Please see the following articles:

Sac Bee, Thurs, 4/12:  "Laws aim at saving energy"

Sac Bee, Thurs, 4/12:  "Enron ordered to provide power to state's colleges"

Sac Bee, Thurs, 4/12:  "PG&E shorts counties $4.2 million:  Poorer local
governments
say it'll be tough to get by with half a tax ration"

Sac Bee, Thurs, 4/12:  "Daniel Weintraub"   (Editorial)

San Diego Union (AP), Wed, 4/11:  "San Diego group proposes western states
power
buyers' cartel"

San Diego Union (AP), Wed, 4/11:  "Judge orders Enron to deliver electricity
to universities"

San Diego Union, Wed, 4/11:  "California utilities label proposed refunds
from providers inadequate"

LA Times, Thurs, 4/12:  "Davis Approves $850 Million for Energy Conservation
Plan"

LA Times, Thurs, 4/12:  "Failure to Buy Entire Network May Doom Davis' Power
Deal"

LA Times, Thurs, 4/12:  "County to Sue Edison Over Nonpayment of $10 Million"

LA Times, Thurs, 4/12:  "PG&E Creditors' Committee Is Appointed"   (Mark
Palmer quoted)

LA Times, Thurs, 4/12:  "Price Caps Excluded in FERC Plan"

SF Chron, Thurs, 4/12:  "Davis Signs $850 Billion Energy Plan
Energy Package Signed by Davis
$850 billion designed to boost conservation "

SF Chron (AP), Thurs, 4/12:  "Federal regulators may soon begin monitoring
electricity market"

SF Chron (AP), Thurs, 4/12:  "LA County joins list of those suing SoCal
Edison "

SF Chron (AP), Thurs, 4/12:  "Developments in California's energy crisis"

SF Chron, Thurs, 4/12:  "Council Temporarily Reduces Utility Tax"

SF Chron, Thurs, 4/12:  "Start Digging, Energy Chief Tells State
He says new power plants, not price caps, are the answer "

SF Chron, Thurs, 4/12:  "Enron Told It Can't Cut Electricity To Schools"

SF Chron, Thurs, 4/12:  "PUC Official's Investments Questioned
Group already filed suit, charging conflict of interest"

Mercury News, Thurs, 4/12:  "Markets indicate even higher prices for summer
power"

Mercury News, Thurs, 4/12:  "Davis signs plan offering incentives for energy
conservation"

Mercury News, Thurs, 4/12:  "Calif. urged to form electricity 'buyers cartel'
"

Mercury News, Thurs, 4/12:  "PG&E bankruptcuy renews focus on billions
utility transferred"

Mercury News, Thurs, 4/12:  "Officials question utilities, generators"

OC Register, Thurs, 4/12:  "Charities join needy in power-bill struggle"

OC Register, Thurs, 4/12:  "Rate plan expands discount eligibility"

OC Register, Thurs, 4/12:  "Dimming chances for resolving power crisis"
(Commentary)
Individual.com (AP), Thurs, 4/12:  "Utilities Allegedly Gouged Calif."

Individual.com (AP), Thurs, 4/12:  "PG&E's Money Transfers Focused On"

Individual.com (AP), Thurs, 4/12:  "States say federal government needs to
act
to stem energy crisis"

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Laws aim at saving energy
By Emily Bazar
BEE CAPITOL BUREAU
(Published April 12, 2001)
Gov. Gray Davis insists that Californians who own aging appliances or shiver
in drafty homes aren't the only ones who will benefit from two major
energy-conservation bills he signed into law Wednesday.
Instead, the Democratic governor -- who is wrestling with the state's energy
crisis as summertime blackouts loom -- has billed the measures as an
opportunity for all Californians to save precious megawatts in the critical
coming months.
"Clearly, the cheapest megawatt this summer is the megawatt we don't have to
buy," said Davis, who vetoed more than $250 million from the bills, leaving
about $860 million for energy-saving programs.
The governor has said many times that conservation is a key element of his
overall plan to solve the energy crisis, and that these bills -- SB 5x by
state Sen. Byron Sher, D-Palo Alto, and AB 29x by Assemblywoman Christine
Kehoe, D-San Diego -- embody that commitment.
Crafted to complement each other, the measures include money for a wide range
of programs, most of which exist. For instance, the bills dedicate millions
of dollars to low-income families who need help paying their electricity
bills and to families who hope to install solar panels on their roofs.
Taken together, the conservation programs are expected to save roughly 2,000
megawatts this summer, enough energy to power about 2 million homes, Davis
said.
In deciding what to veto, Davis said he shaved or eliminated provisions that
would not yield energy savings by summertime.
"Everything we're doing in SB 5x and AB 29x is targeted toward reducing
electricity demand during hot summer afternoons to help avoid rolling
blackouts," said Claudia Chandler, a spokeswoman for the California Energy
Commission.
Among their many provisions, the bills include $90 million in rebates or
other incentives to encourage Californians to replace inefficient washing
machines, air conditioners and other appliances with newer energy-saving
models.
Currently, rebates for energy-efficient refrigerators average about $75, plus
the cost of removing the old refrigerator.
The incentives will be available to customers of investor-owned utilities,
such as Pacific Gas and Electric Co., and municipal utilities, such as the
Sacramento Municipal Utility District.
SMUD expects its share will be between $6 million and $9 million, said Mike
Weedall, manager of energy services.
Some of the $90 million also will go toward helping low-income residents
weatherize their homes and pay their utility bills.
In all, the measures provide $240 million in low-income assistance,
encouraging people to install double-paned windows and insulation where they
live to save power and reduce their energy bills.
Senate leader John Burton, D-San Francisco, said the bills include assistance
for California's families who can least afford the average 29 percent rate
hike recently approved by the California Public Utilities Commission for PG&E
and Southern California Edison customers.
"They're the ones that will end up freezing to death when they can't pay
their bills," Burton said. "We're doing all this (other) stuff; we ought to
take care of them."
The bills also include $60 million in rebates and incentives to help
consumers and businesses reduce their lighting and $105 million to encourage
renewable and other Earth-friendly power generation projects, such as rooftop
solar panels.
In order to entice Californians to participate in these programs, the
measures provide $10 million for a public-awareness campaign.
The measures' journeys through the Legislature, however, were fraught with
roadblocks. The Assembly, for instance, last week added several proposals
favorable to farmers.
One of their proposals would have limited the amount of time interruptible
agricultural customers could lose energy to four hours a day or 20 hours a
month. "Interruptible" customers volunteer to lose power in emergencies in
exchange for lower rates.
But the changes riled Senate leaders. Eventually, the dispute was resolved by
eliminating the Assembly amendments or rewriting them to spread the benefits
among all customers, not just agricultural ones.
Sandra Spelliscy, general counsel for the Planning and Conservation League,
followed the bills' progress through the Legislature and was relieved when
they were approved.
"It has been clear to us for a long time that we were never going to build
our way out of this problem for the summer," she said.

The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com.
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Enron ordered to provide power to state's colleges
By Claire Cooper
BEE LEGAL AFFAIRS WRITER
(Published April 12, 2001)
SAN FRANCISCO -- A federal judge Wednesday ordered a major energy supplier to
resume service to California's universities, ruling that the Texas-based
company probably had no right to switch the schools to public utilities for
their electricity.
U.S. District Judge Phyllis J. Hamilton issued a preliminary injunction
holding Texas-based Enron Energy Systems Inc. to the final year of a
four-year contract to sell energy directly to the University of California
and California State University. Unless a higher court rules otherwise, her
order will remain effective until the results of a full-scale trial.
The two university systems signed the contract to get relief from the risk of
relying on shaky utilities, Hamilton said. She said the company took away
that security when it switched 29 of the state's 33 campuses to Pacific Gas &
Electric and Southern California Edison during the past two months.
She noted PG&E's precarious position since filing for bankruptcy last week.
In applying for the injunction, lawyers representing the universities argued
that Enron was motivated by a desire to sell as much of its electricity as
possible on the spot market, where huge profits have become available. The
universities' contract with Enron, signed in 1998, sets their rate at 5
percent less than the rate being charged by the utilities.
Appearing before Hamilton in support of the schools, state Attorney General
Bill Lockyer argued that Enron, in effect, was saying, "We don't want to sell
power at the price we promised."
But Enron's lawyer, A. William Urquhart, said the company had a duty to its
shareholders to act in their economic interest.
He said he would take the ruling to the 9th U.S. Circuit Court of Appeals
immediately. He asked Hamilton to stay it until the circuit court can act,
but she refused.
In papers filed with the court, Urquhart said Enron switched many customers
to the utilities as the "most logical way to mitigate the impact" of losses
the company incurred after it stopped getting paid by the California
utilities almost a year ago.
Enron will pay the difference between the rate it promised the universities
and the rates charged them by the utilities, he said.
But the universities said they were losing other contracted benefits,
including protection from the threat of blackouts and a sophisticated Enron
metering and billing system that's an essential part of a conservation
program.
After the hearing, Lockyer called the ruling an important victory over a
company that he said has best exemplified the "gouging" and "piracy" of
California consumers during the energy crisis.
He said an investigation by his office that could lead to civil or criminal
charges against energy suppliers should be completed by summer.

The Bee's Claire Cooper can be reached at (415) 551-7701 or
ccooper@sacbee.com.
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PG&E shorts counties $4.2 million: Poorer local governments say it'll be
tough to get by with half a tax ration.
By Jennifer K. Morita
BEE STAFF WRITER
(Published April 12, 2001)

After filing for bankruptcy protection last week, Pacific Gas and Electric
Co. notified local county governments that it won't be able to pay $4.2
million it owes them in property taxes.
That left officials from El Dorado, Nevada, Placer, Plumas, Sacramento,
Sutter, Yolo and Yuba counties with mixed feelings. Some said reserve funds
will cover the losses, at least for now. But officials of other, smaller
counties that rely on PG&E tax money to pay for public services, employees'
salaries and various programs, are nervously crossing their fingers as they
watch the utility's bankruptcy proceedings.
PG&E owes California counties $79 million for the Jan. 1-June 30 property tax
installment that was due Tuesday. It paid slightly less than half of what it
owes.
PG&E officials said the company was limited in what it could pay because of
the bankruptcy filing, and paid only what was due for April 6-June 30.
"Under the bankruptcy law we can pay our obligation going forward as part of
normal business operation," PG&E spokesman Ron Low said Wednesday. "We would
need the court's approval to pay any pre-petition, or pre-filing obligation."
Low added, however, that the utility intends to ask the court to let it pay
the balance. "We fully intend to pay the entire amount owed in property
taxes," Low said.
Two of the hardest-hit counties are Yuba and Plumas.
Yuba County, one of the poorest in the state, depends heavily on PG&E tax
dollars, said County Treasurer-Tax Collector Jim Kennedy.
"PG&E is the largest single taxpayer in the county, and the percentage it
represents of our total tax revenues is the largest share for any county in
the state," Kennedy said.
Although PG&E failed to pay its semiannual installment of $794,292, Kennedy
remained optimistic that a check was in the mail. Still, the county will be
receiving $417,003 less than it is owed.
In Plumas County, where PG&E is the largest private property owner, officials
are reeling from the tax loss.
The utility company paid $762,519 on Tuesday, less than half the $1.6 million
it owed.
Plumas County government's share of the shortfall is around $250,000, said
treasurer Barbara J. Coates. The rest goes to schools, which won't be
affected immediately because the state will make up for the missing revenue.
The county's loss could affect raises for all 350 employees, a countywide
arts program, library hours and improvements to local campgrounds, said Board
of Supervisors vice chairman Robert Meacher.
But the long-term effects are even more disturbing, according to Meacher.
The utility's $3.2 million annual tax payment makes up about 16 percent of
the $20 million collected by the county.
"The uncertainty over future tax revenues is more of an issue now than the
actual dollars," said Meacher, who also serves as chairman of the 28-member
Regional Council of Rural Counties. "Every county that produces hydroelectric
energy for the state of California will be impacted -- some dramatically."
As of Wednesday morning, Placer County had not received PG&E's second
property tax installment of $1.9 million, Treasurer-Tax Collector Jenine
Windeshausen said.
PG&E officials told Windeshausen that the company will pay a little less than
half of the property taxes it owes Placer County.
"As far as the county is concerned, we do not anticipate any reduction of
services due to this," Windeshausen said. "The county has set aside
contingencies for these types of situations."
He said PG&E's portion represents only slightly more than a half percent of
the county's total tax collections.
"We are going to be proactive in the bankruptcy proceedings. We're definitely
pursuing the progress of the bankruptcy court and we're constantly being
appraised of our status," Windeshausen said.
PG&E pays significant property taxes to Yolo County, according to Don
Ishikawa, chief assistant county administrator. Like every county in the
state, Yolo keeps only a portion of that money, and the rest is distributed
to schools, libraries and special districts.
Ishikawa said the lost revenue would be a "big hit" for a county with an
annual budget of only $210 million. But Yolo has enough money in reserve
funds earmarked for property tax losses that there will be no immediate
impact, he said.
Nevada County Treasurer-Tax Collector E. Christina Dabis said she also is
waiting for PG&E's second property tax payment of roughly $615,000.
"We anticipate getting around $300,000," Dabis said. "Our tax roll is about
$100 million and they owe us about $600,000, which is less than 1 percent."
Sacramento County received a $607,794 check from PG&E on Wednesday,
representing about 47.5 percent of what was due, said County Assistant Tax
Collector Linda Pittman.
"We'll have to wait for the bankruptcy case to see what we can do," Pittman
said. "I'm sure we'll be filing a claim with the court for whatever we can."
El Dorado County received $232,527 of the $489,530 that was due, according to
Treasurer-Tax Collector C.L. Raffety.
"They have to pay it like everyone else or they incur penalties," Raffety
said.
In Sutter County, PG&E failed to pay its April 10 installment of $448,484,
Assistant County Administrator Curt Coad confirmed Tuesday.

