Please see the following articles:

Sac Bee, Thurs, 6/7:  GOP scraps House energy bill

Sac Bee, Thurs, 6/7: Norton open to drilling off Santa Barbara

SD Union, Thurs, 6/7: Energy relief bill mired in dispute over price caps

SD Union, Thurs, 6/7: Escondido eyed profit from Hanover plant

SD Union, Thurs, 6/7: Increased hydropower behind price drop

SD Union, Thurs, 6/7: PUC could expand utility discounts to low-income
ratepayers

LA Times, Thurs, 6/7: Senator Fires Warning Shot on Power Costs

SF Chron, Thurs, 6/7: Power switch -- contracts now in limbo
Nosedive in electricity prices will let state deal from strength

SF Chron, Thurs, 6/7: Developments in California's energy crisis

SF Chron, Thurs, 6/7: House GOP leaders backing away from short-term fix

SF Chron, Thurs, 6/7: Power switch -- contracts now in limbo
Nosedive in electricity prices will let state deal from strength

SF Chron, Thurs, 6/7: Senator ready to strong-arm energy panel
New committee chairman to give regulators 2 weeks to set price caps

SF Chron, Thurs, 6/7: Underwriters wary of bond deal
State needs funds to cover costs of buying power

Mercury News, Thurs, 6/7: It's looking better on energy front

Contra Costa Times, Thurs, 6/7:   Four-day week for city halls?

Contra Costa Times, Thurs, 6/7:  Labor leaders demand power plant takeovers

Contra Costa Times, Thurs, 6/7:  Senate shift puts pressure on FERC

OC Register, Thurs, 6/7: A power-bill surge

OC Register, Thurs, 6/7:  Energy notebook
Many experts see light at the end of the crisis sooner than expected

OC Register, Thurs, 6/7: Market spotlight: PG&E woes push down share of
power generators

OC Register, Thurs, 6/7: California ISO's independence at issue

OC Register, Thurs, 6/7:  We still don't get it                (Commentary)
A history of price controls: They didn't work for Sumeria, they won't work
for California

Individual.com (PRnewswire), Thurs, 6/7:  Exponent Advises CPUC on Rolling
Blackout Exemptions

Individual.com (AP), Thurs, 6/7:  Calif. Targeted in Antitrust Probe

Individual.com (PRnewswire), Thurs, 6/7: More Utilities, Industries Must
Reduce Power Purchases
From BPA To Hold Rates Down

Individual.com (PRnewswire), Thurs, 6/7: SCE Customers to See Major Changes
to June Bills
Adding Group Numbers Will Help Consumers Prepare for Rotating Blackouts;
Conservation
Rebates, Discounts Available to Income-Qualified Customers

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GOP scraps House energy bill
By David Whitney
Bee Washington Bureau
(Published June 7, 2001)
WASHINGTON -- Republican leaders in the House abruptly scuttled any further
work on an emergency electricity bill for California on Wednesday, saying
they were unable to reach agreement with Democrats on reining in sky-high
wholesale power costs.
"It became clear we would not be able to come to agreement," said Rep. Billy
Tauzin, R-La., chairman of the Energy and Commerce Committee.
Rep. Joe Barton, R-Texas, the energy subcommittee chairman whose panel wrote
the bill last month, blamed House Minority Leader Dick Gephardt, D-Mo., for
forcing Democrats to insist that wholesale rates be based on the cost of
production to stem price gouging.
Stunned Democrats disputed just about everything committee Republicans said.
"We are disappointed that the Republican leadership canceled this opportunity
to bring price relief to California," said Rep. Henry Waxman of Los Angeles,
the senior Democrat on the energy panel.
"The Federal Energy Regulatory Commission, the White House and now the
Republican Congress has decided it won't help California," Waxman said. "We
feel an outrage that we won't get to mark up a bill that is supposed to help
Californians."
In the Senate, however, where Democrats took charge Wednesday with a one-vote
majority, Democratic leaders threatened congressional action unless federal
regulators took immediate steps to bring down wholesale rates.
Sen. Jeff Bingaman, D-N.M., the new chairman of the Senate Energy and Natural
Resources Committee, gave federal regulators two weeks to act, saying that
his panel may resort to legislation.
Pending before the committee is legislation sponsored by Sen. Dianne
Feinstein, D-Calif., that would peg the wholesale price of electricity to its
cost of production, plant by plant, plus a margin that would allow for a
reasonable profit.
Feinstein said she's hopeful that, barring a change of heart by regulators,
her bill will move shortly.
Behind the congressional sniping is a deep political divide. The Republicans
are opposed to anything that looks like government intervention in the
marketplace, while Democrats believe that government cannot sit by idly while
the pocketbooks of consumers are emptied because of a dysfunctional
electricity market.
Price controls have been the sticking point all along on Barton's bill. Most
of its controversial environmental rollbacks were excised before it came to a
subcommittee vote, and Republican leaders admitted that much of what was left
already was being implemented by the Bush administration and Gov. Gray Davis.
"There has already been demand reduction, supply improvement and action by
the California governor adopting several features of this bill," Tauzin said.
"California is improved today because this bill moved as far as it has."
In an effort to break the stalemate, Republican leaders were prepared to
offer as a compromise legislation sponsored by Sacramento Rep. Doug Ose, the
Republican chairman of the House Government Reform Committee's energy panel.
Ose's bill grew out of an April order by the Federal Energy Regulatory
Commission to control rising prices by instituting a spot-market ceiling
based on the cost of production at the least-efficient, most costly plant
selling into the market during a power emergency. Ose's bill would make that
order effective every day, all day.
But Waxman said Ose's legislation is "not viable." "The effect would be to
give the least-efficient, dirtiest plant a guarantee to the highest prices,
and extend that to the rest of the generators," he said.
Tauzin said the committee was sending a letter to the commission Wednesday
urging it to consider Ose's proposal, but Ose's own letter touting his
approach already is on file at the commission.
Ose said he was disappointed that his legislation "fell victim to partisan
politics."
"It appears that the Democratic leadership in Congress is more interested in
rescuing Governor Davis' re-election campaign than providing immediate relief
to California consumers," he said.
Barton said he believed there were enough votes on the committee to defeat
Democratic price-control amendments and to pass his bill, but that it
probably would have drawn only two or three Democrats on final passage.
That margin was too slim for the committee to demonstrate bipartisan support
as the measure headed to the House floor. And with the clock running out on
being able to do anything for California this summer, Barton and Tauzin
decided to pull the plug.
"This is not the end of this process," Tauzin said, saying that leftover
provisions of the Barton measure will be taken up when the committee
addresses broader energy legislation this summer.
But Democrats, too, said the issue isn't over.
Waxman said they're beginning a drive immediately to collect the necessary
218 signatures on a petition to force the House Republican leadership to
bring cost-based wholesale pricing legislation to the floor.

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

Norton open to drilling off Santa Barbara
By David Whitney
Bee Washington Bureau
(Published June 7, 2001)
WASHINGTON -- Interior Secretary Gale Norton, testifying at a House hearing
Wednesday, did not rule out resumption of oil and gas exploration off the
California coast, particularly near Santa Barbara, where offshore areas are
not covered by a leasing moratorium.
"This is very bad news for the north Santa Barbara Channel," Rep. George
Miller of Martinez, a senior Democrat on the House Resources Committee, said
after the hearing.
Norton appeared before the committee to discuss the Bush administration's
energy policy, one provision of which calls upon the Interior Department to
review legal and policy issues concerning offshore development.
Norton said the administration will abide by moratoriums in effect until 2012
on leasing off much of the West Coast, Florida and the Carolinas.
But when asked by Miller about existing lease areas off Santa Barbara and the
Florida coast that are not covered by the moratoriums, Norton indicated that
there is nothing to prevent additional leasing activity now and that, in the
case of Florida, a departmental review already is under way.
Miller called that a concern because of efforts in the Santa Barbara area to
buy back outstanding leases.
"They are clearly setting their sights on the leases," Miller said. "You read
all the directives from the Minerals Management Service, the Department of
Interior's energy opinions -- you pull all those together -- and it's pretty
clear they want to figure out how to get them into production. They are
looking at a range of laws that have to be changed, and I think weakened, to
bring those into production."
An advisory committee recently recommended that the Interior Department
launch a test program to identify the five top offshore natural gas deposits
around the country to see if deals could be reached with local and state
officials to lift drilling moratoriums.
Norton declined comment on the issue, saying the recommendation had not
reached her desk.

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

Energy relief bill mired in dispute over price caps

By Finlay Lewis
COPLEY NEWS SERVICE
June 7, 2001
WASHINGTON -- Prospects for prompt action in the House to ease California's
energy crisis virtually vanished yesterday, as Republicans scuttled a
short-term relief bill when Democrats refused to drop demands for wholesale
electricity price caps.
At the same time, Sen. Tom Daschle, D-S.D., used the occasion of his first
day as Senate majority leader to set the stage for a two-house, partisan
showdown by throwing his weight behind price caps.
"I will support all necessary efforts to meet that goal," Daschle said in a
letter to Sen. Dianne Feinstein, D-Calif., who is sponsoring price-cap
legislation.

President Bush is adamantly opposed to price caps, a position backed by most
leading Republicans.
Rep. Billy Tauzin, chairman of the House Energy and Commerce Committee, said
a potential agreement on the energy relief measure collapsed in the lower
house because Democrats insisted on including price caps. Republicans blamed
House Minority Leader Richard Gephardt, D-Mo., for scuttling the deal.
"Gephardt .?.?. apparently has made a decision to kowtow to the more radical
elements of the Democratic caucus in the House, and the centerpiece of their
policy is price caps," said Rep. Joe Barton, R-Texas, an energy subcommittee
chairman who prepared the Republican version of the bill.
California Democrats on the energy committee immediately fired back, claiming
Tauzin, R-La., had reneged on a pledge to involve them in negotiations over
the bill during the Memorial Day recess.
"We never heard from them," said Rep. Henry Waxman of Los Angeles, who is
carrying the Democratic House bill. He denied Gephardt was calling the
Democratic shots on the negotiations and contended that a partisan deal on
the bill was never close at hand.
Rep. Jane Harman, D-Redondo Beach, blamed an "ideological group" within the
White House and the House GOP caucus with opposing the imposition of
"temporary, short-term, cost-plus rates .?.?. that will end the gaming in the
system."
Some California Republicans seemed uneasy by the impasse.
"It's going to be a long, hot, difficult summer," said Rep. Mary Bono, R-Palm
Springs, referring to anticipated blackouts across the state as air
conditioners crank up.
The Democratic measure in the House would pressure the Federal Energy
Regulatory Commission to roll back soaring wholesale electricity rates, which
have forced California utilities to the brink or into bankruptcy. The state
has been buying power for California's major utilities, spending some $8
billion since January.
Power generators in some cases charge more than $3,000 per megawatt-hour in
California, though the average cost has been estimated about $300 -- still 10
times higher than it was a year ago. Recently, costs have dropped
dramatically.
A megawatt-hour can power between 750 and 1,000 homes.
Specifically, the bill carried by Waxman seeks to force federal regulators to
impose a rate-setting formula on electricity generators allowing them to
recover only their production costs plus a reasonable rate of return.
The Bush administration opposes price controls, contending it would
discourage the investments needed to develop new energy sources.
The Waxman bill now in limbo attempts to do a number of things: improve the
electricity transmission system to get rid of a bottleneck in the Central
Valley; provide assistance to help the poor pay their energy bills; and grant
Gov. Gray Davis the authority to temporarily waive some air-pollution limits
to increase power production when blackouts are imminent.
Some of the provisions have been advanced on a separate track by the Bush
administration.
Tauzin told reporters that while the House bill is going nowhere, he
acknowledged the Democratic takeover in the Senate means there's "no
avoiding" an eventual House vote on price caps.
He suggested that the GOP strategy may be to play for time. Consumer
conservation efforts, among other things, have resulted in decreased
wholesale prices in California, at least temporarily. He also cited prospects
that new sources of energy may be coming on line.
But Daschle made clear in his letter to Feinstein that he is ready to move
ahead with price caps. He noted a recent media report wrongly stated he was
opposed to price controls.
"Unless FERC acts soon, your legislation should be taken up and passed to
direct FERC to take action," Daschle wrote.
In another energy-related matter, Interior Secretary Gale Norton told a House
committee the administration did not rule out resumption of oil and gas
exploration off the California coast, particularly near Santa Barbara where
offshore areas are not covered by a leasing moratorium.
"This is very bad news for the north Santa Barbara Channel," California Rep.
George Miller, a senior Democrat on the House Resources Committee, told
Scripps-McClatchy Western Service.
Norton appeared before the committee to discuss the administration's energy
policy, one provision of which calls upon the Interior Department to review
legal and policy issues concerning offshore development.
Norton said the Bush administration will abide by moratoriums in effect until
2012 on leasing off of much of the West Coast, Florida and the Carolinas,
according to Scripps-McClatchy.
But when asked by Miller about existing lease areas off Santa Barbara and the
Florida coast that are not covered by the moratoriums, Norton indicated there
is nothing to prevent additional leasing activity now, and that, in the case
of Florida, a departmental review already is under way.

