Today's IEP news...for more, please visit www.rtumble.com.

Thanks,
Jean

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 3, 1081 words
????, THE CALIFORNIA ENERGY CRISIS; ??CALIFORNIA AND THE WEST; ??GENERATORS
????SCRAMBLED TO END PACTS WITH UTILITIES; ??ENERGY: EVEN BEFORE PG&E FILED
FOR
????BANKRUPTCY, ALTERNATIVE PLANT OWNERS WHO HADN'T BEEN PAID IN MONTHS
PURSUED
????COURT ACTIONS., JULIE TAMAKI, TIMES STAFF WRITER, SACRAMENTO
???(Quotes Smutny on behalf of IEP)

The New York Times, April 7, 2001, Saturday, Late Edition - Final, Section
????A; Page 1; Column 4; National Desk, 1174 words, California's Largest
Utility
????Files for Bankruptcy, By LAURA M. HOLSON, LOS ANGELES, April 6
???(Quotes Smutny on behalf of IEP)

Sacramento Bee, April 7, 2001, Saturday, Pg. A23;, 507 words, Natural gas
????project OK'd, David Whitney Bee Washington Bureau and Carrie Peyton Bee
????Staff Writer, WASHINGTON (Quotes Smutny on behalf of IEP)

San Jose Mercury News, April 7, 2001, Saturday, STATE AND REGIONAL NEWS,
????K3364, 1209 words, Filing for Chapter 11 may help PG&E's debt but it won't
????solve power crisis, By Brandon Bailey ?(Quotes Smutny on behalf of IEP)

ADVISORY/More Power to You Organizers to Conduct First Town Hall-Focus Group
Meeting on Energy in San ??
???Diego Business Wire 04/09/01, 11:00a (Copyright , 2001, Business Wire) New
Watchdog Group Urges
???Californians to Voice Concerns, Suggest Solutions to Energy Crisis

PR Newswire, April 9, 2001, Monday, 9:01 AM Eastern Time, FINANCIAL NEWS,
????1036 words, PG&E Bankruptcy Will Not Affect Calpine's Commitment to
????California Power Market, SAN JOSE, Calif., April 9

AP Online, April 9, 2001; Monday, 5:13 AM, Eastern Time, Financial pages,
????970 words, Governor Davis, Utility Toss Blame, GARY GENTILE, LOS ANGELES

AP Online, April 8, 2001; Sunday, 7:17 PM, Eastern Time, Financial pages,
????408 words, PG&E Investors Worry About Nest Eggs, SAN FRANCISCO

The Bulletin's Frontrunner, April 9, 2001, 1419 words, California Governor,
????PG&E Trade Shots In Wake Of Utility's Bankruptcy Filing.

Financial Times (London), April 9, 2001, Monday, COMPANIES & FINANCE
????INTERNATIONAL;, Pg. 28, 340 words, COMPANIES & FINANCE INTERNATIONAL:
????Southern Edison says no to filing, By PAUL ABRAHAMS, SAN FRANCISCO

Financial Times (London), April 9, 2001, Monday, GLOBAL INVESTING;, Pg. 28,
????729 words, GLOBAL INVESTING: Hard sell expected for California bonds:
While
????details are sketchy, the state is hoping to help solve its power troubles
????through the Dollars 10bn-Dollars 14bn issue,

Investment Dealers Digest, April 09, 2001, 868 words, Stranded Cost
????Securitizations Take Off, But Don't Expect an Avalanche of Deals: Issuance
????hits $6 billion as California and courts cast a shadow, Mairin Burns
????(mairin.burns@tfn.com)

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 7, 981 words,
????COMMENTARY; ??USE EMINENT DOMAIN AS A POWER TOOL, MICHAEL J. AGUIRRE,
????Michael J. Aguirre has filed a private attorney general's lawsuit, against
????the major power producers

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 6, 535 words,
????DAVIS ON POWER CRISIS

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 6, 681 words,
????SHOCK'S SILVER LINING

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 3, 769 words,
????CAPITOL JOURNAL; ?CALIFORNIA AND THE WEST; ??Plenty of Failure to Go
Around,
????GEORGE SKELTON, SACRAMENTO

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 3, 1081 words
????, THE CALIFORNIA ENERGY CRISIS; ??CALIFORNIA AND THE WEST; ??GENERATORS
????SCRAMBLED TO END PACTS WITH UTILITIES; ??ENERGY: EVEN BEFORE PG&E FILED
FOR
????BANKRUPTCY, ALTERNATIVE PLANT OWNERS WHO HADN'T BEEN PAID IN MONTHS
PURSUED
????COURT ACTIONS., JULIE TAMAKI, TIMES STAFF WRITER, SACRAMENTO

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 1, 1568 words
????, WITH POWER PRICE SURGES, CALIFORNIA'S A FOLLOWER; ??ENERGY: MUCH OF THE
????NATION IS ALREADY BEING ZAPPED BY DOUBLE-DIGIT INCREASES. SEVERAL STATES
????HAVE HIGHER RATES. DEREGULATION, ANTI-POLLUTION LAWS AND DISTANCE FROM
FUEL
????SOURCES ARE TO BLAME., ERIC SLATER, TIMES STAFF WRITER, CHICAGO

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 1, 1386 words
????, JUDGE IN PG&E BANKRUPTCY CASE SEEN AS A PROBLEM SOLVER; ??COURTS: DENNIS
????MONTALI WILL FACE UNPRECEDENTED LEGAL COMPLEXITIES., MAURA DOLAN, TIMES
????LEGAL AFFAIRS WRITER, SAN FRANCISCO

Los Angeles Times, April 9, 2001, Monday,, Valley Edition, Page 3, 671
????words, THINK TANK HIRES EXPERTS WITH POWER TO SOLVE PROBLEMS DURING ENERGY
????CRISIS, MARGARET TALEV, TIMES STAFF WRITER, CAMARILLO

Los Angeles Times, April 9, 2001, Monday,, Home Edition, Page 1, 1242 words
????, JAMES FLANIGAN; ?OTHERS LEARNING FROM CALIFORNIA'S ENERGY MISTAKES,
JAMES
????FLANIGAN

The San Francisco Chronicle, APRIL 9, 2001, MONDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 1090 words, Governor, Utility In War Of Words; ???Davis furious as
????PG&E defends bankruptcy filing, David Lazarus

The San Francisco Chronicle, APRIL 9, 2001, MONDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 1032 words, Power Grab -- Some Democrats Favor Seizing Plants,
????Bernadette Tansey

The San Francisco Chronicle, APRIL 9, 2001, MONDAY,, FINAL EDITION,
????EDITORIAL;, Pg. A19;, 627 words, Lights Dim On Gray Davis, Marc Sandalow

USA TODAY, April 9, 2001, Monday,, FIRST EDITION, MONEY;, Pg. 4B, 492 words
????, Utility's bankruptcy filing adds to California's confusion, Martin
????Kasindorf, LOS ANGELES

Chicago Tribune, April 9, 2001 Monday, NORTH SPORTS FINAL EDITION, Metro;
????Pg. 1; ZONE: N, 1139 words, SURGE IS SEEN IN GAS-FIRED POWER PLANTS, By
Jeff
????Long and Melita Marie Garza, Tribune staff reporters.

The Associated Press State & Local Wire, April 9, 2001, Monday, BC cycle,
????4:20 AM Eastern Time, Business News, 820 words, California's biggest
utility
????files for bankruptcy, By MICHAEL LIEDTKE, AP Business Writer, SAN
FRANCISCO

Los Angeles Times, April 8, 2001, Sunday,, Home Edition, Page 21, 594 words
????, THE CALIFORNIA ENERGY CRISIS; ??DEMOCRATS SLAM BUSH 'INACTION' IN ENERGY
????CRISIS; ??ADMINISTRATION OFFICIALS DISPUTE THE CHARGE AND ACCUSE
CONGRESSMEN
????OF EXPLOITING THE SITUATION FOR PARTISAN GAIN., ALISSA J. RUBIN, TIMES
STAFF
????WRITER, WASHINGTON

Los Angeles Times, April 8, 2001, Sunday,, Home Edition, Page 1, 1146 words
????, THE CALIFORNIA ENERGY CRISIS; ??PG&E GAVE BONUSES PRIOR TO BANKRUPTCY;
????POWER CRISIS: BEFORE ITS FILING, THE UTILITY ALSO HAD $2.5 BILLION ON HAND
????AND HAD RESTARTED SERVICES SUSPENDED EARLIER BECAUSE OF SHAKY FINANCES.,
TIM
????REITERMAN, TIMES STAFF WRITER, SAN FRANCISCO

Los Angeles Times, April 8, 2001, Sunday,, Home Edition, Page 1, 1304 words
????, JAMES FLANIGAN; ?STATE LOOKS TO PUBLIC POWER AS SOLUTION TO ENERGY
CRISIS,
????JAMES FLANIGAN

Los Angeles Times, April 8, 2001, Sunday,, Orange County Edition, Page 11,
????467 words, ORANGE COUNTY PERSPECTIVE; ??DAVIS HAS STATE HEADED FOR POWER
????WIPEOUT; ???THE GOVERNOR DUCKED HIS RESPONSIBILITY TO STEER CALIFORNIA
AWAY
????FROM THE ELECTRICITY CRISIS, AN EX-SURFING CHAMP SAYS., JOYCE HOFFMAN,
Joyce
????Hoffman, a former women's world surfing champion, lives in, Laguna Beach

Sacramento Bee, April 8, 2001, Sunday, Pg. A1;, 1497 words, Ratepayers lose
????clout PG&E filing cuts consumers' ability to exert pressure on a rescue
????plan., Carrie Peyton and Stuart Leavenworth Bee Staff Writers

Sacramento Bee, April 8, 2001, Sunday, Pg. A16;, 800 words, Chapter 11
????filing just the first of many steps, Stuart Leavenworth and Carrie Peyton
????Bee Staff Writers

Sacramento Bee, April 8, 2001, Sunday, Pg. L4;, 563 words, Lessons from
????history Electricity still needs a public role

San Jose Mercury News, April 8, 2001, Sunday, DOMESTIC NEWS, K3554, 1393
????words, In wake of PG&E bankruptcy, California governor, state officials
????scramble for solution, By Steve Johnson

The San Francisco Chronicle, APRIL 8, 2001, SUNDAY,, FINAL EDITION, NEWS;,
????Pg. A14, 683 words, Deregulation Debacle, Chuck Squatriglia

The San Francisco Chronicle, APRIL 8, 2001, SUNDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 1709 words, POWER PLAY; ???PG&E timed bankruptcy to blame Davis,
????insiders say, David Lazarus

The San Francisco Chronicle, APRIL 8, 2001, SUNDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 1471 words, Davis' Pledges Come Back To Haunt Him, Carla
Marinucci,
????Patrick Hoge

The San Francisco Chronicle, APRIL 8, 2001, SUNDAY,, FINAL EDITION,
????BUSINESS;, Pg. B7, 3592 words, Nuclear Warning; ???Watchdogs eye Duke's
????salvage operation, Scott Winokur, Christian Berthelsen

Los Angeles Times

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Part A; Part 1; Page 3; Metro Desk

LENGTH: 1081 words

HEADLINE: THE CALIFORNIA ENERGY CRISIS;

CALIFORNIA AND THE WEST;

GENERATORS SCRAMBLED TO END PACTS WITH UTILITIES;

ENERGY: EVEN BEFORE PG&E FILED FOR BANKRUPTCY, ALTERNATIVE PLANT OWNERS WHO
HADN'T BEEN PAID IN MONTHS PURSUED COURT ACTIONS.

BYLINE: JULIE TAMAKI, TIMES STAFF WRITER

DATELINE: SACRAMENTO

BODY:

??In filing for federal bankruptcy protection last week, Pacific Gas &
Electric
Co. determined what other power producers had already concluded: The state had
failed to solve their payment problems and the time had come for the courts to
step in.

??In the days leading up to PG&E's Bankruptcy Court petition, a growing number
of alternative energy producers had also been filing lawsuits, seeking to be
freed from their contracts with PG&E and Southern California Edison. The
litigation was triggered in part by a controversial new rate plan imposed last
month by the state Public Utilities Commission in addition to millions of
dollars of debt owed to the producers by the utilities.

??On Tuesday, Dynamis Inc. filed suit in Fresno, saying PG&E owes it $ 3
million.

??Carson-based Watson Cogeneration Co., one of the state's largest alternative
energy producers, also had filed suit to have its contract with Edison
suspended. So did Delta Power, which owns five small gas-fired plants in
California. Both producers are owed tens of millions by Edison.

??At least a dozen such suits have been filed in civil courts, and lawyers
warn
that more could be on the way.

??"Tough solutions were not being brought to the equation, which left PG&E and
others feeling they were better off in the court system," said Jerry Bloom, an
attorney for the California Cogeneration Council.

??The court actions come on the heels of an order by the PUC last month that
Edison and PG&E begin fully paying hundreds of small alternative energy
producers. But some producers say that a new rate plan issued by the PUC would
force them to operate at a loss and that nothing has been done to address the
about $ 1.5 billion owed to members of the group by PG&E and Edison.

??Lawyers say other producers have served Edison with notices that they plan
to
cancel their contracts.

??Gas-fired generators account for about two-thirds of the electricity
produced
by the alternative energy group.

??The California Independent System Operator, keeper of the state's power
grid,
reports that there continues to be a roughly 3,000-megawatt reduction in
output
from the alternative energy producers. The daily sum is enough power to
supply 2
million to 3 million typical homes.

??"It clearly shows the problem hasn't been fixed," said Jan Smutny-Jones,
executive director of the Independent Energy Producers.

??California is home to nearly 700 producers of alternative and renewable
energy, which as a group provide more than a quarter of the electricity used
by
consumers.

??Some of the producers have gone offline or reduced supplies for maintenance
reasons, but others have cut back because they have not been paid by Edison
since November or have received only partial payments from PG&E.

??The drop in output has at times forced the state to purchase replacement
supplies on the pricey spot market for electricity and contributed to rolling
blackouts last month. The latter event prompted Gov. Gray Davis to propose a
plan to get the generators up and running again.

??Consequently, the PUC established a new rate plan for the producers and
ordered the utilities to begin fully paying them beginning this month. The
payment goal would be accomplished in part by slashing the rates that PG&E and
Edison must pay the producers.

??But the PUC action appears to have compelled a growing number of gas-fired
generators to file lawsuits in an effort to be released from their contracts
with the utilities and be paid the millions they are owed.

??Bloom contends that the new rate plan will force some producers to operate
at
a loss because it does not adequately compensate for their gas expenses. He
said
he expects generators to challenge the plan in court or before the Federal
Energy Regulatory Commission.

??Smutny-Jones contends that the plan wrongly assumes that all natural gas
used
by his members can be piped in from the Oregon border, where the price of
natural gas is cheaper. The producers, he added, are seeking assurances that
they will be paid realistic rates by the utilities for future deliveries.

??Utilities are scheduled to pay the first round of reduced rates, as ordered
by the PUC, early next week. Both utilities have indicated that they plan to
make the first round of payments.

??Edison officials said Friday they have been served with 10 producer
lawsuits.
They say they fear that if the generators are let out of their contracts, they
could sell their supplies out of state, which could in turn cause rates to
rise
for California consumers because it would reduce supply.

??PG&E spokesman John Nelson said in an interview last week before the
bankruptcy filing that PG&E has been served with two such lawsuits. He said
his
company is also concerned about the PUC rate plan and whether it truly lowered
the rates PG&E must pay the alternative producers and whether there would be
enough money in the rates paid by customers to turn around and pay the
producers.

??"We're concerned that the commission decision does not solve the problem,"
Nelson said.

??A Davis spokesman said last week that the administration is still working on
the issue of money owed to the producers and that the administration is
continuing to work with the PUC to get more generators back online.

??Observers believe the number of producer lawsuits will grow because most
cases to date have been aimed at Edison. The utility has not paid its
producers
since November and has fought to have its rates slashed.

??By comparison, PG&E has made efforts to partially pay its producers in
recent
months and to keep them informed of their financial situation.

??A Bankruptcy Court is expected to decide whether to affirm the contracts of
producers who sell to PG&E or to free them to sell their power elsewhere.

??An Imperial County judge has already freed CalEnergy, a small geothermal
producer, from its contract with Edison because of Edison's failure to pay the
company. The court has delayed ruling on CalEnergy's request for $ 99 million
in
back payments until April 16--the day the utility is expected to begin paying
its alternative generators.

??Since it quit transmitting 270 megawatts to Edison last month, CalEnergy has
been selling its electricity to El Paso Energy, a marketing company that
resells
power on the spot market. If other generators are able to repeat the pattern,
it
could further reduce state energy supplies, particularly this summer, when
every
megawatt will be needed to avoid blackouts.

LOAD-DATE: April 9, 2001

???????????????????????????????2 of 4 DOCUMENTS

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

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

????????????????April 7, 2001, Saturday, Late Edition - Final

SECTION: Section A; Page 1; Column 4; National Desk

LENGTH: 1174 words

HEADLINE: California's Largest Utility Files for Bankruptcy

BYLINE: ?By LAURA M. HOLSON

DATELINE: LOS ANGELES, April 6

BODY:

??The Pacific Gas and Electric Company, California's largest investor-owned
utility, filed for bankruptcy protection today, declaring that politicians and
regulators had not moved quickly enough to resolve an energy crisis that has
caused periodic rolling blackouts and is costing the state billions of
dollars.

??The filing, which seeks reorganization under Chapter 11 of the bankruptcy
code, shifts decision-making about crucial aspects of the California energy
debacle from officials in Sacramento, the state capital, to a federal
bankruptcy
court in San Francisco, where Pacific Gas and Electric has its headquarters.

???The utility hopes to have more success in court in trying to win relief
from
$9 billion in wholesale energy debt it says it has incurred since prices began
soaring last May. Legislators and regulators have been loath to bail out
Pacific
Gas and Electric or the No. 2 utility, Southern California Edison, whose
billions in debt to wholesalers and marketers stem from flawed state
deregulation that did not allow the utilities to pass on rising costs to
consumers.

??The filing came as a surprise to many, particularly Gov. Gray Davis, who in
a
televised speech only Thursday night reversed his stand against electricity
rate
increases, acknowledging that consumers would have to pay more.

??For months, the two utilities had complained that they were running out of
cash and had demanded that rates be increased to cover their costs, but they
had
not made good on any threat to file for bankruptcy. The reason, in part, was
that the governor's office, in trying to forestall a greater sense of
uncertainty surrounding the energy crisis, was negotiating to keep the
utilities
solvent by buying their transmission lines.

??On Tuesday, executives from Pacific Gas and Electric met for four hours with
the governor's negotiators. On Thursday, Wall Street analysts said they had
been
told by the governor's representatives that there were hopes some resolution
could be reached. That night the governor proposed a plan, with rate
increases a
centerpiece, that he said would help pay off the utilities' debts.

??In the end, none of this was enough for Pacific Gas and Electric. In a
conference call with reporters today, Robert D. Glynn Jr., chairman of the
utility and of its parent company, the PG&E Corporation, said the governor was
not moving fast enough, having delayed a face-to-face meeting for weeks.

??"We've heard a lot of the words that have been involved, but we have not
seen
a lot of actions," Mr. Glynn said. "The regulatory and political processes
have
failed us, and now we are turning to the court."

??Mr. Glynn said the bankruptcy filing would not affect customer service. And,
he said, it involves only Pacific Gas and Electric, which operates in Northern
and Central California, and not the parent company itself or its other units.

??Southern California Edison, meanwhile, said today that it would continue to
try to reach an agreement with the governor.

??Responding to the announcement by Pacific Gas and Electric, Governor Davis
said the company had "dishonored itself."

??"This action was unnecessary," he said. "They've caused undue alarm. PG&E
was
not pushed into bankruptcy, but plunged themselves into bankruptcy for their
own
strategic advantage -- not the best interests of the people of California."

??A few months ago, in a move widely criticized by consumer groups and
legislators, the PG&E Corporation took steps to ensure that the assets of its
other subsidiaries would not be seized in case of a Pacific Gas bankruptcy.
Just
this week the State Public Utilities Commission said it would investigate
whether Pacific Gas and Electric, Southern California Edison and the state's
No.
3 investor-owned utility, San Diego Gas and Electric, had engaged in any
financial misconduct by funneling billions to their parent companies to pay
dividends and repurchase stock.

??Trading in PG&E stock was halted briefly today. When it resumed, the price
quickly fell by nearly 40 percent. By day's end, the stock of Edison
International, parent of Southern California Edison, had also dropped sharply,
by 35 percent.

??That Pacific Gas and Electric, which helped design the deregulation that
brought on the California power crisis, would now take so drastic a step both
concerned and puzzled analysts. "It doesn't make sense, because the governor
endorsed the rate increase the utilities had been asking for," said Susan
Abbott, head of the power group at Moody's Investors Service in New York.

??But Ms. Abbott also noted that the rate increases -- varying from 10 percent
to 37 percent, on top of a 9 percent surcharge adopted by the state this
winter
-- would not entirely eliminate the debt accumulated by the utilities as a
result of deregulation. "There were a lot of people who said, 'Great, the
utilities' problems are over,' " she said. "But they are not."

??The bankruptcy petition filed by Pacific Gas and Electric reported assets of
$24 billion and debts of $18 billion. In his talk with reporters, Mr. Glynn
said
the company was still incurring $300 million in monthly wholesale energy costs
that it had no way of paying. But his biggest concern, aside from the stalled
negotiations with the governor, is the Public Utilities Commission.

??For instance, Mr. Glynn complained about the commission's recent change to
the utilities' accounting practices, a step he said would make it even more
difficult for Pacific Gas to recoup any losses. The commission has also said
it
is the state, which has had to step in as a middleman buying power for the
utilities because many suppliers have cut off their credit, that will be the
first to be paid money flowing from the rise in consumer rates.

??In any event, moving into the bankruptcy court the debate over debt that has
already been incurred should resolve a question that the parties to the issue
have been unable to settle: who indeed will get paid first? Analysts say the
bankruptcy judge, Dennis Montali, will have to consider several issues, in
particular that electricity is a vital necessity.

??That being the case, it is likely that the power generators, which have been
called price gougers and pirates but have supplied the state with enough
energy
to keep the lights on, will have priority among the creditors. That is good
news
for many of the state's smaller generators, many of which were forced to shut
their doors when Pacific Gas and Electric made only partial payments to them.
After that, analysts say, bondholders will most likely be next in line,
although
all this will await a judgment by the court, which among other things must
also
decide what priority the state enjoys.

??"It's going to help focus in a very specific, objective order the manner in
which their financial situation gets sorted out," said Jan Smutny-Jones,
executive director of the Independent Energy Producers Association, which
represents power generators in the state. "The thing to do when you get in a
hole is stop digging. They did that today."

??http://www.nytimes.com

GRAPHIC: Photo: A Pacific Gas and Electric crew at work yesterday on power
lines
in San Francisco. The company has filed for federal bankruptcy protection.
(Associated Press)(pg. A10)

LOAD-DATE: April 7, 2001

???????????????????????????????3 of 4 DOCUMENTS

??????????????????Copyright 2001 McClatchy Newspapers, Inc.

????????????????????????????????Sacramento Bee

?????????????????April 7, 2001, Saturday METRO FINAL EDITION

SECTION: MAIN NEWS; Pg. A23; POWER CRUNCH

LENGTH: 507 words

HEADLINE: Natural gas project OK'd

BYLINE: David Whitney Bee Washington Bureau and Carrie Peyton Bee Staff Writer

DATELINE: WASHINGTON

BODY:

??The Federal Energy Regulatory Commission gave quick approval Friday to a
project that will increase natural gas deliveries for electric power
generation
in California this summer.

??And in a move that intensified the conflict over who should pay for
California's emergency power needs, FERC also ruled that the state grid
operator
must find "creditworthy" buyers for all power it procures. The decision could
either drive up electricity prices by removing a state negotiating tool or
increase the risk of rolling blackouts, or both.

??The action to approve a project from the Williams Cos. comes just three
weeks
after the firm applied for a certificate to add compression stations and other
equipment along its Kern River Transmission Co. line from Wyoming to
Bakersfield.

??With the new stations and equipment, said Williams spokeswoman Beverly
Chipman, the company will be able to deliver an additional 135 million cubic
feet of natural gas into California - enough to generate power for 750,000
homes, she said.

??Chipman said that ordinarily it takes six months to a year to move an
application through FERC. This one sailed through in record time at the
urgings
of the governors of California, Nevada, Utah and Wyoming, she said.

??The $81 million project will include new compression stations in Utah and
California and the upgrading of compressors units in Wyoming, Utah and Nevada.

??"We are prepared to do whatever we can to rush supplies to West Coast
markets," said FERC chairman Curl Hebert Jr.

??FERC's decision on power sales affects the state Independent System
Operator,
which operates the electrical grid. For weeks, the state Department of Water
Resources has been opting to buy less power than California needs when it
feels
prices are too high. The rest - sometimes 1,000 to 2,000 megawatts per hour -
has been bought by the ISO, which operates from Folsom.

??PG&E estimated Friday that the ISO purchases have added about $300 million a
month to its debts. Power sellers, afraid the ISO would not be paid by PG&E or
Southern California Edison, asked federal regulators to force the ISO to find
a
creditworthy buyer or stop compelling sales.

??FERC had ruled on the issue in February, and on Friday it reinforced that
ruling, saying the ISO misinterpreted its earlier decision and must comply.

??The ruling could increase pressure to find "creative" solutions to who will
pay for California's power, said Jan Smutny-Jones, head of the Independent
Energy Producers Association. "Obviously the ISO doesn't have the money and
the
utilities don't have the money either. The question is, where do we go from
here," he said. "My hope is that it does not make blackouts more likely."

??The state hasn't decided whether it will appeal the decision, said Roger
Salazar, a spokesman for Gov. Gray Davis. But he said the federal ruling
appears
to make it likely that California will have to buy more electricity on the
utilities' behalf.

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

LOAD-DATE: April 8, 2001

???????????????????????????????4 of 4 DOCUMENTS

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

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

???????????????????????????April 7, 2001, Saturday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K3364

LENGTH: 1209 words

HEADLINE: Filing for Chapter 11 may help PG&E's debt but it won't solve power
crisis

BYLINE: By Brandon Bailey

BODY:

??SAN JOSE, Calif. _ Filing for bankruptcy protection may help PG&E with its
debts, but it won't solve the state's power crunch.

??Power suppliers promised Friday that they will continue to deliver
electricity for California consumers, which means the lights will stay on for
now. But experts and industry spokesmen say that supply won't be enough to
prevent the shortages and rolling blackouts that state officials have
predicted
for this spring and summer.

??"The summer crisis will still happen," said Bill Highlander of Calpine
Corp.,
a San Jose-based energy producer. "It's a matter of supply and demand."

??In addition, many experts agreed Friday that Pacific Gas & Electric Co.'s
bankruptcy filing could have little immediate impact on other problems that
are
plaguing the state's power system: soaring wholesale prices, congested
transmission lines and aging generating plants.

??But some said the action eventually could lead to more rate increases for
consumers, beyond those proposed by Gov. Gray Davis and the state Public
Utilities Commission in recent weeks.

??The reason lies in the fact that a bankrupty judge doesn't have a magic
wand.

??The court can make sure suppliers fulfill their existing contracts by
guaranteeing that they will be paid for future deliveries, placing them ahead
of
creditors who are only seeking payment for past debts. A judge may be able to
order PG&E's customers to pay higher rates _ or at least the court can put
pressure on state regulators to authorize rate hikes.

??But a judge can't order PG&E's suppliers to build new power plants or speed
up expansion of existing generators. Analysts also said they don't believe a
judge has the authority to limit wholesale prices on the spot market, where
much
of the state's energy is still bought and sold.

