Please see the following articles:

Sac Bee, Mon, 5/7:  "It's crunch time on power rates"

SD Union, Sun, 5/6:  "SDG&E shutoff notices increasing"

SD Union, Sun, 5/6:  "State OKs $7 billion contract"

SD Union, Sun, 5/6:  "The energy crisis gives Filner some easy targets"

SD Union, Sat, 5/5:  "Gephardt tells rally here he's pushing price caps"

LA Times, Mon, 5/7:  "Proud Linemen Take a Hit"

LA Times, Sun, 5/6:  "Utility's Workers Watch Helplessly as Company Falls"

LA Times, Mon, 5/7:  "Utility Bills Are Just One Way People Pay for Energy
Crisis"

LA Times, Mon, 5/7:  "Questions Remains Who'll Take Brunt of the Rate Hikes"

LA Times, Sun, 5/6:  "Riordan and Freeman's Feud Erupts in Public"

LA Times, Sat, 5/5:  "Cheney Rejects Price Caps, Aid for Calif. Power Crisis"

SF Chron, Mon, 5/7:  "Rolling Health Hazards
Summer Blackouts May Pose Public Health Risks"

SF Chron, Mon, 5/7:  "Oh, that boom in 2002 "

SF Chron (AP), Mon, 5/7:  "Developments in California's energy crisis"

SF Chron, Mon, 5/7:  "U.S. considers withdrawing lawsuits against coal
industry
Pollution controls affect power plants "

SF Chron, Mon, 5/7:  "Swimming pool owners get PG&E discounts
Operating pumps at night saves energy "

SF Chron, Sun, 5/6:  "Legislators plan to sue U.S. panel on energy
Top state Democrats want cap on prices"

SF Chron, Sun, 5/6:  "Nevada's winning hand -- power
State sees profit in California's crisis"

Mercury News, Mon, 5/7:  "Share prices rise amid news of big energy deals"

Mercury News, Mon, 5/7:  "Florida shrugs off Calif-blackout scenario"

Mercury News, Mon, 5/7:  "Hot days worry energy watchers"

OC Register, Mon, 5/7:  "Unplugged
Manking has lived thousands of years without electricity.  The Amish still do.
Californians may have to. We called an Ohio hardware store to find out how"

Individual.com (AP), Mon, 5/7:  "Mexico Continues Power Exports To
California"
WSJ, Mon, 5/7:  "Charged Up: Texas May Face a Glut of Electricity, but that
Won't Aid Rest of U.S."

Energy Insight, Mon, 5/7:  "Out of Eden: California on the edge"
------------------------------------------------------------------------------
----------------------------------------------------

It's crunch time on power rates
By Carrie Peyton
Bee Staff Writer
(Published May 7, 2001)
In a San Francisco hearing room, lawyers settled into squeaky green seats,
flopped their briefcases onto the orange carpet and waited.
Where was Gov. Gray Davis' plan for how a whopping electric rate hike should
be spread among homes and stores, farms and offices?
Where were the underlying calculations that explained why Pacific Gas and
Electric Co. customers should pay a stiffer increase than Southern California
Edison's customers?
And where was the sworn witness who would answer tough questions after
formally introducing the governor's plan at quasi-legal rate hearings at the
state Public Utilities Commission?
The Governor's Office knew that business and utility lawyers were asking for
details and for someone they could cross-examine, Administrative Law Judge
Christine Walwyn assured those gathered in the dingy hearing room last week.
"We have relayed all parties' comments to their office. There has been no
response," she said.
Chuckles and snorts played over the room. "Surprise, surprise" one attorney
muttered.
"Frankly, it was handled terribly," Shelly Sharp, PG&E's director of rates,
said later. "It's sort of a mockery of the process."
Rarely has the interplay between Sacramento and San Francisco been as visibly
strained as it was in the rate-making drama that has unfolded for the past
month.
At stake are issues that will touch virtually every home and business in the
state and could drastically alter California's power landscape.
The right rates could spur conservation, reduce summer blackouts and drive
down wholesale costs, many believe. The wrong ones could decimate businesses
and kill jobs, regulators have been warned.
The PUC, which regulates rates, has been gathering data to decide which
consumers will get hit hardest by the $4.8 billion rate hike approved in late
March. Normally, it takes six months to a year to make such decisions.
Now, the PUC is trying to do the job in about six weeks, and Walwyn is
scheduled to release her draft decision Tuesday. Community hearings will be
held across the state before commissioners vote May 14, two weeks before the
new charges start showing up on customers' bills June 1.
Hanging over it all have been two patches of fog. The state did not give
regulators the details on how much money it thinks it needs in rates until
Wednesday -- so late it was "useless" for this round of rate design, said a
source familiar with the process.
The wait for the data has been "just purely frustrating and leaves everyone
in the dark," said Ed Yates, vice president of the California League of Food
Processors.
And the governor, who outlined some general ideas for rates in a speech April
5, followed up two weeks later by trying to submit, as written testimony, a
short question-and-answer summary and slides from his Web site.
"There's no meat on the bones. There are hardly any bones," said Bob
Finkelstein, an attorney for The Utility Reform Network in San Francisco.
Ultimately, the judge refused to admit Davis' offerings as testimony, letting
them into the record only as "reference items" that do not carry the weight
of evidence.
The governor's press office has said it believes Davis' opinions will be
thoroughly considered by the commission in that format.
Davis gave the PUC the same template he gave the Legislature, said spokesman
Steve Maviglio, and "the outlines of the plan are clear." He added that PUC
staffers assured the Governor's Office the information was "acceptable."
The episode was nerve-wracking for participants because of the clout Davis is
believed to carry at the PUC, where three of the five commissioners are his
appointees.
"The parties are legitimately afraid that the governor's proposal might be
rammed down their throats," consumer advocate James Weil said.
The parties include everyone from winemakers to oil refineries. They've been
presenting witnesses, firing off briefs and trying to persuade regulators to
set rates in ways that will have the least possible effect on their
operations.
Do this wrong, and "you're going to lose whole industries," lobbyist D.J.
Smith warned in an interview.
Do this wrong, and "we're going to have severe economic disruption of the
state, of the sort we haven't seen in 30 years," energy economist Severin
Borenstein testified.
Taking the first stab at sorting the wrong choices from the right ones will
be Walwyn, the judge and former Nevada PUC commissioner whom business groups
accuse of tending to favor small consumers. She will have to sift conflicting
arguments on two key issues and scores of smaller ones, often with hundreds
of millions of dollars at stake:
First, how can rates be designed to encourage conservation?
Borenstein, who heads the University of California Energy Institute, urged
the commission to get tough with virtually everyone, despite political
pressure. Big users should be forced onto real-time rates that fluctuate with
the power market, and household users should get rebates for cutting use and
face steep charges if they surpass baseline rates.
Such calls have met with strong opposition from businesses least able to cut
consumption when prices are highest, such as canneries that operate around
the clock and department stores that want to stay open at peak hours.
A second, equally contentious issue is who should bear the brunt of the rate
hike.
PUC President Loretta Lynch, the commissioner assigned to oversee this rate
case, suggested early on that her colleagues should consider reversing a
long-standing policy of charging the biggest users some of the lowest prices.
Before this year's twin rate hikes, PG&E's household rates averaged more than
10 cents a kilowatt-hour while its largest industrial customers paid less
than 5 cents. Heavy industries contend such imbalances are fair because the
biggest power users cost less to serve. They consume steady amounts of
electricity around the clock, while homeowners' consumption shoots up during
high-priced peaks.
The overall rate hike approved unanimously by commissioners March 27 gives
PG&E and Edison the right to collect the equivalent of an extra 3 cents for
every kilowatt-hour of electricity they sell.
There are at least two ways to do that: Charge everyone 3 cents more or send
everyone's rates up about 29 percent for PG&E customers and 26 percent for
Edison's.
"Any time you use an equal-cents allocation, it's going to be to the benefit
of smaller customers," said Sharp, PG&E's rate director. The equal-cent
method is also fairer than equal percentage hikes, she said, because those
are based on "very, very old" calculations about how much it costs to serve
different customers.
But Edison has taken the opposite stand, urging the commission to go easier
on its biggest customers, with rate hikes that top out at about 30 percent
for any one group. "We want to ensure that the increase is allocated fairly
among customer classes," said Akbar Jazayeri, Edison's manager of pricing and
tariffs.

The Bee's Carrie Peyton can be reached at (916) 321-1086 or
cpeyton@sacbee.com.
------------------------------------------------------------------------------
---------------------------------------------

SDG&E shutoff notices increasing

By Jeff McDonald
UNION-TRIBUNE STAFF WRITER
May 6, 2001
Not much bigger than a postcard, the final notice from San Diego Gas &
Electric Co. came curled inside the front gate of her Lakeside mobile home.
Marie Maurer found it only after hearing rustling outside. The bill collector
was already on his way to a nearby mobile home, without having spoken a word
to the 72-year-old woman.
The news was not good. SDG&E wanted $200 -- a big chunk of her $283.95 debt
-- and Maurer was $47 short. The retired nurse had three days to come up with
the money or have her electricity shut off.
"I try so hard to save and to budget," said Maurer, who gets by on a few
hundred dollars a week in Social Security and government rental assistance.
"I don't go anywhere. I collect cans. I pawn stuff."
Maurer is among a growing number of fixed-income senior citizens,
small-business owners and others getting pinched by rising electricity costs
-- and increasingly fearful of what the hot summer months might bring.
Unable to meet the commanding debt piling up on their electric and
natural-gas bills, ratepayers such as Maurer are facing 72-hour disconnect
notices, or in many cases agreeing to what amounts to revolving
pay-as-you-can accounts.
SDG&E refused to say how many customers have had their power shut off for
nonpayment in recent months, saying such information is proprietary and
confidential.
But consumer groups and business resource centers report a fresh influx of
calls for help in finding what little relief is available.
"I'm getting more people contacting me with disconnection notices," said Jodi
Beebe, an analyst with the Utility Consumers' Action Network. "They're
flooded. It's very frustrating for many people."
Ken M. Clark of the Small Business Development Center at Southwestern College
said he gets 10 or 12 calls a week from business owners worried about the
price of power. At this time last year, he was receiving none.
"Some of them are looking for a shoulder to cry on," Clark said. "They're not
necessarily looking to solve the energy crisis, but possibly to buy some time
or make a strategy to get through this."
The situation could grow worse in a hurry. Gov. Gray Davis has suggested that
the Public Utilities Commission allow SDG&E to raise its electricity rate by
44 percent.
Not only that, but barely half the low-income ratepayers in California
eligible for relief programs have enrolled. Regulators blame the low figure
on less-than-diligent outreach efforts by the utilities.
At their meeting last week, commissioners warned utility companies to work
harder at signing up more of the 2 million or so customers eligible for the
California Alternate Rates for Energy program.
"If they don't, we'll order them to," PUC President Loretta Lynch said.
Eligibility rules allow customers with incomes of up to 175 percent of the
federal poverty level to qualify. A one-or two-resident home is now eligible
with an income of $21,233 or less; a three-person home, $25,083.
The program, which offers a 15 percent discount on electricity, is funded by
a 25-to 50-cent surcharge on the bills of other customers. That fee may rise
once regulators decide how to implement the latest rate increase.
Low-income customers are exempt from the recent rate hike.
Officials at SDG&E, where almost 20 percent of the 1.2 million ratepayers are
eligible for discounted electric rates, say they steer as many customers as
they can into the programs. Customer service representatives also are
available to help consumers arrange payment plans, the utility said.
"Whenever we hear that a customer has a problem, we want to contact them and
see if we can't solve the problem," spokesman Ed Van Herik said. "We work to
keep customers' power on."
Jane Johnson isn't so sure.
The disabled woman from San Diego's Lomita neighborhood received a disconnect
notice Friday. SDG&E demanded $210 to avoid shutting off the power within
three business days.
"We were fairly good, but every now and then the bill was late," Johnson
said. "Last August our bills tripled, and ever since then I have not been
able to get caught up."
The run-up in electricity costs last summer prompted state regulators to
order SDG&E to stop shutting off power to customers who could not pay their
bills. But that directive lasted only through October.
By November, the utility began asking larger users to bring their bills
current, and the same request was made of small businesses in December. SDG&E
began requiring residential customers to pay off their debts in January.
Those who cannot pay are subject to a $15 disconnect fee and a $9 charge for
delivering final notices. Even more daunting, a deposit equal to twice the
consumer's highest monthly bill may be required before service is restored.
It is difficult to gauge how deeply the crisis has hurt low-income people.
SDG&E will only discuss in vague terms the numbers of customers who have been
issued disconnect notices or been forced into revolving payment plans.
"After resuming credit collections, we did have an accelerated number of
customers who entered into pay agreements," Van Herik said.
For Maurer and Johnson, assistance came in the form of intervention by Beebe,
the Utility Consumers' Action Network analyst who works with SDG&E in
restructuring customer payments.
Nonetheless, "it's a constant worry," said Maurer, who said she had to sell a
gold watch to finance part of her latest utility bill. "I don't think we're
going to have any real relief for two or three years."
The Associated Press contributed to this report.
------------------------------------------------------------------------------
---------------------------------------------