Escondido eyed profit from Hanover plant

Sides were close, but deal crumbled
By Jonathan Heller
UNION-TRIBUNE STAFF WRITER
June 7, 2001
ESCONDIDO -- You don't need much to build a small power plant: A jet engine
off a junked 747, a generator, some emission-control systems and a permit to
build somewhere.
But how much money can you make on such an investment? Most people have no
idea exactly how much. But a rare glimpse into the big-money world of energy
production can be found in Escondido, where a deal for a proposed 49-megawatt
plant on city-owned land recently went sour.
Documents obtained by The San Diego Union-Tribune show that the deal, if it
had gone through, would have guaranteed the city up to $27 million over 10
years, and made a millionaire of the city's energy consultant.
The Houston-based Hanover Co. was willing to gamble about $35 million to
build a "peaker" plant on leased land in the city's public works yard. The
plant was designed to run part-time, feeding energy into the region's power
grid during times of peak demand.
Hanover and the city negotiated in secret for more than three months before
the deal fell apart. But the two sides appeared close to an agreement on
several key points:
?The city would have made $1 million a year in rent, plus a share of the
profits from the sale of wholesale electricity. In a figures adjusted for
inflation, the city was expecting to earn from $6.7 million to $27 million
over the initial 10-year lease.
?Hanover was expecting average rate of return of about 37 percent, according
to conservative estimates, and recouping its $35 million within five years.
Any profits above that were to be split 60 percent for Hanover, 40 percent
for the city.
?Dean Tibbs of Concord, a consultant hired by the city, was paid $100 an hour
and stood to make 10 percent of any revenue the city received. Tibbs' income
was projected to be from $1 million to $3.9 million over 10 years.
Whether this deal is typical of other peaker plant proposals around the
county is not clear. Most of those are on private property, and not subject
to public disclosure. Some think the Escondido proposal was too optimistic.
"Those numbers are phenomenal," said Brian O'Neill, vice president of
Alliance Power, which is building several power plants in other parts of the
state. "That's absolutely very rich."
"I would never enter in a deal like that," agreed Dale Mesple, an energy
consultant with Ramco, a San Diego company that is building a similar power
plant on private property on Escondido's West Mission Avenue. "The developer
is taking all the risk."
The deal would have achieved Escondido's stated goal of a power plant with no
financial risk to the city. Its biggest cost would have been paying Tibbs.
When council members learned how much he stood to make, they asked him to
restructure his contract. But that never happened because the deal fell
through and he was fired. Tibbs, who did not return phone calls seeking
comment, was paid $26,500 for 265 hours of work.
Mesple said it was smart of Escondido to load Tibbs' contract with incentives
-- such as the 10 percent commission -- because the city had no expertise.
"This way, the city's interests and his interests were aligned," he said.
"This is a tremendous multibillion-dollar business and you don't just
arbitrarily step into that."
City Council members were reluctant to discuss the proposed plant, which was
debated mostly in closed sessions. But Councilwoman June Rady said she
opposed the deal because it wouldn't benefit ratepayers.
"It was a deal for the power-generating industry and a deal for the
consultant," she said. "I could not see where there was a good deal for the
people of Escondido."
Ratepayers might not have benefited, but Escondido would have cashed in on
the electricity crisis.
The one-acre parcel at the city's public works yard was appraised at about
$350,000, a small fraction of the minimum guaranteed return of $6.7 million
the city would have earned, according to a report done for the city by Keyser
Marston Associates. "On this basis alone, KMA finds that the proposed lease
will provide significant financial benefit to the city," the report said.
It was unclear exactly why Hanover rejected the deal. A Hanover
representative did not return calls seeking comment, but a letter from
Hanover executive Chet Erwin to the city said the proposal was "excessively
landlord-oriented."
Erwin also complained about "significant public opposition to the plant."
That comment was mysterious to city officials because details of the proposal
were never released to the public. There was, however, some public opposition
to other power plants proposed in the city.
Experts in the power-plant industry said they were not surprised that Hanover
backed away. While it stood to make millions, its lease payments and revenue
sharing might have made it hard to make a profit in the future if energy
prices nose-dived.
"A million dollars a year (in rent)? I don't think electricity prices are
going to be there for the next 10 years," said Alliance's O'Neill.
Bob Therkelsen, deputy director of the California Energy Commission, said he
had heard of deals where cities have been able to charge almost whatever they
wanted to lease land to power plant developers. "This is an interesting time
and lots of interesting arrangements are coming out of this," Therkelsen
said. But the big question was whether Hanover had long-term contracts to
sell its electricity.
"Prices are high now but there's no certainty they're going to last more than
a couple of years," Therkelsen said.

Increased hydropower behind price drop

By Craig D. Rose
UNION-TRIBUNE STAFF WRITER
June 7, 2001
Experts say state electricity prices are falling because of a surprising
level of hydropower, cooler weather, increased supplies and pressure from
investigations into industry practices.
But despite the recent price declines, they note, electricity costs remain
nearly 50 percent above last year and volatile, with few believing California
has seen an end to its power crisis.
Peak prices slipped yesterday another $15, falling to a range of $62 to $79
per megawatt hour, according to Bloomberg News. This compares with market
prices that were routinely more than $300 per megawatt hour from late winter
into the early weeks of spring.
Future prices have also declined with contracts for delivering power in July
reportedly available for about $175 per megawatt.
Gary Ackerman, executive director of the Western Power Trading Forum, an
industry group, said hydropower -- the cheapest electricity source -- has
been running at roughly average levels despite below average levels of
snowpack in the mountains.
Ackerman said the correlation between snowpack levels and water runoff is
imperfect. He added that there was no certainty that runoff levels would
continue at average levels through the summer.
A spokesman for Sempra Energy Trading, a sister company of San Diego Gas &
Electric Co., agreed that increased hydropower was helping to lower prices.
The spokesman also noted that some power plants in California that had been
out of commission have returned to service.
The state had a record number of plants out of service for months because of
what suppliers said were required maintenance outages or unplanned
breakdowns.
Doug Kline, the Sempra spokesman, said the state's success at securing
long-term contracts has also taken pressure off spot markets.
A veteran power industry consultant said investigations into alleged market
manipulation and a sharpened political focus on high prices have cooled the
industry ardor for pushing the market as high as it might otherwise.
"When everyone was not looking, it was a lot easier (to keep prices high),"
the expert said.
SDG&E said recent price declines have brought its retail power costs down to
7.7 cents per kilowatt hour -- the lowest since last summer -- but still 48
percent more than last year's rates at this time.
Consumer advocates said beleaguered California electricity customers should
hesitate to draw optimistic conclusions from the recent price declines.
"Even the current prices are ridiculously inflated," said Harvey Rosenfield,
of the Foundation for Taxpayer and Consumer Rights in Santa Monica.
Rosenfield said it was possible that the "energy cartel" had blinked in what
he describes as its war on consumers. But he added that it is too soon to
tell whether this will become permanent behavior. And he warned that
California still faces what he says are exorbitant prices from long-term
electricity contracts already signed by the state.
Michael Shames, executive director of the Utility Consumers Action Network,
noted that the hottest months and potentially higher prices are ahead.
"These prices are not staying here," Shames said.

PUC could expand utility discounts to low-income ratepayers

By Karen Gaudette
ASSOCIATED PRESS
June 6, 2001
SAN FRANCISCO ) Reports of slipping energy prices aren't an indication that
California is on its way out of the energy crisis yet, a state energy
regulator cautioned Wednesday.
"It really is premature to say that energy costs are on a downward trend,"
said Jeff Brown, one of five members of the state Public Utilities
Commission. "We still have a tough summer to go through, and we still have
the same inherent problems we had a month ago or a week ago."
Those "inherent problems" ) high demand, low supply and a hunch that
suppliers purposely limit that supply to drive prices skyward ) are still
under investigation by the PUC and the state attorney general's office.
Short-term solutions, such as the electricity price caps Gov. Gray Davis so
desperately wants, are vehemently opposed by the very officials who would
have to enact them ) the Bush administration and the Federal Energy
Regulatory Commission.
On Thursday, the PUC considers what state-level action it can take to curb
California's power woes.
The meeting agenda includes a request from Commissioner Carl Wood to raise
the discount that low-income utility customers receive on their electric
bills.
Ratepayers enrolled in the California Alternate Rates on Energy program
currently save 15 percent on their bills, though not all eligible ratepayers
have applied for the program.
Expanding the discount would mean either the utilities or ratepayers would
have to absorb the $50 million to $60 million difference, Brown said. A small
portion of residential ratepayers' electric bills already goes to support
CARE.
The welfare of small power plants fueled by solar, wind, geothermal, biomass
power or natural gas, which generate as much as a third of the state's energy
supply, also is on the agenda.
The PUC plans to review whether payments it ordered the utilities to make to
those plants have been enough for the plants to resume producing as much
electricity as possible to help increase the state's meager supply of
megawatts.
The PUC recently ordered the utilities to pay the plants after Pacific Gas
and Electric Co. and Southern California Edison Co. paid little or nothing
for several months of electricity deliveries.
Both utilities owe the plants millions of dollars in back payments, but say
so far they have kept up with PUC requirements.

Senator Fires Warning Shot on Power Costs

By RICHARD SIMON, Times Staff Writer

?????WASHINGTON--The new Democratic chairman of the Senate energy committee
bluntly warned federal regulators Wednesday to act more aggressively to rein
in electricity costs in coming weeks or prepare for Congress to intervene.
?????As Sen. Jeff Bingaman (D-N.M.) turned up the political pressure on the
Federal Energy Regulatory Commission, House GOP leaders scuttled an emergency
bill designed to help power-short California through a difficult summer. The
measure became bogged down in partisan wrangling over price controls.
?????Bingaman's comments were a sign of the sudden shift in energy politics
in Washington after Vermont Sen. James M. Jeffords' switch from Republican to
independent and the Democrats taking control of the Senate.
?????In his first day as chairman of the Energy and Natural Resources
Committee, Bingaman urged the Bush administration to "step up to its
responsibility" to ensure that wholesale power rates charged in California
are just and reasonable.
?????And new Senate Majority Leader Tom Daschle (D-S.D.) expressed similar
sentiment in a letter to California Gov. Gray Davis.
?????"Unless FERC takes action," Daschle wrote, "I believe that Congress will
have to consider legislation to address the issue."
?????Bingaman is co-sponsor of a bill introduced by Sens. Dianne Feinstein
(D-Calif.) and Gordon Smith (R-Ore.) that would direct FERC to limit prices
while ensuring that power suppliers recover their costs and still make a
reasonable profit. The Bush administration has opposed price controls,
contending they would discourage power plant construction.
?????The Feinstein bill appeared unlikely to come up for a vote in the Energy
Committee under the former chairman, Sen. Frank Murkowski (R-Alaska).
Feinstein said she hopes that if FERC doesn't act within a few weeks, the
committee will take up her bill. "We intend to keep the pressure up," she
said.
?????Even if such a measure were to pass the Senate, it would face stiff
opposition in the GOP-controlled House of Representatives and probably a
presidential veto. Nor is it clear to what extent Congress can dictate to
FERC, an independent body, what actions to take. But with their newfound
power, the Democrats believe they can, at minimum, increase political and
public pressure on the regulators.
?????On broader energy policy, the Democratic control of the Senate has
dashed GOP hopes for speedy approval of comprehensive energy legislation.
Democrats complain that President Bush's energy plan relies too heavily on
coal, oil and nuclear power. They are expected to push for greater emphasis
on conservation, energy efficiency and renewable energy such as wind and
solar power.
?????Bingaman said that in the short term he hopes to boost energy assistance
to low-income households, address gasoline price spikes--perhaps by revising
the patchwork of regional fuel recipes--and reduce electricity prices in the
West.
?????In a breakfast meeting with energy reporters, Bingaman expressed hope
that two new FERC commissioners would act more aggressively in response to
electricity prices, which have bankrupted California's biggest private
utility, Pacific Gas & Electric, and cost the state billions of dollars.
?????But he noted that there are limits to what Congress can do. "Once a law
is on the books, and a federal agency is not enforcing it, then usually the
remedy is in the courts," he said. Davis has threatened to sue FERC.
?????FERC officials said they did not want to get into a war of words with
Bingaman and would let the agency's record speak for itself. "This agency is
continuing to work extremely hard on the issues facing the country in regard
to energy," said Walter Ferguson, a top staffer for FERC Chairman Curtis L.
Hebert Jr.
?????The commission actions "are our testament," Ferguson added. "The
interests of consumers are paramount, and we will act accordingly."
?????In the House, GOP leaders declared dead a bill that would have provided
some short-term help to California, such as federal aid to ease a notorious
bottleneck in the state's power grid and authority for the governor to ease
emission rules to boost power supplies during an emergency.
?????Democrats suggested that the legislation was killed to save California
Republicans from a politically difficult vote on price controls. Republicans
contended that Democratic leaders were unwilling to compromise.
?????Rep. Joe Barton (R-Texas), the bill's author, said the impasse made it
unlikely that the legislation could pass Congress and clear the president's
desk in time to help California this summer.
?????Barton complained that his GOP colleagues felt like Charlie Brown about
to kick the football only to have the Democrats, like Lucy, pull it away at
the last minute.
?????But Rep. Henry A. Waxman (D-Los Angeles) asserted, "We were never close
to a deal."
?????"The Republicans say they cannot move forward on energy legislation
because Democrats refuse to support any energy legislation that does not
include wholesale price controls, and I say . . . right." added Rep. Bob
Filner (D-San Diego). "What good is a bill that does nothing for consumers?"
?????House Democrats vowed to continue to press for price controls. Some
Republican leaders who have resisted price controls appeared to be softening
their position, as long as it's called something else.
?????Rep. W.J. "Billy" Tauzin (R-La.), chairman of the House Energy and
Commerce Committee, said he was drafting a letter urging FERC to expand its
"price mitigation" order that limits the price that power generators can
charge.
?????The order now applies only when the state's power supplies slip low
enough to trigger an energy emergency. Rep. Doug Ose (R-Sacramento) has
introduced legislation to expand the order to cover all times of day and the
entire Western region.
?????Democrats contend the Republican proposal doesn't go far enough. For
example, the top price paid for power would still be set by the least
efficient generator, providing bigger profits for newer, more efficient
generators.
?????Davis said in a letter to lawmakers that the FERC order is a "faulty
foundation on which to build relief for California. It is extremely limited
in its scope and applicability and provides little, if any, real price relief
for consumers and businesses in California."
?????FERC rules prevent staffers from commenting on specific matters
scheduled for commission action, such as any changes to the California price
control plan. "That issue is pending and we are prohibited from commenting on
it," said Ferguson.
?????Democrats contend that as Californians begin receiving higher utility
bills in the mail, the pressure will grow on Washington officials to clamp
down more vigorously on wholesale electricity prices.
?????But Rep. Mary Bono (R-Palm Springs), who has opposed price controls,
said that at a recent town hall meeting in her district, "out of probably 30
questions, one came up on caps. People in California are looking for real
solutions, and they recognize that's a quick political fix."
---
?????Times staff writer Ricardo Alonso-Zaldivar contributed to this story.