??PG&E has said it's been unable to pay its suppliers because it has a
multibillion-dollar deficit from buying power at wholesale prices that the
state
won't allow it to pass on to consumers. Instead, the state of California has
been buying power for PG&E and Southern California Edison while attempting to
negotiate a bailout for both utilities.

??Some industry spokesmen expressed hope that the bankruptcy filing would give
PG&E suppliers more assurance about getting paid in the future _ and prevent
the
state's energy markets from careening further out of control.

??Still, other analysts warned that if the filing delays payment to smaller
power generators, who provide up to a third of the state's supply, it could
drive more of them out of the market.

??"I just don't see any upside to this at all," said Peter Navarro, a
professor
of economics and public policy at University of California-Irvine, who has
closely followed the effects of deregulation on the state's energy industry.

??Spokesmen for some of the state's largest generators, including Calpine,
Duke
Energy and Dynegy Inc., said PG&E's action would have no effect on their
operations.

??"It really shouldn't have any effect on our putting output into the grid,"
said Tom Williams of Duke Energy, which owns three power plants in Northern
California.

??In large part, that is because these companies have not been selling
directly
to PG&E for several months. Since the utility began developing financial
problems last fall, several major suppliers said they have been negotiating
contracts with other buyers. Dynegy, for example, has committed its output in
contracts with the state of California. Duke has agreements with other
wholesale
energy buyers and traders.

??If the bankruptcy filing allows PG&E to reorganize its debts and eventually
re-enter the energy market on a more stable footing, Steve Stengel of Dynegy
said, "today's action could actually be a catalyst to moving forward toward a
long-term solution."

??But a number of small generators have already shut down their plants because
PG&E and Southern California Edison, the state's other major utility, haven't
paid for past deliveries. That has kept about 3,000 megawatts off-line and
contributed to shortages that caused the state's Independent System Operator
to
declare power alerts on several days last month.

??As the weather gets warmer, the Independent System Operator has warned that
shortages will get worse. And the prospects for bringing those small
generators
back online are uncertain.

??Some of those small producers have said they may have to file for bankruptcy
protection themselves. One spokesman said companies that are currently
operating
their plants will continue in operation for at least 30 days, until they see
what the bankruptcy court will do.

??But if the court doesn't authorize a plan for paying those companies what
they are owed, both for past deliveries and future energy production, Jan
Smutny-Jones of the Independent Energy Producers Association warned, some
small
firms may ask the court to excuse them from their contracts with PG&E.

??That could allow the small producers to sell their electricity on the spot
market, where prices are generally higher than what the generators were
promised
in their utility contracts, Smutny-Jones added. That could leave the state
buying even more power at higher prices.

??While the state has been buying most of the power delivered to utility
customers, the Independent System Operator has continued to make some
spot-market purchases directly on behalf of the utilities. The ISO makes those
last-minute purchases to meet the state's electricity needs when the state has
been unable to purchase enough power in advance.

??In a separate development Friday, federal authorities ruled that generators
cannot be forced to sell power to the ISO if there is no guarantee of payment.
And some analysts suggested that PG&E's bankruptcy filing may jeopardize the
ISO's ability to make last-minute purchases on the utility's behalf.

??A spokesman for Gov. Gray Davis, however, told the Associated Press that the
state may simply step in to guarantee payment on those transactions. And an
ISO
spokeswoman said her agency is confident it will be able to continue those
transactions.

??But few experts held out hope Friday that a bankruptcy court would order
suppliers to reduce their prices, which have soared in recent months.

??While the court might force suppliers to accept a reduction in payment for
past deliveries, "I don't think it's going to be able to affect prices going
into the future," said consumer group attorney Mike Florio, who sits on the
ISO
governing board.

??As for the prices that individual consumers pay, many suppliers have argued,
along with PG&E, that the utility needs to be able to raise its retail rates
even more than already proposed.

??While consumer advocates contend that any rate increases are unjustified,
industry analysts said they are hopeful a judge will be convinced otherwise.

??"I think the long-term result will be that rates will increase more than
what
has been talked about already," said Brian Youngberg, an analyst for the Wall
Street firm Edward Jones Inc.

??(staff writer Deborah Lohse contributed to this report.)

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

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

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

JOURNAL-CODE: SJ

LOAD-DATE: April 7, 2001

ADVISORY/More Power to You Organizers to Conduct First Town Hall-Focus Group
Meeting on Energy in San Diego

Business Wire
04/09/01, 11:00a
(Copyright , 2001, Business Wire)

--(BUSINESS WIRE)--

??????New Watchdog Group Urges Californians to Voice Concerns,
?????????????????Suggest Solutions to Energy Crisis

WHO: ???Peter Foy, California small business owner and chairman of
???????the grassroots watchdog organization More Power to You.

???????Dr. Frank Luntz, one of America's leading public opinion
???????experts for news media covering politics and public policy.

???????San Diego residents concerned about the impact of the current
???????energy crisis.

WHAT: ??The event is the first of a series of Town Hall-Focus Group
???????meetings on the energy crisis that More Power to You will
???????conduct statewide. Their purpose is to provide a platform for
???????the people who pay the electric and gas bills, and pay the
???????taxes, to have a voice in the energy crisis discussion, which
???????has thus far been dominated by politicians and bureaucrats --
???????the very people who helped create the mess we are now trying
???????to clean up. The meeting will be moderated by renowned
???????pollster Dr. Frank Luntz and hosted by More Power to You
???????chairman Peter Foy.

???????San Diegans will be the first that More Power to You turns to
???????for ideas to ensure California has energy for the future at a
???????fair price.

WHEN: ??Wednesday, April 11 at 7 p.m.

WHERE: ?Mission Valley Marriott
???????8757 Rio San Diego Drive
???????Mission Valley

BACKGROUND: More Power to You is a new, grassroots watchdog
???????????organization dedicated to letting the people of California
???????????speak out about the state's energy crisis. More Power to
???????????You chairman Peter C. Foy is a small business owner who
???????????provides insurance, personnel and human resource
???????????management services to other small- to mid-sized
???????????businesses; his company employs 34 people and is located
???????????in Woodland Hills. Pollster and event moderator Dr. Frank
???????????Luntz has conducted political and news program focus
???????????groups for all three major networks and two of the three
???????????cable news channels, PBS and the BBC, as well as national
???????????print media such as The Wall Street Journal and U.S. News
???????????& World Report.

???CONTACT: The Johnson Group
????????????Patricia Johnson/Linda Carlson, 818/703-8329
????????????????????????????????????????????818/399-6811 (cell)

PR Newswire

??????????????????April 9, 2001, Monday 9:01 AM Eastern Time

SECTION: FINANCIAL NEWS

DISTRIBUTION: TO BUSINESS AND ENERGY EDITORS

LENGTH: 1036 words

HEADLINE: PG&E Bankruptcy Will Not Affect Calpine's Commitment to California
Power Market

DATELINE: SAN JOSE, Calif., April 9

BODY:

??In response to Pacific Gas and Electric Company's (PG&E) April 6th Chapter
11
filing, Calpine Corporation (NYSE: CPN), the San Jose, Calif.-based
independent
power company, stated it is confident that PG&E, through a successful
reorganization, will be able to pay Calpine's Qualifying Facility (QF)
subsidiaries for all past due power sales, in addition to electricity
deliveries
made on a going-forward basis.

???Calpine's QF subsidiaries sell power to PG&E under the terms of long-term
QF
contracts at eleven facilities, representing nearly 600 megawatts of
electricity
for Northern California power customers. ?As of March 31, 2001, Calpine has
recorded approximately $267 million in accounts receivable with PG&E, plus a
$68
million note receivable not yet due and payable. ?The company's remaining
California operations, totaling approximately 700 megawatts of capacity,
provide
electricity to municipalities and other creditworthy third parties.

???Calpine's QF facilities are part of a 9,000-megawatt QF supply that provide
California customers with a long-term source of electricity at prices
significantly below current wholesale prices. ?This critical power supply
represents approximately 33 percent of the state's power demand. ?Without
these
contracts in place for this summer, California faces the prospect of more
blackouts and hundreds of millions of dollars in increased costs.

???For these QF contracts to continue, PG&E must assume the contracts in the
bankruptcy proceedings. ?In order to assume these contracts, PG&E will be
required to cure all outstanding defaults, including paying all past due
amounts. ?If PG&E fails to assume the contracts, Calpine's QF subsidiaries
will
be able to sell power on the open market and seek damages from PG&E for breach
of contract through the bankruptcy claims resolution process.
????"As the state's leading developer of new electric generating facilities,
Calpine remains committed to providing innovative solutions for California's
energy crisis," stated Calpine CEO Peter Cartwright. ?"Calpine's natural gas
and
geothermal Qualifying Facilities offer a critical, immediate and long-term
electricity supply for California power consumers at attractive prices. ?We
will
continue to work with PG&E to resolve these issues and will be actively
involved
in all bankruptcy proceedings to ensure California power consumers can benefit
from these vital energy resources."

???Calpine will host a conference call to discuss PG&E's Chapter 11 filing
today at 8:30 a.m. Pacific Daylight Time (11:30 a.m. Eastern Daylight Time).
The
call is available in a listen-only mode by dialing 800-370-0906 five minutes
prior to the start of the conference call. ?International callers should dial
973-872-3100. ?In addition, Calpine will simulcast the conference call live
via
the Internet today. ?The webcast can be accessed and will be available for 30
days on the investor relations page of Calpine's website at www.calpine.com.

???Based in San Jose, Calif., Calpine Corporation is dedicated to providing
customers with reliable and competitively priced electricity. ?Calpine is
focused on clean, efficient, natural gas-fired generation and is the world's
largest producer of renewable geothermal energy. ?Calpine has launched the
largest power development program in North America. ?To date, the company has
approximately 31,200 megawatts of base load capacity and 6,500 megawatts of
peaking capacity in operation, under construction and in announced development
in 28 states and Canada. ?The company was founded in 1984 and is publicly
traded
on the New York Stock Exchange under the symbol CPN. ?For more information
about
Calpine, visit its website at www.calpine.com.

???This news release discusses certain matters that may be considered
"forward-looking" statements within the meaning of Section 27A of the
Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934,
as amended, including statements regarding the intent, belief or current
expectations of Calpine Corporation ("the Company") and its management.
Prospective investors are cautioned that any such forward-looking statements
are
not guarantees of future performance and involve a number of risks and
uncertainties that could materially affect actual results such as, but not
limited to, (i) changes in government regulations, including pending changes
in
California, and anticipated deregulation of the electric energy industry, (ii)
commercial operations of new plants that may be delayed or prevented because
of
various development and construction risks, such as a failure to obtain
financing and the necessary permits to operate or the failure of third-party
contractors to perform their contractual obligations, (iii) cost estimates are
preliminary and actual cost may be higher than estimated, (iv) the assurance
that the Company will develop additional plants, (v) a competitor's
development
of a lower-cost generating gas-fired power plant, and (vi) the risks
associated
with marketing and selling power from power plants in the newly competitive
energy market. ?Prospective investors are also cautioned that the California
energy environment remains volatile, especially in light of Pacific Gas and
Electric Company's Chapter 11 bankruptcy filing, including uncertainties and
delays inherent in the bankruptcy process, where the court sits as a court of
equity and must reconcile the competing interests of multiple parties. ?The
Company's management is working closely with a number of parties to resolve
the
current uncertainty, while protecting the Company's interests. ?Management
believes that a final resolution will not have a material adverse impact on
the
Company. ?Prospective investors are also referred to the other risks
identified
from time to time in the Company's reports and registration statements filed
with the Securities and Exchange Commission.

??SOURCE Calpine Corporation

CONTACT: Bill Highlander, 408-995-5115, ext. 1244, or investors, Rick Barraza,
408-995-5115, ext. 1125, both of Calpine Corporation

URL: http://www.prnewswire.com

LOAD-DATE: April 9, 2001

??????????????????????????????3 of 305 DOCUMENTS

???????????????????????Copyright 2001 Associated Press

??????????????????????????????????AP Online

?????????????????April 9, 2001; Monday 5:13 AM, Eastern Time

SECTION: Financial pages

LENGTH: 970 words

HEADLINE: ?Governor Davis, Utility Toss Blame

BYLINE: GARY GENTILE

DATELINE: LOS ANGELES

BODY:

???Gov. Gray Davis and Pacific Gas & Electric executives traded acrimonious
barbs but no solutions as the state's largest utility headed into bankruptcy
court claiming $9 billion in debts.

??On Sunday, Davis appeared on two nationally televised news programs to
berate
PG&E for awarding an estimated $50 million in bonuses and raises to about
6,000
midlevel managers and support staff on the eve of its filing for bankruptcy
protection Friday.

??''Management at PG&E is just focused upon padding their own pockets, not in
discharging their duty to serve their many customers in California,'' Davis
said
on ABC's ''World News Tonight.''

??Earlier, Davis had issued a statement saying PG&E ''management is suffering
from two afflictions: Denial and greed.''

??In response, PG&E defended their employee bonus package and took a swipe at
the governor.

??''Instead of focusing all his attention on solving the state's yearlong and
ever-worsening energy crisis, the governor has launched a campaign-style
attack
on our company,'' a PG&E statement read.

??The rancor came at the start of a hectic week. A San Francisco bankruptcy
judge was to hold PG&E's first bankruptcy hearing Monday or Tuesday to
determine, among other priorities, which creditors will be paid and in what
order.

??Davis, meanwhile, was still locked in faltering negotiations with Southern
California Edison, the state's second-largest utility, which also claims the
state's flawed 1996 deregulation law is the cause of its financial woes.

??Davis is hoping to strike a deal to buy Edison's share of the power
transmission system for $2.76 billion, which would provide Edison with a
much-needed cash-flow to restructure its debt.

??SoCal Edison executives have said they would continue negotiations with
Davis, but weekend talks in San Francisco failed to resolve any of the
outstanding issues on the table, said Davis' spokesman Steven Maviglio.

??Edison was to file an update on its financial condition with the Securities
and Exchange Commission on Monday.

??___

??On the Net:

??Pacific Gas and Electric Co.: http://www.pge.com

?????(PROFILE

?????(CO:Pacific Gas and Electric; TS:PCG; IG:ELC;)

?????(CO:Southern California Edison Co.; TS:SCE;)

?????)

LOAD-DATE: April 9, 2001

??????????????????????????????4 of 305 DOCUMENTS

???????????????????????Copyright 2001 Associated Press

??????????????????????????????????AP Online

?????????????????April 8, 2001; Sunday 7:17 PM, Eastern Time

SECTION: Financial pages

LENGTH: 408 words

HEADLINE: ?PG&E Investors Worry About Nest Eggs
DATELINE: SAN FRANCISCO
BODY:

???Stocks that were once thought to be as safe as the bank plummeted with
Pacific Gas and Electric Co.'s bankruptcy filing last week, leaving many
investors with empty nest eggs.

??''About all it's good for now is that I can light a fire with it,'' said
J.P.
Abbott, 80, a retired Walnut Creek transportation executive.

??Abbott and his wife have been reinvesting dividends from their 500 shares of
PG&E stock for the past 20 years. They had recently been talking about cashing
out, but weren't quick enough to beat Friday's news.

??PG&E filed for federal bankruptcy protection hours after Gov. Gray Davis
delivered a public speech Thursday about the state's energy crisis.

??PG&E Corp. Chairman Robert Glynn said negotiations with Davis had broken
down, and Chapter 11 was the only alternative left to alleviate the company's
$9
billion debt it accumulated from buying energy for customers whose rates were
capped.

??''We've heard a lot of the words that have been involved, but have not seen
a
lot of actions,'' Glynn said.

??Shares of PG&E Corp. stock fell more than 37 percent Friday when trading
resumed after a halt of more than two hours. The shares closed at $7.20, down
$4.18, on the New York Stock Exchange. The 52-week high was $32.50.

??The company was founded in 1905, and by 1935 it was Northern California's
dominant supplier of gas and electricity and a stable place to invest money.

??Over the years, many of it's employees bought stock. The utility estimates
80
percent of them own shares.

??Don Gregory, 69, of San Rafael kept 3,000 shares, or one-third, of his PG&E
stock after retiring from the company in 1987. Now he wishes he'd sold it all
while times were good.

??A federal bankruptcy judge will now provide a framework for PG&E's creditors
to collect some of their money, while allowing the utility to operate
normally.

??The judge also has the power to order consumers to pay PG&E's debts.

??In filing for Chapter 11 federal bankruptcy protection, PG&E said it also
has
$2.6 billion in cash and bills of $4.4 billion.

??California utilities, including PG&E, are struggling with massive debts
related to the state's power crisis. Utilities have been crippled by
skyrocketing wholesale energy prices, which they haven't been able to pass
along
to consumers under the rules of a recent deregulation of the state's power
market.

?????(PROFILE

?????(CO:Pacific Gas and Electric; TS:PCG; IG:ELC;)

?????)

LOAD-DATE: April 8, 2001

??????????????????????????????6 of 305 DOCUMENTS

??????????????Copyright 2001 Bulletin Broadfaxing Network, Inc.

??????????????????????????The Bulletin's Frontrunner

????????????????????????????????April 9, 2001

LENGTH: 1419 words

HEADLINE: California Governor, PG&E Trade Shots In Wake Of Utility's
Bankruptcy
Filing.

BODY:

??ABC News (4/8, story 4, Muller) reported last night, "Reaction was swift and
angry to the news that, just hours before declaring bankruptcy, PG&E awarded
$50
million in bonuses to some 6,000 employees." Gov. Gray Davis was shown saying,
"Management at PG&E is just focused on padding their own pockets, not in
discharging their duty to serve their many customers in California." ABC
added,
"PG&E, in turn, criticized the Governor for launching a campaign-style attack,
adding that the bonuses went not to senior executives but to midlevel
employees
who 'had worked tirelessly through this crisis.' And, in fact, bankruptcy
attorneys say such payments are not unusual during Chapter 11 reorganization.
.
Reasonable or outrageous, all this bickering has fueled the animosity between
the Governor and the utility. And that worries even the Governor's allies in
the
state capital. . Certainly, the stakes are high. If the state cannot resolve
its
energy crisis, the economy will suffer, far beyond the borders of California."
The Washington Post/Reuters (4/9) reports that PG&E "defended its award of $50
million in employee bonuses a day before declaring bankruptcy. 'The money was
part of our employees' overall compensation package. Part of it is based on
the
financial condition of the company, and part is based on meeting departmental
targets,' Ron Low, a spokesman for Pacific G&E, a unit of PG&E Corp., said
today." The Los Angeles Times (4/9) editorializes, "The bankruptcy of Pacific
Gas & Electric has legal scholars puzzling over how federal court supervision
of
the debt-ridden utility will affect rate-setting, sale of assets such as the
transmission system and the state's role in the crisis. ?And that's apart from
figuring out how it affects Southern California Edison, the chief private
utility in the southern part of the state. Despite executives' denials of any
bankruptcy plans, will Edison be forced into the same boat? Even with all
these
questions, a good shake can have benefits." The Times adds, "If PG&E's
bankruptcy speeds debt resolution and focuses the governor and Legislature on
reforming the state's power generation, transmission and pricing systems,
business will welcome any increase in predictability. Californians are starved
for answers. The federal court's involvement, despite the grave circumstances,
could provide some."

??Cheney Says Administration Has Responded "Very Aggressively." Vice President
Dick Cheney, asked on "Meet The Press" (4/8), whether the power shortage in
California was just a California problem said, "No, it's not. We've in fact
responded very aggressively to Governor Davis's request. We've approved
virtually every request he's made, in terms of speeding up the permitting
process, so they can get the permits they need. We have dealt as effectively
as
possible, much more effectively than the Clinton administration ever did.
Separate and apart from that, of course, the President is the first one in a
long time to put together a task force, which I chair now, to develop a
national
energy policy to deal with these kinds of problems in the future. But for the
Democrats to be making noises that somehow we've been in office now 10 weeks
and
the shortage of power in California is something we caused is just silly."

??Bankruptcy Judge Profiled. The Los Angeles Times (4/9, Dolan) profiles US
Bankruptcy Judge Dennis Montali, "who will oversee Pacific Gas & Electric Co.
's
bankruptcy reorganization." The Times reports Montali "is a highly respected
scholar and effective mediator known for persuading reluctant parties to reach
agreement. In a recent case, Montali achieved in only three days a settlement
between a debtor and creditors in the bankruptcy of an international
engineering
firm. The case had been in bruising litigation for two years when another
judge
asked Montali to mediate it." The Times adds, " He will be calling the shots
in
one of the largest bankruptcy reorganizations in US history. The case raises
unprecedented legal questions and is expected to make new law. Some of the
legal
disputes may wind up before the US Supreme Court, attorneys said. Lawyers who
know the easygoing, witty judge say he is probably relishing this legal
challenge the way a golfer looks forward to playing a new and more difficult
course. The court action begins today, when Montali is expected to decide
whether PG&E can spend cash that others have laid claims to." The New York
Times
(4/9, Holson) reports that experts "are divided about how much power Dennis
Montali.can wield. First, there is little case history for Judge Montali to
rely
on. Previous utility bankruptcies have dealt with different issues and paled
in
comparison to Pacific Gas and Electric's troubles, which is the largest
investor-owned utility bankruptcy filing in history and the third-largest
corporate bankruptcy ever. Second, industry experts say that any rate
increases
included in the utility's reorganization plan would have to be approved by the
California Public Utilities Commission." The Times adds, "The judge will have
to
sort out which creditors get paid first. Most analysts think that the power
generators will be first in line. But whether the money from any rate
increases
will be funneled to the state, which has been buying electricity on behalf of
the troubled utilities, or to the utilities will be hotly debated in court. If
the bankruptcy judge decides to side with utilities, that could jeopardize the
state's already tenuous plan to issue as much as $14 billion in revenue bonds,
which would be used to help cover the state's energy spending." The Times also
reports, "Whatever the outcome, Pacific Gas and Electric will not be able to
escape what it seems to be trying to avoid: a political solution. Governor
Davis
and regulators will still play a role in resolving the broader energy crisis
here despite critics who say they have failed miserably thus far. The judge,
too, will have to negotiate over rate increases with the Public Utilities
Commission -- which will be keeping more than a watchful eye on the
proceedings
-- when a plan is adopted."

??Publicity Aside, California Still Pays Less For Power Than Several States.
The Los Angeles Times (4/9, Slater) reports, "For all its energy notoriety and
outrage over surging electricity rates, California has plenty of company. Much
of the nation faces double-digit price hikes, and several states -- especially
in the East -- continue to pay more for electricity than California. .
Overshadowed by the rhetoric, lawsuits and rolling blackouts is the fact that
Californians have been paying less for electricity than residents in Rhode
Island, New Hampshire, Vermont, New York, Alaska and, by a longshot, Hawaii.
California, in fact, is barely in the top 10 when it comes to electrical
prices." The Times adds, "One of the reasons that Californians have been
paying
less is because they conserve more, with the average resident draining 40%
less
from the grid than the average American. Another reason, however, is that
California's rates have been frozen by law, even as the lids have been coming
off the prices in other states that are deregulating their utilities."

??Oklahoma Building 14 Power Plants In Hopes Of Generating Revenue From
Western
Power Crisis. ABC News (4/8, story 5, Simpson) reported last night, " The
power
crisis is not universally bad news. One state, Oklahoma, is betting that its
willingness to welcome power plants will pay off down the road." ABC
(Karlinsky)
added, "It is a power plant. Under construction even though the entire state
already has all the power it needs. 14 new power plants are being built
statewide. Private power producers are moving in with one goal -- to make
power
in Oklahoma and sell it to the rest of the country. . Much of the power will
be
exported to parts of the Southeast and Southwest where energy shortfalls
haven't
yet reached California proportions, but where demand is growing quickly.
Analysts say the state will make hundreds of millions of dollars in tax
revenue
while creating more than 20,000 jobs, revitalizing small towns like Coweta by
luring companies in with new tax incentives. Analysts say making electricity
could be the biggest boom to hit this state since the oil rush of the early
1900s. . With the nation's third largest supply of natural gas available to
run
the plants, the only obstacle so far has been finding enough transmission
lines
to get the power to the markets that need it."

LOAD-DATE: April 9, 2001

?????????????????????????????15 of 305 DOCUMENTS

??????????????????Copyright 2001 The Financial Times Limited

???????????????????????????Financial Times (London)

????????????????????April 9, 2001, Monday London Edition 1

SECTION: COMPANIES & FINANCE INTERNATIONAL; Pg. 28

LENGTH: 340 words

HEADLINE: COMPANIES & FINANCE INTERNATIONAL: Southern Edison says no to filing

BYLINE: By PAUL ABRAHAMS

DATELINE: SAN FRANCISCO

BODY:

??Southern California Edison, the state's second-biggest electricity
distributor, said over the weekend that it had no intention of emulating
Pacific
Gas & Electric, whose electricity distribution business on Friday filed for
Chapter 11 bankruptcy.

??On Saturday Southern Edison executives met Gray Davis, California's
embattled
governor. He spent the rest of the weekend with his legal team discussing a
strategy to ensure northern California's electricity supply.

??PG&E's decision to seek bankruptcy for its distribution operations, almost
immediately after Mr Davis made a rare state-wide television speech last
Thursday evening, is a serious embarrassment to the moderate Democratic
governor. During the address he had conceded the need for price rises of up to
40 per cent.

??Mr Davis had previously promised to prevent sharp increases in electricity
prices. He had also undertaken to stop the state's utilities declaring
bankruptcy following California's botched 1996 power deregulation. Mr Davis's
office said the governor had been surprised by PG&E's decision.

??The deregulation allowed for free pricing in California's wholesale
electricity market, but prevented distributors such as PG&E from passing on
increased costs to consumers. PG&E lost Dollars 8.9bn because of massive
increases in the cost of wholesale electricity that it could not recoup from
its
customers. Energy costs it should have reimbursed were running at Dollars
300m a
month. At the end March, the group had Dollars 2.6bn in cash and Dollars 4.4bn
of outstanding bills.

??The financial impact of PG&E's collapse is likely to be considerable. Among
PG&E's leading lenders are Bank of New York, which was owed Dollars 2.2bn in
September, as well as Bank of America, Wells Fargo and JP Morgan Chase.

??Bond insurance companies with exposure to California utilities debt include
MBIA and Ambac Financial Group, whose shares fell 9.3 per cent and 4.7 per
cent
respectively on Friday. MBIA said its direct net par exposure to PG&E was
about
Dollars 590m.

LOAD-DATE: April 8, 2001

?????????????????????????????16 of 305 DOCUMENTS

??????????????????Copyright 2001 The Financial Times Limited

???????????????????????????Financial Times (London)

?????????????????????April 9, 2001, Monday USA Edition 1

SECTION: GLOBAL INVESTING; Pg. 28

LENGTH: 729 words

HEADLINE: GLOBAL INVESTING: Hard sell expected for California bonds: While
details are sketchy, the state is hoping to help solve its power troubles
through the Dollars 10bn-Dollars 14bn issue,

BODY:

??California officials might have to draw on a hard-sell technique to lure
investors to the mammoth Dollars 10bn-Dollars 14bn bond issue the state hopes
to
sell to help solve its power troubles.

??But industry participants say the state probably plans to do just that,
rather than risk a lukewarm investor appetite for a complex municipal bond
deal
that would be a record for California and among the largest in the market's
history.

??"This issue will be well received (among investors) if the state does a good
job in detailing both the financing and flow of funds given the extraordinary
circumstances," said Steve Kelleher, senior vice president with bond firm
Sutro
& Co in San Francisco.