State OKs $7 billion contract

Sempra unit to sell half its power output
By Ed Mendel
UNION-TRIBUNE STAFF WRITER
May 6, 2001
SACRAMENTO -- A San Diego-based firm that is building several efficient,
clean-burning power plants has agreed to sell about half its output to the
state under a 10-year contract worth $7 billion.
Sempra Energy Resources becomes the second-largest provider as the state puts
together a portfolio of cheaper long-term power contracts, lowering the cost
of buying power for utility customers on the expensive spot market.
As the state struggles to find power at reasonable prices to keep the lights
and air conditioners on this summer, Sempra Energy Resources will begin
providing 250 megawatts next month during peak-load periods, enough to supply
power to 188,000 to 250,000 households.
Sempra Energy Resources, an unregulated sister company to San Diego Gas &
Electric, will provide as much as 1,900 megawatts by 2004 as new plants at
Bakersfield, Phoenix and Mexicali come on-line. The company is seeking
permits for a new plant in Escondido and an expansion of a plant near Las
Vegas.
"The fact that we are taking roughly half of our output and committing that
to the state I think is a good outcome for us and the state," said Donald
Felsinger, group president of Sempra Energy's unregulated units.
State officials said the price paid for power under the Sempra contract is
lower than the portfolio long-term average of 6.9 cents per kilowatt-hour and
that the price will be a third to a half cheaper this summer than current
spot market prices. They have not revealed the exact price of power specified
in any of the energy contracts.
"This is a positive step toward increasing the available power supply to
California at a significantly lower price than currently found on the spot
market," Gov. Gray Davis said in a statement.
Felsinger said Sempra is investing $2 billion in power plants with the latest
technology capable of using about 40 percent less natural gas while producing
the same amount of power as older models.
"We are probably one of the more attractive prices that has been negotiated,"
said Felsinger, "because we have a brand-new, efficient fleet."
Sempra Energy of San Diego is the parent firm of Sempra Energy Resources and
SDG&E, the local utility.
In one of the ironies of the California electricity crisis, the state will be
buying power from one unit of Sempra Energy and providing the power to the
customers of another Sempra unit, SDG&E.
The state began buying power for utility customers in January after Southern
California Edison and Pacific Gas and Electric, whose rates were frozen under
deregulation as wholesale power costs soared, ran up a $13 billion debt and
were no longer able to borrow.
Monthly bills for customers of SDG&E, the first utility to be deregulated,
doubled and tripled last summer before they were capped by legislation in
September.
The state has spent about $6 billion buying power for the customers of the
three investor-owned utilities. Davis wants to repay the state general fund
with a $12.5 billion bond that would be paid off by ratepayers over 15 years.
Assembly Republicans have proposed that the state surplus be used to pay for
$5 billion of the power costs, lowering the bond to $8 billion and reducing
monthly bills for ratepayers in the months ahead.
There are grim predictions of blackouts and soaring costs as the demand for
power increases this summer, traditionally by about half because of air
conditioning and other factors.
The agency that manages the power grid, the Independent System Operator, has
forecast that the peak demand could reach 50,303 megawatts next month, 3,647
megawatts above the generation expected to be available in the region.
The state has to purchase only about a third of the total supply -- the "net
short" remaining after the power provided from utility generators and small
nonutility generators operating under the federal "qualifying facilities"
program.
The state contract with Sempra, which jointly operates a 480-megawatt plant
near Las Vegas with Reliant Energy of Houston, does not add new generation
but will lower state spending.
An analysis issued by the governor's consultants last week forecast that 37
percent of the power that the state will have to buy from July through
September will be covered by long-term contracts.
The rest of the power will have to be purchased on the expensive spot market.
Some think the analysts' prediction that the average price will be 19.5 cents
per kilowatt-hour is optimistic.
The analysts expect a decline in the average price of 35 cents per
kilowatt-hour from April through June because of additional small plants
operating during peak periods and conservation, including "sticker shock"
from a rate increase that may boost the average residential bill 26 percent.
The state Department of Water Resources, which purchases power for the state,
also is trying to negotiate more contracts like the Sempra agreement that
will help lower costs this summer.
"I don't think we have any others quite that large under negotiation," said
Ray Hart, DWR deputy director, "but we are still working on a number of
contracts."
Hart said that only a contract with a San Jose-based firm, Calpine, is larger
than the Sempra contract announced yesterday. Calpine reportedly has an
agreement to sell the state $12.9 billion worth of power.
------------------------------------------------------------------------------
--------------------------------------------------

The energy crisis gives Filner some easy targets

He's carving new niche, bringing state woes to Washington's attention
By Philip J. LaVelle
UNION-TRIBUNE STAFF WRITER
May 6, 2001
When he passed on the 2000 San Diego mayor's race, Rep. Bob Filner based his
decision, at least in part, on a flawed political calculation.
"I thought the Democrats would be in the majority in Congress," Filner said
in a recent interview. "Given my seniority, I would have a large role to
play."
He was dead wrong. In November, Republicans retained slim control in the
107th Congress while the Electoral College gave the White House to a
Republican who now governs from the right.
Hard times for an old-school liberal like Filner?
Not to hear him tell it.
His party may be out of power, but Filner, 58, is carving a niche for himself
in California's energy crisis, an issue he caught on to last year, long
before it popped up on Washington's radar screens.
Filner is attacking the issue with his well-known brand of aggressive action.
As a San Diego City Council member (1987-1992) he led the Gang of Five, a
dissident bloc that opposed then-Mayor Maureen O'Connor.
As a congressman, the San Diego Democrat reveled in making life difficult for
visiting GOP big shots, crashing local events featuring former Senate
Majority Leader Bob Dole and ex-House Speaker Newt Gingrich.
He peppers county newsrooms with news releases of his energy pronouncements
and frenetic schedule, including a protest Friday with House Minority Leader
Dick Gephardt, D-Mo., outside Duke Energy's South Bay plant.
The crisis provides easy targets:
Democratic Gov. Gray Davis? "You cannot be moderate to solve this problem,"
Filner said.
Republican President Bush? "Basically a prop of the big, big corporations,
and the energy crisis shows it."
Out-of-state energy producers? "They know they can rob our state blind
because they have a friend in the White House."
Energy prices actually began their rise through the stratosphere when
Democrat Bill Clinton was president.
Fifth term
Voters in Filner's solidly Democratic 50th Congressional District seem to
approve. In November they handed him a fifth term with a commanding 69
percent of the vote against light opposition.
A tough campaigner, Filner has consistently won re-election in his South Bay
district by comfortable margins, and ran unopposed in 1998. His biggest
primary challenge came from Democrat Juan Vargas, then on the City Council,
who lost to Filner by 9 percent in 1996. Vargas is now a state assemblyman.
Filner follows the late House Speaker Tip O'Neill's maxim that all politics
is local. After first meeting Filner, people of all stripes typically receive
great-to-meet-you letters, usually within 48 hours.
His district, which abuts the U.S.-Mexico border, includes the southern half
of the city of San Diego, plus National City and Chula Vista. It is one of
the most ethnically diverse in the nation, at 41 percent Latino, 29 percent
Anglo, 15 percent Filipino and 15 percent African-American.
Back in Washington, despite the Republican domination, Filner says he is well
positioned to pursue national leadership roles in the energy crisis and
border infrastructure.
Filner sits on the House Veterans Affairs Committee and the Transportation
and Infrastructure Committee. His successes include helping get an
international sewage treatment plant built here; securing limited benefits
for Filipino veterans of the U.S. military; and securing greater benefits for
all veterans.
He has failed, so far, in efforts to restore full benefits to Filipino
veterans of World War II.
Wide interests
At times, Filner's interests range far afield, from championing a homeland
for the Kurds, a policy rejected by the U.S. government, to co-sponsoring
legislation this term condemning destruction of pre-Islamic statues in
Afghanistan by the Taliban regime.
On core issues, Filner swims against a strong tide. Congress "is totally
controlled by the Republican majority," said UC San Diego political scientist
Gary Jacobson, making "the role of the minority severely circumscribed."
Filner's top areas of interest have been slow to gain traction in the
Beltway. The border is a neglected issue there, but the energy crisis has
finally become a national story.
On border infrastructure -- "my key thing" -- Filner supports completing
state Route 905 to link the Otay Mesa crossing with the interstate freeway
system. He also hopes to revive the San Diego & Arizona Eastern Railway to
create a "jobs train" that could spur commerce here.
"If we can do this border infrastructure .?.?. we not only help trade between
the two nations, we transform the economy of this region," he said.
Julie Meier Wright, president of the San Diego Regional Economic Development
Corp., applauds Filner's focus but finds his positions inconsistent, given
his opposition to the North American Free Trade Agreement. "Border
infrastructure is needed in significant part because of the increased
economic activity" spurred by NAFTA, she said.
Being anti-NAFTA fits his political base; organized labor, which opposed
NAFTA, ranks consistently among Filner's biggest institutional sources of
campaign cash, according to the Center for Responsive Politics.
Paul Ganster, director of San Diego State University's Institute for Regional
Studies of the Californias, sees no inconsistency. "It's possible to be very
critical of NAFTA and at the same time recognize there are very positive
benefits that can be brought by free trade," he said.
Border problems
Filner and others are concerned that the NAFTA has increased problems along
the border that are not being addressed.
"That's my biggest disappointment, that we have not been able to bring the
border to its rightful place in national consciousness. .?.?. Nobody gives a
damn about it in Washington," said Filner, who attended Mexican President
Vicente Fox's inauguration and is in his second year of Spanish lessons.
Filner got on the energy crisis last year when San Diego became the first
California city to bear the brunt of the state's 1996 deregulation
legislation. His working-class district has been particularly hard hit.
In January, he introduced a bill to force the Federal Energy Regulatory
Commission to cap energy rates, retroactive to last June. It was supported by
Rep. Duncan Hunter, R-El Cajon, a conservative about as far from Filner on
the political spectrum as one can get. Filner now supports another energy
bill advanced by representatives from California, Washington and Oregon.
Filner may have no desire to ever run for governor -- but if he held the job,
he said, there would be no mistaking him for Gov. Davis on the energy issue.
"I'd be all over the place. .?.?. I'd probably be in jail because I'd be
joining protests."
He's been there before.
In 1961, as a Cornell University undergraduate, Filner took on segregation
and went to Mississippi as a Freedom Rider. He integrated a lunch counter,
which landed him in state prison for a few months.
A Pittsburgh native raised in New York City, Filner, with a doctorate in the
history of science, is one of the most highly educated members of Congress.
He taught history at SDSU for 20 years. In the mid-1970s he was an aide to
the late Sen. Hubert H. Humphrey. Filner was on the San Diego school board
from 1978 to 1983 before being elected to the City Council.
Will Filner run for mayor in 2004?
"It's a possibility," he said. But if Mayor Dick Murphy "continues the job
he's doing, he's there for two terms, and that puts me a pretty old guy." He
may choose instead to attempt a long House career, hoping the Democrats
become the majority in next year's midterm elections. "The more terms --
assuming you stay in touch with your constituents -- gives you a chance to do
all kinds of things."
------------------------------------------------------------------------------
------------------------------------------------------------