Copyright 2001 Los Angeles Times

Power switch -- contracts now in limbo
Nosedive in electricity prices will let state deal from strength
David Lazarus, Chronicle Staff Writer
Thursday, June 7, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/06/07/MN177308.DTL
Emboldened by an unexpected plunge in electricity prices, state officials
said yesterday that they are prepared to press their advantage and walk away
from nearly two dozen long-term power contracts that now are at above-market
rates.
This represents a complete reversal from the state's position of just a few
weeks ago, when officials were at the mercy of power companies and were all
but begging for any available megawatts.
The state Department of Water Resources already has signed 38 contracts to
purchase electricity at fixed prices over the next decade. But 23 other
contracts, or about 40 percent of the total, remain in negotiations.
"We may not need all 23," said Ray Hart, deputy director of the state
Department of Water Resources. The department so far has spent about $8
billion for electricity on behalf of California's cash-strapped utilities.
If power companies are unwilling to meet the state's demands for more
favorable prices, he said, "I don't think all those contracts will come to
term."
Steve Maviglio, a spokesman for Gov. Gray Davis, was quick to underline
California's changed fortunes as an electricity buyer.
"We're in the driver's seat now," he said. "There's no question about that."
Other officials were feeling similarly encouraged by California's stronger
position to press their attack on power companies that they suspect of having
pushed electricity prices higher.
Larry Drivon, special counsel to a state Senate committee investigating
alleged price manipulation, said the sudden drop in power costs will not
derail attempts to determine if power companies illegally gouged customers.
"Prices have gone down, but they're also capable of going back up again in a
hurry," he said.
Electricity prices have tumbled to the lowest levels since April 2000 -- as
low as $50 per megawatt hour yesterday, compared with more than $500 earlier
this year.
Experts attributed the drop to a decline in the price of natural gas, which
is the fuel that runs most power plants. Milder weather has cut power demand
by reducing use of air conditioners, which in turn slashes the amount of gas
required by generators.
Experts also cited increased electricity production at plants and dams, as
well as greater conservation by consumers and businesses.
"The Armageddon we thought we were facing this summer has backed away a bit,
" said Severin Borenstein, director of the University of California Energy
Institute in Berkeley.
"These lower prices are saying that the market is not going to be as tight as
expected," he said. "That means fewer blackouts."
It also means California's long-term contracts increasingly appear to be a
raw deal if power prices continue to fall.
A state report to be released today says the average contract price is about
$70 per megawatt hour over 10 years and that the average price over the next
five years is $84 -- well above current market rates.
The average contract price in the third quarter of 2001 is $138, rising to
$142 in the fourth quarter, the report says.
LOOKING FOR BETTER DEALS
"I want to work for more favorable deals," said Hart at the Department of
Water Resources.
However, he said, details of the accords will not be made available for the
foreseeable future because that could jeopardize the state's bargaining
position in any subsequent talks with generators.
This contradicted a pledge from the governor last week that details of the
contracts would be revealed within 30 days.
The Chronicle and other media outlets are suing for access to the accords,
arguing that the public has a right to know how $40 billion in tax dollars is
being spent.
Senate President Pro Tem John Burton, D-San Francisco, said he plans to
discuss with colleagues how the drop in power prices can be used to
accelerate the release of the contracts.
"We can't know if the contracts show whether the state is being smart or
stupid until we see them," he said.
PRICE DROP OUT OF BLUE
This much at least is clear: Almost no one could have forecast just weeks ago
that wholesale electricity prices would drop below $100 this summer.
A few months ago, June electricity prices on the forward power market were
running close to $400.
One reason for the changed outlook, ironically, is last week's heat wave,
which left Northern California sizzling and would have been expected to cause
electricity prices to soar as millions of air conditioners kicked into gear.
Instead, power prices remained steady, "and that really changed the
psychology of the market," said Brian Jordan, who monitors electricity
trading at energy market researcher Platts.
Michael Wilczek, another Platts analyst, said that price stability was
bolstered by an increased number of generating plants returning to service
after spring repairs.
He also cited a surge in electricity output from regional dams as the high
temperatures caused mountain snow to melt.
NIGHTMARE HAS ABATED
"Now, things aren't looking like the nightmare scenario some people were
expecting," Wilczek said. "But it still could be a volatile summer."
Jeff Brown, a member of the state Public Utilities Commission, said the
situation could change "in a New York minute."
"It's only June," Brown said. "We've got to go through July, August and
September."
Paul Clanon, the head of PUC's energy division, agreed with Brown that
natural gas costs could spike again.
"I wouldn't hold out big hope for anyone that those decreases are going to be
permanent," Clanon said.
Indeed, if there is one thing Californians have learned, it is that trying to
guess where energy prices are headed is a sucker's game. In April, for
example, the August electricity price on forward markets was about $700.
Yesterday it was closer to $200.
This summer's weather will be the deciding factor in determining whether the
actual August price on daily markets will be as low as $30 or back up at the
$1,900 level seen earlier this year.
"The battle isn't over," said Borenstein at the UC Energy Institute. "But
we've seen real progress."
Chronicle staff writer Bernadette Tansey contributed to this report. / E-mail
David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Developments in California's energy crisis

Thursday, June 7, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/07/state1
105EDT0153.DTL
(06-07) 08:05 PDT (AP) --
Developments in California's energy crisis:
THURSDAY:
* No power alerts Thursday as reserves stay above 7 percent.
WEDNESDAY:
* No power alerts Wednesday as reserves stay above 7 percent.
* Federal antitrust regulators join the crowd of government authorities
looking for possible abuses in California's high-priced wholesale electricity
market. The U.S. Justice Department last month opened an antitrust probe into
a power sales partnership between Arlington, Va.-based AES Corp. and Tulsa,
Okla.-based Williams Energy. AES disclosed the investigation in a Securities
and Exchange Commission filing this week.
* Reports of slipping energy prices aren't an indication that California is
on its way out of the energy crisis yet, says Jeff Brown, one of five members
of the state Public Utilities Commission. He warns of "a tough summer" ahead
and says the state still has "the same inherent problems we had a month ago
or a week ago."
* The Assembly, by a 42-7 vote, approves a resolution asking the Federal
Energy Regulatory Commission to "impose interim price caps until the
California power market has stabilized."
* Officials at the Del Mar Fair say they will keep midway rides going without
pulling power from the grid by operating on generators during the fair run
from June 15 to July 4.
* Shares of Edison International close at $9.98, down 7 cents. PG&E Corp.
closes at $11.07, down 18 cents. Sempra Energy, the parent company of San
Diego Gas & Electric, closes at $26.71, down 20 cents.
WHAT'S NEXT:
* Davis' representatives continue negotiating with Sempra, the parent company
of San Diego Gas and Electric Co., to buy the utility's transmission lines.
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices the state's electricity deregulation law bars them from
passing on to consumers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers. The state is also buying power for a third investor-owned
utility, San Diego Gas & Electric, which is in better financial shape than
much larger Edison and PG&E but also struggling with high wholesale power
costs.
The Public Utilities Commission has approved average rate increases of 37
percent for the heaviest residential customers and 38 percent for commercial
customers, and hikes of up to 49 percent for industrial customers and 15
percent or 20 percent for agricultural customers to help finance the state's
multibillion-dollar power buys.
,2001 Associated Press ?

House GOP leaders backing away from short-term fix
H. JOSEF HEBERT, Associated Press Writer
Thursday, June 7, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/07/nation
al0411EDT0472.DTL
(06-07) 01:11 PDT WASHINGTON (AP) --
A partisan fight over price caps on Western electricity sales has brought a
halt to House attempts to enact short-term energy legislation aimed at
helping California deal with this summer's power crisis.
House Republicans said Wednesday they were no longer pursuing the
legislation, but would concentrate on putting President Bush's long-term
energy plan into law, beginning with a bill aimed at addressing refinery
problems in making gasoline.
"We were no longer going to waste any more time to try to resolve an issue
that can't be resolved," Rep. Billy Tauzin, R-La., chairman of the Energy and
Commerce Committee, said in an interview, when asked about the dispute over
electricity price caps.
Tauzin dismissed charges by Democrats that he was bottling up the
legislation, fearing a price cap was gaining momentum and might pass the full
House. "I think we would have prevailed on the floor as well," said Tauzin,
an opponent of the price cap legislation.
Amid astronomical power prices in California and other parts of the West,
there has been growing political pressure in Congress for legislation to
force federal regulators to take additional steps to rein in wholesale
electricity prices that have been ten times what they were pre-crisis in
1999.
California so far has paid nearly $50 billion for power this year, compared
to about $7 billion in all of 1999. Utilities in the Northwest also have
sharply boosted prices as shortages in hydroelectric power have forced
purchasers to buy on the expensive spot market, driving up retail prices.
Rep. Henry Waxman, D-Calif., had planned to offer an amendment to a
short-term energy bill that would force the Federal Energy Regulatory
Commission to peg wholesale electricity prices in the West to cost of
production plus a "reasonable" profit. Republicans have rejected the
amendment and when negotiations on a compromise failed Tauzin canceled a
series of votes on the bill Wednesday.
House Democratic leader Richard Gephardt of Missouri accused the Republican
majority of "ignoring the concerns of millions of Americans" by foreclosing
further action on short-term energy legislation, including price caps.
Democrats, who took control of the Senate on Wednesday, have said they would
take up a price cap proposal shortly, although its prospects for Senate
passage are uncertain because of strong Republican opposition.
GOP congressional leaders are following the lead of President Bush, who
repeatedly has voiced his opposition to federal price controls arguing they
will hinder development of more electricity supplies and add to the risk of
blackouts. California officials and many Democrats contend price caps can be
structured in such a way as to provide adequate profits to spur investment.
Likewise federal regulators have refused to impost cost-of-service price
caps.
"The president's not willing to do anything," said Waxman in an interview.
"The Federal Energy Regulatory Commission is giving us the back of their
hands. Now the Republican Congress is telling us as well that they have no
interest in the problem."
Tauzin said many of the provisions in the energy bill that had awaited a vote
in his committee -- such as additional money for low income energy assistance
and a long-term plan to ease power grid congestion in California -- are being
done anyway.
"All they (Democrats) wanted is price caps, and they're not going to get
that," said Tauzin.
Instead, Tauzin said he was turning to legislation addressing Bush's broader
energy plan, beginning with measures to address gasoline price spikes. He
said he hoped within a few weeks to move a bill easing the requirement for
so-called "boutique" gasoline blends imposed to meet clean air requirements.
It's not certain whether such legislation would come soon enough to ease this
summer's gasoline price problems, but Tauzin said it could help avert price
spikes next summer.
The White House also has asked the Environmental Protection Agency to address
the boutique fuel issue administratively. Sen. Jeff Bingaman, D-N.M., the new
chairman of the Senate Energy and Natural Resources Committee, also has
singled out this issue as one he wants to resolve in a way, he says, that air
quality does not suffer.
Tauzin said that after the gasoline legislation, he planned to focus
attention on a package of energy efficiency and conservation measures,
followed by separate legislation addressing energy production issues.
,2001 Associated Press ?

