Please see the following articles:

Sac Bee, Fri, 5/25: More outage notice ordered: Davis tells utilities to give
added warning of possible blackouts.

Sac Bee, Fri, 5/25: For seniors, the heat can kill, doctors warn

Sac Bee, Fri, 5/25: House panel debates energy price controls

SD Union, Fri, 5/25: Exec reacts hotly to California claim

SD Union, Fri, 5/25: State power regulators aim to keep more power on grid

SD Union, Fri, 5/25: Slater asks Sempra to purchase generators

SD Union, Fri, 5/25: President will find Californians upset at his energy
stance

SD Union, Fri, 5/25: POLL: Californians dissatisfied with government handling
of energy crisis

SD Union, Fri, 5/25: California PUC to earmark more electricity for grid

SD Union, Fri, 5/25: Davis proposal for more diesel power draws environmental
criticism

LA Times, Fri, 5/25: Davis Orders 3-Tiered Warnings of Blackouts

LA Times, Fri, 5/25: PUC to Reassess Rate Hikes

LA Times, Fri, 5/25:  We Aren't That Desperate (Editorial)

LA Times, Fri, 5/25: Energy Crisis as Political Payback (Editorial)

LA Times, Fri, 5/25: Energy Antics: Oh, Behave! (Editorial)

SF Chron, Fri, 5/25: An air of discontent over diesel backups
Emissions rules ignore emergency generators

SF Chron, Fri, 5/25: Early-warning system for summer blackouts
Media alerts, Web sites would give information

SF Chron , Fri, 5/25: Energy crisis to cast long shadow
A look at what energy crisis means to future

Mercury News, Fri, 5/25: Governor vulnerable, poll shows

Mercury News, Fri, 5/25: California power regulators aim to keep more power
on grid

Mercury News, Fri, 5/25: PUC reviews baseline formula for setting rates

Mercury News, Fri, 5/25: Regulators: Companies pushed up price of power

Mercury News, Fri, 5/25: California power regulators aim to keep more power
on grid

OC Register, Fri, 5/25: Long Beach obtains lien on Edison's assets

Energy Insight, Fri, 5/25: Reliant pushes regional 'negawatt' plan

Individual.com, Fri, 5/25: Reliant Energy to lower Calif. peaking unit power
prices

Individual.com, Fri, 5/25: Shaklee Corporation Headquarters Model for Energy
Efficiency and Ecology Efforts; Bay Area Company Wins State Award CEO Adds
Hybrid Gas-Electric Vehicles to Fleet

NY Times, Fri, 5/25: Power Trader Tied to Bush Finds Washington All Ears

LA Times, Fri., 5/25: THE ENERGY CRISIS Davis Orders 3-Tiered Warnings of
Blackouts

SF., The Examiner, Fri., 5/25: Legislature hangs Davis out to dry
By Nick Driver
Of The Examiner Staff
Democratic and Republican legislators are vying to scuttle Gov. Gray Davis'
plan to buy transmission lines from electric utilities and replace it with
one of their own.
The confusion in Sacramento sidelines what was an imminent deal for a San
Diego-area utility, and throws further in doubt any future deal to purchase
PG&E lines through bankruptcy proceedings.
And all this is happening before President Bush arrives Tuesday to tout his
own transmission line deal.
A week ago, Davis finally found a term-limited senator, Richard Polanco,
D-Los Angeles, to sponsor legislation to purchase Southern California Edison
lines. Now, the governor's office admits that talks will not proceed until
the Legislature agrees on how to finance the buyout of SoCal Edison's lines.
Some Assembly Democrats have proposed an innovative alternative to the Davis
plan, giving the state a five-year option to purchase all power lines for
$1.2 billion. While a much lower price, the bill would also lower Edison's
debt by forcing power marketers to accept 75 percent of the $3.5 billion owed
them.
Under the terms of that proposal, the state would still have to loan Edison
money -- around $1 billion -- and would guarantee SoCal Edison's sale of a
further $2 billion in bonds. The state would also receive a conservation
easement on 21,000 acres of Sierra Nevada watershed land.
As in the Davis bill, SoCal Edison would sell the state relatively low-cost
electricity for 10 years from one of its power plants, and force parent
company Edison International to repay $400 million in transfers.
A Republican plan labeled "Plan R" now making its way through the halls of
the legislature is similar to its Democratic sister, except it allows the
state to take stock in all new plants SoCal Edison is forced to build.
The Democratic bill's sponsors, Assemblymen John Dutra, D-Fremont; Joe
Nation, D-San Rafael; and Joe Canciamilla, D-Pittsburg; believe they can
persuade Edison's board of directors to approve their deal, even though it is
not as attractive as the governor's offer. Edison refused to comment on the
plan.
Republicans led by Assemblyman Keith Richman, R-Northridge, were trying a
different strategy Wednesday. The minority party's "Plan R" has not been
introduced as official legislation, but instead floated among Republicans and
Democrats alike to get momentum before introduction.
Both groups say their bills represent SoCal Edison's only real alternative to
bankruptcy, and that the beleaguered utility may soon join its northern
neighbor, PG&E, in bankruptcy.
So far, Edison has been able to renegotiate debts with power generators
charging high wholesale prices. PG&E declared bankruptcy April 6.
A governor's office staffer said the legislative impasse had diverted all
attention away from any deal-making, but that the two sides continued to meet
frequently.
Another adviser, Joe Fichera, said "there are lots of moving parts" to the
deal to purchase all of San Diego Gas and Electric's transmission lines, but
that he continued to meet with company representatives, including an all-day
meeting Monday. In San Diego, a spokesman for SDG&E referred all calls to the
governor's office.
But the sponsor of the Davis bill, Polanco, is not one of the legislature's
power brokers, and most lawmakers said the $2.76 billion memorandum of
understanding is now in serious jeopardy.
A bankruptcy could lead to even greater chaos, including the threat of an
increase in blackouts. The governor and business leaders have said the
economy would suffer as the likelihood of blackouts and service outages
rises.
Legislators, policy wonks and consumer groups continue to argue over the need
and desirability of the state owning the aging lines that snake across the
state, especially if the bulk of them -- now owned by Pacific Gas and
Electric Co. -- are still not for sale.
Critics such as Senate President John Burton, D-San Francisco, one of the
bill's strongest proponents three months ago, now say the state should not be
in the business of replacing or upgrading dilapidated lines at a cost of
upwards of $1 billion.
Others see the state as the best candidate for improving a system long
neglected by utilities.
"State ownership of the transmission grid would be a better way to help grid
problems such as connecting wind generators," said Joe Ito, an energy analyst
at Lawrence Berkeley Laboratories. "It has been extremely difficult to build
new transmission capacity over the last 10 years, especially into bottlenecks
like San Francisco."
Bush unveiled his Energy Plan last week, including a key plank that would
allow the federal government to use eminent domain to purchase private land
and build more transmission lines. Bush arrives Tuesday for talks with Davis
on this and other solutions to the energy crisis.
The Foundation for Taxpayer and Consumer Rights derides both presidential and
legislative attempts to create more consumer-friendly deals, labeling them
"Bailout Lite."
"The sponsors want to try and trim away some of the fat," said Doug Heller, a
spokesman for the group. "But it's all fat."
Legislature hangs Davis out to dry

______________________________________________________________________________
__________________________

More outage notice ordered: Davis tells utilities to give added warning of
possible blackouts.
By John Hill
Bee Capitol Bureau
(Published May 25, 2001)
Gov. Gray Davis, invoking his emergency powers, ordered California's
utilities Thursday to give customers more warning of rolling blackouts.
Davis' plan calls for a 48-hour notice that power blackouts are likely to
occur, a 24-hour notice that certain neighborhoods will probably be hit and a
one-hour notice to those neighborhoods that the lights are about to go off.
But the plan was short on details and left many questions unanswered. Among
them: how customers will be notified, whether forecasts made a day or more in
advance will lead to false alarms, and how much the governor's proposal will
improve on what utilities already are doing.
"If blackouts are going to occur, there's no reason to keep the public in the
dark," Davis said at a news conference, flanked by law enforcement officials
who bolstered his contention that notice will make the streets safer.
The Democratic governor said his plan is meant to improve on the current
system, in which notification has been haphazard. Utilities recently were
given two minutes' notice by the California Independent System Operator,
which manages the power grid, that blackouts were needed to avoid a
systemwide collapse.
"A two-minute warning may work for the National Football League, but it won't
work for California consumers and the businesses of this state," Davis said.
Davis called on the utilities, the state Public Utilities Commission, the
Office of Emergency Services and others to come up with a plan for the
warnings in the next few weeks.
The board of the California Independent System Operator, which had been
scheduled to approve a more modest blackout plan Thursday, scrapped that
scheme in favor of the governor's. The board told its staff to report back by
June 11.
"We are committed to putting as much information out there as possible and
letting people use it as they see fit," ISO spokesman Gregg Fishman said.
ISO board members cited a report last week that power blackouts could cost
the state's economy $21.8 billion and 135,000 jobs. Some types of businesses,
such as high-technology companies and Central Valley food processors, have
been clamoring for more warning to avoid losses.
Although some have raised concerns about criminals taking advantage of power
blackouts, Davis said warnings would help police make the streets safer by
setting up stop signs or beefing up patrols of the darkened neighborhoods. He
said there have been 60 to 70 traffic accidents during blackouts in
Sacramento alone.
"The so-called bad guys are not sitting there waiting for a blackout," Davis
said.
The utilities already give some warnings to customers, but say they have been
hamstrung by a lack of notice from the Independent System Operator. The ISO,
in turn, is at the mercy of an electrical supply and demand balance sheet
that changes by the second.
"The ISO is managing a very dynamic system where things can change in a
matter of seconds," said a spokesman for Pacific Gas and Electric Co., Ron
Low. "They could find additional power to bring into California or they could
find they lost a resource."
Grid operators also cautioned that the predictions will be rough guesses, not
guarantees.
"We can tell you Monday what we know the facts are for Wednesday, but in the
intervening two days the facts might be different," Fishman said.
Davis said that even if one-hour warnings have been given, the blackout will
be called off if the ISO can find last-minute power. "Obviously, if we can
avoid a blackout, we want to," he said.
But the longer the warning, the more room for error.
"To the extent that you increase the notification, you lower the
probability," said John DiStasio, assistant general manager of customer
services at Sacramento Municipal Utility District.
There are also questions about the best way to let people know.
PG&E officials told the ISO board Thursday that customers want more notice,
but have different ideas of how best to get it. Some said e-mail notice
wouldn't work because they're not on their computers all day. If the blackout
is about to occur, many customers would rather be notified by pager or an
automated phone call. Many customers would like to get notification through
the mass media, much like they get weather news, but are uncertain where to
go.
PG&E now notifies large businesses and customers with medical conditions with
automated phone calls, Low said, but the system takes 15 to 20 minutes. For
the utility to start giving these customers an hour's notice, he said, it
would have to get a warning from ISO well before an hour.
"The more time in advance we receive the notice, the more customers we will
be able to reach," he said.
SMUD is already telling customers on its Web page whether they are next in
line for a blackout, DiStasio said. To comply with Davis' directive, the
utility could use the Web site to notify these customers that a blackout was
expected within 24 hours.
The utility also is notifying about 900 customers by pager, he said.
But the best hope for notifying large numbers of people at the last minute,
he said, is probably television and radio.

The Bee's John Hill can be reached at (916) 326-5543 or jhill@sacbee.com.

More outage notice ordered: Davis tells utilities to give added warning of
possible blackouts.
By John Hill
Bee Capitol Bureau
(Published May 25, 2001)
Gov. Gray Davis, invoking his emergency powers, ordered California's
utilities Thursday to give customers more warning of rolling blackouts.
Davis' plan calls for a 48-hour notice that power blackouts are likely to
occur, a 24-hour notice that certain neighborhoods will probably be hit and a
one-hour notice to those neighborhoods that the lights are about to go off.
But the plan was short on details and left many questions unanswered. Among
them: how customers will be notified, whether forecasts made a day or more in
advance will lead to false alarms, and how much the governor's proposal will
improve on what utilities already are doing.
"If blackouts are going to occur, there's no reason to keep the public in the
dark," Davis said at a news conference, flanked by law enforcement officials
who bolstered his contention that notice will make the streets safer.
The Democratic governor said his plan is meant to improve on the current
system, in which notification has been haphazard. Utilities recently were
given two minutes' notice by the California Independent System Operator,
which manages the power grid, that blackouts were needed to avoid a
systemwide collapse.
"A two-minute warning may work for the National Football League, but it won't
work for California consumers and the businesses of this state," Davis said.
Davis called on the utilities, the state Public Utilities Commission, the
Office of Emergency Services and others to come up with a plan for the
warnings in the next few weeks.
The board of the California Independent System Operator, which had been
scheduled to approve a more modest blackout plan Thursday, scrapped that
scheme in favor of the governor's. The board told its staff to report back by
June 11.
"We are committed to putting as much information out there as possible and
letting people use it as they see fit," ISO spokesman Gregg Fishman said.
ISO board members cited a report last week that power blackouts could cost
the state's economy $21.8 billion and 135,000 jobs. Some types of businesses,
such as high-technology companies and Central Valley food processors, have
been clamoring for more warning to avoid losses.
Although some have raised concerns about criminals taking advantage of power
blackouts, Davis said warnings would help police make the streets safer by
setting up stop signs or beefing up patrols of the darkened neighborhoods. He
said there have been 60 to 70 traffic accidents during blackouts in
Sacramento alone.
"The so-called bad guys are not sitting there waiting for a blackout," Davis
said.
The utilities already give some warnings to customers, but say they have been
hamstrung by a lack of notice from the Independent System Operator. The ISO,
in turn, is at the mercy of an electrical supply and demand balance sheet
that changes by the second.
"The ISO is managing a very dynamic system where things can change in a
matter of seconds," said a spokesman for Pacific Gas and Electric Co., Ron
Low. "They could find additional power to bring into California or they could
find they lost a resource."
Grid operators also cautioned that the predictions will be rough guesses, not
guarantees.
"We can tell you Monday what we know the facts are for Wednesday, but in the
intervening two days the facts might be different," Fishman said.
Davis said that even if one-hour warnings have been given, the blackout will
be called off if the ISO can find last-minute power. "Obviously, if we can
avoid a blackout, we want to," he said.
But the longer the warning, the more room for error.
"To the extent that you increase the notification, you lower the
probability," said John DiStasio, assistant general manager of customer
services at Sacramento Municipal Utility District.
There are also questions about the best way to let people know.
PG&E officials told the ISO board Thursday that customers want more notice,
but have different ideas of how best to get it. Some said e-mail notice
wouldn't work because they're not on their computers all day. If the blackout
is about to occur, many customers would rather be notified by pager or an
automated phone call. Many customers would like to get notification through
the mass media, much like they get weather news, but are uncertain where to
go.
PG&E now notifies large businesses and customers with medical conditions with
automated phone calls, Low said, but the system takes 15 to 20 minutes. For
the utility to start giving these customers an hour's notice, he said, it
would have to get a warning from ISO well before an hour.
"The more time in advance we receive the notice, the more customers we will
be able to reach," he said.
SMUD is already telling customers on its Web page whether they are next in
line for a blackout, DiStasio said. To comply with Davis' directive, the
utility could use the Web site to notify these customers that a blackout was
expected within 24 hours.
The utility also is notifying about 900 customers by pager, he said.
But the best hope for notifying large numbers of people at the last minute,
he said, is probably television and radio.