The Bee's Jennifer Morita can be reached at (916) 773-7388 or
jmorita@sacbee.com.
Bee staff writers Art Campos, Robert D. Davila and Pamela Martineau, and
correspondents Jane Braxton Little and Tom Nadeau contributed to this report.
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Daniel Weintraub

(Published April 12, 2001)

You wouldn't normally take energy policy advice from a consumer advocate who
admits that the plan he has in mind for California recalls the plot of "The
Thief" -- a 1981 thriller about a former safecracker facing down the mob. But
these are not normal times. And Michael Shames is no normal consumer
advocate.
Shames is the executive director of the Utility Consumer Action Network. He
was also the author of a 1999 paper that accurately predicted today's energy
disaster back when most people didn't even know the state's electricity
industry had been deregulated. Now he has teamed with University of
California, Irvine, professor Peter Navarro to propose an audacious approach
to breaking the grip the energy cartel has on California and the West.
Shames and Navarro warn that if nothing is done -- and they suggest Gov. Gray
Davis' recent moves might be worse than nothing -- California faces a summer
of rolling blackouts and a power bill that might reach $50 billion. That's a
catastrophe that neither the state's budget nor its economy could withstand.
Strong measures are needed to prevent it.
Their plan comes down to this: Fight fire with fire. Shames and Navarro want
California, Oregon and Washington to form a cooperative to buy their energy.
Each day, the states would set a price they consider fair and reasonable,
given the costs of producing electricity and a generous profit margin, say 30
percent.
"It's a buyers' cartel," Shames says. "We would give them a dose of their own
medicine."
Any power plant operator that wanted to sell electricity in these three
states would have to meet the price set by the cooperative. Those who didn't
like the price could shut down their plants and sit out the market for the
day.
That's where "The Thief" comes in. In the Michael Mann film starring James
Caan, a Mafia safecracker longs to go straight and live the American dream --
a house, a family, a business of his own. He gets all those things, but his
mob ties insist he do one more job. When he resists, they threaten to take
away all he holds dear. So he sends away his family, shuts down his business
and burns down the house. You can't hurt me now, he says. I'm ready for you.
Shames wants California to say to the power generators: We're ready. The
generators' greatest weapon is the blackout. The fear of darkness leads us to
pay any price for the electrons we need to keep the lights on. It's even
written into state law, a requirement that the people who run our power grid
spend whatever is necessary to keep the juice flowing. They cannot simply say
no, sorry, your price is too high, we'll do without it today.
Under this plan, instead of random rolling blackouts sweeping the state
without notice, Shames and Navarro suggest rotating outages that are planned
and telegraphed ahead of time. That would give predictability to business and
residents, which is what most people want. It also would tip off the crooks,
of course, who might prey on homes suddenly left without alarms. But the
cops, forewarned as well, could mobilize ahead of them with extra patrols.
"If the worst thing they can do to us is take away the lights, we might be
able to cope with that," Shames said. "Then they're in trouble. Then they
start losing big bucks. They have to answer to their stockholders."
So far, it's a plan that a free-market economist could love. Buyers pooling
their clout to win a better price. People sacrificing to get what they want.
Generators free to participate, or not. Even Gary Ackerman, the glib and
cocky spokesman for the Western Power Trading Forum, the generators' trade
group, says it sounds fine to him.
"Nothing wrong with a group of buyers banding together to buy a commodity,"
Ackerman says. "I've got no problem with that whatsoever. If the price they
offer is less than the market price, we're not selling."
That's where things could get nasty. If the blackouts grew too disruptive,
Shames and Navarro say, Davis and his counterparts in Oregon and Washington
would have to be willing to use their emergency powers to seize the plants
that won't play ball. The threat to the states is too great to sit by while
the generators extract billions of dollars from our businesses and residents
and ride off into the sunset.
"We are very concerned that over the next six months, a combination of market
manipulation and the natural forces of electricity shortages will allow these
generators to gorge on us as they never have before," Navarro said. "Is that
tolerable? Do we just grin and bear it and give them the money, or do we do
something?"
Today, with Davis making incremental progress and promising that all will be
well, this plan sounds radical. But Shames has been a prophet before. And who
knows? By this summer, with the air conditioning off and the state budget in
tatters, a buyers' cartel backed up by a governor with some spine might look
downright reasonable.

The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at
dweintraub@sacbee.com.
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San Diego group proposes western states power buyers' cartel

ASSOCIATED PRESS
April 11, 2001
SAN DIEGO ) California, Oregon and Washington should form a cartel to force
power suppliers into reducing electricity rates, consumer activists said
Wednesday.
Forming a three-state cartel could be the only way to avoid blackouts and
steep increases in rates as power demand peaks this summer, according to the
Utility Consumers' Action Network and a University of California, Irvine
business professor.
The activists said their proposal is an alternative to a plan announced last
week by Gov. Gray Davis to survive summer demand with new power plants,
conservation, and higher rates.
Under the activists' plan, the states could use their combined buying power
to force wholesale energy generators to charge an established price for
energy, said professor Peter Navarro.
The plan's backers say it's possible the generators could retaliate with
blackouts, but they believe the most likely outcome is that the six major
private wholesalers will agree to the set price.
Should the companies refused to charge the set price, the states could
acquire the private power plants within its borders through eminent domain,
the legal process that government uses to acquire land for roads and other
public works projects, Navarro said.
So far, no legislator has stepped forward to endorse the plan but that could
change as lawmakers continue to search for alternative solutions to the
state's power woes. A spokesman for the governor, Steve Maviglio, said the
idea is unlikely to win approval.
"The million-dollar question is whether it will pass out of the Legislature,"
Maviglio said. "Given the fact that it's an untested scheme ... I don't think
it will see the light of day."
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Judge orders Enron to deliver electricity to universities

By David Kravets
ASSOCIATED PRESS
April 11, 2001
SAN FRANCISCO ) Saying that Enron Energy Systems Inc. may be in breach of
contract, a federal judge Wednesday ordered the Houston company to abide by
its agreement to sell cheap power to the state's public universities.
Enron was attempting to get out of delivering power for the final year of a
four-year deal with the California State University and University of
California systems. Enron, which buys power from producers and sells it on
the market, said the contract would cost the energy concern $12 million a
month because of skyrocketing wholesale power prices.
Enron said the state should free Enron from its obligation and taxpayers
should pick up the tab.
"It's our economic interest to provide a service with the least amount of
dollars we can provide it for," Enron attorney A. William Urquhart said. He
later described the case as being "all about money. It's all about money."
Enron said it would file an emergency appeal to the 9th U.S. Circuit Court of
Appeals in San Francisco to overturn U.S. District Judge Phyllis Hamilton's
ruling in the suit brought by the state's two university systems.
Appearing in federal court, state Attorney General Bill Lockyer argued that
Enron wants out of the contract so it can engage in a "marketing game" with
the universities' promised power and sell it on the open market for 10 times
more than what the electricity cost Enron.
He said lawmakers may have "left the keys in the car" when they approved
California's failed energy deregulation scheme that has prompted the energy
crisis, "But it is still theft to steal the car."
The judge issued a temporary injunction against Enron, forcing it to continue
providing service as the suit brought by the universities proceeds. When the
judge issued the order, she also said there is a likelihood Enron will lose
the suit.
"I am persuaded, in the end, there is a very strong likelihood of success on
the breach of contract claim," the judge said.
UC's annual electric bill is about $87 million and its natural gas bill is
about $26 million. CSU annually pays about $40 million for electricity and
$20 million for natural gas.
The case is UC Regents vs. Enron Energy Systems Inc., 01-1006.

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California utilities label proposed refunds from providers inadequate

By Toby Eckert?
COPLEY NEWS SERVICE
April 11, 2001
WASHINGTON -- California's two biggest utilities are demanding that power
providers who allegedly overcharged for wholesale electricity be ordered to
pay much larger refunds than federal regulators envision.
In a filing with regulators Monday, Southern California Edison Co. and
Pacific Gas and Electric Co. called the proposed refunds "indefensible as a
matter of both law and logic," saying the Federal Energy Regulatory
Commission used a badly flawed method to calculate the overcharges.
The utilities asked the FERC to recalculate the refunds -- which cover a
limited amount of wholesale charges for January and February -- using the
cost of producing the electricity as a basis. That would certainly result in
refunds much higher than the $124 million the commission has so far
threatened to order if the power providers can't justify their prices.
The utilities' request for a rehearing of the FERC's March refund order comes
after weeks of criticism from California officials and others that the
proposed refunds fall far short of the mark. The manager of the state's power
grid has estimated that price gouging in the wholesale electricity market has
cost California consumers $6.2 billion over the past 10 months, a contention
the power providers deny.
Most of the criticism of the FERC's order has centered on the fact that the
refunds would only apply to charges for power during the most dire shortages,
known as Stage 3 emergencies, when wholesale electricity costs are highest.
The utilities and other critics argue that power prices have been far from
"just and reasonable" during other periods as well.
FERC Chairman Curtis Hebert has defended the proposed refunds and cites them
as evidence that the commission has been aggressive in policing California's
power market.
Meanwhile, a group representing small power generators asked the FERC to
allow them to sell power to parties other than the cash-strapped utilities.
The move would return thousands of megawatts to the state's power grid, the
providers argue, since many of the plants shut down after the utilities
failed to pay them.
The California Cogeneration Council asked the FERC to allow small,
independent power generators to sell their electricity to third parties like
power marketers, municipal utilities and the state Department of Water
Resources, which has been buying power on the utilities' behalf.
Utilities are required to buy power from the so-called qualifying facilities,
but the companies haven't been getting paid in full by Edison or PG&E, which
declared bankruptcy last week.
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Davis Approves $850 Million for Energy Conservation Plan

Legislation: Governor says the spending package is crucial to ease immediate
pressures on the state.

By ROBIN FIELDS and MIGUEL BUSTILLO, Times Staff Writers

?????Gov. Gray Davis approved $850 million for stepped-up energy conservation
efforts Wednesday after making good on threats to reduce the plan's size,
vetoing $250 million in items he said would not get results fast enough.
?????Calling the spending package "the most aggressive, most expensive
conservation effort in America," Davis depicted his signing of two
conservation bills Wednesday as crucial in easing the state's most immediate
power pressures.
?????" "These are programs that Californians can use right now," said
Assemblywoman Christine Kehoe (D-San Diego), whose AB 29 was one of the
measures.
?????The slimmed-down package provides $240 million to weatherize homes of
low-income residents, plus millions for rebates on energy-efficient
appliances, incentives for businesses that cut consumption, and public
information campaigns.
?????The governor's cuts included $25.2 million for efficiency programs at
community colleges, $50 million for California Energy Commission loans and
grants to small businesses to streamline refrigeration facilities, and $24
million to the Department of Corrections to retrofit generators.
?????Davis also axed a $15-million provision for a California Public
Utilities Commission study of "real-time" metering, but he left in $35
million for the purchase and installation of meters that allow utilities to
calculate bills based on when power is used.
?????Severin Borenstein, director of the UC Energy Institute in Berkeley,
estimated that the funds would cover enough meters for businesses that
consume more than 250 kilowatt-hours a day. Such devices, coupled with a rate
plan, could encourage conservation by commercial customers during peak
periods when demand--and prices--are highest, he said.
?????"It is reasonable to estimate that we could take 2,000 to 3,000
megawatts off peak usage this summer, which could save $1 billion,"
Borenstein said.
?????Davis' goal is to shave off at least 2,000 megawatts a day, enough to
power 2 million homes. Experts estimate that the state faces an electricity
shortfall this summer of 3,000 to 7,000 megawatts daily, depending on summer
temperatures and hydroelectric supplies.
?????Conservation is only one prong of the state's efforts to resolve its
power crisis.
?????Davis and executives at San Diego Gas & Electric confirmed Wednesday
that negotiations have intensified this week over state purchase of the
utility's transmission lines.
?????Completed deals with Edison and San Diego Gas & Electric could persuade
the judge in PG&E's Chapter 11 bankruptcy case to order the Northern
California behemoth to accept similar terms for its system, Davis said.
Edison concluded a deal with the state Monday.
?????The governor performed a delicate balancing act at Wednesday's
bill-signing in response to a report, disclosed by The Times on Wednesday,
that several public utilities, including the Los Angeles Department of Water
and Power, joined private suppliers in helping to drive up wholesale energy
prices in California last summer.
?????He defended the California Independent System Operator, which is using
the report as evidence in its effort to persuade federal regulators to compel
suppliers--public and private--to refund $6.3 billion to the state.
?????But he also defended the DWP, although it ranked eighth on Cal-ISO's
list of offenders for the period between May and November last year, reaping
$17.8 million in allegedly excessive profits.
?????"The DWP sold us power, which is more than I can say for the [private]
generators," Davis said. He even thanked DWP General Manager S. David
Freeman, who has acted as his chief negotiator in crafting long-term power
purchase agreements with private suppliers.
?????"Yes, they took their markup, but they came through," Davis said.
?????The chairman of a state Senate committee investigating alleged
manipulation in the state's power market said his panel will probe the
activities of the public agencies as well as private marketers.
?????Though the initial focus of the investigation has been on five large
out-of-state sellers, Sen. Joe Dunn (D-Santa Ana) said, "We always intended
to look at some of the publicly owned [suppliers], such as DWP." Dunn said
Wednesday's report "just reinforces" the need for the review.
?????Hearings will begin next week with an examination of recent studies,
including the Cal-ISO report, of alleged efforts to inflate prices in the
electricity market.
?????In other developments Wednesday, a U.S. District Court judge ruled that
Enron Energy Services Inc., a unit of Houston-based energy giant Enron Corp.,
must continue to sell electricity to California universities under the terms
of its existing contract.
?????The UC and Cal State systems signed a four-year contract with Enron in
1998, locking in discounted fixed rates. In February, Enron notified its
commercial and industrial customers in California, including the
universities, that their power would be supplied by Pacific Gas & Electric
and Southern California Edison.
?????Enron said it will appeal the ruling to the U.S. 9th Circuit Court of
Appeals in San Francisco.
---
?????Times staff writers Julie Tamaki in Sacramento and Rich Connell in Los
Angeles contributed to this report.
------------------------------------------------------------------------------
-----------------------------
Failure to Buy Entire Network May Doom Davis' Power Deal