Gephardt tells rally here he's pushing price caps

By Ronald W. Powell and Craig D. Rose
UNION-TRIBUNE STAFF WRITERS
May 5, 2001
CHULA VISTA -- The nation's electric power crisis heated up here yesterday as
House Minority Leader Richard Gephardt demanded that President Bush and the
Federal Energy Regulatory Commission work to immediately curb runaway
electric rates.
Standing before a noontime crowd of more than 300 angry electricity consumers
outside the bay-front South Bay Power Plant, Gephardt said Bush should tell
the commission to cap the prices power companies can charge. And he said he
is pushing a bill that would impose caps on energy prices.
The former presidential aspirant from Missouri exhorted the throng to
organize and fight against the power generators that have dramatically raised
rates in California and the West.
"This is your country," said Gephardt, pounding the podium to rousing cheers.
"If you vote, if you make yourself heard, we can solve this problem."
Rep. Bob Filner, D-San Diego, who organized the rally, said federal
regulators should order more refunds to consumers for overcharges by what he
described as an "energy cartel."
"This is the kind of pressure that will bring down prices," Filner said.
Filner chose the South Bay plant as the backdrop for the rally because
critics are accusing the facility, operated by Duke Energy, of charging
exorbitant electric rates after receiving a low-cost lease from the San Diego
Unified Port District. The 10-year deal was negotiated in 1998.
According to the terms of the deal, Duke is obligated to build a replacement
plant off-site before its lease expires. Duke then should dismantle the
existing plant and turn over to the port 200 acres, including the plant
property, free of contamination and ready for development.
But critics say taxpayers may not get what was advertised because Duke wants
to build the new plant on 30 of the promised acres.
Filner is joining those who say the existing plant and any new plant should
be publicly owned and offer affordable rates. He said Duke and other
generators are using their facilities to charge illegal power prices -- a
breach of the lease.
"They have broken the terms of the lease and we should take it back," Filner
said.
Jerry Butkiewicz, secretary-treasurer of the San Diego-Imperial Counties
Labor Council, accused Duke of gouging consumers.
"We want the government and the port to take back this property," Butkiewicz
told the crowd. "We own this (plant)."
Duke officials insist the company is abiding by its lease with the port.
After the rally, Duke spokesman Tom Williams said the company does not have
to do anything about building a replacement plant at this time, but is acting
"proactively" by exploring the possibility of constructing a new generating
plant on the same site.
Chula Vista Mayor Shirley Horton, interviewed at the rally, chided Gephardt
and the other congressional representatives, including Rep. Susan Davis,
D-San Diego, for criticizing Duke for raising electric rates while doing
nothing about power plants owned by the federal government that have also
hiked rates.
"What are they doing to provide affordable energy at reasonable prices (at
the federally operated plants)?" Horton asked. Horton wants to see a new
power plant built on a part of the 200-acre site that is south of the current
facility and inland from the bay. She said Chula Vista is negotiating with
Duke in hopes of striking a deal that would allow joint ownership of a new
plant.
Michael Aguirre, a local lawyer suing power companies on behalf of Lt. Gov.
Cruz Bustamante and on behalf of ratepayers in a separate class-action case,
said Duke is among a handful of companies in an energy cartel that have
manipulated prices statewide. Aguirre said the port should move to void its
lease with the company.
But Williams, the Duke spokesman, denied accusations that the South Bay plant
sold power at illegal prices. The Federal Energy Regulatory Commission
recently required the company to issue refunds, but Williams said those
payments are related to surcharges the company imposed on power sales to
compensate for growing credit risks in California.
------------------------------------------------------------------------------
---------------------------------------------------------

Second of three articles
EDISON'S AGONY
Proud Linemen Take a Hit
Energy: Morale sinks as the utility's workers are forced to do the
unthinkable: leave customers in the dark.

By NANCY CLEELAND, Times Staff Writer

?????Lineman Ernie Lopez has been rousted out of bed on countless cold, rainy
nights. He's climbed 100-foot utility poles in heavy winds and grabbed live
electrical lines with nothing but a pair of rubber gloves to protect him.
?????But the hardest thing Lopez has done in 20 years at Southern California
Edison is walk away from a darkened apartment building while residents
pleaded for their heat.

Lineman Ernie Lopez repairs ground wire in Hacienda Heights. He doesn't look
forward to work like he used to.
BRIAN WALSKI / Los Angeles Times

?????It happened in late January. Sinking in debt, Edison had just announced
drastic budget cuts, including a ban on most overtime. The new rule: If it's
not a public safety problem, it has to wait until the next business day.
?????Edison's 990 linemen, as well as the people they left shivering in the
dark, howled. Within a week, the utility loosened its overtime restriction.
But Lopez had already done the unthinkable--twice--and remained shellshocked.
?????"You get the lights on at all costs. That was bred into us from the
get-go," he said two weeks after leaving customers without power in Whittier
and La Puente. "It's in the preamble of our [union] contract."
?????Months of uncertainty and bad press have chipped away at the pride
linemen like Lopez once took in their jobs. Customers harangue him,
complaining about rate increases and fat Edison salaries. Service levels are
deteriorating. It's going to be a terrible summer. "I don't look forward to
coming to work as much as I used to."
?????As Lopez drives toward an outage in Covina, he shouts into a cell phone
over the rattling of his big white truck. "I just wish I knew what direction
they're heading in," he says. "They're not telling us much. . . . We're not
so sure they care about us or the customers anymore."

?????Edison Lacks Enough Veteran Linemen
?????This is bad news for anyone in Edison territory. The utility can't
afford to alienate its veteran linemen because there aren't enough to go
around. Journeymen are in short supply, drawing big signing bonuses and
promises of generous overtime. Edison was trying to hire more than 100 when
the financial crisis hit last summer. Now it faces the triple whammy of a
hiring freeze, low morale and overtime pay cuts that could set off an exodus
of talent.
?????Already, there have been some defections, including several to the flush
cross-town rival, the Los Angeles Department of Water and Power. Lopez and
other veterans remain loyal, but they're checking the Internet, just in case.
"Everybody's depressed, bummed out," he says.

Ernie Lopez now spends more time with his family in Chino Hills. Cutbacks at
Edison have meant less overtime for linemen.
BRIAN WALSKI / Los Angeles Times

?????Linemen like to see themselves as roughneck heroes, riding into town to
turn on the lights, to help the kitty out of the tree. Many are loners,
outsiders, proud of their cowboy culture. They don't tend to move up to
office jobs. They prefer to be out in the field. They are well paid, but what
many love even more are the small signs of gratitude, the cup of coffee from
a customer, the sound of applause when the lights go back on.
?????"We don't do it for the money. We do it for the glory," says Lopez,
almost serious.
?????Along with weathered faces and fallen arches from standing astride
poles, most linemen have developed a rigid sense of civic duty. It is what
makes them leave a warm bed and barge into a downpour at 3 a.m. They've
missed birthdays, anniversaries, Christmas with the kids for their jobs.
Every one of them has stories, of working through hurricanes, ice storms and
earthquakes. Some have been close to death. Some have watched other linemen
die.
?????"Our whole careers have been designed to provide people with power, not
cut it off," says Pat Lavin, a veteran Edison lineman, now business agent for
the International Brotherhood of Electrical Workers, Local 47. "I think our
members would probably offer to work for free if they thought it would help.
They like working for Edison. It's a pride thing."

?????Team Spirit Takes a Hit
?????You see this ethos in Kansas City, home of the International Lineman's
Rodeo. Every September, hundreds of utility field-worker teams pour in from
as far as Jamaica and England to test their skills and stamina against other
linemen.
?????They scramble up wooden poles in seconds, replace transformers and
rescue "hurt man" dummies from the wires. In one event that tests focus as
well as strength and dexterity, a lineman climbs a 45-foot pole holding the
handle of a bucket in his teeth. In the bucket is an egg. At the top, the
lineman ties the bucket to a wire, puts the egg in his mouth and climbs back
down, taking care not to bite.
?????Last year, Edison's senior team--45 years and older--placed fourth out
of 213. It was a huge coup and a career highlight for team member Joe Baker,
a crew foreman and 25-year Edison veteran working out of the Barstow office.
His parents came down from Iowa to watch. His wife and son--an Edison
apprentice--were cheering from the bleachers. Baker had been training for
months, and was in top form. "If you look at the scores," he notes, "you'll
see that we were awfully close to first."
?????He might have made it to the top this year, but Edison won't be sending
linemen to Kansas City in September. The rodeo team is one more casualty of
the California crisis.
?????Seven months after his big win, Baker watches as pieces of Barstow go
dark. Planned blackouts sweep across the southern part of the state for the
first time since World War II. Traffic lights blink off; drivers skid into
intersections. Manufacturing lines stop cold. Root canals go unfinished.
Customers call, confused and angry. They see the men in the white trucks and
wonder, are they pulling the switch?
?????"Today I went into a grocery store. I had on an Edison hat," Baker said
in early April. "The store manager, who's a friend of mine, says, 'Is it safe
to wear that around here?' He wasn't joking. These days, people look at you
funny, like it's all your fault."

?????Union Opposed Deregulation Plan
?????For decades, Edison's linemen enjoyed a strong safety record,
top-of-the-line equipment and lifetime job security. Then came
deregulation--a concept that the linemen's union opposed long before the 1996
state law was adopted, convinced it would destabilize their lives.
?????They were downsized. Their jobs were contracted out or given to
temporary workers. They felt exposed and vulnerable. As early as 1998, an
Edison veteran warned on a linemen's Web site: "All you guys, look out when
deregulation comes your way. . . . SCE is still good, but not like the old
days."
?????Among the 2,000 jobs Edison cut in January were hundreds of contracted
linemen working on large construction projects. Veteran linemen absorbed huge
losses in their half-million-dollar retirement accounts based on Edison stock.

Joe Baker, a 25-year Edison veteran who works in Barstow, says he's noticed a
change in public attitude since power crisis began.
BRIAN WALSKI / Los Angeles Times

?????The utility was on the TV news every night. Linemen began spending more
time with customers, explaining, defending. They blamed the state regulators
who set up the dysfunctional market and the energy suppliers who took
advantage and reaped huge profits, but they also wondered: Why isn't the
company doing more to get the facts out? Why isn't it being more aggressive?
?????In February, the union launched its own campaign, organizing a protest
march at a Huntington Beach generating plant owned by AES, a giant
Texas-based energy wholesaler. The message was that Edison was the victim of
gouging by the generators. But what motorists saw as they drove by were angry
picketers at a power plant, wearing Edison hats and jackets. Victim and
villain were confused. The problem was too complex to fit on a placard. No
more protests are planned.
?????Soon after Edison's belt-tightening, the electrical workers union filed
objections with the state Public Utilities Commission, arguing that the
layoffs and overtime restrictions would seriously reduce the level of service
in Edison territory--a violation of PUC rules.
?????Two months later, the PUC agreed and ordered Edison to restore jobs and
hours that could affect service. By then, some linemen argued, it was too
late. "The customers will remember we weren't there for them," says Lopez, a
longtime union activist and an officer of Local 47.
?????Even after the PUC ruling, overtime restrictions for routine work
continue to cut linemen's pay by at least 20%, far more in some cases. It's a
traumatic loss for those who have grown accustomed to fat checks, and to
nearly doubling their base pay of about $65,000.
?????"For someone with no college degree, earning six figures is not bad,"
says Russ Neal, a supervisor in the Santa Ana distribution center. "But keep
in mind, this job is hard on personal lives. A lot of these guys are paying
ex-wives, child support. They're not all choosing between a boat and a
camper."
?????For some, the change has been a partial blessing. Elite "troublemen"
like Lopez, who are the first on the scene of an outage, get to sleep through
the night, spend more time with their children and read them bedtime stories.
?????"Having Dad home has been wonderful," says Peggy Lopez, Ernie's wife of
20 years. "We have a son, and there's been a lot of bonding lately."
?????But they all miss what the linemen call blood money. The Lopez family is
scaling back on weekend trips and dinners out. Peggy wonders whether she'll
need to go back to work after staying home for 11 years with her two
children. Nine-year-old Albert is in tears after a day of teasing at school:
Your dad's going to lose his job, the kids taunt.
?????"We hadn't shared with the children how serious it was," says Peggy.
"Afterward, he and Ernie had that talk. Now we just pray that things get
worked out."
?????Job-wise, Edison's linemen are probably safe, no matter what happens.
After all, someone has to keep the power going, even through bankruptcy or
state ownership. Still, it's unsettling. Linemen who were once disciplined
for accidentally tripping brief outages are now ordered to cut off customers
for an hour at a stretch. They're nervous and distracted. They want this
crisis to end, but see no end in sight. Supervisors worry about their
linemen's ability to concentrate, to stay focused. After all, in this job, a
moment's carelessness can be deadly.
?????"It's important that we talk to them more and let them vent a little,"
says Bob Woods, who manages Edison's Santa Ana operating center. "When you
read that your company is on the verge of bankruptcy, it's frightening. We
don't want them thinking about that out in the field."
?????Into Woods' office walks Paul Miller, a clean-cut 34-year-old
troubleman, earnest, eager. He's been with the company 15 years. His job is
to make the scene safe, restore as much power as possible, then call in the
regular field crews for heavy-duty work.
?????He's out a lot on weekend nights, when drunk drivers tend to knock down
poles. He's busy when the weather is lousy. He missed Christmas with his wife
and toddler son last year when winds blew lines down all over north Orange
County. Woods called him in for a 12-hour day, along with the station's 11
other troublemen. "I didn't hear one complaint," Woods says.
?????Miller is so proud of his job that he had his name embroidered on his
khaki Edison uniform, along with that odd title, Troubleman. He hopes to
retire from Edison someday. He hasn't had to walk away from a job, not yet.
But it bothered him when he was sent to a Santa Ana apartment building that
had been without power all night.
?????"They were pretty unhappy. Nobody's used to that kind of service. We've
always been right there. . . . I can't stand it, actually, leaving people
off."