The Bee's John Hill can be reached at (916) 326-5543 or jhill@sacbee.com.

For seniors, the heat can kill, doctors warn
By Carrie Peyton and Nancy Weaver Teichert
Bee Staff Writers
(Published May 25, 2001)
As summer slouches toward Sacramento amid a drumbeat of calls to conserve
electricity, doctors and advocates for the elderly are sounding a
counter-theme.
Heat can kill. And most often, it kills seniors.
Year after year, heat waves around the United States are deadlier than
hurricanes or floods, tornadoes or earthquakes, according to the National
Oceanic and Atmospheric Administration.
In California, a single Los Angeles heat wave killed more than twice as many
people as the 1906 San Francisco quake, according to research assembled by
the state Energy Commission.
And national weather disaster statistics show that more than two-thirds of
those felled by the heat in recent years were age 60 or older.
"Heat and the elderly are not a good combination," said Dr. Cheryl Phillips,
a Sutter Medical Group geriatrician. "It's a real concern this year."
As people age, their bodies begin to lose the ability to sense when they are
thirsty or to bounce back quickly from dehydration, she said.
The very people who are most vulnerable to heat also often have a tradition
of thrift and public spiritedness that might lead them to use less
electricity than is safe, doctors and energy officials fear.
"Their conservation ethic was from the '40s and '50s, when we didn't have air
conditioning as prevalent as we do now, and they were much younger. So they
probably feel like, 'I can do this, this is important,' and they're not
recognizing the change in their body," said Claudia Chandler of the Energy
Commission.
The California Department of Aging is concerned enough that it will soon
begin a special outreach to warn seniors about the dangers of hot
temperatures, especially when air conditioning may be low or turned off
because of high utility bills.
In a public education campaign aimed at the 3.6 million Californians who are
65 or older, officials will preach conservation, preparedness for outages and
the need for drinking eight glasses of water each day.
Relatively simple steps can keep people safe -- if they are alert to the
danger.
Some are as obvious as staying out of the sun and moving less on the hottest
days.
Others are more arcane. People of all ages need to be aware that certain
medications, including some anti-depressants and diuretics, can increase
their sensitivity to heat. So can too much alcohol, too much weight, heart
disease and other illnesses.
Allergies and heart problems underscore Margueritte Ranney's juggling act. At
72, she has already had to refinance her house to keep up with rising bills
on a fixed income. She does her laundry with cold water, shuts off unneeded
appliances and opens the door each morning to cool her home.
But when the day's heat builds, Ranney faces a stark choice. It's "very, very
rough," she said -- but she puts her health first. She closes up her
two-bedroom home and turns on her evaporative cooler.
"If I had to turn off my cooler it would be pretty bad," she said. "If I have
to turn it off I have problems."
People who want to cut back on air conditioning while still protecting their
health should use portable fans at home, spray themselves with small misters,
and take "cool breaks" to an air conditioned movie theater or store.
And seniors, especially, should "drink lots of water. Don't wait until you're
thirsty. Drink constantly on hot days," said Phillips.
Two heat-moderating mechanisms weaken with age, she said, and doctors still
don't understand precisely why.
In some ways, the human body is like a glass of salty water. Sweat makes the
water level drop and the salt level rise, and in young people two hormones --
aldosterone and angiotensin -- kick in to restore the balance.
Those hormones are "the ones that signal to the brain, 'dang I'm thirsty,' "
said Phillips. They also tell the kidneys to hold onto water.
But as people age, their sensitivity to both hormones declines, making it
easier for seniors to get seriously dehydrated.
Then things can get even more dangerous, because older bodies don't recover
as quickly from dehydration. The dizziness and confusion that come in later
stages of overheating can trigger bone-breaking falls in a person who is
already frail.
The good news is, there isn't much danger of getting overheated during
rolling blackouts or by setting a thermostat at 78 degrees instead of 72,
said Phillips.
"I'm really not so worried about the power outages. For an hour and a half,
people will do fine," the doctor said. "I'm worried about the power bills.
Elders on fixed incomes who have to decide between food and the power bill,
will say 'heck, I'm turning the air conditioner off.' "
It's a serious worry, according to Gloria Jackson of Sacramento County's
Department of Health and Human Services.
About three or four seniors contact her each week because they are facing a
cutoff of their utilities for unpaid bills, said Jackson, the county's
liaison to the Sacramento Municipal Utility District.
Struggling to pay high energy bills on Social Security or other fixed
incomes, the seniors end up owing from $100 to $370 in overdue bills, she
said. A few have voluntarily had their PG&E gas service disconnected so they
will have enough to pay SMUD for electricity.
With incomes of about $700 a month, seniors may pay rent of $400 to $500 and
then have to figure out how to pay for utilities, prescriptions and food.
"Some of them are borrowing money to pay their utilities," Jackson said.
Others have pawned jewelry.
"I'm very worried," about the coming summer, Jackson said.
Barbara Gillogly, coordinator of gerontology programs at American River
College, encouraged neighbors and relatives to check regularly on older
people who are living alone, especially when temperatures are high.
And relatives need to be alert to the illnesses and medications that can make
seniors especially vulnerable to heat.
Chandler, who cared for her aging father while he had Alzheimer's and was
taking medications, including an anti-depressant, still remembers the summer
day nearly a decade ago that brought that lesson home to her.
"I came home, and he was in an incredibly stressed state," she recalled. "He
was beet red, his skin was fiery to touch and his eyes had started to glaze
over."
The temperature of about 100 degrees had been enough to nearly overcome her
father, and Chandler had to help him into a wading pool to bring his body
temperature down.
"It was really scary. I almost lost my dad that day," she said.

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

House panel debates energy price controls
By Les Blumenthal
Bee Washington Bureau
(Published May 25, 2001)
WASHINGTON -- The House Energy and Commerce Committee delayed consideration
of a major energy bill Thursday as Republicans and Democrats met privately to
explore a possible compromise placing price controls on soaring wholesale
electric rates on the West Coast.
The negotiations hinted at a possible watershed change in the Republicans'
staunch opposition to price controls. An earlier effort to include such
controls in the bill turned contentious and was defeated on a mostly partisan
vote in subcommittee.
But Republicans sought a compromise after President Bush announced he would
meet with California Gov. Gray Davis during a trip to the state next week.
Davis has advocated price controls and has been outspoken in criticizing the
Bush administration and the Federal Energy Regulatory Commission for opposing
them.
The committee talks also came as the possibility of Senate passage of price
controls brightened considerably with the decision of Sen. James Jeffords of
Vermont to bolt the Republican Party. Jeffords' move handed the chairmanship
of the Senate Energy and Natural Resources Committee to Sen. Jeff Bingaman,
D-N.M., who has already included price controls in his version of an energy
bill.
Republicans on the House Energy Committee were optimistic a deal could be
struck, but Democrats said the talks were in the very early stages. GOP
members from California and other Western states were facing increased
political pressure to negotiate.
"We may be on the verge of a very solid, bipartisan agreement," said Rep.
Billy Tauzin, R-La., the committee chairman.
But Rep. Anna Eshoo, D-Atherton, said of a deal: "It's in its infancy, a
premature baby at best. It's been a good give-and-take. Was a deal struck?
No."
Neither side would discuss the details of a potential compromise, though
there were some indications it might involve imposing a so-called cost-based
rate structure on up to 80 percent of the wholesale electricity power
marketers sell, allowing the remaining 20 percent to be sold at competitive
market rates.
William Massey, one of two Democrat commissioners at the FERC, said temporary
federal price controls are legally justified and necessary to avert "an
impending energy-driven economic disaster on the West Coast."
Massey has so far been overruled in his efforts to impose temporary price
controls, but two new commissioners whose nominations are on the Senate floor
could change the equation.
"The question is should we ignore a tool that is in our toolbox and has been
in our toolbox for years that we can use on a temporary basis -- let's say
for the next 18 months -- to get prices under control," he said Wednesday.

The Bee's Les Blumenthal can be reached at (202) 383-0008 or
lblumenthal@mcclatchydc.com.

Exec reacts hotly to California claim
By Joe Cantlupe
COPLEY NEWS SERVICE
May 24, 2001
WASHINGTON -- A top El Paso Corp. executive strongly denounced as "inaccurate
and implausible" allegations by California officials that the Houston-based
company willfully withheld supplying natural gas through its pipeline to
bolster profits.
The company official testified yesterday before a Federal Energy Regulatory
Commission administrative law judge examining charges that the Houston-based
conglomerate cost California billions of dollars.
The company "did not have a financial incentive to withhold pipeline capacity
in order to increase natural gas prices in California," said Ralph Eads,
president of El Paso Merchant Energy, which markets natural gas on pipelines
from Texas and New Mexico into California.
Merchant is a division of El Paso Corp., which operates a key pipeline that
supplies about one-sixth of California's natural gas. Eads is a corporate
executive vice president.
He said that although Merchant earned more than $180 million in pre-tax
profits in selling natural gas in the past year, the company lost potentially
hundreds of millions of dollars more by entering into long-term contracts
under what is known as a "hedging" strategy.
During afternoon testimony yesterday, Eads repeatedly denied suggestions by
an attorney for the California Public Utilities Commission that the company
kept gas capacity "out of the hands of other marketers" to drive up profits
between November and March.
The California PUC lawyer, Harvey Morris, suggested that Merchant failed to
aggressively market its natural gas and knew that it would only use 50
percent of capacity.
Not so, said Eads.
"We bought capacity to use it," he testified.
In testimony filed with FERC, Eads said: "The allegations made against
Merchant by the (California Public Utilities Commission) and supporter
interveners are not only inaccurate, they are also implausible."
California officials have accused El Paso Corp. and its gas marketing company
of using its marketing muscle to drive up the price of gas sold in California
by more than $3.7 billion. Two financially troubled state utilities --
Pacific Gas and Electric Co. and Southern California Edison -- have joined in
the state's case against El Paso.
Testimony before Judge Curtis L. Wagner Jr. is expected to continue into next
week. Wagner plans to make a recommendation to FERC this summer.

State power regulators aim to keep more power on grid

By Karen Gaudette
ASSOCIATED PRESS
May 24, 2001
SAN FRANCISCO ) California's biggest power users, from factories to farms,
now can sign up for even more programs that offer cheaper electricity in
exchange for less power use ) potentially cutting the state's energy-buying
costs by lowering demand.
The state Public Utilities Commission also decided Thursday to begin
re-examining the calculation that determines which residential customers of
the state's two largest utilities will see their bills rise under a recent
record rate increase.
Last year, voluntary blackouts by so-called interruptible customers kept as
much as 3,000 megawatts on the state's power grid, enough electricity to
power more than 2 million homes.
By being first in line for blackouts or cutting use, these customers also
help managers of the state's power grid leave more power to residents and
services necessary for public health and safety, such as fire stations,
hospitals and military bases.
The PUC hopes even more customers will participate this year, meaning less
high-priced electricity the state would have to buy to keep homes and
businesses humming.
"'Negawatts' are our cheapest source of power," said PUC Commissioner Richard
Bilas. The state already has paid $6 billion to buy electricity for the
customers of the state's three largest utilities.
The PUC will allow big customers to sign up for more than one program to
stretch the state's meager supply of electricity. One program promises not to
subject the customers to rolling blackouts if they slash their power use by
up to 15 percent while blackouts are rolling through the rest of the state.
Another program offers customers 10 cents for every kilowatt hour they don't
use during one of a trio of four-hour blocks between 8 a.m. and 8 p.m.
The PUC also will re-examine how it determines baseline, a varying level of
residential power use upon which recent record rate hikes are allocated, to
determine if it is still accurate and fair since its last update nearly a
decade ago.
"It is time to conduct that review," said Commissioner Jeff Brown, adding
that a new calculation for baseline would not be available until winter at
earliest, long after customers begin paying the biggest rate hike in
California history.
Baseline is 50 percent to 60 percent of the average amount of electricity
used by residential customers in the same climatic and geographical area. It
provides a certain amount of electricity at the lowest price utilities
charge. Customers are now charged progressively more when their electric use
rises above 30 percent of their baseline.
Ratepayers throughout the state say baselines are unfair, since they don't
take household size or the growing number of electronic gadgets into account.
However, while changing the baseline may spare more customers, it would also
make remaining customers pay even more.