??The devil is in the details, said traders, and the state is about as short
on
specifics as it is on electricity reserves.

??Last week, the California Public Utilities Commission set an annual revenue
target of Dollars 3.35bn in collections from the utilities for power purchased
by the state on their behalf. Under state law, that amount allows for maximum
bond size of between Dollars 12bn and Dollars 14bn if the state opts to go
ahead
and issue the debt.

??In turn, proceeds from the bond sale, which is expected in May, would be
used
by the state to purchase more power.

??The state began buying power on behalf of PG&E Corp's Pacific Gas and
Electric unit - which filed for Chapter 11 bankruptcy on Friday - and Edison
International's Southern California Edison subsidiary in January. The
utilities
have run up more than Dollars 13bn in debt buying power on the spot wholesale
market, which they must sell at rates capped by state regulators well below
their costs.

??Proceeds from the bond sale are expected to be used to pay back the state's
general fund, which has already been tapped for billions of dollars in power
purchases, and to pay for long-term power contracts negotiated by Governor
Gray
Davis and power generators.

??Selling bonds is just one part of a contentious financial plan outlined by
Mr
Davis and state officials to combat the power crisis as the heavy summer usage
season nears.

??Warren Gordon, a manager on the tax-exempt trading desk with Charles Schwab
in San Francisco, said the muni market does not even know yet whether the
offering will comprise taxable and tax-exempt securities and what the
allocation
might be between the two.

??But he said that despite the state's power woes, the water authority has
been
historically "one of the strongest credits (in the marketplace) . . . a good
trading name," a record that might help win investor interest.

??Even as the state's general obligation debt was placed on credit watch by
rating agency Standard & Poor's earlier this year, the water resource
department
maintained its strong AA rating and stayed clear of credit watch owing to a
strong revenue surplus.

??Philip Angelides, state treasurer, has also proposed a bridge loan to help
the water authority, which has already spent about Dollars 4bn on power costs.
Longer-term bond proceeds would pay off the short-term loan.

??JP Morgan Chase, which has been named lead underwriter of the power debt,
previously said it could arrange a Dollars 3bn bridge loan until the bonds
could
be sold.

??"It's an interesting financing" plan, Mr Gordon said of the state's
proposal.
Remaining questions over the revenue stream to support the bonds leave the
market unclear whether the debt would be considered private-activity bonds or
bonds to be backed by money from the general fund, which can determine their
credit ratings and, essentially, the interest owed bondholders, Mr Gordon
said.

??Among other things, the CPUC must determine what part of recent consumer
rate
increases will go to the state and how much of any revenue stream from
consumer
bills would go to servicing debt on the bonds, the panel said.

??Mr Kelleher said the pending deal compares to the unprecedented bond sale by
the Long Island Power Authority a few years ago. For that deal, bond sellers
"went overboard in educating investors," he said.

??California officials "know that the market isn't going to swallow up a
Dollars 9bn to Dollars 14bn issue just because we're sunny and good looking.

??"The opinion in the broker-dealer arena is that there has so far been a lot
of noise and no music yet. We need to hear something that resembles music."
CBS.MarketWatch.com

LOAD-DATE: April 8, 2001

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??????????????????Copyright 2001 Securities Data Publishing

??????????????????????????Investment Dealers Digest

????????????????????????????????April 09, 2001

LENGTH: 868 words

HEADLINE: Stranded Cost Securitizations Take Off, But Don't Expect an
Avalanche
of Deals: Issuance hits $6 billion as California and courts cast a shadow

BYLINE: Mairin Burns (mairin.burns@tfn.com)

BODY:

??As the downside of electricity deregulation makes news in California, a
small
niche of the asset-backed securitization market that has developed as part of
the shift to competitive pricing is suddenly taking off. How far the sector
will
fly is another matter.
?Three so-called stranded cost securitizations have come to market this year,
raising the total issued to $6 billion. The latest, a $1.4 billion deal from
Connecticut Light and Power that closed 10 days ago, added vital liquidity to
a
market in which just one bond offering priced last year. The Connecticut deal
came on the heels of a benchmark $2.5 billion transaction from Public Service
Electric and Gas, and a $1.7 billion securization from Detroit Edison.
?Stranded cost securitizations first emerged in the mid-1990s as a way for
utilities to recoup their losses on unprofitable assets or investments, in
order
to prepare them for deregulation. To recoup those losses, some utilities are
requesting the right to force customers or competitors to pay them off. The
cash
flow from those payments is what's used to back the securities and pay off
bondholders.
?It's not clear how much growth potential exists in the stranded-cost market,
however. Consumer challenges have slowed the process in some states, and
California's woes may entice some states to resist deregulation altogether.
"The
example of California is a disincentive to restructure and has a chilling
effect
on elected officials as to the impact of changes in the electricity market,"
says Ellen Lapson, a managing director in the global power group at Fitch.
Other
states aren't sitting on unprofitable investments and so don't need to
securitize them.
?But the recent flurry of stranded cost securitizations should entice more
investors to the sector, making it worth their while doing the extensive
research involved. "The sheer size of these deals creates natural liquidity,"
says Gordon Sweely, managing director in structured finance trading at Lehman
Brothers. "More investors will look at the sector as a credit card substitute
with added spread."
?Indeed, the investor base for stranded rate securitizations is much the same
as
it is for credit card or auto-backed transactions. Stranded-cost buyers
demand a
slight premium based on the uniqueness of the asset. This typically amounts to
an extra five basis points for the shorter maturities, and around 12bps for a
10-year deal. In addition, the investor gets a diversification play and the
satisfaction of knowing that his or her investment is more secure than other
ABS
issues.
?That's because consumers need electricity. "The underlying receivables have a
lower default rate than almost any other type of receivables we know of," says
Fitch's Lapson. In addition, the costs are spread across a large group of
electricity consumers.
?The securities, which are structured so that they can receive a AAA-rating,
also are largely insulated from deteriorating credit conditions of the utility
that issues them. That's because consumers theoretically will be required to
pay
the costs regardless of what happens to the utility. As a result,
rating-agency
downgrades of California's two largest utilities have had no impact on the
ratings of bonds in the sector, and the rating agencies say that that such
bonds
should retain their AAA-status even in the event of a utility defaulting.
?So far only 11 of these deals have been issued, and of those deals, seven
have
been underwritten by two leading asset-backed players-Salomon Smith Barney and
Lehman Brothers. "There is a tendency for ourselves, and someone like Salomon,
to be first with unique, more heavily structured products," said Lehman's
Sweely. "These deals fall into that category." The league table situation is
unlikely to change while the future of the sector remains in question.
?Meanwhile, the pipeline is still brimming with potential deals from states
that
have already ruled in favor of passing on such costs to consumers. There
remains
a limit to the market's potential. Typically, a visit to the stranded cost
securitization market is a one-time event. But in a few cases, utilities make
the trip more than once. Illinois Power and Commonwealth Edison may return to
market as did PECO Energy Co., in order to raise the remainder of the desired
funds.
?It appears that the recent flurry of activity was coincidental, which means
there may be no more deals for some time. That's because in large part, the
pace
of issuance depends on how long it takes the various states to give their seal
of approval, particularly if consumers mount a court challenge, as has
occurred
in Texas. Analysts estimate that the securitization of stranded costs for TXU
Electric, Central Power and Light and Reliant Energy could have taken place as
early as last April were it not for their cases' slow progress past the state
utility regulator, the Public Service Commission, and through the courts.
While
the Texas utilities could be in the market by this summer, if the courts drag
their heels, the utilities could just as easily be sitting on the sidelines
when
full deregulation comes into effect on Jan. 1, 2002.

LOAD-DATE: April 9, 2001

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

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

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Metro; Part B; Page 7; Op Ed Desk

LENGTH: 981 words

HEADLINE: COMMENTARY;

USE EMINENT DOMAIN AS A POWER TOOL

BYLINE: MICHAEL J. AGUIRRE, Michael J. Aguirre has filed a private attorney
general's lawsuit, against the major power producers

BODY:

??Gov. Gray Davis should follow Pacific Gas & Electric's example and admit
that
his electricity program is also bankrupt. The governor's primary objective was
to keep the utilities from bankruptcy. He has failed. He should admit his
failure and reformulate his policy. Whatever he does must be based on a clear
understanding of the problem.

??The people of California have a right to buy electricity at fair prices.
Producers of electricity are entitled to a fair return on their investment.
Before 1998, a balance between these two points was struck by the Public
Utilities Commission using cost-of-service pricing. Utilities presented their
production bills, the PUC reviewed them, determined a reasonable rate of
return
and set a rate high enough to cover both. California became the second most
efficient user of electricity in the country under this system, and its
utilities prospered.

??In 1996, the electric power industry, with promises of lower prices, induced
Gov. Pete Wilson, the PUC and the Legislature to reduce the commission's power
to ensure just and reasonable electricity prices. Under the power industry's
system competition, not regulation, would set prices, and prices would go
down.
PG&E head Robert Glynn represented it to be a "huge opportunity for consumers
to
lower their energy costs." PG&E, San Diego Gas & Electric and Southern
California Edison, with PUC approval, then sold California's most significant
generation plants, its gas-fired units, to five multinational corporations.

??These five companies led the onslaught on California consumers, raising
electricity prices from $ 7 billion in 1999 to a projected $ 70 billion in
2001.
California authorities have determined that 98% of the price bids submitted by
these five companies--some 25,000--were based on monopoly, not competitive,
pricing. Gov. Davis is right: "California's deregulation scheme is a colossal
and dangerous failure."

??No one--not Wilson, the PUC or the Legislature--provided an exit strategy if
deregulation did not work. Davis has been unable or unwilling to come up with
one. He failed to get on top of the problem when he took office, despite clear
warning signs. He failed to see that he cannot finance ever higher prices with
public funds, and he lacks the resolve to do what he must to stop them. His
one
effort to use tax funds to keep the utilities out of formal bankruptcy has
failed, with PG&E's filing for Chapter 11 last week.

??There are no good choices now. However, we cannot continue down the road
Davis has chosen. It leads to financial ruin. We cannot rely on private
companies building new generation plants because the same price gougers will
control how the new electricity gets priced. We cannot rely on the Federal
Energy Regulatory Commission or President Bush. California can only rely on
California to solve this problem.

??As a first step, Gov. Davis should do what he threatened to do in his State
of the State address: use the power of eminent domain to recover the gas-fired
generation plants that the price manipulators are using to set monopoly
prices.
He can pay "just compensation" to the owners but not one dime more.

??The governor should now recognize California's vital interest in protecting
itself from these prices. Eminent domain is a reasonable tool to use to
achieve
that goal. It has been used in less compelling circumstances. For example,
eminent domain was used in the early 1980s for George W. Bush's investment
team
to assemble the land on which the Texas Rangers' stadium is built, from which
he
and his partners profited handsomely. If eminent domain can be used for
private
profit, it can be used to protect the vital interests of the state of
California. The plants should be divested to private ownership, but only to
companies that are under PUC jurisdiction.

??The PUC also should be used to plan how California can move forward to an
improved cost-based system of regulation. What we cannot do is to continue on
with the current plan, which is to have the governor set electricity prices
behind closed doors, working with the very people who are suspected of
unlawful
price fixing. PG&E's bankruptcy provides the governor with a new opportunity
to
move to a more effective program.

??The governor should now stop using public funds to buy electricity. He
should
urge Edison to join PG&E in reorganizing under bankruptcy court protection.
This
will allow all parties to contest the unpaid billions of dollars of
receivables
owed to the power producers and their associates. This will send a message to
Wall Street to stop funding such outrageous and predatory practices because
they
don't pay.

??The state attorney general should conduct a criminal grand jury
investigation
into the alleged wrongdoing by the power generators. He should also join in
the
private litigation that asserts that the power producers violated the state's
antitrust laws. He should follow the investigative trail to Houston, Tulsa,
Atlanta and wherever else it leads.

??Finally, Californians are going to have to make a short-term sacrifice to
get
a long-term gain. The governor's call last week for conservation does not go
far
enough. Each city council and mayor and all boards of supervisors should be
required to come up with an emergency conservation plan. We need to cut
consumption to the point where we can meet it with current supply. We cannot
put
an unfair burden on business because this will cost jobs. People with lower
incomes and fixed incomes need to be protected.

??PG&E's bankruptcy filing removes the foundation of the governor's plan. He
should remember the example of FDR, who likened himself to a football
quarterback who tries one play and, if it did not work, then tries another.
But
for heaven's sake, try something. We must show our fellow citizens that we
know
how to act effectively in solving this crisis.

GRAPHIC: GRAPHIC-DRAWING: How many companies does it take to unscrew a light
bulb?, PAUL CONRAD

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

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Metro; Part B; Page 6; Letters Desk

LENGTH: 535 words

HEADLINE: DAVIS ON POWER CRISIS

BODY:

??* Re "Davis Acknowledges Need for Rate Hike," April 6: But of course! While
the greed-monger electric producers get off scot-free to enjoy their obscene
profits and huge pay raises, we are told to conserve and pay more. Gov. Gray
Davis and the other politicos will sleep well, knowing that the energy
industry
will have even more money to contribute to their campaigns, while we sleep not
at all.

??TRENT D. SANDERS

??La Canada

??*

??Thursday night I was about to watch Gov. Davis' address on the power
problem.
The announcer said, "We are going live to Sacramento," and the lights went
out.
After sitting there in the dark for awhile, I decided this wasn't anything
new.
There wasn't even a power alert in effect. Two hours later, after the lights
came back on, I did catch a repeat of his speech. That was nothing new either.

??The plan he ordered in mid-March to reward people who wasted power in the
past--by giving them a 20% reduction in their rate now for remembering to turn
the lights off--is unfair to those of us who have been conserving all along
and
will get a rate increase for our efforts. We are being penalized for buying
those expensive, high-efficiency fluorescent lights.

??While Democrats continue to blame former Republican Gov. Pete Wilson, the
undisputed fact is that the problem is the result of California's population
growth. That growth is due entirely to immigration. If the liberals had not
overturned Proposition 187 back in 1994, we wouldn't be having these problems
now. Resurrecting it would help eliminate the problem.

??JOHN MESSINA

??San Jose

??*

??Re "Probe of Utility Money Transfers Ordered," April 4: The PUC is wasting
time again. Instead of focusing on the problem they created with electricity
deregulation, they are now investigating the financial transactions between
the
utilities and the parent companies. What can come of that review? Either
everything is OK, as the recent audits showed us. Or there is still a little
more money available to the utilities before they go bankrupt. Who cares?

??What we need to do is to deal with the problem. Energy costs far more to the
utilities than the PUC has so far allowed in rates. That difference is so very
large that even the state cannot afford to buy electricity without the recent
PUC rate increase, which is required to go directly to the state.

??Come on, PUC, deal with the real issues and do it before summer.

??THOMAS LONG

??Novato, Calif.

??*

??It's outrageous that the majority of the people of California continue to
face rolling blackouts and rate increases while the inhabitants of a few lucky
municipalities smugly roll along unaffected by the tragedy all around them.
Davis should immediately order the unaffected generators like the L.A.
Department of Water and Power, Glendale, Pasadena, Burbank and others to pool
all their power into the grid. There is no reason why these cities should be
exempt. This is a crisis for California. We are all in it together. It's only
fair that we share the burden.

??TERRY QUINN

??Van Nuys

??*

??We already know that oil and water do not mix. We will now learn that
brownouts and economic growth do not mix either.

??ROY A. FASSEL

??Los Angeles

GRAPHIC: GRAPHIC-DRAWING: Gov. Gray Davis, JULIA SUITS, Minneapolis

LOAD-DATE: April 9, 2001

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

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

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Metro; Part B; Page 6; Editorial Writers Desk

LENGTH: 681 words

HEADLINE: SHOCK'S SILVER LINING

BODY:

??That California's power crisis has been dealt another huge shock is not all
bad. The bankruptcy of Pacific Gas & Electric has legal scholars puzzling over
how federal court supervision of the debt-ridden utility will affect
rate-setting, sale of assets such as the transmission system and the state's
role in the crisis. And that's apart from figuring out how it affects Southern
California Edison, the chief private utility in the southern part of the
state.
Despite executives' denials of any bankruptcy plans, will Edison be forced
into
the same boat? Even with all these questions, a good shake can have benefits.

??There's no doubt that a federal bankruptcy judge has the power to sort out
at
least some of the befuddling problems of the state's energy crisis. Few tears
will be shed, for instance, if a court-ordered restructuring of PG&E's debt
trimmed some of the outlandish profits reaped by private generating companies
that sold power to the utility over the past six months. Federal involvement
could also force the Federal Energy Regulatory Commission to abandon its
hands-off stance on regulating wholesale prices. There is bipartisan support
in
Congress for FERC to conduct a thorough investigation of the price spikes that
pushed the utilities into default and forced the state to spend billions as
the
power purchaser of last resort.

??And what of the utilities themselves? PG&E's award of more than $ 50 million
in employee bonuses the day before it filed for bankruptcy was a terrible
political move, but it is not the jackpot issue. The utility's transfer of
billions of dollars to its parent company even as cash flow problems worsened
will be a more likely and fitting target of scrutiny by bankruptcy overseers.

??Not least, the shock of the bankruptcy may also convince Californians to
take
urgent conservation action before the hot summer months. The state must also
expedite a $ 1-billion conservation program passed by the Legislature late
last
week. No matter who is at fault, summer blackouts are a certainty unless both
business and residential customers take energy savings much more seriously.

??The bankruptcy certainly pulled the rug out from under Gov. Gray Davis, who
had been trying without success to make a deal with PG&E, Southern California
Edison and San Diego Gas and Electric to buy their transmission systems in
exchange for state assistance with debts. Just Thursday night, Davis had
bowed,
in a television address, to the necessity for big rate increases. He no doubt
meant to assure Californians that he was taking strong action to solve the
crisis and keep the utilities from bankruptcy, but he disappointingly offered
no
new initiatives. In the clearest possible slap at Davis, PG&E was at the steps
of the Bankruptcy Court the next morning.

??However embarrassed Davis must have been by the sideswipe, he should not
allow anger to dictate his response. He needs to demonstrate he's above such
pettiness and perhaps even acknowledge that his snail's-pace progress was part
of the problem. Davis redoubled efforts over the weekend to strike a deal with
Edison for its part of the transmission system, but PG&E's bankruptcy
certainly
complicates the transaction.

??Perhaps it was never possible to deal with the utilities' past debts and
restructure the state's power at the same time. Bankruptcy is a rough but
effective tool for dealing with debt, one that might help legislators and the
governor focus more sharply on future reforms.

??Much now depends on the federal bankruptcy judge, Dennis Montali, who is
known as an effective mediator able to persuade reluctant parties to settle.
California's economy has survived the power crisis so far, but it is not
endlessly resilient. If PG&E's bankruptcy speeds debt resolution and focuses
the
governor and Legislature on reforming the state's power generation,
transmission
and pricing systems, business will welcome any increase in predictability.

??Californians are starved for answers. The federal court's involvement,
despite the grave circumstances, could provide some.

LOAD-DATE: April 9, 2001

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

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

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Part A; Part 1; Page 3; Metro Desk

LENGTH: 769 words

HEADLINE: CAPITOL JOURNAL;

CALIFORNIA AND THE WEST;

Plenty of Failure to Go Around

BYLINE: GEORGE SKELTON

DATELINE: SACRAMENTO

BODY:

??It's doubtful any California governor ever has had such a slap in the face.

??Certainly not in the last 60 years. Probably never. Not by anybody but the
voters, at least.

??The man goes on statewide television to project leadership and instill
confidence. The next morning, one of the state's corporate giants files for
federal bankruptcy protection.

??"A lot of words," PG&E Chairman Robert D. Glynn Jr. said of Gov. Gray Davis'
long-awaited TV address. "We have not seen a lot of action."

??Of course, Glynn is playing his own finger-pointing politics, trying to
shift
any personal blame for leading this 149-year-old institution into bankruptcy.
PG&E, after all, did push for the idiotic "deregulation" scheme that brought
it
down. In 1997, Glynn hailed California's deregulation as "a huge opportunity
for
consumers to lower their energy costs."

??The most disingenuous, self-denying finger-pointers are the Sacramento
politicians who passed, signed and delivered this debacle and now blame the
Federal Energy Regulatory Commission for soiling their creation. They accuse
FERC of ignoring federal law that requires it to make sure wholesale
electricity
prices are "just" and "reasonable."

??It's true: FERC has allowed out-of-state power profiteers to loot California
and mug its private utilities. But it was the Sacramento pols--prodded by
campaign-contributing manufacturers and utilities--who unwittingly handed FERC
control over the price of power generated at California's gas-fired plants.
They
weren't thinking then but are whining now.

??And we've got a once-proud company that serves 13 million
Californians--nearly 40% of the population--going belly up.

??*

??"Not since the bankruptcy of the Bank of California in 1875 has there been a
comparable corporate failure," says Kevin Starr, state librarian and
historian.
"With a lineage that goes back to the 1850s, PG&E is more than a company. It
is
a social institution significantly responsible for the creation of
contemporary
California north of Fresno."

??The San Francisco-based Bank of California collapsed because of bad loans,
plummeting mining stocks and a sour national economy. Its failure set off a
panic and plunged San Francisco into a depression for the rest of the decade.

??"This thing is scary," Starr says.

??In January, Starr called the energy crisis "the greatest challenge any
governor has faced in 150 years . . . because it's pervasive. It affects every
sector of society."

??Moreover, it can't be resolved totally within the state Capitol. Energy
producers, utility execs, private financiers, FERC and now a bankruptcy judge
also wield power.

??So far, there has not only been a corporate failure--but also a
gubernatorial
failure. It's not just because Davis set dual goals of avoiding a consumer
rate
hike and utility bankruptcy and failed in both. It's also because the governor
has failed to earn the confidence of the legislators and interests he needs to
help him meet the challenge.

??He's increasingly seen as slow, timid and indecisive--and someone incapable
of developing the personal relationships necessary for difficult
coalition-building.

??"We need a wartime governor right now," says one influential Democratic
lawmaker. "A wartime governor seizes command and gives people confidence in
where he's going."

??*

??Davis has come to a fork in the road. And to quote the great Yogi Berra,
"When you come to a fork in the road, take it."

??One fork could lead to conciliation/appeasement--maybe tripling electricity
rates or borrowing tens of billions on the credit card. The other fork could
lead to confrontation/leadership.

??Mild-mannered Assemblyman Fred Keeley (D-Boulder Creek), chairman of the
Energy Committee, has a bold idea: If FERC won't cap exorbitant wholesale
prices, the governor should consider using his emergency power to seize
contracts between electricity generators and marketers. He'd have to pay "
reasonable value," but it would be substantially less than the wholesale
prices
being inflicted on California by greedy marketers.

??This governor has immense power if he'll use it.

??So far, the public has not quit on Davis. But faith in him is waning. Recent
private polls have found only 23% to 36% of people saying they'd vote today to
reelect him.

??Government's main job is to protect the public, not only from muggers on the
corner, but also in the corporate suites. Californians have been slapped
around--and by Texas bullies, no less. Now, they see their governor being
slapped by PG&E.

??If they get disgusted enough, California voters might just slap Davis
themselves.

LOAD-DATE: April 9, 2001

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

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

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Part A; Part 1; Page 3; Metro Desk

LENGTH: 1081 words

HEADLINE: THE CALIFORNIA ENERGY CRISIS;

CALIFORNIA AND THE WEST;

GENERATORS SCRAMBLED TO END PACTS WITH UTILITIES;

ENERGY: EVEN BEFORE PG&E FILED FOR BANKRUPTCY, ALTERNATIVE PLANT OWNERS WHO
HADN'T BEEN PAID IN MONTHS PURSUED COURT ACTIONS.

BYLINE: JULIE TAMAKI, TIMES STAFF WRITER

DATELINE: SACRAMENTO

BODY:

??In filing for federal bankruptcy protection last week, Pacific Gas &
Electric
Co. determined what other power producers had already concluded: The state had
failed to solve their payment problems and the time had come for the courts to
step in.

??In the days leading up to PG&E's Bankruptcy Court petition, a growing number
of alternative energy producers had also been filing lawsuits, seeking to be
freed from their contracts with PG&E and Southern California Edison. The
litigation was triggered in part by a controversial new rate plan imposed last
month by the state Public Utilities Commission in addition to millions of
dollars of debt owed to the producers by the utilities.

??On Tuesday, Dynamis Inc. filed suit in Fresno, saying PG&E owes it $ 3
million.

??Carson-based Watson Cogeneration Co., one of the state's largest alternative
energy producers, also had filed suit to have its contract with Edison
suspended. So did Delta Power, which owns five small gas-fired plants in
California. Both producers are owed tens of millions by Edison.

??At least a dozen such suits have been filed in civil courts, and lawyers
warn
that more could be on the way.

??"Tough solutions were not being brought to the equation, which left PG&E and
others feeling they were better off in the court system," said Jerry Bloom, an
attorney for the California Cogeneration Council.

??The court actions come on the heels of an order by the PUC last month that
Edison and PG&E begin fully paying hundreds of small alternative energy
producers. But some producers say that a new rate plan issued by the PUC would
force them to operate at a loss and that nothing has been done to address the
about $ 1.5 billion owed to members of the group by PG&E and Edison.

??Lawyers say other producers have served Edison with notices that they plan
to
cancel their contracts.

??Gas-fired generators account for about two-thirds of the electricity
produced
by the alternative energy group.

??The California Independent System Operator, keeper of the state's power
grid,
reports that there continues to be a roughly 3,000-megawatt reduction in
output
from the alternative energy producers. The daily sum is enough power to
supply 2
million to 3 million typical homes.

??"It clearly shows the problem hasn't been fixed," said Jan Smutny-Jones,
executive director of the Independent Energy Producers.

??California is home to nearly 700 producers of alternative and renewable
energy, which as a group provide more than a quarter of the electricity used
by
consumers.

??Some of the producers have gone offline or reduced supplies for maintenance
reasons, but others have cut back because they have not been paid by Edison
since November or have received only partial payments from PG&E.

??The drop in output has at times forced the state to purchase replacement
supplies on the pricey spot market for electricity and contributed to rolling
blackouts last month. The latter event prompted Gov. Gray Davis to propose a
plan to get the generators up and running again.

??Consequently, the PUC established a new rate plan for the producers and
ordered the utilities to begin fully paying them beginning this month. The
payment goal would be accomplished in part by slashing the rates that PG&E and
Edison must pay the producers.

??But the PUC action appears to have compelled a growing number of gas-fired
generators to file lawsuits in an effort to be released from their contracts
with the utilities and be paid the millions they are owed.

??Bloom contends that the new rate plan will force some producers to operate
at
a loss because it does not adequately compensate for their gas expenses. He
said
he expects generators to challenge the plan in court or before the Federal
Energy Regulatory Commission.

??Smutny-Jones contends that the plan wrongly assumes that all natural gas
used
by his members can be piped in from the Oregon border, where the price of
natural gas is cheaper. The producers, he added, are seeking assurances that
they will be paid realistic rates by the utilities for future deliveries.

??Utilities are scheduled to pay the first round of reduced rates, as ordered
by the PUC, early next week. Both utilities have indicated that they plan to
make the first round of payments.

??Edison officials said Friday they have been served with 10 producer
lawsuits.
They say they fear that if the generators are let out of their contracts, they
could sell their supplies out of state, which could in turn cause rates to
rise
for California consumers because it would reduce supply.

??PG&E spokesman John Nelson said in an interview last week before the
bankruptcy filing that PG&E has been served with two such lawsuits. He said
his
company is also concerned about the PUC rate plan and whether it truly lowered
the rates PG&E must pay the alternative producers and whether there would be
enough money in the rates paid by customers to turn around and pay the
producers.

