Following is today's IEP news...for more headlines please visit
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Thanks,
Jean

--
Jean Munoz
McNally Temple Associates, Inc.
916-447-8186
916-447-6326 (fx)

Copley News Service, May 31, 2001, Thursday, State and regional, 893 words,
????Amid giant redwoods, Bush stumps for 'new environmentalism', Bill
Ainsworth,
????SEQUOIA NATIONAL PARK, Calif.

The Dallas Morning News, May 31, 2001, Thursday, WASHINGTON DATELINE, K0440
????, 1113 words, Legislators push for bill to allow sale of "negawatts' to
????California, By Jim Landers

Detroit Free Press, May 31, 2001, Thursday, DOMESTIC NEWS, K0477, 1421
????words, With energy crisis on nation's collective mind, Abraham faces test
of
????his life, By Ruby L. Bailey

Los Angeles Times, May 31, 2001 Thursday, Home Edition, Page 17, 702 words,
????NATION; ; FERC Chief Unfazed By Threat of Third Lawsuit, RICARDO
????ALONSO-ZALDIVAR, JUDY PASTERNAK, TIMES STAFF WRITERS, WASHINGTON

Los Angeles Times, May 31, 2001 Thursday, Home Edition, Page 14, 523 words,
????Bush, Davis Clash on Energy Price Caps

Los Angeles Times, May 31, 2001 Thursday, Home Edition, Page 8, 759 words,
????The State; ; Bush Blunders Into Equal Footing With Davis, GEORGE SKELTON,
????SACRAMENTO

Los Angeles Times, May 31, 2001 Thursday, Home Edition, Page 1, 842 words,
????See How You Like This Action, Mr. President, PETER H. KING, SACRAMENTO

Los Angeles Times, May 31, 2001 Thursday, Home Edition, Page 1, 796 words,
????Estate Tax Repeal to Hurt State Revenue; Finances: Without a portion of
the
????federal money, California stands to lose $356 million next year as the
????credit is phased out., LIZ PULLIAM WESTON, TIMES STAFF WRITER

The New York Times, May 31, 2001, Thursday, Late Edition - Final, Section
????A; Page 27; Column 2; Editorial Desk, 687 words, Bush's Mistake in
????California, By Gray Davis; Gray Davis is the governor of California.,
????SACRAMENTO

The New York Times, May 31, 2001, Thursday, Late Edition - Final, Section
????A; Page 1; Column 5; Business/Financial Desk, 1396 words, In California,
????Blackouts Spur A Search forHome Remedies, By LAURA M. HOLSON, LOS ANGELES,
????May 30

The New York Times, May 31, 2001, Thursday, Late Edition - Final, Section
????A; Page 18; Column 4; National Desk, 135 words, National Briefing West:
????California: Utility Donations, AP

San Jose Mercury News, May 31, 2001, Thursday, STATE AND REGIONAL NEWS,
????K0555, 1171 words, San Jose mayor reverses position, endorses Calpine
power
????plant project, By Mike Zapler

The San Francisco Chronicle, MAY 31, 2001, THURSDAY,, FINAL EDITION, NEWS;,
????Pg. A5, 912 words, Plan would have biggest customers pay Edison's debt,
Greg
????Lucas, Sacramento

The San Francisco Chronicle, MAY 31, 2001, THURSDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 876 words, Regulators want state trade-off for caps; ???Davis
asked
????to give up control of power lines, Bernadette Tansey

The San Francisco Chronicle, MAY 31, 2001, THURSDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 744 words, Municipal utilities warned; ???Governor says he'll
seize
????excess electricity if prices don't come down, David Lazarus, Sacramento

The San Francisco Chronicle, MAY 31, 2001, THURSDAY,, FINAL EDITION, NEWS;,
????Pg. A8, 687 words, NEWS ANALYSIS; ???State awaiting bold act by Davis;
????Rhetoric buys time but summer's near, Lynda Gledhill, Sacramento

The San Francisco Chronicle, MAY 31, 2001, THURSDAY,, FINAL EDITION,
????EDITORIAL;, Pg. A27;, 641 words, FERC is shirking its responsibilities,
John
????A. Russo, John Burton, Robert M. Hertzberg

The Washington Post, May 31, 2001, Thursday, Final Edition, FINANCIAL; Pg.
????E01, 1017 words, Price Caps Have Questionable Record; Even if California
????Gets Controls on Electric Costs, They May Not Help, Martha McNeil Hamilton
????and Greg Schneider, Washington Post Staff Writers

Chicago Tribune, May 31, 2001 Thursday, NORTH SPORTS FINAL EDITION,
????Editorial; Pg. 24; ZONE: N, 503 words, Price caps don't generate energy

Copyright 2001 Copley News Service

?????????????????????????????Copley News Service

????????????????????????????May 31, 2001, Thursday

SECTION: State and regional

LENGTH: 893 words

HEADLINE: Amid giant redwoods, Bush stumps for 'new environmentalism'

BYLINE: Bill Ainsworth

DATELINE: SEQUOIA NATIONAL PARK, Calif.

BODY:

??President Bush yesterday chose one of the oldest living trees an ancient
sequoia as a backdrop to declare ''a new environmentalism for the 21st
century''
that balances protection of natural treasures with private property rights.

??Dressed in casual clothes and a green windbreaker, Bush used the spectacular
setting to highlight his plan to spend $5 billion over five years to reduce
the
national parks' huge maintenance backlog.

??He spoke in reverent tones about the responsibility of the government to
preserve areas such as the sequoia groves of the high Sierra.

??''Our duty is to use the lands well and sometimes not to use them at all,''
Bush said, standing in front of the Sentinel, a 2,200-year-old tree that soars
257 feet and measures 86 feet around.

??Yet Bush said such decisions must not ignore private property rights.

??''We must protect the claims of nature, while also protecting the legal
rights of property owners,'' Bush said.

??He added that state and local governments also have responsibility for the
environment.

??''And usually they have a better grasp of the problem and what is needed to
solve it,'' Bush said. ''Washington has sometimes relied too much on threat
and
mandate from afar, when it should be encouraging innovation and high standards
from the people closest to the land.''

??Environmental groups have criticized Bush on a number of fronts, from
seeking
to open public lands to oil and gas exploration to dropping new restrictions
on
arsenic in drinking water to his broken campaign promise to regulate carbon
dioxide emissions.

??At least one organization, the National Parks Conservation Organization,
took
issue with the plan Bush announced yesterday because it included virtually no
money for new parkland and instead focused on building roads and buildings.

??The Sierra Club suggested that Bush was in no position to claim the mantle
of
environmentalist.

??Polls show the public is leery of the president on the environment, and
yesterday's event was one in a series aimed at bolstering his credentials in
that area.

??The day before, his administration affirmed a plan put into place in the
latter days of the Clinton administration to reduce haze at national parks.
The
Clinton rules, initially put on hold by Bush, help states force older power
plants and industrial facilities to cut air pollution.

??Democrats believe the president, who lost California by 12 percent of the
vote, is vulnerable on environment and energy issues. Tuesday, he met with
Gov.
Gray Davis to discuss the energy crisis, a meeting that resulted in the
expected
disagreement over wholesale electricity price caps Davis wants and Bush does
not.

??Yesterday, energy was not on the president's agenda. He refused to answer
questions from reporters; the general public was not allowed to attend any of
his three events during his two-day California visit, which included a speech
Tuesday at Camp Pendleton.

??Yesterday, his speech took on a philosophic tone about balancing competing
interests.

??''My administration will adopt a new spirit of respect and cooperation,
because, in the end, that is the better way to protect the environment we all
share a new environmentalism for the 21st century,'' Bush said, in a carefully
choreographed setting with park rangers in front of the giant sequoia.

??The president pushed his National Parks Legacy Project, a plan proposed
during his campaign to spend $5 billion on the needs of parks, including
improving neglected buildings and roads.

??As part of the plan, he wants to protect 4,000 miles of rivers, restore
9,000
acres of parklands to their natural habitat and double the money for studying
wildlife resources in parks.

??Bush was joined by Interior Secretary Gale Norton, whom he asked to produce
annual reports on each national park.

??''Good stewardship begins here,'' Bush said. ''... Yet many parks have gone
years without receiving the kind of care and upkeep the American people
expect.''

??Bush said Sequoia National Park is doing what he'd like all parks to do:
serve visitors better.

??The park is adding miles of trails, tearing down buildings that threaten the
roots of the giant trees and building a museum that can teach more visitors
about the unique trees.

??''Sequoia is a model,'' he said. ''Allowing for more visitors without
destroying the very things that draw people here the scenery, the quiet, the
animals left unharmed in their natural habitat.''

??But the National Parks Conservation Association, a watchdog group,
criticized
Bush's overall park policy, giving the new president a grade of ''D.''

??Bush's energy plan, the group said, will actually worsen air quality in many
parks because he wants to weaken the Clean Air Act and he has rejected efforts
to tackle global warming.

??''His unwillingness to address global climate change spells disaster for
many
of our parks,'' the group's report said. ''If he moves to drill for oil and
gas
in national monuments, serious resource degradation is all but guaranteed.''

??The group supports his effort to spend more money on parks, but said his
plan
is ''a bit of a shell game'' because it includes just $61 million this year in
new parks money. Ninety-eight percent of that is for roads and buildings, the
report said, which neglects nature and education.

??WAGNER-CNS-SD-05-30-01 2211PST

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??????????????Copyright 2001 Knight Ridder/Tribune News Service
???????????????????????Knight Ridder/Tribune News Service

???????????????????????????The Dallas Morning News

????????????????????????????May 31, 2001, Thursday

SECTION: WASHINGTON DATELINE

KR-ACC-NO: ?K0440

LENGTH: 1113 words

HEADLINE: Legislators push for bill to allow sale of "negawatts' to California

BYLINE: By Jim Landers

BODY:

??WASHINGTON _ Some Texas congressmen and energy companies are trying to help
California avert blackouts and utility price shocks this summer with a
market-based conservation strategy known as "negawatts."

??A "demand auction" would let power consumers earn money by selling
electricity they choose to conserve. It's aimed at big power users such as
industrial electric furnaces.

??If a California blackout appears likely and the state seeks more power in a
Western auction, these consumers could sell their willingness to conserve for
the same price an electric generator is selling supply.

??Utilities could then transfer the unused power on their systems to
California, pocket a fee and give the rest of the money to the conserving
customer.

??The demand auction concept was dubbed negawatts in the 1970s by Colorado
energy conservation guru Amory Lovins. By creating a marketplace that rewards
consumers for using less electricity, Lovins argued, negawatts (shorthand for
negative watts) reduce the need for power plants.

??The Texas effort, led by state Rep. Joe Barton, unites generating and
marketing companies such as Reliant Energy Inc. and Enron Corp., who some
California critics call the "Houston pirates," in a sweeping conservation
program.

??Backers say a demand auction could reduce blackouts by making more power
available from consumers who choose to conserve for a price.

??Municipally owned utilities and cooperatives have led the opposition to the
proposal by arguing that it lets consumers treat electricity as a property
right
rather than a service.