Slater asks Sempra to purchase generators

May 24, 2001
San Diego County Supervisor Pam Slater is asking Sempra Energy to provide $15
million for the purchase of portable generators to be used during rolling
blackouts this summer.
Slater's request was made in a letter sent yesterday to Sempra President
Steven Baum and comes one day after the Board of Supervisors turned down a
similar request.
A coalition of businesses asked supervisors Tuesday to pay for the
generators, but supervisors rejected the request, saying the county cannot
legally spend taxpayers' dollars on energy generation.
Slater's letter to Baum said that Sempra does not face that restriction. She
added: "It is incumbent upon Sempra Energy to supply enough energy for the
San Diego region to reduce the possibility of rolling blackouts."
A Sempra official said the company will not pay for the generators and said
it already is spending $2 billion on power plants and natural gas pipelines
on the West Coast to address the energy crisis

President will find Californians upset at his energy stance

By John Marelius
UNION-TRIBUNE STAFF WRITER
May 24, 2001
When George W. Bush arrives in California next week for the first time as
president, he will find a solid majority of residents who believe he is doing
a bad job of dealing with the state's mounting energy woes.
A new Field Poll also finds that Californians who were once willing to give
Gov. Gray Davis the benefit of the doubt now disapprove of the way he is
handling the crisis as well.
The nonpartisan, statewide public opinion survey asked Californians to rate
how 11 individuals or entities are doing on the energy front.
The strongly negative appraisal of Bush ranks up there with out-of-state
electricity generators, public utilities and regulatory agencies that have
long been portrayed as the villains in the crisis.
"It's incredible to me that Bush is rated in that league," said Mark
DiCamillo, associate director of the Field Poll. "I think that's an ominous
sign of the mood Californians are in vis-a-vis the federal government
dragging its feet on providing any short-term relief."
He said the numbers seem to signal that the Democratic portrayal of Bush as a
captive of "big oil" and more sympathetic to corporate energy interests than
consumers is taking hold with the public.
"It's starting to stick," he said. "It does seem to be an issue that the
Republican administration is vulnerable on."
The Field Poll conducted telephone interviews with a representative sample of
1,015 adult Californians between May 11 and Sunday. Statistically, such a
poll is considered accurate 95 percent of the time within a margin of error
of 3.2 percentage points.
The poll found Californians are pessimistic about the prospects of a reliable
supply of electricity being guaranteed anytime soon. On the average, they
said they expected the crisis to last 18 more months, which would take it
beyond November 2002, when Davis faces a re-election bid.
"That's obviously something the Davis administration hopes would not play
out," said DiCamillo.
In January, the Field Poll showed Davis' energy efforts were favorably
regarded by Californians. At the time, 41 percent said Davis was doing a good
job managing the energy situation, while 31 percent critiqued his performance
as fair and 22 percent as poor.
Now, only 27 percent regard the governor's handling of the situation
favorably, compared with 32 percent who rate it as fair and 38 percent as
poor.
Californians' appraisal of Bush's performance on the energy front is
considerably more harsh, with 54 percent saying he is doing a poor job and
only 22 percent saying he is doing a good job. (Bush had not yet taken office
when the January poll was conducted.)
Other entities ranked in order of their negative rating: Private electric
utilities, 57 percent; out-of-state energy providers, 55 percent; Federal
Energy Regulatory Commission, 52 percent; California Public Utilities
Commission, 52 percent; Vice President Dick Cheney, 43 percent; state
Legislature, 41 percent; Secretary of Energy Spencer Abraham, 37 percent;
industrial and business energy consumers, 34 percent.
The only entity Californians regard positively for dealing with the
electricity problems turns out to be Californians themselves.
Residential energy consumers were rated as doing a good job, 39 percent, to
33 percent fair and 22 percent poor. That is almost the reverse of January
when residential users were rated only 26 percent good, 36 percent fair and
32 percent poor.
"It's conservation," said DiCamillo. "The public has changed its habits since
January. They think they're doing as good a job as can be expected, but all
the others are just not up to it."

POLL: Californians dissatisfied with government handling of energy crisis

May 24, 2001
SAN FRANCISCO ) Over the past four months, Californians have developed
increasingly negative feelings toward state and federal officials and
agencies involved in California's energy crisis, according to a Field Poll
released Thursday.
A large number of those surveyed are also fearful that Pacific Gas &
Electric's bankruptcy filing will make it more difficult for the company to
provide service to its customers.
Fifty-seven percent of those questioned in May by the Field Institute, a San
Francisco-based nonpartisan polling organization, gave California's private
electric utilities a poor rating. That's more than the 40 percent of
respondents who rated the utilities performance as poor in January.
The same negative feelings held true for out-of-state energy providers.
Fifty-five percent of respondents this month rated their performance as poor,
a noticeable increase from the 44 percent of respondents who gave them a poor
rating in January.
Specifically, those surveyed were asked to rate the job being done by
officials and groups working to improve the energy situation in the state.
The poll found that:
) The percentage of those surveyed who gave the state Public Utilities
Commission a poor rating rose from 42 percent in January to 52 percent in
May.
) 41 percent of those surveyed gave the state legislature a poor rating in
May, as opposed 36 percent in January.
) 38 percent gave Gov. Gray Davis a poor rating in May for his handling of
the state's energy woes, a sharp increase from 22 percent who gave him a poor
rating in January.
The Federal Energy Regulatory Commission also drew negative ratings from
respondents. In May, 52 percent said FERC was doing a poor job, as opposed to
40 percent who gave the commission a rating of poor in January.
Those surveyed were also asked if PG&E's bankruptcy would make it more
difficult for the company to supply electricity to customers, and 49 percent
said they thought it would.
The poll, which questioned 1,015 California adults between May 11 and May 20,
has a margin of error of plus or minus 3.2 percentage points, the institute
said.

California PUC to earmark more electricity for grid

By Karen Gaudette
ASSOCIATED PRESS
May 24, 2001
SAN FRANCISCO ) State power regulators are considering expanding the menu of
programs that offer cheaper energy to customers who voluntarily cut their
power use. It's part of an effort to muddle through an energy-strapped summer
in California with a meager supply of megawatts.
The state Public Utilities Commission could also begin looking into whether
baseline, a level of residential power use upon which recent record rate
hikes are allocated, is accurate and fair.
In March, the PUC released a package of so-called interruptible load
programs, which offer discounted electric bills to factories, schools and
other big users if they agree to be first in line for rolling blackouts.
By cutting their use, these customers help managers of the state's power grid
leave more power to residents and services necessary for public health and
safety, such as fire stations, hospitals and military bases.
Loretta Lynch, PUC president, said the commission hopes to boost
participation by allowing customers who participated in interruptible
programs earlier in the year to also join new programs.
Under one such program, businesses could avoid surprise blackouts by opting
for dimmed lights and reduced power during the duration of outages throughout
the state.
The PUC is also considering funding interruptible programs for the state's
three largest investor-owned utilities as they go into effect, rather than
forcing utilities to wait for retroactive funding a year later.
The commission also plans to examine whether the PUC should change how
residential customers' baselines are calculated to better reflect household
size and a spike in electronic gadgets.
Baseline is a certain amount of electricity guaranteed at the lowest price
utilities charge. Customers who exceed their baselines by more than 30
percent are subject to rate hikes.
"I think it's clear that baselines were set too low and didn't reflect actual
electricity usage," Lynch said.
Mindy Spatt, spokeswoman for The Utility Reform Network, warned that
potentially changing baseline would simply push the rate hikes onto different
customers.
"If you think about the rate increase as sort of a balloon, if you push on it
someplace it's going to pop out somewhere else," Spatt said.
Lynch said the commission would likely postpone many orders affecting various
aspects of the natural gas industry in favor of meshing them together in a
"comprehensive gas strategy."
"I don't think they anticipate any problems with natural gas this summer or
winter," Lynch said.
A PUC investigation into whether natural gas and electricity generators and
sellers illegally drove up prices by withholding energy during times of
highest demands continues.
"What we saw was a pattern of individual behavior which all tracked around
the same time which I believe contributed to the high prices," Lynch said.

Davis proposal for more diesel power draws environmental criticism

ASSOCIATED PRESS
May 24, 2001
LOS ANGELES ) California would get a little power and a lot of pollution from
a proposal being considered by Gov. Gray Davis that would pay owners of
backup generators to produce electricity.
The proposal, one of several options the governor is considering, would pay
for diesel power ) which at its dirtiest is 500 times more polluting than the
cleanest natural gas power plants ) when electricity supplies are stretched.
"If backup generators were to be used, it would only be as a last resort to
avoid blackouts," said Davis spokesman Roger Salazar. "Unfortunately, we are
in an emergency situation. Everything is on the table."
California's persistent power shortage has led to rolling blackouts around
the state several times this year, with more anticipated when hot summer
weather prompts people to use air conditioning.
If all of the state's backup generators ran full time, they would produce
about 425 tons of nitrogen dioxide per day. That's more than nine times the
pollution power plants produced on an average day in 1999, according to state
Air Resources Board data.
And the state would get only about 550 megawatts of electricity ) barely 1
percent of the state's peak power needs ) from the backup generators. That
would be enough to power about 550,000 homes.
"They could have a huge negative effect on air quality," said Ellen Garvey,
executive officer for the Bay Area Air Quality Management Agency. "It's one
thing to run these generators during blackouts and emergency conditions, but
using them for other purposes could be devastating."
Business groups that support the proposal include the League of Food
Processors, the California Manufacturers and Technology Association and San
Diego Gas & Electric.
"These generators could go a long way to taking some demand off the electric
grid and putting some supply back into the power system," said Gino DiCaro,
spokesman for the manufacturers and technology association.
Most of the state's 17,200 backup generators are small units that run on
diesel fuel and lack pollution controls. Some are rentals, and others can be
found at hospitals, office buildings, sewage treatment plants and university
labs.
Unlike backup generators intended for home use, which are not regulated,
industrial-sized units are limited in the number of hours they can operate.
But since the state's power crunch began, regional air-quality regulators
have issued emergency rules allowing them to run more frequently.
Diesel engines produce carcinogenic soot and oxides of nitrogen ) a building
block of asthma-inducing smog.

Davis Orders 3-Tiered Warnings of Blackouts

By DAN MORAIN and NANCY VOGEL, Times Staff Writers

?????SACRAMENTO--In a significant policy change aimed at minimizing business
and consumer disruptions, Gov. Gray Davis ordered state officials Thursday to
enact a three-tier blackout warning system.
?????Forecasts of blackouts will be issued 48 hours beforehand, Davis said.
General areas will be identified in warnings issued 24 hours before likely
outages. Precise locations will be announced an hour before the power is cut,
he said.
?????Business executives, police and consumers have complained that the
current warning system--in which blackouts can come with less than 10
minutes' warning--does not give them sufficient time to save information on
computers, shut down assembly lines, safeguard traffic intersections and
otherwise prevent financial loss and mayhem when the power goes out.
?????In the past, state grid operators only gave short notice because they
often found enough power at the last minute to avert blackouts. They said
they did not want to repeatedly alarm people. Utility officials have said
they feared that advance warning would leave neighborhoods vulnerable to
looters and burglars.
?????But crime has not been a problem during California's six days of
blackouts so far this year. And with experts predicting dozens of days of
forced outages this summer, state and utility leaders say Californians are
better off prepared.
?????"If blackouts are going to occur," Davis said, "there is no reason to
keep the public in the dark. We all deserve as much advance notice as
possible."
?????Utility customers will be notified through company Web sites and radio
and television announcements. Starting with June utility bills, Southern
California Edison customers will be given "block" numbers that allow them to
learn through the Edison Web site, www.sce.com, if they are scheduled for
rotating blackouts on days of short supply.
?????Under the governor's order, Edison spokesman Brian Bennett said,
consumers can expect 24-hour warnings about general areas--Santa Monica or
Santa Ana, for example--that might be targeted for hourlong blackouts.
?????At 60 minutes before a blackout is triggered, Bennett said, the warnings
delivered through radio, television and the Internet will get much more
precise. "For example," he said, "One hour before, we'll say Main Street in
Santa Monica . . . will be affected."
?????Leaders of the agency responsible for deciding when blackouts must be
triggered said Thursday they intend to launch the governor's order by June
15. And if Californians redouble their conservation efforts when they hear of
blackout warnings, they said, the governor's order will ultimately help the
state avoid blackouts.
?????"I think we're going to save power, potentially lives; we're going to
help save jobs and California's economy," said Carl Guardino, a member of the
board that oversees the California Independent System Operator, which manages
75% of the state's transmission system.
?????Davis announced his order at a news conference attended by law
enforcement officials, including Los Angeles County Sheriff Lee Baca, who
said he intends to unveil a more detailed plan for the county today.
?????For some, the decision to give warning was an acknowledgment that the
state is failing to solve the energy crisis.
?????"It obviously says we're surrendering to the electricity crisis," said
Sen. Tom McClintock (R-Northridge. "Here we've arrived in the 21st century,
with all the electronics, and we don't have the power to run them."
?????Utility spokesmen lauded the plan, but said that much of the
responsibility rests with Cal-ISO, which is the only entity that has the
ability to track supplies.
?????"If the ISO only gives us 60-minutes warning, our customers will get
something less than 60-minutes notice," said John Nelson, spokesman for
Pacific Gas & Electric.
?????As it works now, Cal-ISO informs utilities of pending blackouts. The
utility, in turn, informs county offices of emergency services. Using
computerized calling, e-mail and manual dialing, the utilities also inform
law enforcement, major industrial users, people on life support and other
consumers for whom electricity is vital, Nelson said.
?????Californians at large are expected to learn of the warnings through the
media and the Cal-ISO Web site, www.caiso.com.
?????Also on Thursday, Davis met with officials of California's publicly
owned utility districts and came away, he said, with promises that they would
sell excess power to the state at prices significantly lower than on the spot
market.

Copyright 2001 Los Angeles Times

PUC to Reassess Rate Hikes
Energy: State regulators vote to reexamine baselines used to determine how
much customers will pay for power. Consumers say allotments are too low.

By TIM REITERMAN, Times Staff Writer

?????SAN FRANCISCO--Nine days after structuring the largest electricity rate
increase in California history, state regulators on Thursday launched a
reexamination of the unpopular baselines used to determine how much each
residential customer will pay.
?????If the indicators are revised upward, as most expect, that would grant
some customers relief from the rate hike but could necessitate future ones to
generate enough revenue for power purchases.
?????The energy crisis put the esoteric term "baseline" on the minds of
millions of utility customers. During recent hearings on a $5.7-billion rate
increase, the California Public Utilities Commission heard a chorus of
complaints from consumers who said their baseline was unrealistically low,
exposing them unfairly to the rate hike.
?????"The most visible and controversial issue, other than the overall
increase ordered, was the methodology used to spread the increased revenue
requirement to residential customers," the PUC said in voting unanimously to
reassess baselines.
?????On March 27, the PUC approved rate increases for Southern California
Edison and Pacific Gas & Electric Co. but exempted people in a low-income
program and customers consuming less than 130% of their baseline, which is
50% to 60% of average residential usage, with allowances for climate and
season. But other customers will pay more, depending on how much their
consumption exceeds the baseline.
?????Reassessment of the baselines, commissioners said, will not be completed
for the summer, when new rate hikes go into full swing, but it could be done
by winter. Public hearings are scheduled for July.
?????Several commissioners acknowledged that an upward adjustment in
baselines would bring in less money from utility customers and could create a
funding shortfall for future power purchases.
?????"There is no question [the baseline] is out of whack," Commissioner
Richard Bilas said later. "But if the revenue base falls, where do you get
the money? Another rate increase. This is the problem."
?????Thousands of consumers contacted the PUC about the last rate increase
and hundreds complained about difficulty in achieving their baseline
allotments, even when they worked hard to conserve.
?????Baselines have been used to chart utility bills for the past
quarter-century, and they are periodically updated.
?????The levels vary by area and utility. They are not adjusted by household
size. And, critics say, they do not accurately reflect power needs of homes
with computers, VCRs and microwaves.
?????"We heard lots of customers complain it's not fair," said Mindy Spatt,
spokeswoman for Toward Utility Rate Reform. "For example, if you have lots of
children who do not contribute income but use electricity, you could be at a
disadvantage."
?????Living below baseline may not be easy for many. Spatt, whose baseline
for her San Francisco home is 258 kilowatt hours, goes so far as to dry her
laundry on a clothesline, but was slightly above 130% of baseline in March.
?????Bilas' home in Mendocino County has a baseline of about 280 kilowatt
hours and he says he consumes more than 500. "I don't know how anyone can
live on the baseline," he said. But he added, "I have a hot tub I can turn
off."