Power switch -- contracts now in limbo
Nosedive in electricity prices will let state deal from strength
David Lazarus, Chronicle Staff Writer
Thursday, June 7, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/07/M
N177308.DTL
Emboldened by an unexpected plunge in electricity prices, state officials
said yesterday that they are prepared to press their advantage and walk away
from nearly two dozen long-term power contracts that now are at above-market
rates.
This represents a complete reversal from the state's position of just a few
weeks ago, when officials were at the mercy of power companies and were all
but begging for any available megawatts.
The state Department of Water Resources already has signed 38 contracts to
purchase electricity at fixed prices over the next decade. But 23 other
contracts, or about 40 percent of the total, remain in negotiations.
"We may not need all 23," said Ray Hart, deputy director of the state
Department of Water Resources. The department so far has spent about $8
billion for electricity on behalf of California's cash-strapped utilities.
If power companies are unwilling to meet the state's demands for more
favorable prices, he said, "I don't think all those contracts will come to
term."
Steve Maviglio, a spokesman for Gov. Gray Davis, was quick to underline
California's changed fortunes as an electricity buyer.
"We're in the driver's seat now," he said. "There's no question about that."
Other officials were feeling similarly encouraged by California's stronger
position to press their attack on power companies that they suspect of having
pushed electricity prices higher.
Larry Drivon, special counsel to a state Senate committee investigating
alleged price manipulation, said the sudden drop in power costs will not
derail attempts to determine if power companies illegally gouged customers.
"Prices have gone down, but they're also capable of going back up again in a
hurry," he said.
Electricity prices have tumbled to the lowest levels since April 2000 -- as
low as $50 per megawatt hour yesterday, compared with more than $500 earlier
this year.
Experts attributed the drop to a decline in the price of natural gas, which
is the fuel that runs most power plants. Milder weather has cut power demand
by reducing use of air conditioners, which in turn slashes the amount of gas
required by generators.
Experts also cited increased electricity production at plants and dams, as
well as greater conservation by consumers and businesses.
"The Armageddon we thought we were facing this summer has backed away a bit,
" said Severin Borenstein, director of the University of California Energy
Institute in Berkeley.
"These lower prices are saying that the market is not going to be as tight as
expected," he said. "That means fewer blackouts."
It also means California's long-term contracts increasingly appear to be a
raw deal if power prices continue to fall.
A state report to be released today says the average contract price is about
$70 per megawatt hour over 10 years and that the average price over the next
five years is $84 -- well above current market rates.
The average contract price in the third quarter of 2001 is $138, rising to
$142 in the fourth quarter, the report says.
LOOKING FOR BETTER DEALS
"I want to work for more favorable deals," said Hart at the Department of
Water Resources.
However, he said, details of the accords will not be made available for the
foreseeable future because that could jeopardize the state's bargaining
position in any subsequent talks with generators.
This contradicted a pledge from the governor last week that details of the
contracts would be revealed within 30 days.
The Chronicle and other media outlets are suing for access to the accords,
arguing that the public has a right to know how $40 billion in tax dollars is
being spent.
Senate President Pro Tem John Burton, D-San Francisco, said he plans to
discuss with colleagues how the drop in power prices can be used to
accelerate the release of the contracts.
"We can't know if the contracts show whether the state is being smart or
stupid until we see them," he said.
PRICE DROP OUT OF BLUE
This much at least is clear: Almost no one could have forecast just weeks ago
that wholesale electricity prices would drop below $100 this summer.
A few months ago, June electricity prices on the forward power market were
running close to $400.
One reason for the changed outlook, ironically, is last week's heat wave,
which left Northern California sizzling and would have been expected to cause
electricity prices to soar as millions of air conditioners kicked into gear.
Instead, power prices remained steady, "and that really changed the
psychology of the market," said Brian Jordan, who monitors electricity
trading at energy market researcher Platts.
Michael Wilczek, another Platts analyst, said that price stability was
bolstered by an increased number of generating plants returning to service
after spring repairs.
He also cited a surge in electricity output from regional dams as the high
temperatures caused mountain snow to melt.
NIGHTMARE HAS ABATED
"Now, things aren't looking like the nightmare scenario some people were
expecting," Wilczek said. "But it still could be a volatile summer."
Jeff Brown, a member of the state Public Utilities Commission, said the
situation could change "in a New York minute."
"It's only June," Brown said. "We've got to go through July, August and
September."
Paul Clanon, the head of PUC's energy division, agreed with Brown that
natural gas costs could spike again.
"I wouldn't hold out big hope for anyone that those decreases are going to be
permanent," Clanon said.
Indeed, if there is one thing Californians have learned, it is that trying to
guess where energy prices are headed is a sucker's game. In April, for
example, the August electricity price on forward markets was about $700.
Yesterday it was closer to $200.
This summer's weather will be the deciding factor in determining whether the
actual August price on daily markets will be as low as $30 or back up at the
$1,900 level seen earlier this year.
"The battle isn't over," said Borenstein at the UC Energy Institute. "But
we've seen real progress."
Chronicle staff writer Bernadette Tansey contributed to this report. / E-mail
David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Senator ready to strong-arm energy panel
New committee chairman to give regulators 2 weeks to set price caps
Carolyn Lochhead, Chronicle Washington Bureau
Thursday, June 7, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/07/M
N99766.DTL
Washington -- The new Democratic chairman of the Senate Energy and Natural
Resources Committee warned yesterday that unless federal regulators act
within two weeks to intervene in California's electricity market, the Senate
will try to force them to do so.
But over in the House of Representatives, a partisan brawl over limits on the
wholesale price of energy led Republicans to withdraw their bill, which is
intended to help California out of its electricity mess.
Even as Republicans insisted that price caps would never win approval in the
House, they sent a letter to federal regulators urging a tough stand on
market manipulation and all but conceded that the issue was beginning to hurt
them politically.
The actions put the two chambers -- and the two parties -- on a collision
course over price controls that promises to play out in Washington through
the summer, waxing or waning with California's expected blackouts.
The Bush administration strongly opposes controls, saying they would not
alleviate the blackouts and might make them worse. Gov. Gray Davis and
Democrats in Congress insist that price controls will solve the short-term
problem by stanching the flow of money out of the state.
The effort by the Democrats has been given a boost by their takeover of the
Senate. Soft-spoken and Stanford-educated Democratic Sen. Jeff Bingaman of
New Mexico, who now heads the energy committee, warned he would wait several
weeks to see if President Bush's two new appointees to the Federal Energy
Regulatory Commission would take stronger action on prices.
Patrick Wood, head of the Texas public utilities commission, and Nora Mead
Brownell, a Pennsylvania public utilities commissioner, were sworn in this
week, and Wood is said to be in line for the regulatory commission
chairmanship.
Bingaman has co-sponsored California Democrat Dianne Feinstein's bill to
order the regulatory commission to impose price caps. Senate Majority Leader
Tom Daschle, D-S.D., wrote Feinstein on Tuesday saying he supported her bill,
too, and would try to bring it to a vote.
"I hope that FERC will act on its own volition," Bingaman said yesterday. "I
don't think Congress has the experience to step in and do it for them."
But if the energy regulators are unwilling, he said, he would consider Senate
action.
In the House, however, Republicans charged the Democrats with using the price
caps issue purely to score political points with voters.
Rep. Billy Tauzin, the Louisiana Republican who heads the House Commerce
Committee, said he decided to pull the energy legislation late Tuesday
evening "for tactical and practical reasons," saying many of the proposals --
such as plans to clear the state's Path 15 transmission bottleneck -- had
already been adopted by Davis or Bush.
Tauzin also said that while Republicans had the votes to move the bill, it
would pass narrowly and probably arrive too late to avert this summer's
expected problems.
Tauzin effusively praised Rep. Henry Waxman, D-Los Angeles, for making a
"very sincere effort" to bridge the partisan differences over price controls.
But Texas Republican Joe Barton charged that House Democratic leader Dick
Gephardt had short-circuited the talks so the Democrats could keep price
controls alive as a political issue.
"Mr. Gephardt apparently made a decision to kowtow to the more radical
elements of the Democratic caucus," Barton said. He said committee Democrats,
including Anna Eshoo of Palo Alto and Waxman, "would get real close" to
agreement, but then like Lucy with the football in the Peanuts cartoon,
pulled away at the last minute.
"It appeared to me that Mr. Gephardt did not want a deal," Barton said.
No sooner did the Republicans leave their press conference than Democrats
charged into the same room to deny any such thing.
"We were never close to a deal," Waxman said. The Democrats said a proposal
by Sacramento Republican Doug Ose to widen an April order by the Federal
Energy Regulatory Commission -- which imposes a benchmark price during Stage
3 power alerts and heightened scrutiny of power sales over that price -- was
grossly inadequate.
Waxman charged that the Republicans were deliberately letting California
suffer.
"The FERC has said they weren't going to do anything to help California, the
president has refused to do anything to help California, and now the
Republican Congress is refusing to help us as well," Waxman said.
But Fresno Republican George Radanovich said the two parties had been in
serious discussions on a Democratic proposal to impose price caps until 80
percent of the state's electricity purchases are locked into long-term
contracts.
But that fell apart, he said, when some worried whether 80 percent was the
correct number and whether Congress should even be making such decisions.
"For politics, they want to keep the price cap issue," Radanovich said of the
Democrats. "To me it's really a red herring. I think the governor's been
successful in trying to make this argument, and I think he needs to focus on
getting himself out of the electricity purchasing business, restoring the
creditworthiness of the utilities and getting them into long-term contracts.
If he'd put all his energy into those three things, we'd be out of this
problem."
The price-control clash is heating up again just as electricity prices are
suddenly dropping as Californians conserve more than expected and natural gas
prices fall. Whether prices remain low or spike up again could influence the
debate in Congress.
Bingaman also said that although he shares Bush's desire for a long-term
energy plan, he would put that on hold until "later this summer and into the
fall."
E-mail Carolyn Lochhead at clochhead@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 15