??"We're concerned that the commission decision does not solve the problem,"
Nelson said.

??A Davis spokesman said last week that the administration is still working on
the issue of money owed to the producers and that the administration is
continuing to work with the PUC to get more generators back online.

??Observers believe the number of producer lawsuits will grow because most
cases to date have been aimed at Edison. The utility has not paid its
producers
since November and has fought to have its rates slashed.

??By comparison, PG&E has made efforts to partially pay its producers in
recent
months and to keep them informed of their financial situation.

??A Bankruptcy Court is expected to decide whether to affirm the contracts of
producers who sell to PG&E or to free them to sell their power elsewhere.

??An Imperial County judge has already freed CalEnergy, a small geothermal
producer, from its contract with Edison because of Edison's failure to pay the
company. The court has delayed ruling on CalEnergy's request for $ 99 million
in
back payments until April 16--the day the utility is expected to begin paying
its alternative generators.

??Since it quit transmitting 270 megawatts to Edison last month, CalEnergy has
been selling its electricity to El Paso Energy, a marketing company that
resells
power on the spot market. If other generators are able to repeat the pattern,
it
could further reduce state energy supplies, particularly this summer, when
every
megawatt will be needed to avoid blackouts.

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

?????????????????????April 9, 2001, Monday, Home Edition

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

LENGTH: 1568 words

HEADLINE: WITH POWER PRICE SURGES, CALIFORNIA'S A FOLLOWER;

ENERGY: MUCH OF THE NATION IS ALREADY BEING ZAPPED BY DOUBLE-DIGIT INCREASES.
SEVERAL STATES HAVE HIGHER RATES. DEREGULATION, ANTI-POLLUTION LAWS AND
DISTANCE
FROM FUEL SOURCES ARE TO BLAME.

BYLINE: ERIC SLATER, TIMES STAFF WRITER

DATELINE: CHICAGO

BODY:

??For all its energy notoriety and outrage over surging electricity rates,
California has plenty of company. Much of the nation faces double-digit price
hikes, and several states--especially in the East--continue to pay more for
electricity than California.

??Not even Gov. Gray Davis' reluctant proposal last week to kick rates up as
much as 34.5% for the heaviest residential users would guarantee California
the
dubious honor of having the priciest electricity in the United States.

??Overshadowed by the rhetoric, lawsuits and rolling blackouts is the fact
that
Californians have been paying less for electricity than residents in Rhode
Island, New Hampshire, Vermont, New York, Alaska and, by a longshot, Hawaii.
California, in fact, is barely in the top 10 when it comes to electrical
prices.

??One of the reasons that Californians have been paying less is because they
conserve more, with the average resident draining 40% less from the grid than
the average American.

??Another reason, however, is that California's rates have been frozen by law,
even as the lids have been coming off the prices in other states that are
deregulating their utilities.

??"I don't know about you guys," said state Sen. Sheila Kuehl (D-Santa Monica)
at a hearing last week in Sacramento, "but my constituents don't think they
suffered over the past several years because their rates didn't go up 45% and
50% the way they did in New York and Pennsylvania and other parts of this
country."

??These dramatic price spikes are driven by a strange, worst-case confluence
of
electrical-world forces.

??A drought in the Northwest means that there's not enough water to turn the
turbines in the great hydroelectric dams; massive price increases for natural
gas come even as the country is moving toward more natural gas-powered
electrical generators; and the deregulation of utilities--left largely up to
individual states--has proved more complicated than almost anyone dreamed.

??"We look at it as a perfect storm," Rep. Jay Inslee (D-Wash.) said of the
improbably bad stew of circumstances.

??In Boston, residential users face a possible 23% hike, industrial customers
69%. In Cheyenne, Wyo., some residential customers are insulating themselves
against possible hikes of 57%, with some commercial customers looking at an
88%
jump. In Idaho, they're talking hikes of between 34% and 63% for some
customers.
In Nevada, rate hikes scheduled at more than 1% a month, starting in September
and continuing until September 2003, will raise residential rates about 75%.

??All this after two decades of steadily declining electricity rates in the
U.S.--with almost all of the price drops preceding the deregulation that was
supposed to bring down prices.

??Price of Power Fell Steadily for Years

??In the early 1980s, one kilowatt hour of power cost residential customers
about a dime. Over the next two decades, Americans began to employ more
energy-efficient appliances, computers, even lightbulbs, and utilities
produced
their power more and more efficiently.

??At the same time, utilities took advantage of low interest rates to help
retire massive debt incurred during the high-cost, post-Chernobyl building of
nuclear reactors, and they were thus able to pass on further savings to
customers.

??By last year, buying a kilowatt hour set the average American back just 7.5
cents.

??The trend has suddenly stopped.

??In a forecast released Friday, the Energy Information Administration
predicts
that a kilowatt hour will cost about 8 cents on average nationally by the end
of
this year and rise another half-cent in 2002.

??"For the first time in a long time, the prices are going up," said
administration forecaster Neil Gamson.

??A one-cent increase in the price per kilowatt hour would boost the monthly
bill of a typical California residential customer by about $ 10, to $ 117. For
big industrial users, the extra monthly cost could be in the thousands.

??Substantial regional differences have always existed, with the Northeast the
longtime home of the highest prices in the continental U.S. Some Northeastern
customers pay twice as much, or more, than consumers 3,000 miles due west.

??One reason is that, although environmental laws in the Northeast are
typically less stringent than those in California and the Northwest, growing
concerns and tougher anti-pollution legislation have forced utilities to shift
away from the higher-polluting coal-powered generators and toward
cleaner-burning natural gas. The environmentally conscious move has left them,
like several other areas, vulnerable to the recent price spikes of natural
gas.

??The Northeast is also farther from most major sources of fuel, including
natural gas, oil and coal.

??Several states in the Northeast, including Connecticut, Maine, New
Hampshire,
New York and Massachusetts, are actively deregulating. Like California, only
with less drama, they are finding the birth of a free market painful and
expensive.

??Under Massachusetts' deregulation statute, the standard retail rate for a
kilowatt hour was fixed at an average of just over 9 cents through 2005.
However, the rise in natural gas prices has left utilities pleading with
regulators to allow them to raise prices, lest they face California's problem
of
selling their power at a loss--precisely the circumstance that led the Pacific
Gas & Electric Co. of San Francisco to declare bankruptcy Friday.

??Kilowatt Hour's Average Cost Rising

??Earlier this month, the Massachusetts Electric Co. got the go-ahead to
charge
270,000 residential customers an additional 23%. Statewide, analysts say, the
average price of a kilowatt hour is probably edging up from its already high
October figure, the last available, of 11.2 cents.

??In New York, the average cost of a kilowatt hour statewide was 14.1 cents in
October. However, even under a deregulation plan that won't fully free the
utilities from price controls until 2002, some New York City residents have
seen
their rates rise by nearly 20%, to 13.9 cents a kilowatt hour, in recent
months.

??Still, Cornell University economist Tim Mount said he would be surprised and
"very disappointed if we mess things up in the East as badly as they messed it
up in California. I think the regulators thought that it would be easy to run
a
market, and they didn't allow for very much malfeasance" on the part of newly
untethered utilities or private power generators.

??The South, with its coal reserves, has long hovered in the relatively cheap
range of 6 to 8 cents per kilowatt hour and, along with the Midwest, is likely
to be among the most stable areas in the near future.

??Several states in the South and Midwest are also among the last to consider
deregulation--for the very reason that their power is already cheap--and so
may
benefit the most from studying the daily jolt of news out of California.

??The Midwest has, as with so many things, been a picture of moderation when
it
comes to electrical rates. A kilowatt hour goes for 7 to 8 cents or, in the
case
of Illinois, a bit over 9 cents. (Chicago, the country's third-largest city
and
the location of several infamous--although localized--blackouts in 1999, tends
to raise the state's average considerably.)

??Having continued to build power plants when states in the West and East had
all but halted construction, and with Illinois home to 11 price-stabilizing
nuclear reactors, the Midwest is expected to hold the line, at least in the
near
future.

??The Northwest, long the land of cheap, clean hydroelectric power, is already
beginning to see its 5- and 6-cent electric rates climb.

??Many of the utilities in the Northwest receive huge portions of their juice
from the Bonneville Power Administration, which oversees 29 dams in the
Columbia
and Snake River basins and provides 45% of the region's electricity.

??However, the severity of the region's drought--and the accompanying
electricity shortage--was illustrated last week when the BPA announced that it
would stop spilling precious water over its dams to help the spring salmon
run.

??Announcing the news to residents who for decades have fought to restore
salmon runs decimated by the dams was perhaps made a bit easier for acting BPA
administrator Steve Wright because he had previously made another
announcement.
The BPA, Wright said, would likely be raising its own wholesale rates from 95%
to 200% come October.

??Some of the rate hikes around the country are surcharges, meant to fill
utility coffers left empty by the leap in natural gas prices, for example.
Many
others, however, are viewed as permanent. In the West, especially, there is
simply no reason to believe that costs will drop any time soon.

??The bankruptcy move Friday by PG&E only solidified that widely held opinion.
Among its other worries, Bonneville has been holding a $ 100-million IOU from
California utilities--half of it owed by PG&E--and hoping that money would
help
to mitigate its rate hikes to other customers.

??When PG&E became the biggest utility in U.S. history to seek bankruptcy
protection, BPA became just another creditor likely to lose money.

??*

??Times staff writer Julie Tamaki in Sacramento contributed to this story.

??The Price of Electricity

??Here is a look at the average retail price per kilowatt hour in each state
as
of October. California's rates ranked ninth highest.

??Source: Energy Information Administration

GRAPHIC: GRAPHIC: The Price of Electricity, AP / Los Angeles Times

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

?????????????????????April 9, 2001, Monday, Home Edition

SECTION: Part A; Part 1; Page 1; Metro Desk

LENGTH: 1386 words

HEADLINE: JUDGE IN PG&E BANKRUPTCY CASE SEEN AS A PROBLEM SOLVER;

COURTS: DENNIS MONTALI WILL FACE UNPRECEDENTED LEGAL COMPLEXITIES.

BYLINE: MAURA DOLAN, TIMES LEGAL AFFAIRS WRITER

DATELINE: SAN FRANCISCO

BODY:

??U.S. Bankruptcy Judge Dennis Montali, who will oversee Pacific Gas &
Electric
Co.'s bankruptcy reorganization, is a highly respected scholar and effective
mediator known for persuading reluctant parties to reach agreement.

??In a recent case, Montali achieved in only three days a settlement between a
debtor and creditors in the bankruptcy of an international engineering firm.
The
case had been in bruising litigation for two years when another judge asked
Montali to mediate it.

??As a lawyer, Montali helped divert a statewide agricultural crisis 10 years
ago by persuading warring factions to accept a deal in the bankruptcy of an
agricultural cooperative, according to a lawyer in the case.

??"He is very good at not embarrassing people but getting them to understand
they are wrong," said lawyer Larry Engel, who has known and worked with
Montali
for two decades.

??Montali, 60, the son of a winemaker, grew up in San Francisco and now lives
in Berkeley. He is considered among the top tier of bankruptcy experts in the
United States.

??He will be calling the shots in one of the largest bankruptcy
reorganizations
in U.S. history. The case raises unprecedented legal questions and is expected
to make new law. Some of the legal disputes may wind up before the U.S.
Supreme
Court, attorneys said.

??Lawyers who know the easygoing, witty judge say he is probably relishing
this
legal challenge the way a golfer looks forward to playing a new and more
difficult course. The court action begins today, when Montali is expected to
decide whether PG&E can spend cash that others have laid claims to.

??Right from the beginning, Montali will be in the limelight, and lawyers will
be eagerly searching for any clues to his leanings. Montali declined to be
interviewed, but those who know him say he is fair, smart, hard-working and
thoughtful. He does not browbeat, but quietly negotiates to bring people
around,
lawyers said.

??The judge is highly engaged in his cases. He is well prepared,
intellectually
curious and knows the hard questions to ask, lawyers said. He also is a
relatively quick decision-maker, frequently ruling from the bench.

??"Reality tends to come out" in his courtroom because Montali does not allow
lawyers to evade his questions, Engel said.

??There are few precedents to guide Montali in many of the novel legal
questions he is likely to be asked to rule upon. Can he order electricity rate
hikes? The law is unclear. Can he force energy suppliers to hold down their
prices? Doubtful, bankruptcy lawyers said. Can he force PG&E's parent company
to
cough up some money? Possibly. Can he force PG&E to sell off assets? Yes, but
probably not in the near term.

??"This is going to be one of these cases where the envelope is going to be
pushed, and I think there is a danger in making any categorical statements
right
now," said a bankruptcy lawyer who is involved in the case.

??PG&E's Chapter 11 bankruptcy reorganization will be enormously complex
legally, lawyers said. Montali will have to reconcile state utility law and
federal energy law with bankruptcy law. Bankruptcy judges have broad
discretion
to decide disputes, and Montali will control PG&E's purse strings.

??Lawyers who know Montali well say he is savvy about using the Internet to
communicate court information, masters arcane legal subjects quickly, and
probably is thrilled to be making the calls in a case that will be watched
nationally.

??Some people go on the bench to retire. Montali went on in 1993 to have more
fun intellectually, lawyers said.

??Montali "tends to be very constructive," said another lawyer who asked not
to
be identified by name because he may represent a creditor in the PG&E case.
"He
wants his cases to go somewhere, and he tries to encourage people to make
progress."

??Before he was appointed to the bench, Montali had practiced bankruptcy law
for more than two decades. He began representing debtors but was doing
primarily
creditor work in his last law firm job with the city's venerable Pillsbury,
Madison & Sutro.

??The bankruptcy bar he was a part of is relatively small, and the lawyers who
practice it know one another. Several lawyers interviewed about Montali
referred
to him by his first name.

??Because these lawyers are likely to be players together in many cases over
the years, trustworthiness is important, bankruptcy attorneys said.
Effectiveness requires that other members of the bar trust your word and
credibility.

??The practice also requires knowledge of economics and economic terms, ease
both with deal making and trial work, and above all else, practicality,
lawyers
said.

??Whereas a business litigator may know exactly what he or she will be doing
two months from now, bankruptcy lawyers tend to operate on tight deadlines
with
little notice. Many of these lawyers were at their desks over the weekend
preparing for the PG&E case.

??"There is no one in town who is not part of this case," said Engel, who is
representing a municipal utility. "Everyone is involved."

??Montali is tall, lanky and balding. His trademark is his handlebar mustache,
which he has worn for decades and which reflects his gregariousness and humor,
other lawyers said. He cooks Italian food expertly and likes to sail around
San
Francisco Bay and walk his dog during his time away from work. His wife, Mary,
is in the real estate business, and they have three grown daughters.

??As a lawyer, Montali was masterful at bringing about a compromise in the
bankruptcy of a major agricultural cooperative a decade ago, Engels said. At
the
time the co-op went bankrupt, farmers had picked their crops, but there was no
money to operate the canneries and no money to pay the growers. Montali was
representing a bank in the case.

??"We could have had a disaster," Engel said. "Literally, imagine if 5,000
farmers lost their entire crop because there was nobody to take it. Each of
them
would have gone into bankruptcy."

??The parties locked themselves together in one place for a week and half.
Montali was "at the core of it," Engel said. He persuaded all parties to agree
to a plan that involved selling the cooperative. "He would take someone who
was
being a problem over to the side and explain that it wasn't going to work if
they persisted that way," Engel said.

??"He is the ultimate reasonable man who convinced them that this path is the
one they needed to be on in their own self-interest."

??Richard Levin, a Los Angeles bankruptcy lawyer, said Montali has "tremendous
integrity." As a lawyer, he was cogent and forceful in arguments and would
make
simple, clear statements that would cause everyone in the courtroom to pause
and
think, Levin said.

??Montali earned a bachelor's degree in English from Notre Dame University and
then entered the Navy to fulfill a Reserve Officer's Training Corps
commitment.

??He served in various officer positions on two destroyers and taught briefly
at the United States Navy Reserve Officers Candidate School in Newport, R.I.,
before entering law school. He obtained his law degree from UC Berkeley's
Boalt
Hall School of Law in 1968.

??Montali has been elected to the National Bankruptcy Conference and the
American College of Bankruptcy, both elite bodies reserved for those at the
top
of their field.

??Last year, he was appointed to hear appeals in bankruptcy cases for the U.S.
9th Circuit Court of Appeals in addition to his trial duties.

??One of his first cases on the bench ended in disaster. Shortly after he
became a judge, he ruled in favor of a landlord who was trying to evict a
tenant. The tenant had a bankruptcy case before Montali.

??The tenant later went to the landlord's office, shot and killed him, wounded
the landlord's son and tried to kill himself.

??"I didn't have any regret about the decision," Montali told the Daily
Journal, a legal newspaper, several years ago. "But it reinforced in the real
world that I'm making decisions that affect people. It put some real meaning
into things."

??In 1997, Montali ruled that a gay man was liable for damages because he
failed to warn his former lover that he was infected with HIV before they had
unprotected sex.

??The case had wound up before Montali because the defendant filed for
bankruptcy to avoid paying monetary damages if he lost the sexual battery
lawsuit.

GRAPHIC: PHOTO: Bankruptcy Judge Dennis Montali is called a "reasonable man."
PHOTOGRAPHER: Associated Press

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

????????????????????April 9, 2001, Monday, Valley Edition

SECTION: Metro; Part B; Page 3; Zones Desk

LENGTH: 671 words

HEADLINE: THINK TANK HIRES EXPERTS WITH POWER TO SOLVE PROBLEMS DURING ENERGY
CRISIS

BYLINE: MARGARET TALEV, TIMES STAFF WRITER

DATELINE: CAMARILLO

BODY:

??A retired publisher of energy trade magazines has established a think tank
at
Cal State Channel Islands to tackle electricity problems.

??The timing of Gold Coast Innovation Center's opening at the developing
campus
could hardly be better. Area businesses, governments and residents are bracing
for average rate increases of 26.5% and an estimated 34 days of rolling
blackouts this summer.

??Founder Myron Miller's long-term vision is to help everyone from
international business executives to villagers in third-world countries. But
in
the wake of the state's power crisis, the 71-year-old Oxnard man expects many
of
the calls he'll field will be more along these lines:

??* A company or local government could be devastated by rolling blackouts
unless it purchases a good backup power system--soon.

??* A homeowner fed up with rising rates is thinking of dropping off the grid
and going exclusively to solar power.

??* A farmer wonders whether all the plant or animal waste his operations
produce could be harnessed to power his own water pumps and coolers.

??Miller said he and his staff may know the answers, and if they don't,
they'll
put callers in touch with experts who can help.

??Though in its infancy, the nonprofit center has big plans. And already it's
drawing attention.

??"There's an absolute need for this," said Rohit Shukla, chief executive of
Larta, a Los Angeles-based technology alliance. "There's nothing quite like
this
anywhere in California."

??Don Gunderson, president of the Economic Development Collaborative of
Ventura
County, agreed. "They couldn't be coming on line at a better time."

??California's energy crisis hadn't hit when Miller began planning the center
two years ago. Having just sold PCIM Power Electronic Systems Magazine and
Power
Quality Magazine, however, he was looking for a project that would allow him
to
remain a player among engineers and entrepreneurs he'd met throughout the
world
during his quarter-century in publishing.

??"There was some unfinished business," said Miller, who was trained as a
chemist. "There are so many challenges."

??He conceived of a research and networking group that could bring together
industry experts from the United States, Germany, Japan, Mexico and other
countries to address power concerns that translate across continents in a
world
increasingly linked by telecommunications and vulnerable to power shortages
and
interruptions.

??He also drew on local contacts, including John Mungenast, a nationally
recognized power electronics engineer, and Mike Shaw, manager of the design
and
reliability department at Rockwell Science Center in Thousand Oaks.

??Miller envisioned a center where experts collaborate on ways to minimize
electrical surges and dips, a center that could spur research on alternative
fuel sources and serve as a small incubator for energy-related start-up
companies. The center also could provide Cal State and other area university
students with hands-on experience in the field.

??Finally, the group could advise individual companies on what alternative
power sources or energy-saving devices might work best for them--and put them
in
touch with people who design and manufacture such products.

??Miller donated $ 300,000 toward the center, most of which went to renovating
12,000 square feet at the university campus. He assembled a 17-member advisory
board and brought in a director, Steve Herman, a former Litton executive who
recently ran a technology association in Oregon.

??The center hopes to sustain itself through a combination of grants, and
contracts with private industry.

??By the time Gold Coast opened its doors in February, the state's energy
problems had become a crisis and Herman figured that would dominate the
center's
work for months to come.

??In recent weeks, local business groups such as Gunderson's Ventura County
collaborative have called on Herman to speak to their members. Herman said
county and Camarillo government officials also have had some preliminary talks
with him.

GRAPHIC: PHOTO: Myron Miller, left, founder of Gold Coast Innovation Center,
is
counting on Steve Herman's expertise as director of the think tank board.
PHOTOGRAPHER: BRYAN CHAN / Los Angeles Times PHOTO: (B1, Ventura County
edition)
Steve Herman, a former Litton executive who ran a technology association in
Oregon, is director of operations for Gold Coast Innovation Center.
PHOTOGRAPHER: BRYAN CHAN / Los Angeles Times

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

?????????????????????April 9, 2001, Monday, Home Edition

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

LENGTH: 1242 words

HEADLINE: JAMES FLANIGAN;

OTHERS LEARNING FROM CALIFORNIA'S ENERGY MISTAKES

BYLINE: JAMES FLANIGAN

BODY:

??For all the agony and anger about energy in California, compounded now by
the
bankruptcy filing of Pacific Gas & Electric, deregulation and the
transformation
of the electric power industry is moving forward nationwide--and worldwide.

??Many electric companies elsewhere are thriving and being recommended by
investment analysts even as the regulated utility division of PG&E Corp.
surrenders its management to a bankruptcy court and Southern California
Edison,
a subsidiary of Edison International, remains under heavy threat of being
forced
to do the same.

??Companies and regulators everywhere cite California's troubles as stemming
from mistakes they will avoid.

??For example, American Electric Power, a Columbus, Ohio-based leader of the
utility industry, told shareholders in its annual report that California's
blunders of "insufficient power supplies, total reliance on spot pricing and
capping of rates for retail consumers even as costs of wholesale power
multiplied, are not likely to be replicated elsewhere."

??Indeed, many of deregulation's dangers may be avoided now simply because
California and PG&E have put everybody on their guard.

??California's horrible example has spurred recognition that power plants need
to be built.

??And PG&E's collapse sends a message that utility companies operating partly
in regulated and unregulated environments need to separate their accounts so
as
to better understand the different businesses they are managing.

??Wall Street sees electricity as a growth industry just because power is in
relative short supply in many parts of the country.

??"The United States has not built enough power plants over the last 10 years
to meet demand," says analyst Brian Youngberg of Edward Jones & Co., a St.
Louis-based investment company.

??That spells opportunity for companies able to produce low-cost power and
market it in different regions.

??Promising Investment

??Today's favored utilities are those moving to acquire power plants and sell
power as an unregulated commodity in different areas, even as they cope with
deregulation and competition in their home territories.

??The examples of two leading companies will explain a lot about the utility
business today, why investors regard it as promising and how companies and
state
regulators elsewhere are taking steps to avoid the blunders of California.

??Utilicorp United, based in Kansas City, Mo., is the modern outgrowth of a
family-owned electric company dating to 1902. Under Richard Green, the
founder's
great-grandson who has been chief executive since 1982, Utilicorp went eagerly
into wholesale marketing and trading of electricity around the world,
acquiring
companies in Australia and New Zealand, even as it continued to operate
regulated utilities in Missouri--where electricity remains regulated--and six
other Midwestern states.

??Utilicorp, helped by the growth of its Aquila Energy subsidiary that trades
electricity contracts, has expanded to $ 29 billion in revenue in 2000 from
just
over $ 1 billion a decade ago. "I've got two companies," Green says, "one is a
regulated utility, growing 3% to 5% a year and paying a dividend, and the
other
is Aquila, which is growing 20% a year."

??So he is separating the two, issuing stock in 19.9% of Aquila now and
intending to spin it off as an independent company within a year. "Investors
can
then have their choice of growth or stability and dividends," Green says.

??American Electric Power is a venerable pioneer of the utility industry. It
originated the practice of siting power plants atop coal mines so the fuel
could
be transferred efficiently to the steam turbine boilers.

??Now its home state of Ohio is going through a three-year process of
deregulating electricity. So AEP is going aggressively into wholesale
electricity generation and marketing.

??Last year it acquired Dallas-based Central & Southwest Co. and now markets
in
Texas, Louisiana and Oklahoma as well as its traditional bases in Ohio and
Michigan.

??AEP, too, is going to separate its unregulated and regulated businesses.

??It's doing this, the company told shareholders, because "it will enable
investors to value our businesses separately and will improve our ability to
manage the realities of electric deregulation and to focus on the differing
capital requirements of each business."

??Why is that significant? Because PG&E, the holding company that owns Pacific
Gas & Electric, also has thriving energy trading and out-of-state electricity
operations within its corporate structure.

??It built up the unregulated business in recent years by transferring
proceeds
from sales of California power plants and cash flow accruing from the state's
complex deregulation scheme.

??But PG&E didn't separate the unregulated and regulated businesses for
shareholders. And now PG&E's publicly traded stock has lost 77% of its value
and
the company faces a battle in bankruptcy court to keep its unregulated assets
out of the hands of creditors.

??Avoiding Mistakes

??As companies elsewhere try to avoid PG&E's errors, so other states take
pains
not to make California's big mistake of going into deregulation without a
reserve of electric generating capacity. Ohio is making sure that it has a
surplus of generating capacity.

??The Northeastern states of Massachusetts, Connecticut, New Hampshire and
Rhode Island, which have deregulated, also have plenty of spare capacity,
reports Cambridge Energy Research Associates.

??With electricity in surplus, those states and regions can encourage price
competition in electricity. But when there are shortages, as began to occur
last
year in California, desperation buying by customers and price gouging by
suppliers are all but inevitable.

??A point to keep in mind in the wake of California's disaster and PG&E's
downfall is that the electric utility industry and the U.S. system are at the
outset of a long process of transformation.

??It's not unlike the telephone business that has changed so much in the last
30 years, starting from, say, the rise of MCI in the 1970s or the breakup of
AT&T Corp. in 1984.

??Yet those years also saw the rise of whole new technologies and new
companies, even as giants of another age faded and failed.

??California and California companies may yet find success in this new age of
opportunity--and peril--for electricity.

??*

??James Flanigan can be reached at http://jim.flanigan@latimes.com.

??Bright Lights

??Despite the severe troubles of Pacific Gas & Electric and Southern
California
Edison, investors have been keeping some utility stocks at or near their highs
lately. Analysts also favor a few companies directly involved in California,
such as San Diego-based Sempra Energy and AES, which owns and is upgrading
power
plants in the state.

?????????????????????????????????????????????52-week

???Company ???????????????Stock Price* ????High ?????Low ??EPS**

???Amer. Electric Power ????????$47.34 ??$48.94 ??$29.44 ??$2.82

???AES ??????????????????????????43.97 ???72.81 ???35.59 ???1.46

???Cinergy ??????????????????????34.05 ???35.25 ???22.06 ???2.56

???NiSource ?????????????????????30.56 ???31.80 ???16.13 ???1.80

???Sempra Energy ????????????????22.30 ???24.88 ???16.81 ???2.21

???UniSource Energy ?????????????21.20 ???22.18 ???14.13 ???1.32

???Utilicorp United ?????????????31.70 ???33.00 ???18.06 ???2.20

??* Friday close

??**Earnings per share

??Sources: Edward Jones & Co.; Crowell, Weedon & Co.; Bloomberg News.