??"It sets up a whole new class of customers with a legal entitlement to power
they don't consume," said Joe Nipper, senior vice president of the American
Public Power Association. "What you need is yours to consume, but unless you
have a contract beyond that, it's not yours. This may be a federal taking of a
utility's property."

??The approach is appealing to conservatives such as Barton and Rep. Ralph
Hall
because it deepens the nation's experiment in electricity deregulation at a
time
when many California Democrats want to abandon it for price controls.

??Enron executive vice president Steven Kean backed the negawatts idea in
congressional testimony in January.

??"New capacity cannot be brought on in time for this summer's peaks," he
said.
"But demand reductions could be purchased with a minimum of disruption to
businesses, workers and the economy."

??The incentives can be substantial. Residential retail electricity prices in
California normally average around 10 cents per kilowatt-hour. Spot-market
wholesale prices have soared as high as $1.90 per kilowatt-hour.

??A consumer who agreed to stop consumption for an hour to sell that power
could realize $1.80 from a bidding California utility, and still pay the 10
cents to his or her own electricity provider.

??"Every customer should want this type of service in the marketplace, because
it will bring prices down," said John Hughes of the Electricity Consumers
Resource Council, a national organization of industrial and commercial power
users.

??Reliant Energy, which has been vilified by California Gov. Gray Davis and
other California Democrats for its high-priced electricity, bought full-page
ads
in four national newspapers last week to promote negawatts.

??Barton said his Electric Emergency Relief Act, including a nationwide
negawatts market, was the only legislation advancing through Congress that
has a
chance of helping California this summer.

??Despite the concerns of some utilities, the idea has won bipartisan support.

??Barton gives it only a "modest chance" of success, however, because it is
part of legislation many Democrats are seeking to amend by imposing
electricity
price caps and returning regulation to the California power market.

??"It puts us between a real rock and a hard place," Barton said. "The
president is never going to sign a bill that has price caps. But if the
government of California just says, 'Price caps, price caps, price caps,' you
put their members of Congress in the position where if they don't deliver
price
caps, they don't deliver anything."

??If Barton's California relief bill stalls, however, the national negawatts
market idea will probably surface in Congress again this year. Bush's national
energy plan urges Congress to restructure the electricity industry nationwide
along market-based principles.

??"That's kind of where I am, isn't it?" said Barton, who chairs the House
energy and air quality subcommittee.

??Reliant Energy senior vice president John Stout said that without the Barton
bill, California will plummet into an emergency situation this summer where
those in charge will reach for the negawatts concept for fast relief.

??"They will say we got to do something to keep the lights on, now, and
they'll
reach for this," he said.

??Negawatt markets already exist in several parts of the country, including
California. An Internet auction known as the Demand Exchange was established
with the approval of the California Energy Commission in hopes of reducing
consumption this summer by less than 1 percent.

??Test negawatt auctions began in 1999 in Connecticut and Georgia, and more
than a dozen utility exchanges were in existence last year.

??Utilities have long offered rate incentives for customers willing to have
their electricity supplies interrupted at times of peak demand.

??A negawatts auction is popular with big consumers because it lets them
decide
when they want to forego electricity, Hughes said.

??"There is a clear and compelling need to establish a mechanism for allowing
negawatts of emergency supply to be easily purchased in the same way as
megawatts of additional supply," Stout said. "This would enable a deficit area
such as California to purchase emergency supply from anywhere within the
West."

??Several aluminum smelters in the Pacific Northwest have shut down in the
last
year in order to sell electricity for more profit than they could sell
aluminum.
The smelters hold power contracts with the federal Bonneville Power
Administration that contain clauses allowing them to market the electricity.

??Those were contracted arrangements between Bonneville and its customers,
Nipper said. Barton's negawatts arrangement would throw the market open to
virtually all electricity users, and let companies such as Enron profit from
handling the transactions.

??"This would let these companies do these deals and get their commission on
it," Nipper said. "Utilities and their customers can do those deals now
without
any commissions."

??(c) 2001, The Dallas Morning News.

??Visit The Dallas Morning News on the World Wide Web at
http://www.dallasnews.com/

JOURNAL-CODE: DA

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??????????????????????????????8 of 114 DOCUMENTS

??????????????Copyright 2001 Knight Ridder/Tribune News Service
???????????????????????Knight Ridder/Tribune News Service

??????????????????????????????Detroit Free Press

????????????????????????????May 31, 2001, Thursday

SECTION: DOMESTIC NEWS

KR-ACC-NO: ?K0477

LENGTH: 1421 words

HEADLINE: With energy crisis on nation's collective mind, Abraham faces test
of
his life

BYLINE: By Ruby L. Bailey

BODY:

??WASHINGTON _ There was a moment during dinner with President Bush when
Spencer Abraham couldn't believe his luck.

??As Abraham tells it, it was a recent Thursday night. He, Bush and
Environmental Protection Agency Administrator Christine Todd Whitman were on
Air
Force One on a return trip to Washington from Iowa. The former one-term U.S.
senator from Michigan felt a long way from his crushing re-election defeat in
November.

??"People were sending me condolences back then," Abraham said. "You sort of
have to pinch yourself."

??The moment of elation was fleeting. At 7 a.m. the next morning, Abraham
began
touring the country to promote _ and defend _ the controversial energy policy
he
helped create as a member of Vice President Dick Cheney's Energy Policy
Development Task Force.

??Even before its release, the plan _ which supports drilling in Alaska's
Arctic Natural Wildlife Refuge and building more refineries _ faced fierce
opposition from Democrats and environmentalists who want more emphasis on
conservation and immediate relief for consumers.

??"Someone in the department told me, 'It's a good thing you've got a good
sense of humor,'" aid Abraham, who is the scheduled luncheon speaker Friday on
Mackinac Island at the Detroit Regional Chamber's 21st annual Leadership
Policy
Conference.

??His sense of humor has come in handy, he said, since taking the helm of the
bedeviled Department of Energy and becoming the point man in the middle of a
national energy crisis.

??He has hoped for rain in the drought-stricken Pacific Northwest to power
hydrogenerators, but the region remains dry.

??He has been barraged with complaints from Michigan and other Midwestern
states where gasoline prices are skyrocketing.

??He has called for conservation to curb blackouts in California _ but the
state faces a summer of more blackouts than ever before.

??New Yorkers haven't weighed in yet _ but Abraham is sure he'll hear from
them, too, because New York City is facing possible power outages this summer.

??"We can't create new generating machines for them," Abraham said, only
half-joking, in an interview last week. "We don't have a big generator in the
basement that I can turn on and point towards California."

??The problem with politics, he said, is that "people always expect instant
solutions. We have long days here."

??His days have been long since January when the Washington rumor mill said he
was being considered for transportation secretary. Even his critics would not
have been surprised if Bush had tapped him for that job. In 1983, he chaired
the
Michigan Republican Party.

??In 1989, he became deputy chief of staff to Vice President Dan Quayle.
Elected to the U.S. Senate in 1994, he was involved in transportation issues
and
helped Michigan get millions of dollars in highway funding.

??But his nomination to head the Department of Energy surprised many _ and
outraged environmentalists. As a senator, Abraham was conservative and firmly
pro-business. Environmental groups graded him lax on pollution and
conservation.

??His critics pointed out that during his Senate term, he had pushed to
eliminate the very department he was now being tapped to head. At the time, he
said, the department was "redundant," duplicating the work of other
departments.

??"It was surprising, given his position as far as abolishing the Energy
Department," said Tanya Calaba, land and water conservation coordinator for
the
Lake Michigan Federation in Traverse City, which opposes drilling for oil and
natural gas in the Great Lakes. "I don't know what expertise he brings."

??But Abraham contributed heavily to Cheney's task force meetings, said Mary
Matalin, an adviser to Bush and Cheney. The group met 28 times in 14 weeks.
Abraham attended nearly every meeting, between trips to California to deal
with
the rolling blackouts.

??"He was, in every presentation to the president and every task force
meeting,
a key player," Matalin said. "There wasn't an issue on the table that Spence
did
not have an articulation on."

??Even Abraham's supporters don't claim that he had a major hand in writing
the
energy plan. His job, they say, has been as adviser and point man.

??"His role has been largely providing support to the Cheney task force and to
make certain some new ideas get implemented," said Robert Walker, chairman and
chief executive officer of the Wexler Group in Washington. The company lobbies
for BP (formerly British Petroleum) and other energy industry clients.

??Despite his lack of background on energy issues, friends and adversaries say
Abraham has stepped up to the job with his sharp intelligence and hard work.
The
same traits served him well in the Senate, they say, where he never missed a
roll call vote in six years and passed more bills than any other senator in
his
freshman class.

??"I think he has one of the best political and strategic minds that I've
seen," said Red Cavaney, president of the American Petroleum Institute, who
has
known Abraham since his days as chairman of the Michigan Republican Party.

??"If he doesn't have a photographic mind, he's as close to having one as you
can get."

??Abraham had just passed his confirmation hearings when Cavaney showed up at
his office with five petroleum CEOs.

??Sure that he was overwhelmed with his new position, the men offered their
congratulations, extended their assistance and asked for a follow-up meeting
to
discuss the complicated world of refineries.

??But Abraham was ready to talk, Cavaney said.

??"It's extraordinarily complex. Here he was very fresh to the job, and he got
it," Cavaney said. "He's very quickly able to grasp the context, to get into
the
real nut of what the problems are."

??At an Energy Department budget presentation in April, Abraham said the
department faced "a truly extraordinary collection of difficult and pressing
issues."

??The current problems "are modest compared to what they could be in another
five years," he said.

??Rising demands for oil and gas are strapping tight supplies as the nation
also deals with an aging power infrastructure. The results: Natural gas bills
in
Washington, D.C., have tripled. California predicts it could spend 260 hours
this summer in the dark.

??The Food and Agriculture Policy Institute, a Washington think tank, reports
that farmers are likely to see their incomes drop 20 percent during the next
two
years because of high energy costs. In Michigan and other states, gasoline is
threatening to top $2.50 a gallon by summer.

??"He's in a hot spot," said Joseph Stanislaw, president of Cambridge Energy
Research Associates, an energy consulting firm in Washington. "What's the
approach to the challenge? What balance does one strike?"

??That's yet to be determined. But one thing that everyone is predicting:
Abraham will clash with environmentalists on what to do about the nation's
emerging energy crisis.

??It won't be the first time. When Abraham was a senator, the Sierra Club, an
environmental protection organization, included him in its media campaign
against officials it contends don't protect the environment. It also opposed
his
re-election, saying Abraham was in the pocket of the petroleum industry.

??Abraham's re-election campaign received $414,000 from the petroleum
industry.
Bush received $2.8 million from the industry in his bid for the presidency.

??"He is energy-industry sympathetic and energy-industry friendly," said Lana
Pollack, president of the Michigan Environmental Council, a coalition of more
than 50 environmental agencies in Michigan.

??Pollack has known Abraham since 1994 when they both were running in primary
elections for the U.S. Senate. Pollack lost the Democratic primary. Abraham
won
the GOP primary _ and the election.

??"He's never been a friend to the environment," said Daniel Becker, director
of global warming and energy for the Sierra Club.

??Not long after that Air Force One ride, gas prices shot up nearly 25 cents
overnight in Michigan.