By MIGUEL BUSTILLO and NANCY VOGEL, Times Staff Writers

?????SACRAMENTO--Does it make sense for California to own only part of the
state's power grid?
?????That question is dividing state legislators and energy experts after
Gov. Gray Davis' announcement of a $2.76-billion deal to buy Southern
California Edison's transmission lines. The deal was reached Monday, three
days after Pacific Gas & Electric Co. balked at selling its power lines to
the state and filed for bankruptcy.
?????Davis and Democratic legislators have pushed to purchase the whole
transmission system owned by the state's debt-saddled private utilities. They
reason that by owning the highway that electricity must travel to reach homes
and businesses--a 32,000-mile web of wire that is the world's fifth-largest
coordinated power grid--the state would gain a negotiating advantage with the
companies that produce the power.
?????If California's transmission grid were entirely owned by the public,
political leaders believe, the state could gain jurisdiction over key
electricity issues now decided by the Federal Energy Regulatory Commission,
which has been reluctant to intervene in the energy crisis. The state, not
the commission, could then set its own transmission fees and control the flow
of electricity across the grid.
?????Transmission charges bring in roughly $1.4 billion a year for the three
utilities. With that money, the state could not only repay itself for the
purchase of the power lines but also fund system upgrades to unclog
electricity bottlenecks that contribute to blackouts.
?????"Owning the wires is a business, and this business operates at a
profit," said Assemblyman Roderick Wright (D-Los Angeles), who will head a
series of committee hearings on the plan to buy the Edison lines. "We're not
going into their yards and buying old trucks or something; we are buying a
vital piece of their electrical system."
?????However, now that Pacific Gas & Electric has opted to try to find a
solution to its debt problem in Bankruptcy Court rather than continue
negotiations with the state, the prospects of California acquiring the entire
system appear uncertain at best.
?????That is generating concern about what California is getting for its
money--and whether the state stands a chance of gaining any independence from
federal regulators--if it buys only the lines of Edison and San Diego Gas &
Electric.
?????The Edison deal, which needs legislative approval, is unlikely to garner
a single vote from Republicans--Assembly Republican leader Dave Cox (R-Fair
Oaks) calls the grid purchase a socialistic idea. The plan may also encounter
some Democratic opposition.
?????"It was a tough sell to begin with, and I think if you are going to only
buy part, it becomes a tougher sell," said Assemblyman Dean Florez
(D-Shafter).
?????And some utility experts say California gains little, if anything,
unless it acquires the whole system.
?????"The motivating factor for buying the grid, as opposed to hydroelectric
power plants, is because it addressed the central problem facing California:
The federal government is unwilling to crack down on the generators that are
ripping us off, and we need to take back control," said UC Irvine professor
Peter Navarro. "If you only buy 40% of the system, you might as well have
nothing."
?????California would not be able to make some of the most critical upgrades
needed to improve the flow of electricity if it did not acquire PG&E's
portion of the system. The worst energy bottleneck in California is the
notorious Path 15, a series of high-voltage lines that move power between
Southern and Northern California. Path 15 lies largely in PG&E's territory.
?????Davis and some state legislators say California still has a chance to
buy the entire grid. Some, in fact, believe that the utility's bankruptcy
increases the likelihood of a deal: Talks between Davis and PG&E had faltered
in recent weeks, and a judge may have better luck bridging their differences.
?????Negotiations between the state and San Diego Gas & Electric continue,
leaving the possibility of a deal with that utility.
?????But acquiring PG&E's portion, the largest and most important by far, now
requires the approval of a federal Bankruptcy Court judge. And in that arena,
the state may have to compete with private companies for the lines.
?????Trans-Elect, a Washington company that wants to create a national
network of independently owned transmission lines, has offered to buy and
operate the grids of Edison and PG&E for a total of $5.25 billion. The
company has also been in contact with the Davis administration on the
possibility of leasing the lines from California if they are bought by the
state.
?????For the state to buy any of the systems, it needs approval from
FERC--far from a sure thing. The commission in recent years has encouraged
states to put management of large sections of the nation's transmission grid
into private hands to achieve more efficient electricity flow. Even if the
commission approved the purchase, the state may not receive any increased
powers.
?????"FERC would like to see one large regional transmission system in the
West," said David Clement, a transmission expert with Cambridge Energy
Research Associates. "If FERC were to unconditionally approve the sale, then
the transmission system owned by Edison would leave FERC authority. However,
FERC could easily condition the sale such that the transmission grid remains
under their authority."
------------------------------------------------------------------------------
-----------------------------

County to Sue Edison Over Nonpayment of $10 Million

Power: It would be the latest of many small generators to seek payment for
the enforced sale of electricity to the utility.

By JULIE TAMAKI and NICHOLAS RICCARDI, Times Staff Writers

?????Los Angeles County is joining the growing number of small energy
producers suing to get paid for electricity they are forced to sell to the
state's two biggest, nearly bankrupt utilities.
?????In recent weeks, small generators have sued to suspend contracts with
Southern California Edison and Pacific Gas & Electric, which owe the
producers about $1.5 billion for past electricity deliveries. The Los Angeles
County Board of Supervisors authorized the latest lawsuit Tuesday afternoon,
telling its lawyers to go to court to free up its 22-megawatt cogeneration
station at the Pitchess Honor Rancho to sell power to other parties.
?????Assistant County Counsel John Krattli said the county is owed about $10
million for electricity that it has provided Edison since November. "What it
means is less income is coming in to the county," he said.
?????In a related matter, a creditors committee of renewable energy producers
that has been weighing for weeks whether to force Edison into Bankruptcy
Court voiced skepticism Wednesday that the deal Gov. Gray Davis struck with
Edison to purchase the utility's transmission lines will be approved by the
Legislature.
?????The producers said they are concerned that there is not enough money in
rates charged to utility customers to pay committee members that are among
the nearly 700 producers of alternative and renewable power in California.
?????Edison is scheduled to resume paying producers on April 16.
?????"It is critical that Edison make its first scheduled payment . . . and
that back payment is made soon," said Jack Raudy, a committee spokesman.
"Otherwise, an involuntary bankruptcy filing remains very possible."
?????The payment deadline coincides with a hearing in a crucial court case
between Edison and CalEnergy that is being aired in Imperial County. A judge
previously freed the geothermal producer from its contract with Edison
because of the utility's failure to pay the company. The court is expected to
rule on CalEnergy's request for $99 million in back payments and could act on
Edison's request that CalEnergy be required to resume selling power to the
utility.
?????A Sacramento County Superior Court judge has allowed Redding-based
Sierra Pacific Industries to cease selling the electricity it generates to
PG&E, freeing the company to sell about 60 megawatts of power to marketing
companies that resell the supplies on the spot market. CalEnergy has been
doing the same with the 270 megawatts it previously sold to Edison. One
megawatt is enough to power 750 homes during the summer.
------------------------------------------------------------------------------
-----------------------------

PG&E Creditors' Committee Is Appointed

Bankruptcy: Federal trustee picks panel to represent thousands with unsecured
claims against the utility.

By TIM REITERMAN and VIRGINIA ELLIS, Times Staff Writers

?????SAN FRANCISCO--A committee of Pacific Gas & Electric Co.
creditors--ranging from major banks and energy suppliers to the state of
Tennessee and a tree-trimming company--has been selected to represent
thousands of creditors in the utility's bankruptcy case.
?????Taking a key step in administering the bankruptcy case, U.S. Trustee
Linda Ekstrom Stanley on Tuesday selected 11 creditors who collectively will
serve as the eyes, ears and decision makers for those who have unsecured
claims against the utility.
?????In choosing companies that would represent various constituencies of
creditors, Stanley selected four financial concerns and four energy suppliers
with total claims of almost $5 billion.
?????She also named Davey Tree Expert Co., which trims trees for PG&E and has
a $9.6-million claim; the city of Palo Alto, which claims a $200-million
debt; and Tennessee, which says PG&E owes $76 million.
?????All are among the 100 largest unsecured creditors of PG&E, which filed
for Chapter 11 protection from creditors on Friday, declaring that the energy
crisis had thrown the company $9 billion in debt.
?????Working over the weekend, the trustee's staff sent faxes to the largest
100 creditors, asking if they wanted to serve on the creditors committee.
Seventy-five responded affirmatively.
?????Not only was the acceptance rate extremely high, Stanley said, she was
lobbied before the selection. "Today I am getting responses from the
disappointed," she said. "Usually people do not want to serve."
?????The number of committee members is discretionary, although it has to be
an odd number so there are no tie votes. Eleven is an unusually large number,
Stanley said, adding that "there is nothing typical about this case."
?????The company's creditors touch many sectors of the nation's economy, from
Wall Street to vendors providing goods and services to the utility.
?????The committee members include companies that provided power but were not
paid as PG&E's financial condition worsened--Enron Corp. ($580 million),
Dynegy Power Marketing ($255 million), KES Kingsburg L.P. ($182 million) and
GWF Power Systems ($62 million).
?????Also named to the committee were the Bank of New York ($2.2 billion), a
group of banks headed by Bank of America ($1.175 billion), U.S. Bank ($310
million) and Merrill Lynch ($106 million).
?????The only trade creditor represented on the committee is employee-owned
Davey Tree Expert Co. of Kent, Ohio. Chief Financial Officer David Adante
said the company has trimmed brush and trees from around PG&E power lines for
more than 30 years and has 600 employees on the account.
?????"PG&E has always been a good client for us, and we believe firmly that
at the end of the day they are going to survive and continue to be a good
client," Adante said.
?????Tom Milne, who represents the state of Tennessee on the committee, said,
"This has become a political issue here."
?????The Tennessee Consolidated Retirement Fund, Milne said, holds $25
million in commercial paper from PG&E. But the more politically volatile
holding is the state general fund, which PG&E owes $50 million.
?????"The taxpayers of the state of Tennessee are asking why we should
subsidize the ratepayers of California," Milne said. "Our rates have doubled
or tripled here. Why should California be spared? We are hoping for a 100%
return on our investment."
?????Enron Corp. spokesman Mark Palmer said, "I think in being a part of the
solution for restructuring we offer a unique perspective, and I think that's
why we were chosen as one of the members of the committee."
?????He declined to discuss the company's claim. "We don't talk about
specific credit exposures, but we have told our investors, Wall Street
analysts and journalists that we have established adequate reserves," he
said, "and regardless of the situation in California, we will meet our
earnings per share estimates of $1.70 to $1.75 for 2001."
?????Stanley said the committee members must put aside their individual
interests while they act as a fiduciary for unsecured creditors. To represent
it in court, the panel will hire an attorney, to be paid for by PG&E.
?????The committee is expected to be an important player as bankruptcy Judge
Dennis Montali figures out who should be paid and how much as the utility
reorganizes its financial affairs. "The judge will pay lots of attention to
them," Stanley said. "There are many creditors and many large creditors."
---
?????Times staff writer Rone Tempest in Sacramento contributed to this story.
------------------------------------------------------------------------------
-----------------------------
Price Caps Excluded in FERC Plan

Regulation: The panel's chief opposes a ceiling on charges in strategy to
block blackouts in the West.

