Please see the following articles:

Sac Bee, Thurs, 5/17:  "Bush: Plan spells relief on energy "

Sac Bee, Thurs, 5/17:  "FERC nominees open to rate caps "

Sac Bee, Thurs, 5/17:  "Powerful new law for state: The public authority
could seize private plants and market bonds for projects."

Sac Bee, Thurs, 5/17:  "Shareholders of PG&E vent their frustration "

SD Union (AP), Thurs, 5/17:  "Governor signs power authority bill"

SD Union (AP), Wed, 5/16:  "California lawmakers seek Pacific Northwest
energy cartel"

SD Union (AP), Thurs, 5/17: "Bankruptcy judge allows PG&E to pay
property taxes"

LA Times, Thurs, 5/17:  "Calif. Businesses Swallow Rate Hikes Amid
Slowing Economy"

LA Times, Thurs, 5/17:  "Davis Turns Up the Heat on Supplier"

LA Times, Thurs, 5/17:  "FERC Issues Power Ruling"

LA Times, Thurs, 5/17:  "Shareholders Lay Blame on PG&E Managers,Davis"

LA Times, Thurs, 5/17:  "A Swiftian Solution to the Energy Crisis"
(Commentary)

SF Chron (AP), Thurs, 5/17:  "California electric rates jump to second
highest in country"

SF Chron (AP), Thurs, 5/17:  "Bay Area News Roundup
Local news all the time"

SF Chron, Thurs, 5/17:  "California jolted by string of dreary economic news
"

SF Chron, Thurs, 5/17:  "Scheduled blackout plan gaining favor
LIMITING PRICES: 3-state buyers' cartel with Northwest could create leverage"

SF Chron, Thurs, 5/17: "Airport accuses Texas firm of gouging
SFO to build plant with Hetch Hetchy"

SF Chron, Thurs, 5/17:  "Judge orders PG&E to pay overdue taxes to counties
S.F. still must dip into cash reserves for energy bills"

SF Chron, Thurs, 5/17:  "PG&E Corp. accused of gouging in East
Boston company wants federal energy regulators to intervene"

SF Chron, Thurs, 5/17:  "Nuclear, fossil fuels at heart of Bush plan
SWEETENER: $6.3 billion in tax credits for solar and renewable power "

SF Chron, Thurs, 5/17:  "Public power booster gets a top job at S.F. PUC "

SF Chron, Thurs, 5/17:  "Subpoenaed documents withheld
Power companies say no to Lockyer "

SF Chron, Thurs, 5/17:  "Green lobby hopes Bush plan offers them more in
final form"

SF Chron, Thurs, 5/17:  "PG&E's shareholders steadfast
Despite fiscal misery, meeting gives thumbs up to chairman "

Mercury News, Thurs, 5/17:  "Bush's national energy blueprint won't help
California"

Mercury News, Thurs, 5/17:  "Cogeneration will get presidential spotlight"

Mercury News, Thurs, 5/17:  "Conservation lab test begins"    (Editorial)

Mercury News, Thurs, 5/17:  "Backups for energy"

OC Register, Thurs, 5/17:  "2 FERC nominees pledge gas inquiry"

OC Register, Thurs, 5/17:  "Illuminating alternatives"

OC Register, Thurs, 5/17:  "Bush offers varied plan for energy"

OC Register, Thurs, 5/17:  "Energy Notebook:
FERC won't let small generators out of state contracts -- yet"

Individual.com (AP), Thurs, 5/17:  "Calif. Enters Wholesale Business"

Individual.com (Bridgenews), Thurs, 5/17:  "[B] POWER UPDATE/ Bush calls
on FTC to investigate price gouging complaints"

Individual.com (AP), Thurs, 5/17:  "GOP Promises Energy Package Push"

Individual.com (AP), Thurs, 5/17:  "Covanta Energy to Provide California
With 500 Megawatts of New Power"

Energy Insight, Thurs, 5/17:  "Northeast could have overbuilding"

WSJ, Thurs, 5/17:  "Gas Pain: Nation Wants Energy, And Drillers Find it
in People's Back Yards"

NY Times, Thurs, 5/17:  "IN ENERGY PLAN, BUSH URGES NEW DRILLING,
CONSERVATION AND NUCLEAR POWER REVIEW"

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Bush: Plan spells relief on energy
By James Rosen
Bee Washington Bureau
(Published May 17, 2001)
WASHINGTON -- President Bush gave an upbeat preview Wednesday of the energy
plan he will formally unveil today, saying it will give Americans relief from
high gasoline and power prices -- and show the world how the United States
solves tough problems.
Bush gave the plan rave reviews after he and his Cabinet received a briefing
on it from Vice President Dick Cheney and the energy task force he headed
during nearly four months of closed-door meetings.
"My plan helps people in the short term and long term by expediting energy
development," Bush said as he waved a copy of the blue-covered report. "This
isn't just a report that's going to gather dust. This is an action plan
because this is an action administration."
Bush planned to fly to the Midwest this morning and promote the energy plan's
release at an alternative energy plant in St. Paul, Minn., and a meeting of
business leaders in Nevada, Iowa.
"This is an extensive report," Bush told reporters after the Cabinet meeting.
"It provides over 100 proposals to diversify and increase the supply of
energy, innovative proposals to encourage conservation and ways to make sure
that we get energy from producer to consumer."
Bush vehemently denied claims by California Gov. Gray Davis and congressional
Democrats that he has been indifferent to the state's plight as it endured
rolling blackouts and energy price spikes. Bush ticked off steps his
administration has taken to help California, including moves to expedite
permits for new power plants and authorizing rebates to power consumers.
"We're deeply concerned about the state of California, as we are with the
rest of the nation, but we haven't had an energy policy," he said.
"Interestingly enough, this is the first comprehensive energy policy probably
ever -- certainly in a long time."
Bush's robust defense of his reaction to the country's potential energy
crisis reflects how much the issue has heightened the political stakes for
him. Escalating gasoline prices, the California blackouts and a sagging
economy have transformed his effort to forge a national energy plan into an
early test of his leadership.
Rhetorically, Bush and his Democratic adversaries agree the United States
needs a balanced energy policy that combines increased production of oil,
natural gas and other fossil fuels with conservation, development of
alternative energy sources and creation of more efficient automobiles and
appliances.
But Democrats believe that Bush and Cheney are relying too much on energy
production at the expense of environmental protection, while the president
and vice president oppose mainly Democratic calls to tap the Strategic
Petroleum Reserve and impose temporary price controls on energy wholesalers.
Davis on Wednesday again called for price caps.
"What's going on here, pure and simple, is unconscionable price gouging and
market manipulation by the big energy producers and marketers -- most of
them, incidentally, located in Texas," Davis said.
But Bush was unrelenting. "Price controls do not increase supply, nor do they
affect demand," he said.
The eventual verdict on Bush's energy program may play a big role in deciding
which party will control Congress after next year's elections and whether
Bush himself will encounter re-election turbulence in 2004.
Bush has raised the political stakes by urging Congress to pass his $1.35
trillion tax-cut package to help Americans cover their energy costs. That
challenge prompted Democratic Rep. Jay Inslee of Washington state to brand
the tax plan "a money-laundering scheme for Big Oil."
Tom Daschle of South Dakota, Democratic leader of the Senate, criticized Bush
for excluding congressional leaders from the work of the task force. White
House spokesmen say the task force met with 130 representatives from a wide
range of groups -- including oil companies, other energy providers and
environmentalists -- but they have refused to release a list of participants.
As described in broad outline by Bush and Cheney in the days before its
release, the energy plan will emphasize long-term expansion of the country's
power supply over short-term fixes for current shortages.
The plan will recommend that Congress, various government agencies and Bush
use legislation, regulatory reforms and executive orders to spur the
construction of more oil refineries and power plants, and increase production
of nuclear and coal-fired energy.
The Cheney task force, according to briefings for interest groups and
congressional offices, suggests paying for its initiatives through a
combination of tax incentives, direct government funding and market-driven
investments by oil companies and other energy producers.
Democratic lawmakers and allied environmental activists have seized upon the
plan's focus on production -- including oil and gas exploration in Alaska's
Arctic National Wildlife Refuge and other protected areas -- to question
Bush's commitment to conservation and his ties to Big Oil.
Trying to pre-empt the Bush-Cheney plan, Democratic lawmakers released an
energy program of their own Tuesday. In a clear bid to highlight the recent
gasoline price spike, House Minority Leader Dick Gephardt of Missouri and
other Democrats unveiled their package at a gas station in Washington.
The Democratic alternative calls for temporary price controls, a ban on
energy development in natural refuges and tapping the petroleum reserve set
up after the 1970s oil crisis. The proposal would give Americans as much as
$4,000 in tax credits for buying energy-efficient homes and cars, and it
would offer businesses tax incentives to invest in technologies or vehicles
that boost fuel efficiency.

The Bee's James Rosen can be reached at (202) 383-0014 or
jrosen@mcclatchydc.com.

FERC nominees open to rate caps

Bee Washington Bureau
(Published May 17, 2001)
WASHINGTON -- President Bush's two nominees to the Federal Energy Regulatory
Commission said at their Senate confirmation hearing Wednesday that more
needs to be done to remedy California's "dysfunctional" energy market, and
they didn't rule out controls on wholesale rates.
But Patrick Wood III, the chairman of the Texas Public Utility Commission,
and Pennsylvania Utility Commissioner Nora Mead Brownell also said that
re-regulating wholesale prices based on the cost of production is a complex
process that might take too long to be of any help.
"It is no small task," said Wood, who is considered Bush's choice to replace
Curt Hebert Jr. as commission chairman later this year. Hebert is a firm
price control opponent.
Sen. Dianne Feinstein, D-Calif., said their testimony has restored her
optimism that federal regulators may act to stem skyrocketing wholesale rates
that during last week's power shortages hit $1,900 a megawatt-hour.
"I was encouraged," Feinstein said. "The market is broken in California and I
think they understand that. If they know all this and they are pragmatists,
then we have a chance."
The commission is split 2-1 against price controls. If Wood and Brownell
align themselves with the commission's lone price-controls advocate, William
Massey, some form of temporary price re-regulation could pass.
But confirmation hearings are not the typical venue for nominees to part
company with the position of the president selecting them, and Bush and his
administration so far haven't budged in their opposition to price controls.

Powerful new law for state: The public authority could seize private plants
and market bonds for projects.
By Jim Sanders
Bee Capitol Bureau
(Published May 17, 2001)
Arming itself for battle, California took steps Wednesday that could lead to
construction of public power plants, seizure of private ones and creation of
a buyers cartel that would opt for additional blackouts rather than pay
exorbitant prices.
Faced with no control over wholesale prices and no ability to simply stop
buying electricity, supporters said drastic measures may be needed to avoid
the possibility of economic disaster to the state's budget until the market
can stabilize in 18 months to two years.
The Public Power Authority signed into law Wednesday by Gov. Gray Davis could
market up to $5 billion in bonds for new projects. It also would have the
power to operate plants and, if necessary, seize private facilities using
eminent domain or emergency powers.
"California is in a war with energy companies who will use any tactic
possible to manipulate the market and drive up prices," Davis said. "To me,
there is strong evidence that people are manipulating the market and
withholding power to drive up prices."
But critics say pouring billions of public money into new power plants or
threatening electricity generators will do little to increase energy supplies
this summer and could prompt private companies not to invest in badly needed
plants far into the future.
"Every dollar we spend on public energy projects is a dollar not spent on
fixing schools and fixing traffic congestion," said Assemblyman Tony
Strickland, R-Thousand Oaks. "We need to get the state out of the power
business."
Threats and accusations are getting increasingly heated as the state, after
spending more than $7 billion on electricity, continues to struggle with
prospects of rising costs and increasing power blackouts this summer.
"Calling people pirates and gougers is a nice way of spinning the problem
away from Sacramento, but we have to work our way through this (energy
crisis), and calling people names doesn't help," said Jan Smutny-Jones,
executive director of Independent Energy Producers, an association of
wholesale generators.
The newly approved power authority, expected to be created in about three
months, will be governed by a five-member board comprising state Treasurer
Phil Angelides and four gubernatorial appointees.
Legislation to create the power authority was pushed by Senate President Pro
Tem John Burton, D-San Francisco, and sponsored by Angelides.
Building public power plants will help California "regain control of its own
energy destiny," Angelides said.
Davis also promised Wednesday to consider, if approved by legislators, a
resolution to create a buyers cartel with Oregon and Washington. A cartel
would set a reasonable price for electricity and risk blackouts, if
necessary, rather than pay exorbitant prices.
Davis said Californians spent more than 400 percent in additional costs for
electricity last year than they did in 1999 -- and costs are continuing to
rise.
"We're at the mercy of forces that show no mercy," Davis said, adding that he
is willing to take drastic measures if generators don't do everything in
their power to cut costs and increase supply this summer. "I'm not ruling
anything in; I'm not ruling anything out."
Assemblymen Paul Koretz, D-West Hollywood, and Fred Keeley, D-Boulder Creek,
proposed the resolution to create a buyers cartel.
California would create such a cartel only if Washington and Oregon
participated, and neither state has committed.
Strickland said a cartel could backfire by resulting in additional blackouts,
huge business losses and increased crime as neighborhoods go dark.
Smutny-Jones said high electricity prices stemmed from market forces ranging
from drought conditions in the Pacific Northwest to high prices for natural
gas needed to run power plants.
"There's a presumption that you have the Wizard of Oz behind the curtain,
playing with prices," he said. "That's not what is going on."

The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sacbee.com
.

Shareholders of PG&E vent their frustration
By Dale Kasler
Bee Staff Writer
(Published May 17, 2001)
SAN FRANCISCO -- Their investments devastated by Pacific Gas and Electric
Co.'s financial mess, shareholders of the utility's parent brought their
tales of woe to the company's annual meeting Wednesday, peppering the chief
executive with questions about what went wrong.
Although many were supportive of PG&E Corp. CEO Robert D. Glynn Jr., choosing
to blame Gov. Gray Davis and other state policy-makers for the utility's
problems, others focused on PG&E's role in California's deregulation fiasco.
"All of you should have been fired for incompetence," Orinda retiree and
longtime shareholder Clyde Vaughn told Glynn during the question-and-answer
period. He said PG&E's executives became "infatuated with the fairy tale of
deregulation" and "joyfully sold all of us down the river."
Glynn, facing several hundred shareholders during a two-hour meeting in San
Francisco's cavernous Masonic Auditorium, defended the company's decision to
put the utility into Chapter 11 bankruptcy protection and laid most of the
blame for the company's problems on Davis and the Public Utilities
Commission.
"No one wanted this thing to happen," Glynn said after Vaughn spoke from the
audience. He pledged to "rebuild the value of this company."
Glynn appeared to have the support of most shareholders. They applauded when
he explained PG&E's decision to back away from negotiations to sell its
transmission grid to the state as part of a rescue package, saying: "We're
not interested in selling any of our utility assets."
But he also had to contend with shouts from the audience and barbed questions
about even such mundane matters as the appointment of Deloitte & Touche as
the company's accounting firm.
A few booed a fellow shareholder, Bob Orser of Oakland, for defending top
management's decision to forgo their traditional end-of-year bonuses as a
cost-cutting measure.
And three protesters from Global Exchange, the San Francisco community
activist group, were dragged out of the meeting before it ended and before
their leader, Medea Benjamin, had a chance to ask a question.
Afterward, Benjamin said she had been prevented from entering the hall
because, even though she had shareholder credentials, she didn't have an
identification card. She said she was arrested for trespassing, allowed to go
free on her own recognizance, and then returned to the hall after picking up
her I.D. card. She said Glynn deliberately cut the meeting off rather than
take a question from her.
Utility stocks are traditionally so safe and sound that they're commonly
referred to as widow-and-orphan investments, and the companies' annual
meetings are usually tame affairs. But amid California's unprecedented energy
crisis, shareholders of PG&E and Edison International -- parent of
California's other fallen utility, Southern California Edison -- have seen
their dividends scrapped and their share prices fall by more than half in the
past year.
PG&E shares closed Wednesday at $11, down 55 cents.
Particularly hard hit have been many PG&E employees and retirees, who sank
much of their savings into the company's stock. The downfall of PG&E has
meant "a serious shortfall in my income," said retiree Ken Lewetzow, 69, of
Saratoga.
Lewetzow said bankruptcy protection made sense for the utility. "Our dear
governor was running us into the ground," he said in an interview outside the
hall.
Shareholder Richard Collins called on Glynn to do a better job of
communicating with the public, saying, "If the general public does not
support PG&E, and it does not now, I'm afraid it may go under."
A current employee and shareholder, Jim Findley, told Glynn that the
company's board of directors is too insular to cope with the company's
problems.
"Get some people (on the board) with some dirt under their fingernails," said
Findley, a mechanic in the natural gas division in San Rafael. "What you've
been doing isn't exactly successful."
Several in the audience applauded.
Glynn responded, "The rank and file people of PG&E make it what it is."

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.

Governor signs power authority bill

By Jennifer Coleman
ASSOCIATED PRESS
May 16, 2001
SACRAMENTO ) California will no longer be held captive by energy suppliers
charging high prices for power, Gov. Gray Davis said Wednesday as he
officially put California into the electricity wholesale business.
By signing a bill by Senate Leader John Burton, Davis created the California
Consumer Power and Conservation Financing Authority ) a new state agency that
can issue up to $5 billion in revenue bonds to build, purchase, lease or
operate power plants.
Plants financed by the authority will provide cost-based electricity to
California consumers, Davis said, which will help stabilize the state's
volatile energy market.
The power authority is modeled after one in New York, which has 10 power
plants, 1,400 miles of transmission lines and produces about 25 percent of
the state's power. Nebraska also has a power authority, which created a
market in which residents pay 22 percent less than the national average,
Burton said.
An increase in the number of power plant down for repairs this year "is
strong evidence that people are manipulating the market by withholding power
to drive up prices," Davis said.
"The only way we can fight back against this type of price gouging and
manipulation is to build more plants," he said at the bill signing ceremony
in front of a Sacramento Municipal Utility District power plant.
Having a public power authority will "supplement not supplant" private energy
sources, Davis said.
"In a deregulated world, the only way you can guarantee reliable affordable
power is to build it yourself if private companies won't do it," he said.
The bill gives the power authority the power of eminent domain, but Burton,
D-San Francisco, said if the state were to seize any power plants he would
prefer that it would be by using the governor's emergency power, because that
process is quicker.
"Sooner or later the state has got to let these buccaneers know that we're
not going to tolerate what they're doing to us," Burton said. "The only thing
these exploiters understand is possibly a little counterterrorism."
Few Republicans in the Legislature supported the bill, saying the state
shouldn't get further into the power business. They also warned that it could
discourage private companies from building plants.
The bill was sponsored by state treasurer Philip Angelides, who conceded that
it won't save California from blackouts this summer but will help stabilize
the energy markets as more generators are built.
"This legislation will help ensure that California is never again held
hostage by an unregulated private energy market run amok," Angelides said at
a news conference in Los Angeles before speaking at a Town Hall event.
The treasurer said the bill is the "beginning of the end for deregulation ...
which has proven to be a disaster."
He repeatedly blamed the crisis on out-of-state power generators.
"There is a tremendous drain on California because of generators' prices," he
said. "And that drain is heading straight to the heart of Texas."
Other key lawmakers urged Davis Wednesday to join with the governors of
Washington and Oregon to set a limit on the price the states would pay for
power this summer, creating a "buyers' cartel."
The states should set their own price ceiling on electricity in light of
federal regulators' refusal to set region-wide caps, said Fred Keeley,
D-Boulder Creek, the Assembly's point man on energy.
The states would refuse to pay, under any circumstances, more than a
predetermined price that would give electricity generators a "reasonable"
profit, under a resolution sponsored by the nine Democrats.
If generators refused to lower their prices, that would mean almost certain
blackouts in California this summer, said Assemblyman Paul Koretz, D-West
Hollywood, the measure's author.
But those will happen anyway, by all accounts, and the price cap would let
the state better predict and manage the outages, he said.
The resolution proposes that caps be installed for two years, until enough
power plants can be built to allow the market to function naturally.
The state has been buying power for the customers of three major utilities
since mid-January. The utilities' credit was cut off after they amassed debts
of more than $14 billion dollars due to high wholesale electricity prices
that they were unable to pass on to customers.