GRAPHIC: GRAPHIC-TABLE: Bright Lights, Los Angeles Times

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

?????????????????????APRIL 9, 2001, MONDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 1090 words

HEADLINE: Governor, Utility In War Of Words;

Davis furious as PG&E defends bankruptcy filing

SOURCE: Chronicle Staff Writer

BYLINE: David Lazarus

BODY:
California's energy mess took an ugly turn yesterday as Gov. Gray Davis and
Pacific Gas and Electric Co. traded barbs over who is to blame for the
bankruptcy of the state's largest utility.

???In a series of tit-for-tat statements, each side laid claim to the moral
high ground while insisting that the other had been dealing in bad faith.

???The governor spent part of his time yesterday giving television interviews
in response to The Chronicle's report Saturday that PG&E awarded $50 million
in
bonuses and raises to 6,000 employees just hours before Friday's bankruptcy
filing.

???"PG&E's management is suffering from two afflictions: denial and greed,"
Davis said in a brief statement Saturday night.

???In a testy reply, PG&E countered that "instead of focusing all his
attention
on solving the state's yearlong and ever-worsening energy crisis, the governor
has launched a campaign-style attack on our company."

???PG&E said Davis was criticizing "thousands of men and women who have worked
tirelessly and professionally through this crisis" and concluded that
"California would be far better served if the governor turned his attention to
the crisis at hand."

???Steve Maviglio, a spokesman for the governor, fired back yesterday: "PG&E
waged a public relations war on Friday. If they're looking for somebody to
blame, they should look in the mirror."

???Maviglio also said the governor was concentrating on reaching a final
accord
with Southern California Edison Co. for the state to purchase the
cash-strapped
company's power lines for nearly $2.8 billion.

???A last round of talks was scheduled to be held last night.

???"There are a few remaining details to be worked out, but it seems pretty
close," Maviglio said, adding that an announcement of the deal could come as
early as today.

???"The governor is spending his time negotiating with a responsible utility,"
he said.

???Along with the Edison deal, Davis spent the weekend huddling with energy
advisers and lawyers trying to come up with an appropriate response to PG&E's
bankruptcy bombshell.

???Efforts to stabilize California's dysfunctional electricity market suddenly
have become much more complex.

???NOT MUCH CHANGED

???Nevertheless, while PG&E's bankruptcy is by far the most sensational aspect
of California's long-drawn-out energy mess, at the end of the day, it doesn't
really change a thing.

???Consider:

???-- PG&E's financial woes stem from a rate freeze that prevented the utility
from passing along to customers runaway wholesale power costs. That rate
freeze
and sky-high electricity prices remain in place.

???-- California's energy shortage is primarily the result of the state not
having built any major power plants for the past 12 years. PG&E's bankruptcy
does nothing to affect that precarious situation.

???-- PG&E's foray into bankruptcy court does not alter the fact that
electricity demand is outpacing available supply. California consumers still
face a threat of daily blackouts when power usage spikes this summer.

???"The crux of the problem is still the same," said Loretta Lynch, president
of the state Public Utilities Commission. "We face the same challenges we did
before PG&E filed for bankruptcy."

???She added, however, that PG&E's bankruptcy "increases the uncertainty."

???The utility doesn't see it that way.

???PG&E spokesman Ron Low said California's energy woes are no more uncertain
now than they were when the company ostensibly was negotiating with Davis to
find an equitable solution to the state's troubles.

???"California remains in an energy crisis," he said. "As we head toward
summer, resources are going to be very tight."

???WHAT COULD HAPPEN

???In the short run, consumers will notice no change whatsoever. Bankruptcy
protection will allow PG&E to continue operating as usual while the company's
creditors line up to receive at least partial payment of outstanding bills.

???Longer term, there is a very real possibility that electricity rates will
soar if the bankruptcy judge agrees with PG&E that conditions for lifting the
rate freeze were met a year ago and that $9 billion in subsequent expenses
must
be borne by consumers.

???How much people's bills would rise depends on how the rate increase is
structured. It would probably come in the form of a surcharge on existing
fees,
but the monthly hit to consumers could be limited by spreading the total cost
over a number of years.

???The big question mark now is how PG&E's bankruptcy will affect various
political and legislative measures intended to keep California's lights on.

???The state's attempt to purchase PG&E's power lines is obviously finished,
although a new deal could be negotiated in bankruptcy court.

???Meanwhile, the governor is pressing ahead with plans to purchase the
transmission systems of Edison and Sempra Energy's San Diego utility --
although
what the state would do with only a partial power grid has yet to be
determined.

???"Does it make any sense to have the transmission lines of Edison and Sempra
and not PG&E?" asked state Senate President Pro Tem John Burton, D-San
Francisco. "I don't know the answer to that."

???A final accord with Edison this week would validate PG&E's apparent
concerns
that it would have had a harder time limiting backlash to its bankruptcy
filing
if the utility had acted after a breakthrough with Edison was unveiled.

???The Chronicle quoted PG&E insiders yesterday as saying that the decision to
file for bankruptcy had been made early last week, even though senior company
officials said the move followed the governor's Thursday night speech on
solving
California's energy issues.

???One reason PG&E opted to file on Friday morning was because a final deal
with Edison was expected at any time, observers said.

???Paul Patterson, an analyst at Credit Suisse First Boston, noted that if
PG&E
had filed for bankruptcy after Edison came to terms with the state, "they
would
be seen as a spoiler."

???ENSUING CONFUSION

???In any case, PG&E's surprise filing has left all concerned scrambling for
footing in the changed political landscape.

???Consumer advocates watched with dismay yesterday as the state's political
and corporate powers slugged it out for supremacy.

???Nettie Hoge, executive director of The Utility Reform Network in San
Francisco, said all this finger-pointing will do nothing to ensure that
Californians have ample supplies of electricity this summer.

???"These guys should grow up and come up with a situation that works for the
public," she said.E-mail David Lazarus at dlazarus@sfchronicle.com.

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

?????????????????????APRIL 9, 2001, MONDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 1032 words

HEADLINE: Power Grab -- Some Democrats Favor Seizing Plants

SOURCE: Chronicle Staff Writer

BYLINE: Bernadette Tansey

BODY:
With the prospect that state power buyers could burn through more than $2
billion a month this summer, some state Democratic leaders are pushing for a
takeover of private power plants to get soaring prices under control.

???Lawmakers concede that sending state agents to grab the keys of power
generating plants would be an extraordinary measure.

???But now that Pacific Gas and Electric Co. has limited the state's options
with Friday's bankruptcy filing and with little hope for stronger federal
price
controls, state Senate leader John Burton and others say seizing power plants
makes financial and political sense.

???They say they've done the math: Since January, California has spent more
than $4 billion buying power. That's about $1 billion more than private energy
firms paid for the power plants PG&E and California's two other investor-owned
utilities were

???forced to sell under California's botched deregulation plan. At those
rates,
California could soon look like a renter paying the full value of the house
several times a year.

???Profits of 300 percent are not uncommon for large private generators, which
provide about 40 percent of the state's power needs. The state could seize the
assets, compensate the companies and then sell the electricity to consumers at
cost, advocates of the plan say.

???"We have to do something," said Burton, D-San Francisco, one of a group of
legislators who urged Davis at a meeting last week to condemn some of the
plants. "These people have got us by the throat. They're making more money
than
God, and we've got to fight back -- not with words, but with actions."

???Davis himself raised the specter of using his emergency powers to take over
power plants with a fiery flourish during his State of the State address
earlier
this year.

???"If I have to use the power of eminent domain to prevent generators from
driving consumers into the dark and utilities into bankruptcy, then that's
what
I will do," he said in January.

???Davis still hasn't ruled out the possibility, but he says it's not high on
his list of tactics.

???Generators say they would fight tooth and nail against such a grab, and
state GOP lawmakers oppose condemnation, saying it smacks of underdeveloped
countries' nationalizing key industries.

???But Burton and other Democrats, including state Senators Don Perata,
D-Oakland, and Jackie Speier, D-Hillsborough, say the governor's strategy so
far
has left giant energy firms holding all the cards -- and a mounting pile of
the
state's cash.

???Davis had been trying to restore the financial stability of PG&E and
Southern California Edison after their combined $14 billion debt for
electricity
purchases so damaged their creditworthiness that the state had to take over
buying power.

???But now that PG&E has sought bankruptcy protection rather than accept
Davis'
plan to buy its transmission lines, the state may be stuck with the role of
power buyer for years.

???POWERS OF EMINENT DOMAIN

???Sacramento lawyer Richard Desmond, an expert on state powers of eminent
domain, said California could seize generating plants by demonstrating that it
would put the properties to "a higher and more necessary use."

???"The government has almost unlimited power of eminent domain to acquire
property," Desmond said. "The only thing the state has to do is pay 'just
compensation,' as defined under the constitution."

???The state could file a formal suit for eminent domain, a time-consuming
procedure if the owner mounts a fierce resistance over the transfer price,
Desmond said. If the state wants to take immediate possession, it can deposit
an
estimate of the just compensation and fight it out later in court. But if the
state loses, it could be stuck for interest, litigation costs and damages.

???Condemnation of power plants would raise a number of unknowns, such as
figuring out who would manage and operate the facilities. The state might also
be put into the position of having to seize contracts between the generators
and
natural gas providers.

???Davis spokesman Roger Salazar said the governor's first priority was
building new plants to increase supply, rather than condemning existing
plants.

???State Sen. Jim Battin, R-Palm Desert, said he thought seizing plants was a
horrible idea.

???"We would become a third world country and start nationalizing things,"
Battin said. "Nobody would ever build a power plant in California again. I
think
that would be a really bad play."

???COMPANY WOULD FIGHT

???Tom Williams, a spokesman for Duke Energy, said the company would fight
vigorously to protect its multimillion-dollar investment in four California
plants, including Morro Bay and Moss Landing.

???"We would defend our interest and seek a fair market value," Williams said.
Duke spent $611 million to buy or lease the four plants since 1998, and has
embarked on a $1.6 billion program to upgrade and expand them.

???Some power companies, however, may find their claims for the fair market
value of their plants undercut by their own tax filings. Energy firms,
including
Duke, told county assessors last year that the utility plants they bought were
worth hundreds of millions of dollars less than they paid for them.

???Private companies including Duke, Dynegy, Southern Energy, AES Corp and
Calpine spent a total of $3.2 billion to buy divested utility power plants
that
can produce as much as 20,000 megawatts.

???UNDERLYING PROBLEM UNSOLVED

???Williams said taking over the property of private companies would not solve
the underlying problem behind California's high energy prices: rising demand
and
an inadequate supply of energy to fill it.

???Even if Davis seized only one plant, the move might spur other power
generators to drop their prices, said Doug Heller of the Foundation for
Taxpayer
and Consumer Rights.

???"As soon as the generators recognize we're ready to go to a public power
system and take their plants, they may start selling power at reasonable
rates,
and we won't have to go down that road," Heller said.Chronicle staff writers
Tyche Hendricks, Patrick Hoge and Greg Lucas contributed to this report. /
E-mail Bernadette Tansey at btansey@sfchronicle.com.

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

?????????????????????APRIL 9, 2001, MONDAY, FINAL EDITION

SECTION: EDITORIAL; Pg. A19; WASHINGTON INSIGHT

LENGTH: 627 words

HEADLINE: Lights Dim On Gray Davis

BYLINE: Marc Sandalow

BODY:
IF POLITICAL capital were traded on the open market, Gov. Gray Davis might
have
beat PG&E in declaring bankruptcy Friday.Once regarded as a top tier
Democratic
challenger to President Bush in the 2004 election, Davis national reputation
is
suffering the electoral equivalent of a rolling blackout.It hardly matters
that
it was an electricity deregulation scheme approved by a Republican legislature
and signed by a Republican governor who created the current mess.Americas
introduction to the man the New York Times mistakenly referred to as Mr. Gray
is
as the governor who couldnt keep the lights on.Who killed the lights? sang
five
men, not so subtly dressed in gray shirts, gray slacks and gray hats at
Washington Gridiron Club My partys over.Campaign and Elections magazine places
him as a 40-1 longshot to win the presidency, and that was before the
governors
tepid performance of the past couple of weeks.As Washington residents will
tell
you, a politician can smoke crack and survive (ask Marion Barry.) But heaven
help him if he fails to clean the streets after a snowstorm.Davis supporters
shrug off the political damage to a lifelong public servant who has many times
overcome long odds. Indeed, it was as hard for many veteran political
observers
to believe that the uninspiring official who toiled in the back rooms of
California politics for two decades was a player on the national stage.But
there
he was. By virtue of his stunning victory in the 1998 governors race in a
state
that will soon hold 55 electoral votes, Davis was on most everyones list of
Democratic presidential contenders. ?Davis hosted a lavish coming out party
for
the national media at last summers Democratic convention, and became a regular
guest on the networks Sunday talk shows.My friends, Americans are not looking
for a rock star to be president, they want a serious man of substance, Davis
told convention delegates, in a remark aimed at Al Gore but might just as
easily
have been said about himself.In the fall, things were falling into place for
the
politically disciplined, Vietnam veteran. Gores defeat meant the party would
be
looking for a new star. As the incoming chair of the Democratic Governors
Association, Davis had a high profile. The Democratic Leadership Counsel the
same centrist organization that launched the careers of Bill Clinton, Al Gore
and Joe Lieberman regarded him as their top office holder.After raising a
political war chest of $25 million and maneuvering himself to become the
education governor, Business Week was one of many publications to declare him
among the most prominent of the Democratic heavyweights.And then the lights
went
out.Davis always maintained he was focused on Sacramento, not Washington. But
no
one believed him.The presidential bug is something that seems to infect all
California governors, from Pete Wilson and Jerry Brown to Ronald Reagan. If
one
includes the vice presidential flirtations of George Deukmejian and Pat Brown,
one has to go back to Republican Goodwin Knight in the 1950s to find a
California governor who has not talked about as part of a national
ticket.Whether Davis less than flamboyant campaign skills would have moved
voters in New Hampshire or Iowa may never be known. He once joked that he gave
Al Gore charisma lessons. Now he jokes how surprised he is to hear the words
Gray Davis and electricity uttered in the same sentence.Too bad.Many
Easterners
still think of Jerry Brown, Governor Moonbeam, as the quintessential
California
pol. Davis may never have a chance to dispel the stereotype.The powers down,
but
Im still toast, the gray-robed Gridiron members sang at their annual
dinner.Seems like only last night, my star was rising. Now Im just another nut
from the coast.

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?????????????????????Copyright 2001 Gannett Company, Inc.

??????????????????????????????????USA TODAY

?????????????????????April 9, 2001, Monday, FIRST EDITION

SECTION: MONEY; Pg. 4B

LENGTH: 492 words

HEADLINE: Utility's bankruptcy filing adds to California's confusion

BYLINE: Martin Kasindorf

DATELINE: LOS ANGELES

BODY:
LOS ANGELES -- California's largest utility threw more heat than light on the
state's energy muddle by filing for bankruptcy, power players in the deepening
9-month drama say.

???With electric bills climbing and Californians bracing for blackouts this
summer, stakeholders in the deregulation crisis are wondering what Pacific
Gas &
Electric's surprise action Friday will bring next.

???An optimistic view: A solution to the crisis will be sped along by moving
the issue of paying off the utility's $ 9 billion debt to the neutral forum
of a
court. "This is better than what we had before, we think," says Gary Ackerman,
executive director of the Western Power Trading Forum, a trade group for
electricity suppliers.

???A pessimistic view: More shortages are coming, and retail rates may become
mired in squabbling between U.S. Bankruptcy Judge Dennis Montali and Gov. Gray
Davis' Public Utilities Commission.

???Meanwhile, the lights are still on for PG&E's 9 million northern and
central
California customers.

???Here are scenarios envisioned for key forces in the scrimmage:

???* The other utilities. Southern California Edison, which owes $ 5.5 billion
to wholesalers, says it won't follow PG&E into voluntary bankruptcy to get a
breather from creditors. But unpaid suppliers of energy from solar arrays,
windmills and other "alternative" sources may force Edison into bankruptcy.

???To forestall this outcome and back up his gibe that PG&E "dishonored
itself"
in abandoning negotiations with state officials, Davis is working feverishly
for
a quick deal this week to buy Edison's transmission lines for the state for $
2.7 billion.

???But buying and running the power grid can't be done piecemeal. To complete
the package, PG&E's lines are needed. The judge may forbid their sale or
auction
them to private bidders. Davis' plans are "mortally wounded," says University
of
California at Irvine economist Peter Navarro.

???* The state government. Sacramento officials, who have spent $ 4 billion
buying power for cash-strapped utilities, want to float a $ 10 billion bond
issue to make more buys. State Treasurer Phil Angelides says any delays in
issuing the bonds, as the bond market weighs the effect of the PG&E
bankruptcy,
won't be serious enough to hurt the state budget.

???"We may have had one or two new hurdles put in front of us, but we're
confident we can get to the finish line," he says.

???* Consumers. Activist groups say Davis shouldn't bail out utilities by
endorsing rate increases. Some activists view bankruptcy court as a shelter
from
higher bills. Douglas Heller of the Foundation for Taxpayer & Consumer Rights
says federal law doesn't allow Judge Montali to unilaterally raise rates.

???"Bankruptcy court might be the only venue in which we can be somewhat
protected," Heller says. "Gov. Davis has been in full appeasement mode with
the
blackmail artists from Texas and the utilities. How can we do any worse than
that?"

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

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

???????????????April 9, 2001 Monday, NORTH SPORTS FINAL EDITION

SECTION: Metro; Pg. 1; ZONE: N

LENGTH: 1139 words

HEADLINE: SURGE IS SEEN IN GAS-FIRED POWER PLANTS

BYLINE: By Jeff Long and Melita Marie Garza, Tribune staff reporters.

BODY:

??Plans are on the drawing board for dozens of new gas-fired power plants in
Illinois, reflecting a national trend that will put even more demand on a
supply
that this year, at least, was so low that prices soared.

??No one expects the natural gas supply to remain that low for long--hundreds
of new wells are being drilled because of higher prices--but the boom in the
gas-fired generation of electricity raises questions about whether high demand
from those plants will prevent prices from sliding back to what they were a
few
years ago.

??And as electricity becomes increasingly tied to natural gas, observers say
the demands on one are more likely to change the price of the other.

??"We should be concerned about it," said William Abolt, Chicago's environment
commissioner. "You're getting one energy market where the decisions that are
made about natural gas affect the price of electricity."

??Although Abolt advocates using natural gas instead of coal to generate
electricity--"It means cleaner air," he said--he wonders if the gas industry
is
prepared for growing demand on its supplies.

??Generating electricity takes a lot of gas. Midwest Generation's gas-fired
power plant in Morris last year burned enough to keep about 192,000 homes
supplied with natural gas for a year: 24 billion cubic feet. That plant
generated only about 7 percent of all the electricity that Midwest produced,
mostly by burning coal.

??Despite the spike in gas prices during the winter, some companies planning
to
build gas-fired power plants said they have not changed their minds. Even if
gas
prices never drop to what they were a year ago, they said the new plants will
still be cleaner than coal, and efficient, flexible, and profitable.

??Skip Horvath, president of the Natural Gas Supply Association, said his
industry is planning for the coming demand--on paper, anyway.

??"We are working flat-out to meet that demand," he said, "but we are running
into constraints that are slowing us down." Among those constraints: finding
workers to operate drilling rigs, finding engineers to design them and locate
the supplies, getting access to land where the supplies exist.

??Since 1998, 33 companies have proposed projects in Illinois that would total
about 25,000 megawatts of gas-fired power. Some of those projects, accounting
for about a third of the power, are being built or already operating; others
are
still in some stage of the permitting process.

??No one expects all 25,000 megawatts to come on line. The state's total
generation capacity now, by comparison, is just under 34,000 megawatts,
including the gas-fired plants that recently have begun generating.

??In Illinois, natural gas makes up about 20 percent of the electricity
generating capacity--some of which comes from plants that can burn either gas
or
oil. The rest of the state's capacity comes from coal (50 percent) and nuclear
reactors (30 percent).

??If not all of the new generating capacity of the proposed gas-fired plants
is
needed in Illinois, some of it may be destined for consumers elsewhere in the
Midwest. It wouldn't likely go as far as energy-starved California; industry
officials say that the farther you send electricity, the less profitable it
becomes.

??"Some will sell in Illinois," predicted Howard Learner, executive director
of
the Environmental Law and Policy Center. "Some will sell out of state. Whether
they sell in state or out of state will not be based on philanthropy, but on
where they can get the best price."

??Gas-fired electricity generation has skyrocketed nationwide. According to
Horvath, 7,300 megawatts went on line in 1999. In 2000, 22,400 megawatts went
on
line. Another 53,300 megawatts of gas-fired generation is projected this year.

??Horvath's industry has been pushing gas-fired electricity for years. But
it's
only been in the past few that it really has begun to take off. Horvath stops
short of saying the industry was caught off guard. He points to other demands
as
contributing to high gas prices during the winter, such as a very cold
November
and December and a good economy that increased the amount of gas used by
industrial and commercial customers.

??"We were surprised by the magnitude of the turn toward natural-gas electric
generation," Horvath said.

??That turn holds true for Illinois. Just two small coal-fired projects are on
the state's list of pending permits.

??A 1999 study by the U.S. Department of Energy's National Petroleum Council
predicts that electricity generation nationwide will go from using 3.3
trillion
cubic feet of natural gas in 1998 to 7.8 trillion cubic feet in 2015. Total
gas
consumption was 22 trillion cubic feet in 1998. The council predicts that will
rise to 31.3 trillion cubic feet in 2015.

??Gas-fired power generation is especially attractive in Illinois for a couple
of reasons:

??First, electricity deregulation means companies other than electric
utilities
can build plants and sell power.

??Second, there's easy access to many interstate gas pipelines.

??The extent to which all of the new plants will affect gas supply remains to
be seen. Some of the plants won't ever get built, and natural gas production
has
already increased dramatically.

??"I really don't think we will see a tremendous supply problem," said Jim
Monk, president of the Illinois Energy Association, a trade group for electric
utilities.

??"The question it comes down to is what price people would have to charge for
electricity because of the gas prices," said John Long, a vice president at
Midwest Generation.

??For now, deregulation has frozen electricity rates in Illinois until 2004.
Commonwealth Edison has made long-term contracts with its electricity
suppliers
so that electric rates don't reflect the higher price of gas. That means
companies such as Midwest Generation had to absorb the higher cost of
generating
electricity with gas. Midwest switched to burning oil at its Morris plant in
February because of the high cost.

??What will happen after 2004 isn't clear. Arlene Juracek, ComEd's vice
president of regulatory and strategic services, said diversifying the way
electricity is generated is a good thing. That way, price hikes in one sector
can be compensated for by the others.

??Long and others in the industry are still optimistic about the future of
gas-fired electricity. They see the winter's high prices as an unusual blip.

??"In our opinion, gas prices will come down," said Greg Wassilkowsky, manager
of business development at Indeck Energy Services Inc. in Buffalo Grove.

??Competition from more efficient new plants likely will cause older gas-fired
plants to shut down or cut back, Wassilkowsky said, offsetting some of the
increased demand on the natural gas supply.

??In any case, look for the gas-fired plants to thrive.

??"The gas turbines are the technique to use," Wassilkowsky said.

GRAPHIC: GRAPHICGRAPHIC (color): Producing power. Source: Illinois
Environmental
Protection Agency. See microfilm for complete graphic.

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???????????????????The Associated Press State & Local Wire

The materials in the AP file were compiled by The Associated Press. ?These
materials may not be republished without the express written consent of The
Associated Press.

???????????????????????April 9, 2001, Monday, BC cycle

?????????????????????????????4:20 AM Eastern Time

SECTION: Business News

LENGTH: 820 words

HEADLINE: California's biggest utility files for bankruptcy

BYLINE: By MICHAEL LIEDTKE, AP Business Writer

DATELINE: SAN FRANCISCO

BODY:

??California's biggest utility filed for bankruptcy protection Friday, seeking
relief from the state's energy deregulation debacle. The surprise move will
not
turn out the lights but could mean political and financial turmoil for years
to
come.

??In filing for Chapter 11 protection from its creditors, Pacific Gas &
Electric said efforts by Gov. Gray Davis and other state officials to ease the
crisis had gone nowhere.

??"The regulatory and political processes have failed us, and now we are
turning to the court," said Robert D. Glynn Jr., chairman of corporate parent
PG&E Corp. "We expect the court will provide the venue needed to reach a
solution."

??The 13 million people served by the utility probably will be among the least
affected, since bankruptcy proceedings allow companies to continue operating
while they try to solve their financial problems under the supervision of a
federal judge.

??But lenders, bondholders and wholesale power suppliers may have to write off
billions of dollars in losses, and the move could affect more than 20,000
utility employees across Central and Northern California.

??US Bank of St. Paul is among a long list of creditors. The utility owes the
bank $310 million for pollution control bonds, according to the bankruptcy
filing.

??The company's financial reputation also could be damaged for years, making
it
more difficult to buy power and raise money to upgrade transmission lines and
plants.

??Davis, who has been accused by fellow Democrats as well as Republicans of
not
moving decisively to solve California's power crisis, did not immediately
comment on the bankruptcy filing. A spokesman said it was a surprise.

??Just a day earlier, Davis delivered his first statewide address on the
crisis, and dropped his opposition to higher electricity rates.

??After listening to Davis' speech, however, PG&E executives said they
concluded there was little hope of getting relief from the state. PG&E cited
"unreimbursed energy costs, which are now increasing by more than $300 million
per month," bad state regulatory decisions and the "unmistakable fact that
negotiations with Gov. Gray Davis and his representatives are going nowhere."

??Southern California Edison, the state's second-largest utility, said it has
no immediate plans to seek bankruptcy protection.

??The two utilities have been pinched for months by skyrocketing wholesale
power prices and the state's 1996 deregulation law, which bars them from
passing
those costs on to customers. The two utilities say they have lost more than
$13
billion since June and are having trouble buying power and natural gas because
of their credit is so poor.

??The two utilities had warned for months that they were sliding toward
bankruptcy. And the crisis led to rolling blackouts over four days in January
and March as electricity supplies dwindled to nearly nothing.

??The state has stepped in and spent $4.7 billion since January to buy power
for the utilities.

??Those efforts could not stave off the biggest rate increase in California
history: The state Public Utilities Commission last week approved rate hikes
of
up to 46 percent for customers of SoCal Edison and Pacific Gas & Electric.

??Consumer activists criticized the bankruptcy filing, complaining that the
utility's parent company has been making huge profits during the crisis
through
other subsidiaries.

??"The parent company has $30 billion, much of which it has siphoned out of
the
utility coffers. It would have bailed the utility out," said Harvey Rosenfield
of the Foundation for Taxpayer and Consumer Rights.

??State Sen. Debra Bowen, chairwoman of the Senate Energy Committee, said
consumers should see no change in the short run in prices and service.

??The crisis is blamed on a number of factors, including the high wholesale
prices, a tight supply worsened by scarce hydroelectric power in the Northwest
and maintenance of aging California power plants.

??Earlier this week, state power grid managers warned that California will see
more than a month of rolling blackouts for as many as 5 million people at a
time
if residents use as much power this summer as last.

??Pacific Gas & Electric's preliminary bankruptcy filing lists its top
creditor
as Bank of New York, which was owed $2.2 billion as of September.

??The utility had run up an $8.9 billion deficit buying electricity as of Feb.
28. A month later, it had $2.6 billion in cash and outstanding bills of $4.4
billion.