By NANCY VOGEL, Times Staff Writer

?????SAN JOSE--The wholesale power price cap California politicians sought
will not be included in an upcoming federal plan to stabilize the state's
electricity market, the chairman of the Federal Energy Regulatory Commission
said Wednesday.
?????Speaking in San Jose before a congressional panel, Curtis L. Hebert Jr.
said his agency is moving swiftly to help California--but not with price caps
because they would only lead to more blackouts.
?????"The energy is going to go to where the caps are not," said Hebert,
whose commission has regulatory authority over roughly half the power
consumed in the state. "The energy is going to go where the money is."
?????He appeared steadfast in his opposition to a ceiling on power prices
across the West even as another member of his commission, Linda Key
Breathitt, said she is willing to consider price caps.
?????Breathitt told reporters after a hearing on Western electricity troubles
in Boise on Tuesday that the prospect of market power prices soaring even
higher this summer makes her willing to consider short-term limits on how
much private generators can earn. She has previously rejected price caps.
?????The third member on the federal commission--there are two
vacancies--said Wednesday that he was heartened by Breathitt's apparent shift
in thinking.
?????"I look forward to working with her to assure just and reasonable
prices," said William Massey, the lone Democrat on the commission and a
proponent of price caps.
?????The commission cannot cap prices without first launching an
investigation of the wholesale electricity market across the West, Massey
said.
?????"Until there are enough votes to open that formal investigation," he
said, "it's just talk."
?????But even if Massey and Breathitt agreed to support price caps, it is not
clear that Hebert would let a proposal come to a vote.
?????"The chairman of this agency has almost exclusive authority to control
the agenda," Massey said.
?????President Bush has nominated two state utility regulators to the
commission, Pat Wood of Texas and Nora Mead Brownell of Pennsylvania, but
they have yet to be confirmed by the Senate.
?????Gov. Gray Davis spoke to Wood, a Bush loyalist, on Wednesday to lobby
him on the need for price controls in the West. Hebert testified before a
bipartisan panel of six members of Congress at San Jose State. Headed by Rep.
Dan Burton (R-Ind.), the House Committee on Government Reform scheduled three
days of hearings on California's electricity crisis this week in Sacramento,
San Jose and San Diego.
?????Political leaders in California, Washington and Oregon have beseeched
the federal commission to push down soaring prices that have forced utilities
to raise their customers' rates and triggered a bankruptcy filing by
California's biggest private utility. State leaders argue that only the
federal government can control wholesale electricity prices, because power is
bought and sold across state lines.
?????But the commission has so far resisted those pleas, and the governors of
other Western states are not pushing for caps.
?????By May 1, Hebert said, his federal agency will release a plan to
stabilize prices in California.
?????A draft released last month would limit the prices power sellers can
earn only when power reserves are so low in California that grid operators
have declared a Stage 3 emergency. Then prices would be capped at roughly
what it costs to run a small, inefficient, rarely used power plant.
?????Gary Stern, director of market monitoring for Southern California
Edison, criticized the draft plan for considering only those times of Stage 3
emergencies, while power sellers earn excessive profits at plenty of other
times. There were no Stage 3 alerts last summer, for example, he said, when
the profits of power companies soared.
?????Stern also rebutted Hebert's argument that price caps will lead to
blackouts. Last summer, when price caps were in place, he said, the state did
not suffer blackouts. Only after December--when the federal Energy Regulatory
Commission lifted the cap--did supplies shrink to dangerous levels, with four
days of rotating blackouts.
?????Stern said he believes that's because generators and marketers have no
reason to withhold their power from the market once the price reaches the
cap, the maximum price they will earn. Without a cap, he said, sellers can
push prices up by not offering electricity for sale and creating a shortage.
?????"'As long as you can drive the price higher and higher," said Stern,
"there's a strong incentive to withhold."
------------------------------------------------------------------------------
-----------------------------

Davis Signs $850 Billion Energy Plan
Energy Package Signed by Davis
$850 billion designed to boost conservation
Greg Lucas, Sacramento Bureau Chief
Thursday, April 12, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
N192668.DTL
Sacramento -- Gov. Gray Davis signed an $850 billion conservation package
yesterday that will pour millions into loans and grants for Californians to
make their homes and businesses more energy efficient.
Much of the money will beef up existing conservation programs, which means
consumers and business owners can use the aid before California's peak use
months this summer.
"This year, conservation must be as big a part of our summer as barbecues and
baseball," the Democratic governor said after signing two conservation bills
in Los Angeles.
Using his line-item veto power, Davis cut $242 million in spending from the
bills, including $10 million to replace bulbs in traffic lights with light-
emitting diodes or LEDs, which use four times less energy than normal bulbs.
Davis also took out $50 million in loans to help mini-marts and other
convenience stores buy more energy-efficient refrigerators and $50 million in
low-interest loans and grants to low-income residents, small businesses and
homeowners for energy-efficiency construction or retrofit projects.
Davis said the programs wouldn't help save energy during the summer. He
previously said he wanted to spend $1 billion on new conservation programs.
Among the existing programs receiving more money are ones offering loans,
grants and cash to business, agricultural, residential and low-income
ratepayers.
They include rebates on purchases of new refrigerators and air conditioners,
grants to place reflective surfaces on roofs and incentives to create "demand
responsive" buildings that are connected to the Internet. When power alerts
occur, thermostats or lights are automatically adjusted in the buildings to
save energy.
One-fifth of the money is devoted to programs helping the state's poorest
ratepayers.
Of the $240 million in low-income aid, $100 million will go toward
subsidizing up to 25 percent of poor households' gas or electric bills.
Another $120 million goes to subsidies and grants for home energy savers like
insulation, weather-stripping and low-flow shower heads.
For the programs it already operates, the state energy commission expects to
begin handing out money at its April 25 meeting.
The new programs won't be ready quite so rapidly. A spokeswoman for the
commission expected them to be running in June.
Among those new programs are $35 million for a voluntary program for big
businesses to use special electricity meters to identify the time of day when
their energy consumption is highest. Businesses could adjust their operations
accordingly to save energy and money.
The state's utilities, through the Public Utilities Commission, already offer
rebate programs for customers who buy more energy-efficient refrigerators and
air conditioners.
The new law spends another $50 million on that program.
For more information on these and other conservation programs visit www.
flexyourpower.ca.gov.
Chronicle readers' suggestions for how to cope with California's energy
crisis:
"I'm one of those crazy people to has to turn on a light before I walk into
any room. I broke that habit by putting a Band-Aid over all the switches. It
makes me think twice before I pull it off."
John McDonald .
"I believe Gov. Davis' proposed rebates for a 20 percent reduction of energy
usage could be made more realistic and fair by making any reduction of energy
usage qualify for a rate rebate of a proportional amount. For example, a 10
percent reduction would give a 10 percent rate rebate, and even a 5 percent
reduction would result in a 5 percent rate rebate. I predict there will be a
lot of people who try to reduce, and succeed to a modest and laudable extent
(15 percent, for example), but will be frustrated and disappointed that the
goal was unrealistic -- especially for those of us who have already been
energy conscious."
Ralph Leighton .
"My apartment is well shaded by large trees and the windows face northwest. I
discovered that sheets of plastic bubble wrap makes a terrific window
insulator. Although my windows are double pane, they are really not all that
efficient. By simply taping sheets of bubble wrap to the inside of my
windows, I was able to block a great deal of the heat/cold transmission
through the windows. I would heartily recommend this idea to anyone who faces
a similar problem. The bubble wrap is transparent and does not block the
light."
Michael Heinichen .
"If you do not use your electrical fireplaces on a regular basis, switch off
the pilot light. They might be using minimal energy but if everyone saves a
small bit of energy, together a lot will be saved. Start using disposable
stuff even at home so that you use the dishwasher infrequently."
Rajvinder Kaur
"Out of curiosity, I decided to check at what temperatures my
refrigerator/freezer should be set and the proper setting for the hot water
heater. . . . Both the manuals for the refrigerator and the freezer were very
vague about settings -- they basically just told you how to set them, not at
what levels. So, I started "tinkering" with them and determined that all
could be set at a much lower level than where I had them set. Likewise with
the hot water heater that I checked with a kitchen thermometer. This along
with fewer larger wash loads has permitted me to cut my electricity use for
March to 10.9 Kwh per day from 16.1 last year -- a savings of about 32
percent and 18 Kwh below my baseline."
Art Leino .
"I take Navy-style showers (wet down, turn off the water, lather up, rinse).
My father (a Coastie) drilled that firmly into us during the power crisis of
the early '70s, and it paid off. You can save quite a bit of water and power
that way."
Suzanne Grant
E-mail Greg Lucas at glucas@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 3
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-----------------------------------

Federal regulators may soon begin monitoring electricity market
KAREN GAUDETTE, Associated Press Writer
Thursday, April 12, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/12/state0
415EDT0119.DTL&type=news
(04-12) 07:32 PDT SAN JOSE, Calif. (AP) -- Federal energy regulators would
not promise caps on soaring energy prices, but said they hope to begin
``monitoring and mitigating'' the wholesale electricity market by May 1.
The Federal Energy Regulatory Commission will look at future prices to
determine if they are just and reasonable, commission chairman Curt Hebert
told members of the House Subcommittee on Energy Policy and Regulatory
Affairs on Wednesday.
The commission already has sought California power sale refunds of $124
million, and the new system of tracking market abuses could help keep markets
fair, Hebert said.
Hebert left didn't say whether FERC would begin looking at daily trading
activity in search of unfair pricing. Currently, FERC only reviews quarterly
reports from energy traders, and periodically does spot audits of the
markets.
Meanwhile, on the other end of the power spectrum, a federal trustee selected
a committee of Pacific Gas and Electric Co. creditors to represent more than
30,000 creditors in the utility's bankruptcy case, the Los Angeles Times
reported.
U.S. Trustee Linda Ekstrom Stanley selected 11 creditors Tuesday who
represent various groups of creditors and will play an important role as
federal Bankruptcy Judge Dennis Montali determines who should be paid and how
much during the company's financial reorganization.
``The judge will pay lots of attention to them,'' Stanley said. ``There are
many creditors and many large creditors.''
Stanly selected four financial concerns and four energy suppliers with total
claims of nearly $5 billion. She also picked a tree-trimming company that has
a $9.6 million claim; the city of Palo Alto, which claims a $200 million
debt; and Tennessee, which claims PG&E owes $76 million, the newspaper
reported.
The committee members are among PG&E's 100 largest unsecured creditors. The
utility filed for federal bankruptcy protection Friday, declaring the energy
crisis had thrown the company $9 billion in debt.
Cash-starved Southern California Edison Co. agreed Monday to sell its
transmission lines to the state. Gov. Gray Davis said negotiations to buy the
lines of San Diego Gas and Electric Co. began in earnest Wednesday, and once
that deal is done, he'll ask the bankruptcy judge to force PG&E to sell the
remaining grid to the state.
But that will not end California's power problems.
Hebert stressed the need to build more power plants to boost supply, to
improve transmission infrastructure throughout the West and to create a
``regional transmission organization'' to better manage the flow of power.
Hebert has been the target of criticism from state officials, the utilities
and consumer watchdog groups for refusing to cap growing wholesale power
rates. Members of California's Democratic delegation and PG&E again asked for
the cap to avoid summer blackouts.
FERC only has regulatory control over roughly half California's electricity,
Hebert testified, since the rest is imported from Canada and municipal
utilities not under federal jurisdiction.
``How many studies must be done before you spend a dollar and start moving
power in the other direction?'' Hebert said. ``The conversation needs to
stop. Someone needs to start putting shovels in the ground.''
Backed by U.S. Rep. Dan Burton, the Indiana Republican who chairs the
Government Reform Committee, which houses the energy subcommittee, Hebert
warned too many changes to the rules may drive away the very generators
needed to lower prices in the long term by providing more supply and
competition.
PUC President Loretta Lynch told the panel Tuesday in Sacramento the agency
allowed utilities to enter into such contracts last year, but the utilities
chose not to do so.
``What was done then was only half the job,'' said Stephen Pickett, vice
president and general counsel for SoCal Edison. He said the PUC retained the
right to review contracts after they were signed, which scared away
generators unsure if they would see the money.
Davis signed two bills Wednesday, creating more than $500 million in
conservation initiatives and incentives. The money will reimburse homeowners
and business owners for money spent on such items as energy-efficient
appliances and efficient lighting.
Also Wednesday, a federal judge intervened in another power price battle,
ordering Enron Energy Systems Inc. of Houston to abide by its agreement to
sell cheap power to the California State University and University of
California systems. Enron said it would appeal.
U.S. District Judge Phyllis Hamilton issued a temporary injunction against
Enron, forcing it to continue providing service, and said there is a
likelihood Enron will lose the suit.
The state was free of power alerts Thursday morning as reserves stayed above
7 percent.
,2001 Associated Press ?
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LA County joins list of those suing SoCal Edison