??California Gov. Gray Davis announced that his state would sue the Federal
Energy Regulatory Commission to force it to institute federal price controls
on
California's rising electricity prices.

??Despite those problems, Abraham's sense of humor was firmly in place. He
recalled again that night aboard Air Force One, when he was pinching himself
in
disbelief at his good fortune.

??"And people were sending me condolences because I lost the Senate," he
deadpanned.

??(c) 2001, Detroit Free Press.

??Visit the Freep, the World Wide Web site of the Detroit Free Press, at
http://www.freep.com.

JOURNAL-CODE: DE

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??????????????????????Copyright 2001 / Los Angeles Times

??????????????????????????????Los Angeles Times

?????????????????????May 31, 2001 Thursday ?Home Edition

SECTION: Part A; Part 1; Page 17; National Desk

LENGTH: 702 words

HEADLINE: NATION;
;
FERC Chief Unfazed By Threat of Third Lawsuit

BYLINE: RICARDO ALONSO-ZALDIVAR, JUDY PASTERNAK, TIMES STAFF WRITERS

DATELINE: WASHINGTON

BODY:

??The beleaguered chairman of the Federal Energy Regulatory Commission said
Wednesday that he was not fazed by California Gov. Gray Davis' threat to sue
the
agency for failing to cap wholesale electricity rates.

??California officials have gone to the federal courts twice before to force
FERC to impose price caps, Curt Hebert told reporters. And the U.S. 9th
Circuit
Court of Appeals in San Francisco has twice rejected the suits.

??Davis, observing that FERC has a legal obligation to ensure that wholesale
electricity rates are "just and reasonable," threatened to go to court again
after he failed in a meeting Tuesday to persuade President Bush to support
caps
on wholesale electricity prices.

??"They've sued us two times and they have been [dismissed ] two times,"
Hebert
said. "I feel very good about it."

??Responding to reporters' questions, Hebert also appeared to be unaware of
media reports that President Bush had asked a rival for his chairmanship,
Patrick Wood III, to play a special role in dealing with California's
problems.

??Wood, a Bush confidant who until now had been chairman of the Texas Public
Utility Commission, was confirmed by the Senate as a FERC commissioner last
week
and is widely expected to be named to Hebert's job. The president can
designate
any FERC commissioner as chairman without further action by the Senate.

??White House officials said during Bush's visit to Los Angeles on Tuesday
that
Wood would follow up on concerns raised in the president's meeting with Davis.

??Wood said in an interview that he talked briefly with Davis three weeks ago
and more recently with California PUC President Loretta Lynch. He said his
charge is vague: to review the entire situation.

??"I'm looking at short-term things and long-term things," he said, noting
that
he had heard from lawmakers "on both sides of the aisle" complaining that FERC
had not gone far enough.

??Wood, who advocates a more activist role for FERC, said he wants to monitor
how the agency's efforts to limit price spikes in California are working and
that he might push for changes. Unlike Hebert, he said the agency's standard
for
deciding whether a company has market power--enough influence to sway
prices--needs to be reconsidered. He said he is also open to increasing the
amount of rebates ordered to utilities for January.

??And he said he thought FERC should also take another look at the design of
California's deregulated market. "Your work never stops," Wood said. "You
never
get there and say, 'We're done.' "

??California, he added, "is salvageable," though he said blackouts are
inevitable this summer.

??FERC itself has acknowledged that California is paying unfair prices for
electricity, particularly during power shortages. But instead of imposing
price
caps, the agency has instituted a complex system to monitor the market and
seek
refunds from power sellers that overcharge during emergencies.
??A majority of FERC's governing board believes that price caps would deter
investors from building new power plants in California, thereby complicating
efforts to increase energy supplies. Price caps "would destroy what is left of
California," Hebert said Wednesday.

??State officials disagree.

??With California paying as much as $1,900 per megawatt hour to avert
blackouts
earlier this month--five times the current market price--state officials argue
that FERC's approach is no deterrent and that the agency has a legal
obligation
to impose price caps.

??Davis and others contend that temporary controls would bring order to the
power markets and prevent further damage to California's economy. They point
out
that the energy industry operated efficiently under government-set rates until
the recent onset of deregulation.

??But the courts have held that FERC has wide latitude in fulfilling its
obligations under federal law.

??In an April 11 decision denying a petition for relief by the city of San
Diego, a 9th Circuit panel ruled that the same law that gives FERC authority
to
impose price caps also allows it to pursue alternatives.

??On Tuesday, the same court dismissed a petition from state Senate leader
John
Burton, citing its earlier decision in the San Diego case.

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??????????????????????Copyright 2001 / Los Angeles Times

??????????????????????????????Los Angeles Times

?????????????????????May 31, 2001 Thursday ?Home Edition

SECTION: California; Part 2; Page 14; Letters Desk

LENGTH: 523 words

HEADLINE: Bush, Davis Clash on Energy Price Caps

BODY:

??I am disappointed that President Bush and Gov. Gray Davis could not agree on
short-term price caps for electrical rates in California during their May 29
meeting. As a businessman and resident of California, I support the
free-market
system; however, the demand for electricity is no higher now than a year ago.
The supply of electricity is no smaller than a year ago. The only thing that
has
changed is the system that is used for setting prices.

??Businesses in California deserve a break from the crippling increase in
prices. Working moms and dads should not be asked to subsidize power
executives
in other states. The federal government owes the working people and businesses
of California a chance to sort out the mess imposed upon us. We deserve a
short-term cap on prices.

??Steve Graves

??Highland

??*

??Bush is correct to say that electricity price caps will not change either
the
supply or the demand. But he is wrong to allow the greed and price-gouging of
the energy suppliers. Greed and gouging are not parts of compassionate
capitalism.

??Porter Ewing

??Van Nuys

??*

??Davis has done nothing toward solving the energy crisis over the past year
and a half. He has overwhelming party majorities in both the Assembly and
Senate
and yet has passed no meaningful legislation regarding energy. Furthermore,
California voted against President Bush by a 2-1 margin in the recent
presidential election. Despite this, all we hear from the governor is,
"President Bush, federal government, save us! We need price controls."

??Governor, instead of crying to the federal government for help, provide
leadership for solving a California problem. California created the problem,
not
the federal government. It is our responsibility to solve our problems. There
is
nothing stopping you from enacting meaningful solutions to the energy crisis
except your own indecisiveness.

??John Anagnost

??Torrance

??*

??Hurray for Davis! Finally he's going to do something: Sue the Federal Energy
Regulatory Commission for relief from the gougers. Our "compassionate"
president, who thumbed his nose at California, is certainly not going to do
anything to help us, like capping the prices. He's only interested in his big
business and oil friends in Texas making even more money.

??Ann and Dale Johnston

??Thousand Oaks

??*

??Perhaps if Intel (headquartered in Santa Clara) and Advanced Micro Devices
(headquartered in Sunnyvale) charged Dell (headquartered in Round Rock, Texas)
and Compaq (headquartered in Houston) 50 times more for their chips than they
charged Gateway (headquartered in San Diego), Bush might realize that there is
something he can do about extortion.

??Arnie Pierce

??Shingle Springs, Calif.

??*

??In "Governor to Stress Price Caps to Bush" (May 29), Davis is quoted as
saying, "The marketplace is not working." I am curious as to how he knows
that,
when the consumption side of the market has had price caps on it from the very
beginning. If those caps have created the price extremes and supply shortages
that we have seen, just wait until you see both ends of the market with price
caps.

??Russell H. Jeans

??San Pedro

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??????????????????????????????Los Angeles Times

?????????????????????May 31, 2001 Thursday ?Home Edition

SECTION: California; Part 2; Page 8; Metro Desk

LENGTH: 759 words

HEADLINE: The State;
;
Bush Blunders Into Equal Footing With Davis

BYLINE: GEORGE SKELTON

DATELINE: SACRAMENTO

BODY:

??When the president holds a "summit" with a governor, you can figure one of
three things: this president--politically--is weak, desperate or inept.

??With President Bush, we've just seen indications of all three.

??Presidents of the United States simply do not hold summits with
governors--of
any state. Presidents hold summits with leaders of equal stature: other heads
of
state or prime ministers.

??A governor is not a head of state.

??Sacramento is not a little Washington. It's a big Carson City.

??Ronald Reagan never held a summit with Jerry Brown. Bill Clinton barely
acknowledged the existence of Pete Wilson.

??So why would this Republican president fly across country to elevate a
Democratic governor to the exalted level of summitry? Must be that Bush has
looked at private polls and seen he is weaker in California than he'd ever
imagined possible, even after losing here last November by 12 points.

??Indeed, the independent Field Poll recently found that 54% of Californians
think Bush has done a "poor" job of trying to improve the state's energy mess.

??It's desperation time. Better get out to California and show that he does
too
care about the nation's most populous state before it's too late--before the
damage is irreparable. Before he's a liability to Republican members of
Congress, whose reelections next year will be crucial to the GOP's continued
control of the U.S. House.

??And better make that first trip to California about public policy--not about
political fund-raising.

??But the president could have--should have--avoided what the news media would
characterize as a summit. On the governor's L.A. turf, no less. This was
political ineptitude.

??Weeks ago, Bush could have invited Gov. Gray Davis into the Oval Office for
a
chat. Then he could have dismissed any later calls for a second meeting,
saying
there was nothing new to discuss.

??Or Bush could have sent his energy guru, Vice President Dick Cheney, to meet
with Davis. Then there wouldn't have been the summit circus that elevated a
governor, in news coverage, to the level of a president.

??But Bush set his own trap by declaring, even before taking office, that
California was on its own. He ignored the state for four months, then was
goaded
into a summit.

??"We outfoxed them," says Paul Maslin, Davis' pollster. "We turned up the
heat
and made it politically impossible for Bush not to meet."

??Consequently, there was the specter of a governor's "post-summit" news
conference being carried live on CNN. And split screens with Bush on one side,
Davis on the other, both waving presidential-like. Davis sit-down interviews
with all networks. The story at the top of the nightly news.

??One national TV reporter spoke ominously of a "rift" between the governor
and
the president. A newspaper banner screamed: "Bush-Davis Standoff."

??Presidents simply do not have standoffs with governors who are poking them
in
the eye.

??However, it was Bush to the rescue--not of energy consumers, but the
governor. Davis remains one lucky politician. Here he is, foundering in the
polls--his job rating down to 42%, according to Field--and the president rides
out to save him.

??Bush helped Davis onto a tall platform and handed him a loud mike to make
his
pitch to California voters. The governor made it over and over:

??This is not about the philosophy of price controls. It's about federal
regulators ignoring a law that requires wholesale prices to be "just and
reasonable." Enforcing that law is solely a federal responsibility.

??I'm doing everything I can to increase supply. The president needs to rein
in
his buddies--those gougers and market gamers from Texas.

??"This is no time for harsh rhetoric," Bush said. "It's certainly no time for
name-calling."

??The president's certainly wrong. It's time to call out and embarrass--if
possible--the power pirates who are turning 700% profits. Take 40% and be
satisfied. Spare us a recession.

??"Price caps may sound appealing," Bush asserted, "but their result will
ultimately be more serious shortages and therefore even higher prices."