California lawmakers seek Pacific Northwest energy cartel

By Don Thompson
ASSOCIATED PRESS
May 16, 2001
SACRAMENTO ) California should form a "buyers' cartel" with Oregon and
Washington to rein in soaring energy prices, nine Assembly Democrats said
Wednesday.
The states should set their own price ceiling on electricity in light of
federal regulators' refusal to set region-wide caps, said Fred Keeley, a
Democrat who is the Assembly's point man on energy.
The states would refuse to pay, under any circumstances, more than a
predetermined price that would give electricity generators a "reasonable"
profit, under a resolution sponsored by the nine Democrats.
That would mean almost certain blackouts in California this summer, said
Democratic Assemblyman Paul Koretz, the measure's author. But those will
happen anyway, by all accounts, and the price cap would let the state better
predict and manage the outages, he and Keeley said.
Caps would "give these power generators a dose of their own medicine," Koretz
said. "They've been gouging us at every opportunity ) most of us believe by
price manipulation ) making obscene profits at our expense."
It would be far better for the Federal Energy Regulatory Commission to set
Western price caps, Keeley said.
He and Assembly Speaker Robert Hertzberg, also a Democrat, are asking FERC to
reconsider last month's limited caps that Keeley and other Democratic
officials say could actually drive up power prices under some circumstances,
but are insufficient to control prices at other times.
However, Keeley doubted FERC and the Bush administration will reverse their
opposition to caps that they believe would hinder the development of a free
energy market. In that light, Keeley said California must find another way to
cap skyrocketing electricity prices itself, or bankrupt its budget and
economy.
The strategy won't work without Washington and Oregon, however, Keeley said,
but the three acting together can effectively set energy prices throughout
the 11 Western states.
The Pacific Northwest states are vulnerable this summer as well, due to dry
conditions there, said Lenny Goldberg of San Diego-based Utility Consumers'
Action Network. The group first suggested the strategy a month ago.
"At some point it's going to take some drastic action to deal with this
crisis and get us through the summer," Goldberg said.
Keeley and Koretz said they believe it would be easier for Gov. Gray Davis to
negotiate caps with other states if he has the backing of the Legislature.
Similar efforts have been discussed within the Davis administration, said
spokesman Steve Maviglio, but Davis had no immediate reaction.
The lawmakers dismissed generators' objections that capping power prices
would prompt them to sell their electricity for higher prices to other
states, or dissuade generators from building more power plants in California.
California is too large a market for the power producers to ignore, they
said.
If generators refused to sell electricity because of the caps, the state
could respond by seizing the plants themselves, said Koretz and Goldberg,
though Keeley had reservations.
The resolution proposes that caps be installed for two years, until enough
power plants can be built to allow the market to function naturally.
The state has been buying power for the customers of three major utilities
since mid-January. The utilities' credit was cut off after they amassed debts
of more than $14 billion dollars due to high wholesale electricity prices
that they were unable to pass on to customers.

Bankruptcy judge allows PG&E to pay property taxes

By Karen Gaudette
ASSOCIATED PRESS
May 16, 2001
SAN FRANCISCO ) Forty-nine California counties soon will receive roughly $41
million in late property taxes due from bankrupt Pacific Gas and Electric Co.
U.S. Bankruptcy Judge Dennis Montali approved a request from the utility
Wednesday to pay the counties for taxes owed before it filed for bankruptcy
on April 6.
"Somebody's going to have to tell me why I should hold 49 counties of
California hostage for taxes that are due and owing," Montali told other
creditors, who wanted the payment postponed until the court determines how
much PG&E will pay everyone to whom it owes money.
Montali also allowed the utility to spend around $260 million to fund
energy-efficiency programs approved before April 6 that could help
Californians arm themselves with vital megawatts in the state's battle
against rolling blackouts.
The utility owes the taxes to 49 Northern and Central California counties for
the period from Jan. 1 to April 5. The taxes will be used for schools, fire
districts, police and transportation costs.
The taxes were listed as past debts because they were due before the utility
filed for Chapter 11 protection. Under federal bankruptcy law, the filing
halted the collection of past debts ) meaning Montali had to approve the
payment.
PG&E already paid the 49 counties a separate $37 million for property taxes
due for the period from April 6 to June 30. Those taxes were considered new
debts, so they could be paid without Montali's permission.
Montali said the utility and counties had his permission to negotiate with
each other over about $8 million in late fees. If a county chooses to sue
PG&E, however, it risks losing that money when Montali decides who among
PG&E's 150,000-plus creditors will be paid.
More than 100 protesters gathered outside the court demanding low-income
ratepayers be represented at future court hearings, waving handmade signs
that said: "Bankruptcy court does not protect the poor."
Inside, John Gamboa, executive director of the Greenlining Institute, told
Montali that businesses are disproportionately represented at the
proceedings.
"Our concern is simple. No one represents the poor, disabled, minorities and
seniors in the most important bankruptcy case in history," Gamboa said.
On Friday, Montali will be asked to decide whether a committee of nine
ratepayer groups ) including Consumers Union and industry groups representing
small businesses and agriculture ) can continue to take part in the
proceedings. Montali said bankruptcy law restricts him from deciding who
serves on a creditors committee, but said a federal bankruptcy trustee could
add the groups.
PG&E argues that bankruptcy law does not allow such a committee, and that the
state Attorney General can represent ratepayer interests in the bankruptcy
process.
The state has hesitated to become involved in the bankruptcy process for fear
it will lose the right to regulate PG&E.
The utility already has challenged the authority of the Public Utilities
Commission, asking Montali to exempt the utility from having to make
accounting changes that would prevent it from collecting much of its $9
billion debt from ratepayers.

Calif. Businesses Swallow Rate Hikes Amid Slowing Economy

By STUART SILVERSTEIN and MARLA DICKERSON, Times Staff Writers

?????The $5.7-billion increase in power prices that will begin showing up in
utility bills next month will hurt both business and consumers, siphoning off
spending that otherwise could have helped pump up a slowing state economy,
economists said Wednesday.
?????But analysts also sounded a positive note: If the higher power costs
spur enough conservation to hold down rolling blackouts this summer, they
could minimize long-term damage to the state's economy.
?????Rate increases "are part of the solution," said Stephen Levy, director
of the Palo Alto-based Center for Continuing Study of the California Economy.
"It goes under the heading of things that aren't pleasant, and that do
subtract from growth, but aren't debilitating.
?????"If we ran huge blackouts this summer, it would be much more disruptive
for the economy and for our quality of life," Levy said.
?????California's $27-billion agriculture industry, already struggling, was
spared the full brunt of the increases approved Tuesday by the state Public
Utilities Commission. Others industries contend they deserve a similar break,
saying business can't cut back as easily as consumers.
?????"We're just kind of stuck," said Young Su Han, owner of Azteca Market in
Santa Ana, a small grocery and meat store.
?????"We'd like to conserve, but we can't really cut down our electricity
because the meats will go bad and the drinks will be warm."
?????Both business groups and consumer activists say their constituents are
bearing an unfair share of the burden. Consumers say they never sought
deregulation and are now being asked to bail out a failed scheme cooked up by
business interests.
?????Industry leaders counter that residential users are being sheltered from
the full impact of cost increases, which may come back to bite them if
companies are forced to raise prices or lay off workers.
?????Of the $5.7 billion the new rates will raise, $4.6 billion will come
from business, agriculture and street-lighting customers and $1.1 billion
from residential rate payers.
?????Carl Guardino, head of the Silicon Valley Manufacturing Group, whose
members include Cisco Systems, Hewlett-Packard Co. and Intel Corp., contends
that most businesses already pay much more attention to conservation than
households. He said the increases won't encourage conservation by consumers,
who could do the most to help prevent blackouts.
?????Some business owners say they already are stepping up conservation and
otherwise are cutting costs to cope with electricity charges, along with
rising wages and workers compensation insurance premiums.
?????The Charlie's Trio Cafe restaurant chain, based in Alhambra, has started
cutting back employees' hours. It also recently increased prices for the
first time in two years, meaning that customers will have less to spend
elsewhere.
?????"This increase isn't going to kill me," said Michael Fata, a co-owner of
the chain, but he expressed concern that higher costs "are pushing the
customers away." "
?????Economists say that sort of pattern, in which rising energy costs ripple
through the economy, has lead to serious downturns several times since the
1970s. Edward E. Leamer, director of the UCLA Anderson Business Forecast,
noted that increases in crude oil prices preceded national economic downturns
in the mid-1970s, early 1980s and even, less dramatically, at the beginning
of the 1990s.
?????"The argument can be made that higher energy prices are really important
drivers" of the economy, he said.
?????Still, Leamer said the economy is much less dependent on energy today
than it was at the time of past oil-price-related downturns.
?????The effect is particularly limited in California, some economists say,
because the state is the second-lowest user of electricity per capita among
the 50 states. For all types of energy, California is the fourth-lowest user.
?????Though he has yet to reach a final conclusion on whether electricity
rate hikes will severely hurt California, Leamer said, his impression is that
"higher energy costs by themselves don't have that big of an effect. But the
[blackouts] are another story."
?????For many businesses, the reliability of electricity service is far more
important than the cost of power.
?????At Lily's Florist in Monterey Park, owner Robert Yuan figures that his
electricity bill will rise from $500 to about $750 a month. Yuan doesn't have
many opportunities to conserve because he needs to keep his flowers chilled.
?????"If we don't keep them refrigerated, they'll die," he said. "That's
losing even more money."
?????Yuan, 46, said he can handle the extra $250 a month in utility costs.
He's more worried that customers hit with higher utility bills of their own
or caught up in other economic problems will buy fewer flowers.
?????Yuan's concerns are widely shared. Business recruiters who have
descended on California since the waves of rolling blackouts began last
summer said reliability, rather than rate hikes, has emerged as the hot topic
among companies that have expressed an interest in relocating.
?????"Fears of interruption are the big concern we're hearing," said Alex
Fischer, economic development chief for the state of Tennessee who recently
led a massive recruiting mission to Southern California. "Downtime and lost
production are huge expenses," compared with rate increases.
?????To avoid sudden outages, companies such as Ontario furniture
manufacturer Oakwood Interiors have adjusted work schedules to avoid peak
periods when rolling blackouts are most likely to occur.
?????Chief Executive Nick Lanphier said workers who used to start their shift
in the afternoon are now reporting at 8 p.m. and working through the night.
That has solved one problem but created others.
?????"The workers don't like it and productivity is way down," he said.
?????Utility customers such as Lanphier will be hit with a double whammy:
They not only will pay the higher rates, but they also must pay the portion
of the rate increase that was retroactive to March 27. That portion will be
spread out in electric bills over the next year.
?????Lanphier said the big jump in electricity costs would be manageable in
isolation. But over the last year he has also been hit with huge jumps in
other operating costs, including workers compensation, health insurance and
wages. Meanwhile, he said he is being undercut by cheap foreign imports,
hindering his ability to raise prices enough to cover the increase in costs.
?????Officials representing the state's agriculture industry, which received
the smallest rate increases, called the decision by the California Public
Utilities Commission fair. They said the industry's circumstances and
precarious economic condition, as its costs have risen and its products'
prices have fallen, justified further concessions.
?????"Agriculture is experiencing its third tough year in a row," said Hank
Giclas, vice president of Western Growers, a produce industry trade group.
"[The caps] are a positive recognition of the fact that agriculture is unique
and experiencing difficult times, but it doesn't go as far as we would have
liked it to go."
?????Farm users are less able than other commercial customers to cut back on
energy and adopt conservation techniques, officials say, especially during
peak growing seasons. In fact, because of this year's drought conditions,
many are using more energy to pump ground water.
?????The higher energy costs come as California is beginning to experience a
rise in its unemployment rate and a sharp decline in employment growth, two
major economic barometers. Last week the state reported that unemployment
rose to 4.8% in April, still low by historic standards, but up from a 32-year
low of 4.5% in February. What's more, in the first four months of this year,
California has added jobs at less than one-third the pace of 2000.
?????Jack Kyser, chief economist for the Los Angeles County Economic
Development Corp., is counting on no more than a one-year slowdown for
California. That's partly based on his assumption that Californians will
adapt quickly to the energy crunch.
---
?????Times staff writers Marc Ballon, Sarah Hale, Melinda Fulmer and Nancy
Rivera Brooks contributed to this report.

Copyright 2001 Los Angeles Times

Davis Turns Up the Heat on Supplier
Power: Reliant Energy says escalating rhetoric might be leading toward
seizure of a plant.

By DAN MORAIN and NANCY VOGEL, Times Staff Writers

?????SACRAMENTO--After months of broadly vilifying California's energy
suppliers, Gov. Gray Davis has launched a new offensive, taking aim at a
single firm: Houston-based Reliant Energy, whose executives believe the
governor may be building a case to confiscate the company's power plants.
?????Intensifying his assault, Davis on Wednesday called Reliant
"obstructionist." He warned that actions taken by Reliant and other
independent generators this summer will determine whether he signs a windfall
profits tax bill or, in the extreme, commandeers the electricity produced by
a plant or seizes the facility itself.
?????"I've made clear to the generators that they can influence my decision,"
Davis said in an interview. "We have a very tough summer ahead of us. We need
their full cooperation. . . . I reserve the right to do what is in the
state's best interest. I think it is fair to say that Reliant is not off to a
good start."
?????Earlier in the day, after signing a bill creating a power authority in
California, the governor warned electricity suppliers: "If they don't want to
see their plants seized, they should make sure their plants are up and
running this summer."
?????The increasingly hostile barbs have grabbed Reliant's attention. Some
executives believe they are being set up by the administration--for what,
they're not sure. But the company is reviewing contingency plans, ranging
from what plant operators should do if their facilities are picketed and who
they should call if state officials show up unannounced.
?????"We would hope," Reliant spokesman Richard Wheatley said, "that
draconian measures and political rhetoric and finger-pointing would not be
pursued. But there is a history of confiscatory actions, including seizure of
power contracts with other companies."
?????Earlier this year, Davis used his emergency authority to seize long-term
power contracts that Southern California Edison and Pacific Gas & Electric
had signed with power sellers. Those contracts were about to be auctioned by
California's power market to reimburse generators owed money by the hobbled
utilities.
?????By seizing the contracts--estimated to be worth nearly $1 billion--Davis
was able to ensure that power would be sold to California at relatively low
prices, rather than resold on the costlier spot market. Under his emergency
authority, Davis could use the same tactic to seize power plants, or the
power produced by the facilities.
?????But such an act would pose huge risks. Perhaps most troublesome, other
private companies might react by pulling investments out of California or, in
the case of out-of-state generators, stop sales here.
?????Still, as the power crisis worsens and public frustration grows, calls
for the governor to seize power plants have become more intense.
?????"Sooner or later," Senate President Pro Tem John Burton said Wednesday,
"we've got to let these buccaneers know that we're not going to tolerate what
they're doing to us. The only thing these exploiters would understand is
possibly a little counterterrorism."
?????Reliant got involved in California's deregulated market in 1998, buying
five power plants from Edison for $292 million. Combined, the plants are
capable of supplying 3,700 megawatts of electricity, enough to serve 2.8
million homes.
?????In the first quarter of 2001, Reliant's wholesale energy sales increased
by 171%, producing income of $216 million, compared to a loss of $22 million
for the same period last year.
?????Reliant is not alone in making huge money off California's deregulation
debacle. Also profiting have been Duke Energy, Williams Cos., Mirant Corp.
and Dynegy Inc.--all based outside California.
?????In the past, Davis has used an assortment of inflammatory terms to
broad-brush the generators. He recently called them "the biggest snakes on
the planet Earth."
?????But Reliant in particular has drawn the governor's wrath for allegedly
being more recalcitrant than the others in working with the administration.
?????"They just want to bleed us dry," Davis said in his interview with The
Times. "I'm not saying they're unique in that capacity. But they are uniquely
obstructionist."
?????Davis said that, among other things, Reliant has opposed court and
federal orders that it sell power to the state and recently refused to
forgive a portion of the hundreds of millions of dollars it is owed by
California's utilities.
?????Reliant also informed Davis that it is asking higher prices in part
because it added a credit charge, essentially questioning the state's
credit-worthiness.
?????Last Thursday, the governor decided to go public--to "name names," in
the words of his chief political strategist, Garry South.
?????"The reason these generators have gotten away with murder is because
people in California don't know who they are," South said. "They aren't
household names. . . . People are not familiar with their names, their logo,
or what they do."
?????Breaching confidentiality surrounding the state's power purchases, Davis
announced at a press conference that the state paid $2,000 per megawatt-hour
to avert blackouts last week, and named Reliant as the seller.
?????The price--actually $1,900 per megawatt-hour--was five times recent
market prices.
?????The governor continued his attack on ABC's Sunday morning news show,
"This Week." He again cited the amount Reliant had charged but this time put
a partisan spin on it.
?????"That is obscene," Davis said of the price. "No one can defend that. The
company is named Reliant. It's in Texas. It's a big buddy of President Bush
and Vice President Cheney, and they can't just sit back there and say, 'Hey,
it ain't our problem.' "
?????Reliant is a major political player nationally, particularly in the
Republican Party, giving more than $250,000 to various national GOP
committees last year. Steve Letbetter, Reliant's chief executive, was one of
President Bush's so-called "pioneers"--donors who committed that they would
raise at least $100,000 for his presidential campaign.
?????Like most independent power generators, Reliant has become a more
significant player in Sacramento, contributing $52,900 to state lawmakers
last year--including $10,000 to Davis last May--and spending $106,000 on
lobbying, plus $40,000 so far this year.
?????Reliant spokesman Wheatley said that despite the governor's invective,
his company is committed to seeking solutions to California's problems and
that it has "operated legally and ethically."
?????"Regardless of what happens," Wheatley said, "we're going to make every
effort to keep our contacts with the state on a high plane, despite the
political rhetoric, despite the name-calling and despite all the allegations
that have been made."
?????In fact, Reliant executives wonder whether the state is playing fairly
itself, possibly paying the record $1,900 a megawatt hour to give the
governor ammunition against the company.
?????Reliant Vice President John Stout said he never expected the state to
pay that amount. He said the company bid exceptionally high in the hopes that
it would not have to run one of its so-called peaker plants, which the
company uses for reserve power.
?????Reliant prefers to use it as a backup in case one of its main power
plants breaks down. That allows the company to avoid buying high-priced
replacement power on the open market in order to fulfill its obligations to
the agency that manages most of California's transmission grid.
?????But grid operators at the California Independent System Operator
concluded that they needed extra power to stabilize the grid and avoid
blackouts, and state power buyers agreed to pay Reliant's asking price.
?????Stout questions whether that was the lowest bid available or whether it
was deliberately chosen.
?????Oscar Hidalgo, spokesman for the power-buying branch of the state
Department of Water Resources, said there was nothing political about the
purchase.
?????"It was a split-second decision made on the real-time market to fill
some voids we were having in our power supply at the time," Hidalgo said.
"The intent was very clear: to keep the lights on."

Copyright 2001 Los Angeles Times

FERC Issues Power Ruling
Energy: Agency says order will help some firms bring electricity to market.
Davis says it will hurt state.

By MEGAN GARVEY, Times Staff Writer

?????WASHINGTON--An order issued Wednesday by federal regulators may make it
easier for California's alternative energy generators--considered a crucial
component of the battle against blackouts--to bring their electricity to the
market this summer.
?????The Federal Energy Regulatory Commission order, which came a day after
Gov. Gray Davis asked the commission to "stay its hand" on matters relating
to electricity producers known as "qualifying facilities," or QFs, granted
parts of the emergency relief sought by the cash-strapped facilities.
?????The commission said the action was "designed to ensure the maximum
amount of QF power will be available to the California market this summer."
An industry group predicted this week that the state will face 260 hours of
electrical blackouts this summer, a situation federal regulators say their
provisions could help alleviate.
?????But the move was greeted angrily by Davis, who has been holding his own
negotiations with the QFs and said the effect of FERC's order is to expedite
the sale of QF power "on the outrageously expensive spot market.
?????"I want to send a simple message to FERC: Read the Hippocratic oath:
First, do no harm," Davis said.
?????Nearly 700 alternative energy producers provide California with about
one-fourth of the power it uses. But many of those companies have reduced
their output or taken their plants offline in recent months as utilities have
failed to pay their bills.
?????The nonpayment and an inability to get their electricity to market have
caused California producers of solar, wind and biomass energy and smaller
gas-fired generators to cut production by as much as 3,000 megawatts a day.
The companies estimate they are owed more than $1.5 billion by Pacific Gas &
Electric, which has filed for bankruptcy, and Southern California Edison.
?????"Clearly, we want to make sure the QFs get paid, but we also don't want
them to be going to the open market to get paid 10, 20 times the contract
rate," said Davis spokesman Steve Maviglio.
?????The governor's concern, he said, was that any action by FERC might harm
ongoing discussions between his office and the alternative energy generators,
who have been meeting for a week to hammer out an agreement to get them back
online by summer.
?????The FERC action ensured that QFs have the right to sell excess
power--electricity they generate above their contractual obligations with
utilities--to third-party purchasers, such as traders, who could sell it to
the highest bidder.
?????FERC also said that if QFs could persuade a court to release them from
contractual obligations to the utilities, they could sell all their power to
such third parties.
?????Davis vowed to ask state Atty. Gen. Bill Lockyer to "intervene in every
state court case where a QF attempts to get out of its contractual
obligation."
?????Federal regulators declined to void long-term contracts between the
state's alternative power generators and utilities, despite the fact that the
QFs haven't been fully paid since November.
?????Federal regulators also took steps to increase the power supply in
Western states in the next few months by removing obstacles to rapid
completion of pipeline projects.
?????In another matter, FERC declined to order refunds for high prices paid
for power in California in April. The commission said that because Stage 3
emergencies were not called that month, no potential refunds are called for,
citing that was the condition set in an earlier order issued by federal
regulators.
?????Although California officials have said the state has been overcharged
$6 billion for electricity since the crisis began, federal officials have
instructed generators to refund only about $124 million or explain why the
higher prices were justified.
?????The issue of price-gouging continues to be a point of contention between
federal regulators, who have said time and again they do not believe price
caps are the answer, and California officials, who say the state needs relief.