Thursday, April 12, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/12/state0
115EDT0376.DTL&type=news
(04-12) 01:15 EDT LOS ANGELES (AP) -- Small energy producers who have sued
Southern California Edison over nonpayment will soon be joined by Los Angeles
County.
The Board of Supervisors on Tuesday authorized a lawsuit against the utility,
which owes about $10 million for electricity provided since November by the
22-megawatt co-generation station at the Pitchess Honor Rancho.
Several small power generators have sued to suspend contracts with both
Edison and Pacific Gas & Electric, which owe the producers about $1.5 billion
for past electricity sales. PG&E, which recently filed for bankruptcy
protection, had been paying the small generators about 15 cents on the dollar
since November. Edison has made no payments, but is scheduled to resume
paying producers April 16.
In one case, a hearing has been scheduled for April 16 in Imperial County
over a lawsuit filed by CalEnergy against Edison. A judge previously allowed
the geothermal producer out of its contract because the utility failed to pay
the company. The court is expected to rule on CalEnergy's request for $99
million in back payments and could also rule on Edison's request to require
CalEnergy to resume selling it power.
CalEnergy has been selling the 270 megawatts it previously provided to Edison
on the spot market.
Edison and PG&E claim they've lost nearly $14 billion since June because of
high wholesale prices that the state's electricity deregulation law bars them
from passing onto ratepayers. PG&E filed for federal bankruptcy protection
April 6, saying that state regulators and lawmakers failed to help the
utility remain solvent.
In a related matter, a Tulare lighting company sued SoCal Edison on Tuesday
claiming the utility violated state law by failing to implement a 10 percent
rate cut mandated under the state's 1996 deregulation law. Anchor Lighting is
seeking class-action status for business and residential customers in the
lawsuit filed in Los Angeles Superior Court. The action seeks unspecified
compensatory and exemplary damages.
Steven Conroy, a spokesman for SoCal Edison, said he had not seen the lawsuit
and could not comment.
,2001 Associated Press ?
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Developments in California's energy crisis
The Associated Press
Thursday, April 12, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/12/state0
418EDT0120.DTL&type=news
, , -- (04-12) 07:30 PDT Here is a look at developments in California's
energy crisis:
THURSDAY:< ?-- The House Government Reform Committee plans energy hearings in San Diego. ?-- The state remains free of power alerts Thursday morning as reserves stay ?above 7 percent. ?-- Sen. Dianne Feinstein, D-Calif., speaks to Silicon Valley CEOs about the ?energy shortage. ?-- Gov. Gray Davis' energy advisers and officials from San Diego Gas & ?Electric Co. continue meeting about the sale of transmission lines to the ?state. ?-- Business leaders plan to gather at the state Capitol to discuss energy ?problems. ?WEDNESDAY:<
-- Negotiations began in earnest with SDG&E for a state buyout of its
transmission lines. Once that deal is done, Davis said he hopes to persuade
the bankruptcy judge in San Francisco to force PG&E to accept a similar deal.
The state already reached an agreement to buy Southern California Edison's
transmission lines.
-- Curt Hebert, chairman of Federal Energy Regulatory Commission, told
congressmen meeting in San Jose that FERC hopes to begin ``monitoring and
mitigating'' the energy markets by May 1. This would allow FERC to influence
prices preemptively. Hebert, a strong free-market advocate, stopped short of
promising caps on soaring energy prices, stressing the need to build more
power plants and improve the transmission system to better manage the energy
flow.
-- The 9th U.S. Circuit Court of Appeals said FERC is not required to order
immediate refunds to ratepayers as the city of San Diego demands. The city
asked FERC to order rebates to consumers who suffered ``unjust and
unreasonable'' electricity bills last year. ``FERC's delay is not so
unreasonable,'' said the court, adding that it is confident FERC will review
the charges.
-- A federal judge ordered Enron Energy Systems Inc. to abide by its
agreement to sell cheap power to California's public universities. Enron,
which said it would appeal, has tried to get out of delivering power for the
final year of the four-year deal. Enron -- whose parent company is the
nation's largest energy trader -- says honoring the contract would cost it
$12 million a month because of skyrocketing wholesale power prices, and that
taxpayers should pick up the tab. State Attorney General Bill Lockyer says
Enron wants to play a ``marketing game'' and sell the universities' promised
power on the open market for 10 times what it cost Enron.
--Lockyer says whistle blowers who help prove energy wholesalers illegally
profited from the state's power problems would be entitled to a percentage of
the state's recovery. Lockyer estimated could range from $50 million to
hundreds of millions of dollars. Lockyer's office is investigating whether
the market was illegally manipulated -- a charge wholesalers deny.
-- Bankruptcy experts say Pacific Gas and Electric's creditors will target
$4.63 billion the utility transferred to its parent company while receiving
no investments in return. Lawyers will likely exhume e-mail exchanges among
PG&E management, take depositions from top executives and pore over reams of
documents in search of evidence, said Bill Zewadski, co-chairman of the
American Bar Association's bankruptcy litigation subcommittee.
-- Standard & Poor's said there is a ``strong likelihood'' that SoCal
Edison's credit rating will be raised if its $27.6 billion transmission lines
deal receives final approval. But the company's ratings, now at junk bond
level, won't return to where they stood before soaring wholesale electricity
prices buried the utility in debt. In any event, no action will be taken
until the transmission line sale is approved by state and federal regulators,
as well as the California legislature, S&P said.
-- Davis signed two bills creating more than $500 million in conservation
initiatives and incentives. The money will reimburse homeowners and business
owners for money spent on energy-efficient appliances and more efficient
lighting. Lawmakers at the ceremony in Los Angeles blasted power generators
for putting profits first. ``Generators from out of state have no sense of
patriotism or compassion for their fellow citizens,'' said Assemblyman Gil
Cedillo, D-Los Angeles.
--California Rep. George Radanovich announces his request for a General
Accounting Office study of the energy crisis has been granted. He requested
the investigation in March citing concerns about allegations of price gouging
and market manipulation in California's wholesale power market.
-- Consumer activists proposed forming an energy buyers cartel among
California, Oregon and Washington to force suppliers to reduce electricity
rates. The united front could be the only way to avoid blackouts and steep
rate increases as demand peaks this summer, according to the Utility
Consumers' Action Network.
-- No power alerts were called as reserves stayed above 7 percent.
-- Shares of PG&E Corp. dipped 4 cents, or 0.5 percent, to close at $8.46.
Edison International stock closed at $12.02, up 64 cents, or 5.6 percent.
<
WHAT'S NEXT:< ?-- The House Government Reform Committee plans energy hearings in San Diego ?on Thursday. ?-- Edison and PG&E are expected to file their 2000 earnings reports April 17. ?-- The state Senate starts hearings April 18 in its inquiry into allegations ?that electricity suppliers illegally withheld power to drive up California's ?wholesale prices. Wholesalers deny such accusations. ?-- Also April 18, the Assembly plans to resume hearings in its inquiry into ?California's highest-in-the-nation natural gas prices. ?< ?THE PROBLEM:<
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices that the state's electricity deregulation law bars them from
passing onto ratepayers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers. The state is also buying power for a third investor-owned
utility, San Diego Gas & Electric, which is in better financial shape than
much larger Edison and PG&E but also struggling with high wholesale power
costs.
The Public Utilities Commission has raised rates up to 46 percent to help
finance the state's multibillion-dollar power-buying.
Even before those increases, California residents paid some of the highest
prices in the nation for electricity. Federal statistics from October show
residential customers in California paid an average of 10.7 cents per
kilowatt hour, or 26 percent more than the nationwide average of 8.5 cents.
Only customers in New England, New York, Alaska and Hawaii paid more.
,2001 Associated Press ?
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Council Temporarily Reduces Utility Tax
Chronicle Staff Report
Thursday, April 12, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
NL160902.DTL&type=news
Oakland City Council members, saying the city should share the pain of
increasing energy bills, have agreed to freeze the utility tax on poor
residents and reduce it for the rest of Oaklanders.
The council voted Tuesday to adopt a six-month change in its 7.5 percent tax
on utility bills, effective immediately.
Most residents will see the tax drop to 6 percent, saving the typical
customer about $2.25 on a $150 monthly bill from PG&E.
The tax will be suspended altogether for low-income residents who already
qualify for lower PG&E rates, about 12 percent of Oakland residents. They
already pay a lower city utility tax rate of 5.5 percent.
,2001 San Francisco Chronicle ? Page?A - 23
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Start Digging, Energy Chief Tells State
He says new power plants, not price caps, are the answer
Marshall Wilson, Zachary Coile, Chronicle Staff Writers
Thursday, April 12, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
N186703.DTL&type=news
The federal energy official being pressured by Democrats to help California
out of its power mess ventured into the heart of blackout country yesterday,
but gave the locals no indication he wanted Washington to get involved.
Rather than bend to pressure from Western lawmakers to support wholesale
price controls on energy sales, Curt Hebert, chairman of the Federal Energy
Regulatory Commission, lectured Californians that the only way out of the
crisis is to "start putting shovels in the ground" and build more power
plants.
Even as Hebert was testifying about what a disaster price caps would be
during a House committee hearing being held at San Jose State University,
Sen. Dianne Feinstein, D-Calif., was in San Francisco renewing her push for
exactly the remedy the FERC chairman opposes.
FERC has questioned whether the prices some energy providers have charged in
California were reasonable, Feinstein noted in a meeting with The Chronicle's
editorial board. "But they refuse to (cap prices) under a very ideological,
free-market doctrine."
In Silicon Valley, where businesses say rolling blackouts have cost them
millions of dollars and are putting a crimp in the economy, Hebert told
members of the House Committee on Government Reform that price controls "do
not promote long-term consumer welfare."
He stressed over and over that California's problems are the result of what
he termed the state's failure to unleash market forces.
"The demand for electricity continues to expand while supply fails to keep
pace," Hebert said. "Someone needs to start putting shovels in the ground."
Gov. Gray Davis and other state lawmakers have conceded that California erred
in not approving any major power plants for more than a decade. But they
point out that seven new plants are under construction in California,
including four that will be done by this summer, and 10 more are waiting for
final permits.
State lawmakers asked FERC this week to impose price caps for 18 months, in
part to give California time to get more power on line.
Feinstein plans to introduce a bill later this month to force FERC to impose
temporary wholesale price controls on energy sold in the Western states.
The bill got a major boost last month when Sen. Gordon Smith of Oregon, a
free-market Republican, agreed to sign on as a co-sponsor after Feinstein
included a provision requiring states to allow utilities to charger higher
electricity rates to recoup their costs.
Feinstein said the federal government's role should be to provide price
stability until California is able to build enough new power plants.
"I can't stress enough the effect on California," she said. "We're not
dealing with automobiles. We're dealing with a basic staple of life."
Yesterday's hearing was called by Rep. Dan Burton, R-Indiana, who began the
day by saying, "We didn't come here to point fingers. We came here to listen
and to learn."
The panel didn't want to listen to about a dozen protesters who were hustled
out by security guards. The protesters wanted to talk to the panel and
question Hebert.
The state's energy crisis may be headline news, but a forum next door on how
to find a job in "creative careers" sponsored by San Jose State's English
Department was packed. Students read books and napped outside the hearing
room.
Campus officials did not dim the lights in the room, a common way these days
to cut energy demand. Burton, however, exhibited some solidarity with
Northern Californians subjected to rolling blackouts.
"The first time I ever experienced a rolling blackout was down around Carmel
the other night when we were having dinner with some friends," Burton said
during a break. "There wasn't a light on as far as we could see."
E-mail Marshall Wilson at marshallwilson@sfchronicle.com, and Zachary Coile
at zcoile@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 3
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Enron Told It Can't Cut Electricity To Schools
Bob Egelko, Chronicle Staff Writer
Thursday, April 12, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
N136368.DTL&type=news
A federal judge ordered energy giant Enron to restore direct electric service
to the University of California and the California State University system
yesterday. Enron had wanted to abandon its agreements with the universities
so it could sell the power for more money elsewhere.
U.S. District Judge Phyllis Hamilton issued the injunction after a hearing in
which an Enron lawyer said the company was entitled to act in its own
economic interest, and state Attorney General Bill Lockyer accused Enron of
gouging Californians.
Enron Energy Systems signed four-year contracts with the two university
systems in 1998, agreeing to supply power for 5 percent less than the price
cap set by the state's 1996 deregulation law. All the campuses were covered
except UCLA and UC-Riverside, which buy electricity from municipal suppliers.
The contracts were due to run through next March, but Enron dropped direct
service to the universities Feb. 1 and left them to rely on power supplies
from Pacific Gas & Electric and Southern California Edison Co. Enron,
meanwhile, brokered sales of the same electricity at much higher prices on
the spot market.
Enron promised to keep its promise of low rates for the rest of the contract,
but the universities said the change to utility service would hurt their
conservation efforts and expose them to the risk of blackouts. They also said
losing their status as direct-power purchasers could exclude them from future
long-term purchases, costing them as much as $297 million over 10 years.
Shifting two of the state's biggest energy consumers to utility service also
increased the need for power purchases by the state, which took over that
role in January after PG&E and Edison defaulted on payments to power plants.
Lockyer, the state's top lawyer, said yesterday that Enron was costing the
state $12 million a month by refusing to honor contracts with the university
and other customers who had signed long-term, fixed-price agreements.
In issuing an injunction restoring the universities to direct service,
Hamilton said the language of the contracts indicates that "Enron did not
have the right to return the university systems to the utilities." She cited
the "precarious position of PG&E," which filed for bankruptcy last Friday,
and said the universities had bought some protection from the risks of
utility service when they signed the contracts.
Enron attorney A. William Urquhart said the company would seek an emergency
stay from the U.S. Court of Appeals in San Francisco.
"It is unreasonable that a publicly traded company like Enron would not try
to manage its risk by returning the universities to utility service,"
Urquhart said.
,2001 San Francisco Chronicle ? Page?A - 4
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PUC Official's Investments Questioned
Group already filed suit, charging conflict of interest
Todd Wallack, Chronicle Staff Writer
Thursday, April 12, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/B
U116693.DTL&type=news
A consumer watchdog group, which filed suit last year to oust one of the
state's top utility regulators for investing in a mobile phone company, is
now questioning some of his other holdings.
The Foundation for Taxpayer and Consumer Rights in Santa Monica said six of
Henry Duque's other investments may pose serious conflicts of interest --
including one in a company involved in the current energy crisis.
Duque, appointed to the California Public Utilities Commission by former
Governor Pete Wilson in 1995, put money in:
-- A trust that received much of its proceeds from selling natural gas to
Duke Energy, one of the key electricity suppliers in California. Duque owned
shares in the San Juan Basin Royalty Trust from April 7, 2000 to Sept. 20,
2000.
Foundation lawyer Pamela Pressley said the investment was worrisome because
Duque was in a position to vote on policies that might favor maintaining
higher wholesale energy prices.
-- Telewest Communications, a British cable and phone company that is owned
largely by utilities regulated by the PUC. The company was originally a joint
venture of TCI and US West, which are both registered with the agency as
telecommunications carriers. AT&T acquired a significant interest in the
company after it purchased Media One, which was split off from US West. Duque
owned stock in Telewest from April 6, 2000 to Sept. 25, 2000.
-- Loral Space and Communications, which began a satellite-based telephone
company in San Jose called GlobalStar Telecommunications. Duque owned shares
from September 14, 1999 to June 16, 2000.
-- NTL, a British cable television operator, which acquired Cable & Wireless
Communications' consumer arm. Cable & Wireless' U.S. arm is subject to
regulation by the PUC, the foundation said. Duque sold his stake in the firm
on Sept. 20, 2000.
-- Two firms that supply equipment to AT&T and other telecommunications firms
regulated by the PUC. Paradyne makes DSL equipment, which helps provide
high-speed Internet access. Vertel develops software called "middleware" for
the telecommunications market. Duque owned stock in both companies at the end
of the year.
"If these allegations are true, Mr. Duque should resign," said Robert
Fellmeth, director of the Center for Public Interest Law at the University of
San Diego.
Duque's attorney has already acknowledged that the investment in the wireless
company was an oversight, but dismissed the latest complaints as unfounded.
"It's silly," said attorney Joseph Remcho. "It's no wonder they (the
foundation) are not being helpful" in solving the energy crisis.
Pressley, the foundation attorney, first raised the issue in a letter to PUC
President Loretta Lynch yesterday, and provided a copy to The Chronicle. In
light of the findings, Pressley said the PUC should reverse its decision to
pay Duque's legal fees to fight a suit to remove him from office. PUC lawyer
Gary Cohen declined comment, adding that the agency hasn't had a chance yet
to review the complaints.
In December, the foundation asked a San Francisco Superior Court judge to
oust Duque because he bought 700 shares in Nextel Communications, the
nation's fifth-largest wireless phone company. State rules bar PUC
commissioners from owning stock in companies regulated by the agency.
Nextel is registered with the PUC as a utility, and Duque has voted on
several matters involving either Nextel or the cellular phone industry as a
whole. A hearing has not been scheduled so far in the case, Remcho said.
Another consumer advocate said he didn't think the latest investments would
make much difference.
"He has already violated the law (by investing in Nextel) and refused to
resign," said Michael Shames, executive director of the Utility Consumers'
Action Network.
Unlike the Nextel investment, Shames said he didn't think the other
investments were illegal. But he thought the law should be changed to bar
commissioners in the future from investing in industries they regulate, even
if the specific company isn't registered as a utility with the PUC, he said.
"These are examples of the interconnectedness of this industry," Shames said.
"All the companies within the industry are connected, so whether they have
come up before the commission shouldn't matter."
E-mail Todd Wallack at twallack@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?B - 1
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Markets indicate even higher prices for summer power
Posted at 10:31 p.m. PDT Wednesday, April 11, 2001
BY JOHN WOOLFOLK
AND JENNIFER BJORHUS