??PG&E Corp. stock fell more than 37 percent when trading resumed after being
halted for more than two hours. The stock closed at $7.20, down $4.18, on the
New York Stock Exchange. The 52-week high was $32.50. The stock of SoCal
Edison
parent Edison International was down $4.39, or 35 percent, to $8.25.

??On the Net:

??PG&E Corp.: http://www.pgecorp.com

??Edison International: http://www.edison.com

GRAPHIC: AP Photo CAJS102

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

?????????????????????April 8, 2001, Sunday, Home Edition

SECTION: Part A; Part 1; Page 21; Metro Desk

LENGTH: 594 words

HEADLINE: THE CALIFORNIA ENERGY CRISIS;

DEMOCRATS SLAM BUSH 'INACTION' IN ENERGY CRISIS;

ADMINISTRATION OFFICIALS DISPUTE THE CHARGE AND ACCUSE CONGRESSMEN OF
EXPLOITING THE SITUATION FOR PARTISAN GAIN.

BYLINE: ALISSA J. RUBIN, TIMES STAFF WRITER

DATELINE: WASHINGTON

BODY:

??Congressional Democrats sharpened their criticism of President Bush's
handling of the Western energy crisis Saturday, using their national radio
address to accuse him of failing to move aggressively to protect consumers
from
rising electricity prices and power supply shortages.

??"We know that in a crisis, inaction is not an option," said Rep. Jay Inslee
(D-Wash.). "But to date, unfortunately, that is all America has received from
the Bush administration--inaction and excuses."

??The Democratic comments came as Congress is facing pressure to respond to
the
energy crisis--lawmakers from the West, in particular, are hearing from
consumers concerned about sharply higher prices and potential blackouts during
the summer.

??A power crisis through the summer would almost certainly become a political
rallying point for politicians on Capitol Hill eager to push new energy
policies.

??Bush administration officials strongly disputed the Democratic charge that
they were ignoring the power crisis and asserted they have taken every step
possible except price controls on electricity suppliers.

??"It is unfortunate that some Democrats are trying to exploit this crisis for
partisan gain, distorting the record," Energy Secretary Spencer Abraham said
in
a statement. "We oppose price controls . . . ?but the Bush administration will
continue to look for constructive ways to remove obstacles to new electricity
supply in California and the West."

??Bush has called for aggressive new oil exploration while making clear he
will
not support any form of price controls on power suppliers.

??Democrats have touted approaches that combine much more limited exploration.
And some, such as Inslee, want to see the government intervene when prices
skyrocket.

??Inslee, in his remarks Saturday, singled out for criticism the Federal
Energy
Regulatory Commission, which regulates interstate electricity markets. He
charged that the agency had failed to ensure that consumers would not be
gouged.

??The commission "has the responsibility to assure that only reasonable energy
prices are charged," Inslee said. He charged that the Bush administration was
refusing to enforce fair pricing laws.

??Sen. Jeff Bingaman of New Mexico, who joined Inslee in delivering the
Democratic radio message, called on Bush to work on a bipartisan basis with
Congress to draft an energy plan that balances new exploration and the
development of clean fuel supplies with energy conservation measures. He also
urged Bush to make good on campaign promises to expand emergency assistance to
low-income families feeling the pinch.

??"I hope the Bush administration recognizes the need to step up and to work
on
a bipartisan basis to meet these challenges head-on," Bingaman said.

??"We can encourage natural gas development and oil drilling in regions where
it's been done in an environmentally sound way for decades," he added. "We can
provide incentives that help families conserve energy, thereby cutting their
utility bills."

??Bingaman and 14 other senators, including Senate Minority Leader Tom Daschle
(D-S.D.), introduced two pieces of energy legislation last month. One would
create tax incentives to encourage businesses to expand natural gas production
in selected areas of the country. It also would encourage the development of
"clean" coal production and of renewable energy sources, such as wind and
solar
power.

??The second measure would encourage energy conservation and launch an
in-depth
study of the problems plaguing the nation's wholesale electricity market.

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

?????????????????????April 8, 2001, Sunday, Home Edition

SECTION: Part A; Part 1; Page 1; Metro Desk

LENGTH: 1146 words

HEADLINE: THE CALIFORNIA ENERGY CRISIS;

PG&E GAVE BONUSES PRIOR TO BANKRUPTCY;
?POWER CRISIS: BEFORE ITS FILING, THE UTILITY ALSO HAD $2.5 BILLION ON HAND
AND
HAD RESTARTED SERVICES SUSPENDED EARLIER BECAUSE OF SHAKY FINANCES.

BYLINE: TIM REITERMAN, TIMES STAFF WRITER

DATELINE: SAN FRANCISCO

BODY:

??In the days approaching Pacific Gas & Electric Co.'s bankruptcy filing, the
debt-ridden utility had more than $ 2.5 billion in cash on hand and was
restarting services suspended earlier this year because of its shaky finances.

??Then, the day before the filing, the utility awarded 6,000 managers and
other
employees more than $ 50 million in annual bonuses and announced that
long-delayed merit increases had kicked in for the same workers.

??The timing of the bonus payments in particular raised an outcry from
consumer
groups and state officials.

??"Management is suffering from two afflictions: Denial and greed," Gov. Gray
Davis said in a statement.

??"It does not look good," said state Senate President Pro Tem John Burton.
"They already have a business and a P.R. problem."

??The bonuses and raises were announced in an e-mail sent Thursday by Chief
Executive Robert Glynn to employees. The payments cover about a third of the
company's 19,000 workers, ranging from nonunion clerical staff to all but the
very top management.

??On Friday, hours after PG&E had filed for reorganization of its debts under
Chapter 11 bankruptcy laws, a San Francisco judge approved the company's
overall
employee compensation plan. But PG&E officials said the ruling did not
specifically cover the bonuses or merit raises.

??Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer
Rights, said the bonuses should not be allowed.

??"Talk about manipulating the corporate finances to benefit management prior
to bankruptcy," he said. "It is the kind of arrogant mismanagement that is
responsible for the ruin of this company."

??Richard Levin, a Los Angeles bankruptcy attorney, said such payments to
employees are not unusual, especially after the filing of bankruptcy.

??"A company trying to reorganize has to take pretty strong action to keep
employees," he said. "If they did not do it, who is going to keep the
electricity flowing?"

??PG&E, the state's largest utility, declared in its filing for bankruptcy
protection that it is more than $ 9 billion in debt--several times more than
cash on hand--and was getting nowhere in negotiations with the governor for
state purchase of its power lines and other assets. The filing, which
includes a
list of creditors, allows the company to continue to operate while it
reorganizes its financial affairs. A judge, working under federal bankruptcy
law, will determine who will be paid and in what order. The first hearing is
scheduled for Monday.

??Company officials defended the payments, which were reported in Saturday's
San Francisco Chronicle, and fired back at Davis. "Instead of focusing all his
attention on solving the state's yearlong and ever-worsening energy crisis,
the
governor has launched a campaign-style attack on our company," PG&E said in a
statement Saturday.

??The payments, officials said, are awarded each year to employees who meet
the
company's performance goals and objectives. "They are smaller this year
because
of the larger financial crisis the company is going through but, it is safe to
say, more deserved this year than in years past because of the challenges
facing
our employees this year," said PG&E spokesman John Nelson.

??The payments came after the company began reversing some of the cost-cutting
measures imposed early this year after its finances worsened, PG&E officials
said.

??PUC Orders End to Some Cutbacks

??Among other things, PG&E had suspended projects involving the underground
placement of power lines, prompting cities and residents to protest to state
regulators. The company also eliminated about 325 jobs earlier this year and
was
planning layoffs of almost 700 more. But the California Public Utilities
Commission last month blocked the layoffs and ordered the company to rescind
any
cutbacks affecting service.

??Company officials said that, thanks in part to a tax refund of $ 1.1
billion,
the company now has about $ 2.5 billion to $ 2.8 billion on hand.

??"We are now in a position to start relaxing some of those cash-conservation
measures," Nelson said Saturday. "About a week ago we started doing
undergrounding again and performing new installations of electrical service"
in
business parks and elsewhere.

??"This compensation package was one of those measures reinstated," he said.

??Officials said the payments exempted the company's 25 officers, as well as
about 12,000 union workers who received raises in January.

??They said the total of the bonuses, estimated roughly at more than $ 50
million, is substantially lower than the $ 83 million in payments suspended in
January when the utility announced cost-cutting measures.

??That $ 83 million included bonuses for employee performance and a bonus
based
on the company's success.

??"As we close the books for 2000, we have determined that we are unable to
make that portion of the incentive payment due to the negative financial
impact
of the ongoing California energy crisis," CEO Glynn said in his e-mail.

??He said the incentive bonuses were awarded along with merit increases
averaging 3% for all employees, effective April 1. Bonuses commonly are about
four weeks of salary, officials said, but can vary according to performance
and
other factors.

??Mike Florio, senior attorney at the Utility Reform Network, said, "That is
going to be a little hard for the public to swallow. . . . I feel better that
the 25 top executives are not included. Those are the people that have run
this
company into the ground."

??On Saturday, Davis administration negotiators redoubled efforts to keep the
same fate from befalling Southern California Edison.

??Davis hopes for a state takeover of the massive system of electricity
transmission lines owned by PG&E, Edison and San Diego Gas & Electric.
However,
the bankruptcy complicates that effort, which already has proved to be
daunting.
A federal bankruptcy judge will have to approve any deal that involves PG&E.

??Edison executives and Davis' aides met in San Francisco in an effort to
strike a deal by which the state would purchase Edison's share of the
transmission system for $ 2.76 billion. The company would use the money to
restructure its debt.

??Edison has agreed in principle to sell the state its transmission system.
However, the company is seeking relief from some PUC regulations that could
later undermine aspects of the deal and could jeopardize the company's future
financial stability.

??On Saturday, Burton reiterated his call for the governor to "commandeer" two
or three power plants owned by out-of-state producers. "These people have us
by
the throat and are making more money than God," he told a news conference
here.
"You have to fight back."

??Steve Maviglio, the governor's press secretary, said Davis has not ruled out
such a seizure.

??*

??Times staff writer Dan Morain in Sacramento contributed to this story.

GRAPHIC: PHOTO: PG&E chief Robert Glynn announced bonuses and merit raises in
an
e-mail Thursday. ?PHOTOGRAPHER: Associated Press

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

?????????????????????April 8, 2001, Sunday, Home Edition

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

LENGTH: 1304 words

HEADLINE: JAMES FLANIGAN;

STATE LOOKS TO PUBLIC POWER AS SOLUTION TO ENERGY CRISIS

BYLINE: JAMES FLANIGAN

BODY:

??California, which led the nation into electric power deregulation, is about
to give it another model to contemplate: public power.

??The bankruptcy filing Friday of PG&E Corp.'s Pacific Gas & Electric Co. only
underlines the role that a new state power authority is slated to play as an
electricity supplier of last resort.

??The authority, which is being set up through legislation, would finance
power
plants, even build them if necessary. It probably would own and expand the
transmission lines that carry power throughout the state.

??Energy experts such as S. David Freeman, general manager of the Los Angeles
Department of Water and Power, say a California power authority is the only
way
to get plants built and paid for. State Treasurer Philip Angelides has been
preparing since January to set one up. And Mayor Richard Riordan of Los
Angeles
says that "a state authority is the only way to get siting for power plants
and
get things moving."

??The Pacific Gas & Electric bankruptcy filing will delay some plans, such as
the state's proposed purchase of the utility's transmission lines. But
ultimately, state ownership will be necessary because no private party seems
able or willing to invest $ 1 billion or so to upgrade the lines to meet
California's needs.

??In the long term, public power would ensure that California has a surplus of
electricity instead of the shortages it has today. But that security is
expected
to come at a price, as the costs of power may be higher than many other states
will be paying.

??Electricity deregulation nationwide may yet fulfill its promise of lower
rates and better service. Time will tell. But California's flawed
deregulation
plan has failed, and now state funds and public agencies are picking up the
pieces.

??The state's costs will be high. Angelides plans to sell $ 17 billion in
revenue bonds to finance purchases of electricity and transmission lines. But
Thursday night, after Gov. Gray Davis' speech on energy, state officials gave
a
briefing to financial analysts in which state debt numbers totaling $ 20
billion
were discussed, as well as revenue bonds for utility debts of $ 8 billion.

??California electricity users would pay such debts over 15 years, reports
Gerald Keenan, a utility strategist for the accounting firm
PricewaterhouseCoopers who participated in Thursday's briefing.

??The prospect is that electricity delivery in California a few years from now
will not be in the hands of the three investor-owned utilities but will be
owned
by municipal and regional agencies.

??Yet the real story, amid today's chaos and uncertainty, is that California
residents and even the investor-owned utilities themselves welcome the shift
from private to public ownership.

??Political support has been growing. Last summer, when electric bills first
rose in San Diego, residents called for the city to take over Sempra Energy's
San Diego Gas & Electric subsidiary. Similar groups in San Francisco were
calling for city-owned power long before supplier Pacific Gas & Electric filed
for bankruptcy.

??The Los Angeles Department of Water and Power is the model other cities are
looking to.

??The nation's largest municipally owned utility at $ 2.7 billion in annual
revenue, the DWP has been hailed for having abundant power supplies at low
prices all through the state's energy crisis. It has those supplies because
the
DWP, like all municipal utilities, was exempt from deregulation.

??"Public power is taking a giant leap, and private power meanwhile has fallen
on its face," says DWP chief Freeman, veteran of public power agencies for
more
than 30 years.

??Freeman, who favored deregulation when he came to Los Angeles in 1997, now
says it has wrecked a good system.

??"Since the days of Thomas Edison, private utilities were responsible for
keeping the lights on," he says. "The deal was you got a local monopoly. For
that you earned a rate of return on your assets and paid a secure dividend and
widows owned your stock."

??But deregulation, which sought to spur competition among generators of
electric power, changed all that.

??In California, Pacific Gas & Electric, Edison International's Southern
California Edison and SDG&E were forced to sell their power plants to other
companies. Subsequently they got caught up in the ruinous spiral of paying
high
prices for wholesale power but having to sell it at low, fixed prices to
retail
customers.

??Now the role of investor-owned electric utilities in the state may be at an
end. And the irony, sources say, is that their parent companies are quietly
happy to relinquish the business.

??All have developed profitable, unregulated subsidiaries and non-utility
divisions.

??PG&E Corp., for example, gets more than 50% of its $ 24 billion in annual
revenue from unregulated power-generating facilities in other states and from
energy trading. Without its utility, PG&E sees itself as a growing company
participating in the transformation of electricity markets nationwide and
worldwide.

??Elsewhere, after all, utility companies such as North Carolina's Duke
Energy,
Kansas' Utilicorp United and Georgia's Mirant Corp. (formerly Southern Co.)
are
hailed as attractive growth companies by investment analysts.

??Similarly, Edison International earns almost $ 400 million a year in profit
from its Edison Mission Energy and Edison Capital subsidiaries. A company
headquartered in a state short of power plants, Mission Energy is the
second-largest owner of power plants in the United States, with facilities in
Pennsylvania, Illinois and the Midwest as well as plants in Europe and Asia.

??Edison and PG&E have taken pains to segregate those moneymaking subsidiaries
from their regulated businesses, although lawyers for creditors in the PG&E
bankruptcy proceeding will surely try to attach such profitable assets.

??A comparable pattern of regulated and unregulated divisions holds for
Sempra,
which is not threatened by the massive debts overhanging PG&E and Edison.

??So what's the real outlook for the state's utility companies--and for the
state's electricity supply?

??The DWP's Freeman sees the companies spinning off their utility subsidiaries
to shareholders or selling them to municipalities. He notes: "Their boards of
directors are saying, 'Why do we need this heartache?' "

??Fine, but will a change in utility ownership help solve California's energy
crisis?

??Not really, says Lawrence Makovich, senior electricity analyst at Cambridge
Energy Research Associates.

??"California is pursuing distractions, arguing about transmission lines and
utility finances," he says. "It needs to build power plants."

??But Freeman counters that state authority and public ownership are just what
will ensure that plants are built.

??"We'll see to it that enough plants are built and old plants re-powered to
give the state a 15% reserve of power," says Freeman, who has headed the
Tennessee Valley Authority, the New York State Power Authority and the
Sacramento Municipal Utility District in a long career. Attaining a 15%
reserve
would mean adding at least 5,000 megawatts of power--enough to serve about
3.75
million typical homes.

??The price of power, he reckons, will be $ 60 to $ 70 a megawatt-hour. That's
about double the cost before the energy crisis--but a bargain compared with
current rates in California's dysfunctional spot market. Many electric bills
are
sure to rise 30% to 40%.

??But we'll have our power, and that rate may be reasonable compared with
those
of other states a few years from now, Freeman says. "By 2003 we'll be out of
the
woods, and by 2004 California will be a model to the rest of the country."

??Will the California model of state power work better than its deregulation
did? We'd better hope so.

??*

??James Flanigan can be reached at jim.flanigan@latimes.com.

GRAPHIC: PHOTO: DWP General Manager S. David Freeman favors a state power
authority. ?PHOTOGRAPHER: BORIS YARO / Los Angeles Times

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

?????????????????April 8, 2001, Sunday, Orange County Edition

SECTION: Metro; Part B; Page 11; Art Desk

LENGTH: 467 words

HEADLINE: ORANGE COUNTY PERSPECTIVE;

DAVIS HAS STATE HEADED FOR POWER WIPEOUT;
?THE GOVERNOR DUCKED HIS RESPONSIBILITY TO STEER CALIFORNIA AWAY FROM THE
ELECTRICITY CRISIS, AN EX-SURFING CHAMP SAYS.

BYLINE: JOYCE HOFFMAN, Joyce Hoffman, a former women's world surfing champion,
lives in, Laguna Beach

BODY:

??Back in the 1960s, my needs for energy were basic. I drove up and down the
coast of California competing and looking for the best waves in a 1960 VW bus
that seemed to go from San Diego to Santa Cruz on not much more than a tank of
gas.

??Good old Mother Nature provided the energy that produced the waves I rode,
and while "she" could sometimes be a little stingy, on the whole, there were
more than enough waves for the number of people brave enough or crazy enough
to
be surfers in those days.

??It was more difficult to be a surfer in the 1960s. The wetsuits were
extremely primitive and not particularly effective. The typical surfboard
weighed at least 40 pounds.

??Well, that was 40 years ago and a lot has changed. With the advent of the
modern wetsuit and leashes and surfboards so light and maneuverable that
anyone
from 2 to 90 can handle them, we have an energy crisis in the water. There is
too much demand for the supply. We have too many surfers chasing too few
waves.

??My life is very different today. I am no longer a professional athlete
constantly chasing the next wave and the next title. I manage a portfolio
consisting of real estate in Orange County and the Inland Empire. All the
qualities of discipline and focus and vision that enabled me to reach the
pinnacle of a sport have ensured my success in the "real world" of business.

??Energy still plays a large role in my life, but it is a much more complex
issue than it once was. While I realize that the blame for our current crisis
can be spread far and wide, I believe that the highest-elected official in
California has ducked his responsibility.

??It is obvious that Gov. Davis made a political decision against rate
increases last year when problems with the supply and demand of energy first
surfaced. Our governor has shown himself to be more concerned with his own
political ambitions than the long-term health of California.

??The problem was allowed to go unchecked, and the ramifications of this
inaction will haunt Californians for decades. Most of the properties I manage
have no mechanism to pass these increases through to the users. The majority
of
the tenants have long-term leases wherein their monthly rent obligation
includes
their utility usage, and most of these leases include yearly increases of 3%
to
4% in order to compensate for a modest degree of inflation. I do not know how
I
or other small-business owners can absorb increases of this size.

??It is times like these that I feel a great deal of nostalgia for the brutal
honesty and simplicity of sports. The governor and his administration have
shown
themselves unable or unwilling to even compete at the most basic level. Isn't
it
a shame that the qualities of discipline, focus and vision are in such short
supply in our leaders?

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????????????????????????????????Sacramento Bee

??????????????????April 8, 2001, Sunday METRO FINAL EDITION

SECTION: MAIN NEWS; Pg. A1; POWER CRUNCH

LENGTH: 1497 words

HEADLINE: Ratepayers lose clout PG&E filing cuts consumers' ability to exert
pressure on a rescue plan.

BYLINE: Carrie Peyton and Stuart Leavenworth Bee Staff Writers

BODY:

??Short of electricity and even shorter of patience, consumers suddenly have
lost some influence in California's energy crisis: their ability to exert
political pressure over a rescue plan for the state's biggest utility.

??Friday's decision by the Pacific Gas and Electric Co. to file for Chapter 11
bankruptcy protection effectively shifts responsibility for the utility's
future
from state leaders to a federal judge, one who doesn't necessarily need to
look
out for consumer interests.

??With near-monarchical powers, Judge Dennis Montali temporarily could double
electricity bills. He could sell off PG&E's vast land holdings. He could
unravel
Gov. Gray Davis' hopes of buying the state's electric grid.

??Legally, the biggest creditors have the loudest voices in a bankruptcy.
Customers generally have none.

??Consumer groups say they are worried about the unchartered territory into
which PG&E has plunged the state, but power generators say they are pleased
that
creditors can make their case in a less-politicized forum.

??"We've filtered out the politics, we've filtered out the consumer rage,"
said
Gary Ackerman, head of the Western Power Trading Forum, a coalition of
electricity marketers. "Now we're down to creditors and debtors."

??As the historic bankruptcy case unfolds in San Francisco, the fate of
consumers will be just one of a multitude of unknowns in the state's power
future and its repercussions for California's economy.

??The questions could touch everyone from environmental groups worried about
PG&E lands to Sacramento Municipal Utility District customers who might face
more rate hikes if changes are made to complex power contracts that involve
PG&E, SMUD and a key SMUD supplier.

??Amid intense focus on the bankruptcy's implications, PG&E was upbraided
Saturday by Davis and consumer groups for paying incentive bonuses to about
6,000 executives and workers Thursday, one day before it declared bankruptcy.

??"PG&E's management is suffering from two afflictions: denial and greed,"
Davis said.

??The bonuses, normally given out annually, were withheld in January as part
of
PG&E's cash conservation efforts. They were resumed along with power line
upgrades and other programs when the utility concluded it had enough cash,
said
PG&E spokesman John Nelson.

??They would have totaled $80 million in a good year and were less this year,
he said, unable to supply a figure. The money went to everyone from file
clerks
to company directors, but excluded company officers, Nelson said.

??While PG&E was defending its actions, Judge Montali was apparently at work
Saturday, as updates on next week's hearing schedule appeared on the Web page
of
the federal Bankruptcy Court's Northern District.

??Before his appointment eight years ago, Montali was a prominent San
Francisco
bankruptcy lawyer who tackled major cases.

??"He's a workaholic. He'll work as many hours as it takes," said San
Francisco
bankruptcy lawyer John Hansen, who has known Montali for more than 25 years.

??He described the judge as likely to look for creative solutions, and
probably
willing to establish new law if he concludes there's a basis for quickly
raising
electric rates.

??Montali, a 61-year-old judge with long experience handling bankruptcy cases,
will face some daunting rulings as he presides over the largest utility
bankruptcy filing in the country's history.

??Should he force PG&E's parent company to pay off some debts of its
subsidiary? Should he force the utility to give up its transmission lines or
its
hydroelectric plants to the state? Should he call for PG&E customers to pay
higher rates as part of the reorganization plan, and if so, how much?

??"He is certainly going to get his 15 minutes of fame," said Lynn LoPucki, a
law professor at the University of California, Los Angeles. "How would you
like
to be the guy who triples the utility rates of the state where he sits?"

??As LoPucki notes, under federal law, a bankruptcy judge cannot permanently
raise rates in California without approval of the state's Public Utilities
Commission.

??But while a utility's reorganization is being shaped by the court, he said,
a
judge appears to have wide latitude to unilaterally raise rates until he
approves a final plan.

??The point has not been litigated in previous utility bankruptcy filings, but
one section of the federal bankruptcy code says a judge may "issue any order,
process or judgment that is necessary or appropriate to carry out the
provision
of this title."

??"A lot of us have assumed the bankruptcy judge has no authority to raise
rates while the case has gone on," said LoPucki. "But that has been called
into
question by various lawyers, and it is far from settled."

??Hansen said it would not be "beyond the pale" for a bankruptcy judge to
conclude that PG&E can't reasonably put together a reorganization plan until
it
can charge enough to cover its wholesale costs. Over the last year, average
wholesale electricity prices have increased more than 800 percent, while
retail
rates have gone up just under 50 percent.

??"The judge would be making new law," he said, and from what he knows of
Montali, "I don't think he'd be hesitant to do it."

??If he chooses, Montali could hand down those decisions with no input from
the
5.5 million households and businesses that write checks to PG&E every month.

??Consumer groups are not powerless. They could sue to force PG&E's parent
company to pay some of the utility's debts, assuming the PUC fails in its own
attempt to require PG&E Corp. to kick in some money. And LoPucki said he
wouldn't be surprised if Judge Montali gave consumer groups some kind of voice
in the proceedings.

??But there is no requirement for a bankruptcy judge to listen to consumers,
acknowledged Harvey Rosenfield of the Foundation for Taxpayers and Consumer
Rights. Still, his group will try to be heard.

??"Any legitimate process has to include the ratepayers," he said, and courts
have allowed it before.

??The case, to continue Monday with hearings into numerous issues on how PG&E
handles its cash, potentially could affect every element of the state's
electricity morass.

??Montali could determine whether a 29 percent average rate hike approved by
regulators last month is divvied up as the PUC specified. If the judge
approves
some other formula, that could call into question how the state is repaid for
PG&E's share of the $3 billion-plus California has spent buying power since
January. PG&E has complained that the state formula is unfair, but utility
spokesman Nelson said Saturday that PG&E believes payments to California will
be
made in full because they are protected under state law.

??The judge has another route to raise rates, if he chooses: He could decide
to
pull PG&E's existing federal lawsuit against the PUC into the bankruptcy
proceeding, and rule himself on whether federal law forces state regulators to
let PG&E raise rates.

??Montali also will review PG&E's dealings with alternative power plants,
called qualifying facilities, and if PG&E asks to sever those contracts, he
could cut them free, which would force PG&E to buy more of its power on the
pricey wholesale market and increase costs for its customers.

??He could approve the sale of utility property, including up to 140,000 acres
of PG&E forest lands, reservoirs and campgrounds.

??"That could mean that some of its lands are sold to developers, and their
environmental values will be lost," said Steve Evans of the conservation group
Friends of the River.

??Consumer advocate Michael Shames said his biggest fear is not that the judge
would raise rates, but that to restore PG&E to health, its power plants or
other
assets would be "sold off and put in the hands of the same friendly folks
who've
been gouging us."

??And for the most part, the consumers who could be touched by almost every
action the judge takes will be watching.

??Haskel Causey, co-owner of a lumber company in West Sacramento, said he
wasn't thrilled about a bankruptcy judge determining the rates paid by 13
million people in PG&E's service territory.

??"It's going to have a tremendous effect on the economy," Causey said
Saturday, of the prospect of higher rates. "People will be more concerned
about
their energy bills, and they are going to spend less. Then you throw in the
downturn in the stock market, and things are look pretty bleak."

??The Bee's Carrie Peyton can be reached at (916) 321-1086 or
cpeyton@sacbee.com. Amy Chance and Emily Bazar of The Bee's Capitol Bureau
contributed to this report.

??What's Next

??* Tuesday and Wednesday: Bankruptcy Judge Dennis Montali has scheduled
hearings in San Francisco on PG&E's bankruptcy filing.

??* Tuesday: The U.S. House Government Reform Committee will hold the first of
three hearings this week on California's energy crisis at 11 a.m. at the
Sacramento Convention Center.