Underwriters wary of bond deal
State needs funds to cover costs of buying power
Greg Lucas, Sacramento Bureau Chief
Thursday, June 7, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/07/M
N168905.DTL
Sacramento -- A $12.5 billion bonds-for-electricity deal considered critical
to California's budget solvency may be delayed unless the state takes steps
quickly to assure underwriters that the bonds are a sound investment.
Backers want greater certainty that buyers of the bonds will be guaranteed
revenue from utility ratepayers before taking the sale to market, according
to state bankers and lawmakers.
Without those assurances, the bond sale could be delayed or, if it is not,
the selling costs could be higher for the state if buyers see the bond issue
as a riskier investment. Providing that certainty, however, could mean a rate
increase should the state's energy costs rise.
"The bond market simply is not going to respond to a sale where there is not
an assured revenue stream," said Sen. Steve Peace, D-Chula Vista, chairman of
the upper house's budget committee. "And that revenue stream is not there
yet."
STATE BUDGET AT RISK
Without the bond sale, the state budget would be forced to absorb the more
than $8 billion it has spent since January to purchase power for
cash-strapped utilities. A financial blow of that size could only be absorbed
by making deep cuts in spending, raising taxes or both.
The three state budget proposals created by the Democratic governor, the
Assembly and the Senate all assume the bonds will be sold and the state's
coffers replenished.
But a lot must be done to accomplish that.
Although underwriters and bond lawyers working with State Treasurer Phil
Angelides declined to comment, Angelides and other sources close to the
negotiations said several key elements necessary to market the bonds are not
in place.
The first of these is that buyers of the bonds want to be sure they will get
paid.
The plan is for a portion of each utility customer's bill to be devoted to
paying off bond holders.
Essential to the bond deal is a formal agreement between the Public Utilities
Commission and the state that whatever costs the state incurs, buying power
will be covered by the rates charged utility customers.
That pledge, which could mean a rate increase if energy prices don't keep
falling, is intended to give bond buyers the confidence there will be enough
revenue to pay them off.
The Department of Water Resources, which buys the state's power, estimates
that it needs about $700 million a month to cover its costs -- a total of
$9.2 billion through June 2002.
The assumption is that as energy prices fall, state costs will drop, freeing
up cash to pay off bond holders.
"Ratepayer revenues, including the most recent rate increase, are expected to
cover all of (the state's) costs and the debt service," said Tim Gage,
director of Gov. Gray Davis' Department of Finance, which is involved in the
negotiations with the PUC.
PUC DUBIOUS ABOUT DEAL
Participants in the negotiations say the PUC is reluctant to sign the
agreement because it would surrender its power over deciding whether the
state spent more than it should in buying power.
PUC Commissioner Jeff Brown said that giving a blanket assurance the state's
expenses will be covered might lead to an automatic rate increase if current
rates turn out to be too low to cover both utility costs and the state's
power purchases.
"The PUC has rate setting authority," Brown said. "We have to be in a
position to protect the ratepayers."
But Brown said the PUC has just begun the process of determining how the
money will be shared, an issue that is likely to be hotly contested over the
next month.
UNRESOLVED ISSUES
There are still other issues that must be resolved before the bond sale.
The state must sign agreements with Pacific Gas and Electric Co., Southern
California Edison and San Diego Gas & Electric on how the utilities will
route ratepayer money to the state to pay its costs.
And the PUC must increase rates for SDG&E customers because higher rates for
those ratepayers is part of the revenue flow to the state, Angelides said.
Peace and others predict that the bonds will eventually be sold, probably at
high yields for investors and higher costs for the state.
The sale probably won't happen in August as first hoped, however.
Angelides said the two weeks before Labor Day are poor ones to sell the bonds
because many so people are on vacation. He predicts a sale some time in
September.
That would put the state uncomfortably close to the time it will no longer be
able to raid various funds to cover the drain on the general fund from
revenue buys.
"It's a pretty narrow window that has to be met," Angelides said.
Energy at a glance Energy-related developments yesterday:
-- EL PASO CASE TOO COMPLEX
FOR QUICK RULING -- JUDGE
The judge in a federal investigation of possible market manipulation by a
Texas energy company said yesterday that he might not issue his findings
until September.
The case involving El Paso Corp. proved so complex that Curtis Wagner, chief
administrative law judge for the Federal Energy Regulatory Commission,
extended the schedule for written arguments until July 24. The commission
then extended the deadline for his report from July 12 to Sept. 4.
El Paso has been accused by California regulators and utilities of causing
huge run-ups of gas and electricity prices by restricting supplies of natural
gas flowing into the state on a company pipeline.
The company has denied that it did anything wrong and says the price
increases were the result of normal market forces.
-- SMALL GENERATORS
MAY RECEIVE PAYMENTS
Hundreds of small power generators that are owed millions by state utilities
could get a cash infusion to keep them online under a proposal to be
considered today by the state Public Utilities Commission.
Any small supplier that shows it will be forced to stop operating unless it
is paid part of the back debt would receive 15 percent of the amount owed by
Pacific Gas and Electric Co., Southern California Edison or San Diego Gas &
Electric Co.
The small plants stopped receiving full payments during the winter as
skyrocketing electricity prices drove the utilities into debt.
Chronicle staff writer Bernadette Tansey contributed to this report. / E-mail
Greg Lucas at glucas@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 15

It's looking better on energy front
Posted at 9:50 p.m. PDT Wednesday, June 6, 2001
BY STEVE JOHNSON AND JOHN WOOLFOLK

Mercury News

After months of pessimistic predictions that California was facing a summer
of blackouts, the energy outlook is brightening.
Increased conservation, new power plants and more electricity imports are
easing the threat of routine summer outages.
``I feel good,'' said Bob Therkelsen, deputy director of the California
Energy Commission, crediting a crash program to speed power-plant
construction and persuade people to use less electricity. ``Overall, that
objective of increasing supply and reducing demand is happening.''
While no experts say the crisis is over -- and some warn the situation could
quickly worsen -- state energy analysts and some industry officials are
revising their dire forecasts.
Things certainly didn't look good two months ago. Back then, power plant
breakdowns and routine repairs had made nearly 15,000 megawatts of power
unavailable in California -- about a third of what the state normally uses.
And Gov. Gray Davis was warning that by May and early June, the state could
be ravaged by blackouts.
But a lot has changed since then. On Wednesday, only about 6,000 megawatts
was unavailable because of plant repairs. Other than two blackout days -- on
May 7 and May 8 -- last month and the first part of June have had relatively
few power problems. Moreover, appeals to conserve appear to be sinking in. On
Sunday, state officials announced an 11 percent drop in electrical use last
month compared with May last year.
Not wasting power is especially crucial, said Richard Grix, an analyst with
the California Energy Commission.
``It's really been the people who have turned up the thermostats, put in the
fluorescent energy-efficient light bulbs and run their dryers at night,'' he
said. ``It's all the efforts of people trying to conserve electricity that
have made the outlook a lot better. And that still has to happen'' to avert
blackouts this summer.
James Macias, executive director of the San Jose-based power plant developer
Calpine Corp., said he expected fewer blackouts and lower electricity prices
than predicted this summer because of the number of new plants coming online.
``I'm optimistic things are improving,'' he said in a New York briefing.
News from Northwest
California's prospects for buying electricity from other states appear to be
better, too.
The state normally relies on such imports for about one-fourth of the power
it uses, with much of it coming from the Pacific Northwest. In recent months,
California officials had feared those supplies might dry up this summer,
because a drought had reduced the amount of water needed to drive the
region's hydroelectric dams. But those concerns have eased.
``We're not out of the woods yet,'' concluded a study last week by the
Northwest Power Planning Council. But since its last analysis of available
power supplies in March, it added, ``the situation has improved
considerably.''
Officials at the Bonneville Power Administration, the giant Portland, Ore.,
federal hydropower agency, sounded a similarly sunny note. They said
agreements by aluminum and other major industries to reduce their power usage
has made more power available for California.
Bonneville, with 29 dams and a nuclear plant, generates 8,000 megawatts and
is obligated to deliver 11,000 megawatts. Typically, it buys the difference
on the market. So with power prices soaring, Bonneville asked the industries
to reduce demand by 3,000 megawatts or face price increases up to 250
percent.
So far, the companies have committed to drop 1,200 megawatts, which means
there is that much more electricity available for other customers, including
California, said Bonneville spokesman Mike Hansen. ``We're not out there
competing with everyone else for that power,'' he said. ``We're feeling
pretty good about this summer.''
Help from the weather
Even the weather appears to be cooperating.
To be sure, May was hotter than normal and temperatures are expected to be
unusually hot across much of the Southwest. That could drive up electricity
use for air conditioning in places like Arizona, potentially limiting the
Southwest's ability to ship power here. But the long-term forecast for
California looks normal, which means ``no apocalyptic forecast here and
that's good,'' said Walter Snell, a meteorologist with the National Weather
Service in Monterey.
Such guarded optimism about the state's power supplies comes as electricity
prices have unexpectedly fallen to levels not seen since last spring before
California's energy crisis erupted.
Market experts say prices reflect lower power-plant fuel costs, more imports
and increased conservation, but caution that prices, like the blackout
threat, are likely to again rise this summer.
Words of caution
Arthur O'Donnell, editor of California Energy Markets, said a big reason that
hydroelectric supplies have increased in the Pacific Northwest is that the
snow has melted a month earlier than usual. While that unexpected surge of
power has helped bring down electricity prices across the West, he said, it
could cause those same supplies to peter out earlier than expected this
summer.
Others warn that a sudden rash of power-plant breakdowns or an unexpected
spell of hot weather could easily push California back to the brink of
blackouts. In addition, they fear some generators might withhold power to
drive up prices, although suppliers have denied doing that.
Gov. Davis' spokesman Steve Maviglio said it's wise not to take any
predictions about what might happen this summer too seriously.
``They're all educated guesses,'' Maviglio said. ``Nobody knows for sure.''
As a result, he added, ``We're preparing for the worst and hoping for the
best.''

Contact Steve Johnson at sjohnson@sjmercury.com or (408) 920-5043.

Published Thursday, June 7, 2001
Four-day week for city halls?
POWER CRISIS
Antioch and Vallejo are considering Fridays off to cut power costs
By John Simerman
TIMES STAFF WRITER
Antioch and Vallejo are among several California cities looking to shed
energy use by cutting back on the number of days that city hall stays open.
Local agencies have started to feel the pinch of higher electricity bills,
and some are beginning to exhaust their efforts to squeeze out savings from
conservation.
Antioch officials soon will consider a move to close City Hall every other
Friday, but will keep the doors open longer on other days.
"Once you put something like that in place, I think we'd look at that as
being permanent," said Ron Ward, the city's community development director.
"It provides a little more flexibility for the commute public and it provides
a benefit for employees."
The city has budgeted a 46 percent increase in electricity and natural gas
costs for the fiscal year beginning July 1. It is not yet clear how much the
extra day of darkness would save.
In Vallejo, the City Council next week will consider starting a four-month
pilot program for a four-day work week at City Hall, with extended hours on
the other four days. The city figures it can save 28 percent off its energy
bill, and may also realize a $50,000 profit in a program to sell its saved
energy back to the statewide grid.
"It has the potential to become permanent and expand to other buildings. It
also has the potential to go away if it doesn't result in the savings we
expect," said Mary Hill, assistant city manager.
Beginning next week, Las Positas College in Livermore and Chabot College in
Hayward will shut down on Fridays through the end of July. Energy costs for
the Chabot-Las Positas district will run about $800,000 more than budgeted
for this year, said district spokeswoman Jennifer Aries.
Many cities and public agencies have switched to more efficient traffic
signal lights, ratcheted back air conditioners and installed motion sensors
to dim lights when nobody's around. Even with those measures, energy costs
are expected to rise dramatically over last year.
Making matters worse in the Bay Area, a power pool that secured cheap
electricity for 56 public agencies took a bath last month under the weight of
the state's energy debacle, forcing those agencies to seek refuge under
Pacific Gas & Electric's regulated rates. PG&E has told some cities that
their rates could run more than twice as high as they were paying in the
power pool.
Albany, Antioch, Benicia, Berkeley, El Cerrito, Hercules, Moraga, Orinda,
Pinole, Pleasanton, San Pablo, Vallejo and Contra Costa County were among the
agencies in the pool. San Mateo County, which also was in the pool, has
closed one of its main administrative buildings on Fridays to reduce
consumption.
Officials in most East Bay cities, however, said they consider such cutbacks
a last resort. Officials with several cities said they found it would not
save much. In some, police occupy the same building as city hall, making it
impossible to shut off power to the building.
"People get very accustomed to being able to get their building permits and
pay their utility bills on whatever day," said Scott Baker, Pleasanton's
assistant director of public works. He said city officials "casually"
discussed such a move, but decided against it.
In a survey conducted in late May by the League of California Cities, many
city officials reported they were pondering a move to curtail hours, but had
not yet made a final decision. To some, the savings is not enough to justify
a long weekend.
"There's not a whole lot we can save," said Bill Norton, Clayton's interim
city manager. "And you've got citizens who will say, 'You're going down to
four days a week, show us why.'"
Reach John Simerman at 925-943-8072 or jsimerman@cctimes.com.