Mercury News

With severe power shortages predicted for the West, energy traders are
already selling this summer's electricity at prices that far exceed previous
years and put California's power bill on an alarming trajectory.
August contracts in Western markets are now trading for as much as $750 per
megawatt-hour -- five times last August's average price of $147 and well
above the August 1999 average price of $40.
``There's really no limit that I can see,'' said Stanford University
economist Frank Wolak, chief market analyst for the state's main power grid,
adding that without some price control, ``the sky's the limit this summer.''
No one knows just what an August day will cost California for power. But the
arcane world of energy futures trading hints at what California may be paying
on the spot market, where about 10 percent of the state's power is being
bought to make up for daily shortfalls. If today's market activity is any
indiction, it suggests the bidding on electricity this summer, when demand
surges, could get worse than during the most critical shortages this past
winter.
``It's going to be an ugly summer,'' predicted Dan Pigeon, director of
wholesale marketing for Calgary-based TransAlta Energy Marketing.
California's mounting daily power costs have been a growing concern since
mid-January when the state stepped in to buy electricity for its ailing
private utilities, Pacific Gas & Electric Co. and Southern California Edison.
The two companies are unable to buy power because of the massive debt they
built up buying power for more than they can charge their 9 million
customers.
The state is buying more than a third of the utilities' electricity with no
end in sight. PG&E has filed for bankruptcy and a proposed deal with Edison
is months from final approval.
Higher bill certain
It's hard to say what California's power cost could be this year because
state officials have refused to disclose what they are paying, citing
concerns about negotiating advantage.
But with market prices spiraling, experts say this year's bill is sure to be
higher than expected. Average spot prices today, in what is normally a cheap
month, are already an astronomical $315 per megawatt-hour, more than 10 times
the average over the last three years.
A megawatt-hour, the standard wholesale unit of electricity, powers about
1,000 homes for an hour. California consumes 18 million megawatt-hours in a
summer month.
``The run-up in prices bodes poorly for the state in a big way,'' said
Michael Shames, executive director of the Utility Consumers' Action Network
in San Diego. ``The dollars we're talking about are huge.''
The total cost of power in California was $7 billion in 1999 and $27 billion
last year. Shames expects the state to spend $50 billion this year, while
Wolak says the tab will more likely be $70 billion.
State officials have put the cost at up to $27 billion for 18 months, but
Severin Borenstein, director of the University of California Energy
Institute, and other market watchers doubt state officials are including the
growing costs of summer power contracts.
The state is believed to be paying about $50 million a day for power now, but
if Shames or Wolak are right, that could put the average cost at $137 million
to $192 million a day.
Last-minute purchases
State efforts to secure cheap power contracts for this summer and beyond have
fallen short, covering just a third of the power it needs. The rest must be
bought in expensive day-ahead and spot markets.
It's unclear whether the state's $50 million daily estimate even includes
last-minute spot market buys, which are handled by the transmission grid
operator. State officials refused to discuss the matter.
But experts say it's unlikely the state is counting those costs, which now
are running about $20 million a day.
``This is additional money you're paying,'' Wolak said.
What has Wolak and other experts more worried, however, is the growing cost
of electricity futures for this summer.
Futures are contracts reserving the right to buy a commodity such as
electricity at a set price on a later date. Like stocks and bonds, they are
traded on several exchanges, including the New York Mercantile Exchange.
``Futures prices reflect people's best estimate of what the spot price would
be at that time,'' Wolak said.
Energy companies that trade electricity futures are loathe to talk about the
high summer prices because of accusations about price gouging.
Mark Palmer, spokesman for Texas-based Enron Corp., said his company is
paying high prices, too. ``If we're buying for $750, we're going to turn
around and try to sell at $751,'' he said. ``The spreads between the prices
at which we're buying and we're selling are tiny.''
Experts, however, warn that prices could go higher.
In December, when California went to Stage 3 alerts, Pigeon of TransAlta
Energy Marketing saw spot prices soar. ``There was a weekend when our coal
plant tripped off, we were buying at $5,000 an hour,'' he said.
If California is on the brink of blackouts for days, as expected, prices will
``jump like crazy,'' said Marshall Clark, who manages natural gas contracts
for the state. ``The market has just gotten more riskier, much more
complex.''
The state's neighbors are facing the same high-priced contracts for summer
deliveries.
``It's not just a California problem,'' said Tom Williams, spokesman for Duke
Energy North America. ``This is a Western crisis.''
Blackout showdown
With federal regulators still resisting the regional wholesale price caps
state leaders hope for, market experts and consumers suggest a more radical
approach: refusing to pay the higher prices, even if it means blackouts.
``It would be a game of chicken,'' said Borenstein with the University of
California Energy Institute. ``The question is, is the state willing to take
the blackouts to make the point that we won't pay prices that are way above
competitive levels?''

Contact John Woolfolk at jwoolfolk@sjmercury.com or (408) 278-3410.
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Davis signs plan offering incentives for energy conservation
LOS ANGELES -- Gov. Gray Davis signed his long-promised electricity
conservation plan into law Wednesday, saying the $850 million package should
save thousands of megawatts and reduce the prospect of rolling blackouts this
summer.
The measures are intended to address the energy needs of households and
businesses, with provisions ranging from rebates to ratepayers who buy more
efficient refrigerators and washing machines to free installation of
lighting, air conditioning and heating in commercial buildings.
``We want to make sure that every building, every office building, every
retail shop, every high-tech community, every agriculture concern squeezes
down the megawatts they use as much as humanly possible and still allows them
to make a profit,'' Davis said.
Here are a few of the plan's energy-reduction incentives:
?$60 million for high-efficiency lighting in commercial buildings.
?$50 million in low-interest loans for schools and municipalities to practice
energy efficiency.
?$50 million for energy-efficient household appliances.
The conservation plan follows by two days the state's agreement to buy
transmission lines from Southern California Edison. The state Legislature and
the California Public Utilities Commission still must sign off on the Edison
arrangement, but the energy-saving measures go into effect immediately.
``This is a race against time,'' Davis told reporters. ``We'll be contacting
the largest customers, the businesses that consume the most electricity.
We'll say to them, `We have the equipment; when can we come install it?'
We're not waiting for them to call us.''
The law allocates $105 million to promote renewable energy and clean
electricity distribution projects. It also sets aside $240 million in grants,
weatherization loans and discounts for low-income electricity users.
For Theresa Bailey, coordinator of a Salvation Army energy assistance program
in Oakland, the provision for cash-strapped customers comes right on time.
``People are really getting panicky about their bills, and I see lines of
people every day,'' Bailey said. ``I'm worried that I'm going to be shut
down, because I'm going to run out of money real quick. It would be really
nice if we could get more money.''
Surrounded by legislative co-sponsors, Davis signed the bills outside Los
Angeles' municipally owned Department of Water and Power headquarters, where
a canopy of solar panels shades cars in the parking lot and electric vehicles
are part of the company fleet. The public utility is exempt from
deregulation, which the governor, other Democrats and consumer advocates have
blamed for contributing to California's electricity crisis.
``This was a hard bill to get passed, and it's absolutely critical if we are
going to have any chance of mitigating the summer blackout problem,'' said
state Sen. Byron Sher, D-Redwood City, a lead sponsor who wasn't able to
attend the Los Angeles ceremony. ``Reduction in usage is the only tool
available in the short term.''
The legislation, if fully implemented, could reduce California's demand by
almost half the 4,000 to 5,000 megawatts Davis hopes to save this summer. A
megawatt supplies enough power for from 750 to 1,000 homes.
``These bills this summer can prevent 34 days of rolling blackouts'' each
day, which could temporarily darken 5 million homes, said Assembly Majority
Leader Kevin Shelley, D-San Francisco.
Since the extent of the energy crisis became clear late last year, California
residents have cut their electricity consumption 8 percent. State officials
hope to achieve 10 percent savings during the high-demand summer.

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Calif. urged to form electricity ``buyers cartel''
LOS ANGELES (Reuters) - California was urged Wednesday to fight back against
a ``sellers cartel'', blamed for driving up wholesale electricity prices in
the state, and form a ''buyers cartel'' with energy-starved neighbors Oregon
and Washington.
The call was made in a report co-authored by economist Peter Navarro of the
University of California-Irvine and Michael Shames of the San Diego-based
consumer group The Utility Consumers' Action Network (UCAN).
In the report, the authors also argued that if sellers failed to produce
ample power at a price set by the ``buyers cartel,'' California should sieze
in-state power plants.
The report warned that without such action California could face a
blackout-riddled summer and some $50 billion in extra costs buying power on
the open market.
``To avert this disaster, we propose California join with the other `victim
states' of Oregon and Washington to form a `buyer's cartel,''' the report
said.
``We propose offering to pay a reasonable price to the (sellers) cartel
members - but not a penny more,'' it said.
Wholesale power prices have skyrocketed in the last year and some blame a
group of out-of-state power companies, some of whom purchased plants which
the state's utilities sold as part of the deregulation of California's
electricity industry.
The report named Mirant Corp., Enron Corp., Dynegy Inc., Reliant Energy Inc.
and Williams Cos. Inc. as members of the ``sellers cartel.''
``Using their market power, they have demonstrated that they are both willing
and able to manufacture artificial shortages,'' the report said.
MERCHANT MARKETERS DENY ANY WRONGDOING
Merchant power marketers have repeatedly denied any wrongdoing in
California's chaotic wholesale electricity market, arguing that the prices
they charge reflect the underlying cost of power generation, tight supplies
throughout the region, and the high financial risk of doing business in the
state.
The report said a fair price would be calculated daily based on natural gas
prices and other factors. It would include a generous profit margin and would
result in an average price of 15 to 20 cents per kilowatt hour. It noted that
the current futures price for the summer was close to 60 cents.
``This summer of darkness will no doubt be an orgy of price-gouging by the
cartel -- as prices on the wholesale market are expected to double or triple
from their already exorbitant levels,'' it said.
California state lawmakers Tuesday at a meeting in Boise, Idaho pleaded with
federal regulators to impose cost-based rates for both electricity and
natural gas for the next 18 months in 11 western states.
Federal regulators have been reluctant to impose price controls and they are
also opposed by many of the inland western states who fear they would cushion
consumers rather than give them the kind of price shock needed to spur energy
conservation.
The chronic shortage of power in West is caused partly by growing demand
linked to the region's strong economic and population growth in recent years.
There have also been few power plants built during the last decade, partly
due to uncertainty surrounding the deregulation of the electric utility
industry.
Summer power shortages will be exacerbated by a drought in the Pacific
Northwest which will severely curtail output from the region's massive system
of hydropower dams, which in good years provide about 70 percent of the
Northwest's electricity.