Copyright 2001 Los Angeles Times

Shareholders Lay Blame on PG&E Managers, Davis
Energy: Investors at company's annual meeting grew contentious over its
recent bankruptcy filing.

By JOSEPH MENN, Times Staff Writer

?????SAN FRANCISCO--Angry PG&E Corp. shareholders vented their frustration
during the company's annual meeting Wednesday, blaming management for a
bankruptcy filing that could wipe out their investments.
?????Dozens of retired company employees and other stockholders cheered at
calls for the resignation of Chief Executive Robert Glynn at the contentious
meeting in a Nob Hill auditorium as police barriers kept activists at a
distance outside.
?????While many of the hundreds who attended described themselves as company
loyalists furious at bungling by Sacramento lawmakers and Gov. Gray Davis,
others said PG&E bore responsibility for backing the state's 1996 attempt at
electricity deregulation.
?????"The PG&E management, infatuated with the fairy tale of deregulation,
joyfully sold us down the river," shareholder Clyde Vaughn said to applause.
"The very top managers who led us into this mess were recently given
multihundred thousand dollar raises. The truth of the matter is you all
should have been fired for incompetence."
?????Profit taken in by PG&E's utility unit, Pacific Gas & Electric Co.,
after 1996 was sent to the parent company, which is not in bankruptcy. PG&E's
stock fell 55 cents to $11 Wednesday on the New York Stock Exchange, down
from more than $30 in September.
?????As at virtually all annual meetings of public companies, the actual
balance of power was never in doubt. The company's nominees for director ran
unopposed, and management's proposals for enlarging a stock-based incentive
plan and other measures passed by a 5-to-1 ratio.
?????But Glynn was careful to avoid seeming arrogant, professing
disappointment with the past year's performance and treating most of his
sometimes voluble critics with respect.
?????"No one wanted this to happen," Glynn said of the bankruptcy filing.
?????Certainly not the shareholders, many of whom had regarded PG&E shares as
among their safest investments.
?????"They shouldn't have filed," said E.C. Nielsen, 84, adding that much of
her income had been from PG&E holdings. "I've lived through two depressions.
You don't give up."
?????Of those that spoke against the management, a 28-year rank-and-file
employee got the warmest response from the crowd for suggesting that
perception had become more important than reality at PG&E and that regular
workers should be appointed to the board.
?????"Put someone up there that can get you away from a policy of plausible
deniability," mechanic Jim Findley said. "Someone with dirt under their
fingernails."
?????In his opening remarks and in answering questions from the floor, Glynn
accused Davis, state regulators and others for the mess now threatening to
cut power to California homes and businesses on a routine basis this summer.
?????At its core, the problem is that the prices Pacific Gas & Electric could
charge for electricity were capped by the state, while the wholesale prices
it paid for electricity were not. Those prices rose much higher than
envisioned when the deregulation plan was approved, and the utility's
attempts to win approval to charge more were rebuffed.
?????"If the state had approved the comprehensive rate stabilization plan we
filed last November, Pacific Gas & Electric would still be credit worthy and
not in Chapter 11" as the third-largest U.S. bankruptcy, Glynn said. The
filing six weeks ago listed $18 billion in liabilities.
?????He said a last-ditch plan to sell the company's transmission lines to
the state fell apart when Davis' negotiators backed off earlier commitments.
He said that the idea could be revived in bankruptcy court.
?????"We are not seeking a rescue, a bailout or a handout from the state or
anyone else," Glynn said. "We are simply asking the state to follow the law,
which allows us to recover wholesale power costs in retail rates."
?????Pacific Gas & Electric intends to file a proposed reorganization plan to
pay creditors and begin moving out of bankruptcy court by August, he said. In
the meantime, more power plants are being built.
?????Glynn said the company will fight to recover the multibillion-dollar hit
it has taken because of the skewed prices, in part from electricity suppliers
that federal regulators say overcharged. If the government doesn't sue those
firms, he said, other interested parties, including consumer groups, will.
?????A few shareholder activists at the meeting proposed a raft of measures,
including steps to increase the size of the board. One such reform measure
passed, recommending that the board allow a majority of shareholders to
approve any takeover even if company directors object.
?????The leader of a consumer and human rights activist group said she was
initially barred from the meeting despite having proxies carrying the right
to vote on behalf of four shareholders.
?????Medea Benjamin of Global Exchange later reentered and shouted criticism
of the company as the two-hour meeting ended before she and others were
recognized to speak. She was removed by security guards and charged with
trespassing.
?????As shareholders left, PG&E staffers handed out miniature flashlights
bearing the company's logo.
?????A spokesman said the trinkets were a tradition predating the energy
crisis and weren't intended either as commentary or as tools to cope with
rolling blackouts.

Copyright 2001 Los Angeles Times

Thursday, May 17, 2001
A Swiftian Solution to the Energy Crisis
By PAUL JOSEPHSON

?????Some skeptics criticize the plans of the Bush administration to ignore
conservation, start drilling for oil in pristine parks and renew nuclear
reactor construction with a program so aggressive it would put the Russians
and the French to shame. I think these plans don't go far enough, especially
concerning nuclear power.
?????With the right mix of geography, hubris and uranium, we can be energy
self-sufficient and forget about conservation entirely.
?????Over the next 10 years, let's build hundreds of 1,000-megawatt nuclear
power stations in Wyoming. This would end our dependence on foreign oil once
and for all.
?????Building so many simultaneously would lower capital and labor costs and,
in 10 years, make serial production of reactors possible. Wyoming has a high
unemployment level, so construction of scores of reactors will provide
thousands of jobs. It also has plenty of open space, so it's a win-win
situation.
?????Some critics worry that nuclear power will remain costly, even if we gut
the ability of the Nuclear Regulatory Commission to set the highest safety
standards in the world. They point out that most reactors have reached the
end of the operating lives, have never ran as efficiently or cheaply as
promised and will soon be decommissioned. They claim that old reactors, with
the spent fuel that has accumulated since the 1960s, have created a
multibillion dollar clean-up and waste disposal problem that will have to be
left for another administration to solve. And they obsess about the
difficulty of providing workable evacuation plans in the event of an
accident.
?????But, hey, we've come a long way since Three Mile Island. Anyway, Wyoming
is sparsely populated, so there would be only minor health risks in the event
of an accident, and mostly to coyotes, wolves and bears.
?????Just imagine: Given the population densities and geology of Wyoming, we
could even site nuclear fuel fabrication and waste storage facilities in the
same spot. Let's create National Nuclear Park, bringing technology and nature
together in a way that satisfies conservationists, tourists and
businesspeople alike. A triple-win situation!
?????The North Platte, Green and Bighorn rivers would provide more than
enough water to cool the reactors, and for the dry seasons we could build
huge holding reservoirs for winter runoff. Granted, effluent cooling water
from the stations would raise river water temperatures several degrees,
endangering flora and fauna. But if the tundra of Alaska can take the risk,
so can the Rattlesnake Hills of Wyoming.
?????We can call them hot springs! Ichthyologists could study which fish and
game to introduce in the warmer waters, making Wyoming a year-round
wonderland for sportsmen.
?????And why worry about how to get electricity from Wyoming to California
and New York? It's a heck of a lot easier to transmit electricity from Casper
to the Bronx than to pipe and tank oil from the Arctic Circle to refineries
in the lower 48. And no need to worry about how to finance all this;
President Bush's alternative energy research budget was cut to the bone, so a
few billion dollars for superconductivity research is up for grabs.
?????A major objection to nuclear power has been the siting of stations on
coastal waters from Seabrook, N.H., to Diablo Canyon, Calif., not far from
big cities in states that have largely voted for Democratic candidates. So
let's give the states that tend to vote Republican the opportunity to have
nuclear power stations, too.
?????A nuclear Wyoming could also calm those critics from the Northeast and
Midwest states who are upset about the Western states' federal subsidies for
mineral and grazing rights, the construction of logging roads, etc., etc.
Given Wyoming's willingness to produce electricity for the nation--and why
wouldn't it?--these other states could no longer point to the fact that some
states take in more in federal moneys than they pay in taxes.
?????But why stop at a nuclear Wyoming? We could build 50 reactors in west
Texas. Since our president and vice president are so committed to a new
energy policy, they should have no objections to offering the services of the
states where they have made their careers and livelihoods. Talk about a
compassionate energy policy!
?????There's no need to worry our heads about such nonsense as a carbon tax
that discourages profligate use of fuel in gas-guzzling vehicles, or
investing in research on renewables and conservation. We can solve everything
by making Wyoming our nation's "nuclear state."
- - -

Paul Josephson Teaches History at Colby College in Maine.

Copyright 2001 Los Angeles Times

California electric rates jump to second highest in country
KAREN GAUDETTE, Associated Press Writer
Thursday, May 17, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/17/state0
322EDT0106.DTL&type=news
(05-17) 00:22 PDT SAN FRANCISCO (AP) --
Customers of the state's two largest utilities will need to dig a little
deeper to pay next month's bill now that California is looking to make back
some of the $6 billion it has spent to keep the lights on.
Under the plan approved Tuesday by the state Public Utilities Commission in a
3-2 vote, the heaviest residential users of Pacific Gas and Electric Co. and
Southern California Edison Co. will see their overall monthly bills increase
by 37 percent, to about $85 or $71 more a month respectively.
Other households that use minimal amounts of energy won't see an increase at
all, the PUC said.
The PUC's commissioners warned the latest rate, the largest in California
history, could be followed by more increases this summer.
"We have not solved the problem today," said PUC commissioner Richard Bilas
who voted against the allocation. "When you look down the road we're going to
have to go through this exercise again sometime in the next three months."
Juan Ungo, one of dozens of low-income ratepayers protesting outside a PG&E
bankruptcy hearing in San Francisco Wednesday, said the allocations will
worsen his family's power bill. Soaring natural gas prices and an earlier
rate hike already made it jump from $50 a month to $120 a month.
"Somebody has to fight for the plight of the poor people," Ungo said.
Businesses say somebody needs to fight for them as well, before higher power
costs drive them to layoff workers, go bankrupt or leave the state.
Without all residential customers getting socked in the wallet, businesses
fear there won't be enough incentive to conserve.
"Are we going to have a double whammy here? Are we going to have no blackouts
and higher rates?" asked Michelle Mortague-Bruno, spokeswoman for the
190-member Silicon Valley Manufacturers Association.
The plan, a revised rate design from PUC President Loretta Lynch, allocates a
3-cent rate increase the PUC approved March 27.
The increase raises residential rates to an average of 15.6 cents per
kilowatt, just behind the nation's highest rate of 16.4 cents in Hawaii. On
monthly bills, that translates to an average of $4 to $85 more per month,
depending on usage amount.
The 3 cents, plus a 1-cent rate increase from January, was spread over the 9
million customers of PG&E and Southern California Edison Co. in dramatically
different ways.
Industrial rates rise by no more than 49 percent, and agricultural rates are
also capped at either 15 or 20 percent depending on when the power is used
each day. Commercial rates aren't capped, and amount to roughly 38 percent
more on average, the PUC said.
The increase is for any energy use above 130 percent of "baseline," and
amount designed to provide for much of the needs of a typical household, but
varying according to seasonal temperatures.
The PUC said about half of all residential households won't go above that 130
percent line, meaning they will not see a rate increase.
To encourage conservation, a tiered system makes above-baseline energy use
progressively more costly. Residential customers using more than 300 percent
above their baseline will pay up to 80 percent more for that additional
electricity.
Nonresidential customers must pay more for every kilowatt, and computer chip
makers to hospitals to fruit growers say it's unfair.
"This is probably the worst economic calamity the state has ever seen," said
David Marshall, chief financial officer at Gregg Industries' iron foundry in
El Monte.
Marshall expects Tuesday's increases to cost Gregg at least $1 million this
year.
The rate hikes are retroactive to March 27, though those retroactive charges
will be spread over a 12-month period.
Low-income customers who sign up for the California Alternate Rates for
Electricity program are exempt, as are customers who need electricity to run
life-sustaining medical equipment.
The increases will not affect San Diego Gas and Electric Co. or Californians
who buy electricity directly from energy wholesalers.

Bay Area News Roundup
Local news all the time
Bay City News Report
Thursday, May 17, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/17/roundu
p.DTL&type=news
(05-17) 06:00 PST -- A federal bankruptcy judge in San Francisco has ordered
Pacific Gas and Electric Co. to pay $41.2 million in overdue property taxes
to 49 counties in the state.
U.S. Bankruptcy Judge Dennis Montali on Wednesday turned down the utility's
proposal to pay the taxes only to counties that agreed to forgo late payment
fees and penalties.
The judge told PG&E lawyers, "Somebody is going to have to tell me why I have
to hold California counties hostage for debts that you owe."
He instructed to the utility to pay the taxes -- which were due on April 10
-- in full within five days. The judge said PG&E and the counties could
negotiate later about whether the utility must pay penalties, which include a
10 percent delinquent penalty plus 1.5 percent per month in interest.
The taxes accrued between Jan. 1 and April 5, the day before PG&E filed its
petition for Chapter 11 bankruptcy court protection. Because the filing of
the petition suspended previous debts, PG&E needed court authorization to pay
them.
A group of 16 counties -- including Alameda, San Francisco, Santa Clara and
Sonoma counties in the Bay area -- opposed PG&E's plan to pay only counties
that waived the penalties.
San Francisco City Attorney Louise Renne said after the hearing, "The ruling
recognizes that counties are PG&E's highest priority creditors and should not
have to give up any part of their legitimate claims." San Francisco is owed
about $3 million, she said.
The Board of Regents of the University of California has voted unanimously to
alter its stance on race-based admissions, rescinding a 1995 ban on the
practice.
Many regents described yesterday's vote as bringing back the "welcome mat"
for minority students.
"This is a great day for the students of California ... and for the people of
California in general," said Regent Odessa Johnson. "I wore black today
because I hoped I was coming to a funeral."
The funeral was for two resolutions adopted by the regents in 1995, which the
resolution superceded. The first, SP-1, banned the consideration of race or
gender in the student admissions process, effectively countering UC's
affirmative action policy at the time. The second, SP-2, banned the same
considerations with regards to hiring and contracting through the UC system.
Both of those resolutions were bolstered the following year by state
Proposition 209, which outlawed race- and gender-based considerations at all
state agencies. But yesterday's vote overturned those resolutions.
But it is unclear, in light of Prop. 209, how far beyond mere gesture the
resolution goes. As they spoke, a small army of student protesters chanted
from outside the UC San Francisco conference room. The protesters, estimated
at 150 to 250 in number and hailing from every UC campus, erupted in cheers
after the vote was tallied.
A packed San Francisco Opera House listened last night as the Dalai Lama
encouraged the wealthy to close the gap between rich and poor and everyone to
nurture strong values in an age when religion is losing influence.
The spiritual and political leader made little mention of the Chinese who
occupy Tibet, except to say they don't treat other people as brothers. Hatred
and ill feelings towards others are nothing more than blind energy, he said,
and hurt the hater just as much as the hated.
"Basically we are all human beings," he said. "On that level, we are all
brothers."
All people want to have a happy life, he said, and that life should be a
basic right for everyone. People of the world need to minimize their negative
potential and understand that communication between people and nations is
easier with an open heart. Anger is an unreliable source of energy, he said,
causes suspicion in marriages and creates between friends.
Even though religion appears to be losing its influence in modern times, he
said it still has the power to help humanity. People need to sh a set of
values that include caring, compassion for others and a sense of community if
they want to make the world a better place. ern society, he told an audience
that included actress Sharon Stone, continues to widen the gap between the
rich and the poor of the It is up to wealthy people with their greater
influence, he said, to initiate change.
"We need to address this issue," he said.
St. Mary's College students angry about what they said was lenient treatment
of an alleged student rapist have called an end to their hunger strike,
according to a spokesman for the Moraga school.
"At two o'clock this morning all issues were resolved, and the last tent was
removed at 6:30 a.m.," St. Mary's spokesman Clifford Williams said on
Wednesday.
Between 12 and 20 students pitched tents on the lawn in front of the quiet
campus's central chapel building on Monday.
They charged that administrators had failed to enforce a proclaimed policy of
"zero tolerance" for campus sexual assaults when they reversed a disciplinary
board's determination that a male student was responsible for the rape of a
female student and should be expelled. Administrators decided instead to
suspend the student from campus activities.
An economist with the Federal Reserve Bank of San Francisco says the nation's
longest running economic expansion is not headed for recession, but Tuesday's
interest rate cut was made to avoid one. which measures the value of a
nation's output of goods and services, increased by 2 percent from the first
of January through the end of March. A recession is declared when the GDP
decreases for six consecutive months, he said, but that hasn't happened since
1990.
"This is still a record expansion," Zimmerman said. "The economy is not in a
recession."
But voting members of the Federal Reserve felt other economic indicators,
such as high layoffs and low orders for new products, indicate a downturn so
they took their action.
Cutting the interest rate, which the Federal Reserve did on Tuesday by 0.05
percent, is seen as a stimulant to the nation's economy, Zimmerman said.
Teachers in Pittsburg have just voted to approve a new contract, moving
toward the end of a 31-month stalemate with the school district over salary,
benefits and teacher quality.
A spokesman for the teachers' union said the contract extends an 8 pay raise
to preschool teachers and those at the Children's Center and also grants a
one-time 1 percent bonus to all teachers with
1 percent set for next year if certain funding is available. It also creates
a peer assistance and review program in which teachers help each other
improve student learning and a catastrophic leave bank rmits staff to donate
sick time to those who need it, among other benefits.
The 485 members of the Pittsburg Education Association were invited to vote
Wednesday afternoon. The agreement, which must win approval again on May 23
when the Pittsburg Unified School District board considers it, settles
salaries and working conditions for a three-year period that ends next year.
"I personally think that we're on the brink of harmony," Pittsburg Unified
School District Interim Superintendent Jack Gyves said earlier "I hope
nothing goes sideways between now and the two votes. If we can break this
logjam ... I think some very good things will happen."
Pittsburg Education Association leaders hailed the tentative agreement and
praised district officials for bringing "closure" to the long negotiating
process, which included a five-day strike by teachers 1n June, 2000.
JoanneStanley0425a05/17/01
Updated: (05-17) 06:00 PST
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prohibited. The Bay City News roundup is only available on this site on the
day of publication. It is not archived.
,2001 Associated Press ?

California jolted by string of dreary economic news
ALEXA HAUSSLER, Associated Press Writer
Thursday, May 17, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/17/nation
al0515EDT0463.DTL&type=news
(05-17) 02:15 PDT SACRAMENTO (AP) --
For two years, California has enjoyed a soaring economy and boom-year
budgets, but no more. The state has been jolted by a costly power crisis and
three straight days of bleak economic news.
The tumultuous week has included a record rate hike, a warning of a massive
shortfall, downgrading of the state's already poor credit and cuts of more
than $3 billion from the governor's budget.
And the bad news comes as California braces for summer power outages that
could further disrupt the economy.
"We are being hit with these reduced financial estimates just when we are
facing a critical need for more resources to get us through the power supply
problems this summer," said Tom Leiser, senior economist at the University of
California Los Angeles' School of Management. "The timing is pretty bad."
On Wednesday, Legislative Analyst Elizabeth Hill warned that California faces
a $4 billion budget shortfall in 2002-03 unless legislators trim Gov. Gray
Davis' already-revised $102.9 billion budget.
"It will be much more difficult to correct a $4 billion problem if they don't
start today," Hill told reporters.
Davis slashed $3.2 billion from his proposed budget Monday, blaming a
plunging stock market and a faltering economy reliant on income taxes and
stock gains from high-tech workers.
State power regulators had more bad news Tuesday, boosting rates by up to 80
percent for some customers in what was the largest increase in California
history.
In response, Moody's Investors Service downgraded California's credit rating
Wednesday, citing the energy crisis' stubborn drain on the state's finances.
Standard & Poors already rates California's credit among the worst in the
nation -- equal to Hawaii and slightly better than Louisiana.
Davis' latest budget plan assumes the state will be repaid by mid-August for
at least $6.7 billion in power buys. However, no one outside of the Davis
administration knows how much the state is paying for power, and if the
prices go too high, California could run out of money before the bond
revenues can replenish the treasury, analysts said.
Despite the dire predictions, finance department officials say California is
in better shape than it was during the recession of the early 1990s, when
then-Gov. Pete Wilson was scraping to make up for a $14 billion budget
shortfall.
"We've simply seen the end of a boom that was created by a soaring stock
market," said Sandy Harrison, spokesman for the state Department of Finance.
The Assembly and Senate must still approve a final budget for the next fiscal
year, which begins July 1.
Until then, Davis will face an aggressive cadre of Republican legislators who
on Wednesday blamed him for fobbing off all of the tough budget choices on
legislators.
Assemblyman George Runner, a Republican, said Davis has "abdicated his
responsibility to produce a responsible budget."