Copyright 2001 Los Angeles Times

We Aren't That Desperate

?????Who hasn't stood at a street corner and recoiled from the noxious, hot,
sooty, exhaust spewing from a diesel bus or truck? As bad as that is, the
exhaust of standby diesel-fueled electric power generators is worse. These
smelly, noisy machines are typically used by large businesses as emergency
power backups--in earthquakes, for instance. They have virtually no pollution
controls and pose a health risk.
?????Under normal circumstances these generators might almost never be used.
But Gov. Gray Davis is considering issuing an executive order to pay owners
of these backup generators to run them constantly during Stage 3 power
alerts, the highest alert before rolling blackouts. This is an agonizing
choice, but the health risk--these generators pour out nitrogen dioxide, a
chief smog ingredient--tips the balance against them. A Davis spokesman says
the generators, an estimated 17,200 of them statewide, would be run only as a
last resort. But if the aim was to avert blackouts, they could be running for
hours at a time. As The Times' Gary Polakovic reported Thursday, the
generators are concentrated in areas, including Los Angeles, that already
have severe air quality problems.
?????Environmentalists are protesting, saying it would be better and more
practical to pay companies to conserve power. The governor also has a plan to
cut 20% from the bills of homeowners and businesses that reduce power use by
20%. That program, if pursued aggressively and in combination with other
incentives now being offered, would probably save as much power as the diesel
generators could make. To use these units in an attempt to stave off
blackouts is too desperate and could cause more harm than it prevents.
Copyright 2001 Los Angeles Times

Energy Crisis as Political Payback

?????Re "All We Need Fear Is Bush's Tale of Doom," May 23: Arianna
Huffington's analysis is perfect and, coupled with Paul Conrad's cartoon
("OPEC oil production executive Cheney"), addresses the so-called energy
crisis for what it really is: political payback, greed and obscene profits in
spite of the massive windfalls the energy and oil companies continue to reap.
?????Dan Pellow
????? Los Angeles

????? *
?????The California Public Utilities Commission is releasing information it
has known for many months about the well-orchestrated manipulation of
California's electricity market ("PUC Allegations Detailed," May 19). To PUC
President Loretta Lynch: You knew about this collusion months ago, so why did
you wait so long to divulge it? To Gov. Gray Davis: Your indecisiveness in
this matter has just about bankrupted the state; you should have used your
eminent domain authority to take back the power plants months ago, but now
you've run out of money (ours). To President Bush: Your loyalty to the Exxons
and Enrons of the world will subject California's and the nation's economies
to a great setback. The real culprit is greed. When you let the fox in the
henhouse, do you really expect him to eat only a few chickens?
?????Barry C. Olsan
????? Ontario

????? *
?????Davis' declaration of "war" against the companies that supply our energy
is unconscionable. What supplier would want to risk capital serving a market
that treats him as an enemy?
* * *
?????Beatrice W. Forbes
????? Palos Verdes Estates

????? *
?????Funny that Republicans blame Bush's predecessor, Bill Clinton, for the
nation's energy problems but not Davis' predecessor, Pete Wilson, for
California's.
?????Saul Davis
????? Studio City

????? *
?????Gas prices are over $2 a gallon. Electricity prices are out of control.
Natural gas is low, and the threat of rolling blackouts lurks around every
corner, with no end in sight. Geez. I miss Bill Clinton.
?????Brian Frieson
????? Gardena

????? *
?????There is much to disagree with in the Bush energy plan, but it's hard to
fault the concept of integrating the various transmission grids under federal
control to more efficiently distribute power. What's troublesome, however, is
the seemingly deliberate manner in which renewable energy sources and
conservation are being marginalized. If the feds control a national grid,
might they not find ways to make it most difficult for alternative power
generators to access it?
?????Phillip Cutler
????? Costa Mesa

????? *
?????Re "Lockyer Fires Earthy Attack at Energy Exec," May 23: Rape is a
heinous crime; it is not a legally sanctioned form of punishment. This
distinction seems to have eluded California Atty. Gen. Bill Lockyer when he
suggested that Enron Corp. Chairman Kenneth Lay deserved to be locked in a
jail cell with an amorous inmate. Lockyer's comment reflects an
all-too-common belief that people who are incarcerated deserve to be raped as
part of their punishment. California deserves an attorney general who
understands the difference between legal incarceration and state-sanctioned
torture. Lockyer should resign.
?????Robert Shannon
????? South Pasadena

????? *
?????Lockyer's comment to the energy robber barons, "If we catch them,
they're going to be prosecuted," is nothing but an empty threat. Despite all
the evidence that the energy moguls are guilty, we all know what will happen.
Essentially, nothing. Or at most, they'll admit to no wrongdoing, pay a small
fine and make some innocuous statement about putting this all behind us.
?????Trent D. Sanders
????? La Canada

????? *
?????Peter H. King writes about an energy problem in 1948 (May 20). On June
27, 1924, my mother wrote in her diary: "Electricity and service cut by 25%
due to shortage."
?????Sarah M. Duncan
????? San Gabriel

?????
Copyright 2001 Los Angeles Times

Energy Antics: Oh, Behave!

?????Admit it: The only comic relief in this energy crisis has been watching
our leaders go at suppliers and each other like pro wrestlers or Jerry
Springer guests.
?????In his State of the State address last January, Gov. Gray Davis accused
the big private electric power generators of legalized highway robbery and
threatened to seize their plants if necessary. Then he really got angry,
calling them "the biggest snakes in the world." This past week, Atty. Gen.
Bill Lockyer boosted the rhetoric a notch by declaring he would like to
personally escort the chairman of Enron Corp. "to an 8-by-10 cell that he
could share with a tattooed dude who says, 'Hi, my name is Spike, honey."'
Meanwhile, President Bush and Vice President Dick Cheney have blamed
California for causing its own problems with a "harebrained" deregulation
scheme and mocked the state's power purchases and conservation programs. It's
been fun. Now it's time for our leaders to act like adults.
?????Davis and Bush always will have their political differences, but the
economies of both the state and the nation are endangered by California's
energy situation. These leaders need to work together as cooperatively as
possible, starting next week when Bush makes his first visit to California as
president.
?????Davis wrote Bush Wednesday offering to meet with him during his
California visit. Bush spokesman Ari Fleischer said the president looks
forward to discussing energy and other issues. Good start. Let's hope the
conversation is civil and that the civility spreads.
?????No matter how much California has been abused by the power companies,
and it absolutely has, the state still needs them to help solve the crisis
caused by shortages of electric power generation this year and next. Usually,
the biggest targets of official and public wrath are the investor-owned
utilities such as Southern California Edison and Pacific Gas & Electric Co.
But not this time because, in the view of the state, the utilities have been
bled dry by the power generators' stratospheric prices. The state had to take
over the purchase of power when the generators refused to extend any more
credit to Edison and PG&E. Legal recourse should be pursued, but the
threatening rhetoric needs to subside.
?????State lawmakers are right to be upset with the White House for refusing
to use its authority to set reasonable temporary wholesale price controls.
And Davis is justifiably upset with Bush and with Cheney, who said the only
solution was to build more power plants--ignoring the fact that the state is
building 10 plants now, with five more on the way, and that the only way to
control wholesale power rates is for Washington to cap them.
?????If the state hadn't bought the power, the generators would have let the
lights go out. Davis needs to deliver that message, quietly and persuasively,
while Bush is in California. And Bush needs to listen respectfully, like an
adult. Copyright 2001 Los Angeles Times

An air of discontent over diesel backups
Emissions rules ignore emergency generators
Carolyn Said, Chronicle Staff Writer
Friday, May 25, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/25/M
N195913.DTL&type=news

Gov. Gray Davis said yesterday that he may ask companies to run their
emergency generators during Stage 3 electricity alerts as a way to stave off
blackouts. And when blackouts do occur, thousands of tractor-trailer-size
generators will whir to life, powering elevators and lights, hospital
equipment, even assembly lines.
But that prospect has created major concerns. Most of those industrial-
strength generators run on diesel oil, a highly polluting fuel. Because they
were intended for emergency use, generators have escaped most environmental
regulations. What's more, they are likely to be called into service on the
hottest, smoggiest days of the year.
"We think our air quality will be significantly worse this summer because of
diesel generators and peaker plants," said Dan Jacobson, a legislative
advocate with the California Public Interest Research Group in Sacramento.
Identified as a toxic air contaminant by the state, diesel fuel spews out
nitrogen oxides, which cause smog and acid rain. It also emits particulate
matter -- tiny soot and dust particles that can lodge in the lungs and may
increase cancer risk.
Diesel generators produce as much as five times more pollution per megawatt
hour of operation than even the oldest, dirtiest coal-fired power plants,
according to the California Air Resources Board. They are 600 times as
polluting as modern gas-powered plants.
Practically every hospital, large office building and apartment complex has a
diesel generator standing by on the roof or parking lot, in basements and
boiler rooms.
The air board estimates there are 11,000 diesel generators in California,
which produce an average of 373 kilowatts, enough to power essential
functions for a sizable building. But the number is probably much higher
because businesses have stampeded to acquire generators over the past few
months.
"Generators operate in an urban setting, close to where people work and
live," said Kenneth Lim, supervising air quality engineer for the Bay Area
Air Quality District. "If there were widespread rolling blackouts, and these
engines fired up all at the same time, the impact could be very significant."
INCREASED CANCER RISK
The California Air Resources Board said that operating a one-megawatt diesel
engine for 250 hours per year "would increase cancer risk to nearby residents
(within one city block) by 250 in a million" -- 50 percent more than the
existing cancer risk from exposure to ambient diesel fumes from trucks and
buses.
Diesel generators largely avoided air-control laws because regulators assumed
they would be used only in case of an earthquake or other once-in-a-
blue-moon catastrophe.
Stage 3 alerts and blackouts are likely to be everyday occurrences this
summer. Predictions range from 260 hours to as high as 1,100 hours of
blackouts.
Most blackouts and Stage 3 alerts will occur on hot days when air quality is
already poor.
"Our worst-case scenario would be if we get into a two-, three- or four-day
episode where it's really hot and really stagnant," said Lucia Libretti,
spokeswoman for the air quality district.
"It's bad enough smogwise on those days, but when you add these dirty diesel
backup generators to that mix, it's not going to be a pretty sight."
This summer's predicted blackouts have brought a surge of business for
generator companies.
GENERATING FAST SALES
Caterpillar Inc., the leading manufacturer of big generators, said it has
sold and rented more than 900 megawatts of portable power on the West Coast
so far this year, enough to power almost 1 million homes. That's seven times
as much backup power as Caterpillar provided to the region last year. The
customers include factories, data centers, banks, utility substations and
planned communities.
"Everyone in the state is now claiming that they need a backup generator,"
said CalPIRG lobbyist Jacobson. "It's not just the hospitals; every business
says they need a backup; the rich people who live in Beverly Hills say they
need it. The door is open and everyone is trying to get one."
Small backup generators sold at Costco and Kmart that provide enough power
for, say, a TV, some lights and a blender run on gasoline, which emits fewer
pollutants than diesel.
But most business, commercial and agricultural users turn to diesel engines,
which can handle heavier loads, kick on in 10 seconds and provide a steady
stream of power.
One positive about the rush to get new generators is that they pollute less
than older models.
"They aren't black-smoke-billowing units like you might have seen 15 or 20
years ago," said Jim Parker, director of electric power for Caterpillar in
Peoria, Ill.
Diesel fumes from buses, trucks, tractors and construction equipment already
surround us. But their emissions are regulated, unlike those from generators.
DIRTY BUT ESSENTIAL
Allen Schaeffer, executive director of the Diesel Technology Forum, which
promotes the use of diesel fuel, said it is important to consider the big
picture.
"You have to look at the full equation of increased risk to public health and
safety from not having (generators during blackouts)," he said. "Generators
are a very important part of keeping life going, especially essential,
critical services in California."
Consumer advocates and environmentalists were critical of Davis' proposal to
turn on diesel generators when the power supply gets tight.
"If the governor wants to do something dramatic, why not call in the National
Guard to install solar panels? They could be put on libraries, schools, civic
buildings in a couple of weeks," said Teri Olle, toxics program director at
the CalPIRG.
E-mail Carolyn Said at csaid@sfchronicle.com.