Copyright 2001 Los Angeles Times
------------------------------------------------------------------------------
------------------------------------------------------------------

EDISON'S AGONY
Utility's Workers Watch Helplessly as?Company Falls
Energy: Proud engineers and technicians, wincing as the firm is pilloried,
blame deregulation rules. Firm was "dragged into this kicking and screaming,"
one says.
By NANCY CLEELAND, Times Staff Writer

"I'd cry if I had any more emotion."
John Ballance keeper of Southern?California Edison's transmission and
distribution grid for most of he past 32 years.

?????There are hundreds of them at Southern California Edison--engineers and
technicians hired a generation ago at the height of California's
build-and-grow frenzy. Steady Eddies. Methodical thinkers.
?????They designed massive things like nuclear reactors and gas-fired
generators and kept electrons flowing over 50,000 square miles of territory.
They did their jobs so well that no one ever noticed.
?????For more than 100 years their precise, problem-solving nature defined
Edison culture, and distinguished the company as one of the country's most
highly regarded utilities.
?????Then came deregulation, which eventually cut the financial guts out of
Edison, creating a crisis solvable only by political consensus.
?????For once the engineers were stumped. Mathematical logic no longer
served. They lacked the intangibles--the finesse, the gifts of spin and
horse-trading--to put their company back together.
?????Today they draw up intricate plans to salvage the company, but the plans
go nowhere with regulators and politicians.
?????The world hates and blames Edison, and the engineers cannot understand
why. They brandish the truth--Blame a flawed deregulation system, not us!--as
if it might redeem them. Yet each week finds them more marginalized.
Bewildered, some have been reduced to waiting, with nothing to do but watch
their legacy disintegrate. It's a cruel way to end a career that was built on
long-term planning and the power of rational thought.
?????"I'd cry if I had any more emotion," says John Ballance, keeper of
Edison's transmission and distribution grid for most of the last 32 years.
?????He is a soft-spoken, church-volunteering grandfather with twinkling eyes
and a navy blue cardigan. Mr. Rogers with a slide rule. He was hired in the
late 1960s straight out of UC Berkeley, where he played clarinet in the
marching band. Edison brought him back to his hometown. It was a dream job.
?????Now 53, Ballance still gets excited thinking about the highlights: that
hot early summer when he installed six temporary transformers in a weekend to
avoid blackouts. That post-earthquake scramble when he guided crews to
restore a substation that powered Ventura and Santa Barbara counties. Seven
years later, he remembers every detail: 23 lines tripped at 4:17 a.m., all
back up by 12:30 p.m.
?????"It was a good day when you had a problem come up that wasn't
anticipated but you had a contingency plan for it, and it worked," he says
nostalgically.
?????No one anticipated this: Edison on the verge of bankruptcy. And so far,
none of the contingency plans has worked.
?????By early January, Edison has had to pay so much money to power
wholesalers that it owes several billion dollars and is bleeding nearly $20
million more a day. Each time a customer turns on a light or a computer or a
hair dryer, the debt grows.
?????Here's what passes for humor at utility headquarters in suburban
Rosemead, 10 miles east of downtown Los Angeles: When you lose money on every
kilowatt, you don't make it up in volume.
?????Edison defaults on loans and suspends its dividends for the first time
in its history. Creditors threaten to haul it

Edison engineer John Ballance, left, with systems operator Kenneth House,
never dreamed the firm would be on the brink of bankruptcy.
??Photos by BRIAN WALSKI /
Los Angeles Times

into bankruptcy court. Budgets are slashed, and nearly 2,000 employees get
pink slips. More than 100 executives work a week for free.
?????"It's very depressing," says Donald Fellows, who once designed power
plants and is now reduced to feeding numbers to the state commission that
sets utility rates. "Most people go to work for a utility because they have
high security needs. You don't find a lot of risk takers here."
?????A large, balding man with a penchant for mirthful sarcasm and a tendency
to answer questions by pulling out a calculator, Fellows becomes downright
grumpy when talking about his current job: manager of revenues and tariffs.
?????Pure frustration, he huffs. He spends far too much time in hearing
rooms, listening to "self-serving drivel" from Edison's many critics and
second-guessers, who seem to pass right over the numbers Fellows so
meticulously gathers.
?????In his view, state regulators micro-managed Edison into this mess, by
forcing it to buy power on the volatile spot market. Wholesale prices
exploded, from 3 to 30 cents a kilowatt. Now the people who made the rules
are blaming Edison for letting it happen. And getting away with it.
?????"You sit in those hearings and sometimes it's like Alice in Wonderland,
the way things get twisted," he says. "You look around and wonder: Did I fall
into a trapdoor?"
?????He is just back from a Public Utilities Commission meeting in San
Francisco, where he pleads Edison's case for a 30% rate hike. Nothing less
will keep the utility solvent, he warns.
?????Consumer advocates are hostile, suspicious. The commission compromises
by raising rates about 10%. Edison's stock plunges, at one point losing half
its value in a few hours of trading. Credit agencies downgrade its investment
rating to just above junk status. Banks suspend corporate credit cards.
?????Fellows, who put in 28 mostly good years at Edison, loses the bonus that
was nearly half his salary last year. He looks at his worthless stock options
and wonders whether he can still afford that early retirement in May, when he
turns 55. And if so, should he take it? Is it right to walk away?

?????Panicked Retirees Flood Firm With Calls
?????The winter passes in a painful fog of uncertainty across the bland
1970s-era Edison complex, home to 4,000 engineers, lawyers, managers and
clerks. Employees keep their heads down, but they cannot escape the crisis.
?????It jumps out from the cafeteria entrance, where a posting advertises
brown-bag sessions on resume writing and interview techniques. It startles
them every evening at 5, when a too-loud recorded voice warns that power will
soon shut down to emergency levels. Television crews camp outside, lining up
for live shots every few hours. Employees pray for other breaking news,
anything to take them off the front page for a while. Managers cut budgets,
look for expendable jobs. Public relations spokesmen set up a SWAT team to
deal with all the calls.
?????Jo Ann Goddard, parent company Edison International's vice president for
investor relations, fields calls from dozens of panicked retirees. One
80-year-old man, who lost a fourth of his income when dividends were
suspended, calls every week for an update. He always takes time to ask how
she's holding up.
?????Pam Bass, Southern California Edison's vice president for customer
relations, takes flak from angry business owners in the state-regulated
"interruptibles" program, which was designed to handle rare emergencies. For
weeks now, the businesses have had to shut down several hours a day. Some
have lost millions and laid off entire shifts.
?????As the company's value dives, it takes down children's college funds,
vacation dreams, early starts on retirement. Yet many engineers are even more
troubled by the steep erosion of service.
?????Ballance is close to tears as he guts his construction budget, canceling
orders and contracts that were eagerly placed just six months earlier. This
was going to be a big year, a chance to fix Edison's aging collection of
poles, substations and wires.
?????He hesitates, scarcely believing what he is about to say: "We're
knowingly taking on risk. . . . If we get extreme temperatures this summer,
only a few pockets out could cause serious problems."
?????Through his office window, he looks out on a trail of hulking
transmission towers marching toward the horizon, a solid, sturdy bit of
evidence that Edison is still the proud source of power for Southern
California. What he doesn't know is that the lines themselves will soon be
caught up in the energy debacle.