Scheduled blackout plan gaining favor
LIMITING PRICES: 3-state buyers' cartel with Northwest could create leverage
Lynda Gledhill, Chronicle Sacramento Bureau
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N88959.DTL&type=news
More blackouts but no ransom payments for energy gougers -- that's a deal
looking increasingly attractive to California lawmakers and consumer
advocates.
The idea, which has attracted the support of some key lawmakers and the
cautious interest of Gov. Gray Davis, is for the state to set a firm ceiling
on what it will pay power producers for electricity this summer -- and not
one dime more.
The trade-off would be certain blackouts, possibly more than if the state
continues to pay any price electricity sellers demand.
Some advocates of the idea think that California could minimize the number of
blackout hours and gain a measure of control over the energy crisis by
scheduling service interruptions.
"We need to stop this game of electricity chicken," said Michael Shames,
director of the Utility Consumers' Action Network, which first proposed the
idea. "We are likely to see blackouts this summer; we should use them to our
advantage rather than be victimized by them."
The plan calls for creating a "buyers' cartel" of California, Oregon and
Washington. Essentially, the states would decide at what price they were
willing to buy power and refuse to purchase once it tops that level.
The state has spent $6 billion on energy purchases since January, and at one
point during last week's power shortage was spending $1,900 per megawatt hour
-- more than 10 times what Davis has planned on for this summer. That kind of
spending cannot go on, Democratic Assemblyman Fred Keeley of Boulder Creek
said yesterday.
"The question is, can we sustain the level of spending we have and have the
state maintain economic stability? I believe the answer is no," said Keeley,
the lower house's main figure on energy policy and author of the bill that
put the state in the power-buying business.
"To get this problem solved, we have to think in bold terms," said Keeley,
who introduced a resolution along with fellow Democratic Assemblyman Paul
Koretz of West Hollywood that urged Davis to form a cartel.
THREE STATES ARE BETTER THAN ONE
Davis said last week that "my bias would be to keep the lights on at any
price." But yesterday, the governor said a temporary price limit is
"certainly a matter we've talked about and considered at some length. The
next step will be to see how the governors of Oregon and Washington respond
to it."
A spokesman for Gov. Gary Locke of Washington said the matter is being
considered. Calls to the office of Oregon Gov. John Kitzhaber were not
returned.
The idea has appeal among some consumers who believe, as many state officials
do, that California is being gouged for electricity.
"I can see if our bills were $20 or $30 more, but this is ridiculous," said
Kimberly Chambers, an 18-year-old fashion design student from Oakland.
"Whatever it takes, I don't think we should have to pay for more."
But Yunah Kim, 36, who moved to the Bay Area from New York a month ago, said
blackouts should not even be considered.
"The infrastructure of government is coming apart, and it's the basic service
government is able to provide," she said. "Businesses are not going to put up
with that. It's very shortsighted. We just have to pay until there's a
solution."
Severin Borenstein, director of the University of California Energy Institute
in Berkeley, said blackouts might be worse than supporters of price limits
believe.
"I think they (power companies) would call our bluff," and sell their
electricity elsewhere, Borenstein said. "I don't think the state has the
ability to credibly commit to paying no more than 'X.' That would be a very
controversial decision."
Legislation is already in the works to give Davis the ability to enter into a
West Coast buyers cartel. A bill sponsored by state Sen. Dede Alpert, D-
Coronado, would allow the Independent System Operator to refuse to buy power
if it is too expensive.
The maximum the state would pay would be set by a formula, based on such
things as the cost of natural gas. A reasonable profit for power producers
would be built in, supporters said.
LOOKING FOR SOME CONTROL
Alpert said everyone wants to avoid blackouts, but that seems unlikely.
"Everybody I talked to -- once you establish that there will be blackouts --
both businesses and residents say, let's have control," Alpert said.
The California Manufacturers and Technology Association, which commissioned a
recent report that said unplanned blackouts could cost the state economy $21.
8 billion and 135,000 jobs, is considering whether scheduled interruptions
would be less harmful.
"The problem if we do (scheduled blackouts) is that we may have an inordinate
amount of blackouts," said Gino DeCaro, a spokesman for the group.
NO EASY TASK
The ISO, which runs the state's power grid, is scheduled to issue a report
tomorrow on how scheduled blackouts might work.
Sen. Debra Bowen, D-Marina del Ray, said that planning blackouts is not as
easy as it sounds.
"The difficulty is a pragmatic one -- the circuits are not wired to deal with
choices like we are having to make," said Bowen, who has been holding
hearings on how the state might better manage blackouts.
"Maybe we should be paying people to turn off their fuse box," Bowen said.
Chronicle staff writer Marsha Ginsburg contributed to this report. / E-mail
Lynda Gledhill at lgledhill@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Airport accuses Texas firm of gouging
SFO to build plant with Hetch Hetchy
Alan Gathright, Chronicle Staff Writer
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N7566.DTL&type=news
San Francisco -- San Francisco International Airport officials angrily
accused a Texas energy firm yesterday of an 11th-hour attempt to price gouge
the airport in a deal for a 51-megawatt "peaker" plant needed to avoid summer
blackouts.
Instead, airport officials said they will work with the city-owned Hetch
Hetchy Water and Power agency to fast-track development of its own gas-fired
peaker plant, said airport spokesman Ron Wilson. The goal will be to build a
permanent 571-megawatt plant that could power 571,000 homes.
An irate Wilson said the airport broke off negotiations with El Paso Merchant
Energy Co. after the Houston firm allegedly jacked up the cost of the deal.
An original agreement to supply power to the airport was approved by the
airport commission March 20. The day before it was to be voted on, El Paso
indicated that it was going to need more money -- and the airport said the
numbers being discussed were untenable.
"They wanted to get into our pockets so deep that we're not even dealing with
them anymore," Wilson said. The terms of the rejected agreement were not
immediately available yesterday.
"DOLLAR SIGNS FLASHING"
"The dollar signs are flashing in their eyes and they don't care whether
you've got power or not as long as they can make their money," Wilson said.
An official of the Texas firm's parent company, El Paso Corp., expressed
surprise at the San Francisco airport's decision to break off negotiations
and denied any charges that the supplier tried to shake down the airport.
"As far as we're concerned, we're still negotiating on the project with them
and we'd love to do it," said Norma Dunn, an El Paso senior vice president.
"All of the talk of changing the deal, of course, is not true. We're still
very much willing to sit down and work this out."
California regulators are also accusing El Paso Merchant Energy of trying to
drive up natural gas prices by restricting access to the company pipeline
into Southern California.
The SFO plant was scheduled to go online in August.
Airport officials said yesterday that the airport now plans to begin
assembling 10 one-megawatt plants that could be running by June 1 to help
keep airport terminals cool when the summer power crunch arrives.
SEVERAL SCENARIOS
Because the California Energy Commission has already licensed the El Paso
peaker plant, SFO could quickly take over the project under several
scenarios, said Claudia Chandler, the CEC's assistant executive director.
The fastest way is for El Paso to voluntarily transfer the plant license to
SFO, which could have the peaker plant running by late July, she said.
If El Paso won't cooperate, SFO could seek its own license under a 21-day
approval process that Gov. Gray Davis ordered in February to speed
development of the temporary plants.
Given the 21-day approval, SFO could have the plant running by September. To
speed approval, Chandler said, the airport would have to keep the location,
size and type of plant similar to the El Paso proposal.
If there are substantial changes, SFO could seek a seven-day license
amendment.
"Even if SFO was unsuccessful in negotiating with El Paso to transfer the
license, if they filed their application right now . . . that puppy would go
through the licensing process quite rapidly," Chandler said. 'We're very
focused on getting new generation online to meet this summer's electricity
demand. Every megawatt that we can bring online counts."
E-mail Alan Gathright at agathright@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 15

Judge orders PG&E to pay overdue taxes to counties
S.F. still must dip into cash reserves for energy bills
Rachel Gordon, Jason B. Johnson, Chronicle Staff Writers
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N238828.DTL&type=news
San Francisco -- Bay Area governments, strapped by rising energy costs,
received a bit of a boost yesterday when a federal bankruptcy judge ordered
the Pacific Gas and Electric Co. to pay their outstanding property taxes, but
the overall energy outlook still appears bleak.
Rising energy bills in San Francisco, for example, forced a Board of
Supervisors panel yesterday to dip $4 million into the city's reserves, set
aside for everything from hospital laundry service to heat at the jails.
A Bankruptcy Court judge in San Francisco ordered PG&E to pay $41 million in
overdue property taxes the utility owes California counties.
The utility's taxes were due April 10. It's still unclear whether PG&E will
have to pay roughly $8 million in penalty fees to 49 counties.
"Money like that is welcome," said Napa County Treasurer-Tax Collector Marcia
Humphrey, whose county is owed $262,364 in property taxes and another $26,000
in penalties.
While yesterday's decision helps, Bay Area cities and counties are struggling
to balance higher energy costs with the other demands on their budgets.
For example, Alameda County spent $1.4 million on natural gas during the last
fiscal year and expects to spend $2.3 million during the current fiscal year,
which ends June 30. Next year, the natural gas budget will jump to $2.7
million, said Matthew Muniz, energy program manager for Alameda County.
Alameda County had budgeted $6.8 million for electricity costs, Muniz said,
but that may balloon to $12.3 million in the worst case scenario. The
additional money has been set aside in a contingency fund so services
shouldn't be affected.
Santa Clara County faces a similar situation.
"The (power) budget is going to be bigger this year, that's for sure. But how
much bigger, we don't know yet," said Kevin Carruth, Santa Clara County's
director of the General Services Agency.
In San Francisco, operations supported by the general fund -- among them
recreation centers, the hospital and health clinics, police stations,
firehouses, the animal shelter and the jails -- originally were allocated
$10. 5 million for energy costs. Now the bills are projected to jump to
nearly $17 million -- a 61 percent increase.
Some departments plan to absorb all or part of the costs; others needed a
special handout, totaling $4 million, which the Board of Supervisors Finance
Committee approved yesterday. Operations that don't rely on the general fund,
such as Muni and the airport, are expected to overspend their power budgets
by another $5 million, bringing the citywide energy deficit to $11 million.
"It's a strain on the budget, but it's not a budget buster," said City
Controller Ed Harrington.
As power costs have jumped, the city has fattened its coffers with an extra
$5 million in user utility tax revenue levied on commercial power customers.
And Tuesday's electricity rate increase approved by the state Public
Utilities Commission may mean even more money for San Francisco. The city's
Hetch Hetchy power agency, which generates and sells electricity, will be
able to charge more because its rates are tied to those charged by PG&E.
Meanwhile, government leaders are looking for creative ways to combat the
energy crunch.
San Francisco Board of Supervisors President Tom Ammiano yesterday presented
an ambitious proposal to install a network of energy-producing panels on
rooftops in San Francisco's sunny neighborhoods. Ammiano predicted that in
seven to 10 years the project could produce up to 50 megawatts of
electricity, meeting about 5 percent of the city's energy needs.
Ammiano's idea calls for a private-public partnership. He hopes the project,
which would require at least 140,000 acres of solar modules, would be large
enough to result in lower costs to buy and maintain the equipment.
At the same time, government officials are scrambling to conserve energy now.
San Francisco Mayor Willie Brown ordered a 10 percent reduction of power use
this year, with more decreases called for next year.
Tell us what you think -- Can you save 20 percent on your energy usage? Gov.
Gray Davis' administration is offering rebates to Californians who save on
power starting in June, and if you have a strategy for conserving, The
Chronicle wants to hear it. We'll be writing about the hardest-working energy
savers in a future story. To get involved, write to the Energy Desk, San
Francisco Chronicle, 901 Mission St., San Francisco CA 94103; or
e-mailenergysaver@sfchronicle.com.
E-mail the writers at rgordon@sfchronicle.com and jbjohnson@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 13

PG&E Corp. accused of gouging in East
Boston company wants federal energy regulators to intervene
David Lazarus, Chronicle Staff Writer
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N235086.DTL&type=news
San Francisco -- San Francisco's PG&E Corp., which complains about being
gouged by out-of- state power generators, is itself gouging consumers in the
Boston area, Massachusetts' largest investor-owned utility has charged.
Nstar, owner of Boston Edison Co. and Cambridge Electric Co., asked federal
regulators this week to prevent PG&E Corp. and Sithe Energies Inc. from
increasing electricity prices during power shortages.
"With two local companies controlling almost 90 percent of supply, they have
the ability to corner the market and dictate excessive prices that we and our
customers believe are unjust and unreasonable," said Paul Vaitkus, Nstar's
vice president of energy supply.
Peter Meier, associate general counsel for PG&E Corp.'s National Energy
Group, denied yesterday that his company's plants have overcharged Boston
consumers.
"We're not exercising market power," he said. "We charge rates that bring us
a fair and reasonable return."
PG&E Corp. owns 21 power plants in the New England area, mostly hydroelectric
facilities. Sithe Energies, based in New York, holds stakes in 27 North
American plants, primarily in New York and Massachusetts.
Nstar's Vaitkus said power prices routinely soar whenever regional
transmission lines become overburdened and local utilities are forced to buy
power from PG&E Corp.'s and Sithe's generating facilities.
'CONGESTION CHARGES'
He said Boston area consumers were forced to pay about $70 million in
"transmission congestion charges" last year, and he called upon the Federal
Energy Regulatory Commission to limit PG&E Corp.'s and Sithe's prices to "out
of pocket expenses."
"We are asking FERC to do what they have recently done in California and
prevent generators from charging excessive prices to energy companies and
their customers when the market is not workably competitive," Vaitkus said.
In fact, the regulatory commission has provided only limited relief to
California and has steadfastly refused to place a limits on runaway wholesale
power rates, which drove PG&E Corp.'s utility subsidiary, Pacific Gas and
Electric Co., into bankruptcy.
PG&E Corp.'s Meier said there is no reason for the regulatory commission to
act against his company in New England.
"We don't increase our prices above fair return during periods of
congestion," he said.
PG&E CORP. AND POLLUTION
But Lori Ehrlich, a Boston environmental activist, countered that it is
impossible for Massachusetts residents to take PG&E Corp. at its word.
"They've polluted our local environment, lied to us and played every trick in
the book," she said. "There is arrogance at the heart of this company."
Emissions from two of PG&E Corp.'s coal-fired plants were linked by the
Harvard School of Public Health last year to illnesses and premature deaths
in the region.
Ehrlich's organization, HealthLink, began a statewide campaign in
Massachusetts yesterday to educate citizens about toxic emissions from coal-
fired power plants.
"Eighty dump trucks of coal waste per day are currently carted away from PG&E
Corp.'s two coal-burning power plants in Salem and Somerset," she said.
In Nstar's case, the company asked federal authorities to order PG&E Corp.
and Sithe to refund customers for past overcharges and to limit what the two
companies can charge during shortages.
"We have an obligation to our customers to monitor the market and bring to
the attention of regulators market inefficiencies and imperfections," Vaitkus
said.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 14

Nuclear, fossil fuels at heart of Bush plan
SWEETENER: $6.3 billion in tax credits for solar and renewable power
Carolyn Lochhead, Chronicle Washington Bureau
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N233180.DTL&type=news
Washington -- The Bush administration, warning that the nation faces its most
serious energy crisis since the 1973 oil embargo, last night released
highlights of a long-awaited national energy plan that relies on increasing
supplies of energy.
As expected, the plan proposes to increase production of fossil fuels and
nuclear power, in many cases by easing regulatory barriers, while sweetening
the deal with $6.3 billion in new tax credits for "green energy" fuels such
as solar and biomass.
While declaring that years of "neglect" have created the problem, the
administration's report on the plan insists that technology, not austerity,
offers a way out.
"Our prosperity and way of life are sustained by energy use," the report
says.
Speaking briefly to reporters, President Bush called the plan "a very
optimistic look at America," but one that is "tough, in that it lays out the
problems."
The 163-page plan cites California's blackouts in its second paragraph,
saying they "demonstrate the problem of neglecting energy supply." But as to
immediate remedies, the plan says, "unfortunately, there are no short-term
solutions to long-term neglect."
"We're going to solve this problem," Bush said early yesterday before the
report's release. "This isn't just a report that's going to gather dust."
Reacting to charges that he is offering no immediate relief on gasoline
prices and is captive to the energy industry, Bush also promised that his
administration would "make sure that nobody in American gets illegally
overcharged" for gasoline and that federal electricity regulators would
monitor prices "to make sure they are fair and reasonable."
Bush also said he has worked with California officials to expedite power
plant permitting and is "deeply concerned" about the state.
"The quicker supply gets on, the easier it's going to be for the consumers in
the state of California," Bush said.
White House officials said Bush will issue two executive orders next week
that would direct federal agencies to speed permitting of energy facilities
and require studies of the energy impact of regulatory actions.
As the administration has said in interviews and statements the past month,
the report focuses on increasing supplies of traditional fossil fuels and
nuclear power, with a heavy stress on updating the nation's electricity grid
and other energy infrastructure.
A senior administration described the grid as a relic of the 1950s that
balkanizes the country into isolated power islands, preventing transmission
from areas of ample supply to areas of shortages.
In an attempt to mitigate rising gasoline prices, the report also orders an
Environmental Protection Agency review of "boutique" gasoline formulas that
various states require to control air pollution. The aim is to standardize
fuel blends so that regions are less dependent on single refineries.
In a pre-emptive strike, Democrats attacked the plan as ineffective hours
before the highlights were released.
"The president seems almost totally indifferent" to California's blackouts,
said House minority leader Richard Gephardt, D-Mo.
The report calls for easing regulations that inhibit new electricity
transmission lines and gas pipelines, including calling for federal
condemnation of private property to build power lines.
It stresses increased use of coal as the nation's "most abundant fuel source"
and recommends revisiting nuclear power, encouraging expansion of existing
plants and easier licensing for new nuclear technologies.
DRILLING ON PUBLIC LANDS
And it calls for a thorough review of all public lands to open areas for
potential oil and gas exploration, including a recommendation that 8 percent
of the Arctic National Wildlife Refuge be opened to oil and gas exploration.
Administration officials said there are no plans to challenge the current
moratoriums on new oil leasing off the coasts of California or Florida.
But the policy also makes a pitch for renewable fuels and conservation. The
report calls for applying new technologies to conservation, including a $4
billion tax credit for hybrid automobiles that run on both gasoline and
electricity, including fuel cells.
It would expand tax credits for biomass, and create a 15 percent tax credit,
up to $2,000, for consumers who install solar energy panels in their homes.
Yet while renewables "provide hope for America's future," the report says,
they currently meet just 2 percent of U.S. energy needs.
"The day they fulfill the bulk of our needs is still years away," the report
said. "Until that day comes, we must continue meeting the nation's energy
requirements by the means available to us."
The plan also insists that technology can help Americans have more energy and
a cleaner environment at the same time.
Americans want to conserve energy, the report says, but the "best way of
meeting this goal is to increase energy efficiency by applying new
technology."
FUEL-EFFICIENCY STANDARDS
The plan dodges any recommendation on raising auto fuel-efficiency standards,
a glaring omission for environmentalists. Sens. Dianne Feinstein, D- Calif.,
and Olympia Snowe, R-Maine, want higher standards for light trucks, including
SUVs, saying that could cut oil imports by 10 percent.
However, a senior administration official also said that Energy Secretary
Spencer Abraham has been directed to revisit proposed cuts in research into
solar, wind, biomass and other renewable fuels. Abraham slashed the programs
in Bush's budget, and the official said much of that spending may be
restored.
Bush plans to showcase the full report in a speech in St. Paul, Minn. today,
at a high-tech utility using efficient new "heat and power" systems and
biomass fuels as a backdrop.
Of the plan's 105 recommendations, the administration touts 42 of them as
encouraging alternative fuels, conservation and environmental protection,
while saying 35 focus on increasing energy supply and modernizing the
transmission infrastructure.
SUPPORT FOR RENEWABLES
A new USA Today/CNN/Gallup poll showed why the administration has been
suddenly stressing renewables.
Taken last week, the poll showed 91 percent support for investments in solar,
wind and other renewable sources, and more than 80 percent support for
mandating new energy efficiency standards in appliances, buildings and cars.
Twenty items in the report, including the unpopular proposal to drill in the
Arctic refuge, require congressional action. Senate majority leader Trent
Lott, R-Miss., said he would like to have a comprehensive energy bill passed
by July 4.
Bush energy plan
Among recommendations in President Bush's energy plan:
Production: Ease restrictions on oil and gas development on public lands;
open a portion of the Arctic National Wildlife Refuge in Alaska to drilling;
ease permit process for refinery expansion and construction.
Power plants: Give government authority to take property through eminent
domain for power lines; ease regulatory barriers, including clean air rules,
to make plants more efficient.
Other areas: Give tax breaks for purchase of nuclear plants; continue tax
credits for wind energy generation.
Conservation: Give tax credit for purchase of high-mileage, hybrid gas-
electric vehicles.
Source: Associated Press
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E-mail Carolyn Lochhead at clochhead@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Public power booster gets a top job at S.F. PUC
Edward Epstein, Chronicle Staff Writer
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N225696.DTL&type=news
San Francisco -- Mayor Willie Brown has hired a longtime advocate of public
power associated with David Freeman, Gov. Gray Davis' top electricity
adviser, to help increase San Francisco's independence from PG&E.
Brown's hiring of Edward Smeloff, a former elected board member at the
Sacramento Municipal Utility District, for a top post at the city Public
Utilities Commission is another step in the mayor's attempt to create a
regional power authority -- and give the city greater energy security. Such
an agency could build power plants and enter into long-term electricity
contracts.
"I can't think of a bigger challenge than coming back to California and
helping San Francisco get through this summer, encourage conservation and
then put together a long-term plan so San Francisco becomes invulnerable in
its power supply," said Smeloff, who now lives in New York. He will start
work on June 4 as the city PUC's assistant general manager for power policy,
planning and resource development.
Smeloff, whose hiring will be announced today, was an elected board member at
Sacramento's public utility from 1987 to 1997. The utility, which almost went
bust in the 1980s because of problems with its Rancho Seco nuclear power
plant, hired Freeman as its general manager in 1990.
Freeman later went on to head the Los Angeles Department of Water and Power
and now is the state's chief power buyer.
After leaving Sacramento, Smeloff moved to New York, where he is executive
director of the Pace University Law School energy project.
Brown's hiring of Smeloff still leaves open the top job at the San Francisco
PUC. The agency has been headed by temporary general managers since Anson
Moran retired in January 2000 and Brown and the PUC continue to look at
candidates.
There has been grumbling at City Hall that Brown's inability to find a new
PUC boss has undercut his own goal of raising public power production.
Mayoral spokesman P. J. Johnston said the mayor considers "Smeloff's hiring a
big step toward improving San Francisco's position in regards to public
power."
Smeloff's appointment comes while the city's electricity future is in flux.
Hammered by the state power crisis, voters in November could face as many as
three electricity-related ballot measures.
One measure, proposed by longtime public power advocates, would create a
municipal utilities district in the city with an elected board, much like the
one in Sacramento. A second, pushed by Supervisors Gavin Newsom and Tony
Hall, would create a city power authority. A third, backed by Supervisor Mark
Leno, calls for selling as much as $125 million in bonds to install
solar-generating facilities on city property.
Smeloff said the existing PUC, which generates power through the Hetch Hetchy
hydroelectric dams, is going in the right direction by pursuing an agreement
with Palo Alto and the city of Santa Clara to form an alliance of Bay Area
public power agencies. The accord could lead to joint purchases of power, in
search of lower costs, and maybe to the construction of new power plants.
E-mail Edward Epstein at eepstein@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 13