Early-warning system for summer blackouts
Media alerts, Web sites would give information
Greg Lucas, Lynda Gledhill, Chronicle Sacramento Bureau
Friday, May 25, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/25/M
N130894.DTL&type=news
Sacramento -- Pledging to take some of the uncertainty out of summer
blackouts, Gov. Gray Davis outlined a plan yesterday to tell "specific
neighborhoods" about probable rotating outages an hour in advance.
Davis' early-warning plan would also require utilities to give a 48-hour
warning of possible blackouts.
That would be followed by a 24-hour warning of what neighborhoods would be
hit. Then, one hour before the actual blackout, the California Independent
System Operator and utilities will notify the neighborhoods where power will
probably be shut off.
Californians wouldn't have to have their utility block numbers committed to
memory to know if blackouts are likely to hit their home, office, or child's
day care center under Davis' plan.
Details still need to be worked out, but the plan envisions an outreach
system whereby customers would be told through media alerts and other
outreach -- including possible Web sites -- which geographic areas would be
affected.
Currently, only people who know which Pacific Gas and Electric Co. block they
live or work in know if they could be subjected to blackouts, and media
alerts come only minutes before the power goes off.
"If blackouts are going to occur, there's no reason to keep the public in the
dark," Davis said.
A PG&E representative said the company hopes to have more information
available on its Web site, as well as an 800 number people can call to learn
what block they are in.
"For several months, we've been looking at ways to improve our customer
notification process," Ron Low, PG&E spokesman said. "We are looking at
designing new programs and new ways to provide information on outages."
Businesses and consumers favor greater warning of impending blackouts. The
Democratic governor said such warnings would also allow law enforcement more
time to put officers in the field, particularly at busy intersections where
traffic lights may go dark.
Davis said that within a few days he will issue an executive order requiring
that utilities begin to issue the warnings.
Administration officials said the Office of Emergency Services will work with
the Public Utilities Commission and the utilities on the plan.
Utilities will also be responsible for providing law enforcement agencies
with detailed maps identifying the locations of vulnerable populations --
including nursing homes, schools, and high-rises -- as well as the location
of facilities exempted from blackouts, such as hospitals.
Within an hour of Davis' announcement, the California Independent System
Operator board of directors approved a motion implementing the advanced
notification system.
Elena Schmid, vice president of corporate and strategic development for the
ISO, told the board it is important to remember that the key term in any
early warning system is "probable."
The ISO data showed that blackouts would not be needed 61 percent of the time
after a warning was given 30 minutes in advance, which was the staff
recommendation.
A warning given 60 minutes in advance, as was adopted by the board, would
probably result in even more false alarms, Schmid said.
Of the 62 hours since January that blackouts appeared likely 30 minutes out,
they were actually called 24 times.
In other energy-related matters yesterday, Davis:
-- Said several municipal utilities, including the city of Palo Alto and the
Los Angeles Department of Water and Power, have agreed to supply their excess
power to the state at prices below spot market prices.
Until now, the municipal utilities had been selling their power at high
prices, leading some to say that they were gouging the state.
"I believe the prices municipal utilities have charged the state during the
past are unconscionable," Davis said in a statement after the meeting. "There
was a strong commitment made from the municipal utilities to provide the
state with excess power at lower, reasonable costs whenever possible."
-- Threatened yesterday to sue if federal regulators don't limit the prices
the state is being charged to buy electricity. The threat came just days
before President Bush comes to California for the fist time to meet with
Davis.
Although Davis supports a lawsuit filed Tuesday by state lawmakers seeking
the same thing, his comment was his first suggestion of a lawsuit of his own.
E-mail the reporters at glucas@sfchronicle.com and lgledhill@sfchronicle.com.

Energy crisis to cast long shadow
A look at what energy crisis means to future
Mark Simon
Thursday, May 24, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/24/M
NS121240.DTL&type=news
What we need to do is tune in, turn off and drop out.
Tune in to how you use energy. Turn off those things that use electricity.
And drop out of the power grid by using alternative power sources and
alternatives to power sources.
That's the only thing we can do in the short term.
In the long term, you can almost see what will be coming down the pike.
As the state's energy problems worsen, as the state throws its surplus down a
rathole, as our own utility bills skyrocket and as blackouts roll across the
state, someone will write a statewide ballot initiative and get it on the
ballot.
It will do two things.
First, it will undo the deregulation of the state's energy industry. It will
try to put everything back the way it was.
Second, it will punish the producers of power and energy.
It will levy some new fee or tax or it will regulate the industry as a public
utility or it will require that the state take over the industry entirely.
Huge amounts of money will be spent against it. Opponents will outspend
supporters by a substantial amount.
TV ads will run constantly, predicting dire consequences if the initiative is
approved.
We'll be told it will be bad for business. Labor leaders will tell us that it
will cost jobs. Experts will say it will have no effect on the problem, or
make the problem worse.
All of that will probably be true.
The initiative will pass easily.
It will pass because it will appear to address what are widely understood as
the two main causes of the current energy crisis -- a badly bungled
deregulation and unbelievably greedy energy producers.
It will pass because the initiative's authors will understand that most of us
are furious about the way this mess was created and that we're eager to take
it out on the industry leaders we see as the leading villains.
It will pass precisely because all the people who will tell us it shouldn't
are the people who got us into this disaster in the first place, and we won't
believe them.
It's much harder to say whether the energy crisis will have more immediate
political repercussions for some of the elected officials we might blame for
the problem -- such as the state Legislature and Gov. Davis, who could have
done something about this a year ago and chose not to.
Yes, the latest polls make it clear that Californians are furious with Davis
and the Legislature.
But elections for office are not yes/no propositions -- you don't get to vote
up or down on Davis.
They are a contest between two major party candidates, which means elections
are always a matter of comparisons -- Davis compared with his opponent.
Someone has to come along and convince voters he or she can do the job better
than Davis.
There might, indeed, be such people. It's unlikely one of those people will
appear on the ballot in 2002, however.
The current political landscape is heavily populated with profiles in
discouragement -- people who, fearful of losing, lack the nerve to run
against a well-financed incumbent.
The great irony here is that voters thought term limits would solve that
problem -- rather than being stuck with a well-financed incumbent, we'd force
him out of office.
In reality, we're stuck with the well-financed incumbent until his term
limits are up -- in six or eight years.
That does nothing to solve the problems that might arise in those six to
eight years. It has done nothing to embolden would-be candidates. Now, they
just meekly wait their turn.
And it has made a shambles of the legislative process by populating the
Capitol with people who don't know what they're doing, only where they're
going next. Meanwhile, the people who do know what they're doing have been
kicked out office.
It's no coincidence that the deregulation mess was made in a Legislature full
of people elected during the term-limit era.
A statewide initiative, brave candidates, ending term limits -- those are all
things that will happen in the future.
Right now, it's time to tune in, turn off and drop out.
Tune in to what you are doing as an individual consumer -- cast a critical
eye at your own habits.
Turn off your appliances, your lights, your air conditioner and reduce your
individual energy consumption. It's much easier than it appears.
Energy consumption has dropped in my household by more than a third by
switching off some lights, converting to fluorescent light bulbs, turning
down the refrigerator and connecting some appliances to a power strip, so
that they truly are turned off.
Finally, drop out of the power grid. Look for other ways to power your home
-- most notably solar power, which is readily available.
Find other alternatives to high-consumption appliances, such as clotheslines.
Drop out.
They can't gouge you if they can't get to you.
Simon can be seen 7:30 p.m. Fridays on The Chronicle's "Peninsula This Week"
on cable Channel 26, and at other times on local access channels. You can
reach him at (650) 299-8071, by fax at (650) 299-9208, or e-mail at
msimon@sfchronicle.com.

Governor vulnerable, poll shows
Posted at 9:40 p.m. PDT Thursday, May 24, 2001
BY HALLYE JORDAN

Mercury News Sacramento Bureau

SACRAMENTO -- With the energy crisis sapping his once-potent popularity, Gov.
Gray Davis could be a one-term governor if the 2002 election were held now,
according to a Field Poll released today.
The survey indicates that voters, by a 10-point margin, are not inclined to
support Davis for re-election. His approval rating, which stood at an
impressive 60 percent in January, has plummeted to 42 percent.
In recent weeks, Davis advisers have pooh-poohed reports of the governor's
growing political weakness, noting that the Republicans had mustered no
strong candidate to oppose him. But that may be changing: In a Thursday
interview with the Mercury News, outgoing Los Angeles Mayor Richard Riordan
said he would ``love to tackle'' the problems confronting the state, and
promised a decision on his candidacy by the end of next month.
The Field Poll showed Davis and Riordan running neck-and-neck in a trial
heat.
Poll director Mark DiCamillo said the most alarming news for Davis in the
poll is that opposition to the governor is intense, while his support is only
lukewarm. Just 14 percent of those polled said they were ``very inclined'' to
re-elect him, while 32 percent said they were ``not at all inclined.''
Bob Mulholland, political adviser to the California Democratic Party,
shrugged off the survey, noting that Gov. Pete Wilson overcame a 23-point
deficit to challenger Kathleen Brown in 1993 to win by 15 points.
Aides to Davis said they look forward once again to confounding critics of
the governor, who lagged behind his two primary opponents for months in 1998.
Advisers unruffled
``We've seen this movie before,'' said Garry South, Davis' political adviser,
about the poll. ``There nothing in there that makes me quake in my boots.''
The Field Poll is the latest in a string of surveys that have given
Republicans hope for retaking the corner office they controlled for 16 years
before 1998.
But despite the brisk sale of bumper stickers proclaiming ``Blackouts
2001/Gray Out 2002!,'' the GOP still faces enormous obstacles in trying to
unseat a savvy, 30-year career politician who has amassed a $25 million
campaign war chest for his re-election.

?

?
Associated Press file
California Gov. Gray Davis

With Democrats claiming the bulk of statewide offices and majorities in both
houses of the Legislature, Republicans are at a low mark in terms of
influence. The energy deregulation bill at the root of the power problem was
written by a Republican assemblyman and signed by former Republican Gov. Pete
Wilson.
And it is Republicans, polls show, that the public most closely links with
the greedy generators and power-rich Texans they blame for skyrocketing
electricity bills.
``Davis couldn't have picked a better political moment to fumble,'' said
University of California-Irvine political scientist Mark Petracca. ``Despite
the quicksand he's in, Republicans aren't standing on solid ground either.
They are as culpable for the mess as Democrats are and, besides that, they
don't have a leader.''
To unseat an incumbent, the rule of thumb is that a party needs an issue and
a candidate. Republicans think they have their issue now: A recent private
poll showed that the energy crisis was the top concern of 42 percent of
Californians surveyed. More telling was that education ranked second, but was
only cited by 7 percent -- a huge gap and a stunning drop for the issue that
Davis has tried to make his top priority.
The real challenge
The candidate part, however, is stickier. Republicans start at a disadvantage
in a state where voters overwhelmingly approve of abortion rights, gun
control and protecting the environment.
And at the moment, the GOP's likeliest candidates for governor are Secretary
of State Bill Jones, who suffers from a lack of name recognition and a poor
track record at fundraising, and William E. Simon Jr., a wealthy Los Angeles
businessman and philanthropist who has no political experience and ties to
the savings and loan and oil and gas industry that could hurt.
``Davis is extremely vulnerable, but neither of these individuals is the
right candidate to defeat him,'' said one GOP consultant, who asked not to be
identified.
Indeed, the Field Poll shows Davis with double-digit leads against either
Simon or Jones. That's why the GOP flirted earlier this year with maverick
choices such as movie star Arnold Schwarzenegger, who ultimately said he is
not interested.
More recently, talk in GOP circles has turned to Riordan and former Stanford
provost Condoleezza Rice. Many Republican insiders doubt that Rice, who
garnered 36 percent to Davis' 45 percent in the Field Poll, would want to
leave her position as President Bush's national security adviser. But Riordan
may be more interested.
Riordan `fits'
Assemblyman Rod Pacheco, R-Riverside, said Riordan is a moderate on social
issues, has broad name recognition, can attract voters in the state's urban
districts and has proven leadership ability.
``We need a new captain of the ship because this ship is heading toward the
iceberg,'' Pacheco said. ``Dick Riordan is the only one who fits.''
On Thursday, Riordan told the Mercury News he will decide whether to run by
the end of June. Although he was looking forward to retirement -- and finally
learning to play golf -- he said his ``Irish-Catholic conscience'' and his
wife's support of whatever he decides could motivate him to run.
He said California is suffering major problems with education, health care
and energy that need to be addressed. ``These are the types of crises that I
love to tackle.''

Contact Hallye Jordan at hjordan@sjmercury.com or (916) 441-4602.

California power regulators aim to keep more power on grid
Posted at 6:40 a.m. PDT Friday, May 25, 2001
BY KAREN GAUDETTE

Associated Press Writer

SAN FRANCISCO (AP) -- State power regulators are busy devising ways to curb
demand among the state's heaviest users during peak periods.
From factories to farms, California's biggest power users are being
encouraged to sign up for even more programs that offer cheaper electricity
in exchange for less power use -- potentially cutting the state's
energy-buying costs by lowering demand.
The state Public Utilities Commission also decided Thursday to begin
re-examining the calculation that determines which residential customers of
the state's two largest utilities will see their bills rise under a recent
record rate increase.
Last year, voluntary blackouts by so-called interruptible customers kept as
much as 3,000 megawatts on the state's power grid, enough electricity to
power more than 2 million homes.
By being first in line for blackouts or cutting use, these customers also
help managers of the state's power grid leave more power to residents and
services necessary for public health and safety, such as fire stations,
hospitals and military bases.
The PUC hopes even more customers will participate this year, meaning less
high-priced electricity the state would have to buy to keep homes and
businesses humming.
''`Negawatts' are our cheapest source of power,'' said PUC Commissioner
Richard Bilas. The state already has paid $6 billion to buy electricity for
the customers of the state's three largest utilities.
The PUC will allow big customers to sign up for more than one program to
stretch the state's meager supply of electricity. One program promises not to
subject the customers to rolling blackouts if they slash their power use by
up to 15 percent while blackouts are rolling through the rest of the state.
Another program offers customers 10 cents for every kilowatt hour they don't
use during one of a trio of four-hour blocks between 8 a.m. and 8 p.m.
The PUC also will re-examine how it determines baseline, a varying level of
residential power use upon which recent record rate hikes are allocated, to
determine if it is still accurate and fair since its last update nearly a
decade ago.
``It is time to conduct that review,'' said Commissioner Jeff Brown, adding
that a new calculation for baseline would not be available until winter at
earliest, long after customers begin paying the biggest rate hike in
California history.
Baseline is 50 percent to 60 percent of the average amount of electricity
used by residential customers in the same climatic and geographical area. It
provides a certain amount of electricity at the lowest price utilities
charge. Customers are now charged progressively more when their electric use
rises above 30 percent of their baseline.
Ratepayers throughout the state say baselines are unfair, since they don't
take household size or the growing number of electronic gadgets into account.
However, while changing the baseline may spare more customers, it would also
make remaining customers pay even more.