?????An Odd Sense of Hope and Mission
?????Along with nail-biting anxiety, January brings an odd sense of hope and
mission to Edison headquarters. State and federal legislators are finally
paying attention, trying to understand what happened. Auditors are going
through the books. Gov. Gray Davis says he will consider a state plan to
rescue California's private utilities, but with a daunting pair of
parameters--no utility bankruptcies and no rate increases.
?????Edison must analyze hundreds of contract, rate and transmission-cost
variables--months of work--within a couple of days. At last the problem
solvers have something to sink their teeth into.
?????"I've seen this time and again over the 21 years I've worked here," says
an optimistic Charles Basham, who runs Edison's internal Web site and
considers himself its unofficial historian. "We work best in a crisis."
?????Corridors that thread past gray cubicles and into wood-paneled executive
offices are strangely silent. No gossip around the water coolers. No shrieks
of exasperation. Just lots of conference calls and long nights with cold
pizza and coffee.
?????Alan J. Fohrer, who helped design the San Onofre nuclear plant, has come
back to help. These days he runs Irvine-based Edison Mission Energy, a
fast-growing, unregulated sister company to Southern California Edison that
owns and operates generating plants around the world.
?????Fohrer's wife is out of town. At dawn he dashes home to Arcadia to wake
his kids before they notice he's gone, make their lunches and get them off to
school. Then he rushes back for another day of calculations.
?????After 36 hours, Fohrer wears a tentative smile. There is a way--if a
series of events falls perfectly in line--to pay off Edison's debts without
raising rates.
?????"We have an opportunity," says the 50-year-old executive, laying out all
the little pieces. "But we have to move quickly. The problem gets bigger
every day."
?????Weeks pass. Fohrer's plan becomes moot because state legislative
proposals keep adding demands: Edison must hand over a chunk of company
stock. Or all of its prized hydroelectric system. Or its valuable
transmission lines. These ideas come and go, almost whimsically, without ever
taking solid form. The urgency that once distracted Edison employees
dissolves into a numbing sense of powerlessness.
?????Fohrer--intense, serious, focused, a veteran of the 1990s deregulation
debate, when he says most of his ideas were ignored--struggles for words to
describe his frustration, then finally sputters, "This is silly."
?????He graduated from USC in 1973 with a degree in civil engineering. He
dreamed of designing huge, complex structures like oil refineries, and talked
to all the major international firms. Then Edison courted him, and Fohrer was
charmed. Edison was at the tail end of a five-year hiring binge, ramping up
to design and build dozens of new power plants for the fast-growing state.
?????The expansion didn't last long. Inflation hit, raising the cost of
construction. The Arab oil embargo struck, straining supplies and making
conservation look like a good idea. The Three Mile Island nuclear plant
leaked radiation, setting off a fierce antinuclear backlash. Edison built
only two generators after 1973.
?????None of that compares to the current mess, says John L. Jurewitz, an
economist and Edison's manager of regulatory policy. Like many veterans, he
knows precisely when it started: April 1994, when the PUC announced that it
was moving to an open retail market.
?????"Starting at that point," Jurewitz says, "we were in damage control
mode."
?????Edison executives worked with state legislators to fashion the 1996
state law that became the framework for restructuring. But Ballance, Fohrer,
Jurewitz and others directly involved in those talks insist that what they
lobbied for was a far cry from what was later implemented.
?????They want the world to know that, as Fellows puts it, "the utility was
dragged into this kicking and screaming." They highlight passages and fax
reports and letters dating back to 1993.
?????But the old papers are dense and complicated. Southern California
Edison--big, familiar, accessible--continues to be a target.
?????The engineers shout at the television. They cringe at the morning
newspaper. They riffle through their files to find the old documents that
will prove their point. But by then it's too late. The media, the
politicians, the public have moved from one oversimplified idea to the next.
?????And these consumer advocates!
?????"How do they get coverage so easy just because they sound good?" asks
Danny Haberern, an engineer who lost his Illinois railroad job when the line
went bankrupt, then fled to a "safe," regulated utility. He's now district
supervisor in Edison's Montebello center. "I don't get it."
?????Edison is getting bundles of hate mail. Edison is the butt of shock
radio programs. Edison employees are being snubbed at their children's
basketball games.
?????It's not our fault, they say, a little too desperately. We never wanted
to sell our power plants. We asked for long-term contracts four years ago. We
pleaded for a rate hike in December. When we ran the system, it never failed.
?????Facing the new market, Edison slashed its staff through a series of
layoffs and voluntary retirements in the mid-1990s. In 1998, to comply with
deregulation, it sold 12 gas-fired power plants and bought the electricity
back through a state-supervised market where prices fluctuate daily.
?????Other retailers are invited to jump in and compete, but retail
competition never materializes in force, and prices do not drop but soar. By
last December, it is clear that the market is dysfunctional. Under the
deregulation law, Edison cannot respond by raising rates. By the end of the
year, the utility is out of cash and comes within a filament of cutting power
to customers.
?????Back in the old days, John Ballance could make a troubled generator
continue running if the grid needed juice. He could get on the phone and tell
the manager, "You'll just have to hang on for a few hours, until we get past
the peak." And it would happen.
?????Now those same plants go offline whenever the new owners say, and all
the begging in the world won't bring them back.
?????In February an international energy firm, PA Management Group, names
Edison the most reliable utility in the Western region, based on 1999
figures. The veterans chuckle. They know it will be many years before Edison
is lauded for reliability again. They try not to think about it, gathered in
the cafeteria, graying heads bent over the tortilla soup.
?????"It used to be something to be proud of, to work for the utility," says
John R. Fielder, 56, a senior vice president for regulation, who once
directed Edison's information technology team.
?????"There was an ethic and an attitude, being good citizens, financially
healthy, part of the communities we serve," he says. "Now people don't
understand. They wonder, 'How did you let this happen? Who's going to get
fired?' It's just destroying the whole fabric of the place."
?????Ballance leaves for a long-planned family vacation, to visit his new
grandchild in Massachusetts. "I wonder if I'll have a job to come back to,"
he says. He checks the Internet for news every morning and night, and draws a
blank.
?????It's only after his return that Ballance learns the state will buy
Edison's transmission grid--half of his job--in exchange for a "bailout." The
federal government won't let it happen, he says. Besides, it makes no sense.
?????"I fail to see what the state or customers are going to actually get for
all of this," Ballance says, hours after Gov. Gray Davis announces a
tentative deal for the wires in late February. "I just don't understand the
rationale, when it seems to me that there's a fairly simple solution, and
that is to raise the rates of electricity."
?????In March, saturated with frustration, Fellows decides to take that early
retirement. He will move to central Oregon with his wife, his mother and his
28-year-old paraplegic son. He will play golf and try to forget about
California's new, deregulated world.
?????"It's hard," he says. "You almost feel like you're abandoning the place.
I've wrestled with that for a while. But my wife wants to go, and I've come
to the conclusion that I'm probably not indispensable after all."
?????He stays around long enough to watch California's other struggling
utility, Pacific Gas & Electric, file for bankruptcy protection. It happens
April 6, a Friday. On Saturday, members of Fellows' staff work through the
night, gathering numbers for a final deal with the state, which Davis unveils
with great fanfare Monday.
?????Already disengaged, watching from an emotional distance, Fellows
pronounces the deal DOA; the Legislature won't approve it. His voice is
uncharacteristically unburdened. This is no longer his problem.

Copyright 2001 Los Angeles Times
------------------------------------------------------------------------------
-------------------------------------------------------------------------

Utility Bills Are Just One Way People Pay for Energy Crisis
Money: From hotel rates to zoo admission, fees are being added.

By JENIFER WARREN, Times Staff Writer

?????Do you depend on a dry-cleaner? Dine out now and then? Do you patronize
a hair salon, pump iron at a gym, send flowers occasionally or plan to take a
vacation this year?
?????If so, you'll probably be paying an energy surcharge on those and many
other goods and services. In some cases, you already are.
?????Visitors at the San Diego Zoo found a $1.50 "energy assistance fee"
tacked onto the admission as of last week. The Water Grill in downtown Los
Angeles raised prices about 3% last month. And the San Francisco Federal
Reserve Bank predicts the average Californian will spend at least $750 extra
over the next year on new energy-related costs.
?????Hotels were the first to pass on the pain of the state's spiking utility
costs, but now the practice is spreading. The result: Many Californians will
get stung by the energy crisis multiple times: once through rate hikes coming
next month, then again and again through special fees tacked on by businesses
coping with their own power bills.
?????The surcharges aren't popping up just on luxuries such as a stay at a
beach-side inn or an hour in a tanning bed. Even staples such as milk could
cost more.
?????Milk processors have asked the state Department of Food and Agriculture
for a price adjustment, a shift that--if approved at a hearing late this
month--could bump up costs at the supermarket. And gasoline prices--already
about $2 a gallon--could be nudged further upward if summer blackouts shut
down refineries and pinch fuel supplies.
?????For some Californians, the risks are more basic. Some businesses,
reluctant to raise prices too high for fear of scaring off customers, will
offset soaring utility costs by laying off employees, cutting wages or
slashing benefits.
?????"We will see an impact on unemployment rates, we will see an impact on
wages, we will see an impact on benefits," said Shirley Knight, assistant
state director of the National Federation of Independent Business. "When
you're a small business owner and your [power] bill triples, you simply have
no choice."
?????Four months after the energy crisis hit California full force, financial
repercussions continue to multiply. The state is spending upward of $50
million a day buying energy for struggling utilities, and the sale of $12.5
billion in bonds to return that money to government coffers is clouded by
politics and a legal dispute.

?????Summer Blackouts Threaten Economy
?????The state's $1.25-trillion economy, while still strong, is already
showing wear and tear as uncertainty about energy costs and supply endure,
some economists say. A summer of blackouts, meanwhile, threatens to hurt
business productivity, discourage new investment and push inflation rates up,
they say.
?????"Elevated energy costs present a significant drag on the economy and can
be expected to reduce growth and economic output and employment," a study by
the Bay Area Economic Forum said. The study said 42% of Bay Area businesses
report that power problems have already hurt their profit margins and their
competitiveness relative to competitors outside the region.
?????Steven Cochrane, a senior economist at Economy.com in West Chester, Pa.,
is not surprised: "There are strong downsides to this [energy crisis] for the
state both short term and long term. Everyone is watching California."
?????For most residents of the Golden State, the most visceral blow will be
felt through rate hikes, beginning--but probably not ending--with the
increase reaching as high as 46% for some that will show up in June bills.
?????But the effects go far beyond that, and some analysts are attempting to
quantify them. The San Francisco Federal Reserve Bank study estimating a $750
annual hit for an average Californian figures $250 for electricity bill
increases, $200 for additional natural gas charges and $300 for the indirect,
day-to-day costs that will rise because of power-related surcharges and price
hikes.
?????The report's authors emphasize that their figure "would rise
substantially" if the full increase in wholesale electricity prices borne by
the state was taken into account.
?????Even so, $750--representing 1.5% of the average Californian's annual
income--is a very real bite, especially for the poor. Already, community
organizations report increases in calls for help from people forced to choose
among keeping their power on, buying food or paying for day care.
?????"It's that whole fixed-income thing," said Dennis Osmer, who runs a
nonprofit organization in Santa Cruz County that helps the poor pay their
energy bills. "If they're living on Social Security and just getting by, any
kind of increase in anything can push them right off the edge."

?????Extra Outlay Just 'Sunk Down a Hole'
?????Veterans of the state's consumer groups warn that the consequences of
the energy crisis for Californians--and the fiscal health of the state as a
whole--are staggering, and not yet fully known. Harry Snyder, a senior
advocate for Consumers Union, likens it to "a 7.0 earthquake that hits
everyone, everywhere."
?????"Wherever you turn, there's an impact," Snyder said. "The cafe owner
around the corner said his utility costs doubled in the last year and are now
the same as his rent. A friend who owns a bakery says his suppliers have
added a 20% surcharge. This all gets passed on to us, and it's just money
sunk down a hole--it's not spending that advances our well-being in any way."
?????California business owners say they have little choice but to tack on
costs to help with their own ballooning bills. And they say that along with
the rising natural gas and electricity bills, they have been hit with a jump
in the minimum wage--by 50 cents in January--and high gasoline prices.
Workers' compensation rates are up as well.
?????Hotels, which spend about 3.6% of their revenue on energy costs, led the
charge in passing on the extra expense. In January, most began adding fees
ranging from $1 to $4. Stay at the venerable Westin St. Francis on San
Francisco's Union Square and you're looking at $2.85 extra per night, per
room. At the Quality Inn in Mammoth Lakes, it's $2.50.
?????In San Diego, the zoo added the energy charge Thursday. Though many
visitors might not think of the zoo as a big energy gobbler, public relations
director Ted Molter said many exhibits consume lots of kilowatts.
?????Reptiles, for example, require warm temperatures and lighting, while
pumps and filtration systems run constantly to keep water clear in the
underwater viewing portion of the hippo enclosure.
?????Molter said the zoo, a nonprofit organization, experienced a 290%
increase in the amount it pays per kilowatt hour during the last year. "We
don't take this fee lightly and look forward to the day when we can roll it
back," he said.
?????At the Calistoga Village Inn & Spa near Napa, Manager Gisela Schaefer
said the natural gas bill has risen 500%--to $7,000 in March--making a price
increase at the 41-room compound inevitable. The spa includes numerous
energy-guzzling Jacuzzis, pools and saunas, and its natural hot springs
require pumps to draw water from underground.
?????But Californians need not travel to the wine country to experience
energy surcharges. At Foasberg Cleaners in Long Beach, owners in February
posted signs announcing a fee--about 3% per item--to account for spiking
utility costs.
?????Vice President James Foasberg said the cleaners' natural gas bill has
tripled in the last year, and he expects his June bill from Southern
California Edison to show a 40% increase in his electricity rate.
?????"We hate to do this, but we have no choice," said Foasberg, who has also
been pinched by high gasoline prices that cost him more for deliveries. "Some
of our smaller competitors are afraid to raise prices, so they're just
closing down a few days a week. It's terrible."
?????Restaurant owners also are getting hit from two sides: reeling from
higher utility costs and getting squeezed by linen, dairy and produce
suppliers who are raising prices because of the energy crisis. Signs advising
customers of surcharges have begun popping up next to the cream pitchers at
coffee shops, while managers of some restaurants are reluctantly opting to
charge more for meals.
?????Jeff King is chairman of a company that owns 11 restaurants from
Calabasas to San Diego, including the Water Grill in Los Angeles and iCugini
and Ocean Avenue Seafood in Santa Monica. King said energy costs for the
eateries rose by $150,000 during the last four months, prompting him to raise
menu prices about 3% last month.
?????"The last thing you want to do is charge the guests more," King said.
"But this is a major hit. And unfortunately, I think it's just the beginning."
?????Economist Cochrane agrees, predicting the energy debacle will cause a 2%
increase in California's inflation rate overall, showing up in price hikes
for every conceivable product and service.
?????"Power is such an essential component of production, so for most
businesses there's no escape," said Cochrane, who studies California for his
economic forecasting company. "These rate increases are so large, and they're
hitting so quickly, that those businesses that don't go under have no choice
but to raise prices."
---
?????Times researcher Patti Williams contributed to this story.