Subpoenaed documents withheld
Power companies say no to Lockyer
Robert Salladay, Chronicle Sacramento Bureau
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N191789.DTL&type=news
Sacramento -- Three power companies under investigation by Attorney General
Bill Lockyer for allegedly gouging California consumers and manipulating the
energy market have refused to hand over key documents to the state.
A May 25 court hearing in San Francisco has been set to resolve the dispute
between Lockyer and the three companies based in Texas and Georgia. Although
some documents have been turned over, Reliant, Mirant and Dynegy have refused
to disclose internal company information since it was subpoenaed by Lockyer's
office Feb. 15.
According to copies of the subpoenas, Lockyer is looking for evidence that
the power companies, among other things, withheld energy or shut down plants
for "maintenance" in order to squeeze supply and drive up prices.
Lockyer has asked for at least 91 separate types of documents, from personnel
and maintenance records to computer programs and e-mails.
In court filings, the power companies have objected almost line by line to
Lockyer's request, calling many of the requests "vague, ambiguous and
unintelligible." In other cases they object to sharing personnel information
and even computer programs because, as Mirant wrote in its response,
"software licenses do not allow them to distribute copies of software."
But the power companies also object to handing over confidential information
about their business to government attorneys at the same time the companies
are negotiating with other government officials over selling power to the
state.
"We have never said we didn't want to cooperate with the attorney general,"
said Chuck Griffin with Mirant Energy. Griffin said some boxes of information
were sent to Lockyer yesterday while others are being kept until
confidentiality concerns can be addressed.
Because of the dire financial situation at PG&E and Southern California
Edison, the state Department of Water Resources has taken over responsibility
for negotiating long-term contracts with power suppliers and is buying power
on the spot market to keep the state running.
In its April filing with the court, Lockyer's office promised to keep
critical documents away from "government agencies (the Department of Water
Resources) that have acted as Reliant's competitors in the market or with
whom Reliant is negotiating electricity contracts."
Richard Wheatley, a spokesman for Houston-based Reliant Energy, said he
couldn't comment much beyond the court documents except to say, "We can't be
assured that the information would in fact be kept confidential within the
attorney general's office."
E-mail Robert Salladay at rsalladay@sfchronicle.com
,2001 San Francisco Chronicle ? Page?A - 14

Green lobby hopes Bush plan offers them more in final form
Carolyn Lochhead, Chronicle Washington Bureau
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N187253.DTL&type=news
Washington -- As President Bush prepares to release his energy plan today,
the solar, biomass and other "green" energy industries are cautiously
optimistic about what it will contain.
Despite the advance thrashing Bush has taken for his pro-nuclear, pro-
drilling approach, producers of renewable fuels are expecting a host of tax
credits to make their products more competitive with fossil fuels.
Still, alternative-fuel lobbyists briefed on the report by Vice President
Dick Cheney said the plan will be quite vague. They were told to expect no
numeric goals on how much of U.S. energy needs should be supplied by
renewables or any other source, and few specific legislative guidelines.
"I expect the biggest thing this plan will do is give representatives who
care about clean energy the cover to do what they want to do," said Katherine
Hamilton, co-director of the American Bioenergy Association.
Indeed, despite nearly four months' work by a top-level multiagency task
force headed by Cheney, the report is expected to leave most of the messy
details of a new energy policy to Congress.
As a result, it may ignite a free-for-all on Capitol Hill, sending lobbyists
for every imaginable fuel source and efficiency scheme scrambling for some of
the action.
Among its few specifics, the report is expected to call for bigger tax
credits for biomass and a 15 percent tax credit, up to $2,000, for consumers
who install solar energy panels in their homes.
"If we could get tax credits -- and the Cheney plan is going to have tax
credits to expand biomass to use crop residues -- it will become cost
effective," Hamilton said.
The administration has often said that U.S. energy needs would require large
investments in new power plants -- 1,300 of them over the next 20 years - -
and more fossil fuels, including coal, oil and natural gas, along with a
fresh look at nuclear power. The statements have sent environmental groups
into an uproar, and the administration has been working to counter its
pro-oil image.
Cheney told renewable-fuels lobbyists that almost all the report's financial
incentives will be for energy efficiency and renewables, not fossil fuels.
But reliance on fossil fuels and nuclear power will still be the thrust of
the report, giving short-shrift to conservation and renewables, advocates
said.
"There are going to be some things we're going to support," said Carol
Werner, executive director of the Environmental and Energy Study Institute, a
nonprofit policy group. "We're just very concerned that the balance is going
to be tilted in the other direction."
Ironically, while Bush is best known as an oil industry veteran, his Texas
ranch house has incorporated state-of-the art energy-efficiency features,
including a geothermal heat pump.
"He's done a great job with their house," Werner said. The question, green-
energy advocates say, is whether he will try to extend those ideas elsewhere.
One of the most glaring deficiencies for environmentalists is what they
believe to be the report's failure to recommend raising auto fuel-efficiency
standards. Sen. Dianne Feinstein, D-Calif., and Olympia Snowe, R-Maine, want
higher standards for SUVs, saying that could cut oil imports by 10 percent.
Automakers are opposed, and the administration wants to wait for a National
Academy of Sciences report due in June.
Among other things, the report is expected to:
-- Recommend making it easier for businesses or consumers who generate their
own electricity, say by solar panels, to sell it into the grid. It will not
advocate requiring utilities to buy a specific percentage of renewable power.
-- Encourage development of geothermal plants on federal lands and ease
permitting for renewable-fuel plants.
-- Encourage locating power plants on brownfields, which are abandoned
industrial sites where redevelopment is hindered by environmental
contamination.
-- Advocate hydrogen and fusion research.
Despite all the attention, the Bush plan may serve chiefly as a starting
point for Congress.
"My prediction is that it will be a little of this, and a little of that, and
probably more tax credits than make sense because everybody likes them," said
Paul Portney, president of Resources for the Future, a Washington think tank.
The one thing no politician wants, however, is for increased prices to
dictate conservation and increased supply. High prices are only now making
some renewable sources competitive with fossil fuels.
"To economists, letting the price rise is the solution," Portney said. "To
elected representatives, having the price go up is the problem."
Although Bush is declaring a U.S. "energy crisis" that requires a big supply
push, Portney predicted that three to five years from now, "the next energy
crisis is going to be too much capacity and depressed prices for oil, gas and
possibly even electricity."
High prices have already sent energy profits soaring and stirred a boom in
natural gas drilling and power plant construction. High prices and the
economic slowdown are expected to soften demand.
Boom and bust cycles typify the energy industry.
E-mail Carolyn Lochhead at clochhead@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 15

PG&E's shareholders steadfast
Despite fiscal misery, meeting gives thumbs up to chairman
David Lazarus, Chronicle Staff Writer
Thursday, May 17, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/17/M
N185567.DTL&type=news

San Francisco -- PG&E Corp. Chairman Robert Glynn, who has become one of the
poster boys for California's ever-worsening energy troubles, was at last
among friends yesterday.
The company's annual shareholder meeting in San Francisco was, more than
anything else, an affirmation from PG&E's legion of gray-haired stockholders
--
many of whom have held the company's shares for decades -- that they will
stick with Glynn come hell or high water.
Or the bankruptcy of PG&E's flat-broke utility subsidiary.
Shareholder John Monahan rose at the meeting to tell Glynn, "You're doing a
great job."
He and others appeared encouraged by PG&E's repeated declarations in recent
weeks that things aren't as bad as they seem.
"Chapter 11 is not a destination," Glynn told the roughly 500, mostly elderly
shareholders gathered at the Masonic Auditorium on Nob Hill. "It's not a
place we want to stay. It's a portal through which we're moving to restore
Pacific Gas and Electric to full financial health."
The audience applauded enthusiastically.
"There are many challenges in the future," Glynn said. "But there's also a
very solid foundation on which to build."
More applause.
PG&E's shareholder meeting came just one day after state regulators adopted
the largest rate increase in California history, resulting in bills rising by
37 percent for some of the utility's residential customers.
No one in the auditorium held this against the company. Nor was there much
resentment over the utility having filed for Chapter 11 protection.
Similarly, few shareholders said they were perturbed by the company's
decision last month to write off nearly $7 billion in debt or to forgo
dividend payments.
"The company is doing all right," said 84-year-old C.J. Megas. "It's the damn
politicians."
This was a common refrain among PG&E shareholders: Things would be fine if
only Gov. Gray Davis and state regulators would stop meddling and allow PG&E
to get on with its business.
"I'll hold on to my shares," said Robin Sparks, 60. "I can support this
company. It's the politicians that are ruining things."
Never mind that PG&E's stock closed yesterday at $11.14, or less than half
the level of last year's annual meeting.
Consumer advocate Medea Benjamin tried to stir things up by gaining access to
the meeting and calling for the resignation of Glynn and other board members.
"Where is your responsibility?" she shouted while being hustled from the
auditorium by security guards.
"Give my regards to Gray Davis," one shareholder shot back amid hearty
laughter from the crowd.
Of course, some actual business also got done. Shareholders approved all the
procedural motions that management supported and voted down everything
management opposed.
PG&E was so confident of the company's ability to choreograph the meeting
that, at dress rehearsal on Monday, it was deemed unnecessary to have Glynn
field mock questions to prepare for a possible drubbing from irate
stockholders.
By and large, Glynn stuck to the same script he has been reading from since
PG&E filed for bankruptcy on April 6.
Chapter 11 was necessary, he said, because the company was left with no other
recourse after regulators passed a series of "negative decisions" affecting
the utility and bailout talks with the governor collapsed.
State officials, Wall Street investors and many of PG&E's own customers may
be biting their fingernails awaiting some resolution to the company's
financial problems.
But most individual PG&E shareholders are prepared to let things run their
course, and they don't seem to mind very much how long this might take -- or
how bad things may worsen before California's energy woes are over.
"You know," said Alec Willis, 65, "one of the best things that could have
happened for California would be if Southern California Edison had declared
bankruptcy right after PG&E."
He nodded to himself.
"Maybe that would have gotten the attention of Sacramento," Willis said.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 14

Bush's national energy bluepring won't help California
Posted at 11:16 p.m. PDT Wednesday, May 16, 2001
JIM
PUZZANGHERA
Mercury News Washington Bureau

WASHINGTON -- President Bush will unveil a national energy plan today that
offers little help for California this summer but tries to shield the rest of
the nation from the same debilitating blackouts in the future with more oil
and natural-gas drilling and greater use of coal and nuclear power.
In previewing the plan Wednesday, Bush and White House officials emphasized
that conservation and improving energy efficiency through high technology are
significant parts in meeting the nation's growing energy needs and reducing
dependence on foreign oil. Of the plan's 105 proposals -- most already made
public -- 42 deal with conservation, development of alternative fuels and
environmental protection.
A senior administration official said Wednesday that the only item in the
plan that could help California this summer is a planned presidential order
to have federal agencies expedite permit approvals for new power plants
nationwide. But Bush already ordered those quicker reviews for California
earlier this year. The other specific California proposal would direct the
secretary of energy to look into helping the state improve the current
transmission bottleneck between Northern and Southern California.
``Unfortunately, there are no short-term solutions to long-term neglect,''
the Bush plan says of California's crisis.
More broadly, the White House believes the proposals to increase supply and
improve electricity and natural-gas distribution are the keys to helping
California and the rest of the country deal with energy problems. The
163-page proposal says the United States is facing ``the most serious energy
shortage since the oil embargoes of the 1970s.''
Bush on Wednesday directed two federal regulatory agencies to monitor
electricity prices in the state and elsewhere and ``make sure that nobody in
America gets illegally charged.''
But the state's problem is largely its own to solve, Bush administration
officials have repeatedly said.
California Gov. Gray Davis has been pleading with federal regulators to
temporarily cap the price of wholesale electricity throughout the West to
give the state time to get new power plants on line. But Bush on Wednesday
reiterated his opposition to those controls.
That angered Davis and other California Democrats.
``Without just and reasonable prices for power, the crisis here in California
and the West inevitably will spill over and damage the already-sluggish
national economy,'' Davis said. ``Mr. President, runaway energy prices are
not just a California problem. With all due respect, I once again urge you to
stand up to your friends in the energy business and exercise the federal
government's responsibility to ensure energy prices are just and
reasonable.''
Long-term proposals
Instead of price controls for California or elsewhere, the White House is
focusing on long-term energy proposals that may not even get passed by
Congress, let alone be producing results, by the height of California's
summer.
For example, drilling in Alaska's Arctic National Wildlife Refuge, which Bush
is asking Congress to allow, is not expected to produce any oil for at least
five to 10 years. The supply is estimated at 6 billion barrels, enough to
satisfy total U.S. demand for only nine months.
Bush and Vice President Dick Cheney have said several times since taking
office that the administration believes that the main way to solve the
problem is to increase the nation's energy supplies.
That stance, backed by most Republicans and the energy industry that Bush and
Cheney both once worked for, puts the administration at odds with most
Democrats and the environmental movement. The plan's release officially
ignites one of the largest political battles in years.
``It provides over 100 proposals to diversify and increase the supply of
energy, innovative proposals to encourage conservation and ways to make sure
that we get energy from producer to consumer,'' Bush said Wednesday after
receiving the plan from the high-level administration task force headed by
Cheney that drafted it over the past three months.
But Carl Pope, executive director of the Sierra Club, said the
administration's conservation proposals don't change the fact that the White
House plan overall is bad for the environment and the nation.
``There's a Texas saying that the president apparently is very fond of, which
goes, `You can put your boots in the oven, but it doesn't make them
biscuits,'?'' Pope said. ``When they start claiming this plan is about clean
energy, about progressive technology, about energy efficiency, they're
putting their boots in the oven. I'd rather bake biscuits.''
Highlights of plans
Among the highlights released by the White House last night are:
?Require that all major federal regulatory actions take into account the
impact on energy supplies, distribution and use, including decisions made
about federal lands.
?Encourage the expansion of nuclear-power plants, and study whether
reprocessed nuclear waste can be used to generate power. The technology,
abandoned in the United States 30 years ago but used elsewhere, produces
weapons-grade plutonium that can lead to national security risks.
?Spend $3 billion over 10 years on programs to assist low-income people with
heating and electric bills as well as to prepare their homes for cold
weather.
?Spend an additional $2 billion over 10 years on research into burning coal
more cleanly.
?Spend $4 billion over 10 years on tax credits for consumers who purchase
hybrid electric-gasoline vehicles or vehicles powered by new hydrogen fuel
cells.
``It's tough in that it lays out the problems,'' Bush continued. ``It's a
direct assessment of neglect, but this great nation of ours, because of our
technology, our attitude, our adherence to free enterprise, our willingness
to conserve, we're going to solve this problem.''
The vast majority of the proposals -- 85 -- can be acted on by Bush and
federal agencies, and 20 require congressional approval.
While serving as the poster child for a potential national energy crisis,
California gets little assistance in the Bush plan as it faces a summer of
soaring prices and predictions of extensive rolling blackouts. Bush noted the
administration had worked with Davis to expedite federal review of state
power plant proposals.
``So the quicker supply gets on, the easier it's going to be for the
consumers of the state of California. We're deeply concerned about the state
of California, as we are with the rest of the nation,'' said Bush, who will
be traveling to Southern California later this month in his first trip to the
state since last fall. ``But we haven't had an energy policy. Interestingly
enough, this is the first comprehensive energy policy probably ever,
certainly in a long time.''
Former President Jimmy Carter had the last major energy program during his
administration in the midst of the energy crisis of the late 1970s. But
unlike Carter's proposals, which in part sought government mandates to
increase supply and urged Americans to conserve, Bush emphasizes free-market
solutions.
No lifestyle changes
The plan's message for Americans is that high-tech advances in energy
efficiency, coupled with increased energy supplies, will allow them to avoid
sacrificing their way of life to solve the energy problem.
The plan's conservation proposals come after Cheney infuriated
environmentalists when he belittled conservation in a major energy speech
last month. ``Conservation may be a sign of personal virtue, but it is not a
sufficient basis for a sound comprehensive energy policy,'' Cheney said.
Democrats and environmental groups have charged that Bush's plan simply does
the bidding of large oil and energy companies. Bush received $2.8 million in
campaign contributions during his presidential bid from the energy and
natural-resources industry, according to the Center for Responsive Politics.
``For big oil and other suppliers, the Bush energy plan is a dream come
true,'' said Sen. Dianne Feinstein, D-Calif. ``But clearly among those most
left out by the plan are the people and businesses of California who have
been under siege by electricity and natural-gas marketers bent on gouging
every cent they can from a broken energy market that the Bush administration
has refused to try to fix.''
But Bush said he's optimistic his plan will solve the nation's energy
problems. ``I think this is a country that is going to show the rest of the
world how to deal wisely with energy,'' he said.