Published Thursday, June 7, 2001
Labor leaders demand power plant takeovers
POWER CRISIS
They bolster Gov. Gray Davis in Oakland in the first of six rallies planned
around California

By Ethan Rarick
TIMES STAFF WRITER
Stepping up their involvement in California's electricity crisis, the state's
labor leaders literally took to the streets Wednesday in a protest that
hammered President Bush, bolstered Gov. Gray Davis and displayed the unions'
own reinvigorated political muscle.
In the first of six planned protests around the state, the California Labor
Federation held a rally in downtown Oakland and then marched to a nearby
power plant owned by Duke Power, one of the out-of-state power companies
demonized by Davis as greedy marauders pillaging the Golden State.
"We are tired of being gouged by Duke Power and those other power producers,"
said Art Pulaski, executive secretary-treasurer of the labor group. "We're
here to say, 'No, we're not going to take that anymore.'"
In front of the plant at Jack London Square, protesters unveiled a huge
"People's Notice of Eminent Domain" suggesting the state should take over
power plants to solve the crisis.
The demonstrations, which will continue throughout June and July, give the
labor federation a chance to capitalize on its growing role in California
politics. In 1998, unions played a big role in helping to elect Davis, and
last year labor groups were a key element in Democrat Al Gore's bid for the
presidency.
Union officials insisted their new campaign is sparked by concern over union
members' utility bills, but the political implications are clearly near the
surface.
"If we don't speak up, big corporations and the Bush administration will
resolve this crisis on the backs of working families," Pulaski said in a
written statement issued before the protest. "We lobbied and held press
conferences in Sacramento this spring. Now it's time to take the action to
the streets."
The Davis and Bush administrations have traded potshots over the energy
crisis, with the governor attacking the president for doing too little to
limit wholesale prices, and the president and his aides saying California has
failed to focus on energy production.
The rivalry continued even after the governor and president met to discuss
the issue last week in Los Angeles.
Labor officials echoed Davis in calling on the Federal Energy Regulatory
Commission to cap wholesale prices for natural gas and electricity.
Pulaski said union members are being gouged on their utility bills thanks to
outrageous prices.
"This is not a rally; this is a campaign that involves consumers across the
state," Pulaski said. "We're building momentum from San Francisco to San
Diego to give consumers an opportunity to speak up."
But labor leaders also were more vigorous than Davis in calling for plants to
be seized. During his State of the State address last January, Davis
threatened to take over plants, but since then has held the idea at arm's
length.
Unions often have differed with Davis on other minor points, despite their
general support for the governor. Although Davis signed a bill restoring
California's requirement for overtime pay after eight hours of work in a day,
he also vetoed union-backed bills increasing workers' compensation and
unemployment insurance benefits.
Tom Williams, a spokesman for Duke Energy, the North Carolina-based company
that owns the plant where Wednesday's protest occurred, said the
demonstration would do nothing to help solve the crisis.
"All of this discussion doesn't generate a single kilowatt of electricity,"
Williams said. "I think it's unfortunate."
Williams also noted that all four of Duke's California plants are unionized,
including the one where the protest occurred.

Published Thursday, June 7, 2001
Senate shift puts pressure on FERC
POWER CRISIS
New energy committee chairman warns regulators to rein in energy costs or
face new legislative action
By Richard Simon
LOS ANGELES TIMES
WASHINGTON -- The new Democratic chairman of the Senate Energy Committee
bluntly warned federal regulators Wednesday to act more aggressively to rein
in electricity costs in coming weeks or prepare for Congress to intervene.
As Sen. Jeff Bingaman, D-N.M., turned up the political pressure on the
Federal Energy Regulatory Commission, House GOP leaders scuttled an emergency
bill designed to help power-short California through a difficult summer. The
measure became bogged down in partisan wrangling over price controls.
Bingaman's message was a sign of the sudden shift in energy politics in
Washington after Vermont Sen. James M. Jeffords' switch from Republican to
independent and the Democrats' taking control of the Senate.
In his first day as chairman of the energy panel, Bingaman urged the Bush
administration to "step up to its responsibility" to ensure that wholesale
power rates charged in California are just and reasonable.
New Senate Majority Leader Tom Daschle, D-S.D., expressed similar sentiment
in a letter to Gov. Gray Davis.
"Unless FERC takes action," Daschle wrote, "I believe that Congress will have
to consider legislation to address the issue."
Bingaman is co-sponsor of a bill introduced by Sens. Dianne Feinstein,
D-Calif., and Gordon Smith, R-Ore., that would direct FERC to limit prices
while ensuring that power suppliers recover their costs and still make a
reasonable profit. The Bush administration has opposed price controls,
contending they would discourage power plant construction.
The Feinstein bill appeared unlikely to come up for a vote in the energy
committee under the former chairman, Sen. Frank Murkowski, R-Alaska.
Feinstein said she hopes that if FERC doesn't act within a few weeks, the
committee will take up her bill. "We intend to keep the pressure up," she
said.
Even if such a measure were to clear the Senate, it would face stiff
opposition in the GOP-controlled House of Representatives and probably a
presidential veto. But with their newfound power, the Democrats have the
ability to increase political and public pressure on FERC, an independent
body.
In a breakfast meeting with reporters, Bingaman expressed hope that two new
FERC commissioners would act more aggressively in response to electricity
prices, which have bankrupted California's biggest private utility, Pacific
Gas & Electric, and cost the state billions of dollars.
But he noted that there are limits to what Congress can do. "Once a law is on
the books, and a federal agency is not enforcing it, then usually the remedy
is in the courts," he said.
FERC officials said they did not want to get into a war of words with
Bingaman and would let the agency's record speak for itself. "This agency is
continuing to work extremely hard on the issues facing the country in regard
to energy," said Walter Ferguson, a top staffer for FERC Chairman Curt
Hebert.
In the House, GOP leaders declared dead a bill that would have provided some
short-term help to California, such as federal aid to ease a notorious
bottleneck in the state's power grid and authority for the governor to ease
emission rules to boost power supplies during an emergency.
Democrats suggested that the legislation was killed to save California
Republicans from a politically difficult vote on price controls. Republicans
contended that Democratic leaders were unwilling to compromise.
Rep. Joe Barton, R-Texas, the bill's author, said the impasse made it
unlikely that the legislation could pass Congress and clear the president's
desk in time to help California this summer.
But some Republican leaders who have resisted price controls appeared to be
softening their position, so long as it's called something else.
Rep. W.J. "Billy" Tauzin, R-La., chairman of the House Energy and Commerce
Committee, said he was drafting a letter urging FERC to expand its "price
mitigation" order that limits the price that power generators can charge.
The order now applies only when the state's power supplies slip low enough to
trigger an energy emergency.

A power-bill surge
For consumers who use more than average, higher rates to show up on this
month's statements.
June 7, 2001
By ANNE C. MULKERN
The Orange County Register
After a year of hearing about the state's electricity crisis, the bulk of
Orange County consumers now start feeling more of the financial costs.
Power bills with new, higher rates will start arriving Friday for customers
of Southern California Edison Co., which serves most of Orange County.
The average consumer will pay 37 percent more, although customers who use the
lowest amounts of power escape the rate increase entirely.
Approved by state regulators in May, higher rates are intended to raise $5
billion to repay the state for power purchases.
Because cash-strapped Edison is unable to purchase power, the state's
Department of Water Resources now buys a portion of the power needed by
Edison customers.
The rate hike, however, does not fully cover the wholesale cost of that
power, and there is no guarantee there will not be future increases.
"I don't know what the future holds for ratepayers," said Steve Maviglio,
Gov. Gray Davis' spokesman.
"Our goal is to avoid electric-rate shock to business and ratepayers.''
The hike comes on top of a 9 percent increase approved in January.
The higher rates also will cover current and future electricity costs.
Utilities have run up billions in debt paying for power over the past year.
That debt will be reimbursed through bonds, which will be sold and then paid
back through a surcharge on electric bills.
The bills also wraps in Davis' olive branch to consumers: a 20 percent rebate
for those who can cut their power consumption by 20 percent from last year's
levels. Those who can't cut usage that much won't see any rebate.
The rate hike also encourages conservation by targeting consumers who use the
most power. Those consuming more than 300 percent of their baseline - an
amount considered necessary for essential uses - will pay the most for that
extra power.
The highest rate of the five-tier plan, including the cost of generating and
delivering the power -- is more than twice as much as the lowest rate.
Customers with low incomes, those who use medical equipment and those who use
less than 130 percent of their baseline amount, will not pay higher rates.
Edison said about half its residential customers will not see any increase.
Orange resident Conrad Moreno, however, said he doesn't think he can shrink
his power usage low enough to avoid the rate hike.
Moreno, 55, used more than twice his baseline amount last summer. He's cut
back on air conditioning, except on the hottest days, bought a more-efficient
refrigerator and turns off lights.
But he thinks he'll still face higher bills. He paid about $145 last August,
and thinks this year's peak bills will be more than $200.
"I don't see how anybody -- unless they never use air conditioning at all --
can stay under baseline,'' Moreno said.
"The only way you can keep it down that far is to not use (air conditioning)
at all.''
The rate increase does not affect San Diego Gas & Electric Co. customers in
south Orange County.
That utility has applied for a similar increase, which regulators will
consider June 28.

Energy notebook
Many experts see light at the end of the crisis sooner than expected
June 7, 2001
The Orange County Register
San Francisco California's power crisis, which has led to repeated statewide
blackouts and the bankruptcy of the state's largest utility, may end sooner
than expected, some observers are saying.
Gov. Gray Davis has predicted that the problems will ease by mid-2003.
Dropping wholesale power prices and new plants coming on line this summer are
leading some to predict an earlier end to the crisis.
"We're going to be surprised to see the results of the market starting to
correct itself," James Macias, an executive director with California
power-plant owner Calpine Corp., said at a briefing in New York. "I'm
optimistic things are improving, and it won't be as bad as people thought."
Calpine's 540-megawatt South Point Energy Center in Mohave County, Ariz.,
opened last week. Two new plants in California that can generate a combined
1,080 megawatts, or enough power to light 810,000 typical California homes,
will open within six weeks, company spokeswoman Katherine Potter said.
California electricity prices plunged to a nine-month low Wednesday as
several power plants returned to service after spring repairs, while milder
weather reduced air-conditioning demand.
Regulators may put off decision on exemption for oil refineries
Los Angeles California utility regulators likely won't decide until August
whether to exempt refiners from rolling blackouts this summer, a spokesman
for the California Public Utilities Commission said Wednesday.
That delay could lead to spiking prices for gasoline and other fuels, as at
least two major California refiners have threatened to cut production if the
exemptions aren't granted.
"The applications will be reviewed, and a decision will likely be made in
August," said PUC spokesman Armando Rendon.
Enron chairman says company would deal on state settlement
Houston Enron Corp. Chairman Kenneth Lay said the world's largest energy
trader would accept less than 100 percent of the money it's owed for power
sold to California if it could reach a settlement with the state.
Lay, who spoke on PBS's "Frontline" television program, refused to say how
much of a "haircut" the company would accept.
In other news:
California utilities would have to pay some alternative-energy producers 15
percent of back debts under a plan by state energy regulators to reduce the
likelihood of power shortages.
The proposal, which the California Public Utilities Commission plans to vote
on today, would permit payments to individual alternative-power generators
that show they need the money to keep making electricity.
House Republicans declared dead Wednesday a proposed bill to help
electricity-starved California avoid summer power outages, after Democrats
refused to drop demands for wholesale price caps opposed by President George
W. Bush.
Edison International's Southern California Edison asked a state judge to take
control of more than 30 lawsuits filed in different courts by small
generators seeking past-due payments from the state's No. 2 utility. Southern
California Edison wants one judge to hear all the cases to eliminate the
potential for conflicting verdicts from different courts.
The Assembly, by a 42-7 vote, approves a resolution asking the Federal Energy
Regulatory Commission to "impose interim price caps until the California
power market has stabilized."

Market spotlight: PG&E woes push down shares of power generators
Investors fear the companies won't be paid, and energy prices are falling.
June 7, 2001
Bloomberg News
Shares of Calpine Corp., Reliant Energy Inc. and other U.S. power generators
have fallen as much as 21 percent since late May because investors are more
worried that the companies won't be paid as part of Pacific Gas & Electric's
bankruptcy filing, executives and analysts said.
Falling spot and forward electricity prices in California and elsewhere also
have hurt shares, analysts said.
Shares of Calpine have fallen 21 percent since May 21. Shares of Reliant have
fallen 13 percent since May 24. NRG Energy has fallen 13 percent since May
24.
"Investors are concerned about the PG&E bankruptcy proceeding," Calpine
spokesman Richard Barraza said in an interview in New York. PG&E Corp.'s
utility, California's biggest, filed for Chapter 11 bankruptcy protection in
early April with almost $9 billion in losses from buying electricity at
soaring prices that couldn't be passed on to customers.
Falling power prices also contributed to the share-price decline, Commerzbank
Securities analyst Andre Meade said. Electricity in the California-Oregon
border region for day-ahead delivery fell Wednesday to the lowest level in 11
months, dropping 12 percent to $60 a megawatt-hour, according to Bloomberg
Energy Service statistics. A megawatt hour can light 750 California homes for
an hour.
"We don't have any summer weather to speak of, and as a result, the forward
price for electricity is declining," John Hancock Patriot Group fund manager
Gregory Phelps said.
The price on the California-Oregon border for July and August delivery has
fallen 56 percent to $222.50 a megawatt-hour from a high this year of $505 on
April 1, Bloomberg statistics said.
The price in New York for July and August delivery has fallen 22 percent to
$58.25 a megawatt-hour from a high this year of $75 on April 16.
Shares of AES Corp., the biggest U.S. power-plant developer, have fallen 11
percent since May 23. They fell 7 cents Wednesday to $42.47.
AES said Tuesday that the Justice Department is investigating allegations it
agreed with the Williams Cos. to limit expansion of electric generators in
California near AES's own electric plants.
Williams fell $1.20, to $37, Wednesday. The stock has fallen 12 percent since
May 21. Calpine rose 46 cents, to $43.76. Reliant fell $1.29, to $41.46. NRG
fell 55 cents, to $26.28.