??* Tuesday: The Federal Energy Regulatory Commission meets in Idaho with
representatives from 11 Western states on electricity price volatility.

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????????????????????????????????Sacramento Bee

??????????????????April 8, 2001, Sunday METRO FINAL EDITION

SECTION: MAIN NEWS; Pg. A16; Q&A on PG&E

LENGTH: 800 words

HEADLINE: Chapter 11 filing just the first of many steps

BYLINE: Stuart Leavenworth and Carrie Peyton Bee Staff Writers

BODY:

??When Gov. Gray Davis gave his State of the State speech in January, he
painted a bleak picture of a utility's potential bankruptcy.

??"Bankruptcy would mean that millions of Californians would be subject to
electricity blackouts, public safety would be jeopardized, businesses would
close, jobs would be lost, investment would flee the state, and our economy
would suffer a devastating blow," Davis said on Jan. 8.

??The governor may have engaged in hyperbole, but PG&E's filing for bankruptcy
protection Friday is sure to rock the state in unexpected ways. Here are some
answers to basic questions about the bankruptcy filing:

??Q: What does a Chapter 11 bankruptcy filing do?

??A: Chapter 11 temporarily shields PG&E from legal claims of creditors,
mainly
power generators the utility hasn't paid for electricity. The company's next
step is to come up with a "reorganization plan" to pay its debts, estimated
at $
9 billion. Such a plan must be approved by creditors and the court.

??Q: Will PG&E customers face higher rates, beyond the 29 percent increase
approved by the Public Utilities Commission?

??A: Not immediately. Judge Dennis Montali first will want to study the PUC's
rate increase. If he finds it isn't adequate to keep PG&E in business, he
could
order a temporary rate increase to tide the utility over until a
reorganization
plan is approved, according to some legal experts. Under federal laws,
however,
the PUC would have to approve any rate increase that is part of the final
reorganization plan.

??Q: Will PG&E employees or management be affected?

??A: Typically, a judge issues orders ensuring that employees' benefits and
salaries remain intact. Current management stays in place.

??Q: Which creditors get paid first?

??A: Under federal law, creditors are paid in the following order:

??* Secured creditors, such as banks that loaned money for power plants.
Revenue bondholders also are secured creditors, but only to the extent of the
collateral they secured.

??* Companies that lend money to keep PG&E running during the bankruptcy
period.

??* Employees, contractors, vendors and others who keep the company running.

??* Unsecured creditors, such as power generators and collection agencies for
those companies, such as the California Independent System Operator.

??* PG&E's parent, PG&E Corp.

??* PG&E shareholders.

??Q: Who will be part of the bankruptcy hearings?

??A: The main parties will be PG&E and a committee, or committees, of secured
and unsecured creditors. Judge Montali probably will allow state
representatives
to participate.

??Q: How long does a bankruptcy proceeding last?

??A: A typical case lasts about a year, although some have lasted six or more.

??Q: Will California be paid back for the energy it is buying for PG&E?

??A: PG&E says California is a secured creditor and will be paid back. But
some
generators say they may challenge California's status.

??Q: Could PG&E's parent corporation be forced to pay off some of PG&E's
debts?

??A: Possibly. A judge ordered a parent of Dow Corning to cover some debts
when
it sought bankruptcy protection during its litigation over silicon breast
implants.

??Q: Will the filing hurt California's finances?

??A: Unclear. Moody's Investors Services didn't change California's bond
rating
Friday. But it changed its outlook on general interest bonds from "stable" to
"negative."

??Q: Does the state still plan to take over the transmission grid of PG&E,
Southern California Edison and San Diego Gas & Electric?

??A: Gov. Davis says talks are continuing with Edison and SDG&E. But many
analysts and some lawmakers say the state would achieve little by assuming
only
part of the grid, and the PG&E portion couldn't be transferred to the state
unless a court approved it.

??Q: Will PG&E's filing affect the Sacramento Municipal Utility District?

??A: SMUD could be affected because it is owed about $36 million by the state
Independent System Operator, which in turn is a PG&E creditor. SMUD also is
worried about the filing's impact on an ongoing dispute before federal
regulators that could boost the price of a large wholesale power contract.

??Q: What will happen next?

??A: PG&E has 120 days to file its reorganization plan, spelling out how it
will repay its debts. Often, such plans are worked out with major creditors,
because they have a vote on the outcome.

??Q: Is it certain PG&E will pursue bankruptcy protection?

??A: No. It's possible for a debtor and all its creditors to agree that
they've
found a way around the bankruptcy, and to come back to the judge together and
say they no longer need to be in Chapter 11 proceeding. But such cases are
rare.

??Q: Is any group a clear winner in this process?

??A: Yes - lawyers.

??* * *

??The Bee's Stuart Leavenworth can be reached at (916) 321-1185 or
sleavenworth
@sacbee.com.

GRAPHIC: Associated Press photograh / Justin Sullivan A Chapter 11 filing
allows
a company to reorganize to pay its debts while remaining in business, so PG&E
will be able to continue operating its facilities, like this one in San
Francisco.

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????????????????????????????????Sacramento Bee

??????????????????April 8, 2001, Sunday METRO FINAL EDITION

SECTION: FORUM; Pg. L4; OUR VIEWS

LENGTH: 563 words

HEADLINE: Lessons from history Electricity still needs a public role

BODY:

??"The question is whether the state herself shall develop and distribute ...
at least a large share of this power ... or whether the people shall suffer
private corporations, operating solely for profit ..."

??Bee editorial August 29, 1912

??As California struggles to regain control of its electricity system, it is
easy to lose sight of the big picture and hard to contemplate how history
could
provide any guidance to something so contemporary, so monstrously complex. Yet
history turns out to be a valuable compass that could help lead us in the
right
direction.

??This seemingly new fight over generators, grids and prices is actually a
very
old one. Dormant for decades as the status quo remained unchanged, it has
abruptly reawakened. Today's debate is couched in the language of our time,
with
all those energy institutions with abbreviations like FERC, ISO, PUC and PX. ?

??Fundamentally, however, the dilemma remains unchanged. Electricity is as
unique a commodity as it is vital. It cannot be stored. It must be generated
precisely when it is needed. This poses an extraordinary challenge for
government to guarantee a reliable, affordable supply. It demands a balancing
of
the vital roles of the public and private sectors. Given today's crisis --
private utilities wallowing in debt, merchant generators extracting high
prices,
consumers facing ever-rising rates -- the search for that right balance
remains
an elusive one.

??This newspaper first engaged the question near its very inception. The West
was young. The rules of the game were largely unwritten. And the public
interest
was threatened by private greed. Would government or companies dam the rivers
and build the hydroelectric plants? Who would control the grid? And perhaps
most
important, could citizens revolt against the local, privately held monopoly
and
turn power into a public enterprise?

??That's what Sacramento did against PG&E in the 1920s. Voters created the
Sacramento Municipal Utility District. They funded hydroelectric projects in
the
Sierra. And they wrested the local distribution system from a resistant PG&E.

??Other cities such as Lodi, Roseville, Modesto, Los Angeles and Redding
created public power agencies or city power departments with leaders elected
by
voters, not shareholders. The eventual result in California was a blend of
public and privately held agencies. Public power provided a yardstick by which
to measure the private sector. This system was hardly perfect. But it wasn't
broken.

??Now it is. The fixes must redefine the roles of the public and private
sectors to bring the system back in balance.

??Will government or private companies own the new plants that supply those
precious last megawatts of power at the pricey peak? Who will own or expand
the
transmission grid to relieve bottlenecks that stifle competition? Will private
utilities be allowed to take their customers for granted, or will citizens
have
the unfettered right to create a public power agency in their community?

??In our race to deregulate in the 1990s, we forgot how public power has
provided the discipline for the private marketplace that left to itself will
feast on price volatility. The public interest simply cannot be delegated to
the
private sector. Not then, not now, not ever. This is the lesson of history. As
we go about the fixes, we cannot afford to forget this yet again.

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

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

????????????????????????????April 8, 2001, Sunday

SECTION: DOMESTIC NEWS

KR-ACC-NO: ?K3554

LENGTH: 1393 words

HEADLINE: In wake of PG&E bankruptcy, California governor, state officials
scramble for solution

BYLINE: By Steve Johnson

BODY:

??SAN JOSE, Calif. _ The way they lambasted each other for PG&E's plunge into
bankruptcy Friday, Gov. Gray Davis and the utility's top executives sounded
like
innocent passengers on the Titanic, seemingly powerless to prevent it from
sinking.

??In reality, the governor and officials at Pacific Gas & Electric Co. _ along
with state regulators _ were supposed to be at the helm. Though PG&E's
fortunes
are now in the hands of a bankruptcy judge, little has changed for state
authorities. They still bear much of the responsibility for charting
California's course out of its energy crisis.

??But the problems that PG&E ran into _ from a critical shortage of power
plants to an easily manipulated electricity market _ still threaten the state
and won't be quickly solved.

??Eager to avoid another utility bankruptcy, Davis officials met Saturday with
Southern California Edison officials in San Francisco to firm up state plans
to
buy the transmission lines of Edison and the San Diego utility owned by Sempra
Energy Co. The idea is to give those businesses _ especially financially
strapped Edison _ a much-needed infusion of cash.

??But since the state's hopes to buy PG&E's lines have hit a major snag, some
people worry that the state may wind up owning only half of California's power
grid, which they fear would be of limited value.

??"Does it make any sense to have the transmission lines of Edison and Sempra,
and not PG&E?" asked Senate President Pro Tem John Burton, D-San Francisco, on
Saturday. "I don't know the answer to that."

??Davis spokesman Steve Maviglio said Saturday that the state is exploring the
possibility of acquiring PG&E's transmission lines through the bankruptcy
court.
In fact, Maviglio said some lawmakers are mulling the idea of taking over all
of
PG&E _ an option Davis has not ruled out.

??Even if the state does take over all three companies' lines _ and PG&E's
other operations _ it would still have to deal with the major hazards that
contributed to PG&E's demise. And until some way is found to navigate around
those, many experts believe, California and its consumers will remain in
perilous straits.

??As things stand now, said Stanford Economist Frank Wolak, "we're looking at
a
disaster in a big way this summer."

??The shortage of power supplies

??In explaining why the utility suddenly filed for bankruptcy _ catching Davis
and other lawmakers by surprise _ Robert Glynn Jr., Pacific Gas and Electric
Co.
chairman, said negotiations with the governor were "going nowhere."

??Davis fired back that PG&E "has dishonored itself" and "acted in a selfish
manner."

??Yet a more fundamental reason for PG&E's financial collapse is California's
critical shortage of power plants. And despite PG&E's bankruptcy, that
situation
hasn't changed.

??Under the 1996 law that deregulated the sale of electricity in California,
PG&E and other utilities were encouraged to sell their power plants so other
companies could enter the energy producing business, presumably spurring
competition and lowering prices for consumers.

??But while companies did buy many of PG&E's plants, they delayed building new
ones, because of uncertainties about the newly deregulated system. Meanwhile,
the state's population _ and its power demands _ continued to grow. The result
was highlighted in a recent report by the California Independent System
Operator, which oversees most of the power grid. It predicted the state would
be
nearly 6,000 megawatts short by June _ enough for 4.5 million homes.

??Despite PG&E's bankruptcy action, "the fundamentals haven't changed," said
California Public Utilities Commissioner Richard Bilas Saturday. "We haven't
enough supply and too much demand....It's not good. It really isn't."

??The market's vulnerability to manipulation

??That dearth of power is primarily responsible for driving up the price of
power, which heavily contributed to PG&E's financial troubles, since the rate
it
has been permitted by law to charge its customers doesn't cover all its power
costs. But California officials accuse electricity suppliers of also
manipulating the energy market to help those prices rise.

??Among other things, the companies have been accused of switching off some of
their plants just before demand for power soars, to earn top dollar for the
electricity they produce from other plants. That charge has been vehemently
denied by suppliers. But state officials are suspicious, because in recent
months more than a fourth of the state's entire generating capacity has been
out
of commission for what their operators claim was necessary maintenance.

??Erik Saltmarsh, chief counsel to the California Electricity Oversight Board,
said it's too early to know if PG&E's bankruptcy filing will make it easier or
harder for price gouging to occur.

??He noted that some power suppliers have characterized the high prices they
charged PG&E as a kind of risk premium, since they weren't sure the struggling
utility would repay them. Once the bankruptcy court stabilizes PG&E's
financial
condition, Saltmarsh said, that excuse may vanish.

??But he said the filing also might prompt some suppliers to charge even
higher
prices while the state buys power on PG&E's behalf, out of fear that the
bankruptcy proceedings might somehow limit that opportunity in the future.

??"I don't know what will happen," Saltmarsh said, "but I certainly wouldn't
take the position that our vulnerability to high charges just got reduced."

??The government's regulatory hodge podge

??Over the past few months, the state has quickly run up billions of dollars
in
power bills, with no end in sight. Yet no single regulatory body is in charge
of
making sure the state is getting its money's worth.

??As it is now, five separate state agencies oversee various critical aspects
of California's energy markets _ monitoring the flow of electricity, keeping
track of utility operations, approving new generators and purchasing power.
Now,
a bankruptcy court will get into the act, as well. And some lawmakers are
pushing to create still another governmental body _ a power authority, which
could buy or build its own generating plants.

??But the one agency with the most clout over electricity suppliers and the
prices they charge _ the Federal Energy Regulatory Commission _ so far has
declined to do what state officials have begged it to do: punish companies
accused of charging too much. And despite PG&E's bankruptcy action, that
reluctance appears unlikely to change.

??"I personally am not sure the federal government should get involved" in
such
matters, said Public Utilities Commissioner Henry Duque. "We're big boys and
we
should be able to handle it ourselves."

??But the commission's president, Loretta Lynch, disagrees. In a statement she
issued in response to PG&E's bankruptcy announcement, she pointed out that
"neither the commission nor the governor has the power alone to change these
prices because the FERC has authority over California's wholesale energy
markets."

??The fickleness of Mother Nature

??Because of its razor thin electricity reserves, California is particularly
at
the mercy of the weather, which hasn't been kind lately.

??A drought across the Pacific Northwest has severely reduced the amount of
water gushing through the hydro-electric dams that this state relies on for
power in emergencies. And that problem could be aggravated by hot weather this
summer.

??Last June, record temperatures were partly responsible for knocking out
power
to about 100,000 Bay Area customers. This summer, that could be repeated.
Citing
data from the National Weather Service, an organization that monitors power
supplies throughout the region _ the Western Systems Coordinating Council _
issued a report Friday that predicted "above-normal warmth" across the West.

??What's it all add up to? Even if PG&E eventually manages to restore its
financial health in bankruptcy court, the recent report by the Independent
System Operator was not optimistic about the state's immediate prospects. "
California," it concluded grimly, "is facing an electricity shortage of
unprecedented proportions."

??(staff writers Chris O'Brien, Brandon Bailey, Lori Aratani and Chuck Carroll
contributed to this report.)

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

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

JOURNAL-CODE: SJ

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????APRIL 8, 2001, SUNDAY, FINAL EDITION

SECTION: NEWS; Pg. A14

LENGTH: 683 words

HEADLINE: Deregulation Debacle

SOURCE: Chronicle Staff Writer

BYLINE: Chuck Squatriglia

BODY:
Chronology of major events that led to Pacific Gas and Electric Co. filing for
bankruptcy on Friday:

???1996: Gov. Pete Wilson signs legislation making California the first state
to deregulate its electricity market.

???1998: PG&E and other utilities begin selling power plants, as required by
the deregulation law. The law caps rates until the utilities are divested of
plants, which was expected to take four years.

???1999: San Diego Gas & Electric sells its plants to private generators,
allowing the utility to raise its rates. Customers' bills triple within a year
as the utility passes on rising wholesale electric costs.

???2000

???June 15: As the electricity shortage begins, rolling blackouts hit San
Francisco.

???Aug. 2: Gov. Gray Davis calls for investigation into possible price
manipulation in the wholesale electricity market.

???Dec. 13: U.S. Energy Secretary Bill Richardson orders suppliers to sell
electricity to power-strapped California to try to fend off blackouts.

???Dec. 15: The Federal Energy Regulatory Commission approves a flexible rate
cap plan, but allows power suppliers to charge utilities more if they can
prove
a higher price is warranted.

???2001

???Jan. 1: PG&E warns that it will run out of cash within three weeks unless
the state Public Utilities Commission raises rates 26 percent. PG&E shares
drop
29 percent to a 52-week low of $12.

???Jan. 4: The PUC approves an emergency rate hike of 15 percent for PG&E
customers.

???Jan. 5: Standard & Poor's and Moody's Investors Services downgrade PG&E's
corporate parent, PG&E Corp., to a notch above "junk" status.

???Jan. 11: PG&E plans to lay off 1,000 employees as a cost-cutting move. The
PUC later forbids the utility to do so.

???Jan. 16: PG&E says it is days away from defaulting on more than $1 billion
in debts it must pay by Feb. 15. PUC Commissioner Carl Wood warns that the
utility's bankruptcy "is now a very real possibility."

???Jan. 17: PG&E defaults on $76 million worth of short-term debt. Gov. Davis
signs an emergency order allowing the state to buy electricity under a plan to
prevent utility bankruptcies and additional blackouts.

???Jan. 19: Davis signs legislation allowing the state to spend as much as
$400
million to buy electricity.

???Jan. 23: The Bush administration extends an emergency order first issued by
the Clinton administration directing electricity wholesalers to sell to
California.

???Jan. 27: Natural gas suppliers threaten to cut off PG&E because of the
utility's mounting debts.

???Jan. 29: PG&E threatens to default on $1.3 billion in debts unless
creditors
grant extensions.

???Jan. 30: An independent audit reveals PG&E sent $682 million to its parent
company even as it sank deeper into debt.

???Feb. 1: Davis signs a multibillion-dollar plan to have the state buy
electricity for PG&E and other utilities.

???Feb. 6: President Bush allows the expiration of an emergency federal order
requiring electricity wholesalers to sell to California. A federal judge in
Sacramento orders Reliant Energy to continue selling to the state.

???Feb. 16: Davis proposes a multibillion-dollar plan to restore financial
health to PG&E and two other investor-owned utilities by buying their power
lines.

???Feb. 23: Davis announces an "agreement in principle" with Southern
California Edison to buy its transmission lines for $2.7 billion. Negotiations
with PG&E soon falter over the price tag.

???March 1: PG&E announces it will pay its creditors just 15 cents on the
dollar.

???March 27: The PUC approves record rate increases of up to 46 percent for
Edison and PG&E customers.

???March 29: Davis asks lawmakers to approve spending another $500 million to
buy power for PG&E and other utilities, bringing the state's tab to $4.7
billion.

???April 5: Davis proposes relieving the utilities' debts by giving them a
share of the PUC's proposed rate increase. PG&E says the governor's remarks
offer no comprehensive solution to the power crisis.

???April 6: PG&E files for Chapter 11 bankruptcy protection.

???Sources: Associated Press, Bloomberg, Chronicle Research

GRAPHIC: PHOTO (7), (1) Gov. Pete Wilson, (2) U.S. Energy Sec. Bill
Richardson,
(3) President Bush, (4) Gov. Gray Davis

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????APRIL 8, 2001, SUNDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 1709 words

HEADLINE: POWER PLAY;

PG&E timed bankruptcy to blame Davis, insiders say

SOURCE: Chronicle Staff Writer

BYLINE: David Lazarus

BODY:
When Gov. Gray Davis took to the airwaves Thursday to explain how California
was
going to solve its energy troubles, PG&E Corp. Chairman Robert Glynn was one
of
the few who knew that things were about to get much, much worse.

???Without telling the governor -- and contrary to later explanations -- Glynn
had decided days earlier that Pacific Gas and Electric Co. would file for
bankruptcy protection Friday morning, sources within the utility said.

???Moreover, the timing of the move now seems to have been very deliberate.

???PG&E, observers say, seized the opportunity to declare bankruptcy Friday so
it could lay blame on the governor while also staying ahead of a breakthrough
in
Davis' separate bailout talks with Southern California Edison -- a deal that
worked against PG&E's financial interests.

???The behind-the-scenes picture taking shape is that PG&E apparently realized
that it had no choice but to act on Friday.

???After months of bankruptcy preparations, this was the company's best chance
to minimize backlash from the filing, and PG&E scrambled to have everything in
place before the governor uttered a word.

???However, that's not how Glynn and other PG&E officials told the story.

???"We listened carefully to the (governor's) statement and the commentary
that
followed, and this decision is the result," Glynn said Friday of why PG&E had
chosen to file for bankruptcy.

???Davis felt he'd been ambushed.

???The governor called Glynn on Friday night and expressed his deep
disappointment over PG&E's actions. Sources said the call did not go well, and
that a possibly insurmountable gulf had opened up between the state's top
politician and the head of its largest utility.

???"The governor was led to believe that we were dealing in good faith, and
clearly that was not the case," Steve Maviglio, Davis' spokesman, said
yesterday. "Instead of looking in the mirror, they pointed fingers."

???As Glynn told it, PG&E's talks with Davis had broken down weeks earlier.
"We've heard a lot of the words that have been involved but have not seen a
lot
of actions," he said.

???By last week, the deal slowly taking shape between the utility and the
state
had ballooned to almost incomprehensible complexity.

???What once had been a mere cash infusion for a troubled company now involved
public acquisition of power lines and land, changes in California's regulatory
laws, multibillion-dollar bond offerings and potentially huge rate increases
for
consumers.

???Financial analysts who had been briefed on the status of the negotiations
after the governor's Thursday speech said it appeared that Davis was ready to
do
virtually anything to keep PG&E from going bankrupt.

???PG&E SMELLED WEAKNESS

???But they said PG&E may have sensed that the governor had lost the political
clout to sell to lawmakers what was shaping up to be a very generous deal.

???"Although a reasonable deal could have been reached, it's unclear whether
all the parties in the state would have signed on," said Paul Patterson, an
energy-industry analyst at Credit Suisse First Boston in New York.

???Sources familiar with the talks said the negotiations reached an impasse
last month when PG&E demanded that the state Public Utilities Commission be
reorganized so that it would have less oversight authority over the utility's
activities.

???Such a change would have given PG&E almost free rein to raise its 13
million
customers' rates any time the utility saw fit, the sources said. One called
PG&E's demand "a deal breaker."

???PG&E spokesman Ron Low denied yesterday that such a condition had been
sought. Rather, he said PG&E merely wanted written assurance that any
agreement
reached with the governor "could not be undone by the PUC."

???Other sources cited a different turning point in the negotiations. They
said
the talks began to disintegrate several weeks ago when Davis criticized PG&E
and
other utilities for not making payments to smaller power companies that were
struggling to get by.

???"It is wrong and irresponsible of the utilities to pocket and withhold the
money," the governor said. "It's immoral and has to stop."

???PG&E's chief financial officer, Peter Darbee, reportedly told one of Davis'
negotiators that Glynn "took it personally" when PG&E was called "immoral."

???Whatever the reason, Glynn knew well before the governor's speech on
Thursday that his utility was going to file for bankruptcy.

???FILING 'READY TO GO'

???"We had this thing ready to go long before that," acknowledged PG&E
spokesman Greg Pruett.

???Indeed, PG&E had hired bankruptcy attorneys from the New York firm of Weil
Gotshal & Manges last August. Although the lawyers ostensibly had been
retained
to help keep the utility from going bankrupt, their mission shifted as PG&E
sank
deeper into debt.

???By early this year, sources within the utility said, the attorneys had
drawn
up all necessary papers to file for bankruptcy at a moment's notice. The only
question was the timing.

???Many observers now believe that PG&E never intended to cut a bailout deal
with the governor. The utility made no secret of its displeasure with having
to
sell off lucrative assets like power lines, land or dams.

???Moreover, PG&E executives appeared to sincerely believe that they were
entitled to recoup the entire $9 billion in debt accrued because of a rate
freeze that prevented the utility from passing along sky-high power costs to
customers.

???They had faith in a lawsuit pending in federal court that seeks to overturn
the rate freeze and allow full recovery of past expenses.

???But time was against PG&E. The utility's Southern California cousin,
Edison,
was holding its own bailout talks with Davis, and, unlike PG&E, had found the
terms of the deal to its liking.

???In February, Edison reached a tentative accord with the governor to sell
its
transmission lines to the state for nearly $2.8 billion.

???Now, the negotiators say, a final deal may be just a few days away,
including an agreement for Edison to drop its own lawsuit seeking recovery of
past costs.

???EDISON DEAL POSED PROBLEMS

???If so, this would have been a big headache for PG&E. Among other problems,
it would have been an enormous challenge, to say the least, to publicly defend
pursuit of its federal lawsuit when Edison had announced that such legal
tactics
were unnecessary.

???"It's possible they would be seen as a spoiler if Edison has a deal in
place
and then PG&E filed for bankruptcy," said CS First Boston's Patterson.

???"They'd been looking at bankruptcy for months," he also said. "They looked
at the political landscape and decided this was the best way to go."

???The looming Edison deal added extra urgency to PG&E's bankruptcy timing. If
PG&E waited until this week to file, it risked the governor announcing a final
agreement with Edison as early as tomorrow.

???Observers said that risk, as well as the opportunity for finger-pointing
provided by Davis' Thursday night speech, gave PG&E almost no choice but to
schedule its bankruptcy filing for Friday morning.

???Once the filing date had been settled on, PG&E set the bankruptcy wheels in
motion.

???"These things take time to put together from the moment you decide to do
it," said PG&E spokesman Pruett.

???BONUS HANDOUTS

???Among other considerations, Glynn wanted to hand out bonuses and raises to
about 6,000 managers and other employees at the utility and its parent
company.

???Such a move would be more difficult after the bankruptcy filing had been
made. The bankruptcy judge could even forbid it.

???Backtracking from a previous decision not to hand out bonuses this year,
Glynn told PG&E workers in an internal memo late Thursday that he had changed
his mind.

???Bonuses and raises would be awarded, he said, because of workers' "efforts,
teamwork and dedication during the past year, and particularly throughout the
ongoing energy crisis."

???Next, PG&E had to orchestrate the actual filing and its subsequent fallout.
Securities regulators were informed that the company had an important
announcement pending, and trading in PG&E's stock was immediately halted.

???Employees were informed of the bankruptcy move in an e-mail message sent
out
at 9:30 a.m., followed by a town hall-style meeting in the corporate
auditorium
15 minutes later.

???Glynn and Gordon Smith, PG&E's chief executive, then spoke by telephone
with
reporters, followed by a full day of one-on-one interviews to hammer home the
company's message.

???CRITICISM OF NEGOTIATORS

???In one such interview, Glynn reiterated to CNBC that "the governor's
negotiators have moved away from previous agreements that we had reached with
them."

???He also faulted state regulators for having taken "negative actions" that
jeopardized PG&E's financial position -- an unusual argument for a utility
already $9 billion in the hole.

???Meanwhile, the company's spinmeisters issued "talking points" for employees
so they too could communicate PG&E's stance. It advised them to say bankruptcy
was "in the best interests of our customers, employees, suppliers, debt
holders
and shareholders."

???Going forward, PG&E has two weeks in which to compile all the necessary
paperwork supporting its filing, and will then schedule subsequent
developments
with Federal Bankruptcy Judge Dennis Montali.

???The process, which could last years, ultimately will provide a framework
for
PG&E's creditors to recover at least a portion of the money owed them, and
will
allow the utility to continue operating in an otherwise normal manner.

???PG&E said it foresees no disruptions of service or layoffs of employees.

???RATES COULD SKYROCKET

???However, customers' rates could go through the roof if the bankruptcy judge
decides that consumers should shoulder the utility's $9 billion debt burden.