??Wrong again. California didn't suffer supply-caused blackouts until the Feds
lifted wholesale price caps last December and power producers began gaming the
market to finesse top dollar. In fact, most power plants now being built in
California began under price caps.

??Bush likes to hearken back 30 years to failed price controls under Richard
Nixon. But if Nixon's mind had been as inflexible as Bush's, he never would
have
gone to China.

??Now that was a summit.

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??????????????????????????????Los Angeles Times

?????????????????????May 31, 2001 Thursday ?Home Edition

SECTION: California; Part 2; Page 1; Metro Desk

LENGTH: 842 words

HEADLINE: See How You Like This Action, Mr. President

BYLINE: PETER H. KING

DATELINE: SACRAMENTO

BODY:

??And so the president of the United States made his way to California this
week and offered some advice. What Californians need to do, President Bush
said,
is quit whining about the energy mess and take action: "Energy," he said, "is
a
problem that requires action, not politics, not excuses, but action."

??Issuing $12.5 billion in bonds, pushing a dozen or so new power plants
through the pipeline, launching a World War II-style conservation
campaign--apparently these don't qualify as action. And asking federal
so-called
regulators to step forward and bring some order to a deregulated wholesale
market run amok--well, apparently, that would fall under the heading of
"excuses."

??And excuses won't do. No, sir. Action is the answer. Now just what action
the
president believes Californians should take he did not make clear. At this
point, however, there seems to be about only one course left untried--seizing
power plants. Now there's action.

??It's fun just to imagine the potential theatrics. National Guard troops
swarming the gates, while plant operators, screaming strange Texas curses,
frantically shred the maintenance records. And, look, there goes Gray Davis
himself, shinnying up a smokestack to unfurl the bear flag, shouting "Eureka!
We
have seized it!"

??Alas, however glorious such imagery, this is not how it would work. The most
persistent proponent of plant seizure option has been state Treasurer Phil
Angelides, and in an interview he described an almost bland procedure: a paper
battle that ultimately would engage, as he put it, "fleets of lawyers and
accountants."

??Before he delved into specifics, Angelides, a Democrat and former land
developer, paused to make the historical case for taking public action to rein
in runaway private markets and protect common interests. He spoke of Teddy
Roosevelt and the trustbusters, of the federal response to the Great
Depression,
of the long history of regulated power utilities, and also of zoning laws and
the not uncommon instances of eminent-domain property seizures for roadways
and
schools.

??"The notion of a society and economy protecting itself through public action
against a private market gone awry," Angelides said, "or through the
acquisition
of private property in the public interest, is not a novel one, a radical one,
or one that is inconsistent with the successful American economy of the 20th
century--when prudently used."

??In fact, he said, "it's as American as apple pie."

??So then, how would a seizure work?

??Angelides picked up a government code book and read aloud the section that
empowers the governor "in a state of emergency to commandeer or utilize any
private property or personnel deemed by him necessary in carrying out the
responsibilities hereby vested in him as chief executive of the state, and the
state shall pay a reasonable value thereof."

??He explained that the governor would issue an order to give the state
temporary title to either a plant or the power it produced. The plant would
keep
operating as usual. Once the energy crisis had passed, ownership would be
returned to the private company and there would be negotiations or court
contests to determine the "reasonable value" of what the state had taken. The
question of reasonable value, of course, is where the accountants come in,
attempting to prove that their prices were reasonable.

??"It might be worth seizing the contracts of one power plant," Angelides
said,
"just to see how they could justify these prices. They couldn't."

??What plants do we seize?

??Angelides made reference to the 23 California plants purchased by outside
companies, most of them Texas-based, after the state's deregulation plan was
hatched. The utilities sold these plants--constituting about a third of the
state's generating capacity--for a total of about $3.2 billion. At the time,
it
was thought that PG&E and Edison had snookered the Texans. Hah.

??The treasurer said his staff, using figures favorable to the generators'
case, has calculated that the reasonable price of power from these plants
ought
to be running at about $110 to $150 an hour. Instead, they are commanding
prices
double or triple that amount. Said Angelides: "They are making profits unseen
any time in our history, a classic example of a private market run amok."

??OK, then, when do we saddle up?

??It is the governor's call, but in Angelides' view seizures should be made
only if current "obscene prices" jump even higher this summer to a level of
"horrifically obscene prices." At present, he said, through a combination of
bonds, rate increases and aggressive conservation, the state can stagger
through
the crisis and into a more orderly energy future.

??If wholesale prices shoot any higher, though, the plan will collapse,
leaving
California with few options. Rates cannot be raised again without jeopardizing
the economy. The bond card has been played to the hilt. And there are limits
to
how much demand can be curbed by conservation. What's left? Plant seizures, of
course. Action.

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??????????????????????????????Los Angeles Times

?????????????????????May 31, 2001 Thursday ?Home Edition

SECTION: Business; Part 3; Page 1; Financial Desk

LENGTH: 796 words

HEADLINE: Estate Tax Repeal to Hurt State Revenue;
Finances: Without a portion of the federal money, California stands to lose
$356
million next year as the credit is phased out.

BYLINE: LIZ PULLIAM WESTON, TIMES STAFF WRITER

BODY:

??At a time when energy woes and a slowing economy are threatening
California's
fiscal health, Congress' repeal of federal estate taxes is expected to cost
the
state $356 million next year and more than $1 billion annually by 2005.

??In fact, California stands to lose more money than any other state as the
repeal legislation reduces the number of people who face the estate tax and
chokes off the portion of federal revenue that used to be diverted to the
states.

??"Given the circumstances we find ourselves in right now, this certainly will
make future budgets tighter and more difficult," said Brad Williams, senior
economist for the California Legislative Analyst's office.

??Few state officials were willing Wednesday to publicly criticize the popular
repeal plan, despite the cost. State Controller Kathleen Connell said that
estate tax repeal was supported by most Californians, who eliminated the
state's
own estate tax by a 64% majority in a 1982 referendum.

??"Any loss of revenue, when we're impacted doubly by the energy crisis and
the
slowing economy, is going to be painful," Connell said. "But I find it hard to
argue against eliminating the federal tax when we eliminated our own."

??Although California repealed its own estate tax, it--like every other
state--continues to collect a portion of the federal taxes levied each year on
the estates of affluent Americans who die.

??This so-called state death tax credit has been part of federal estate tax
law
since 1926, and essentially allows states to coordinate their own estate taxes
with that of the federal government.

??States that don't have estate or inheritance taxes of their own collect the
full amount of the credit they're allowed under federal estate tax law. Many
of
the 12 states that have their own estate tax systems collect the difference
between the federal credit they're allowed and the amount of money they
collect
directly from their citizens.

??California, thanks to its huge population and wealth, is by far the largest
recipient of the credit. The Golden State received $937 million in estate tax
revenue in fiscal year 1999-2000--an amount equal to 1.3% of the state general
fund, according to the Center on Budget and Policy Priorities, a nonpartisan
research group. Nationwide, states collected more than $5.5 billion in 2000,
according to the group's figures.

??To reduce the overall cost of estate tax repeal, however, Congress decided
to
phase out the states' ability to collect this revenue--and to do it twice as
fast as the phase-out of estate taxes overall.

??By 2005, the states will no longer receive a portion of federal estate tax
revenue, even though the federal government is scheduled to continue
collecting
estate taxes until 2010. The changes were part of the $1.35-trillion tax cut
approved by Congress on Saturday.

??Congress' repeal plan also will decrease the number of people who are
subject
to the tax by 40% by raising the amount of money that can be passed tax-free
to
heirs. Next year, for example, people who die can leave up to $1 million
without
having to pay estate taxes, up from $675,000 this year.

??Congress' changes are expected to cost California $356 million in fiscal
year
2002-2003, said Sandy Harrison, assistant director for the state Department of
Finance. That's enough money to pay salaries and benefits for nearly 12,000
beginning teachers, said Mike Myslinski, spokesman for the California Teachers
Assn.

??The losses will mount to $1.1 billion by 2005 and $1.5 billion by the time
the federal estate tax is scheduled to be eliminated on Dec. 31, 2009.

??California is facing other strains on its budget, including more than $7
billion spent so far to purchase electricity and a $5.6-billion drop in taxes
collected from stock options and capital gains, thanks to stock market
slowdowns.

??But California isn't the only state that will suffer. Florida collected $779
million last year--4.1% of its general revenue--while New York collected $450
million, or 1.3% of its revenue, from the state death tax credit, according to
the research group's figures.

??Nevada--which like Florida has no personal income tax--may take the biggest
hit. Nevada collected $76.7 million from federal estate tax revenue, an amount
equal to 4.9% of its general fund revenue.

??"[Nevada and Florida] don't have a personal income tax, so they're more
reliant on other sources of revenue," such as the estate tax, said Arturo
Perez,
senior policy specialist for the National Conference of State Legislatures.

??Unlike most other states, Nevada segregates estate tax money into a special
endowment fund to pay for education, including University of Nevada programs,
state officials said.

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??????????????????????????????The New York Times

?????????????????May 31, 2001, Thursday, Late Edition - Final

SECTION: Section A; Page 27; Column 2; Editorial Desk

LENGTH: 687 words

HEADLINE: Bush's Mistake in California

BYLINE: ?By Gray Davis; Gray Davis is the governor of California.

DATELINE: SACRAMENTO

BODY:

??I hope President Bush understands how perilous a course he is setting for
both California and the national economy with his opposition to caps on the
outrageously high wholesale price of electricity -- opposition he reiterated
to
me when we met Tuesday.

??California is experiencing an energy shock like that perpetrated by the
Organization of Petroleum Exporting Countries in the 1970's. That episode
plunged the United States into deep recession and gave rise to a long period
of
stagflation -- rising prices in a no-growth economy.

???The size of the energy shock to California this year is likely to be in the
range of $40 billion to $50 billion, according to Alan Blinder, the former
vice
chairman of the Federal Reserve Board. It is enough to threaten the still
solid
California economy with recession and to knock the nation's gross domestic
product down by at least half a percent -- enough to counter the stimulative
effects that the Bush tax cut is intended to have on the stumbling national
economy. As the Fed chairman, Alan Greenspan, observed in late January, "It is
scarcely credible that you can have a major economic problem in California
which
does not feed to the rest of the 49 states."

??The president's energy policy sets long-term goals of self-sufficiency
through increased power generation, energy efficiency and fuel supplies. These
are many of the same solutions we in California are rapidly pursuing. But the
short-run emergency in California stems as much from energy cost as from
energy
supply.

??Since I've been in office, we've cut approval times in half and licensed 15
major power plants. And we have put in place the nation's most comprehensive
conservation program. Still, we are being squeezed to the breaking point by
outrageous prices for the electricity we buy. This is why I called on the
president for an energy policy that includes short-term caps on the price of
wholesale power. Under the Federal Power Act of 1935, only the Federal Energy
Regulatory Commission has the power to ensure a just and reasonable wholesale
electricity market in California. This is not a matter of discretion for
federal
regulators; it is an obligation. The law requires the F.E.R.C. to ensure that
rates are just and reasonable. California itself can do nothing about the
unconscionable wholesale electricity prices that are often more than 700
percent
higher than they were just a year ago. President Bush must direct the
commission
to exercise its authority under the law.