California ISO's independence at issue
Federal regulators could object to the state acting as a 'market
participant.'
June 7, 2001
By REBECCA SMITH
The Wall Street Journal
As California politicians wade deeper into the energy crisis, the state's
electric-grid operator appears headed toward a showdown with federal energy
regulators over whether its board is independent enough.
The California Independent System Operator bowed to pressure from the Federal
Energy Regulatory Commission and submitted its qualifications to continue as
a federally sanctioned grid operator.
But the tardy filing is almost certain to be challenged by federal regulators
and market participants because the ISO's governance structure has strayed
from a "bedrock requirement" that it be "independent of control by any market
participant."
The market participant casting the long shadow is the state of California.
Since January, when the state of California began buying huge sums of
electricity on behalf of its nearly broke utilities, the ISO has been under
pressure to give state officials preferential treatment and unique access to
market-sensitive information.
Its chief operations officer, paid $245,000 a year according to the most
recent IRS filing, is on indefinite loan to the governor's office where he is
working as an energy adviser.
This politicization of the ISO is significant because the organization's
purpose is to run a market for power needed to keep the electric system in
balance and to give buyers and sellers impartial access to the power lines on
which they depend to move electricity. Unlike other commodities, electricity
can't be stored. Transactions, therefore, depend completely on instantaneous
access to the electric superhighway of high-voltage lines. The FERC worries
that a loss of political independence by the ISO will further degrade the
state's already dysfunctional energy market.
The FERC hasn't formally accused the ISO of acting improperly, but it is
clear that a wall between the state and the ISO that once was solid has
become permeable. Last month, the ISO notified the FERC that the state of
California had asserted "it must have access to the ISO control room floor"
and "nonpublic information" as a "necessary condition" of continuing to buy
power, even though such preferential access violates ISO rules. But without
the state to back power purchases - it has spent nearly $8 billion on
electricity since January - the ISO's market would collapse and blackouts and
chaos likely would ensue.
The governance issue, which may appear esoteric, actually cuts to the heart
of the power crisis in California. State officials feel they have ceded too
much control to the FERC, which they accuse of shirking its duty to protect
consumers. As a consequence, the state has forced its way into the inner
workings of the formerly arcane ISO, a public-benefit corporation formed
three years ago amid California's push to deregulate its electricity market.
In January, the Legislature authorized the governor to eject a FERC-approved
board of directors and hand-pick his own five-member ISO board. The state
attorney general ordered old board members to resign or face personal fines
of $5,000. Currently, one ISO board member is a former member of the
governor's staff, while another, on the governor's behalf, negotiated the
proposed purchase of utility transmission assets by the state, all the while
serving as chairman of the supposedly independent board.
The ISO's chairman says changes in the board structure have made the ISO more
answerable to the citizenry and "efficient." Michael Kahn, who is a San
Francisco attorney, added that the governance structure had to change to
reflect the fact that "we're in a state of emergency."
In its filing Friday, the ISO took the position that the tighter relationship
between the ISO's board and the state doesn't violate the FERC's requirement
that ISO boards be free of control by market participants. Even though the
state has been "required to provide financial support," the ISO asserts, this
"participation does not make ... the State a market participant." Many market
watchers scoff at that contention.
"Inevitably, this will lead to a showdown," said N. Beth Emery, former
general counsel of the ISO and now an energy attorney for Ballard, Spahr,
Andrews & Ingersoll in Washington, D.C. "Clearly, the ISO is in violation of
the independence requirement."
But the FERC doesn't have many tools for enforcing its vision of autonomy.
That may explain why it has failed to intervene. It can order the ISO to make
board changes, for instance. But if it refuses, there may not be much the
FERC can do except threaten to rescind the ISO's operating tariffs. That, of
course, is the opposite of what the FERC wants to do, which is encourage
creation of multistate grid organizations free of any political favoritism.
But California's angry isolationism appears to be growing. Gov. Gray Davis
said the ISO's filing ensured the state will "maintain control of our own
energy destiny and not be subject to the whims of federal regulators or the
interests of other states."

Thursday, June 7, 2001

We still don't get it
A history of price controls: They didn't work for Sumeria, they won't work
for California
June 3, 2001
By John Seiler
The Orange County Register
In the midst of California's electricity crisis, Gov. Gray Davis and other
Democrats keep calling for price controls on the wholesale price California
is charged for power.
At his meeting Tuesday with President George W. Bush, Gov. Davis insisted on
"some form of price relief" from the Federal Energy Regulatory Commission and
promised a lawsuit against the FERC; the president insisted that price
controls don't work.
Also on Tuesday, the 9th Circuit Court of Appeals turned down a suit by
California legislators, led by Senate President Pro Tem John Burton, to get
the Federal Energy Regulatory Commission to order price controls.
In Congress, Sens. Dianne Feinstein and Barbara Boxer are pushing legislation
to impose price controls.
But this is folly. Throughout all human history, wage and price controls have
been tried and failed in every case.
The facts are in Forty Centuries of Wage and Price Controls: How Not to Fight
Inflation, by Robert Schuettinger and Eamonn Butler, published in 1979 by the
Heritage Foundation:
lSumeria. Price controls and other government actions destroyed the ancient
kingdom's economy. But in about 2350 B.C. the new king, Urakagina, ended "the
burdens of excessive government regulations over the economy, including
controls on wages and prices." The kingdom recovered. The king's documents
also use the word amargi, apparently the first recorded use of the word
"freedom."
lBabylon. The Code of Hammurabi is famous as the "first of the great written
law codes," the authors note, but it's also a long list of price and wage
controls. This produced "a decline in trade in the reign of Hammurabi and his
successors." The authors quote another historian, W.F. Leemans, who wrote,
"Prominent and wealthy tamkaru [merchants] were no longer found in
Hammurabi's reign."
In the same way, California's price control threats have retarded the
construction of new power plants here. "If you are a generator, you would be
inclined to look in the 49 other states to invest," California Energy
Commission member Robert Laurie said May 22.
All those Texas energy tamkaru are reluctant to get near our state.
lEgypt. Price controls helped destroy the ancient Egyptian dynasties and
their economy collapsed in the third century B.C.
lChina. Price controls were common throughout ancient Chinese history. The
policy was such a failure that, according to historian Huan-chang Chen,
"since the Ch'in dynasty (221-206 B.C.), the government of modern China has
not controlled the economic life of the people as did the government of
ancient China." (This history was written in 1911, before the communist
controls beginning in 1949 or the partial restoration of capitalism in 1979.)
lGreece. When grain prices rose too high in ancient Athens, the government
appointed "sitonai, corn-buyers, who ... introduced price reductions and
rationing," according to historian M.I. Finley. Violators could be put to
death.
In a similar fashion, California Attorney General Bill Lockyer said on May
22, "I would love to personally escort [Enron Corp. Chairman Kenneth] Lay to
an 8-by-10 cell that he could share with a tattooed dude who says, 'Hi my
name is Spike, honey'."
The Greeks also executed inspectors who failed to control prices, something
that might give pause to California officials plumping for price controls.
"Despite the high mortality rates for merchants and bureaucrats alike, the
price of grain continued to rise when supplies were short and continued to
fall when supply was plentiful," the Heritage authors note.
lRome. The ancient Latins imposed their worst price controls during the
tyrannical reign of the emperor Diocletian (284-305 A.D.). According to
historian M. Rostovtzeff, the controls brought "great harm" and "terrible
bloodshed, without bringing any relief. Diocletian shared the pernicious
belief of the ancient world in the omnipotence of the state, a belief which
many modern theorists continue to share with him and with it."
Diocletian was forced to abdicate and the controls were lightened, but 60
years later Julian the Apostate again imposed controls (361-63 A.D.), which
proved a failure and helped bring about the decline and fall of the Roman
empire.
lMedieval times. Charlemagne imposed crop price controls in 806. The controls
failed.
In 1330, the government of England fixed wine prices. But prices kept rising.
After the Black Death in 1348 killed one-third of Europe's population,
workers were in demand. Governments across Europe imposed wage laws, which
led to laborers withholding their work and to Wat Tyler's rebellion in
England in 1381.
lColonial America. In 1630 in Massachusetts, the General Court fixed wages
and prices, imposing a fine of 10 shillings on offenders. The controls
"lasted about six months and were repealed," the Heritage authors note. The
government then tried to regulate trade with Indians; that didn't work,
either.
In Connecticut, "The New Haven Colony was made notorious by its minute
inquisition into the details of buying and selling, of eating and dressing
and of domestic difficulties," noted a history compiled by the Connecticut
Bureau of Labor Statistics in 1887. "It utterly failed. The people were wise
enough to see that it was a failure."
lThe American Revolution. In 1777, Pennsylvania froze commodities used by
George Washington's continental army to try to help the troops as well as the
local population. "The prices of uncontrolled goods, mostly imported, rose to
record heights," the Heritage book says. "Most farmers kept back their
produce, refusing to sell at what they regarded as an unfair price. Some who
had large families to take care of even secretly sold their food to the
British who paid in gold."
The result was that Washington's continentals "nearly starved to death" at
Valley Forge. The Continental Congress then adopted a resolution, which read,
"[R]esolved, that it will be recommended to the several states to repeal or
suspend all laws or resolutions within the said states respectively limiting,
regulating or restraining the Price of any Article, Manufacture or Commodity."
When the controls were removed, prices soared to "80 times their pre-war
level for a short period before settling down to a level just greater than
the pre-war average, where they remained for the next decade," the Heritage
authors write.
Washington's army then could buy provisions and won the War of Independence.
lThe French Revolution. The first Law of the Maximum "provided that the price
of grain and flour in each district of France should be the average of local
market prices which were in effect from January to May 1793." This caused
shortages and popular uprisings so that "by August of that year the May law
was generally regarded as a dead letter."
lWorld War I. The war brought "the most widespread and extensive system of
economic controls in history." In England after the war, The Economist noted
in 1919, "[T]he country now can view the results. On every side failure is
visible and palpable. No single branch of trade which the government has
touched shows a success."
lNazi Germany. "Nazi price control was more rigorous and elaborate than
anything seen earlier in Germany or any other nation," the Heritage authors
write. However, "even this rigid structure could not prevent all of the
problems associated with wage and price controls that basic economic theory
would predict." The result was a huge black market and shortages, which
fortunately damaged Nazi military production. While awaiting trial at
Nuremberg, Hermann Goering admitted "trying to control people's wages and
prices ... . I tried it and failed."
lThe Soviet Union. After the Russian Revolution in 1917, the Soviet Union
imposed "total wage and price control," the book notes. The result was
endemic shortages, malnutrition that in the early years led to famines that
killed millions, a vast black market and the eventual implosion of the Soviet
economy.
If Nazis and Soviets couldn't maintain effective price controls, even with
the threat of torture, concentration camps and execution, what makes modern
governments think they can succeed?
lAmerica in World War II. Price controls were delayed two years apparently
because the Roosevelt administration saw they didn't work in Germany and
Italy. When the controls were imposed, noted economist Milton Friedman, "Even
60,000 bureaucrats backed by 300,000 volunteers plus widespread patriotism
were unable during World War II to cope with the ingenuity of millions of
people finding ways to get around price and wage controls that conflicted
with their individual sense of justice."
A personal account comes from a Pennsylvania farmer, Marshall L. Jones, in
his book Recollections. "There was a normal potato crop in 1943 but prices
were rising due to war-time demand," he writes. The government then put a
ceiling on prices. In the past, some farmers stored supplies to get a higher
price in the spring. "As a result, all potato growers, including myself, sold
their potatoes during the fall and early winter as soon as they reached the
ceiling price. In the spring of 1944 all potato supplies (except seed) were
gone ... . It seems that sometimes when governmental agencies interfere with
normal marketing procedures the result is just the opposite of that desired."
lThe 1970s Malaise. In 1971, President Nixon imposed wage and price controls
to deal with inflation, ending most of them in 1974. "During this period, the
Wholesale Price Index (WPI), nevertheless, increased at an annual rate of 12
percent and the Consumer Price Index (CPI) increased at an annual rate of 7.2
percent," the Heritage book reports. "Just prior to the freeze, the rate of
inflation was running about 4.5 percent per annum."
The law of supply and demand is as inflexible as the law of gravity. Trying
to short-circuit it with wage and price controls is pure folly. It hasn't
worked across 4,000 years and it won't work if imposed in California.
Indeed, much of our problem stems from controls that remain on retail
electricity prices. Imposing more controls on wholesale prices would add a
new chapter to the four millennia of price-control failure.
John Seiler is an Orange County Register editorial writer.