???In the meantime, PG&E is continuing efforts to persuade customers to use
less power in the face of severe electricity shortages this summer, including
TV
ads promoting conservation.

???One such ad is scheduled to run in the Bay Area tonight during a showing of
"The Ten Commandments," in which Moses leads his people through the desert and
to the promised land.

???Glynn, now leading his company through the wilderness of bankruptcy, can
only be hoping to be as fortunate.E-mail David Lazarus at
dlazarus@sfchronicle.com.

LOAD-DATE: April 8, 2001

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????APRIL 8, 2001, SUNDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 1471 words

HEADLINE: Davis' Pledges Come Back To Haunt Him

SOURCE: Chronicle Staff Writers

BYLINE: Carla Marinucci, Patrick Hoge

BODY:
In January, Gov. Gray Davis stood before the Legislature for his State of the
State address and delivered a definitive vow -- and a devastating prediction.

???"To utilities and the financial community, let me say this: I reject the
irresponsible notion that we can afford to allow our major utilities to go
bankrupt," he said. "Our fate is tied to their fate."

???Davis painted a chaotic picture of what could follow: "Bankruptcy would
mean
that millions of Californians would be subject to electricity blackouts.
Public
safety would be jeopardized. Businesses would close. Jobs would be lost.
Investment would flee the state. And our economy would suffer a devastating
blow."

???But on Friday, the event Davis called unthinkable came to pass as the
state's largest utility declared bankruptcy just hours after the governor
delivered his first televised address to the state on the energy crisis.

???The dramatic move by Pacific Gas and Electric Co. -- that many saw as a
slap
in Davis' face -- highlighted what critics say are the California governor's
worst political liabilities: an overly cautious, controlling nature and a
tendency to focus on protecting political turf with easy promises.

???In this situation, it meant Davis promised no rate increases for consumers
while pursuing a bailout strategy to force the utility to give up one of its
prized assets, its network of transmission lines.

???"Most men never have a chance to write their own epitaphs. But Gray
provided
the language for his political gravestone," said GOP consultant Dan Schnur, a
former top aide to Davis' predecessor, Republican Pete Wilson. "He did it all
by
himself."

???Davis' defenders say the governor deserves credit during the past months of
the state's energy crisis for steadfastly seeking a plan that would protect
average California consumers.

???"Davis does get some points for fighting off the rate increase for awhile,"
said Bruce Cain, political science professor at the University of California
at
Berkeley.

???Bob Mulholland, campaign adviser to the state Democratic Party, said the
governor is the captain in a classic battle between Democratic populism and
the
big oil-and-energy interests who control wholesale electricity prices.

???"The Texas boys have California right where they want us," he said. "PG&E
declares Chapter 11 bankruptcy while they're eating filet mignons."

???Others, however, say Davis has single-mindedly pursued unrealistic options
that have caused delay and greater financial fallout.

???They point to Davis' insistence since January that PG&E sell its
transmission lines in exchange for cash to pay off its debts, an option the
company always disliked. Southern California Edison in late February signed a
tentative $2.8 billion deal to sell its transmission lines, and some speculate
that Davis hoped PG&E would cave in and do the same.

???Despite its reluctance, PG&E officials said they agreed to sell the lines
in
a handshake deal with a top Davis negotiator in late February. But the state
quickly backed away from the deal, said Dan Richard, a PG&E senior vice
president.

???At the same time, Richard said, the governor was publicly chastising the
utility for its actions and the Davis-controlled Public Utilities Commission
was
issuing rulings the company felt jeopardized its economic survival.

???PG&E Corp. Chairman Robert Glynn said that for the three critical weeks in
March, PG&E had no negotiations at all with the Davis administration.

???Finally, on March 27, Glynn called the governor and spoke with Davis --
warning him that the firm was as close as it ever had been to filing
bankruptcy.

???A top Davis negotiator last Monday requested that PG&E officials come to
Sacramento for a meeting -- and another Davis adviser told the company it
would
probably not like what was being offered, Richard said. PG&E representatives
were presented with a proposal they felt was a major step back, Richard said.

???Despite PG&E's displeasure, on Wednesday Davis met with the Assembly
Republican caucus and reported that negotiations with PG&E were going well,
according to legislators at the meeting. When asked, Davis reportedly
downplayed
the possibility of bankruptcy proceedings.

???DAVIS IN TOUCH?

???"It makes you want to consider whether or not the governor's office is
really in touch with the crisis," said Jamie Fisfis, a spokesman for Assembly
Republican leader Dave Cox, R-Fair Oaks.

???Davis' own declarations have eroded his credibility, Fisfis said.

???"No rate increases . . . no bankruptcies," Fisfis said. "Those things have
come to pass."

???Said Assemblyman Keith Richman, R-Northridge: "The governor was strongly
focused on the political expediency of not raising rates, and was taking a
stance that was completely unrealistic."

???Davis' micromanaging style also allowed for no bipartisan cooperation,
Fisfis said.

???"He didn't really give us an opportunity to participate or assist, because
he kept everything secret," Fisfis said.

???Even some in Davis' own party have become increasingly vocal in their
criticism.

???ARITHMETIC FAULTY

???Assemblyman Dean Florez, D-Shafter, said the arithmetic laid out in the
governor's proposals apparently did not add up for PG&E, providing neither
enough money to buy power in the future, nor to pay off its debt.

???Florez -- who has sponsored a bill to help utilities pay off past debts --
said legislators probably will begin pursuing their own proposals, some of
which
were shelved to give the governor a chance to do it his way.

???Davis "may have locked himself in too early by saying we can do this
without
a rate increase," Florez said. "That is what made this thing really impossible
to deal with."

???Garry South, Davis' senior political adviser, argued that critics should
focus their wrath not on Davis, but on the arrogance and greed of big
utilities.

???"The governor cannot hold a gun to PG&E's temple and force them to a deal,"
said South. "He is only one player in this drama, and unfortunately, he
doesn't
control most of the other players."

???In the most recent negotiations, South said PG&E demanded that Davis
"basically agree to all of their conditions, forgive all their past debts,
forget the fact that they brought this thing on themselves (by supporting
deregulation), bail them out with the taxpayers' money . . . and hold them
harmless."

???South insisted that consumers understand. "The governor's standing with the
public has held up," he said, "because people view him as having the interests
of the consumer at heart -- of not caving into big utility companies."

???VOTERS' PATIENCE UNKNOWN

???Critics say the real question is how much patience voters will have for
Davis, who faces re-election in 19 months, as the crisis unfolds.

???But UC's Cain said Davis is still a strong favorite for re-election
"because
of the weakness of the opposition, and the inability of Republicans to say
they've got a better idea."

???And Davis' $26 million (war chest) will buy "a lot of ads," Cain said, "to
point out what Pete Wilson and the Republicans did to introduce this thing in
the first place."

------------------------------------------------------------------------------
--
-

???"Our Fate Is Tied to Their Fate"

???- Gov. Gray Davis, State of the State Address, Jan. 8, 2001

???"I reject the irresponsible notion that we can afford to allow our major
utilities to go bankrupt."

???Jan. 8

???Even as Gov. Gray Davis worked to solve the energy crisis and prevent
utility bankruptcies, PG&E was moving closer to the brink. -- PG&E stock
prices:

???Jan. 1: $17

???Jan. 8: $14 (State of the State Address)

???Jan. 17: $9.63 (The day Davis announced the state would begin buying
electricity on behalf of utilities.)

???Feb. 22: $14.55

???March 28: $13.20

???April 6: $7.20 (The day PG&E filed for bankruptcy.)

???"If we can assure Californians there's a reliable source of power, at an
attractive low rate, then I think they can see light at the end of the
tunnel."

???Jan. 9 -- Power alerts: California was under a Stage 1, 2 or 3 alert for 41
consecutive days from Jan. 13 to Feb. 22. -- Energy costs: Davis signed
emergency legislation on Jan. 29 setting aside $400 million for what was to
be a
short-term plan to buy electricity directly from power generators.

???The cost kept rising:

???By the end of January: $535 million.

???By the end of February: $2.8 billion

???By April 6: about $4 billion.

???"The goal is to buy power California needs. There will be no rate
increases."

???Jan. 13 -- Rate hikes: The Public Utilities Commission approved an average
40 percent rate hike on March 27. Davis on April 5 suggested a slightly
smaller
increase of an average of 37 percent and said half of all households would see
no increase.

??E-mail the writers at cmarinucci@sfchronicle.com and phoge@sfchronicle.com.

GRAPHIC: PHOTO, Gov. Gray Davis' critics accused him of protecting his turf
with
easy promises. / Associated Press 2000

LOAD-DATE: April 8, 2001

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

?????????????????????APRIL 8, 2001, SUNDAY, FINAL EDITION

SECTION: BUSINESS; Pg. B7

LENGTH: 3592 words

HEADLINE: Nuclear Warning;

Watchdogs eye Duke's salvage operation

SOURCE: Chronicle Staff Writers

BYLINE: Scott Winokur, Christian Berthelsen

BODY:
Robin Mills, a Washington, D.C., handyman, and Dick Sears, a Winston-Salem,
N.C., professor, have little in common besides their mutual distrust of the
company whose stock both own, Duke Energy Corp., and they say Californians
should know why they're down on their investment.

???While Duke may serve its 396,000 shareholders well and have Wall Street's
admiration, it's also a company, Mills and Sears say, that will openly defy
the
government on vital but costly air-pollution measures and move ahead with a
risky nuclear program no other energy producer would touch.

???Duke, the third-largest U.S. utility, acquired three Pacific Gas and
Electric Co. plants in 1998 and today accounts for about 5 percent of
California's power. It plans to expand in the Golden State.

???In recent shareholder resolutions, Mills and Sears accused Duke of
polluting
the air by burning coal, and of jeopardizing the safety of millions in the
Southeast by proceeding despite fierce opposition with a plan to convert
plutonium warheads to nuclear fuel.

???Sears' antipollution resolution, introduced in November, came a month
before
the Environmental Protection Agency charged the company and others with
numerous
violations of the federal Clean Air Act. The pollution that Duke allegedly
caused, the government said, was responsible for increased sickness and
mortality from lung disorders among residents of the Southeastern United
States.

???"I went to the emergency room twice last summer. I didn't know what was
happening to me," said Nina Layton, 53, of Charlotte, N.C., where Duke is
headquartered. "My asthma doctor said the coal-fired plants were one of the
main
culprits."

???Duke denied the federal charges, saying it will defend itself vigorously.

???Energy-industry watchdogs and concerned shareholders say that Duke warrants
close scrutiny from California consumers, regulators and elected officials
seeking solutions to the state's energy problems without eroding the high
standards that have made it the nation's environmental pacesetter.

???Today, California may be an environmentally by-the-book state where new
plants run by coal and nuclear sources -- which account for 98 percent of the
fuel Duke uses nationwide, about equally divided -- are economically
impractical
or close to unthinkable, legally and politically. But no one can say how its
energy needs will shape public opinion and government policy in the future.

???"If I were a resident of California, I wouldn't want to give a large
economic interest in the state's energy market to them (Duke) because we know
their policy: To fight pollution-control efforts," said David Hawkins,
director
of the air and energy program of the Natural Resources Defense Council in
Washington, D.C.

???Coal-fired generation of electricity is legal in California, although
environmental laws and the state's lack of coal pose costly obstacles.

???No nuclear plants have been licensed here since Diablo Canyon (near San
Luis
Obispo) in the early 1970s, but the technology remains attractive to the
industry, despite debacles at Three Mile Island and Chernobyl, because nuclear
plants don't pose emissions problems common to fossil-fuel plants.

???According to Claudia Chandler, spokeswoman for the California Energy
Commission, state law says no nuclear plants may be built until a safe way to
dispose of nuclear waste is found.

???While there is no legal reason Duke couldn't build coal-fired facilities in
California, the nuclear option is unlikely right now. That could change if the
radioactive waste problem were solved or de-emphasized due to the need for
more
power.

???"The winds seem to be shifting politically. I'm sure they're considering
their options," said Barbara Puklin Silverman, an energy analyst for Arnold &
S.
Bleichroeder of New York.

???DUKE CLAIMS TO OBEY RULES

???Company spokeswoman Cathy Roche said Duke will rely on natural gas to fuel
three of its California plants (a fourth in Oakland's Inner Harbor runs on
diesel). She dismissed attacks on Duke's plutonium project as the criticism of
"a very small group of antinuclear activists who will go as far as they can to
shut down that option."

???Roche said blame for air pollution in the Southeast should be laid on the
auto industry, other industries and power plants in other states, particularly
those in Tennessee. She pointed to honors Duke has won from financial
publications and its consistently high customer-satisfaction ratings.

???"We do very tenaciously defend our record when we have complied with the
rules," Roche said, with reference to Duke's reputation for litigiousness when
challenged or resisted by regulators and private citizens -- a reputation that
hasn't dimmed its luster on Wall Street.

???"The company has been one of the best-regarded builders and operators of
power plants in the country and one of the early movers in the merchant energy
business created through the deregulation," said Thomas Hamlin of First Union
Securities in Richmond, Va.

???In recent months, Duke's stock has been selling in the low to mid-40s, near
the top of its trading range -- and up more than 50 percent from last year.

???'IT MAKES ME COUGH'

???Duke says California's environmental laws and other regulatory hurdles are
why more than 25 percent of its generation capacity in the state frequently
has
been unavailable. Chief Executive Officer Richard Priory blames
special-interest
groups in California. He told the Winston-Salem Journal, hometown paper of one
of North Carolina's polluted cities, "(I)n the Carolinas, we're committed to
getting it right."

???But what's "right" for the Carolinas is far from clear.

???"It makes me cough a whole lot more, and coughing is what upsets my lungs,"
said Virginia Richardson of Winston-Salem, who lives near Duke's coal-fired
Belews Creek plant, one of the company's dirtiest.

???Richardson, 70, has a chronic lung condition that gets worse, she said,
when
the plant is spewing emissions.

???"I notice smells in the area. Sometimes the air looks foggy, smoky or
whatever. I come in the house," Richardson said. "It's the same stuff over and
over, shortness of breath, I get tired, I get bad colds in the wintertime."

???Clay Ballantine, a physician at a large hospital in Asheville that serves
22
counties in western North Carolina, said that during the summer of 1999, one
of
the worst in local memory for pollution, he treated at least a half-dozen
patients for severe respiratory problems. They later sold their second homes
in
the Blue Ridge Mountains and returned to their home states. A dozen other
physicians on the staff treated similar numbers, he said.

???"The tourists come here thinking they'll get clean mountain air, and they
end up with flareups of normally stable breathing problems they had before --
with severe asthma and emphysema," Ballantine said.

???"We're seeing more lung disease than when I came here four years ago,"
Ballantine added. "My opinion is the emissions from the coal-fired power
plants
are the main correctable variable."

???A study published in October tabulated the death and disease caused by air
pollution from all sources, focusing in part on pollution from coal-fired
plants
such as Duke's.

???The study was conducted by a private consultant, Abt Associations of
Cambridge, Mass., for Clear the Air, a joint project of the Clean Air Task
Force, the National Environmental Trust and the U.S. Public Interest Research
Group Education Fund. Among its findings:

???-- California, which has relatively few coal, oil and diesel plants, ranked
46th in per capita deaths from power-plant pollution. North and South
Carolina,
where Duke's eight coal-fired plants are situated, ranked 6th and 7th,
respectively.

???-- An estimated 1,800 North Carolinians die each year from power-plant
pollution, compared with an estimated 259 in California, which has a
population
4.2 times larger.

???-- Two North Carolina cities -- Charlotte and Greensboro -- rank among the
nation's worst in annual incidence of deaths, asthma attacks and
hospitalizations attributable to power-plant pollution.

???A third city, Asheville, has the nation's sixth-highest rate of deaths
related to power plant pollution, the study found. Asheville Mayor Leni
Sitnick
said her tourism-dependent city faces economic doom unless the pollution
problem
is solved.

???COMPANY CRITICS SILENCED

???Sears' antipollution measure, proposed Nov. 10, never received a public
hearing. Duke told him Feb. 19 that, with the approval of the Securities and
Exchange Commission, it would refuse to put it before the annual shareholders'
meeting in Charlotte on April 26.

???Mills' antinuclear resolution, opposed by Duke in repeated legal
objections,
expired during a two-year period and eventually was removed from the ballot,
despite the support of thousands of shareholders, among them Peter Gill Wylie,
great-grandson of one of the company's founders.

???In an interview, Wylie said that when Mills' antiplutonium measure failed a
second time last year, he began to sell his large holdings of stock in the
company.

???"It's very scary to me," Wylie said, "that if Duke makes one wrong step,
not
only would potentially millions of people be hurt, but the stock would be
worthless."

???The dissident shareholders say there's a lesson for California in their
experiences.

???"You have to be very careful with them. They're willing to use their
lawyers
wherever and whenever they need to," Mills said.

???'ARROGANCE OF POWER'

???A 22,000-employee company with a global reach (it has done work in more
than
50 countries), Duke is accustomed to having a free hand in North Carolina,
political observers in the South say, because it has been a big employer
(10,128
people are on its payroll in the state) and liberal-spending political
powerhouse there for decades.

???Bob Hull, research director for Democracy South, a Chapel Hill, N.C.,
watchdog group, said North Carolina's political culture has encouraged big
businesses like Duke to assert themselves in ways not seen elsewhere.

???"Unlike other states that have found government a hindrance," Hull said,
"North Carolina has had a hegemony of industrial, financial and agricultural
interests that have used government as an engine. Duke has been a part of that
for decades."

???As an example, critics point to Duke's pressure on then-Gov. Jim Hunt in
October to lobby state officials to set a lower overall air-pollution standard
than more than 11,000 residents said they wanted in hearings. Higher standards
result in fewer pollution-related deaths, data show.

???In exchange for a weaker and less costly standard, Duke -- which had teamed
up with the state's other large utility, Carolina Power & Light -- agreed to
show restraint. It said it would not sue the state if the tougher standard was
set aside. It got its way.

???Duke's Roche, backed by the chairman of the North Carolina Environmental
Management Commission, David Moreau, denied allegations that the company
pressured Hunt improperly.

???But environmental commissioner Bob Epting, a Chapel Hill, N.C., lawyer who
voted against the lower standard, told local reporters that Hunt, Duke and
CP&L
had made a backdoor and backroom deal. Five months later, he's still angry.

???"It abused the dignity of the commission and spat in the face of the
citizens," Epting told The Chronicle. "It reflects the arrogance of unfettered
power, whether in the governor's office or the Duke presidential suite.

???"To the extent you permit that in California, Duke will do the same thing
there," he added. "The people of California ought to be on the lookout.

???"There's never been anybody at Duke," Epting asserted, "who stood up and
said, 'We're going to make the environment as important as our bottom line.' I
don't know there ever will be."

???DUKE'S POLITICAL DONATIONS

???Duke has one of the two largest corporate political action committees in
North Carolina; CP&L has the other. Together, they donated more than $1.5
million to candidates and measures in North Carolina between 1989 and 1998,
and
more than $100,000 to Hunt since 1990, including donations from executives and
lobbyists, according to Democracy South.

???In California, Duke donated $14,000 on Aug. 3 to Gov. Gray Davis, state
Sen.
Debra Bowen, D-Marina del Rey, chair of the Senate Energy Committee, and to
the
Senate Democratic Leadership Fund.

???Duke also pumped money into a ballot measure in Morro Bay (San Luis Obispo
County), where it plans a controversial plant modernization opposed by a group
of local residents. The company spent nearly $13,000 in support of an
initiative
that called for approval of the project. It spent an additional $4,300 backing
state Sen. Jack O'Connell, D-Santa Barbara/San Luis Obispo, who endorsed it.
O'Connell is a member of the state Senate Committee on Environmental Quality.
The measure passed.

???"Morro Bay is a beautiful place to live," said resident Jack McCurdy, a
founder of the anti-Duke Coastal Alliance, "but it's spoiled, having to live
with Duke and the people they bought off."

???O'Connell said: "Any attempt to link any contribution to my position on the
ballot measure is absurd and laughable. The project is sound. We're in an
energy
crisis. A clear majority in the community understands that."

???But McCurdy's group claims the plant, fueled by natural gas, will put an
additional 76 tons of particulate matter into the air, an amount equivalent to
more than 300 percent of all emissions produced each year by diesel buses in
the
Bay Area. Particulates are particles small enough to enter and lodge in the
lungs.

???McCurdy said health hazards to children, who will be attending school close
to the new facility, will increase, water quality will deteriorate and marine
life will die. The bay is one of three California estuaries protected by the
Clean Water Act's National Estuary Program.

???The Coastal Alliance calls the plant there now "a moral and ethical
abomination" and contends Duke wants to make a bad situation significantly
worse.

???"They have sought and pretty much succeeded in making Morro Bay a company
town," said McCurdy, a retired Los Angeles Times reporter.

???With the assistance of Santa Barbara's Environmental Defense Center, a
public-interest legal group, the Coastal Alliance plans to fight Duke's Morro
Bay expansion project before the California Energy Commission as it proceeds
through the review process this year.

???Duke says the Morro Bay project will meet all the requirements of state and
federal law and use the best available technology to lower smog levels.

???'A PUTRID HALO'

???Epting, the environmental commissioner, is a pilot who flies a small plane
over the central part of North Carolina.

???"You can see an orangish-yellow plume that connects these plants. It's a
putrid halo that sits over the top of Chapel Hill, Raleigh, Greensboro and
Charlotte. That's what these companies give us," he said.

???But state regulators have not found much to complain about, at least with
regard to Duke. Environmentalists say that's because they haven't looked hard
enough.

???"Nobody here is doing anything about this," said Janet Zeller of the Blue
Ridge Environmental Defense League in Glendale Springs, N.C.

???North Carolina air-quality official Mike Aldrich contended that wasn't the
case.

???"Sometimes they'll make you make them do it right," Aldrich said of Duke,
"but they will do it right."

???The federal government's experience has been different.

???In December, the Justice Department took Duke to court on behalf of the
EPA,
which had failed to persuade the company to bring its eight coal-fired plants
in
the Carolinas into compliance with the Clean Air Act.

???The government charged Duke with more than 50 violations punishable by
fines
upward of $25,000 a day, saying the company had gone at least a decade without
installing costly equipment to control power-plant emissions containing sulfur
dioxide, nitrogen dioxides and particulates.

???While the suit's ultimate fate may be uncertain under the Bush
administration, environmental groups and power company watchdogs in the
Southeast see it as confirmation of what they have been saying for years.

???DUKE NUKE REBUKE

???Under a controversial federal program, Duke is the only energy company with
a lucrative government contract (it comes with a $130 million credit) to
dispose
of plutonium, a byproduct of disarmament. Its partners in the contract are
French energy company Cogema and a U.S. plutonium-facility contractor, Stone &
Webster.

???The radioactive waste would be salvaged near Georgia's second-largest city,
Augusta, at a secured 300-square-mile Energy Department site on the Savannah
River in Aiken, S.C., from decommissioned plutonium warheads shipped from
Amarillo, Texas.

???It would be mixed with uranium to form MOX, mixed oxide fuel, then used at
Duke facilities close to Charlotte -- one of which, the McGuire Nuclear
Station
on Lake Norman, sits amid planned residential communities partly developed by
a
Duke-owned real estate company.

???Construction, under a contract with the federal Energy Department's
National
Nuclear Security Agency, is scheduled to begin in 2003; operations are
expected
to continue through 2022, when the lethal leftovers of the nuclear arms race
have been consumed.

???Roche said the company has a good record on its nuclear operations and was
invited to run the MOX program because the government has confidence in it.

???But critics call the project economically and environmentally risky, as
well
as a magnet for terrorists, because recycled plutonium can be converted back
to
weapons-grade materiel with relative ease.

???"It's going to be a fiasco," said Mills, the Duke shareholder, a onetime
electrician on a nuclear submarine who inherited stock and uses it as a paper
pulpit for his clean-energy views. "The question in California is: Will they
expand by building nuclear?"

???Paul Gunter, director of the Reactor Watchdog Project for the Nuclear
Information and Referral Service in Washington, D.C., predicted that as
California continues to map out long-term plans to address its energy needs,
nuclear-powered generation inevitably will be a focal point.

???Notwithstanding barriers to development now in place, he said, plutonium
fuel and the substantial hazards that accompany nuclear energy may become
major
concerns in the state.

???Zeller of the Blue Ridge group said it's unlikely the Savannah River
project, if completed, can be confined to the two North Carolina plants Duke
says it now has in mind for MOX fuel.

???"It's absurd for anyone to believe this plutonium factory at Savannah River
is for just those reactors," she said. "These are the first phase. Others will
be slated for weapons-grade plutonium. Where? Nobody knows. Every state with a
nuclear power plant better be interested."

??-----------------------------------

??Duke Exerts Energy in Business and Politics

???-- About the company: Duke Energy is a multinational energy company
composed
of 14 operating units. It entered California July 1, 1998, with Duke Energy
North America's purchase of 2,645 megawatts of production from PG&E. Duke
generates 3,450 megawatts in Oakland, Moss Landing (Monterey County), Morro
Bay
(San Luis Obispo County) and Chula Vista (San Diego County), accounting for
about 5 percent of the state's electricity. It plans to add 1,560 megawatts at
these plants, which run primarily on natural gas. The company employs about
22,000 people in more than 50 countries, including more than 1,000 in
California.

???-- Financial performance: It has $58 billion in assets. Revenue in 2000 was
more than $49 billion, up 127 percent from 1999; earnings per share were a
record $4.20, up 17 percent. It was the second-highest-ranking company for
return on equity on the Dow Jones utility average in 2000. The stock is held
by
the top seven utilities mutual funds and given second-highest overall
weighting
in those funds, according to Morningstar of Chicago. By the end of 2000,
shares
were worth 70 percent more than when the year began.

???-- Political spending: DukePAC, the company's political action committee,
more than tripled its donations to U.S. House and Senate candidates in
the1999-2000 election cycle, with House Republican candidates receiving
$39,000
from Duke in 1997-98, more than twice as much as Democrats. Senate Republican
hopefuls, including Matt Fong of California, got $2,500, compared with $1,750
donated to Democrats. During the next election, however, Duke's donations grew
enormously. House Republicans received $93,875 and House Democrats $55,000;
Senate Republicans received $33,000, Democrats $9,500. In California, Duke
donated comparatively small amounts last summer to Gov. Gray Davis, state
Senate
Energy Committee Chairwoman Debra Bowen, D-Marina del Rey (Los Angeles
County),
and the Senate Democratic Leadership Fund. The company spent $126,394 on
lobbying in Sacramento in 1999-2000.

???-- CEO compensation: CEO Richard Priory's 1999 pay package totaled more
than
$2 million; a salary increase, $1.9 million bonus and other compensation
pushed
it to $3.2 million in 2000. Both years exclude value of stock holdings,
including options, which vary in value depending on market conditions. Priory
exercised stock options and sold shares Nov. 1-2 that netted him more than $1
million.Chronicle librarian Charles Malarkey contributed to this report. /
E-mail Scott Winokur at swinokur@sfchronicle.com and Christian Berthelsen at
cberthelsen@sfchronicle.com.

GRAPHIC: PHOTO (4), (1) David Hawkins, director of the air and energy program
of
the Natural Resources Defense Council in Washington, D.C., says Duke Energy
fights pollution control efforts at every turn. / Eric Luse/The Chronicle, (2)
Duke Energy Chief Executive Officer Richard Priory defended his company's
practices. / Gayle Shomer/The Chronicle, (3) Duke Energy's plant in Morro Bay
is
scheduled to be expanded over the objection of some residents, who claim the
emissions will pose serious health hazards and threaten the region's marine
life. / Photos by Phil Klein/Special to The Chronicle

LOAD-DATE: April 8, 2001