??In a letter Tuesday to the president, 10 economists warned, "F.E.R.C.'s
failure to act now will have dire consequences for the State of California and
will set back, potentially fatally, the diffusion of competitive electricity
markets across the country."

??It is true that California's problems stem from a fundamentally flawed 1996
state electricity deregulation law. The utilities were required to sell off
half
of their fossil-fuel-fired power plants while they were barred from entering
into contracts for a long-term supply of cheap electricity. The result is an
unregulated sellers' market for electricity, susceptible to naked
manipulation.

??The agency that runs California's power grid has identified $6 billion in
overcharges by the generators. Prices are greatly inflated. The same
electricity
that cost Californians $7 billion in 1999 was $27 billion in 2000 and is
projected to cost upwards of $50 billion in 2001. Much of this is fed by
escalating wholesale natural gas prices that were 1,000 percent higher in
Southern California in December 2000 than in December 1999. The F.E.R.C. has
failed to curb these natural gas prices as well.

??The Bush administration still maintains that the energy policy it has
proposed is all that can reasonably be done and says it opposes further
federal
intervention in the energy market, even if the problem threatens the nation's
economy. The threat is real, and the Bush administration must adopt a more
responsible energy policy, one that restrains energy price manipulation and
creates a fair and competitive energy market across the West and the whole
country.

??http://www.nytimes.com

GRAPHIC: Drawing (Wes Bedrosian)

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??????????????????????????????The New York Times

?????????????????May 31, 2001, Thursday, Late Edition - Final

SECTION: Section A; Page 1; Column 5; Business/Financial Desk

LENGTH: 1396 words

HEADLINE: In California, Blackouts Spur A Search forHome Remedies

BYLINE: ?By LAURA M. HOLSON

DATELINE: LOS ANGELES, May 30

BODY:

??For Evans Keller, a turkey farmer in the Central Valley of California, the
energy crisis has become a matter of life and death.

??For 17 years, he and his family have raised turkeys near Fresno, far from
the
dot-com companies of Silicon Valley and the "Baywatch" beaches most outsiders
associate with the state. In his world, where daily summer temperatures soar
above 100 degrees on dusty ranches, Mr. Keller is forced to use electric fans
and fog-making machines to cool his one million turkeys -- or watch them roast
in tin-roofed sheds.

???But with energy experts forecasting more than 260 hours of blackouts this
summer and no relief in sight from regulators or politicians, Mr. Keller has
taken matters into his own hands. In April, he bought eight small generators
at
Costco that he could hook up to tractors and use to keep the fans and misters
running when the Pacific Gas and Electric Company cuts his power.

??Since then he has regularly conducted drills on the 14 farms that supply him
with turkeys -- 4 farms he owns and 10 run by independent contractors -- and
has
spent weeks winnowing the routine down to 40 minutes, barely enough time
before
the birds begin to wither under the searing sun.

??"Believe me, we're not proud," said Mr. Keller, who said he had appealed
earlier this year, without success, to Pacific Gas and Electric for advance
warnings of blackouts. "We'll do what we have to to protect our investment."

??The energy crisis here has come to this: from tourist attractions in sunny
Southern California, to farmers who dominate the central region of the state,
to
technology concerns up north, businesses are coming up with novel ways to cope
with what many fear will be an unpleasant summer.

??The concerns are understandable given the issues that many businesses face,
including lost revenue and potential layoffs, as the state's power shortages
continue. "The uncertainty is what kills you," Jerry Meek, utility operations
manager at Roche Pharmaceuticals in Palo Alto, said.

??Trying to reduce that uncertainty, businesses are applying to the state's
Public Utilities Commission for exemptions from having their power turned off
this summer. (The deadline is Friday.) Last week, Gov. Gray Davis announced
that
the state would begin a three-tiered warning system for residences and
businesses that are likely to be affected. The first warning will come two
days
before a blackout; the second, one day in advance; and the final warning, one
hour before the lights go out.

??A more radical approach is being suggested by Mike Briggs, a Republican
assemblyman from Fresno. He is asking the state to schedule potential blackout
days as much as months in advance so business owners know when their turn is
coming. "It is scary what this has come to," Mr. Briggs said. "But this gives
people options."

??Farmers in the Central Valley, for instance, have to order water for their
crops a day ahead. But if the power is off when the water shows up in an
irrigation canal, he said, "they can't open the gates and the water flows
right
past them." One business owner told Mr. Briggs that he spent $30,000 one month
to lease two generators that were never used. "He said it would have been nice
to know ahead of time so he could rent the generators for a day," the
assemblyman said.

??Of course critics worry that burglars will know when the lights go out, too.
"Yes, there is the downside of more potential burglaries," Mr. Briggs said.
"But
maybe people are willing to make that trade-off."

??Even those business owners who say they are currently protected from power
failures are making preparations -- just in case. The Legoland California
amusement park in Carlsbad, near San Diego, has an arrangement with its
utility,
the San Diego Gas and Electric Company, to keep the lights on, said a
spokeswoman, Courtney Simmons. Still, she added, the park is prepared in the
event of a loss.

??The contingency plan consists of keeping open the 3 rides, of the 20 total,
that are not powered by electricity, she said. Barbecues would be rolled out
to
cook food, and the park's boulevards would be flooded with performers,
including
singers, dancers, jugglers and musicians who will entertain until the power
comes back on. "We are prepared for outages no matter what the cause this
summer," she said.

??Many tourist attractions, including Disneyland in Anaheim, are already
prepared because they upgraded their systems in 1999, fearing a Year 2000
disaster that would threaten the power grid. "A lot of these things were
already
tested and documented," said Ray Gomez, director of communications at
Disneyland
Resorts. "We are skilled at emergency evacuations. Energy is only one part of
that."

??As part of its plan, Disneyland shored up its emergency operations center,
holding employee drills to turn on emergency power. This summer, Disneyland
will
have employee volunteers who roam the park day and night, turning out lights
and
replacing incandescent bulbs with more energy-efficient ones. The park also
works with the city of Anaheim, which supplies the park with power, to
conserve
5 to 10 percent, minimizing the risk of blackouts at all.

??Oddly enough, Disneyland is reviving its Main Street Electrical Parade, a
29-year-old light show that had most recently been an attraction in Florida.
Leslie Goodman, a senior vice president for strategic communications for Walt
Disney Parks and Resorts, said the park had made sure that the parade did not
use energy when Californians need it most. The lights in the parade are
powered
by battery, and are recharged during off-peak hours. But, she added, despite
what was a difficult decision and a potential public relations nightmare, "the
show goes on."

??While most businesses make an effort to conserve (if for no other reason
than
to save money as rates soar), some communities are giving corporations added
incentives. The city of Palo Alto, for example, has agreed not to cut off
power
to Roche Pharmaceuticals as long as the company reduces energy consumption by
15
percent within 30 minutes of an announced Stage 3 alert, the state's most
critical. Only once has Roche lost power, said Mr. Meek, the company's utility
operations manager. And that, he added, was because of a mistake.

??Roche has a plan to ensure that a blackout does not happen. Once Mr. Meek
gets an alert on his pager from a city representative (who can see how much is
being saved because the company has a real-time meter for the 15-building
campus), voice mail and e-mail messages are sent to more than 1,000 employees
asking them to turn off nonessential lights. The air-conditioning is changed
to
raise the temperature in most areas to 78 degrees from a normal 72 degrees.
Lighting in all offices is reduced, and some employees move from their dark
cubicles to the window-walled cafeteria to work, he said.

??"The question is, do you treasure light or do you want your computer shut
down?" Mr. Meek asked. If these measures do not reduce overall demand by 15
percent, Roche will switch on backup generators to power the laboratories.
Why?
If laboratory tools are not properly shut off before a loss of power, it takes
days to recalibrate them, costing thousands of dollars and wasted time, Mr.
Meek
said. "My focus with the uncertainty is to do what we can to get around it,"
he
said.

??One way that California businesses are seeking certainty is by appealing to
the state's Public Utilities Commission for relief. One commissioner, Carl
Wood,
said in a recent interview that about half the customers who got electricity
from the state's three largest utilities were exempt from blackouts because
their services were considered essential, like fire stations or hospitals, or
because they shared power with an essential source. No more than 60 percent of
the state's customers can be exempted from blackouts.

??Recently, an exemption was granted for the Bay Area Rapid Transit District,
which runs 95 miles of commuter train service in the San Francisco
metropolitan
area, Mr. Wood said. Pacific Bell Park, home of the San Francisco Giants, has
asked for one, too; that request is being reviewed.

??"It can be extremely disruptive and expensive if there are lots of blackouts
this summer," he said. "This is a big economic issue."

??Just imagine, he said, musing about how the summer could end: "Disneyland
without rides?"

??http://www.nytimes.com

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??????????????????Copyright 2001 The New York Times Company

??????????????????????????????The New York Times

?????????????????May 31, 2001, Thursday, Late Edition - Final

SECTION: Section A; Page 18; Column 4; National Desk

LENGTH: 135 words

HEADLINE: National Briefing West: California: Utility Donations

BYLINE: ?AP

BODY:

??The state's three investor-owned utilities gave hundreds of thousands of
dollars in campaign contributions to former Gov. Pete Wilson and crucial
legislators who pushed through the state's electricity deregulation law, a
political watchdog group said. The group, the Center for Public Integrity, a
nonpartisan organization in Washington, D.C., said the utilities spent $51.6
million on campaigns from 1994 to 2000. About $39 million was spent to defeat
a
1998 ballot measure that would have rolled back important provisions of the
state's 1996 deregulation law. From 1994 until he left office early in 1999,
Mr.
Wilson received $171,000 from the Pacific Gas and Electric Company; the
Southern
California Edison Company; the San Diego Gas and Electric Company; or their
parent companies, the center said.

??http://www.nytimes.com

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??????????????Copyright 2001 Knight Ridder/Tribune News Service
???????????????????????Knight Ridder/Tribune News Service

????????????????????????????San Jose Mercury News

????????????????????????????May 31, 2001, Thursday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K0555

LENGTH: 1171 words

HEADLINE: San Jose mayor reverses position, endorses Calpine power plant
project

BYLINE: By Mike Zapler

BODY:

??SAN JOSE, Calif. _ After a year of staunch opposition to a major power plant
in South San Jose, Mayor Ron Gonzales reversed course Wednesday and endorsed
the
project, removing the largest remaining barrier to construction and angering
residents of a nearby neighborhood he had pledged to protect.

??Speaking before news cameras and reporters in his City Hall office Wednesday
afternoon, Gonzales said he had negotiated an agreement with Calpine that
eased
his concerns about the Metcalf Energy Center project. The deal, he said,
contains provisions to help shield the Santa Teresa neighborhood from air
pollution, gives local businesses the chance to negotiate below-market
electricity rates and provides a sure energy source for local residents.

??"We need power in San Jose and we believe this power plant is needed in San
Jose," Gonzales said. "We've worked hard to make this plant better for the
neighborhoods and better for the city."