Cogeneration will get presidential spotlight
Posted at 11:21 p.m. PDT Wednesday, May 16, 2001
BY SETH BORENSTEIN

Mercury News Washington Bureau

WASHINGTON -- President Bush and environmental groups agree on at least one
part of his energy plan. Both want to promote a kind of utility plant that
produces both electricity and heat or air conditioning and operates twice as
efficiently as existing power plants.
Bush will spotlight the process, called combined heating and power, or
cogeneration, today in St. Paul, Minn., when he unveils his energy policy at
the city's downtown heating-and-cooling plant, which soon will be making
electricity, too.
Two-thirds of the potential energy in the coal, oil or natural gas burned in
conventional electric power plants escapes as waste heat or pollution. In a
cogeneration plant, the waste heat is used to warm buildings or run air
conditioners.
``We use two fires when we could use one,'' said Tom Casten, president of
Private Power LLC, a Chicago-area combined heat company, and the chair of the
International Cogeneration Alliance, based in Brussels, Belgium.
U.S. cogeneration has been growing in recent years, but it isn't as popular
as it is in Europe, Casten said. The United States gets 7 to 9 percent of its
power from cogeneration plants, he said. Mainly, heavy industries, college
campuses and downtown sections of older cities such as New York and
Philadelphia use it.
Denmark gets 59 percent of its electricity from cogeneration; the Netherlands
gets 42 percent. Finland hasn't built a new central power plant in 20 years
and China in the past decade hooked up a system to heat 55 million families
through cogeneration plants, Casten said.
``There's an incredible amount we can do which we're not doing,'' Casten
said. ``If we operated at the efficiency of the Netherlands or Finland we'd
save $77 billion a year.''
To move in that direction, the Bush administration's new energy policy will
include two provisions. One would speed up depreciation under the tax code
for cogeneration equipment. The other would rewrite environmental regulations
in ways that would make cogeneration easier.
The Bush plan also will try to improve relations between cogeneration
companies and conventional power companies. They are split over two issues:
how conventional utility companies pay for electrical power from cogenerators
and how they get it.
Some environmental groups are grudgingly on board. ``They're making all the
right noises,'' said Phil Clapp, the president of the National Environmental
Trust, a Washington ecology lobby. ``But the proof is going to be in what
they send to Capitol Hill.''

Contact Seth Borenstein at sborenstein@krwashington.com.

Conservation lab test begins
Published Thursday, May 17, 2001, in the San Jose Mercury News
HERE'S the experiment into which California residents and businesses have
been dragooned: Will higher prices cause consumers to cut back their use of
electricity?
On Tuesday, the California Public Utilities Commission bowed to the reality
of the electricity shortage. People will have to pay more. Industry will pay
a lot more. One beneficial side effect should be that they use less power.
Until now, consumers have been buffered from high electricity prices.
Starting June 1, that's over, except for residents who are especially
thrifty.
The PUC imposed an overall rate increase of 3 cents per kilowatt hour in
March, but it did not decide until Tuesday how to apportion the pain among
residents, farmers, businesses and industry.
The allocation of pain left no one happy. The only thing certain in cases
like these is that each class of customers feels in its heart that the other
guys are getting a sweet deal.
The PUC ``caves in to industry lobbying,'' said the consumer group TURN. The
PUC ``strangled'' business, said the Silicon Valley Manufacturing Group.
Discounting the hyperbole, industry has the more compelling grievance, even
though industrial rates have declined relative to residential rates over the
past two decades, from a time when they were almost the same.
Electricity costs less per unit to deliver to industries than to residences.
In the PUC's rate hike, industry should have been asked to pay only the 3
cents a kilowatt hour instead of roughly 3.5 cents. That still would have
given it a much larger percentage increase than residences.
Residents will hardly welcome higher bills. They will rightly suspect that
generators of electricity are taking advantage of the shortage to squeeze
consumers. That is a claim to be pursued in Sacramento, Washington and the
courts.
The PUC had no choice but to raise rates, given what the state has been
paying to buy electricity. And despite what hysterical protesters at the PUC
meetings have said, residents can keep their bills manageable with a litle
sacrifice.
Electricity usage that falls below 130 percent of the so-called baseline
level is exempt from the rate increase. While 130 percent of baseline is less
electricity than many households need, those who use up to 200 percent of
baseline, a more achievable goal, will see their bills rise only 7 percent,
from $76 to $81 for average households in the Bay Area.
The PUC correctly structured the rate schedule to be punitive toward those
households that use the most electricity. For those who use 300 percent of
baseline or more, the bills rise 37 percent.
If there is any consolation here, it is this: California consistently ranks
among the states using the least amount of electricity per capita. While
higher rates will harm some businesses and residents, the state economy as a
whole is not dependent on an abundance of cheap power.
The rate hike will cost users of electricity $5.7 billion, which the state's
economy can absorb. And if it serves as a stimulus for California to become
even more energy-efficient, the pain will provide at least some gain.

Backups for blackouts
O.C. events and companies prepare for expected summer power outages.
May 17, 2001
By TIFFANY MONTGOMERY
The Orange County Register

PINK-LIGHT STICKS will make any power outages more festive at the Orange
County Fair in July.
Photo: Chas Metivier / The Register
?
?

Orange County Fair organizers have bought 10,000 glow sticks to make rolling
blackouts more festive, reserved an extra generator and acquired 15 tower
lights for parking lots.
Officials at Edison International Field in Anaheim are conferring with Major
League Baseball and umpires about what to do if the lights go out during a
game.
And several cities are lining up generators for sewer and water pumps and
installing pricey battery backups for traffic signals to prevent a rash of
accidents.
People all over Orange County are readying for a summer of rolling blackouts,
preparations that intensified after outages this month. Some experts have
estimated that the state could be facing 15 hours of darkness a week when the
heat hits.
"We think it's a good safety measure for the public," said Don Vestal, city
manager of Westminster, which will spend $240,000 to outfit 81 signals with
battery packs.
Medieval Times in Buena Park plans to be ready. The entertainment company,
which performs 365 days a year, is shelling out $220,000 to buy and install a
generator to ensure that the show goes on even if the power goes out.
"This is something the company has been thinking about for years," said
spokesman David Manuel. "But now we really need it."

2 FERC nominees pledge gas inquiry
At Senate committee hearing, Feinstein grills candidates on why Southern
California is paying more.
May 17, 2001
By DENA BUNIS
The Orange County Register
WASHINGTON Nora Brownell and Patrick Wood promised Sen. Dianne Feinstein on
Wednesday that if they are confirmed as the nation's newest federal energy
regulators they will get to the bottom of why the cost of bringing natural
gas into Southern California has skyrocketed.
Feinstein, D-Calif., asked the two nominees to the Federal Energy Regulatory
Commission why natural gas was selling at $11.52 per measured unit Tuesday in
Southern California and $4.31 in the San Juan Basin in Arizona. The nominees
were questioned by the Senate Committee on Energy and Natural Resources,
which must vote to send their nominations to the full Senate.
"You have hit upon an ingredient in the dysfunctionality that we do not fully
understand,'' said Brownell, a Pennsylvania public utility commissioner.
"Both Pat and I have asked a lot of questions and have been unable to get
answers that are satisfactory to us.''
The numbers just don't add up, said Wood, chairman of the Texas Public
Utilities Commission.
"We've been asking a lot of different players in the market: Where is the
money going? Which pocket is it in? Who's got it? I'm not sure I've got the
right answer to those questions.''
President George W. Bush nominated the two Republicans to fill vacancies on
the five-member FERC. Bush is expected to name Wood, an old friend of his, as
FERC chairman if he is confirmed.
Feinstein believes California might have found two allies, who are expected
to easily win Senate confirmation. "The market is broken in California, and I
think they understand,'' Feinstein said.
Feinstein has been stinging in her criticism of FERC since the beginning of
the state's electricity crisis last year. And she has been consistent in
calling on FERC to impose temporary price controls to stabilize the
electricity market, something the majority of the commissioners have refused
to do.
Feinstein stopped short of predicting that California might have two votes
for such caps. And nothing the nominees said at the hearing implied they were
ready to vote for such controls.
Both nominees come from states that are in the process of re-regulating their
electricity markets. And both said they support a market-based system.
"Rate caps are one of many things that need to be considered, but need to be
considered in an extremely cautious way'' Brownell said at the hearing.
Nonetheless, Feinstein was encouraged. She has not been able to ask the
nominees flat- out whether they would vote for price caps because then they
would have to recuse themselves if such a vote came up before the commission.
"You have to nip around the edges and try to figure out" where they stand,
Feinstein said. "They are knowledgeable; they don't appear to me to be
ideologues.
"All I can say is I'm reasonably optimistic.''

Illuminating alternatives
Leaving little to chance, O.C.'s public and private sectors prepare to
enlighten darker hours.
May 17, 2001
By TIFFANY MONTGOMERY
The Orange County Register

DAVE BROKAW, the county fair's public safety chief, shows the power of light
sticks
Photo: Chas Metivier / The Register
?
?

Orange County residents, businesses and city governments are scrambling to
prepare for a predicted wave of rolling blackouts this summer that could shut
off power for as much as 15 hours a week.
The uptick in preparations comes as the governor and Legislature continue to
struggle to resolve the power crisis and as state regulators imposed the
biggest electricity rate increases in state history.
Communities are taking dramatic steps to ensure traffic flow with battery
backups for signals and generators for critical sewage and water systems,
Businesses also are ramping up.
Lowe's in Westminster has a 600-kilowatt generator parked on a semi-trailer
in the back of the building so the home-improvement store can run at full
capacity during a blackout.
"In this case it allows us to stay open and free up energy for others during
a (electricity) shortage," said company spokeswoman Suzanne McCoy.
The Laguna Hills Holiday Inn has quadrupled its supply of flashlights and
plans to have employees stationed on each floor during a blackout. At the
Laguna Hills Mall, diesel generators can light common areas of the center for
eight hours, but independent boutiques must close during outages, said Lisa
Emerzian, marketing director.
Randy Schlotthauer, vice president of Slotsy Tours and Travel in Fullerton,
learned how power-dependent his business was last year when a car took out a
nearby telephone pole. His high-tech phone system, which rings through 200 to
300 calls a day, was useless, as were his computers, which connect to airline
reservation systems.
That day, he bought a $600 generator.
"I always prepare for the worst and hope for the best," he said.
Orange County Fair plans to ride it out
Oakley Inc. in Foothill Ranch decided to prepare for the worst in December
when it bought a temporary generator that could keep the 540,000-square-foot
plant manufacturing sunglasses, clothing, shoes and watches during blackouts.
The company is currently negotiating to buy a permanent generator that would
automatically switch on when the power goes out, said Al Krueger, a company
manager.
Venues that draw large crowds, such as the Orange County Fair, have been
preparing for blackouts for months. Some attractions, such as the two
carnivals, always run on generators. This year, nine machines will power the
rides at the fair, which runs from July 13-29.
The Arlington Theatre also has a backup generator, and another unit to light
the main mall, security and first-aid areas has been reserved, said Orange
County Fair General Manager Becky Bailey-Findley.
Edison Field must play outages by ear
Edison International Field of Anaheim also has back-up generators to provide
some electricity during blackouts, but not enough to power the field lights
during a night game, said John Drum, manager of ballpark operations.
If a game is in progress, umpires and Anaheim officials will have to decide
whether to end the game or delay it until the power returns. That decision
could depend on many things, including how long the lights will be out and
what inning it is.
Edison Field officials also have been talking with employees about what to do
during a blackout, including how to clear the stadium.
"We have to think about what happens if there's 45,000 people here and we
lose power," Drum said.
People driving during blackouts often get confused at intersections where
traffic signals aren't working, police say. Several cities, including Laguna
Niguel, Mission Viejo, Westminster and San Clemente are currently installing
battery back-ups for signals in major intersections to prevent collisions.
When the power gets cut, signals with batteries become blinking red lights
instead of going black. The battery packs cost about $3,000 each.
Several other cities are planning to install the backups or are considering
the move. Many are planning to use money saved from converting to
energy-efficient Light Emitting Diode (LED) traffic lights to help fund the
battery packs.
City managers have been sharing blackout preparation tips at monthly local
League of Cities meetings. And if blackouts become a crisis, the county's
Emergency Operation Center will open and coordinate emergency efforts, just
as it does during disasters like fires and earthquakes.
In San Juan, a truck filled with stop signs, barricades and orange cones is
parked behind City Hall 24 hours a day. City workers have identified key
intersections that will need stops signs during a blackout, a step many
cities, including Los Alamitos, Villa Park and Laguna Beach have taken.
Strategies for sewer and water pumps
Laguna Beach has readied one mobile generator for sewer pump stations that
can't function without electricity.
"We only have to worry about six stations," said City Engineer Steve May.
"One hour (blackouts) shouldn't be a problem."
Huntington Beach also has back-up generators for sewer stations. Trabuco
Canyon and Rancho Santa Margarita water districts have emergency generators
for water pumps, as does the city of Fountain Valley.
Tustin is in the process of retrofitting its wells with generators and
recently tested a mobile unit. Officials have ordered two more, $100,000
mobile generators.
The Irvine Ranch Water District has already used generators extensively this
year.
The district is on the "interruptible" plan - a program where users agree to
shut down power during a shortage in exchange for lower rates. So far this
year, the district has turned off power and turned on their fuel-powered
generators 14 times, using 70 percent of the allotted generator usage allowed
by air quality regulators.
"We're trying to save that 30 percent we have left for the summer months,"
said district spokeswoman Marilyn Smith.
County officials are preparing for blackouts by setting up emergency
generators for the downtown Santa Ana building that houses the offices of the
county assessor, clerk-recorder and treasurer-tax collector. The $300,000
project should be complete by July.
The Costa Mesa Senior Center considered buying a generator but found the
units too expensive.
"Our biggest crisis would be if we had a power outage on a Thursday during
bingo," said Diane Schwartz, facilities manager. "We would have to call the
numbers by hand."

Bush offers varied plan for energy
Conservation, exploration and nuclear efforts are in the proposal.
May 17, 2001
By DAVID E. SANGER
The New York Times
WASHINGTON President George W. Bush's long-awaited energy plan proposes
loosening regulations on oil and gas exploration, conservation-minded efforts
like a review of gas-mileage standards, and a $4 billion tax credit for a new
generation of highly fuel-efficient cars.
It also urges a reconsideration of a quarter-century ban on the reprocessing
of nuclear fuel.
With a declaration that the energy problems threaten the nation's economy and
security, the Bush plan also orders a sweeping review of public lands to
determine whether more energy resources can be extracted.
"America in the year 2001 faces the most serious energy shortage since the
oil embargoes of the 1970s," the report by the president's energy task force
states.
Without action, projected energy shortfalls in coming years "will inevitably
undermine our economy, our standard of living and our national security."
The proposals are among 105 initiatives outlined in the report, according to
a senior government official who briefed reporters on its contents Wednesday
night.
The White House released an eight-page overview of the document, which will
be distributed in full today.
The official said Bush would also issue two executive orders this week that
will direct all federal agencies to consider the effects of all new
regulations on energy production and to expedite permits for all energy
projects "while remaining mindful of protecting the environment."
The executive order directing agencies to speed up permits for power plants
and other energy projects is an element officials pointed to when asked how
Bush's plan would help California's electricity crisis.
The plan also directs Secretary of Energy Spencer Abraham to review whether
the federal government should help with the widening of Path 15, the
transmission conduit that connects Northern and Southern California.
The inadequacy of that path has created a bottleneck and made it difficult to
move power from one end of the state to the other.
Bush will also order the secretary of the interior, Gale Norton to "look at
any impediments" that discourage exploration for oil and gas.
The report repeats Bush's commitment to explore in the Arctic National
Wildlife Refuge - a proposal that seems unlikely to survive in Congress - but
it also urges a review that will include other locations in Alaska, the Rocky
Mountains and the Gulf Coast.
The decision to offer a relatively hefty tax credit for "hybrid" cars, which
use a combination of gas and battery power, is bound to help both Detroit and
two Japanese automakers - Honda and Toyota - which are already marketing such
vehicles in the United States.
They will be less enthusiastic about orders by Bush for the government to
review the federal standards for automotive fuel efficiency - though the
report makes no commitment that those standards will be raised.
The plan also calls for a new evaluation of nuclear reprocessing, a
technology that takes advantage of the fact that as reactors consume uranium,
they also produce plutonium. If the plutonium is chemically scavenged from
the fuel, it can be used to run reactors.
But the technology has drawbacks. The work is dirty, with the threat of
radioactive releases, and it is expensive. For the past decade at least, it
has been far cheaper to fuel reactors with new uranium than to recover
plutonium.
And while uranium fuel used in power reactors cannot be used to make a bomb,
plutonium can.
That raises the threat of world commerce in a material that could be diverted
by countries, or even terrorists, that want a bomb.
The report mixes a number of existing initiatives with new ones, particularly
in the area of conservation.
For example, of $10 billion in proposed tax credits over the next 10 years,
$3.7 billion are already in the proposed fiscal 2002 budget.
There are no credits or other tax breaks for oil or gas producers, or
electric utilities - a reflection of the White House's sensitivity to
criticism that Vice President Dick Cheney, who headed the task force, and
other top officials spent their private-sector years in the energy industry.
But the tone of deregulation, reassessment of the merits of the Clean Air
Act, and the emphasis on opening of federal lands to more energy production -
everything from wind power to oil and gas drilling - provides those
industries with effective subsidies totaling in the billions.
Register staff writer Dena Bunis contributed to this report.

Energy notebook
FERC won't let small generators out of state contracts -- yet
May 17, 2001
From staff and wire reports
WASHINGTON Federal energy regulators stopped short of letting small power
generators in California get out of existing contracts with utilities that
cannot pay, though they said they will revisit the issue.
The Federal Energy Regulatory Commission extended waivers to allow small
generating facilities to shift their power elsewhere in the event that a
judge orders they can break their contracts.
"The commission is not acting unilaterally to abrogate existing contracts,"
FERC Chairman Curt Hebert said.
He said the FERC was following the wishes of Gov. Gray Davis.
Some generators in the state aren't operating at full capacity because they
haven't been paid.
Davis wrote to Hebert this week asking the commission to hold off on allowing
the generators to break their contracts until the state has a chance to work
things out with generators.
Officials of Southern California Edison, the state's second-largest utility,
also urged the FERC not to intervene, saying any remedy that lets generators
refuse to sell power to utilities that can't pay will prompt generators to
sell their electricity elsewhere.
Two Democrats urge a 'buyer's cartel' in West
SACRAMENTO Two Democratic lawmakers Wednesday called for a Western region
"buyer's cartel,'' in which Californians would endure planned blackouts when
the state turns away from high-priced power.
Assemblyman Fred Keeley of Boulder Creek, the resolution's author, and
Assemblyman Paul Koretz, D-West Hollywood, said they wanted to encourage Gov.
Gray Davis to coordinate with Oregon and Washington to become a regional
cartel.
The goal of such an action, said Keeley, the Assembly's point man on energy,
is to force generators to lower their energy prices.
California can't continue to pay exorbitant prices - up to $1,900 a
megawatt-hour - for power, Keeley said.
"This is a bold proposition, and blackouts need to be managed in a
thoughtful, predictable way,'' Keeley said.
The concept was first proposed by the Utility Consumer Action Network and
Peter Navarro, a University of California, Irvine, economics professor.
Davis said the concept is one of the many options he's considering, but he
hasn't made a decision.
GOP lawmakers proposing a San Diego public utility
SACRAMENTO A number of Republican lawmakers from San Diego are proposing that
their county form a municipal utility district that would have the authority
to condemn San Diego Gas & Electric's facilities.
The bill is authored by Assemblyman Mark Wyland, R-Del Mar. Wyland wants to
form a San Diego Municipal Utility District, but the new public utility would
not have power plants to generate electricity for its customers.
The municipal district would have the authority to take over San Diego Gas &
Electric's existing plants and transmission lines.
Assemblywoman Pat Bates, D-Laguna Niguel, is also supporting the bill.
The bill, AB206, applies only in San Diego County. The 100,000 south Orange
County residents served by San Diego Gas & Electric would remain with the
utility.
A Sempra spokesman would not comment on how Orange County residents would be
affected if a public San Diego utility seized a number of the company's
generating and transmission facilities.
Governor signs measure for state power authority
SACRAMENTO California will no longer be held captive by energy suppliers
charging high prices for power, Gov. Gray Davis said Wednesday as he
officially put California into the electricity wholesale business.
By signing a bill by Senate Leader John Burton, D-San Francisco, Davis
created the California Consumer Power and Conservation Financing Authority -
a new state agency that can issue up to $5 billion in revenue bonds to build,
purchase, lease or operate power plants.
Plants financed by the authority will provide cost- based electricity to
California consumers, Davis said, which will help stabilize the state's
volatile energy market.
The power authority is modeled after one in New York, which has 10 power
plants, 1,400 miles of transmission lines and produces about 25 percent of
the state's power.
Nebraska also has a power authority, which created a market in which
residents pay 22 percent less than the national average, Burton said.
PG&E to pay 49 counties $41 million in back taxes
SAN FRANCISCO Forty-nine California counties soon will receive roughly $41
million in late property taxes due from bankrupt Pacific Gas & Electric Co.
U.S. Bankruptcy Judge Dennis Montali approved a request from the utility
Wednesday to pay the counties for taxes owed before it filed for bankruptcy
on April 6.
"Somebody's going to have to tell me why I should hold 49 counties of
California hostage for taxes that are due and owing," Montali told other
creditors, who wanted the payment postponed until the court determines how
much PG&E will pay everyone to whom it owes money.
Montali also allowed the utility to spend around $260 million to fund energy-
efficiency programs approved before April 6 that could help Californians arm
themselves with vital megawatts in the state's battle against rolling
blackouts.
More than 100 protesters gathered outside the court demanding that low-income
ratepayers be represented at future court hearings.
The protesters waved signs that said: "Bankruptcy court does not protect the
poor."
Register staff writer Hanh Kim Quach, Bloomberg News and The Associated Press
contributed to this report.