Exponent Advises CPUC on Rolling Blackout Exemptions

June 7, 2001

MENLO PARK, Calif., June 5 /PRNewswire/ via NewsEdge Corporation -
Exponent, Inc., (Nasdaq: EXPO) announced today that it is assisting the
California Public Utilities Commission (CPUC) evaluate applications from
customers of the three investor-owned utilities in California for exemption
from this summer's rotating electrical outages ("rolling blackouts").
Exponent is providing consulting services to assist the Commission in
assessing the potential impact of rolling blackouts on public health and
safety at various facilities. Economic impact will not be considered. The
Commission has already exempted select customers that provide public health
and safety services (e.g., police, fire, hospitals, air traffic control, and
communication utilities) from rolling blackouts since the early 1980s.
"The multidisciplinary nature of Exponent's organization allows us to draw
upon the expertise of leaders from a variety of technical areas which gives
us the capability to undertake an assignment of this complexity," stated
Exponent CEO Michael Gaulke.
The CPUC has concluded that at least 40% of the summer peak electricity load
must be available for rolling blackouts. Currently, the three largest
utilities have approximately 50% of their summer peak load available for use
during rotating outages. Therefore less than 10% of the summer peak load is
available for additional exemptions.
In order to determine which businesses will make up this 10%, Exponent has
assisted the CPUC in the selection of key parameters and indices to be used
in the risk assessment. Over the past few weeks, Exponent has developed an
Internet-based questionnaire for data collection from exemption candidates.
The CPUC has approved and finalized this questionnaire and, with the
assistance of the three investor-owned utilities, has notified customers of
the application process. Currently various California business customers are
in the process of submitting exemption applications on the Exponent managed
web site -- www.rotating-outages.com. About 10,000 exemption applications
have been submitted to date. In early August, the CPUC plans to make a final
decision regarding additional exemptions.
Exponent, Inc., is a leading engineering and scientific consulting firm with
expertise in over 70 technical disciplines. Exponent's multidisciplinary
organization of engineers, scientists, physicians and business consultants,
addresses complicated issues facing industry and government today. The firm's
consultants provide product design analysis, development and testing; analyze
failures and accidents to determine their cause and prevention; and evaluate
environmental and human health concerns to find cost-effective solutions.
Exponent is certified to ISO 9001 and is authorized by the General Services
Administration (GSA) to provide professional engineering services. Exponent
may be reached at 888-656-EXPO, info@exponent.com, or www.exponent.com.
MAKE YOUR OPINION COUNT - Click Here
http://tbutton.prnewswire.com/prn/11690X96318475
SOURCE Exponent, Inc.
CONTACT: Dr. Angela Meyer of Exponent, Inc., 888-656-EXPO, or
ameyer@exponent.com
Web site: http://www.exponent.com (EXPO)

Calif. Targeted in Antitrust Probe

June 7, 2001

By MICHAEL LIEDTKE
AP Business Writer
SAN FRANCISCO (AP) via NewsEdge Corporation -
Federal antitrust regulators have joined the crowd of government authorities
looking for possible abuses in California's high-priced wholesale electricity
market.
The U.S. Justice Department last month opened an antitrust probe into a power
sales partnership between Arlington, Va.-based AES Corp. and Tulsa,
Okla.-based Williams Energy. AES disclosed the investigation in a Securities
and Exchange Commission filing made earlier this week.
A Justice Department spokeswoman declined to say Wednesday whether the agency
is investigating other power wholesalers selling electricity in California.
The inquiry is examining whether the alliance between AES and Williams is
discouraging the expansion at three Southern California plants that generate
about 4,000 megawatts of electricity. AES bought the plants from Southern
California Edison in 1998, but Williams sells the power under an exclusive
marketing agreement.
The Justice Department's probe is just one of many investigations unfolding
in California. The state Attorney General, California Public Utilities
Commission, California Electricity Oversight Board and Federal Regulatory
Energy Commission also are examining whether wholesalers manipulated power
prices in California, where this year's total electricity bill is expected to
be seven to 10 times higher than two years ago.
Williams last month agreed to refund $8 million in electricity sales after
FERC accused officials of the temporary closure of AES plants to drive up
power prices in California.
AES denies any wrongdoing, but is cooperating with the Justice Department
investigation, said spokesman Aaron Thomas.
___= ?On The Net: ?http://www.aesc.com ?http://www.williams.com ????????More Utilities, Industries Must Reduce Power Purchases From BPA To Hold Rates ?Down ????????June 7, 2001 ??????PORTLAND, Ore., June 6 /PRNewswire/ via NewsEdge Corporation - ?The Pacific Northwest has reached the halfway point in its effort to hold the ?Bonneville Power Administration's Oct. 1 rate increase below 100 percent, BPA ?acting Administrator Steve Wright said Wednesday. ?"If we stopped where we are today with about 1,200 megawatts of load ?reductions, the rate increase would be more than 150 percent in year one," ?said Wright. "On the other hand, if we push ahead and get another 1,200 ?megawatts, we can reduce the rate hike below 75 percent. We need those ?utilities and industries that have not yet taken action to step up to the ?plate." ?Wright said BPA wholesale customers have 16 days left to make commitments to ?reduce their purchases from BPA. The goal is for all customer groups to ?reduce their overall purchases by 2,400 megawatts. To date, the aluminum ?industry has been the biggest contributor to the load reduction effort, ?having met 75 percent of its share of the load reduction target. ?Public and private utilities so far have contributed 11 percent and 25 ?percent, respectively, of their share. In addition, the private utilities are ?also negotiating long-term agreements to reduce their purchases from BPA. ?Wright noted that some customers can cancel their load reduction commitments ?if enough other customers do not sign up. That increases the urgency for the ?region to achieve the additional commitments. ?"We could actually lose some of the progress we have made on load and rate ?reduction unless the rest of our customers make load reduction commitments in ?the next two weeks," Wright said. ?BPA is scheduled to issue its final decision June 20. That rate structure ?will be submitted to the Federal Energy Regulatory Commission for approval. ?The rate could include adjustments every six months based on market ?conditions. The driving factor is the amount of power BPA must purchase in ?the market to meet the demands of its customers. Market prices have been at ?all-time highs but recently have been declining. ?BPA supplies about 46 percent of the region's power. BPA needs about 3,700 ?average megawatts of additional supply to meet all of its customers' loads in ?the six months starting Oct. 1. So far, the agency has purchased 1,300 ?megawatts, and utilities and industries have reduced their demand on BPA by ?1,200 megawatts. That leaves 1,200 to go. ?"The more BPA needs to buy, the higher the market price will be because the ?sellers respond to higher demand by raising prices," Wright explained. "On ?the other hand, less demand will ultimately cause prices to fall. Absent ?unforeseen factors, market prices could even decline in the months ahead if ?the region avoids purchases." ?Wright emphasized that a rate increase of 150 percent or more would deal a ?harsh blow to the Northwest's economy. ?"The wholesale customers of BPA can and should do their part by reducing ?their loads. We have two weeks left to get the job done, and I remain ?confident that the region can reassert control of its energy destiny," Wright ?said. ?MAKE YOUR OPINION COUNT - Click Here ?http://tbutton.prnewswire.com/prn/11690X36565175 ?SOURCE Bonneville Power Administration ?CONTACT: Ed Mosey or Mike Hansen of Bonneville Power Administration, ?503-230-5131 ?Web site: http://www.bpa.gov ?????????SCE Customers to See Major Changes to June Bills Adding Group Numbers Will ?Help Consumers Prepare for Rotating Blackouts; Conservation Rebates, ?Discounts Available to Income-Qualified Customers ????????June 7, 2001 ????????Adding Group Numbers Will Help Consumers Prepare for Rotating Blackouts; ?Conservation Rebates, Discounts Available to Income-Qualified Customers ?ROSEMEAD, Calif., June 6 /PRNewswire/ -- Beginning this week, Southern ?California Edison (SCE) customers will see several major changes to their ?utility bills, as directed by the California Public Utilities Commission ?(CPUC) and the governor's office. ?Most notably, SCE bills now contain the "Rotating Outage Group" number ?assigned to all customers, which will help them better prepare for outages ?during statewide power emergencies. Another addition to the bill is the ?CPUC's newly adopted "tiered-rate" billing structure. And later this month, ?when bills are prepared reflecting June power use, a new line item called ?"California 20% Rebate" will be added for customers who meet the summer ?conservation requirements of the state's new "20/20" bill rebate program. ?"Whenever major changes are made to the bill, we get a considerable number of ?customer inquiries," said Pam Bass, SCE's senior vice president for customer ?service. "That's why our customer care representatives are standing ready to ?help consumers understand the new information and how they can use it as an ?effective tool to manage their energy costs and to cope through the ?inconveniences caused by rotating outages." ?Rotating Outage Group Numbers ?Customers can now find an alphanumeric Rotating Outage Group number on the ?upper left portion of the bill, next to the service account number. This ?number represents a group of circuits -- the smallest units of the ?distribution grid -- that can be turned on and off to manage electrical load ?when SCE is ordered to do so by the California Independent System Operator ?(Cal-ISO) during critical power emergencies. ?By knowing the rotating outage group to which their homes and businesses are ?assigned, customers will be able to monitor whether they will likely be ?affected when rotating blackouts are in effect. ?For example, if the news media were to report that rotating outage groups ?A035 through A045 were likely to be affected in the next round of blackouts, ?customers in group A038 would know that they may be affected and could take ?steps to prepare. With some exceptions, SCE generally interrupts customer ?groups in numerical order, based on the amount of electrical load reduction ?required by Cal-ISO when power reserves are critically low throughout the ?state. ?Group numbers may change, without advance notice, for operational reasons and ?as the CPUC revises its policy regarding customers exempted from blackouts. ?SCE will notify customers of such changes as quickly as practical. ?Customers are advised to stay informed of power forecasts every day through ?the news media and a special online service offered by SCE. A new "pop-up" ?window automatically greets visitors who click onto SCE's Web site ?(www.sce.com), which provides a wide range of rotating blackout information. ?When outages are in effect, the site will display a chronological listing of ?group numbers and communities that were previously interrupted, those that ?are currently being interrupted and group numbers and communities that are ?likely to be affected next (if blackouts are expected to continue). SCE will ?offer similar information through its toll-free number, (800) 611-1911. ?Before calling, customers should have both their service account and rotating ?outage group numbers available. ?New Tiered-Rate Structure ?The CPUC's newly adopted "tiered-rate" structure now appears on residential ?bills, showing up to five tiers of energy consumption and the escalating ?surcharges applied to each tier. Customers who use more will pay more. ?Those who use 130% or less of their "baseline" allocation (Tiers 1 & 2) are ?exempt from any rate increase, as are those income-qualified customers ?participating in the CARE program. However, consumption above this level will ?be billed at higher tier levels in the form of surcharges authorized by the ?CPUC. Customers whose usage reaches Tier 5, for example, will pay the highest ?surcharge for each kWh exceeding 300% of their baseline allocation. ?The structure was designed to encourage conservation and to recover the cost ?for wholesale electricity purchased for customers by the California ?Department of Water Resources. These charges are being collected by SCE only ?as an agent for CDWR. ?California 20/20 Rebate Program ?Later this month, a new line item, "California 20% Rebate," will appear on ?the bills of those customers who use at least 20% less electricity than for ?the same period last year. A 20% bill credit will be applied to the bills of ?qualifying customers for their usage in June, July, August and September. ?SCE has launched a comprehensive public information effort to help consumers ?understand the new bill changes, ways to conserve energy, and to reinforce ?the importance of preparation and safety during rotating blackouts. The ?program components include bill inserts, radio advertising, public outreach ?and presentations, media briefings and SCE's Web site that addresses all of ?these programs and services. Customers are encouraged to visit www.sce.com ?frequently for updated information and new resources provided by SCE. ?In addition, customers can obtain new rate and bill information by calling ?the company's 24-hour customer number at (800) 655-4555. ?SOURCE Southern California Edison ?CONTACT: Corporate Communications of Southern California Edison, 626-302-2255 ?Web site: http://www.sce.com ?Web site: http://www.edisonnews.com (EIX) ???