??But the city entered talks with Calpine about five weeks ago in a vastly
weakened position, and its chief negotiator, mayoral budget director Joe
Guerra,
was unable to extract most of the concessions the city and neighborhood had
sought. Santa Teresa leader Elizabeth Cord called the neighborhood protection
provisions "totally not substantive," and another opponent said a lawsuit is
likely if the plant is ultimately approved.

??"The mayor's deal does nothing to reduce the impact on this neighborhood,"
Santa Teresa activist Issa Ajlouny said. "It's the same project as it was two
years ago except San Jose residents will be paying millions of dollars more."

??Cisco Systems, which is planning a 20,000-worker campus adjacent to the
proposed plant and has strenuously opposed it, appears to be softening its
opposition. Kent Jenkins Jr., a spokesman for the company, said Wednesday that
Cisco would still prefer not to have the plant, but that officials were
pleased,
at first glance, with the health and safety concessions Gonzales had
negotiated.
Asked whether Cisco might file a lawsuit, Jenkins said, "we're not ruling
anything in or out and by that, I don't want to imply we are considering
anything."

??He added that the agreement will have no bearing on the company's plans to
build the campus. "All along we were committed to pursuing Coyote Valley and
that remains unchanged," he said.

??With experts predicting a summer of rolling blackouts, and with the
California Energy Commission expected soon to override the city council's
November rejection of the plant, Gonzales was under enormous pressure to
strike
a deal. Polls taken by Calpine had shown overwhelming public support for the
plant, another ominous sign for the mayor who is up for re-election next year.

??While the city probably could not have blocked approval of the plant once it
got state approval, the mayor indicated as late as April 18 that the city
might
fight it in court. But that possibility vanished with Wednesday's
announcement,
leaving a possible neighborhood-backed lawsuit as the only potential threat.

??"This power plant is coming to San Jose. That's clear from the support it
has
gathered in Sacramento," Gonzales conceded, referring to Gov. Gray Davis'
endorsement in April. So rather than continue to fight an uphill battle,
Gonzales decided it was best to negotiate what he could.

??At the press conference, Gonzales touted provisions in the deal that will
provide two additional air monitoring stations to ensure the plant complies
with
local air quality standards. The agreement also provides a three-month window,
prior to the plant's opening, for San Jose businesses to negotiate long-term
power contracts with the Metcalf plant at a "below market" rate, said Calpine
chief executive officer Peter Cartwright.

??But the city clearly got less than it wanted, which was at least partly the
price of Gonzales' longtime resistance to the 600-megawatt plant:

??_One key negotiating point was how much Calpine would pay to extend a
recycled-water pipeline seven miles to the plant site. The city started by
asking the company to pay at least $25 million of the roughly $50 million
price
tag. But, in a provision Gonzales touted as a victory, Calpine will pay 20
percent of the cost, or $10 million, and the city will pick up the remaining
$40
million. Calpine said the company is simply paying its fair share.

??_In an effort to protect neighborhoods from pollution, the city wanted
Metcalf to operate full time, since emissions are highest when a power plant
first fires up. The city tried to arrange a long-term contract with the state
to
buy power from Metcalf to keep it running constantly, but officials balked at
such a commitment.

??Calpine said it intends to keep the plant running constantly as long as
demand _ in the form of annual contracts with the state _ justifies it. If
demand is lacking, the company will lower the number of potential times the
generator will start up by 25 percent, from 624 per year to 468 annually. That
restriction would last five years, by which time the energy crisis in
California
is expected to be long over.

??_In the fall, Calpine offered $10 million in electricity discounts to help
win the city's backing for Metcalf. Wednesday's agreement includes a $6.5
million benefits package, including $5 million for parks and open space
acquisition in Santa Teresa; $1 million for energy conservation programs and
assistance to low-income people to help pay their energy bills; and $500,000
to
help provide health insurance to San Jose children.

??_Calpine has agreed to install new technologies that reduce or eliminate the
use of ammonia, which would be extremely hazardous if accidentally released,
as
soon as those systems are deemed "economically feasible" and approved by state
regulators. But because there is no standard in the agreement, the burden
would
fall on the city to prove that a new technology was feasible. If the two sides
disagreed, the decision would fall to a third-party arbitrator.

??There is also a significant question of whether ammonia-free technology,
known as SCONOx, already is viable _ a position taken by the U.S.
Environmental
Protection Agency.

??Calpine's Cartwright, who appeared at the press conference with Gonzales,
said Wednesday that the company is committed to switching as soon as possible
from liquid ammonia to less hazardous solid ammonia.

??The city council is scheduled to take up the agreement at its Tuesday
meeting. Although Gonzales persuaded the council to vote with him against the
controversial project last fall, most members are expected to go along with
the
mayor's switch.

??The project would then go through the city planning process again this fall.
Calpine hopes to begin construction this year and to have the plant up and
running by summer 2003.

??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune

??(c) 2001, San Jose Mercury News (San Jose, Calif.).

??Visit Mercury Center, the World Wide Web site of the Mercury News, at
http://www.sjmercury.com/

JOURNAL-CODE: SJ

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?????????????????????????The San Francisco Chronicle

????????????????????MAY 31, 2001, THURSDAY, FINAL EDITION

SECTION: NEWS; Pg. A5

LENGTH: 912 words

HEADLINE: Plan would have biggest customers pay Edison's debt

SOURCE: Sacramento Bureau Chief

BYLINE: Greg Lucas

DATELINE: Sacramento

BODY:
Legislative leaders are drafting a new rescue plan for Southern California
Edison that would put the utility back on its feet financially at the expense
of
its biggest customers.

???The plan would leave manufacturers, refineries and other big industrial
customers with the burden of paying nearly all the utility's $3.5 billion back
debt through a dedicated charge. Residential and small commercial users would
be
on the hook for only a fraction of the back debt.

???Big users say it is unfair to saddle them with all of Edison's debt, but
supporters of the plan say it's these users that wanted deregulation and
should
shoulder the costs it created.

???"We're trying to put something together in a way that solves all these
problems, and if people are to be pigheaded about it, we won't solve any
problems," said Assemblyman Fred Keeley, D-Boulder Creek (Santa Cruz County).

???Although the plan is an alternative to Gov. Gray Davis' proposed deal to
put
Edison back on its feet financially, it could be used as a model to help
restore
Pacific Gas and Electric Co. to solvency.

???Democrats say the plan contains some elements desired by Republicans, but
GOP lawmakers object to saddling large business users with Edison's debt.

???The plan is based on the way gas customers are divided into "core" and
"noncore" users.

???SEPARATING 'CORE' USERS

???Under this proposal, electrical users would be divided the same way. Core
users would be customers who use 500 kilowatts or less a month. Noncore would
be
those using more than 500 kilowatts.

???Out of Edison's 4.2 million customers, only 3,600 would be noncore
customers. But those 3,600 customers use about 26 percent of Edison's demand
for
energy.

???Core customers would get their power from generators owned by Edison,
long-term contracts and alternative energy producers, such as wind farms and
solar panels, on contract with the utility.

???That would mean those customers would no longer be subject to the whims of
the spot market, which has far higher prices than other sources of
electricity.

???Large users, the noncore customers, would be given the right to negotiate
to
buy their power directly from generators or build on-site power plants to make
themselves energy self-sufficient.

???The plan would be phased in through January 2003 to give large energy
customers time to prepare for buying power on the open market.

???During that period, residential, small business and large industrial users
would all share in paying off Edison's debt. But in 2003, that burden would
shift exclusively to the big users.

???Republican lawmakers and those same large users have been clamoring to be
given what is called "direct access" to generators so they can negotiate
cheaper
rates.

???Enron is also backing the idea of cutting loose the largest electricity
users because that would create a built-in market for the energy the company
sells.

???Large users who want to remain on the grid could do so.

???EDISON 'ENCOURAGED'

???Sources said Edison officials met with lawmakers over the weekend to iron
out details of the plan.

???A spokesman for Edison said he was "encouraged" by the talks.

???"I haven't seen a finished product or a plan," said Bob Foster, a senior
vice president with Edison. "They're approaching this in a spirit of goodwill
and trying to find a solution."

???Big businesses complain that the plan does not work because right now,
there
is nowhere they can buy cheap electricity.

???"We're very concerned that separating the core from the noncore means we
will experience extreme rate hikes over the next two years," said D.J. Smith,
a
lobbyist for the California Large Energy Consumers Association.

???"When you add blackouts, the multiple interruptions of production and
another potentially huge rate hike, the result would be catastrophic to the
economy," Smith said.

???Added Dorothy Rothrock, a lobbyist for the California Manufacturers and
Technology Association: "What's the rationale for the noncore to be paying the
entire Edison undercollection? It sounds to me like just pure politics. They
don't want voters to pay because they vote."

???CONSUMER ADVOCATE SMELLS A RAT

???Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights,
said he thought the plan would eventually turn into a bailout as business
interests muscle lawmakers into pushing some portion of Edison's debt onto
residential and smaller commercial customers.

???"I think it's a trick. We've seen this same tactic used at the Public
Utilities Commission, where what were supposed to be rate increases for big
business end up costing more for residential and small businesses," Rosenfield
said.

???The new plan also does not include the outright purchase of Edison's part
of
the transmission system that loops electricity around the state.

???Davis backs buying the lines for $2.7 billion. Democrats have insisted that
for the state's financial help, taxpayers receive something of value.

???Republicans have insisted that they will back no proposal that includes
state purchase of transmission lines.

???In the new proposal, the state would have a five-year option to buy the
transmission lines for $1.2 billion -- the book value of the asset.

???In addition, the utility would make $1.5 billion available to the state to
either purchase other assets -- such as Edison's hydroelectric facilities, for
example -- or use it in partnership to build new power plants.E-mail Greg
Lucas
at glucas@sfchronicle.com.

GRAPHIC: PHOTO, "If people are to be pigheaded about it, we won't solve any
problems," said Assemblyman Fred Keeley.

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?????????????????????????The San Francisco Chronicle

????????????????????MAY 31, 2001, THURSDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 876 words

HEADLINE: Regulators want state trade-off for caps;

Davis asked to give up control of power lines

SOURCE: Chronicle Staff Writer

BYLINE: Bernadette Tansey

BODY:
California's testy relationship with federal energy regulators could turn
into a
showdown tomorrow, when state power officials must decide whether to surrender
some control over the state's electricity market or risk losing limited price
curbs that kicked in this week.

???In agreeing last month to set flexible caps to restrict price gouging
during
electricity shortages, the Federal Energy Regulatory Commission said the state
and its utilities must agree to let an independent organization manage
California's power transmission lines.

???Under that setup, California would be one of a group of Western states
sharing a linked transmission grid whose rates and access rules would be set
by
independent managers.

???It is part of the commission's drive to create regional electricity markets
throughout the country and make it easier to trade power across state lines.
The
regional grids would be a prelude to the nationwide free market in electricity
advocated by the Bush administration and power marketers like Enron. ?

???But California Assembly Democrats who have challenged the federal demand
say
the requirement could interfere with some of the state's homegrown solutions
to
its energy crisis, such as Gov. Gray Davis' proposal that the state buy and
run
transmission lines owned by Southern California Edison Co.

???"A lot of folks were wondering how those two things would interact and are
they mutually exclusive," said Paul Hefner, an aide to Assembly Speaker Robert
Hertzberg, D-Sherman Oaks.