Calif. Enters Wholesale Business

By JENNIFER COLEMAN
Associated Press Writer

SACRAMENTO (AP) _ Gov. Gray Davis signed a bill Wednesday
creating a state agency that will be able to borrow up to $5
billion to build, buy, lease or operate power plants.

California will no longer be held captive by energy suppliers
charging high prices for power, Davis pledged, as he officially put
the state into the electricity wholesale business.

Plants financed by the California Consumer Power and
Conservation Financing Authority will provide cost-based
electricity to California consumers, Davis said, which will help
stabilize the state's volatile energy market.

The power authority is modeled after one in New York, which has
10 power plants, 1,400 miles of transmission lines and produces
about 25 percent of the state's power. Nebraska also has a power
authority, which created a market in which residents pay 22 percent
less than the national average.

An increase in power plants down for repairs this year ``is
strong evidence that people are manipulating the market by
withholding power to drive up prices,'' Davis said.

``The only way we can fight back against this type of price
gouging and manipulation is to build more plants,'' he said.

Having a public power authority will ``supplement not supplant''
private energy sources, Davis said.

``In a deregulated world, the only way you can guarantee
reliable affordable power is to build it yourself if private
companies won't do it,'' he said.

Few Republicans in the Legislature supported the bill, saying
the state shouldn't get further into the power business. They also
warned that it could discourage private companies from building
plants.

The bill was created by Senate Leader John Burton and sponsored
by state treasurer Philip Angelides. Angelides conceded that it
won't save California from blackouts this summer but will help
stabilize the energy markets as more generators are built.

Angelides added that the bill is the ``beginning of the end for
deregulation ... which has proven to be a disaster.''

He repeatedly blamed the crisis on out-of-state power
generators: ``There is a tremendous drain on California because of
generators' prices. And that drain is heading straight to the heart
of Texas.''

Other key lawmakers urged Davis Wednesday to join with the
governors of Washington and Oregon to set a limit on the price the
states would pay for power this summer, creating a ``buyers'
cartel.''

The states would refuse to pay more than a predetermined price
that would give electricity generators a ``reasonable'' profit
under a resolution sponsored by nine Assembly Democrats.

If generators refused to lower their prices, that would mean
almost certain blackouts in California this summer, said
Assemblyman Paul Koretz, the measure's author.

But those will happen anyway, by all accounts, and the price cap
would let the state better predict and manage the outages, he said.

The resolution proposes that caps be installed for two years,
until enough power plants can be built to allow the market to
function naturally.

The state has been buying power for the customers of three major
utilities since mid-January. The utilities' credit was cut off
after they amassed debts of more than $14 billion dollars due to
high wholesale electricity prices that they were unable to pass on
to customers.

[B] POWER UPDATE/ Bush calls on FTC to investigate price gouging complaints

(BridgeNews) May 16, 2118 GMT/1718 ET

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

TOP STORIES:

Bush calls on FTC to investigate complaints of energy price gouging

Washington, May 16 (BridgeNews) - President Bush Wednesday called on the
U.S. Federal Trade Commission to investigate charges of energy price gouging,
if circumstances warrant, saying he does not want American consumers to be
"overcharged"  for gasoline, electricity or natural gas.

( Story .21973, .21829, .20005, .16888 )

Court okays PG&E request to continue public purpose payments

San Francisco, May 16 (BridgeNews) - The U.S. Bankruptcy Court Wednesday
approved Pacific Gas and Electric's motion to confirm that the funds collected
by the utility for public purpose programs can be used immediately to pay
obligations incurred before its April 6 petition. The court also allowed
PG&E
to pay its pre-petition portion of its property taxes.

( Story .21644 )

FERC finds no need for refunds for April Calif. power sales

San Francisco, May 16 (BridgeNews) - There will be no refunds for wholesale
power sold into California in April, said a U.S. Federal Energy Regulatory
Commission order issued Monday. FERC determined a $318 per Megawatt-hour
clearing price for April but could not apply it to any power sales since the
state did not call a Stage 3 power emergency last month to kick in the refund
mechanism.

( Story .21750 )

FERC nominees noncommittal on California electric price caps

Washington, May 16 (BridgeNews) - President Bush's two nominees to the
Federal Energy Regulatory Commission on Wednesday sidestepped lawmakers'
questions on imposing price controls on the cost of wholesale electricity in
California, leaving open to question whether as commissioners they will move
to
cap spiraling power costs in the nation's most-populous state.

( Story .19400 )

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

OF INTEREST:

--AMERICAS--

Edison utility fncl stabilization bill seen Thurs: spokesman

San Francisco, May 16 (BridgeNews) - California Senator Richard Polanco (D)
will introduce legislation Thursday to implement the memorandum of
understanding between Southern California Edison and California Gov. Gray
Davis
to stabilize the utility's financial health, Steve Maviglio, Davis spokesman,
said Wednesday. Maviglio said that the bill will just address the MOU and will
not take into account alternate  "Plan Bs"  being circulated by other
legislators.

( Story .20409 )

Calif. governor signs power plant authority bill

San Francisco, May 16 (BridgeNews) - California Gov. Gray Davis Wednesday
signed a bill to create the California Consumer Power and Conservation
Financing Authority, which will be given broad powers to construct, own and
operate electric generation and power facilities and has the power of eminent
domain to take over plants as need be. The authority can also invest in
natural
gas projects, using the up to $5 billion in revenue bonds it can issue.

( Story .21741 )

CMS says leak reported on offshore Sea Robin natgas pipeline

New York, May 16 (BridgeNews) - CMS Sea Robin is investigating a reported
leak on its offshore natural gas pipeline system near Eugene Island Block 295
on the  "J"  leg. The investigation requires the  "J"  segment of the pipeline
to be removed from service. A CMS spokesman declined to comment on how much

a

natural gas volume or capacity was being affected by the outage, citing
company
policy.

( Story .19949 )

PG&E calls customer-specific flow order on Calif. natgas pipe

New York, May 16 (BridgeNews) - Pacific Gas & Electric's California Gas
Transmission (CGT) unit has issued a customer-specific operational flow order
(OFO) for its natural gas pipeline system effective Thursday. CGT forecasts
natural gas flows on its pipeline to be outside of operating limits Thursday
and Friday and much above limits Saturday. PG&E's citygate prices are seen
being pressured Thursday as most Wednesday trades were done before the OFO was
issued.

( Story .21120 )

Williams Northwest flow order pressures Rockies cash prices

New York, May 16 (BridgeNews) - An operational flow order (OFO) issued for
Williams' Northwest natural gas pipeline continues to pressure prices in the
Rocky Mountain region. The order, restricting volumes through the Kemmerer
Compressor, was effective Tuesday.

( Story .21499 )

Off spec natgas seen pressuring prices, forcing pipe alerts

New York, May 16 (BridgeNews) - Natural gas containing high levels of
hydrocarbons are currently flowing on many pipelines, a fact that some
observers say is partly responsible for the recent pressure on cash prices.
Several major pipelines in the Gulf and Midcontinent region are issuing alerts
due to off-spec natural gas flowing into their pipelines.

( Story .19669 )

GOP Promises Energy Package Push

By H. JOSEF HEBERT
Associated Press Writer

WASHINGTON (AP) _ Awaiting an energy blueprint from the White
House, Senate Majority Leader Trent Lott promised to move quickly
on legislation, hoping Congress can complete action before the end
of summer.

But Lott said Wednesday that some of President Bush's expected
recommendations, such as expanded drilling on federal land and
taking private land for power lines, ``will be hotly debated'' on
Capitol Hill.

Democrats launched a pre-emptive strike Wednesday, saying the
Bush energy package will do little to address soaring gasoline
prices, the West Coast power crisis and the need to get Americans
to use less energy.

``The president seems almost totally indifferent'' to soaring
electricity problems and blackouts in the West, said House Minority
Leader Richard Gephardt, D-Mo.

White House press secretary Ari Fleischer insisted that the
president's energy task force, while focusing on long-term energy
problems, also will have measures that ``will help in the short
term.''

The ``comprehensive approach'' to be outlined by the president's
105 specific energy proposals ``will help consumers'' this summer,
said Fleischer, who didn't provide details.

Other government sources said the task force recommendations
will direct Environmental Protection Agency Administrator Christie
Whitman to look into ways to give refiners more leeway in blending
gasoline to spur supply and ease distribution.

The task force will ask the EPA to try to get states to abandon
requirements for ``boutique'' gasoline blends as part of their air
pollution control strategies.

The industry has blamed the requirement for many different
blends for some of the refinery and distribution problems, a claim
disputed by environmentalists.

The task force also will call for increased funding of the
federal programs to help low-income families pay for cooling and
heating costs, said the sources, who spoke on condition of
anonymity.

Both Republicans and Democrats in Congress agree those funds
should be beefed up.

Lott, R-Miss., speaking to reporters, said he hoped to bring an
energy bill to the Senate floor next month and have it to the
president by July 4 ``or certainly this summer.''

As for Democratic criticism that the GOP approach tilts too
heavily toward production, Lott said, ``I don't believe we can
conserve ourselves into (meeting) the energy needs we'll have in
the future.''

``The president has no program for the short term, telling
people that they're on their own. And the only long-term solution
is to waive environmental protections,'' Gephardt countered at a
news conference.

Among the recommendations that will be made by the president's
energy task force is a call for more transmission lines and power
plants to address future electricity needs and changes in air
pollution rules to improve the production and distribution of
gasoline, according to government sources.

Against strong opposition from environmentalists, the task force
also will call for lifting the ban on oil drilling in the Arctic
National Wildlife Refuge in Alaska. Specifically, Bush will call
for opening 8 percent of the pristine territory to oil drilling,
Fleischer said Wednesday.

But none of these proposals will provide much help this summer,
officials acknowledge.

Meanwhile industry experts predicted more severe power problems
in California, including frequent rolling blackouts; possible power
disruptions in the Northeast; and tight electricity supplies in the
Pacific Northwest because of the region's severe drought.

The North American Electric Reliability Council, an
industry-sponsored watchdog organization, said in a report Tuesday
that California's power problems this summer are likely to be worse
than even state officials have predicted, with 260 hours of rolling
blackouts _ an average of 20 hours a week _ likely because of a
power shortfall that could be as much as 5,000 megawatts during
peak demand periods.

A megawatt is enough power to serve 1,000 homes.

While most of the country will have enough electricity, the
council's report also warned of potential problems in the
Northeast, with possible power disruptions if there is a persistent
heat wave, and in the Pacific Northwest as well as possibly in
Texas. The New York City area could have blackouts if there are
transmission problems on lines into the region, the report said.

While Texas has plenty of electricity, it ``should be closely
watched'' because the state is shifting into a retail competitive
market in June and consolidating some grid management activities,
David Cook, the reliability council's general counsel, said.

``There is no magic bullet, no single thing to be done that will
solve the challenges we face'' in trying to assure electricity
reliability, Cook said in testimony before the Senate Energy and
Natural Resources Committee.

In the Pacific Northwest, there is expected to be enough power
to meet summer demand despite low hydroelectric generation as a
result of a severe drought. But, the report said, if the region's
drought continues, there could be rolling blackouts next winter.

Covanta Energy to Provide California With 500 Megawatts of New Power

FAIRFIELD, N.J.--(BUSINESS WIRE)--May 16, 2001 via NewsEdge Corporation  -

California Energy Commission Grants Approval to Three Mountain

Power Facility

Covanta Energy Corporation (NYSE: COV) announced that the
California Energy Commission (CEC) today unanimously approved the
Company's "Application for Certification" for its proposed
500-megawatt Three Mountain Power project. The decision, which was
announced at a CEC business meeting in Sacramento, California, grants
Covanta a license to construct and operate the natural gas-fired,
combined cycle facility to be located in Burney, approximately 45
miles northeast of Redding, California. Project construction is
expected to begin in the fall of 2001, with commercial operations
expected to commence in late 2003 or early 2004.

"Three Mountain Power will be a vital addition to California's
energy supply, adding 500 megawatts of environmentally friendly,
dependable power to the grid," said Scott Mackin, President and Chief
Executive Officer of Covanta Energy. "Given the urgent need for power,
we're pleased that CEC has approved this project. With its
state-of-the-art technology, Three Mountain Power will be among the
cleanest and most efficient power plants of its kind in the nation, if
not the world."

The Three Mountain Power project will also bring significant
economic benefits to the Burney region. An average of 200 construction
workers will build the project over two years, with an estimated
construction payroll of $25 million. Three Mountain Power will also
create between 20 and 25 new permanent jobs, with an annual payroll of
over $1 million. To allow local residents to train and potentially
compete for these jobs, Three Mountain Power is sponsoring Lassen
Community College's power plant operator training class in the
community. Once operational, the facility is expected to pay $2.5
million annually in property taxes.

Covanta Energy Corporation is an internationally recognized
designer, developer, owner and operator of power generation projects
and provider of related infrastructure services. The Company's
independent power business develops, structures, owns, operates and
maintains projects that generate power for sale to utilities and
industrial users worldwide. Its waste-to-energy facilities convert
municipal solid waste into energy for numerous communities,
predominantly in the United States. The Company also offers
single-source design/build/operate capabilities for water and
wastewater treatment infrastructures. Additional information about
Covanta can be obtained via the Internet at www.covantaenergy.com, or
through the Company's automated information system at 866-COVANTA
(268-2682).

CONTACT: Covanta Energy Corporation | Investor Relations: |
Louis M. Walters, 973-882-7260 | Media Relations: | Danielle Tinman,
415-538-3718

By David Wagman
dwagman@ftenergy.com
This is the second in a three-part series examining the Northeast's debate
over three key issues: generation, transmission and environment. How the
region deals with these issues could become a model for the rest of the
country.

Power plant developers in the Northeast did what experts expected them to do
when markets first opened to competition: They flocked to the region.

In fact, so much new construction is underway that observers now fret over
possible overbuilding and depressed power prices. But as new power plant
construction continues apace, some owners of existing plants worry that
strict new local environmental rules favor natural gas so much the region may
end up at risk due to the fuel's price volatility.

"The new regulations tend to favor combined-cycle natural gas facilities,"
said Bryan Riley, Eastern regional vice president with NRG Energy. "We
advocate that fuel diversity is essential in electric supply going forward."

Not a surprising position, perhaps, given that Minneapolis-based NRG Energy
owns the 117-MW Somerset station, one of what Massachusetts officials call
the "filthy five" (actually six, but the alliteration is better) power plants
targeted for scrubbing, fuel switching or shutdown.

"The standard in Massachusetts for CO2 (carbon dioxide) is, at least with
current technology, impossible to meet with a coal-fired facility," Riley
said. "We can't afford to spend hundreds of millions of dollars to bring it
up to standards."

The Providence, R.I., Journal-Bulletin quoted Massachusetts officials as
saying the plants targeted under the plan produce 40% of the state's
electricity. Even so, enough energy would be available to meet the state's
needs if all six shut down, the officials said, noting 14 new plants should
come into operation by 2005.

Indeed, according to Boulder, Colo.-based RDI's NEWGen database, more than
15,000 MW of new generating capacity is either under construction or in the
advanced stages of development in the Northeast Power Coordinating Council
(NPCC) region, which includes New York, New England and eastern Canada.
Almost all the new capacity will be natural gas-fired.

Nearly half of the capacity*some 7,300 MW*will be in Massachusetts. Another
2,800 MW will be in New York state, including the proposed Athens generating
station, which PG&E National Energy Group plans to have on-line by 2004,
provided the hotly contested plant wins necessary permits.

NEW CAPACITY ADDITIONS IN NPCC SPREADSHEET
http://public.resdata.com/ei_departments/lead/canada.xls

But the sheer volume of activity doesn't mean all areas will end up being
served equally.

Bottlenecks
Three major transmission constraints*one affecting Boston and northeastern
Massachusetts, one affecting New York City and one affecting Long Island,
N.Y.*leave those areas with limited ability to bring in power from outside
the immediate area to meet electric demand. At the same time, local siting
issues make it tough to build new power plants. As a result, high consumer
demand has meant that some older, dirtier and less efficient plants are still
in service, giving policy makers a target for stricter air quality controls.

Some of the oldest, least efficient and most expensive plants are in
southeastern New York state and New York City, said Doug Logan, principal
with RDI Consulting. But high demand for power means this capacity is
unlikely to leave service anytime soon. Consolidated Edison, New York City's
utility, said in early May it planned to restart its 50-year-old Hudson
Avenue generating station. Environmentalists objected, telling the New York
Times the plant would create more pollution per pound of fuel consumed than
any other in the city.

Worm in the Big Apple
But those responsible for regulating the state's power supplies point to a
dilemma facing New York City.

In testimony before a state oversight panel in March, Public Utility
Commission Chair Maureen O. Helmer said at least 80% of New York City's
projected peak load must be met by generation located within the city. She
said the New York Independent System Operator (ISO) projected peak load for
the city of 10,535 MW, meaning roughly 8,428 MW would have to be generated in
the city, due to its import constraints.

But the same ISO report found only 8,031 MW of in-city generating capacity as
of Feb. 15. If correct, that adds up to a 397-MW shortfall, under normal
weather conditions. Under extreme weather conditions, New York City's peak
load could reach 11,125 MW, the ISO said. That would raise the corresponding
in-city capacity requirement to 8,900 MW.

"Thus," Helmer said, "the in-city generating deficiency would increase to 869
MW rather than 397 MW." Given the transmission constraints and the
possibility of much hotter than normal weather, "397 MW must be viewed as a
floor, not a ceiling," she said.

Bottom line: Approve new capacity and install it quickly. The New York Power
Authority plans to add 450 MW of capacity within New York City before the
start of the summer peak demand season. Helmer said this amount would meet
minimum requirements and would help avoid calling on older, dirtier
generating plants.

Tougher rules
Policy makers in Massachusetts and Connecticut are waging an environmental
war of their own by imposing highly restrictive rules.

The Connecticut rules*described by one source as the "toughest air emission
regulations in the country"* were adopted in December and follow an executive
order from Gov. John G. Rowland to reduce SO2 emissions by over 40,000 tons a
year (a 50% reduction) and NOx emissions by nearly 3,500 tons a year (a
20%-30% reduction) from 61 large emission units statewide, including power
plants.

In April, Massachusetts imposed new rules of its own, targeting power plant
emissions of NOx, SO2, mercury and*for the first time*carbon dioxide, the
same stuff we exhale with every breath.

The Massachusetts rules are aimed squarely at six power plants (the so-called
"filthy five") and will force them by 2004 to cut their NOx emissions to
about half what federal law allows. By 2006, the plants would have to cut SO2
emissions by 53%-74%. Carbon dioxide emissions would be reduced by 10%, and
airborne mercury emissions would also fall, by an amount to be set next year.

As an alternative, state officials gave power plant owners until 2008 to
switch to natural gas.

"We would utilize the rules under the second strategy and re-permit the
plant," said NRG Energy's Riley, speaking of his company's Somerset station.

Another source at a generating company in the area, who asked to remain
anonymous, said his company is still trying to figure out the regulations and
where air quality standards are going overall. Signs point to a shift in
strategy among states.

"After 10 years of the states and the feds saying there's a place for
regionally based market trading (of emission credits), all of a sudden
they're throwing it out the window and going individually," the power
industry source said. "It's incongruous. As we're getting larger competitive
markets, we're seeing legislatures becoming more specific" in writing
environmental rules.

$100 million and 100 years
Alex Farrell, research engineer in the Department of Engineering and Public
Policy at Carnegie Mellon University, agreed. States appear less willing to
let power companies "average" emissions across a region's entire fleet of
power plants. Rather than trade over-compliance at one plant for
under-compliance at another, regulators are clamping down on all power
plants. But that strategy could backfire.

A power plant operator might invest $100 million on scrubber technology for a
baseload plant that runs at a 90% capacity factor, said Riley. But a $100
million investment may be harder to swallow at a peaking plant with a 30%
capacity factor or less, he said.

Using a regional averaging and emission trading approach, overachieving at a
big baseload plant could produce enough credits to offset emissions at a less
frequently used peaking facility. That would leave both plants economical to
run.

Under the new rules, baseload and peaking plants are treated the same and
expected to scrub. State-specific emission trading programs are being
contemplated, but no assurances exist that what has worked at the more
dynamic regional level can work on a smaller, more confined local level.

"If you force someone to make a $100 million investment to a plant and the
operator looks and sees it will take 100 years to recover, then you may need
to shut the plant down," Riley said. The result "threatens the reliability of
the system," particularly if peaking plants end up at risk, he said.

Capacity additions
Among other large power plant projects tracked by NEWGen in the Northeast are
the 800-MW Gorham station being built in Maine by American National Power
Inc., the 792-MW Lake Road facility being built in Connecticut by PG&E
National Energy and the 750-MW Nickel Hill Energy plant being built by
Constellation Power in Massachusetts. In the Canadian portion of NPCC, the
largest power plant under construction is an 870-MW hydro facility being
built by Hydro-Quebec. The Sainte-Marguerite station is due to enter service
this spring.