PUC reviews baseline formula for setting rates
Posted at 11:07 p.m. PDT Thursday, May 24, 2001
BY MICHAEL BAZELEY

Mercury News

SAN FRANCISCO -- Responding to complaints from across the state, energy
regulators Thursday said they would examine whether adjustments are needed to
the baseline levels that determine how much electricity residential users get
at a reduced price.
The formula behind the once obscure baseline has suddenly become crucial to
millions of Californians. Under a new state law, customers who keep their
electrical usage at or near the baseline levels on their bills are exempt
from rate increases that take effect next month.
Now that the baseline is so important, officials with the state Public
Utilities Commission said they want to make sure it is applied as fairly as
possible.
``We want to move aggressively on this,'' said Commissioner Jeff Brown.
The baseline was established two decades ago to guarantee households a
minimum amount of electricity at the lowest possible price. It is supposed to
represent 50 percent to 70 percent of the average customer's usage for each
climate zone.
The current system accounts for differences in climate and seasons, with
residents in warmer climates given higher amounts of baseline-priced
electricity.
The calculation has been criticized recently for not taking into account the
energy needs of home-based businesses or family and home size.
PUC officials said they would probably examine several issues, including
changing household characteristics and whether geographic boundaries should
be redrawn. Any changes also would affect the baseline for natural gas.
Commissioners cautioned against any heavy-handed tinkering with the baseline.
State and utility officials already are counting on a certain amount of
revenue from the new rate increase. Shielding too many more customers from
the increases ultimately could saddle other residential and business users
with higher rates, officials said.
``This is not going to be a giveaway program,'' Brown said.
State lawmakers also are mulling changes to the baseline law, which was
created in 1982.
State Sen. Jackie Speier, D-San Mateo, is carrying a bill that would order
the PUC to take into consideration the presence of children when calculating
a household's baseline.
The Senate Energy Committee passed the bill Thursday on a 6-2 vote. It goes
next to the Senate Appropriations Committee.
Also Thursday, the PUC adopted a program that offers business customers
dramatically cheaper electricity if they reduce usage during preset four-hour
blocks throughout the day. That program comes on top of another program,
adopted earlier, that exempts businesses from blackouts if they agree to
reduce their usage by 15 percent during high-demand periods.
The PUC postponed action on what to do about small independent power
generators that are owed $1.5 billion from the state's two largest utilities.

Contact Michael Bazeley at mbazeley@sjmercury.com or (415) 434-1018.

Regulators: Companies pushed up price of power
Posted at 11:07 p.m. PDT Thursday, May 24, 2001
BRANDON
BAILEY

AND CHRIS
O'BRIEN
Mercury News

After months of investigation, state regulators say they have evidence
suggesting that power companies have deliberately driven up wholesale
electricity prices. Now they must decide whether those companies have done
anything illegal.
State Attorney General Bill Lockyer said Thursday he believes the evidence
``strongly suggests'' power companies acted illegally to drive up prices. He
has said that he would love to put top energy executives in jail.
But he and other state regulators acknowledged they are still trying to
decide what laws may have been broken.
``Californians universally believe we're getting ripped off, that there's
serious price-gouging,'' Lockyer said Thursday. ``However, profit-taking can
be legal. It depends on how you do it. And how much you do it.''
Lockyer said he is not ready to file charges and that it may be two months
before he wraps up his investigation. His office, one of five state agencies
investigating the electricity industry, along with two legislative
committees, is mulling over options ranging from criminal charges to a civil
lawsuit.
``The legal issues are difficult,'' agreed Gary Cohen, chief counsel for the
state's Public Utilities Commission, which is coordinating its investigation
with Lockyer's office. ``Finding the right legal theory and making it stick
is challenging.''
Power industry spokesmen deny any wrongdoing.
``Reliant is participating in the market -- not manipulating the market,''
said a statement issued this week by Reliant Energy, which owns several
plants in Southern California.
But PUC President Loretta Lynch said last week that her agency has evidence
of power plant operators cutting back their output at certain times, then
``ramping'' production up and down in what appeared to be an effort to drive
up prices by manipulating supplies.
Economists with the state's Independent System Operator, meanwhile, say their
studies show power suppliers used sophisticated bidding strategies to drive
up prices and rake in $6 billion more last year than they would have earned
in a truly competitive market.
High selling prices
After analyzing thousands of transactions in the state's wholesale markets,
ISO experts concluded that power suppliers, including some public utilities
as well as private companies, were able to sell electricity at prices higher
than production and fuel costs would seem to warrant. But some anti-trust
experts say this isn't illegal unless there's a coordinated effort by more
than one company -- which the power industry denies.
Other experts have noted a third type of ``gaming,'' in which power suppliers
appeared to be taking advantage of localized bottlenecks in the state's
transmission grid -- either by producing too much power or too little, and
then earning a bonus when grid operators paid them to either scale back
production or provide a little extra to help balance out supply and demand.
In one prominent example, Oklahoma-based Williams Energy recently paid $8
million to settle a rare enforcement proceeding brought by the Federal Energy
Regulatory Commission after state officials accused the company of profiting
from the shutdown of two power plants that served a local transmission area.
Williams, however, admitted no wrongdoing.
While industry representatives mostly blame high prices on short supplies,
some also say there is nothing wrong with reducing their output when prices
are low and increasing production when prices go up, as long as they meet all
their contractual obligations to produce power.
``That's the way the market works,'' said Gary Ackerman of the Western Power
Trading Forum. ``We've designed a system where, every hour, power plant
owners can make decisions about whether to produce or not produce, given
whatever excess capacity is not committed to someone else.''
But some regulators, while refusing to disclose specifics, say their evidence
suggests something more sinister.
Some generators appear to have withheld power during Stage 1 alerts, when the
state's reserves were extremely limited, said the PUC's Cohen.
``For generators to withhold supply under those conditions is wrong,'' he
said. ``And we believe it's unlawful.''
Straining equipment
PUC officials say they are concerned that the ``ramping'' behavior does more
than drive up prices in the short term.
They also suspect it puts extra strain on old equipment, contributing to an
abnormally high number of power plant breakdowns, which in turn has made
supply problems worse over the past year.
As part of its investigation, the PUC has hired former utility workers to
help inspect power plants and review operating records. The attorney
general's office has subpoenaed a mountain of records, including generator
data from an industry Web site that critics believe was used by power
companies to share competitive information.
Investigators also have subpoenaed records of communication between control
room operators, who directly control the output of each generating unit, and
energy traders, who buy and sell that output for the parent company.
While Lockyer says criminal charges are possible, some experts predict the
state will file a civil lawsuit, in part because there is a lower standard of
proof in civil court.
No smoking gun
Lawsuits alleging civil violations can bring fines and damage awards. While
some experts say it's unlikely the state could recover anywhere near the $6
billion in excess revenue that the ISO identified, Lockyer noted that
anti-trust laws allow a judge to award triple damages.
Authorities acknowledge they have no ``smoking gun'' -- a document or meeting
in which power companies agreed to coordinate their production or sales.
But if a company knows it can hold back power until prices rise, because it
knows that other companies will do the same, the effect is the same as if the
companies had explicitly agreed not to undercut each other's prices, said
state Sen. Joe Dunn, D-Garden Grove, who is chairing a legislative
investigating committee.
The San Francisco city attorney's office has filed a lawsuit, joined by Santa
Clara County, that alleges both direct collusion and violation of the state's
unfair business law.
``I think under either test,'' said Owen Clements, chief of special
litigation for San Francisco, ``this is a very strong case.''

Mercury News staff writer Michael Bazeley contributed to this report.

Contact Brandon Bailey at bbailey@sjmercury.com or (408) 920-5022. Contact
Chris O'Brien at cobrien@sjmercury.com or (415) 477-2504

California power regulators aim to keep more power on grid
Posted at 6:40 a.m. PDT Friday, May 25, 2001
BY KAREN GAUDETTE

Associated Press Writer

SAN FRANCISCO (AP) -- State power regulators are busy devising ways to curb
demand among the state's heaviest users during peak periods.
From factories to farms, California's biggest power users are being
encouraged to sign up for even more programs that offer cheaper electricity
in exchange for less power use -- potentially cutting the state's
energy-buying costs by lowering demand.
The state Public Utilities Commission also decided Thursday to begin
re-examining the calculation that determines which residential customers of
the state's two largest utilities will see their bills rise under a recent
record rate increase.
Last year, voluntary blackouts by so-called interruptible customers kept as
much as 3,000 megawatts on the state's power grid, enough electricity to
power more than 2 million homes.
By being first in line for blackouts or cutting use, these customers also
help managers of the state's power grid leave more power to residents and
services necessary for public health and safety, such as fire stations,
hospitals and military bases.
The PUC hopes even more customers will participate this year, meaning less
high-priced electricity the state would have to buy to keep homes and
businesses humming.
''`Negawatts' are our cheapest source of power,'' said PUC Commissioner
Richard Bilas. The state already has paid $6 billion to buy electricity for
the customers of the state's three largest utilities.
The PUC will allow big customers to sign up for more than one program to
stretch the state's meager supply of electricity. One program promises not to
subject the customers to rolling blackouts if they slash their power use by
up to 15 percent while blackouts are rolling through the rest of the state.
Another program offers customers 10 cents for every kilowatt hour they don't
use during one of a trio of four-hour blocks between 8 a.m. and 8 p.m.
The PUC also will re-examine how it determines baseline, a varying level of
residential power use upon which recent record rate hikes are allocated, to
determine if it is still accurate and fair since its last update nearly a
decade ago.
``It is time to conduct that review,'' said Commissioner Jeff Brown, adding
that a new calculation for baseline would not be available until winter at
earliest, long after customers begin paying the biggest rate hike in
California history.
Baseline is 50 percent to 60 percent of the average amount of electricity
used by residential customers in the same climatic and geographical area. It
provides a certain amount of electricity at the lowest price utilities
charge. Customers are now charged progressively more when their electric use
rises above 30 percent of their baseline.
Ratepayers throughout the state say baselines are unfair, since they don't
take household size or the growing number of electronic gadgets into account.
However, while changing the baseline may spare more customers, it would also
make remaining customers pay even more.

Long Beach obtains lien on Edison's assets
The city is the fourth small supplier with an attachment on the utility.
May 24, 2001
By KATE BERRY
The Orange County Register
The city of Long Beach became the fourth small power supplier to get a lien
against the assets of Southern California Edison, a move that could push the
utility closer to bankruptcy.
Last week, Edison was ordered to freeze at least $9 million in bank accounts
to cover payments owed to Long Beach for power Edison bought from the city's
trash-to-energy plant.
Getting a lien on the utility's assets ensures the city will be paid, even if
the utility files for bankruptcy.
Stephen Pickett, Edison International's general counsel, said the utility
plans to appeal.
Long Beach also is suing Edison International, the utility's parent company,
for breach of contract, claiming the utility should not have transferred $4.7
billion to its parent company over a four-year period beginning in 1996, when
deregulation was implemented.
"Edison International was required to honor the debts of its subsidiary,''
said Robert Shannon, Long Beach's city attorney.
So far, Edison has been sued by 27 small power suppliers, known as qualifying
facilities, or QFs. The lawsuits either seek to put a lien on the utility's
assets to recover unpaid debts or attempt to terminate 20-year contracts to
provide power to Edison.
Edison owes QFs about $1 billion and is trying to combine the cases before a
single judge in Los Angeles.
But Long Beach differs from other power suppliers because it wants to stay in
its contract with Edison.
"We just want to be paid under our contract. We still want to deliver them
power,'' said Shannon.
As a municipality, Long Beach also did not have to post a bond to obtain a
lien as the other QFs must.
Ed Feo, a lawyer for wind, solar and biomass QFs, said liens on Edison's
assets could have a domino effect.
"Two things will accelerate a bankruptcy filing by Edison: Either the deal to
sell its transmission lines (to the state) is going nowhere and alternatives
are not acceptable - or if attachments are made to the company's property
that the utility doesn't want to run the risk of losing.''
Three other QFs have posted bonds to obtain liens against Edison. They
include Caithness Energy, which got a lien on Edison's 56 percent interest in
two qualifying facilities that make up the Mohave Generating Station in
Laughlin, Nev.; IMC Chemicals, a unit of IMC Global Inc. of Northbrook, Ill.,
and that won a $7 million lien; and Herber Geothermal Co. and Second Imperial
Geothermal Co., which is owned by Covanta Energy Corp., a former unit of
Ogden Corp., based in Fairfield, N.J.

By Rick Stouffer
rstouffer@ftenergy.com
The electricity supply-demand equation is simple: Match supply to demand and
things are dandy. Demand overwhelms supply: build more supply.

Throughout the country, but particularly in California, there is no question
more supply is mandated*NIMBY (not in my backyard) be hanged. But what about
the demand side of the issue? What about getting customers involved in the
solution by allowing them to sell their excess power back into the system?

'Negawatts' nothing new
Granted, the concept of negawatts is nothing new; it was coined roughly a
quarter-century ago by the founder of the Boulder-based consulting firm E
Source: Amory Lovins. Many utilities today use customer curtailment to get
them through wattage rough spots from time to time.

All the existing independent system operators have actively considered
demand-side bids at one time or another, according to Richard Rudden,
president of the consulting firm R.J. Rudden Associates in Hauppauge, N.Y.

But what about a negawatt program serving the entire Western Interconnection?
Rather than a supply exchange, aka an independent system operator, put in
place a "demand exchange" where customers could make a choice: Do I produce
widgets, run my milling machines, build product or take the power I would
have used, bid it out and see what happens?

Just such a demand exchange within the Western Interconnection is being
championed by an unlikely proponent: Reliant Energy Inc.

The Houston-based energy giant already has testified in Washington, D.C.,
concerning the proposal, has had meetings with key Western state government
leadership and pitched its idea to trade associations and environmental
groups.

The scorecard: Thus far, no one has laughed, no one has walked away from the
conversations*no one has said "no," according to Reliant's John H. Stout,
senior vice president of asset commercialization.

"You're taking forced, rotating outages and prioritizing the interruption,
with the customer (that) can take the outage doing so," said Stout.

Much of what Reliant proposes is included in Texas Republican Congressman Joe
Barton's Electricity Emergency Assistance bill, but no big generator is
pushing from the industry side like Reliant.

A demand exchange
Like generators, including Reliant, bidding load into the independent system
operator pool, a demand exchange allows retail customers to determine what
they could spare and bid in a specific load and acceptable price.

The negawatt dispatch clearinghouse would develop a bid stack and make it
available throughout the Western Systems Coordinating Council (WSCC). If a
particular system needed more power, it would contact the clearinghouse,
which would match the least cost set of bids that could be shipped, keeping
in mind additional transmission charges.

Once the bids were identified, the clearinghouse would contact the customer
and its local control area. The customer would interrupt and the host utility
would move the curtailed megawatts onto an export schedule.

One key to the program's success is that no one loses money. The customer
that gave up its designated electrons would continue to pay its retail
supplier for what it didn't actually use, and the customer would receive its
bid price, times the megawatts curtailed, minus its regular retail charges,
plus any payment to the transmission provider.

"The key is it gets the incentives right at the margin," said William Hogan,
a professor at Harvard University's John F. Kennedy School of Government.

Another key to the Reliant-championed negawatt program is that it is not
seasonal; it doesn't lock a potential megawatt-shedder into a long-term
contract.

"You can bid into the market every day," said Stout.

"It offers a tremendous advantage in that it allows distributive decisions to
be made, how much a customer is willing to take for an energy entitlement,"
said Richard Tabors, president of the Cambridge, Mass.-based energy
consulting firm Tabors, Carmanis & Associates.