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PG&E bankruptcy renews focus on billions utility transferred
SAN FRANCISCO (AP) -- Pacific Gas and Electric is bankrupt and its holding
company remains profitable, partly because the utility transferred billions
of dollars to its corporate parent in the years leading up to its financial
collapse. Is this fair?
Whether the money handed over to PG&E Corp. represented business as usual or
a reckless raid on the utility's finances will likely become a pivotal issue
in the bankruptcy case, affecting millions of customers and thousands of
creditors.
There's plenty of money to haggle over. From 1997 through September 2000, the
utility paid $4.63 billion to the parent company and received nothing in
return, according to a state-ordered audit completed in January.
In another controversial move made the night before the April 6 bankruptcy
filing, the utility paid 6,000 employees a total $50 million in bonuses and
raises -- an average of more than $8,000 per worker.
``I would expect that the creditors are going to be looking at all that
transferred money as money that they should have been getting paid by the
utility,'' said bankruptcy professor Judy Beckner Sloan of the Southwestern
University School of Law in Los Angeles.
The stakes are so large that the peripheral trial -- which is known as an
``adversary proceeding'' and is expected to revolve around this thorny legal
question -- may overshadow the main event.
To get to the bottom of what happened, lawyers will likely exhume e-mail
exchanges among PG&E management, depose top executives and pore over reams of
documents, said Tampa, Fla. lawyer Bill Zewadski, co-chair of the American
Bar Association's bankruptcy litigation subcommittee.
``It's going to be a very complicated process, something that could drag on
for years,'' Zewadski predicted.
Even if the creditors decide to go after the money that flowed from the
utility to parent company, it will be difficult, if not impossible, to
recover the cash, bankruptcy experts say.
The parent company, which made $753 million during the first nine months of
2000, up 40 percent from the same period the year before, already has spent
most of the utility money to pay shareholder dividends and buy back stock to
boost its market value. The parent company also invested $838 million in its
still-thriving power-generating subsidiaries.
Those unregulated subsidiaries, lumped together as the National Energy Group,
aren't a part of the regulated utility, but they conceivably could be pulled
in if creditors prove the parent company's investments in National Energy
should have been made in the utility instead.
Should a judge decide the parent company acted wrongfully and there isn't
enough money to repay the utility's creditors, the bankruptcy code allows for
a court judgment holding the parent company liable, said Kenneth N. Klee, a
bankruptcy professor at the UCLA School of Law.
If the liability were large enough, it could also force the parent company
into bankruptcy.
PG&E Corp. executives are confident that the parent company and unregulated
subsidiaries will be shielded from the utility's bankruptcy case.
``We fully expect that the financial condition of PG&E Corp. and (National
Energy) will be unaffected'' by the utility's bankruptcy, PG&E chief
financial officer Peter Darbee assured investors during a conference call
last week.
Darbee reiterated previous statements that PG&E followed all the state's
rules governing the relationship between holding companies and regulated
utilities.
The California Public Utilities Commission isn't so sure. Three days before
the bankruptcy filing, the regulators opened an investigation into whether
the parent company illegally took the utility's money or shirked its
responsibility to assure the utility had adequate capital.
The parent company made a move to insulate itself and National Energy from
the utility's financial woes in December when it received federal regulatory
approval to reshuffle its corporate structure in a maneuver known as
``ringfencing.'' The term refers to the concept of building a barrier between
a company's stable and high-risk operations.
The walls separating the utility from the parent and other subsidiaries are
another offshoot of the 1996 California law that deregulated the state's
electricity market.
It seems ironic now, but regulators ordered PG&E to splinter into distinct
companies to protect the then-rich utility in case something went awry at the
parent company or the unregulated businesses.
To drag the parent company and National Energy into the bankruptcy case, the
creditors will have to prove that the money taken from the utility
represented ``fraudulent transfers,'' bankruptcy experts said.
This doesn't mean there must be evidence of actual fraud. Rather, the
creditors will have to show that the utility relinquished its assets while
receiving ``less than reasonably equivalent'' value in return, said
University of Missouri bankruptcy professor Robert Lawless.
The parent company didn't invest anything in the utility from 1997 through
September 2000, according to the state-ordered audit.
Part of the PUC's investigation is focused on whether the parent company
should have either been putting more money in the utility or pulling less
cash out of its subsidiary to build the equivalent of a rainy-day fund.
PG&E's utility had been thriving until wholesale electricity prices shot up
in May 2000, driving up the cost of delivering power far beyond what
regulators allowed to be passed on to consumers.
In 1998 and 1999, the utility's profit totaled $1.5 billion on combined
revenues of $18.2 billion. In the nine months ending in February 2000, the
utility said its wholesale electricity costs exceeded its revenue by $8.9
billion.
Even as it fell into a deeper hole, the utility continued to transfer money
to its parent company until late last year, when PG&E Corp. finally suspended
its shareholder dividends.
``If all the utility was doing was paying dividends to its parent, this is
going to be a difficult case for the creditors to win,'' Lawless said.
Zewadski concurred, noting that ``it's part of a subsidiary's job to pay its
profits to the corporate parent.''

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Officials question utilities, generators
Published Thursday, April 12, 2001, in the San Jose Mercury News
BY MICHELLE GUIDO

Mercury News

Officials from California's two major utilities and two of its smaller power
generators were in the hot seat in San Jose on Wednesday, fielding questions
from federal lawmakers about their role in the state's power crisis.
On Day 2 of a three-day swing through California, three Republican members of
a U.S. House subcommittee on energy policy and three local Democratic
representatives heard testimony from utility officials and from the chairman
of the Federal Energy Regulatory Commission.
The energy crisis is expected to bring rolling blackouts to California
through the summer months, and energy officials warned on Wednesday that the
high prices consumers face here undoubtedly will spill over into neighboring
states if FERC doesn't cap prices now.
But FERC Chairman Curt L. H,bert Jr. reiterated what he said Tuesday at a
Western energy summit in Boise: He does not support price caps on electricity
-- in California or any of the Western states.
``The energy is going to go where the caps are not, and nine out of 11
Western state governors have said they don't want price caps in their
states,'' H,bert said. ``A cap sends us in the wrong direction.''
Instead, he said, by May 1, FERC will unveil a plan to monitor energy prices
and in some cases, might ease the price of energy sold on California's more
expensive spot markets. He wouldn't elaborate, but made it clear those
adjustments would not include price caps.
Government Reform Committee Chairman Dan Burton of Indiana opened the hearing
by saying the committee's mission was not to ``point fingers.''
``We wanted to see if there were ways the federal government and the state
government could work together to get past this crisis,'' he said.
At one point early in the hearing, demonstrators attempted to address the
lawmakers. They were ushered out of the room by security personnel.
Burton was joined by Republican representatives Doug Ose of Woodland and
Steve Horn of Lakewood. Also participating in the hearings were Democratic
representatives Zoe Lofgren and Michael Honda of San Jose and Barbara Lee of
Oakland.
The Democrats pushed strongly for FERC to consider price caps.
``We need to gain control of this out-of-control market and gain control of
the price gouging,'' Lofgren said.
Honda concurred: ``We believe that FERC has a responsibility and they've even
said that rates are unjust and unreasonable. We need short-term caps.''
It was clear that Burton doesn't believe that price caps are the answer. On
several occasions, he suggested that capping energy prices might result in
even more blackouts as summer approaches.
Lee suggested that some people believe the only way out of the crisis is some
form of re-regulation. But Dede Hapner, vice president of regulatory
relations for PG&E, said she wasn't sure that was the answer.
``We still think a correctly structured market could work. It's certainly
working in other states,'' Hapner said. ``In retrospect, the way the
deregulation market was structured was designed to fail.''
Today the hearings move to San Diego, where members will hear from
representatives of generators that have been accused of overcharging
California, including Reliant Energy, Sempra Energy and Williams Energy
Services.

Contact Michelle Guido at mguido@sjmercury.com or (408) 295-3984.

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Charities join needy in power-bill struggle
With families rationing energy and money, relief agencies fear they'll be
unable to help in summer.
April 12, 2001
By HANH KIM QUACH
The Orange County Register
GARDEN GROVE - Kim Paris' children have a choice once it gets dark: They can
either watch TV, or color. Not both.
The reason is because the television uses electricity. So does the lamp by
which her children color.
"With the (energy) situation, I can't afford the bill (for both)," said
Paris, who is struggling to pay off six months of energy bills totaling
nearly $2,000. "There's always a compromise in my house."
People in Paris' situation are being helped by Orange County nonprofits in
this year's energy crisis, but several local charities report that emergency
energy assistance is draining their coffers quickly.
Some charities fear they won't have any cash left to help by summer.
And once the money is gone, "the needy go without," said Kathy Kifaya,
director of the Orange County Community Development Council's utility
services.
"They become homeless, or they stay in their apartments living without
electricity, heat, air conditioning. They're living in unhealthy situations;
they become sicker; they miss school; they go without food," she said.
The drain on money is due in part to larger bills. Natural-gas shortages this
winter pushed up heating bills.
And charities are still reeling from last summer, when bills for south-county
residents in San Diego Gas & Electric's territory briefly tripled when the
utility passed a key threshold under the state's deregulation law and was
allowed to pass its full electricity costs onto consumers. The state later
enacted a law to reduce and cap the amount SDG&E customers have to pay.
So large is the demand that the Salvation Army's best-funded centers in
central Orange County run out of their monthly allotment within two weeks.
"It's just going really fast," said Bonnie Miller, a Lutheran Social Services
program manager for emergency assistance. "We're seeing more bills that are
over $200 for one month." She points to $20,000 in donations, which vanished
in 2 1/2 weeks. Usually, that would have lasted at least six weeks.
The energy crunch could also crush many low-income families who have settled
in the county's cheapest -- but once-trendy -- 1970s-era all-electric
apartments, which have few energy-efficient appliances, she said.
MORE PEOPLE IN NEED OF MORE ASSISTANCE
The higher bills have caused more residents to turn to the charities.
The Orange County Community Development Council typically receives about
4,000 calls a month for utility help. But in the past five months, as
residents countywide needed assistance to afford natural-gas bills, the
organization has received about 7,000 calls a month, Kifaya said.
This summer, with electricity-rate increases and other energy problems, she
suspects it'll receive 10,000 calls a month. The organization signs up
eligible residents for federal assistance with their bills. It also conducts
45-minute classes on energy conservation.
"We're really bracing for April, May and June," she said. "We don't know how
bad it's going to get."
CREATIVE MONEY SHUFFLING
Lupe Savastano at Catholic Charities of Orange County has gotten more
creative with assistance, collaborating with other charities to help one
family. Sometimes she pays a portion of a family's rent equal to the utility
bill so that the client can free up the cash for electricity.
But she's still concerned about what's coming up this summer.
"A lot of people are going to have their services disconnected," Savastano
said.
In the meantime, families will continue to impose strict conservation
measures.
Kelly Massengale in Westminster has scaled back to three loads of laundry a
week -- half as many as she used to do. The TV is off when no one is
watching, and the heater is hardly ever switched on. Her gas bill last month
was $45; the electric bill was $94. Massengale, who lives with her mother and
two children, ages 3 and 6, said she'll walk more and use the bus to save
money to pay for rate increases.
But some things she can't afford to change, like the energy-guzzling
refrigerator the family has used since she was 11. Now, she's 34.
"Nobody can afford the increases," she said.
Meanwhile, for Paris, every single kilowatt-hour counts.
A single mother of children ages 7 through 14, Paris has to make do with the
$1,030 she receives a month in child support -- $850 of which pays for rent
at her all-electric apartment.
She unplugs her appliances to keep even the smallest amount of electricity
from draining into the cords. She only plugs in what she's using for the
moment.
Said Paris: "I'm trying to do everything I can."
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Rate plan expands discount eligibility
PowerPower 200,000 more in area would qualify under higher income ceiling.
April 12, 2001
The Orange County Register
About 200,000 more Southern Californians would qualify for discounted utility
bills under a rate system proposed by state regulators last month.
The rate system, which is expected to be approved this month, would allow a
family of four earning $30,100 to qualify for the program, called California
Alternative Rates of Energy, or CARE. Previously, only families earning less
than $25,800 were eligible.
Families enrolled in the CARE program are exempt from rate increases -
including last month's rise of as much as 36 percent and January's 9 percent
increase.
The discounts have been a relief, albeit small, for Kim Paris of Garden
Grove. When Paris moved into her all-electric apartment six months ago, she
didn't realize a broken heater was guzzling energy. Because of a
misunderstanding with her landlord, she didn't switch the utility service
into her name until recently. By that time, she had accumulated a bill of
$2,300.
"It upset me a lot because if I would have known that (heater) was causing my
bill to go up, I would have (unplugged) it a long time ago,'' Paris said.
Enrolling in CARE has shaved nearly one-fourth off the bill. But she still
can't afford it. That's why she has become militant about conservation.
She tells her five daughters, "If you can see even a little bit without a
light, you don't need it.''
About 1 million customers in Southern California Edison's service area are
eligible under the new guidelines, said John Nall, coordinator of the
program.
The program, however, is undersubscribed, officials say. Only 55 percent of
those eligible take advantage of the reduced rates.
Ratepayers subsidize the discounts and other programs, such as one to help
make older homes more energy-efficient. The total charge for the Public
Purpose Programs is less than 3 percent of an average bill.
Ratepayers who qualify for the discount can apply through their utility. To
contact area utilities, call:
Southern California Edison: (800) 447-6620
San Diego Gas & Electric: (800) 411-SDGE (7343)
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Thursday, April 12, 2001