The single largest capacity addition currently planned in the Northeast would
be PG&E National Energy Group's 1,080-MW Athens station. Though the plant was
proposed in April 1997, it may not be available until 2004 at the earliest,
due to skirmishes over local siting issues, state siting authority and
federal project reviews.

When Athens was first proposed, three-quarters of the state's fossil-fired
plants were at least 35 years old. Many of these plants were oil-fired and
built before passage of the federal Clean Air Act. Athens was conceived to
displace these older assets and serve the New York City market, said Dan
Whyte, director of permitting for PG&E National Energy Group.

But the power plant ran afoul of local preservation groups, which objected to
the developer's choice of a site within view of the estate of a 19th century
leader of the Hudson River school of landscape painting.

Court cases followed, including a challenge to New York's Article X and the
siting board's authority to waive local zoning rules to approve a plant
proposal. In April, a state appellate court upheld the siting board's
authority and said private applicants like PG&E National Energy Group have no
duty to look at alternate locations.

The action isn't finished, however. The U.S. Army Corps of Engineers*one of a
handful of federal agencies reviewing the plans*has yet to issue a project
permit. Reports say the corps is also considering the "landscape view" issue
and could, under federal law, require the developer to consider alternative
sites.

Also worth watching is the expected return*between December 2001 and December
2005*of several nuclear units operated by Ontario Power Generation, adding
3,600 MW of capacity to the market.

Their return would mean a "flood of power coming into the market,"
potentially driving prices lower on already low-cost portions of New York
state's grid, said RDI's Logan. "Any one of the units could have a
substantial impact on the market, at least in western New York state and
perhaps even in the East Central Area Reliability Council region," which
includes parts of the industrial Midwest.

Gas Pain:
Nation Wants Energy,
And Drillers Find It
In People's Back Yards
---
Owners Have Little Recourse
When They Learn They
Don't Own Mineral Rights
---
A Clash in La Plata County
By Chip Cummins
?
05/17/2001
The Wall Street Journal
Page A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)
DURANGO, Colo. -- From their patio just outside this Rocky Mountain resort
town, Mark Brown and Brenda Nash can see almost 30 miles as ponderosa pines
give way to open range. "All we can hear here is the birds, the wind and the
coyotes," says Ms. Nash.
Not for long. J.M. Huber Corp., a New Jersey oil company, plans to cut a
swath of scrub oak and pine from the hill where the couple's log-frame home
sits to make room for a 100-foot-high rig that will work around the clock for
several days drilling for natural gas. Then, depending on how the well goes,
Huber could set up a 25-foot steel pump jack just a stone's throw from the
couple's back porch.
The head of another Huber pump jack already creaks slowly up and down on a
cleared lot across the road from the entrance to the Homestead Ranches
subdivision where the couple live. "Look where they want to put it," says Ms.
Nash. "It's right in the middle of a suburb."
Environmentalists and politicians are girding for a fight with the Bush
administration over plans, expected to be announced today, to open more
federal land in Alaska and the West to drilling. But here and in many other
parts of the country, property owners are already engaged in -- and losing --
a battle over drilling on private land.
Natural-gas drilling has exploded as companies pour record profits from high
prices back into exploration and development. Baker Hughes Inc., a drilling
contractor, says 994 rigs are drilling for natural gas in the U.S. these
days, up 57% from this time last year and the highest number since it started
counting them in 1987. Some states have loosened restrictions in gas-rich
areas on how far apart wells need to be.
At the same time, once-rural communities where much of the drilling takes
place have seen surges in new residents fleeing the cities, putting the two
sides on a collision course. Now, "a lot of our production is out in the
areas where people live," says Adam Keller, a planner for Durango's La Plata
County.
More drilling adds welcome tax revenue and jobs. But in many cases, the
people who look out their windows on the rigs and pumps aren't seeing a dime.
New wells often are drilled on land where the surface rights and the mineral
rights are separate. The landowner can farm or build a home, but the returns
from oil or gas production go to someone else.
In most states that have large mining or oil-and-gas production, surface and
mineral rights were severed decades ago as landowners sold one or the other.
Now, thanks to inheritance, for every deed to a property's surface, there may
be numerous mineral-rights owners. In exchange for royalties on production,
these owners can lease their rights to oil and gas companies, which face only
a few restrictions on how and when they can exploit the underground riches.
To put in a well, oil companies clear and cover with gravel a drilling pad as
big as several acres, move in a rig and dig a pit where mud used for
lubricant is mixed and stored. The process can take up to four weeks. Once
the well is finished, landowners are left with about an acre of cleared land
sporting a shoulder-high "Christmas tree" of pipes, gauges and valves, plus
storage tanks and sometimes a compressor and two-story-high pump jack, all of
which may stay on the land for years. "The one person that's getting nothing
out of this is the landowner without any mineral rights," says Jerry
Campbell, a land developer in North Texas.
With the boom, homeowners and developers all over Texas, the biggest
gas-producing state, are battling oil companies over well placements.
Oklahoma's Conservation Commission has put out a brochure telling landowners
how to deal with geologists conducting seismic studies with explosives on
their land. Farmers and new homeowners in western New York and parts of West
Virginia are complaining of noise and traffic related to drilling.
The clash has been fierce in the West, in places like southwestern Colorado's
La Plata County, an expanse of mesa and wooded foothills that draws mountain
bikers and rafters in the summer and the ski and snowboard set in winter. The
population here has been growing about 3% a year, and annual building permits
now run double those of a decade ago.
La Plata County also sits above the San Juan Basin, by some estimates holding
40 trillion cubic feet of recoverable gas, much of it trapped in underground
coal seams. It's so rich that production from this county alone is enough to
meet natural-gas demand for the entire state.
Drilling here, after taking a jump in the early 1990s, fell off as gas prices
remained low. But interest revived in a hurry last year after gas prices
soared and then leveled off recently at a profitable $4.50 per million
British thermal units. The county planning office, tucked in the courthouse
basement, expects to approve about 100 drilling permits this year, compared
with 62 in 1999, for operators like Huber and BP PLC.
Last year the Colorado Oil and Gas Conservation Commission ruled that
drillers could sink one well per 160 acres in parts of the county, twice the
previous density. That move gave the county some 600 new drilling sites --
parcels of a couple of dozen acres that are known as "windows." It also
ignited outcries from residents. "This isn't West Texas," says Josh Joswick,
a county commissioner. "I don't think people want this to turn into the gas
patch."
Mr. Brown, a 47-year-old supervisor for United Parcel Service, and his wife,
Ms. Nash, 52, moved here two years ago. Ms. Nash, a native of rural Georgia
who doesn't much care for noise or neighbors, was put off by all the drilling
activity. Along a 10-mile stretch of curving county road on the way to the
couple's home, farms give way to modest homes, many with horses in the
backyard. Driveways alternate with gated roads leading to well sites, most
with a pump jack, a compressor and an assortment of storage tanks. "All I
could think about was `Dallas,' " the television show, says Ms. Nash, a tall
woman with a mane of wild blond hair. "I didn't even want to be close to
anything like that."
They settled on a one-story, 1,200-square-foot home on 10 acres of wooded
hillside in the Homestead Ranches subdivision. Ms. Nash says she made clear
to her real-estate agent that she didn't want to be near drilling but adds
that she didn't know about the separate ownership of mineral rights, and it
never was discussed.
She soon found out. While Ms. Nash was unpacking, a neighbor dropped by to
say hello. "You know you're in the window?" Ms. Nash remembers the neighbor
saying after handing over a batch of cookies. Part of the property, it turned
out, fell inside an approved drilling area. A few months later, Huber called
to say that the company, based in Edison, N.J., had leased the mineral rights
under the couple's home and intended to drill. "Our hearts just sank," says
Ms. Nash.
The couple considered trying to sue the real-estate agent but decided the
cost would be too high. However, when negotiations with Huber over where to
drill broke down, they joined other surface-rights owners in a suit against
Huber and a unit of BP. The suit asks a state court for a judgment to clarify
a state-supreme-court ruling on the rights of property owners and oil
companies.
Huber won't discuss this well site, citing the litigation, but its project
engineer for the area, Scott Zimmerman, says the company has come to terms
with other surface owners. "Most of them realize there is a mineral estate,
so we work together to find a site that's good for both of us," he says. But
he adds, "We have the rights to develop the minerals."
Indeed, Colorado law allows operators to drill over property owners'
objections after posting a bond of as little as $5,000 per well against
possible surface damage. State regulators say about a third of the drilling
permits they grant each year are on sites where the surface rights and
mineral rights have been separated, and in most of those cases, drillers post
bonds rather than hammer out agreements with surface owners in advance. Mr.
Zimmerman says Huber operates 60 wells in La Plata County and intends to
drill six to eight more this year, but so far it hasn't had to resort to
posting bonds.
Drillers can generally use an amount of land that is considered "reasonable"
to recover their minerals. The regulators who grant drilling permits use
various criteria including spacing rules and population density. In Colorado
neighborhoods where there is at least one home every two acres, for instance,
wells have to be at least 350 feet from homes.
Oil companies blame real-estate agents for not telling buyers about potential
drilling. But there's only so much agents can say for sure, says Sandy
Cooper, president of the Durango Area Association of Realtors. She says she
can point out existing wells and designated drilling windows on a map hanging
in her office, and sometimes sends clients to the county planning office and
the oil companies.
Colorado requires real-estate brokers to disclose known defects of property.
Drilling issues are a different matter. Last month, the state enacted a law
requiring that title insurers tell a property's buyer if the property's
mineral rights have been severed, and thus that there may be oil or gas
drilling on the land someday. At the same time, the new law requires owners
of the surface rights -- the homeowners -- to notify those who own or lease
mineral rights of any plans to change the use of the surface, such as by
building a subdivision on it.
That could be difficult where mineral rights have been scattered among heirs.
Ms. Cooper says a title commitment on a property that crossed her desk
recently listed 17 mineral-rights owners, including one who had an interest
of 127/552 dating from 1956. "It's worse than your family tree," she says.
The drilling boom even baffles some homeowners and developers who are savvy
about mineral rights. Allen Arnold ran an oil company for 10 years before
investing two years ago in 187 acres near the flyspeck town of Rhome in Wise
County, Texas. The county is growing quickly, absorbing spillover from Fort
Worth and Dallas to the south. A new regional airport and auto racetrack
nearby have added to growth.
But Mitchell Energy & Development Corp. of the Woodlands, Texas, and smaller
operators are hard at work drilling for natural gas in Wise County. The Texas
Railroad Commission, which regulates the oil-and-gas industry in the state,
recently loosened well-spacing rules for the local Barnett Shale formation.
Mitchell plans to drill 276 holes in Wise and neighboring counties this year,
up from 124 last year.
The company says it has been trying to work with surface owners and has run
newspaper ads warning homebuyers to check on mineral rights. But Mr. Arnold,
who is 50, wasn't ready for its latest move: asking Rhome officials to let
the company drill a well on the second phase of Mr. Arnold's Ellis Homestead
development, between what he hopes will someday be two residential lots. The
first phase has paved roads, sewers and a handful of brick homes that sell
for up to $200,000.
Mr. Arnold, who puts his investment in the project at about $2 million, says
he is selling two to three lots a month. But if people "see a wellhead, a
pumping unit or a tank battery, they're going to think there's a safety issue
and they're not going to want into the neighborhood," he says. He adds that
he has no obligation to disclose drilling in the area, but if prospective
buyers ask, "I'll tell them there is a possibility that there will be a well
there or anywhere around here." Mr. Arnold says a well on his land "could
kill my subdivision," and he intends to fight it.
"That situation, to me, is a sad situation," responds Doug Mitchell, Mitchell
Energy's construction superintendent. "There's not going to be a fight.
Mitchell has the right to drill there, and they're going to exercise their
right."
Mr. Mitchell, 47 years old and no relation to Mitchell Energy's founder,
knocks on doors to inform landowners their property is slated for a well. He
negotiates land-use agreements that may include cash or landscaping valued at
as much as $2,000 for surface damage. "I've had women just break down and
bawl and squawl when I go down to settle with them," he says. "My skin, if
you cut into me right now, is about this thick," he says, indicating with a
thumb and forefinger the thickness of one of the sirloins served at the
nearby Ponder Steakhouse.
Mr. Mitchell pulls his truck under the stone archway of another subdivision
to meet with a developer. Lifesize statues of a cowboy and a small herd of
longhorns greet visitors, though the development has only a few homes. As Mr.
Mitchell and the developer prepare to discuss some wells near the land, the
man complains that Mitchell and other oil and gas companies ought to pay
market value for the lots they drill on, with gas prices so high.
Mr. Mitchell isn't biting. "My rebuttal to him," he says later, "is, `Hey, no
doubt, I can read a tax roll as well as anyone. But why should I pay again
for rights I've paid for already?' "

National Desk; Section A
IN ENERGY PLAN, BUSH URGES NEW DRILLING, CONSERVATION AND NUCLEAR POWER
REVIEW
By DAVID E. SANGER
?
05/17/2001
The New York Times
Page 1, Column 6
c. 2001 New York Times Company
WASHINGTON, May 16 -- President Bush's long-awaited energy plan proposes
loosening regulations on oil and gas exploration, conservation-minded efforts
like a review of gas mileage standards and a $4 billion tax credit for a new
generation of highly fuel efficient cars, and urges a reconsideration of a
quarter-century ban on the reprocessing of nuclear fuel.
With a declaration that the energy problems threaten the nation's economy and
security, the Bush plan also orders a sweeping review of public lands to
determine whether more energy resources can be extracted.
''America in the year 2001 faces the most serious energy shortage since the
oil embargoes of the 1970's,'' the administration's energy report states.
Without action, it continues, projected energy shortfalls in coming years
''will inevitably undermine our economy, our standard of living and our
national security.'' [Excerpts, Page A21.]
The proposals are among 105 initiatives outlined in the administration's
energy report, said a senior government official who briefed reporters on its
contents tonight. The White House released an eight-page overview of the
document, which will be distributed in full on Thursday.
The official said Mr. Bush would also issue two executive orders later this
week directing all federal agencies to consider the effects of all new
regulations on energy production and to expedite permits for all energy
projects ''while remaining mindful of protecting the environment.''
The overview released tonight states that federal regulation of the nation's
energy producers has unduly inhibited production and increased prices.
''Regulation is needed in such a complex field, but it has become overly
burdensome,'' the report says. ''Regulatory hurdles, delays in issuing
permits and economic uncertainty are limiting investment in new facilities,
making our energy markets more vulnerable to transmission bottlenecks, price
spikes and supply disruptions.''
Mr. Bush will also order Interior Secretary Gale A. Norton, an outspoken
proponent of seeking new sources of energy on federal lands, to ''look at any
impediments'' that discourage exploration for oil and gas.
The report repeats Mr. Bush's commitment to explore in the Arctic National
Wildlife Refuge -- a proposal that seems unlikely to survive in Congress --
and also urges a review that will include other places in Alaska, the Rocky
Mountains and along the Gulf Coast.
The report also urges the revision or reinterpretation of a major clause of
the Clean Air Act that requires long government review of any modifications
of power plants that affect their emissions.
The senior government official, who was deeply involved in the development of
the plan, argued tonight that the ''new source reviews'' by the Environmental
Protection Agency are a ''time-consuming process'' that often ''discourage
fuel efficiency.''
The Justice Department will also be ordered to review several
multi-million-dollar lawsuits brought by the Clinton administration against
utilities accused of ignoring the law.
One official of an environmental group said the report was about what he had
expected, and he predicted that conservation organizations would be highly
critical of it.
''This has just a lot of opportunity for mischief from the energy producers
and no real solid commitments for the green components,'' the official, David
G. Hawkins, senior lawyer for the Natural Resources Defense Council, said.
Mr. Hawkins said he was ''astounded'' that the policy would recommend a
review of legal actions now under way on utility emissions, calling it
''political interference with law enforcement.''
Mr. Bush is to announce his plan on Thursday morning at an innovative energy
plant in St. Paul. But even before he begins his campaign for a national
energy policy, he has touched off a heated political argument between
Democrats and Republicans over how to balance environmental concerns against
growing energy needs, and whether to impose temporary price caps in places
like California, where a deregulation program and soaring demand has sent
prices rocketing.
Democrats have urged the use of such controls, while Mr. Bush will argue
''vociferously'' on Thursday, one aide said, that the controls would only
discourage the production of more electricity.
Mr. Bush's report adopts a tone that is by turns admonishing and encouraging.
''The complacency of the past decade must now give way to swift, but
well-considered, action,'' it says in its introduction, echoing themes that
Mr. Bush and Vice President Dick Cheney, who headed the task force, have
sounded in recent weeks.
''Present trends are not encouraging, but they are not immutable,'' the
report says.
Then, in a clear effort to separate Mr. Bush's approach from President Jimmy
Carter's politically disastrous calls for household austerity during the
energy crises of the late 1970's, it adds: ''Our country has met many great
tests. Some have imposed extreme hardship and sacrifice. Others have demanded
only resolve, ingenuity and clarity of purpose. Such is the case with energy
today.''
The decision to offer a relatively hefty tax credit for ''hybrid'' cars,
which use a combination of gasoline and battery power, is bound to help both
Detroit and two Japanese automakers -- Honda and Toyota -- which are already
marketing such vehicles in the United States.
They will be less enthusiastic, however, about orders by Mr. Bush for the
government to review the federal standards for automotive fuel efficiency,
though the report makes no commitment that those standards will be raised.
The plan also calls for a new evaluation of nuclear reprocessing, a
technology that takes advantage of the fact that as reactors consume uranium,
they also produce plutonium. If the plutonium is chemically scavenged from
the fuel, it can be used to run reactors.
But the technology has drawbacks. The work is dirty, with the threat of
radioactive releases, and it is expensive.
For the last decade at least, it has been far cheaper to fuel reactors with
new uranium than to recover plutonium. And while uranium fuel used in power
reactors cannot be used to make a bomb, plutonium can, raising the threat of
world commerce in a material that could be diverted by countries -- or
terrorist groups -- that want a bomb.
Britain, France and Japan currently reprocess fuel, although the British are
considering ending the practice because it is so expensive.
But reprocessing can reduce the volume of plutonium requiring disposal, which
is important because plutonium is so long-lived and difficult to store
safely.
Some opponents of the technology said today that they believed it had been
included in the Bush plan as a sop to Nevada, where the Energy Department is
trying to build a waste repository. But reprocessing would not eliminate the
need for such a repository.
The plan also calls for cooperation with Canada on building a pipeline that
could bring more natural gas into the United States.
The report mixes several existing initiatives with new ones, particularly in
the area of conservation. For example, of $10 billion in proposed tax credits
over the next 10 years, $5 billion in credits are already in the budget or
the result of extending existing ones.
Other programs get modest increases. The administration recommends $300
million in new money for the Low Income Home Energy Assistance Program and
calls for funneling some oil and gas royalty payments, which companies pay
the federal government for extracting resources on public land, to the
program for the poor.
Similarly, in an effort directed toward environmentalists, it would commit
royalties from any energy extracted in the Arctic National Wildlife Reserve
for land conservation.
There are no credits or other tax breaks for oil or gas producers, or
electric utilities -- a reflection of the sensitivity of the White House to
criticism that Mr. Cheney and other top officials spent their private-sector
years in the energy industry. But the tone of deregulation, reassessment of
the merits of the Clean Air Act and the emphasis on opening of federal lands
to more energy production -- everything from wind power to oil and gas
drilling -- provides those industries with effective subsidies totaling in
the billions of dollars.
Much of the report simply urges companies to build, build and build some
more, including 38,000 miles of new gas pipelines, 255,000 miles of
distribution pipelines and a new power plant every few days for the next 20
years. But for every such proposal, Mr. Bush's team carefully inserted
proposals for expanding the use of renewable fuels, from geo-thermal energy
sources to the methane produced in landfills.
The nuclear power industry gets one major concession: a tax break that would
eliminate the double taxation of money put aside for decommissioning plants.
Those taxes have been a deterrent to buying and selling nuclear plants. It
commits $2 billion over 10 years to a clean-coal technology program in the
Department of Energy.
It urges the Federal Energy Regulatory Commission to speed the licensing of
hydroelectric power plants, and seeks ''market-based incentives'' to reduce
pollutants that cause global climate change.
But this winter Mr. Bush rejected any American participation in the Kyoto
treaty on global warming, which would have mandated cuts in American
emissions, at considerable economic cost.

Photos: The president met yesterday with cabinet members, including Secretary
of State Colin L. Powell and Defense Secretary Donald H. Rumsfeld. (Stephen
Crowley/The New York Times)(pg. A1); Speaker J. Dennis Hastert, left, and
Representative Dick Armey yesterday after a meeting on energy with Vice
President Dick Cheney. (Associated Press)(pg. A20)