As Tabors points out, customers who sell back into the market obviously are
doing so to play the margin, to make money. But their efforts also will have
a serious impact on the spot market price.

"Every megawatt not consumed is a megawatt which doesn't have to be
produced," Tabors reasoned. "That lowers the marginal cost, the spot market
cost. It really comes down to what (specific megawatts) are worth to someone
and not worth to me."

Heavy users thrilled
Heavy industrial users already are thrilled with the regional negawatt
proposal. "We think it is a well thought-out program. We feel customers have
the right to buy power, they should have the right to sell power and ought to
be compensated like the generators," said John Anderson, executive director
of ELCON, the Electricity Consumers Resource Council, which represents large
industrial users from nearly every manufacturing sector.

Anderson favors this particular plan because it gives the customer choice*
sound familiar?*allowing it to determine when it shuts down or gives up its
power.

"This is voluntary. You know when you will be shut down and thus you won't
incur any damages," said Anderson. "Many proposals tell the customer to cut
usage, but it costs money for industrial users to just shut down. Command and
control proposals treat everyone alike*and they're not."

Stout said at least two vendors have expressed interest in taking part in the
Reliant proposal, with discussions already taking place with Automated Power
Exchange Inc. (APX).

"We have had discussions with Reliant; we're in the business of working with
generators," said John Melby, vice president for North American marketing for
Santa Clara, Calif.-based APX.

According to Melby, APX represents more than half the demand response in the
California ISO. He said the company could utilize key computer programs and
systems previously developed to get the region-wide negawatt program up and
running.

The down side
There could be a number of problems in moving forward with such a large plan.
Consultant Tabors, for example, pointed to the White House and the Bush
administration's seeming preoccupation with supply.

Harvard's Hogan said having the power available when needed was key, while
Reliant's Stout said the biggest hurdle was that many states prohibit retail
customers from selling load back into the wholesale market. An obvious
solution to that would be passage of the Barton bill; however, nothing is
certain in such a divided Congress.

Thus, Stout continues to travel the West pushing the negawatt program.
California Gov. Gray Davis was briefed on the plan some two weeks ago when he
called a meeting of all California's generators.

"We thought he (Davis) generally liked the idea," Stout said.

Next up on Reliant's hit list is S. David Freeman, former head of the Los
Angeles Department of Water and Power and now Davis' California energy
conservation "czar."

"We've already raised the issue with him (Freeman), but we're looking to plug
him in," Stout said.

Reliant Energy to lower Calif. peaking unit power prices

New York, May 24 -(BridgeNews) - Reliant Energy said Thursday it will lower

the price of its power bids from emergency limited run time peaking units that
have environmental permit operating restrictions despite Reliant's concerns
that the state will deplete the available power of these plants too soon. The
company had received criticism for recent high bid prices from these plants.

*                    *                     *

Reliant said in a release that it initiated this move in anticipation that
local air quality control boards will lift restrictions on the run time for
the
units.

In letters sent to the South Coast Air Quality Management District, the
Santa Barbara County Air Pollution Control District and the Ventura County Air
Pollution Control District, Reliant said it resubmitted their request for an
extension on the run time limits of its emergency peaking units.

The company said the extensions would reduce the price of bids associated
with these units from the $1500 to $1900 per megawatt hour level to $150 to
$250 per megawatt hour.

Extensions also would help increase the available supply of power during
power emergencies. Currently, the emergency peaking units are allowed to run
for only a few days per year.

"Reliant has recently been sharply criticized for bids from these plants,"
Joe Bob Perkins, president and chief operating officer of Reliant Energy
Wholesale Group said in a statement. "To show we are committed to working with
all parties, we are voluntarily reducing prices in the hopes that all the
decision makers in California understand the need to lower restrictions during
times of emergencies.

"In essence, we are doing exactly what Governor Gray Davis has suggested,"
Perkins said.  "But if restrictions are not lowered, we will run out of power
from these units very quickly."

Reliant's position has been that it has purposely bid the power from the
units in question at prices designed to discourage premature use preserve
availability for when the state is forced into emergencies because of low
power
reserves.

Extensions from the air quality control boards would allow Reliant Energy
to operate these plants without penalty during emergency times and alleviate
the need to ration the units operating time.

But the company said it Reliant Energy intends to lower the prices of the
megawatts produced at this plant, in hopes that restrictions will be raised.

The units affected by this commitment include units at Reliant Energy's
Mandalay, Etiwanda, and Ellwood facilities.

Perkins said in his statement that the focus should be on the supply
problem, which he considers to be the root of the current power crisis in the
state.

"It is astonishing that many decision makers continue to take the focus
off of supply in the name of political finger pointing,"  Perkins said.  "As a
result, many Californians still do not believe there is a serious supply
problem."

Independent power generators have come under increasing scrutiny and are
being investigated by the state's Attorney General Bill Lockyer's office for
gaming the market. Generators are being investigated as to whether they have
shut plants for maintenance in order to spike prices during peak periods and

periods when the California Independent System Operator declares alerts when
power reserves drop below certain levels in the state.

Reliant Energy is based in Houston, Texas.  End

Shaklee Corporation Headquarters Model for Energy Efficiency and Ecology
Efforts; Bay Area Company Wins State Award CEO Adds Hybrid Gas-Electric
Vehicles to Fleet

PLEASANTON, Calif.--(BUSINESS WIRE)--May 24, 2001 via NewsEdge Corporation  -
With energy
costs soaring and electric companies near bankruptcy, authorities and
businesses in California are scrambling for answers. Utilizing
endeavors that can serve as a guide for other California businesses,
one Bay Area company's creative thinking about the environment and
energy conservation has received statewide recognition and acclaim
rather than heftier electricity bills.

In a luncheon event scheduled for May 30th at the Sterling Hotel
in Sacramento, the California Council for Environmental & Economic
Balance (CCEEB) will honor health and wellness company Shaklee
Corporation by presenting it with the Edmund G. "Pat" Brown Award for
its cutting edge climate change initiative designed to create genuine
environmental improvements. Working with the Climate Neutral Network
and four leading U.S. environmental organizations, Shaklee became the
first Climate Neutral Certified enterprise by completely offsetting
its greenhouse gas emissions, meaning that the company has achieved a
net zero impact on global warming. The award, named after the late
California Governor Edmund G. Pat Brown, is the highest honor bestowed
by the CCEEB.

Energy Costs Down by 1/3 at new headquarters

The new world headquarters for Shaklee located in Pleasanton,
California boasts numerous cutting edge energy-saving features and was
constructed using sustainable materials. The company's move from a San
Francisco skyscraper and converted warehouses in Hayward to a freshly
built, environmentally and energy sensitive building in November 1999
reduced Shaklee's energy consumption by more than 900,000 kilowatts of
electricity during the last calendar year resulting in approximately a
30% reduction in energy costs. Just a few of the buildings innovative
features include:

--  Under-floor air system uses gravity and the natural cooling

provided by the concrete subfloor to provide a more effective

way to heat and cool the building.

--  High performance glazing on the windows that limits the

absorption of solar heat and maximizes daylight as well as

shades that are raised or lowered automatically based upon the

solar load.

--  "Lightshelves" that bring daylight deep into the building's

interior and also work to shade the building during the

hottest parts of the day, reducing the amount of energy needed

for heating and cooling.

--  Timers that control exterior and interior lights and motion

sensors that turn on lights and equipment, and dimmers that

reduce light when natural light is sufficient.

Hybrid Gas-Electric Car Added to Shaklee Fleet

In a further environmental/conservation effort, Shaklee CEO Bob
Schults recently traded in his company SUV for a Prius. The car is the
world's first mass-produced hybrid vehicle that combines a highly
efficient gasoline engine with an electric motor. Its energy-efficient
and environmentally friendly features include an average 52 miles per
gallon in the city and an emission rate of 50 percent less carbon
dioxide than most other cars.

Schults was so pleased with his Prius that he added it as an
option to Shaklee's Bonus Car Program, one of the top 25 company-owned
commercial fleets in the country. "It's only appropriate that we made
this car a part of Shaklee's automotive fleet to encourage everyone to
become more eco-friendly," Schults said. "The U.S., not to mention the
world at large, needs it now more than ever before."

The CCEEB is not alone in recognizing Shaklee's environmental
efforts. In 2000 Shaklee has also received the Earth Day New York
Environmental Business Leadership Award, the Business Environmental
Network Award from Bay Area Action and the Peninsula Conservation
Center Foundation, and the City of Pleasanton Mayor's Commendable
Commute Awards for the highest rate of employee use of mass transit
and telecommuting.

CCEEB is a coalition of California business, labor and public
leaders who work together to advance collaborative strategies for a
sound economy and a healthy environment. CCEEB was founded almost 30
years ago by the late Governor Pat Brown because he and other key
leaders believed that new thinking was needed to effectively address
challenges facing California. As the only statewide private,
nonprofit, nonpartisan association to represent the interests of both
industry and labor, CCEEB takes pride in its ability to achieve
results by bringing creative and effective solutions to the forefront
of policy debate.

Founded in 1956, Shaklee is a global consumer products company,
recognized as an industry pioneer with a trusted name in health and
wellness. For more information, visit www.shaklee.com.

CONTACT: Shaklee |              Karin Topping, 925/924-2007 |
ktopping@shaklee.com