Dimming chances for resolving power crisis
We're still not convinced that the California government should buy the 60
percent of the state's power grid owned by the three big utilities (20
percent is owned by the municipal utilities and 20 percent by the federal
government). But on Monday one of the utilities, Southern California Edison,
worked out an agreement with Gov. Gray Davis to sell its portion of the grid
for $2.76 billion.
"The deal would allow the state to take possession of Edison's 12,000-mile
network of power lines at a price more than twice its book value," reported
the Register. "Edison would use that money and issue $2 billion in bonds to
pay off about $5.4 billion in debt, which it accumulated by purchasing power
at high prices that couldn't be passed on to consumers under a rate freeze.
"Both Edison- and state-issued bonds will be paid off by ratepayers via their
electricity bills." The company would end its lawsuits against the state.
"Edison also agreed to invest $3 billion over five years in improvements to
the transmission lines. And its corporate parent would contribute $420
million to reduce the utility's debt."
In a conference call we joined with other reporters yesterday, Gov. Davis
explained that he hopes the Legislature will take up the matter when it
returns to the capitol next Monday and quickly draft legislation for the
purchase. He also will meet on Wednesday with Sempra Energy, the parent
company of San Diego Gas & Electric, and hopes to work out a similar
agreement.
As to Pacific Gas & Electric, which last week declared bankruptcy, he hopes
to convince "the bankruptcy court that we are the appropriate buyer" of
PG&E's portion of the power grid.
We asked the governor about how politics would be kept out of the process of
building and maintaining the grid, to prevent legislators from rigging the
system to favor their districts. "There will be a specific agency responsible
for efficiency of the grid and what improvements would be necessary," he
replied. "It will be a power agency to which I will make all the
appointments."
Given that this electricity problem has been bumbled by other state-appointed
entities - the Public Utilities Commission, the Independent System Operator
and the Power Exchange - we fail to see how yet another public agency would
be better than private-sector operation.
If the deal for the grid somehow falls through for financial reasons, then
what would happen? "Plan B," the governor said, is "we get assets of
comparable value" such as "hydroelectric facilities" owned by the utilities.
"Or they give us cheap power to make up the difference." That would mean even
more state ownership and control of the electricity industry.
Finally, if it's approved by the Legislature, this is going to be an
exceedingly complicated transaction.
The governor said the whole deal "would take at least a year to conclude"
because it involves "20,000 documents going back at least 100 years." By
contrast, he pointed out, transactions solely in the private sector, even of
this magnitude, usually can be completed in a matter of a few months.
To us, that's one more reason against government ownership: These have been
private assets for a century and entangling government in the matter means
more complication, not less.
The Legislature first should closely scrutinize the power-grid purchase
proposal, then reject it. In the forefront should be two local Democrats,
Sen. Joe Dunn of Garden Grove and Assemblyman Lou Correa of Santa Ana. If
this power problem isn't solved but is made worse, it will be their party,
with its large majorities in both houses, that suffers in the 2002 election.
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Utilities Allegedly Gouged Calif.

LOS ANGELES (AP) via NewsEdge Corporation  -
Private power wholesalers have been blamed
for driving up California's electricity prices but even
government-owned utilities allegedly manipulated the market,
maximizing profits and inflaming the energy crisis, according to a
confidential document obtained by the Los Angeles Times.

The document shows that the power providers, including the Los
Angeles Department of Water and Power, influenced the spiraling
costs of wholesale electricity between May and November 2000.

The DWP was eighth on the list of alleged price gougers for
seeking high prices during periods of high demand, which helped
inflate costs across the entire spot market, the document said.

The document decodes the identities of unnamed power providers
in a recent study by the California Independent System Operator.
CISO examined thousands of hours of bidding practices for 20 large
electricity providers.

DWP General Manager S. David Freeman called the findings
``outrageous.''

``We have consistently charged (CISO) our cost plus 15
percent,'' Freeman said. ``It's not as though we're up there
peddling a bunch of power to jam it down their throats.''

In addition to the DWP, the document singles out two other
government-run agencies that it said consistently inflated prices:
the federally owned Bonneville Power Administration in the Pacific
Northwest, and the trading arm of Canada's BC Hydro in British
Columbia.

BC Hydro reaped the most in what the state's power-grid operator
deemed ``excess profits.'' The Canadian agency took in $176
million, several times the amount of allegedly excessive earnings
collected by all but one private generator. Second on the list was
Atlanta-based Mirant which collected nearly $97 million.

The companies cited said they broke no state rules and abided by
California's 1996 deregulation law, the Times reported Wednesday.

BC Hydro officials acknowledged, however, that they anticipated
periods of severe power shortages and let their reservoirs fill
with water overnight, then opened them to produce cheap
hydroelectric power to sell at a premium.

``It was the marketplace that determined what the price of
electricity would be at any given time,'' BC Hydro spokesman Wayne
Cousins told the Times. ``We helped keep the lights on in
California.''
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PG&E's Money Transfers Focused On

By MICHAEL LIEDTKE
AP Business Writer
SAN FRANCISCO (AP) via NewsEdge Corporation  -
Pacific Gas and Electric is in bankruptcy
court, but its holding company remains profitable, partly because
the utility transferred billions of dollars to its corporate parent
in the years leading up to its financial collapse. Is this fair?

Whether the money handed over to PG&E Corp. represented business
as usual or a raid on the utility's finances will probably become a
pivotal issue in the bankruptcy case, affecting millions of
customers and thousands of creditors.

From 1997 through September 2000, the utility paid $4.63 billion
to the parent company and received nothing in return, according to
a state-ordered audit completed in January.

In another controversial move made the night before the Chapter
11 bankruptcy filing April 6, the utility paid 6,000 employees a
total $50 million in bonuses and raises _ an average of more than
$8,000 per worker.

``I would expect that the creditors are going to be looking at
all that transferred money as money that they should have been
getting paid by the utility,'' said bankruptcy professor Judy
Beckner Sloan of the Southwestern University School of Law in Los
Angeles.

To get to the bottom of what happened, lawyers will probably
exhume e-mail exchanges among PG&E management, take depositions
from top executives and pore over reams of documents, said Tampa,
Fla., lawyer Bill Zewadski, co-chairman of the American Bar
Association's bankruptcy litigation subcommittee.

``It's going to be a very complicated process, something that
could drag on for years,'' Zewadski said.

Even if the creditors decide to go after the money that flowed
from the utility to parent company, it will be difficult, if not
impossible, to recover the cash.

Pacific Gas and Electric and Southern California Edison, the
state's two biggest utilities, say they have lost more than $13
billion since June because of skyrocketing wholesale power prices
and California's 1996 deregulation law, which bars them from
passing those costs on to customers.

The crisis has led to rolling blackouts over the past few months
and warnings from the two utilities that they were sliding toward
ruin.

PG&E, which made $753 million during the first nine months of
2000, up 40 percent from the same period the year before, already
has spent most of the utility money to pay shareholder dividends
and buy back stock to boost its market value. The parent company
also invested $838 million in its still-thriving power-generating
subsidiaries.

Those unregulated subsidiaries, lumped together as the National
Energy Group, are not a part of the regulated utility, but they
could be pulled into the bankruptcy case if creditors prove the
parent company's investments in National Energy should have been
made in the utility instead.

Should a judge decide the parent company acted wrongfully and
there isn't enough money to repay the utility's creditors, the
bankruptcy code allows for a court judgment holding the parent
company liable, said Kenneth N. Klee, a bankruptcy professor at the
UCLA School of Law.

If the liability were large enough, it could also force the
parent company into bankruptcy.

PG&E executives said they are confident that the parent company
and unregulated subsidiaries will be shielded from the utility's
bankruptcy case.

PG&E chief financial officer Peter Darbee said the parent
company followed all the state's rules governing the relationship
between holding companies and regulated utilities.

The California Public Utilities Commission is not so sure. Three
days before the bankruptcy filing, the regulators opened an
investigation into whether the parent company illegally took the
utility's money or shirked its responsibility to assure the utility
had adequate capital.

The parent company made a move to insulate itself and National
Energy from the utility's financial woes in December when it
received federal regulatory approval to reshuffle its corporate
structure in a maneuver known as ``ringfencing.'' The term refers
to the concept of building a barrier between a company's stable
operations and its high-risk ones.

The walls separating the utility from the parent and other
subsidiaries are, paradoxically, an offshoot of the deregulation
law.

At the time, regulators ordered PG&E to splinter into distinct
companies to protect the then-rich utility in case something went
awry at the parent company or the unregulated businesses.
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States say federal government needs to act to stem energy crisis

By H. JOSEF HEBERT
Associated Press Writer
BOISE, Idaho (AP) via NewsEdge Corporation  -
A six-hour brainstorming session between
federal and state energy regulators ended with a clear message:
Western states want more help from Washington to corral the
region's deepening power crisis.

The three members of the Federal Energy Regulatory Commission
flew to Idaho for what Chairman Curtis Hebert called ``frank
discussions'' with officials from 11 Western states about the
astronomical electricity prices that have spread from California to
almost every corner of the region.

And the Washington regulators got an earful.

``Montana is taking a hell of a hit because of this market,''
declared Gary Feland, whose job it is to approve requests by the
state's utilities to pass wholesale price increases on to their
retail customers.

``Politically we're getting beat up,'' added Feland.

In many states, retail electricity sales are still regulated,
but wholesale markets are not. The state officials warned that many
of the electricity rate increases, stemming from wholesale price
run-ups, have yet to reach consumers, but will in the coming months
as states have no choice but to approve them.

Much of the discussion focused on whether FERC, which regulates
the wholesale power market, should temporarily impose price
controls to ease the impact of what one of the commissioners,
William Massey, called ``a looming disaster'' this summer if
nothing more is done.

Afterward, Hebert tallied up the results: Five states opposed
such controls, three wanted them desperately and three others were
not sure. Previously, the latter three had lined up in the ``no''
column.

Hebert has made clear his opposition to renewed price regulation
_ even temporarily to address an emergency _ because he argues that
a free market is the only way to get people to build more power
plants and transmission lines and create the ``price signal'' to
foster conservation.

His position drew support from Vice President Dick Cheney in a
telephone interview with the Associated Press in Olympia,
Washington.

``The problem with price caps is that they don't solve the
problem,'' said Cheney. ``Just look at California, where they had
caps applied at the retail level that, coupled with the requirement
to buy power on the spot market, has driven PG&E into bankruptcy.''

Pacific Gas & Electric, California's largest utility, said last
week it had debts of dlrs 9 billion and filed for Chapter 11
bankruptcy protection.

Like the state officials, FERC is deeply split on the issue of
price controls.

``It is wrong to put the entire Western economy in harm's way
solely to protect a price signal arising from a dysfunctional
market,'' Massey said. ``Our passion for the market must be
tempered with commonsense.''

A contingent from California submitted a proposal calling for
cost-based price caps for 18 months on wholesale electricity and
natural gas sales across the West. Only FERC can impose such caps.

``We have done our part. We cannot do it alone,'' Bob Herzberg,
speaker of California's Assembly, told the three FERC
commissioners. The Californians listed the state's response to its
power problems so far: Actions to boost conservation, increase
retails electricity rates and speed up power plant construction.
Still, they bemoaned that California this year was expected to
spend dlrs 65 billion on electricity, nearly 10 times its power
bill in 1999.

Hebert insisted that the FERC ``is doing everything it can'' to
ensure just and reasonable prices and cited the commission's action
to seek dlrs 124 million in refunds on California power sales. He
also said the commission plans soon to approve a new system of
tracking market abuses.

Officials from Washington state and Oregon joined California in
the plea for temporary price regulation. The Northwest has been hit
by a severe drought, making less hydro-generated electricity
available and forcing greater reliance on the high-priced spot
market. On Monday the Bonneville Power Authority said it may have
to nearly triple what it charges for its power if demand doesn't
drop sharply and reduce the need of spot market purchases.

In a surprising development, Wyoming, Utah and New Mexico said
they no longer were sure that price controls would be such a bad
thing. And even those opposed to price caps, like Montana's Feland,
criticized FERC for not being more aggressive in challenging prices
_ many of them now 10 times what they were a year ago _ as
unreasonable.

___=???Associated Press Writer David Ammons in Olympia, Wash.,?contributed to this report.???