Copyright 2001 Los Angeles Times
------------------------------------------------------------------------------
----------------------------------------------------------------

Question Remains Who'll Take Brunt of the Rate Hikes
Power: Everyone has opinions on how to allocate the increases. PUC will hold
hearings before selecting a plan.

By TIM REITERMAN, Times Staff Writer

?????SAN FRANCISCO--When the California Public Utilities Commission approved
the largest electricity rate hike in state history, it ignited debate over
how the pain of almost $5 billion in increased power charges will be shared.
?????Everyone from the governor and the PUC president to consumer groups and
industry associations has weighed in, with about 20 plans.
?????They all say their formulas translate into equitable charges that will
encourage serious energy belt-tightening.
?????The PUC, as the state's chief regulator, must decide how to divvy the
rate increase among millions of utility customers, ranging from single-family
homes to factories that employ thousands of people.
?????Beginning today in Santa Monica, the commission will hold a series of
hearings to let the general public have its say before the scheduled adoption
of a rate plan on May 14.
?????PUC officials say rates will increase by an average of almost 30%. The
question is: Who gets hit the hardest?
?????The rate structuring is a pivotal piece of California's strategy for
surviving the summer without economic devastation and extricating the state
from a crisis that already has wreaked hardship on the state budget,
utilities and customers alike.
?????The PUC not only must assess a welter of competing proposals that
sometimes clash head-on. It also must design the rate structure without
knowing with certainty how much money the state will need to buy power in the
future.
?????Roughly half of residential users--including low-income customers--would
see no rate increases, and that number could grow, experts say, if customers
conserve significantly. Under proposals from Pacific Gas & Electric Co. and
Southern California Edison, rates for heavy users would increase by 50% or
more.
?????One battle shaping up is over whether residential customers alone should
pay for the increased cost of delivering power to those conserving enough to
be exempted from the rate hikes. Or should it be shared with businesses and
other nonresidential customers?
?????The answers are politically and economically tricky because someone is
going to feel the pinch.
?????"It is enough money to cause a noticeable increase for customers to whom
it is allocated," Paul Clanon, head of the PUC energy division, said.
?????PUC President Loretta Lynch, Gov. Gray Davis and others say rates should
be tiered to reward energy savers and punish heavy users. The proposals
involve fluctuation of a customer's baseline, an amount utilities determine
as the minimum level needed for household usage, varying by climate and
region.
?????Some proposals call for four tiers of residential users; others for five.
?????Under Southern California Edison's proposal, residential customers would
receive a 5% rate hike for usage that sometimes exceeds 130% of their
baseline amount but falls below 200%. Customers who use 300% above the
baseline less than six months a year would see a 45% increase. Above that,
the rate would climb to 70%.
?????Lynch's proposed rate design attempts to reduce the gap between what
residential customers pay and the lower rates paid by commercial and
industrial customers.
?????The California Large Energy Consumers Assn., representing big steel and
cement companies, said a rate hike of 3 cents a kilowatt hour--approved in
March by the PUC--amounts to a huge increase for large industrial users who
currently pay substantially lower rates than residential customers.
?????"One class should not pay an increase that is twice or three times [the
percentage] . . . as others," said William H. Booth, lawyer for the
association.
?????Farmers and food processors express concerns that they would take a
heavy hit because, unlike some industries, they are less able than some
customers to shift power use to nonpeak times.
?????"The bulk of the crops go to processors in the summer," said Ron
Liebert, staff attorney for the 94,000-member California Farm Bureau
Federation. "We can't say we'll do a double shift at night. Some crops have
to be irrigated around the clock."
?????The commission also must resolve a $1 billion disagreement over how much
money the rate increase will raise.
?????If the utilities have their way, the 3 cents per kilowatt hour increase
will be multiplied by the total number of kilowatt hours used by its
residential, commercial and industrial customers.
?????However, The Utility Reform Network (TURN) contends that total should
not reflect energy usage by low-income customers and other residential
customers who consume less than 130% baseline--groups exempted from rate
increases. That means the utilities would collect a total of about $4 billion
from customers, not $5 billion.
?????TURN's proposal, according to staff attorney Bob Finkelstein, also would
mean "less money will be flowing to [the Department of Water Resources] for
power purchases."

Copyright 2001 Los Angeles Times
------------------------------------------------------------------------------
------------------------------------------------------------

Riordan and Freeman's Feud Erupts in Public
Power: Each questions the other's role in keeping the city free of
California's energy crisis.
By MICHAEL FINNEGAN and TERENCE MONMANEY, Times Staff Writers

?????With California mired in energy troubles, Mayor Richard Riordan and his
former power chief S. David Freeman trumpet the extraordinary fortune of Los
Angeles: no rate hikes and no blackouts.
?????Yet Riordan and Freeman have sullied their mutual success story by
waging bitter campaigns to discredit one another--at first behind the scenes
but now in public.
?????Pettiness, ingratitude, conflicts of interest, overblown claims of
achievement: Such is the back and forth between two leaders who would seem to
have good reason to pat one another on the back.
?????To Freeman, who has resigned as general manager of the L.A. Department
of Water and Power to become chief energy advisor to Gov. Gray Davis, it
seems Riordan resents his high-profile role in trying to steer California out
of the energy crisis.
?????So the mayor, Freeman charged, has elbowed his way into energy issues
that he is ill-equipped to handle and taken steps along the way that could
harm the environment.
?????"With all due respect, I have 25 years of experience and knowledge--and
he has 25 days," Freeman said. "But he's the mayor, and he didn't like it
that I didn't just say yes to everything he came up with."
?????To Riordan, Freeman's efforts to fight air pollution have given short
shrift to the threat of skyrocketing power rates in Los Angeles. The mayor
said Freeman also failed to recognize potential conflicts of interest between
his city and state roles in the power crisis. And he scoffed at Freeman for
saying he had lifted morale at DWP.
?????"Morale was terrible under him," Riordan said. "I mean, they are so
relieved right now."
?????The backbiting has left associates suspecting the clash is really about
egos. City Councilwoman Ruth Galanter sees Riordan and Freeman as proud,
successful men unable to say, "I couldn't have done it without X, Y and Z."
?????"Each of them is used to being the boss and taking pleasure at being
recognized as the boss," she said.
?????Much of the conflict has taken place in private meetings. And the mayor,
a Republican multimillionaire, has taken pains to play down his dispute with
Freeman, a liberal Democrat from Tennessee who wears a cowboy hat and speaks
with a Southern drawl.
?????In an interview after his resignation, Freeman laid out the conflict
point by point, often in terms bluntly critical of the mayor. One of his
concerns, Freeman said, was that Riordan in his final two months as mayor
could reverse the agency's progress in protecting the environment.
?????Freeman cited Riordan's plans concerning coal-fired power plants in
Nevada and Utah that are partly controlled by the DWP, the nation's largest
municipal utility. The first is the Mohave Generating Station in Laughlin,
Nev., a plant that has been blamed for spreading some of the haze that
shrouds the Grand Canyon. The DWP had planned to sell its stake in the plant,
but Freeman said Riordan ordered him to back out of the sale.
?????He described the mayor's move as a sign that Riordan and his appointees
on the board that oversees DWP were "completely insensitive to the fact that
that power plant is one of the most environmentally troubling plants in the
West."
?????"I've worked real hard to try to build some environmental sensitivity
into the DWP policy," Freeman said. "And I am concerned as to whether the
current commissioners and the mayor have that sensitivity, and what they
might do in the interim to basically overturn the progress we've made."
?????The other plant is part of the Intermountain Power Project in central
Utah. Riordan has proposed building a new coal-fired generating unit there,
but Freeman said he objected because of the pollution it would cause.
?????In both cases, Riordan said he was striking the appropriate balance
between protecting the environment and meeting the energy needs of Los
Angeles at an affordable cost. By keeping its share of the Mohave plant and
expanding the Utah plant, Los Angeles can avert the astronomical price hikes
of natural gas--and the sharp rise in ratepayers' bills that would follow,
Riordan said.
?????Natural gas, which provides 26% of the fuel for DWP plants, causes less
air pollution than coal, which provides 51%. The rest is mainly nuclear and
hydroelectric. Los Angeles has averted rate hikes and blackouts in part
because the DWP relies less on natural gas than most other California power
providers.
?????"I favor clean air and more natural gas, but not to the point where
we're going to destroy the economy of Los Angeles," Riordan said.
?????On the Mohave plant, Riordan questioned the benefit of selling the
city's share to a buyer that would simply continue running it.
?????"It's still going to be coal-driven," he said. "How does selling it help
the environment?"
?????The tension between the two has built steadily as the state power crisis
has worsened. With the charismatic DWP chief drawing favorable news coverage
in stories on how L.A. has dodged the crisis, Riordan and the DWP
commissioners began to view him as "too big for my britches," Freeman said.
?????The conflict reached its peak on April 17, the day Freeman resigned to
become the governor's advisor. The DWP board president, Kenneth T. Lombard,
said the mayor told commissioners that day that "it made the most sense to
release him immediately."
?????"All we were doing, frankly, was release him from his responsibilities,
and then whatever time he needed to clean out his office was fine with us,"
Lombard said.
?????From Riordan's standpoint, Freeman needed to be stripped of his
authority right away because of a potential conflict of interest: The city
utility sells surplus power to the state, so Freeman would be on both sides
of the sales.
?????Freeman, who had voluntarily bowed out of a DWP meeting on the state
power crisis earlier that day, was outraged at his sudden release, in part
because he was denied the chance to say goodbye to agency employees. In an
interview, he called the conflict of interest assertion "complete malarkey."
?????"The insinuation that I have done anything less than protect the
interests of the city of Los Angeles is bordering on slanderous, considering
what I've accomplished here," he said.
?????Brian D'Arcy, who heads the union local that represents 6,000 DWP
employees, agreed that Riordan and his commissioners "kind of ran him out of
here. For David to be summarily jettisoned out of here without even a
howdy-do is absolutely tacky," D'Arcy said.
?????Riordan said Freeman deserves "an A-plus" for his work at DWP. The mayor
conceded that he knew of nothing that Freeman had done "to hurt Los Angeles."
But, he added, "when you have a conflict of interest, you have to act before
anything happens."
?????Freeman has long bridled at the oversight of DWP, not just by the mayor,
but by the agency's board and the City Council. In 1998, he called for City
Charter amendments to consolidate authority in a more independent board of
directors. The proposal went nowhere.
?????Freeman's concerns were echoed in a report to be released Monday. The
Rand Enterprise Analysis report was commissioned by the DWP. It calls for
restructuring DWP management much the way Freeman proposed. But Riordan and
Galanter, who chairs the Council's Commerce, Energy and Natural Resources
Committee, rejected the concept.