???Other officials say the federal requirement is premature because no
regional
organization yet exists that California can join.

???Mike Florio, a board member of the California Independent System Operator,
which manages the state's power grid, said California is already part of
regional efforts to clear transmission bottlenecks and share surplus power.
But
Florio said no Western state will rush into a regional arrangement and
surrender
part of its authority without ensuring a good deal for its own consumers.

???"We certainly don't want to be forced into an entity where generators or
power marketers get to dictate the terms," Florio said. "This has got to be a
long courtship rather than a shotgun wedding."

???When federal regulators initiated the move toward regional transmission
grids during the Clinton administration in 1999, participation was voluntary,
said Gary Cohen, general counsel to the state Public Utilities Commission.

???But in its April 26 order, the federal energy commission made its offer of
limited price relief contingent on a filing by June 1 from the Independent
System Operator committing the state to a regional management plan.

???The PUC and the Assembly are challenging that requirement. If anything,
Cohen said, the state needs to increase control over its energy system while
it
recovers from its disastrous debut into deregulation, rather than submit to a
regional authority that would be overseen by the federal government.

???"This doesn't seem to be the time to be doing more experimenting," Cohen
said. "We certainly have not been able to rely on FERC to look out for the
interests of Californians."

???WAITING FOR STATE'S RESPONSE

???Curt Hebert, chairman of the federal commission, declined to say yesterday
whether the government would immediately yank the soft price caps that went
into
effect this week if it found the ISO response unsatisfactory.

???"He said he didn't want to prejudge the case," said commission spokeswoman
Tamara Young-Allen. "He will wait to see what California files."

???PUC Commissioner Jeff Brown said he would be willing to give up some state
control of the grid in exchange for meaningful price controls. But, he said,
the
federal measures granted fell far short of what California needed.

???"Hell, those caps are pretty toothless as they are," Brown said.

???The price controls are in effect only during power shortages. The cap is
the
price offered by the least-efficient generating plant. And generators can
challenge any federal ruling that they have exceeded the caps, by claiming
high
costs.

???The controls were in place for the first time yesterday, when the state
declared a Stage 2 power emergency, meaning reserves fell below 5 percent of
available capacity.

???Florio said state power managers' answer to the federal government will
probably be that they are already doing within California much of what a
regional transmission organization would do.

???ISO COULD PLAY A ROLE

???The ISO manages the grid to ensure that power gets to where it is needed in
the state, the organization told federal regulators in January. The agency
could
represent California when a Western regional organization develops, it said.

???The governor declined to say yesterday what stand he would take on federal
regulators' demand.

???"I'm of a mind to do something, but I still have to talk to my lawyers,"
Davis said.

???Assembly Democrats say regulators in Washington have no right to withhold
actions to correct California's dysfunctional power market.

???"They're required to . . . ensure that just and reasonable rates prevail in
the market," Hefner said. "Why should we have to dicker to get them to do the
job Congress created them to do?"E-mail Bernadette Tansey at
btansey@sfchronicle.com.

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?????????????????????????The San Francisco Chronicle

????????????????????MAY 31, 2001, THURSDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 744 words

HEADLINE: Municipal utilities warned;

Governor says he'll seize excess electricity if prices don't come down

SOURCE: Chronicle Staff Writer

BYLINE: David Lazarus

DATELINE: Sacramento

BODY:
Gov. Gray Davis threatened last night to seize excess power generated by
California's municipal utility districts, which he said have charged even
higher
electricity prices than out-of-state generators.

???Davis said in an interview with The Chronicle that some municipal utility
districts have charged the state as much as 10 percent more than the average
wholesale cost demanded by private power companies.

???The governor's tough talk came as California suffered through a Stage 2
power alert and faced the prospect of a long, hot summer of rolling blackouts
and skyrocketing electricity prices. So far this year, the state has paid more
than $8.2 billion to buy power for its cash-strapped utilities.

???In a variation on his threat to seize power plants from out-of-state
generators if they continue gouging California ratepayers, the governor said
he
would use his executive powers to claim excess juice from the locally owned
utilities if they do not lower their prices.

???He said he is ready to go to court if they offer resistance.

???"We're going to get that power one way or another," Davis said.

???Municipal utilities are city-owned power companies. In Northern California,
there are municipal utilities in Alameda, Palo Alto, Redding, Sacramento and
Santa Clara. Los Angeles has the largest municipal utility in the state.

???30 DAYS TILL CONTRACT DETAILS

???For the first time, the governor also gave a time frame for releasing
details of more than 40 long-term electricity contracts California is signing
with generators since the financial meltdown of the state's two biggest
utilities.

???He said that after about six more contracts get nailed down, he expects
full
details to be made available within 30 days.

???Although the contracts involve nearly $40 billion in public funds, Davis
and
other state officials have adamantly refused to divulge their contents,
insisting that secrecy is needed to remain competitive during negotiations.

???The Chronicle and other media outlets have filed suit for access to the
contracts, arguing that the public has a right to know how its money is being
spent.

???RUDE AWAKENING

???While going toe-to-toe with the out-of-state generators, the last thing
Davis needed was for municipal utilities -- the home team, as it were -- to
emulate the Texas big boys and dig deep into California's pockets.

???Yet the governor's negotiators have been struggling for weeks to convince
municipals that they are obliged to provide power at cost -- which Davis
insisted they are required to do by law.

???He met last week with the heads of a dozen municipal utilities and told
them
explicitly that he would not tolerate gouging from within the state as
California faces a summer of potential blackouts.

???The governor said after the meeting that the municipals had agreed "to make
most of their excess power available this summer . . . at prices significantly
lower than those being charged on the spot market."

???Apparently, however, little progress has been made since that declaration.

???Davis told The Chronicle last night that he is still "trying very hard to
promote this notion that we're all in this together."

???While unwilling to specify which municipal utilities have been most
aggressive in their pricing, and refusing to place a dollar amount on how much
the utilities charged, Davis said he is prepared to seize up to 800 megawatts
of
output if the they do not change their ways.

???Eight hundred megawatts is enough power to light about 800,000 homes.

???Representatives of the various municipal utilities could not be reached for
comment, nor could a spokesperson for the California Municipal Utilities
Association in Sacramento.

???"I told them that they will either (reduce their prices) voluntarily or
involuntarily," the governor said.

???UNCERTAIN FUTURE

???It remains to be seen, however, whether the municipal utilities will play
ball. To date, they have shown a firm inclination to go their own way.

???In March, Lodi's municipal utility district and a Northern California
municipal utility cooperative that includes Palo Alto, Santa Clara and Alameda
told Pacific Gas and Electric Co. that they will not participate in rolling
blackouts during power shortages.

???"I won't arbitrarily screw my customers . . . so 5,000 PG&E customers can
turn on their lights somewhere else," said Alan Vallow, director of the
utility
serving Lodi's 58,000 residents.E-mail David Lazarus at
dlazarus@sfchronicle.com.

GRAPHIC: PHOTO, Gov. Gray Davis accused city-owned utilities of gouging.

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?????????????????????????The San Francisco Chronicle

????????????????????MAY 31, 2001, THURSDAY, FINAL EDITION

SECTION: NEWS; Pg. A8

LENGTH: 687 words

HEADLINE: NEWS ANALYSIS;

State awaiting bold act by Davis;

Rhetoric buys time but summer's near

SOURCE: Chronicle Sacramento Bureau

BYLINE: Lynda Gledhill

DATELINE: Sacramento

BODY:
Gov. Gray Davis may have scored a victory by publicly clashing with President
Bush this week on energy policy, but the governor's tough rhetoric also raises
expectations for bold action as a summer of rolling blackouts bears down on
California.

???With little hope that federal regulators will adopt broad price controls on
wholesale electricity prices, Davis will have to chart his own course to take
Californians through the summer without loss of life or bankrupting the state.

???"If the federal government continues their current policies, and if we have
a very bad summer in terms of blackouts and heat waves, then the governor will
be forced to take other steps," said Tim Hodson, director of the Center for
California Studies at California State University at Sacramento.

???So far, Davis -- known for his cautious and micromanaging style -- has been
reluctant to make sweeping use of his emergency powers and has won few major
victories in California's energy crisis. The state's largest utility has filed
for bankruptcy, and the state has spent more than $8 billion to buy
electricity
on behalf of the utilities.

???Davis said yesterday that he will "fight like hell" to get California some
relief from the Federal Energy Regulatory Commission. He said he would move
forward with a lawsuit against the federal agency if it does not impose price
caps.

???But although beating the drum of federal intervention may have given Davis
a
temporary boost this week, sustaining that level of rhetoric won't be
effective
over the long term, said Bob Waste, a professor at California State
University,
Sacramento.

???"He's made it harder for the president to do not very much," he said. "But
I
think the governor has to look at playing the bases and using eminent domain."

???As recently as this week, Davis raised the possibility of seizing power
plants.

???"Once the president said it was time to stop playing politics, Davis had to
ratchet back the rhetoric," agreed political analyst Sherry Bebitch Jeffe. "He
was precluded from using the federal government as the villain."

???The Bush visit gave Davis, mentioned as a possible challenger to Bush in
2004, a national spotlight on a scale he had not had before. He did interviews
with all the networks and even won five minutes at the top of CNN's "Larry
King
Live," a spot long coveted by the administration.

???The 35-minute, tightly choreographed meeting between Davis and Bush yielded
little progress, but it was a good political show, Hodson said.

???But Davis may now have to seriously consider the choices he so far has been
reluctant to take: seizing power plants, slapping a windfall profits tax on
out-of-state generators or scheduling blackouts. Last night, he raised another
possibility: seizing excess power generated by municipal utilities that the
governor says have gouged the state.

???Senate President Pro Tem John Burton, D-San Francisco, said it's time for
Davis to take some dramatic action.

???"Clearly, the only people who are going to help us is ourselves," he said.

???State Treasurer Phil Angelides now advocates commandeering plants if
generators continue to raise the price of electricity sold on the spot market.

???Davis' plan to rescue Southern California Edison from following Pacific Gas
& Electric Co. into bankruptcy has stalled in the Legislature. Many lawmakers
wonder what would be so terrible about letting the courts handle such an
extremely delicate issue.

???And lawmakers continue to mull the prospect of scheduling blackouts in an
effort to gain some control over how much money the state is spending on
electricity. At a rate of $55 million a day, the state has spent $8.2 billion
to
buy power since Jan. 17.

???"I've got to say I'm getting there," Assembly Speaker Robert Hertzberg said
about scheduling rolling blackouts. "At some point, we may just have to be
like
Nancy Reagan and 'Just say no.' "

???But Davis has wavered on the plan, at first saying his preference was to
keep the lights on no matter what the cost, then saying it was an idea he
would
consider.

???E-mail Lynda Gledhill at lgledhill@sfchronicle.com.