Power Trader Tied to Bush Finds Washington All Ears
By LOWELL BERGMAN and JEFF GERTH
?
05/25/2001
The New York Times
Page 1, Column 1
c. 2001 New York Times Company
Curtis Hebert Jr., Washington's top electricity regulator, said he had barely
settled into his new job this year when he had an unsettling telephone
conversation with Kenneth L. Lay, the head of the nation's largest
electricity trader, the Enron Corporation.
Mr. Hebert, chairman of the Federal Energy Regulatory Commission, said that
Mr. Lay, a close friend of President Bush's, offered him a deal: If he
changed his views on electricity deregulation, Enron would continue to
support him in his new job.
Mr. Hebert (pronounced A-bear) recalled that Mr. Lay prodded him to back a
national push for retail competition in the energy business and a faster pace
in opening up access to the electricity transmission grid to companies like
Enron.
Mr. Hebert said he refused the offer. ''I was offended,'' he recalled, though
he said he knew of Mr. Lay's influence in Washington and thought the refusal
could put his job in jeopardy.
Asked about the conversation, Mr. Lay praised Mr. Hebert, but recalled it
differently. ''I remember him requesting'' Enron's support at the White
House, he said of Mr. Hebert. Mr. Lay said he had ''very possibly'' discussed
issues relating to the commission's authority over access to the grid.
As to Mr. Hebert's job, Mr. Lay said he told the chairman that ''the final
decision on this was going to be the president's, certainly not ours.''
Though the accounts of the discussion differ, that it took place at all
illustrates Enron's considerable influence in Washington, especially at the
commission, the agency authorized to ensure fair prices in the nation's
wholesale electricity and natural gas markets, Enron's main business.
Mr. Lay has been one of Mr. Bush's largest campaign contributors, and no
other energy company gave more money to Republican causes last year than
Enron.
And it appears that Mr. Hebert may soon be replaced as the commission's
chairman, according to Vice President Dick Cheney, the Bush administration's
point man on energy policy.
Mr. Lay has weighed in on candidates for other commission posts, supplying
President Bush's chief personnel adviser with a list of preferred candidates.
One Florida utility regulator who hoped for but did not receive an
appointment as a commissioner said he had been ''interviewed'' by Mr. Lay.
Mr. Lay also had access to the team writing the White House's energy report,
which embraces several initiatives and issues dear to Enron.
The report's recommendations include finding ways to give the federal
government more power over electricity transmission networks, a longtime goal
of the company that was spelled out in a memorandum Mr. Lay discussed during
a 30-minute meeting earlier this spring with Mr. Cheney.
Mr. Cheney's report includes much of what Mr. Lay advocated during their
meeting, documents show. Both men deny discussing commission personnel issues
during their talk. But Mr. Lay had an unusual opportunity to make his case
about candidates in writing and in person to Mr. Bush's personnel adviser,
Clay Johnson. And when Mr. Bush picked nominees to fill two vacant Republican
slots on the five-member commission, they both had the backing of Enron, as
well as other companies.
Mr. Lay is not shy about voicing his opinion or flexing his political muscle.
He has transformed the Houston-based Enron from a sleepy natural-gas company
into a $100 billion energy giant with global reach, trading electricity in
all corners of the world and owning a multibillion-dollar power project in
India. He has also led the push to deregulate the nation's electricity
markets.
Senior Bush administration officials said they welcomed Mr. Lay's input but
did not always embrace it: President Bush backed away from curbing
carbon-dioxide emissions, an effort supported by Enron, which had looked to
trade emission rights as part of its energy business.
''We'll make decisions based on what we think makes sound public policy,''
Mr. Cheney said in an interview, not what ''Enron thinks.''
The Bush-Lay bond traces back to Mr. Bush's father and involves a personal
and philosophical affinity. Moreover, Enron and its executives gave $2.4
million to federal candidates in the last election, more than any other
energy company. While some of that went to Democrats, 72 percent went to
Republicans, according to an analysis of election records by the Center for
Responsive Politics, a nonprofit group.
''He's for a lot of things we're for,'' said Mr. Johnson.
But when it came to deciding on nominees for the commission, Mr. Johnson said
that Mr. Lay's views were not that crucial. The two most important advisers,
he said, were Andrew Lundquist, the director of Mr. Cheney's energy task
force, and Pat Wood 3rd, the head of the Texas public utility commission.
As governor, Mr. Bush named Mr. Wood to the utility commission. This year,
when the White House filled the two Republican slots on the federal agency,
Mr. Wood was the first choice, Mr. Johnson said.
Consumer advocates and business executives praise Mr. Wood. But Mr. Lay also
had a role in promoting him. Shortly after Mr. Bush was elected governor in
1994, Mr. Lay sent him a letter endorsing Mr. Wood as the ''best qualified''
person for the Texas commission.
In all, there are five seats on the commission, two held by Republicans, two
by Democrats and one held by a chairman who serves at the pleasure of the
president. Mr. Hebert, who became a commissioner in 1997, was named chairman
by Mr. Bush in January.
The Federal Energy Regulatory Commission's mandate to ensure fair prices in
wholesale electricity and natural gas markets makes it crucial to sellers
like Enron as well as consumers.
The movement toward deregulation sometimes leaves the commission caught in a
tug of war: power marketers like Enron are trying to break into markets and
grids controlled by old-line utilities, which operate under state regulation.
The commission's chairman has considerable latitude in setting its agenda.
As part of its oversight of the wholesale electricity markets, the commission
ordered several companies to refund what it considered excessively high
prices this year in California. One lesser offender named in the commission's
public filings -- $3.2 million, of a total of $125 million -- was an Enron
subsidiary in Oregon.
Enron owns few generating assets, but buys and sells electricity in the
market. Many of those transactions resemble the complicated risk-shifting
techniques used by Wall Street for financial instruments.
Mr. Hebert, after he became chairman, initiated an examination into the
effects those techniques have on the electricity markets. ''One of our
problems is that we do not have the expertise to truly unravel the complex
arbitrage activities of a company like Enron,'' he said, adding, ''we're
trying to do it now, and we may have some results soon.''
William L. Massey, one of the agency's two Democratic commissioners, said he
supported the inquiry but had not been aware of it -- an indication of the
chairman's ability to set the commission's agenda.
Finally, the commission is trying to speed the pace of electricity
deregulation by opening up the nation's transmission grid, much of which is
owned by privately owned utilities that enjoy retail monopolies. Some Enron
officials say the commission has been moving too slowly to open the grid.
They attribute some of the problem to utilities. But they also fault Mr.
Hebert.
''Hebert still has undeserved confidence in some of the vertically integrated
companies coming to the table and dealing openly'' with transmission access
issues, said Richard S. Shapiro, an Enron senior vice president.
The utilities, however, maintain that they provide cheap and reliable service
for their customers. Washington lobbyists for one Southern utility said that
Enron was really interested in focusing on the utility's big-business
clients, which under state regulation pay higher rates than residential
customers.
Since 1996, about half the states have moved to open their retail markets to
competition, and the commission has begun to make it easier for outsiders to
use the nation's transmission grid. But the promise of cheaper rates has been
largely unfulfilled. So the push for more deregulation, in which Enron has
been a leader, has slowed, especially when California's flawed program led to
skyrocketing rates and chaotic markets.
Mr. Hebert is a free-market conservative who favors deregulation but also
recognizes the importance of state's rights. A former Mississippi regulator,
he is a protege of Trent Lott, the Senate Republican leader from Mississippi.
Mr. Hebert said Mr. Lott was instrumental in his nomination to the commission
in 1997 by President Clinton.
President Bush elevated Mr. Hebert to chairman on Inauguration Day, a move
Mr. Lay said he told the White House he supported.
Mr. Johnson, the White House personnel chief, said that Mr. Lott and Mr.
Hebert had both been told that Mr. Hebert could remain chairman at least
until the administration's nominees -- Mr. Wood and Nora Brownell, a
Pennsylvania utility regulator -- are confirmed by the full Senate. The
Senate energy committee voted earlier this week to approve the two nominees,
after a hearing last week indicated strong support.
It is widely expected that President Bush will name Mr. Wood to replace Mr.
Hebert as chairman after the Senate acts.
In an interview for a forthcoming episode of ''Frontline,'' the PBS series,
Mr. Cheney suggested as much. ''Pat Wood's got to be the new chairman of the
F.E.R.C., and he'll have to address'' various problems in the electricity
markets, he said.
Mr. Hebert said that no one had told him he was being replaced. If someone
else is named chairman, Mr. Hebert can remain a commissioner until the end of
his term, which expires in 2004.
It was a few weeks after President Bush made him chairman that Mr. Hebert
said he spoke by telephone with Mr. Lay.
Mr. Lay told him that ''he and Enron would like to support me as chairman,
but we would have to agree on principles'' involving the commission's role in
expanding electricity competition, Mr. Hebert said of the conversation.
A senior commission official who was in Mr. Hebert's office during the
conversation said Mr. Hebert rebuffed Mr. Lay's offer of a quid pro quo. The
official said that he heard Mr. Hebert's side of the conversation and then,
after the call ended, learned the rest from him.
Mr. Hebert said that he, too, backed competition but did not think the
commission had the legal authority to tell states what to do in this area.
Concerning the issue of opening transmission access through the creation of
regional networks, Mr. Hebert supports a voluntary process while Enron seeks
a faster and more compulsory system.
Mr. Lay said that while he might have discussed issues relating to the
commission's authority concerning access to the grid, ''there was never any
intent'' to link that or any other issue to Mr. Hebert's job status.
The commission is a quasijudicial agency, so decision-makers like Mr. Hebert
must avoid private discussions about specific matters pending before the
commission. Mr. Hebert and Mr. Lay both said that line was not crossed, but
Mr. Hebert said he had never had such a blunt talk with an energy-industry
executive.
Mr. Lay added that his few recent conversations with Mr. Hebert were nothing
special. ''We had a lot of access during the Clinton administration,'' he
said.
And he said that while making political contributions ''probably helps'' to
gain access to an official, he made them ''because I'm supporting candidates
I strongly believe in.''
Last June, Enron executives were asked to make voluntary donations to the
company's political action committee. The solicitation letter noted that the
company faced a range of governmental issues, including electricity
deregulation.
This year, some people who sought but did not get nominations to the
commission said that Mr. Lay and Enron had had a role in the process.
One was Joe Garcia, a former Florida utilities regulator and prominent
Cuban-American activist. He said he had been ''interviewed'' by a few Enron
officials, including Mr. Lay, who he said had not been as ''forceful or
insistent'' as the other Enron officials.
But in their conversation, Mr. Garcia said, Mr. Lay made clear that he would
be visiting the White House, adding that ''everyone knew of his relationship
and his importance.''
Mr. Johnson, the White House personnel chief, could not cite another company
besides Enron that sent him a list of preferred candidates for the
commission, but he remembered hearing the views of Tom Kuhn, who heads the
utility industry trade group, the Edison Electric Institute. Mr. Kuhn was a
classmate of Mr. Johnson and Mr. Bush at Yale.
As for his conversation with Mr. Garcia, Mr. Lay said he was comfortable with
his candidacy but ''I'm not sure what I told him about my friends at the
White House.''
This article is part of a joint reporting project with the PBS series
''Frontline,'' which will broadcast a documentary about California's energy
crisis on June 5.

Photos: Kenneth L. Lay, left, chairman of the country's largest energy
trader, and Curtis Hebert Jr., chairman of the Federal Energy Regulatory
Commission, differ in their accounts of a conversation about energy
deregulation. (Photographs courtesy WGBH/''Frontline'')(pg. A18)

THE ENERGY CRISIS Davis Orders 3-Tiered Warnings of Blackouts
DAN MORAIN; NANCY VOGEL
?
05/25/2001
Los Angeles Times
Home Edition
Page A-1
Copyright 2001 / The Times Mirror Company
SACRAMENTO -- In a significant policy change aimed at minimizing business and
consumer disruptions, Gov. Gray Davis ordered state officials Thursday to
enact a three-tier blackout warning system.
Forecasts of blackouts will be issued 48 hours beforehand, Davis said.
General areas will be identified in warnings issued 24 hours before likely
outages. Precise locations will be announced an hour before the power is cut,
he said.
Business executives, police and consumers have complained that the current
warning system--in which blackouts can come with less than 10 minutes'
warning--does not give them sufficient time to save information on computers,
shut down assembly lines, safeguard traffic intersections and otherwise
prevent financial loss and mayhem when the power goes out.
In the past, state grid operators only gave short notice because they often
found enough power at the last minute to avert blackouts. They said they did
not want to repeatedly alarm people. Utility officials have said they feared
that advance warning would leave neighborhoods vulnerable to looters and
burglars.
But crime has not been a problem during California's six days of blackouts so
far this year. And with experts predicting dozens of days of forced outages
this summer, state and utility leaders say Californians are better off
prepared.
"If blackouts are going to occur," Davis said, "there is no reason to keep
the public in the dark. We all deserve as much advance notice as possible."
Utility customers will be notified through company Web sites and radio and
television announcements. Starting with June utility bills, Southern
California Edison customers will be given "block" numbers that allow them to
learn through the Edison Web site, http://www.sce.com, if they are scheduled
for rotating blackouts on days of short supply.
Under the governor's order, Edison spokesman Brian Bennett said, consumers
can expect 24-hour warnings about general areas--Santa Monica or Santa Ana,
for example--that might be targeted for hourlong blackouts.
At 60 minutes before a blackout is triggered, Bennett said, the warnings
delivered through radio, television and the Internet will get much more
precise. "For example," he said, "One hour before, we'll say Main Street in
Santa Monica . . . will be affected."
Leaders of the agency responsible for deciding when blackouts must be
triggered said Thursday they intend to launch the governor's order by June
15. And if Californians redouble their conservation efforts when they hear of
blackout warnings, they said, the governor's order will ultimately help the
state avoid blackouts.
"I think we're going to save power, potentially lives; we're going to help
save jobs and California's economy," said Carl Guardino, a member of the
board that oversees the California Independent System Operator, which manages
75% of the state's transmission system.
Davis announced his order at a news conference attended by law enforcement
officials, including Los Angeles County Sheriff Lee Baca, who said he intends
to unveil a more detailed plan for the county today.
For some, the decision to give warning was an acknowledgment that the state
is failing to solve the energy crisis.
"It obviously says we're surrendering to the electricity crisis," said Sen.
Tom McClintock (R-Northridge. "Here we've arrived in the 21st century, with
all the electronics, and we don't have the power to run them."
Utility spokesmen lauded the plan, but said that much of the responsibility
rests with Cal-ISO, which is the only entity that has the ability to track
supplies.
"If the ISO only gives us 60-minutes warning, our customers will get
something less than 60-minutes notice," said John Nelson, spokesman for
Pacific Gas & Electric.
As it works now, Cal-ISO informs utilities of pending blackouts. The utility,
in turn, informs county offices of emergency services. Using computerized
calling, e-mail and manual dialing, the utilities also inform law
enforcement, major industrial users, people on life support and other
consumers for whom electricity is vital, Nelson said.
Californians at large are expected to learn of the warnings through the media
and the Cal-ISO Web site, http://www.caiso.com.
Also on Thursday, Davis met with officials of California's publicly owned
utility districts and came away, he said, with promises that they would sell
excess power to the state at prices significantly lower than on the spot
market.

Legislature hangs Davis out to dry
By Nick Driver
Of The Examiner Staff
Democratic and Republican legislators are vying to scuttle Gov. Gray Davis'
plan to buy transmission lines from electric utilities and replace it with
one of their own.
The confusion in Sacramento sidelines what was an imminent deal for a San
Diego-area utility, and throws further in doubt any future deal to purchase
PG&E lines through bankruptcy proceedings.
And all this is happening before President Bush arrives Tuesday to tout his
own transmission line deal.
A week ago, Davis finally found a term-limited senator, Richard Polanco,
D-Los Angeles, to sponsor legislation to purchase Southern California Edison
lines. Now, the governor's office admits that talks will not proceed until
the Legislature agrees on how to finance the buyout of SoCal Edison's lines.
Some Assembly Democrats have proposed an innovative alternative to the Davis
plan, giving the state a five-year option to purchase all power lines for
$1.2 billion. While a much lower price, the bill would also lower Edison's
debt by forcing power marketers to accept 75 percent of the $3.5 billion owed
them.
Under the terms of that proposal, the state would still have to loan Edison
money -- around $1 billion -- and would guarantee SoCal Edison's sale of a
further $2 billion in bonds. The state would also receive a conservation
easement on 21,000 acres of Sierra Nevada watershed land.
As in the Davis bill, SoCal Edison would sell the state relatively low-cost
electricity for 10 years from one of its power plants, and force parent
company Edison International to repay $400 million in transfers.
A Republican plan labeled "Plan R" now making its way through the halls of
the legislature is similar to its Democratic sister, except it allows the
state to take stock in all new plants SoCal Edison is forced to build.
The Democratic bill's sponsors, Assemblymen John Dutra, D-Fremont; Joe
Nation, D-San Rafael; and Joe Canciamilla, D-Pittsburg; believe they can
persuade Edison's board of directors to approve their deal, even though it is
not as attractive as the governor's offer. Edison refused to comment on the
plan.
Republicans led by Assemblyman Keith Richman, R-Northridge, were trying a
different strategy Wednesday. The minority party's "Plan R" has not been
introduced as official legislation, but instead floated among Republicans and
Democrats alike to get momentum before introduction.
Both groups say their bills represent SoCal Edison's only real alternative to
bankruptcy, and that the beleaguered utility may soon join its northern
neighbor, PG&E, in bankruptcy.
So far, Edison has been able to renegotiate debts with power generators
charging high wholesale prices. PG&E declared bankruptcy April 6.
A governor's office staffer said the legislative impasse had diverted all
attention away from any deal-making, but that the two sides continued to meet
frequently.
Another adviser, Joe Fichera, said "there are lots of moving parts" to the
deal to purchase all of San Diego Gas and Electric's transmission lines, but
that he continued to meet with company representatives, including an all-day
meeting Monday. In San Diego, a spokesman for SDG&E referred all calls to the
governor's office.
But the sponsor of the Davis bill, Polanco, is not one of the legislature's
power brokers, and most lawmakers said the $2.76 billion memorandum of
understanding is now in serious jeopardy.
A bankruptcy could lead to even greater chaos, including the threat of an
increase in blackouts. The governor and business leaders have said the
economy would suffer as the likelihood of blackouts and service outages
rises.
Legislators, policy wonks and consumer groups continue to argue over the need
and desirability of the state owning the aging lines that snake across the
state, especially if the bulk of them -- now owned by Pacific Gas and
Electric Co. -- are still not for sale.
Critics such as Senate President John Burton, D-San Francisco, one of the
bill's strongest proponents three months ago, now say the state should not be
in the business of replacing or upgrading dilapidated lines at a cost of
upwards of $1 billion.
Others see the state as the best candidate for improving a system long
neglected by utilities.
"State ownership of the transmission grid would be a better way to help grid
problems such as connecting wind generators," said Joe Ito, an energy analyst
at Lawrence Berkeley Laboratories. "It has been extremely difficult to build
new transmission capacity over the last 10 years, especially into bottlenecks
like San Francisco."
Bush unveiled his Energy Plan last week, including a key plank that would
allow the federal government to use eminent domain to purchase private land
and build more transmission lines. Bush arrives Tuesday for talks with Davis
on this and other solutions to the energy crisis.
The Foundation for Taxpayer and Consumer Rights derides both presidential and
legislative attempts to create more consumer-friendly deals, labeling them
"Bailout Lite."
"The sponsors want to try and trim away some of the fat," said Doug Heller, a
spokesman for the group. "But it's all fat."