Copyright 2001 Los Angeles Times
------------------------------------------------------------------------------
-----------------------------------------------------------------------

Cheney Rejects Price Caps, Aid for Calif. Power Crisis
By DOYLE McMANUS and RICHARD SIMON, Times Staff Writers

?????WASHINGTON--Vice President Dick Cheney said Friday that there is little
more the Bush administration can do to alleviate California's energy crisis
this year and declared his opposition to further federal intervention in the
energy market even if the problem threatens the nation's economy.
?????"It's all you can do in the short term," Cheney said of the modest
energy conservation measures President Bush announced earlier this week, such
as turning down air conditioners in federal buildings.
?????In an interview with The Times, Cheney, whom Bush has put in charge of
designing a new national energy policy, said he strongly believes that energy
prices should not be capped or regulated under any circumstances.
?????He said he disagreed with the Federal Energy Regulatory Commission's
decision last month to place limits on wholesale electricity prices during
emergency shortages.
?????"I'm a skeptic. I've never seen price regulations that I've felt very
good about," Cheney said.
?????"If I had been at FERC, I would never had voted for short-term price
caps. But that's their decision. . . . I hope for their sake, and
California's, it works."
?????FERC, an independent regulatory commission, decided April 25 to cap
wholesale prices when statewide electricity reserves fall below 7%, using a
formula pegged to the cost of production for the least efficient generating
plant.
?????Consumer groups and Democratic members of Congress have criticized the
decision as too soft, but Cheney--like other advocates of
deregulation--condemned it as a step too far.
?????"Price caps are not a help. They take us in exactly the wrong
direction," the vice president said. "The way you address these issues is you
either have to reduce demand or increase supply. And anything that doesn't do
that is counterproductive, especially if it takes us in the opposite
direction, which to some extent price caps may because they discourage
investment."
?????"Ultimately, I think we're going to be better off if we have a
deregulated energy market in this country," he added.
?????Asked whether he might soften his opposition to price controls if the
energy crisis began to produce significant damage to the national economy,
Cheney shook his head ruefully.
?????"I start with a strong view, based on prior experience, that government
should intervene in the marketplace with great reluctance.
?????"I admit that I was traumatized in my youth by being part of the Nixon
wage and price controls," he said with a wry smile. In 1971, when President
Nixon sought to tame inflation with federal controls, Cheney was an obscure
White House official.
?????"I remember how we started out with 14 pages of regulations . . . which
I typed up myself." A few years later, "we had a roomful."
?????More important, Cheney recalled, the Nixon price controls led to a
series of "unintended consequences," including a decline in domestic
production of oil, increased reliance on foreign energy sources and the
failure of the U.S. automobile industry to build fuel-efficient cars.
?????Cheney, speaking in his West Wing office, acknowledged that the
administration's tough position against price caps could offend many
California voters in the short run, but he said he was confident that
Californians would come to accept his position in the long run.
?????"There is a much greater willingness today . . . to have this debate,"
he said.
?????Cheney said the administration has done "virtually everything" that Gov.
Gray Davis has asked, except to impose price controls.
?????"We're doing everything we can. Remember, we've been here 100 days. Our
predecessor left this area virtually untouched, I think primarily because it
involves very tough issues. It means you've got to go out and address some of
the most sensitive political issues . . . and we're doing that. That should
have been done years ago. If it had been done years ago, California wouldn't
have trouble today."
?????Cheney said the national energy policy manifesto he plans to issue later
this month will touch on California--but largely as an example for the rest
of the nation to shun, not as a focus for federal action.
?????"We talk about California; there are a lot of examples there in terms of
what needs to be done and, to some extent, what to avoid. . . . [But] the
things we focus on with respect to policy are long-term in nature and aren't
going to provide any relief this summer."
?????Cheney offered a glimpse of his strategy for building political support
for a national energy policy that is expected to promote domestic production
of oil, gas, coal and nuclear power.
?????Contending that technological advancements have reduced the
environmental risks of oil and gas exploration on public lands, he said, "We
can, in fact, have both: a clean environment and adequate supplies of energy."
?????While Cheney has been criticized for emphasizing the supply side over
energy conservation, he said, "Conservation has a role to play, but it's not
sufficient. You cannot build an energy policy just on the notion of
conservation. . . . People have used the conservation arguments in order to
avoid some of the tough issues associated with increasing supply."
?????Acknowledging that increased reliance on nuclear power--an issue he has
embraced--has been a tough sell, Cheney said public attitudes appear to be
changing. He said he recently asked a group of moderate lawmakers whether
they would be open to construction of new nuclear power plants. "Nearly every
hand went up," he said, touting the "environmental values" of nuclear power.
?????Cheney also said that, although he believes that unilateral economic
sanctions "rarely work," he understands there are "special problems" in
removing sanctions against oil exporters such as Libya and Iran. Bush has
said he has no intention at the moment of removing sanctions on Libya and
Iran; Cheney said he favors a review of sanctions.
?????The task force report will deal with another controversial proposal:
industry efforts to allow federal authorities to exercise the power of
eminent domain to obtain rights-of-way for new electrical transmission lines,
as they already do for gas pipelines.
?????Cheney would not say whether the task force would recommend that
authority. But such a proposal is likely to face opposition from state and
local officials.

Copyright 2001 Los Angeles Times
------------------------------------------------------------------------------
-----------------------------------------------------------------------

Rolling Health Hazards
Summer Blackouts May Pose Public Health Risks
David Bragi, Special to SF Gate
Monday, May 7, 2001
,2001 SF Gate
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2001/05/07/health
watch.DTL
On May 1, just prior to putting the finishing touches on this column from my
El Cerrito home, I heard the low, mournful howl of a disaster siren in the
neighboring city of Richmond. A car had slammed into a utility pole, knocking
out electrical power to the General Chemical Corp. plant.
The company's backup generators had failed to kick in and the ensuing power
outage tripped a safety valve which shut down the compressor. After power was
restored, the safety valve would not reopen, causing a leakage of sulfuric
gas into the air. By the time workers plugged the leak, approximately 100
people, all in Richmond, had arrived at area hospitals with minor ailments.
Although not caused by the state's energy crisis, this electrical outage
highlights how the prospect of chronic blackouts could pose some very real
and unexpected threats to public health. So far we have been lucky, with
planned rolling blackouts lasting no longer than about 90 minutes.
But if sudden, unexpected shortfalls in electrical supply cause outages
lasting longer than a few hours, Californians may face such health hazards as
unclean drinking water, food spoilage, vaccine shortages, heat stroke and
disabled and elderly residents living without electricity.
For instance, widespread outages could affect the availability and safety of
water supplies. Local water districts are concerned that the state Public
Utilities Commission has not exempted their facilities, such as pumping
stations that transport water uphill and treatment plants that purify water,
from rolling blackouts.
"In addition to our own facilities, outages could affect the State Water
Project and the Central Valley Project's ability to get water to us," said
Marty Grimes, public information representative for the Santa Clara Valley
Water District, which provides wholesale water supplies to Santa Clara
County. On the retail level, some of the smaller suppliers lack large storage
tanks and would themselves run out of water quickly.
If treatment plants go off-line, water quality might also decline in some
areas, in which case consumers would have to boil their tap water for at
least 20 minutes before drinking it. "We are doing all we can to minimize
this possibility and see it as unlikely," says Grimes. "If that were to
happen, we'd be ready to inform everyone in the affected area immediately."
To help keep the water flowing during outages, the district has installed
backup generators in treatment facilities and key pumping stations, and is
keeping Anderson Reservoir as full as possible. "It is high enough in
altitude that electricity is not needed to get the water to our treatment
plants. Gravity does all the work," says Grimes.
The district also recommends that consumers use less water when the weather
is very hot or outages are likely to occur. "In essence," says Grimes,
"saving water can save energy."
Since refrigerators and freezers run on electricity, when the power goes out,
so does your ability to keep perishables fresh. One health risk occurs when
somebody carelessly reheats and eats yesterday's frozen casserole long after
a blackout has already thawed it back to life.
"It goes way beyond spoilage," says Susan Conley, director of food safety
education for the Food Safety and Inspection Service at the U.S. Department
of Agriculture. "If, because of the blackouts, the temperature in the
refrigerator or the freezer goes above dangerous levels, then you could have
a problem with bacterial contamination," such as botulism.
Contrary to popular opinion, simply sniffing around is not a good way to tell
whether food is safe to eat, since not all bacteria produce noticeable odors.
A better course is to learn how to keep your food cold for as long as
possible and which foods last for how long at what temperatures.
For instance, a blackout lasting under four hours will not spoil the food in
your refrigerator. A freezer will keep frozen food safe for at least a day.
To keep the cold air inside, keep refrigerator and freezer doors closed
unless you absolutely need to retrieve food.
Some foods, muffins for instance, will last longer than others, such as eggs.
For an easy-to-read spoilage chart that recommends when to use, refreeze or
discard various foods, go to the USDA's Keeping Food Safe During A Power
Outage page. It also has a collection of practical tips, such as safe
temperature levels, using thermometers, and handling dry ice.
As for food spoilage at grocery stores, I asked a butcher at Armond's Quality
Meats in El Cerrito how well the meats in the store's refrigerated glass
display counter would hold up during an extended outage. He said they would
keep the counter closed; since the case is kept at just above freezing, the
meat would remain safe until the next day.
Medical facilities also rely upon refrigerators to keep perishables cold and
safe. Unfortunately, like water facilities, smaller clinics and hospitals in
California are not exempt from planned blackouts, although major hospitals
are.
According to Dr. Barbara Ramsey, medical director the Native American Health
Center's community health clinic in Oakland, if power goes down for more than
two hours, their biggest problem will be vaccine spoilage. In addition,
replacing them may also prove difficult if power outages to other clinics
across the state or nation result in widespread shortages.
"We have episodic vaccine shortages without blackouts," she says, largely
because drug manufacturers allegedly limit the supply of medicines to improve
profit margins. "We just had one with tetanus. For those vaccines that aren't
profitable, I would see a particular risk."
Ramsey recommends that parents of children between 15 months and 30 months
and 4 to 6 years get them vaccinated as soon as possible, especially if they
expect to enroll them in a school or day care center that requires
inoculations prior to admission. Often, says Ramsey, "the parents go, 'Oh,
the kid turned 4 but I've two years to do these vaccines.' Then suddenly the
parent wants boosters given today because preschool starts tomorrow. But if I
don't have the vaccine, tough luck."
Otherwise, having experienced a rolling blackout a few weeks ago, she gives
mixed reviews about the clinic's ability to operate without power. Since the
clinic is "a fairly low-tech operation," Ramsey says she is confident that it
can continue to provide basic services, with the exception of the EKG machine
and dental equipment. "Just to shine that light in your mouth requires
electricity," she says.
Other medical issues must be dealt with in the home, especially for elderly
and disabled residents. Medicines kept in the refrigerator can spoil,
life-support equipment can shut down, and heat stroke can result in serious
illness or death. Some Bay Area communities plan to open summer "cooling
shelters" for seniors during hot days.
Keeping tabs on San Francisco's homebound elderly and disabled residents
during a disaster is largely the responsibility of a volunteer disaster
preparedness program called NERT, for Neighborhood Emergency Response Team.
In other cities it might go by another acronym, such as NEAT (Neighborhood
Emergency Assistance Team) or CERT (Community Emergency Response Team).
While distributing informational flyers, Susan Yip, NERT coordinator for San
Francisco's Balboa Terrace neighborhood, noticed some notes pasted to a front
door indicating that a disabled person lived inside. So she left a note of
her own asking if the occupant would like to contact her in order to be
placed on a list of local residents who may have special needs during a
neighborhood-wide emergency.
"His son phoned me and told me about his father, who lived alone in the
house," was in his late 90s, mostly bedridden, and on an oxygen machine, says
Yip. "He explained to me which window to climb in and that he has a chair
right there to jump down on, that kind of thing."
Not long after, a rolling blackout hit the neighborhood. She quickly paged
the son, they met at the father's house, and went inside together.
Fortunately, the oxygen machine did not depend upon AC power and was
operating normally. "Because the rolling blackout happened during the daytime
and it just lasted an hour and a half, it was just a good drill for us," she
says.
Yip is more concerned about the consequences of nighttime outages. "If it
were dark and he went to turn on his light and that didn't go on, there might
just be that fear of what's going on." So an important part of a NERT
volunteer's job is providing neighbors with information, reassurance and a
sense of hope.
Even in a power outage, the greatest impediments to good health are apathy
and ignorance. So if we take steps to protect health and safety during the
energy crisis, then the next string of blackouts may end not with a trip to
the hospital and a lot of embarrassing questions, but with an excuse to sit
on the front porch and enjoy the balmy evenings of summer.
If you would like a NERT volunteer to visit an elderly or disabled San
Francisco resident during a community-wide emergency, call (415) 554-9960. If
you live in another community, contact your local fire department for
information.

David Bragi, a freelance journalist who lives in El Cerrito, California, is
Editor of the multicultural webzine New Tribal Dawn. 	?