GRAPHIC: PHOTO, Gov. Davis talked about taking U.S. energy regulators to
court.
/ Associated Press

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?????????????????????????The San Francisco Chronicle

????????????????????MAY 31, 2001, THURSDAY, FINAL EDITION

SECTION: EDITORIAL; Pg. A27; OPEN FORUM

LENGTH: 641 words

HEADLINE: FERC is shirking its responsibilities

BYLINE: John A. Russo, John Burton, Robert M. Hertzberg

BODY:
FRONTIER TOWNS without a sheriff were not fit for families. Professional
baseball games would be meaningless without umpires to call plays fairly. And
a
regional electricity market descends into naked greed if its federally
mandated
referee walks off the job.

???Last week, the city of Oakland and the state Legislature filed a landmark
lawsuit against the Federal Energy Regulatory Commission to compel FERC to do
its job.

???Our case is critical to California, and its outcome may well affect
consumers and businesses across America.

???In 1999, more than two years after deregulation, one megawatt hour of
electricity in California cost an average of $30.

???Today, the spot market price has spiked to more than $1,900 -- 63 times the
post-deregulation cost. This cost explosion was not caused by California's
admittedly troubled attempt at deregulation, but deregulation clearly invited
electricity providers to exploit a chaotic marketplace.

???Ethics aside, electricity generators have done what commodity producers
have
always done: Charge as much as the market will bear.

???Understanding this essential truth about commodity markets and recognizing
the critical role energy plays in our economy and our lives, Congress created
FERC. Unfortunately for Californians, FERC stubbornly refuses to fulfill its
statutory obligation to ensure "just and reasonable" energy rates.

???As a result, Californians are suffering immediate, irreparable harm and
jeopardy to our health and safety.

???In light of FERC's utter abdication of its mandate to protect the public
interest, the state Legislature, on behalf of all Californians, and the city
of
Oakland, on behalf of its residents, were forced to petition for relief in
U.S.
District Court. This lawsuit is not about politics; it is not about energy
deregulation in California.

???The objective of this lawsuit is simple: FERC should do the job that
Congress created it to do. FERC should, when appropriate, limit the prices
charged by out-of-state generators and establish a refund program for the
return
of any windfall profits they obtained.

???Ironically, FERC's own mission statement reads like a wish list for
California consumers: "The commission chooses regulatory approaches that
foster
competitive markets whenever possible, assures access to reliable service at a
reasonable price, and gives full and fair consideration to environmental and
community impacts in assessing the public interest of energy projects."

???California and Oakland have a message for FERC:

???-- Fostering "competitive markets" does not mean that power generators
should be allowed to compete to see who can extort the highest price.

???-- "Reliable service" should not mean reliable rolling blackouts.

???-- Exorbitant price increases cannot be considered "reasonable."

???Had "full and fair consideration" been given, the city of Oakland and the
state of California would not be compelled to go to court.

???Much has already been written about the potential impact to the faltering
American economy from California's electricity crisis. There is also a broader
danger presented by FERC abdication. An appointed bureaucracy should not be
permitted to ignore the clear will of our democratically elected Congress. Our
fellow Americans should not be distracted by all the finger-pointing
surrounding
California's deregulation fiasco.

???Mark this well: If FERC can get away with refusing to do its job here in
the
West, it can look away with similar impunity from price-gouging anywhere else
in
the United States.

???California can tell the rest of the nation from bitter experience (and with
due respect to poet John Donne) "Ask not for whom the price spikes. It spikes
for thee."John A. Russo is Oakland city attorney. John Burton is president pro
tem of the state Senate. Robert M. Hertzberg is Assembly speaker.

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??????????????????????Copyright 2001 The Washington Post

?????????????????????????????The Washington Post

????????????????????May 31, 2001, Thursday, Final Edition

SECTION: FINANCIAL; Pg. E01

LENGTH: 1017 words

HEADLINE: Price Caps Have Questionable Record; Even if California Gets
Controls
on Electric Costs, They May Not Help

BYLINE: Martha McNeil Hamilton and Greg Schneider, Washington Post Staff
Writers

BODY:

???As California Gov. Gray Davis and President Bush clash over energy policy,
their major dispute has revolved around price caps.

???Davis has argued that the best and quickest solution to California's energy
crisis would be for the federal government to rein in wholesale electricity
costs through price caps.

???Bush has responded that caps will do nothing to lessen demand or increase
the supply of electricity.

???This is not the first time that the government has been pressured to put a
lid on prices in the face of economic problems and public outcry. Past efforts
have had mixed results and illustrate how difficult price caps can be to
administer properly.

???President Richard Nixon, with a reelection campaign in the offing in 1971,
imposed wage and price controls to help keep inflation at bay. While hailed as
politically expedient, the system got low marks from many economists. Federal
price controls on oil resulting from the 1973 Arab embargo and controls on
natural gas were also eventually deemed ineffective and scrapped.

???Economists say that price caps make the most sense when markets are not
working properly -- when a shortage of sellers, for instance, means there is
no
real competition. Indeed, in a market dominated by a limited number of
sellers,
governments often have acted to regulate prices. That's how it worked in the
old
world of regulated utilities. The utilities had to convince regulators that
price hikes were justified.

???Davis says California is struggling with a similar situation of too few
sellers, and caps are needed as an emergency measure until new power plants
are
completed. Ten economists, including Alfred Kahn, the father of airline
deregulation, have backed California in a letter to Bush and Republican
congressional leaders.

???"Creating a well-functioning electricity market in California as soon as
possible is the best way to ensure that competition in wholesale electricity
will spread through the U.S. and provide the greatest possible benefits to
consumers," the letter reads.

???The economists argued for temporary price caps and said that if the caps
were set high enough, they would not discourage competition. They warned that
the crisis in California, unless abated, could set back the cause of
deregulation.

???Joseph Fichera, the chief executive of Saber Partners, a New York-based
consulting firm that has been advising Davis on the energy situation, argues
that Bush has misunderstood California's predicament.

???"He's talking supply and we're talking economic impact, and there's a
disconnect," Fichera said.

???Fichera agrees that price caps have historically tended to limit the supply
of a product, but new power plants are currently under construction. The price
caps are needed to keep the state from having to borrow billions of dollars to
pay for energy until those plants come on line.

???"Right now we're in a shortage, and just like in war or any time there's a
shortage, you have to manage that through select government intervention,"
Fichera said.

???With no help forthcoming from the president, Davis is pursuing a lawsuit
designed to force federal regulators to impose limits on wholesale prices.
Earlier this week the Federal Energy Regulatory Commission took a small step
in
that direction, telling some wholesalers to hold down prices during shortages
severe enough to be declared state emergencies. But most out-of-state
suppliers
and municipal systems, including the one in Los Angeles, aren't covered by the
directive.

???In California, when deregulation came, retail prices -- what residential
and
small-business consumers play for electricity -- were reduced, and frozen for
several years.

???From mid-1998 until the middle of last December, California's Independent
System Operator -- the power-grid manager the state set up to oversee the flow
of electricity on the state's deregulated market -- imposed a price cap on
wholesale electricity.

???The rates varied at first but eventually settled at $ 250 per megawatt. The
Independent Systems Operator then asked FERC to remove the caps in an effort
to
encourage more supply to flow to California.

???"In a span of three days, prices went from $ 250 a megawatt to $ 1,500,"
said Steve Maviglio, a Davis spokesman. "It put the foot to the gas pedal in
terms of accelerating bankruptcy and putting the state in a crisis situation."

???When wholesale prices soared, utilities ran out of money.

???Some proponents of price caps argue that FERC is obligated under the law to
step in.

???"There's a law on the books now, the Federal Power Act, which requires the
FERC to maintain just and resonable wholesale prices," said Linda Stuntz of
Stuntz, Davis & Staffier, a law firm whose clients include Southern
California
Edison.

???As long as FERC is reviewing this issue, the courts are unlikely to
intervene to help Davis, according to Stuntz and others.

???Some major consumers of electricity argue that even if FERC does act, it
would not solve their energy problems in California.

???John Anderson of the Electricity Consumers Resource Council, which
represents major power consumers including California-based Intel Corp. and
Chevron Corp., said a price cap wouldn't cover municipal power companies or
cooperatives, or such major out-of-state suppliers as Canadian power sellers.

???"Governor Davis speaks as if FERC could wave a wand and cap all prices,"
said Anderson. California should take other steps, including raising
residential
and small-business rates, to encourage more conservation, he said.

???Lynn Church, head of the Electric Power Supply Association, which
represents
independent power producers and marketers -- the companies Davis largely
blames
for the crisis -- also opposes caps.

???"By putting an artificial cap on the process, you discourage new
development
by not sending the proper message that there is a shortage and that people
need
to build and get into the market," she said. "Secondly, it dampens the price
signal to consumers" to use less power.

??Staff researcher Richard Drezen contributed to this report.

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????????????????????Copyright 2001 Chicago Tribune Company

???????????????????????????????Chicago Tribune

??????????????May 31, 2001 Thursday, NORTH SPORTS FINAL EDITION

SECTION: Editorial; Pg. 24; ZONE: N

LENGTH: 503 words

HEADLINE: Price caps don't generate energy

BODY:

??President Bush and Gov. Gray Davis face the same political firestorm in
California: Pummeled with blackouts and skyrocketing electric costs,
Californians are in a rage and demand government action.

??Davis, a Democrat with presidential aspirations, is furiously lobbying the
federal government for a quick-acting analgesic--price caps.

??But on Tuesday, during his first visit as president to California,
Bush--much
to his credit--did not take Davis' bait. The state's energy fiasco is real and
so are the high prices, the president acknowledged, but price caps do little
to
solve the problem. California must dampen demand and boost supplies. Price
caps
will do neither.

??That prescription won't win Bush any political points in California--a state
he lost in November by a thumping 12 percent margin--but it's the right one.
Blunders by state government created much of the California energy crisis to
begin with, and the solution now lies in less government intervention, not
more.

??California's problems began in 1996, with a botched attempt to deregulate
the
electricity market that was supposed to lead to cheaper rates for consumers.
Instead it has shifted billions of dollars to energy companies and
electricity
brokers, many of them out of state.

??Other major miscalculations by state government preceded the deregulation
fiasco, such as the decision by regulators in the late 1970s to force
utilities
to buy electricity generated by alternative means, such as solar and wind
energy, often at higher prices. Southern California Edison estimates that
since
1985 it has paid $25 billion more to buy such power than it would have cost to
generate it by traditional means.

??Meanwhile, there has been no construction of new power plants for the past
decade even though California's burgeoning electronics industry is an
electricity hog and demand has risen sharply along with the state's economic
recovery during the past five years.

??California also imports approximately 20 percent of its electricity and has
to compete with fast-growing Phoenix and Las Vegas for any regional surpluses
of
electricity.

??There is evidence that speculation by some energy providers has worsened
California's woes. At least six investigations by state and federal agencies
are
looking into charges of collusion or price-fixing by out-of-state energy
suppliers. This is as it should be.

??The federal government, at the behest of Bush, also has made available
subsidies to help low-income residents cope with higher bills, and is speeding
up the licensing process to build new generating plants.

??These measures will not solve California's energy crisis immediately--or
help
Davis' or Bush's political futures.

??But rather than seek political retribution, Californians ought to pressure
politicians for real, long-term solutions, not quickie fixes. In a market
economy, that means easing demand and boosting supplies through conservation
measures and new generating capacity.

??Not fast or sexy solutions, but ones that work.

LOAD-DATE: May 31, 2001