public Utilities Commission is expected Wednesday to approve
the plan that would require Edison to make partial back payments to renewable
energy generators, many of which have sued the utility and curtailed power
production.
The plan would raise the rates being paid to generators that use natural gas
and offer a stable rate for five years to generators using wind, solar,
geothermal or other renewable sources.
The agreement also requires Edison to pay at least 15 percent of what it owes
generators.
The deal removes the threat of legal action against the utility if full
payment for power bought since January is made within six months after the
PUC order becomes final.
"I think it's a good, balanced deal for both sides, and the only issue will
be making sure the PUC will adopt the deal," said Jerry Bloom, a spokesman
for the California Co-generation Council, which represents many small natural
gas-fired power generators.
Burton calls for batteries to keep traffic signals lit
SACRAMENTO State Senate President Pro Tem John Burton, D-San Francisco,
introduced a bill Monday that would provide battery backups for traffic
signals at critical intersections throughout the state in hopes of preventing
potentially deadly accidents during rolling blackouts.
The bill would require the California Energy Commission, with the California
Highway Patrol, to identify critical intersections based on traffic,
accidents and the presence of children.
Although the state has 45,000 signalized intersections, only the estimated
13,500 intersections equipped with light-emitting diodes, a more
energy-efficient kind of light, would be eligible.
Battery backups cost $3,000 to $5,000 each.
The money for the program would come from funds provided to the California
Energy Commission for conservation efforts, said Dave Sebeck, a Burton
spokesman.
It is unclear whether cities, counties and other agencies that have already
installed backups would be reimbursed by the state.
To become law, the bill must be approved by the energy and appropriation
committees in the Senate and Assembly, pass both houses by a two-thirds
majority and be signed by Gov. Gray Davis, Sebeck said.
Officials at the energy commission and the CHP declined to comment Tuesday
because they have not reviewed the legislation.
In Orange County, only 209 of 3,030 intersections in a Register survey
released this week will be equipped with battery backups as of July 1.
Bill to allow state seizure of power plants advances
SACRAMENTO A State Assembly committee approved legislation Tuesday that would
allow the state to seize power plants that regulators determined had charged
unreasonable prices for electricity.
The Assembly Judiciary Committee voted 6-3 to approve a bill by Assistant
Majority Leader Juan Vargas to allow the state to seize and run power plants
for 18 to 24 months and then pay their owners for the use of the plants.
The state Public Utilities Commission would first have to determine if the
plants sold electricity at "unjust and unreasonable" prices.
The measure, which supporters concede stands little chance of becoming law at
this point, is designed as a warning to power generators selling electricity
in the California market.
"It's a tremendous effort to send a message to the generators," said Wendy
Harmon, a spokeswoman for Vargas, a Democrat from Chula Vista.
The bill still must pass at least one Assembly committee, as well as pass a
floor vote and be approved by the state Senate and then signed by the
governor.
Gov. Gray Davis has said he wants to "leave the option open" of supporting
legislation allowing the state to seize power plants.
Power generators say that the possibility the state may seize power plants
has slowed the building of new plants in the state, prolonging the supply
shortage that has contributed to soaring wholesale prices.
Mirant said this month it was postponing construction of an already-approved
plant in Contra Costa because of concern about whether the state would seize
power plants.
A spokesman for Davis said at the time he would be surprised if the company
didn't proceed with its plans.
Register staff writer Tiffany Montgomery and The Associated Press contributed
to this report.