,2001 SF Gate ?
------------------------------------------------------------------------------
---------------------------------------------------------------

Oh, that boom in 2002
Jon Carroll
Monday, May 7, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/07/DD168333.DTL
I THINK WE must now believe and accept that there is no bailout coming, no
miracle cure. Human behavior will remain the same, which takes care of the
demand end, and human avarice and incompetence are also reliable, which takes
care of the supply end.
Which means we will have blackouts this summer.
It seems ironic in the inner Bay Area, where our power needs drop
precipitously from May to October (except for a little furnace action on
those brisk, foggy summer days), but the rest of the state wants to stay cool
cool cool.
I can't blame it. If I lived in Fresno, I would succumb to temptation, I'm
pretty sure. What with those rotating blocks, I'd get hit only once every
fourth blackout or so. I could live with that.
Hell, I will live with it, even though I don't own an air conditioner, even
though daylight saving will cut my illumination needs substantially, even
though we have already unplugged the freezer and turned out lights like
little Boy Scouts. And, of course, like little Girl Scouts -- equally
virtuous energy savers.
Nevertheless, we are all in this together, just like in the old days. We are
experiencing solidarity in our misery. Maybe we'll make up folk songs as we
sit around the blocks of ice.
Perhaps you remember 1989, when the bridge fell down. Everything was
different for a while. Many of us took ferries and said, "God, this is the
only way to travel. I'm never going back to my car again."
Yes, well. Bad habits die hard.
SO I AM thinking what it might be like when the great blackouts start to
happen. I am thinking of people learning to live without television or
computers. I am thinking about people at loose ends, wandering around their
homes or places of businesses.
"What did people do for fun before there was electricity?" Various
suggestions will come up: quoits, bearbaiting, starting a land war in Asia.
And then Person A will look at Person B and remember the oldest recreation
known to humanity. It's free, it gets better the more you do it, it wastes
not a gram of our precious fossil-fuel resources. Batteries are not even
necessary (although, of course, optional). Salmon habitats are untouched; air
quality remains the same.
The heat, of course, would be a deterrent. The boredom, on the other hand,
would be a goad. It would be the old heat/boredom dilemma. I'm betting on
boredom here. "The hell with it, we can always take a cold shower," some
romantic person can say.
I am envisioning people putting locks on the Xerox-room door. You know what
I'm saying?
SO LET US think big picture. Let us think downstream. Let us count to nine
starting from July: August, September . . . May! I am strongly suggesting
here that obstetrics wards staff up for May 2002. Extra beds, extra people.
Hospitals may already be preparing the budgets for that time frame -- don't
be caught off guard.
Oh, and think of the names. Blackie will suddenly be fashionable for boys,
and maybe Blaze for the girls. Or even Heather, with a little hyphen between
the t and the h. Wouldn't that be cunning? I suspect we may see a few kids
named Xerox too.
Couples will not be able to hear the phrase "rolling blackout" without
giggling.
Maybe, under the pressure of circumstance, old fires will be rekindled. Two
parents might suddenly come home from their darkened workplaces in the middle
of the day to a blessedly silent house . . . violins and roses. People in
cubicles facing dead computers might begin to chat . . . incense and
peppermints. People will say, "This is great! We should keep doing it even
when the energy crisis is just a memory!"
Just like we're all riding the ferry now.
Giving a whole new meaning to the phrase "gridlock," it's fun in the dark.
Skyrockets in flight, afternoon jcarroll@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?B - 10
------------------------------------------------------------------------------
---------------------------------------------------------------

Developments in California's energy crisis
The Associated Press
Monday, May 7, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/07/state0
940EDT0145.DTL&type=news
, , -- (05-07) 06:40 PDT Developments in California's energy crisis:
MONDAY:
--Democrat state lawmakers say they will announce that they are suing federal
energy regulators for refusing to cap the spiraling cost of electricity.
-- A legislative committee is expected to vote on a bill to tax power
generators' windfall profits.
-- The state Assembly could consider a bill to authorize $12.5 billion in
bonds for power buys. Republican members have balked at financing that much
money, suggesting that the state instead use some of its surplus to buy
electricity for customers of three cash-strapped utilities.
-- The state remains free of power alerts as reserves stay above 7 percent.
FRIDAY:
-- Customers of Pacific Gas and Electric Co. will have their own committee in
the utility's bankruptcy proceedings, a move to which PG&E officials
immediately objected. The nine-member committee will be the consumers' voice
at the bargaining table, says Nettie Hoge, executive director of The Utility
Reform Network, and a member of the panel appointed by the U.S. Trustee's
office. PG&E spokesman Ron Low says ratepayers could be represented by the
state attorney general and didn't need a committee.
-- California's power buyers announce a $7 billion contract with Sempra
Energy Resources for electricity for the customers of three utilities. The
10-year contract will provide 250 megawatts of electricity starting June 1,
eventually increasing to 1,900 megawatts, the governor's office says. One
megawatt is roughly enough power for 750 homes.
-- Southern California Edison and several organizations kick off an
advertising campaign Saturday to urge support for Gov. Gray Davis' plan to
rescue the utility by purchasing its power lines. Among the members of the
coalition running the television and radio ads are the California Small
Business Roundtable, California Professional Firefighters and the California
Taxpayers Association.
-- Energy Secretary Spencer Abraham visits San Francisco to trumpet a Bush
administration plan directing federal facilities to conserve electricity.
Abraham says the effort, which does not specify how much power must be saved,
is an important step as the administration prepares to release its national
energy policy later this month. But he also stresses that conservation is not
the panacea to California's power affliction and that the state also must
build new power generators.
-- Shares of Edison International closed at $9.25, down 3 cents. PG&E Corp.
closed at $9, up 14 cents.
-- No power alerts are reported as reserves stay above 7 percent.
WHAT'S NEXT:
-- The governor meets Wednesday with the CEOs of several major energy
suppliers to discuss the money they're owed by the state's two largest
utilities, the state's creditworthiness and how wholesalers can help the
state during the energy crisis. Davis says he won't be discussing any of the
investigations into price manipulation in the wholesale market.
-- Davis' representatives continue negotiating with Sempra, the parent
company of San Diego Gas and Electric Co., to buy the utility's transmission
lines.
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices the state's electricity deregulation law bars them from
passing on to consumers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers. The state is also buying power for a third investor-owned
utility, San Diego Gas & Electric, which is in better financial shape than
much larger Edison and PG&E but also struggling with high wholesale power
costs.
The Public Utilities Commission has raised rates as much as 46 percent to
help finance the state's multibillion-dollar power buys.
,2001 Associated Press ?
------------------------------------------------------------------------------
---------------------------------------------------------------

U.S. considers withdrawing lawsuits against coal industry
Pollution controls affect power plants
Katharine Q. Seelye, New York Times
Monday, May 7, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/07/M
N213627.DTL&type=news
Washington -- The Bush administration is considering pleas from coal and
electric companies to drop a series of government lawsuits initiated by the
Clinton administration to require the utilities to install modern pollution
controls on old, coal-fired power plants.
The request, which the coal industry says would let it quickly increase its
output of power, has touched off a debate within the administration. Christie
Whitman, administrator of the Environmental Protection Agency, which
initiated the litigation, is resisting the industry's suggestion, while Vice
President Dick Cheney and Energy Secretary Spencer Abraham are sympathetic.
The Bush administration is determined to increase the nation's use of fossil
fuels to produce power in response to what it deems an energy crisis.
The coal industry says the EPA's enforcement of the Clean Air Act is
preventing investments that would generate tens of thousands of megawatts of
electricity from existing coal-fired plants and that the cost of new
pollution controls would have to be paid by consumers.
"There is a recognition that plants aren't modernizing because the burden is
too onerous," a White House official said yesterday.
Discussions within the administration about the lawsuits have intensified in
recent days, as the White House completes a report by a energy task force
headed by Cheney. The report is to be printed this evening.
"The coal industry is pushing very hard to lock this in and make it part of
the report," said an environmentalist who has been following the case
closely.
At stake are emissions that would cost millions of dollars to control and
that account for a significant share of the nation's air pollution.
The Clean Air Act exempted many older plants from strict emissions controls,
but required modern controls when owners modified plants in ways that
increased emissions.
For years, the agency says, plants evaded the requirements by insisting that
certain modifications were merely "routine maintenance." But the agency found
that a number of major electric utilities had been modernizing their plants
with projects that increased emissions.
Since 1988, the EPA has sued 11 companies over controls at 49 power plants.
If the administration dropped these lawsuits and otherwise softened
regulations, the council argues, coal-fired plants could provide an increased
capacity of 40,000 megawatts within three years, almost twice the capacity of
all new power plants built last year, and 5 percent of the total generating
capacity available nationwide.
,2001 San Francisco Chronicle ? Page?A - 3
------------------------------------------------------------------------------
---------------------------------------------------------------
Swimming pool owners get PG&E discounts
Operating pumps at night saves energy
Michael McCabe, Chronicle Staff Writer
Monday, May 7, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/07/M
N121100.DTL&type=news
A penny here, a penny there, a megawatt here and a megawatt there, for
Pacific Gas and Electric Co it all adds up -- maybe.
In the fervent hope and fear that each tiny zap of electricity is going to
count this summer, PG&E is offering owners of private swimming pools $20 if
they set their pool timers to operate the pumps during off-peak hours.
Shifting 15 megawatts off peak demand, the daylight time of day when power
shortages are most likely to occur, may sound like a drop in the bucket. But
PG&E says 134,000 private pools exist in Northern and Central California, and
that's enough to save 15 megawatts, or enough to power 15,000 homes at any
one moment.
And that could add up to a sizable savings in light of the grim predictions
for this summer.
The Independent System Operator, which oversees the state's power market,
estimates that on any given day in June, the state will fall 6,815 megawatts
short of demand. That would put nearly 7 million homes in the dark.
So PG&E figures every bit of conservation helps, even pumping dirt and debris
and other foreign matter out of swimming pools at night or in the early
morning.
To qualify for the $20 check -- a one-time rebate, owners of in-ground
swimming pools must agree to set their timers to operate the pumps between 8
p. m. and 10 a.m.
The offer does not extend to public pools for public health reasons or to
solar-heated pools, which do not use power from the grid.
"Obviously, this is not a silver bullet to solving the energy crisis, but it
is one BB among many," said Staci Homrig, a PG&E spokeswoman. "Every little
bit helps, and this is just our latest among many programs offering
incentives to customers who are more energy efficient at home." Other PG&E
programs include offering $3 off energy star-labeled compact fluorescent
lamps, which use 75 percent less energy than standard incandescent bulbs; $75
rebates for Energy Star-labeled clothes washers and $50 for dishwashers. PG&E
also offers $75 rebates for refrigerators that meet the 2001 Department of
Energy efficiency standard.
Some pool installation companies say the $20 offer sounds like a good idea,
generally. But they caution that pool owners who operate their sometimes
noisy pumps only at night may run into problems with local noise-abatement
ordinances.
"If you run your pumps at night, then you are going to hear it running," said
John Maguire, owner of the Pool Man, which serves Sonoma County. "But I'm
sure PG&E will get a good response -- a lot of people will be happy to take
$20."
Other pool experts said, however, that the most modern pool equipment is very
quiet and pumps manufactured in recent years should not cause a noise
problem.
Generally, though, the reaction was that PG&E probably could spend whatever
money it has left more wisely.
"The trouble is that $20 is not a whole lot of money," said Rick Wolpin,
director of Sales and Marketing for Lifetime Pools in Palo Alto. "If it was
$20 a month off their bill, I could see people jumping at it."
At least one pool owner agrees.
"I don't think 20 bucks is much of an incentive, but I probably would have
done it anyway -- and also take the $20," said Deborah Clark, who has a lap
pool in her San Jose backyard.
Indeed, most pool owners already shut their pumps down during the day, said
Randy Saunders, division manager for Adams Pool Solutions based in
Pleasanton. "I would bet 90 percent of the pool owners would be happy to do
that because the backyard pool doesn't care what time of day it is as long as
it gets four to eight hours of circulation," Saunders said. "I think it's a
terrific idea, assuming PG&E can afford it."
PG&E officials say they will have little problem coming up with the $2
million or so the program may cost if 80 percent of its pool-owning customers
enroll in the program.
PG&E's Homrig said all the rebates will come after the bankruptcy filing, and
so will not be affected by its filing for Chapter 11 on April 6. She said the
money for the rebates will come from the utility's customers, who pay a small
portion of each month's bill for energy efficient programs.
To make sure that those who sign up for the $20 are actually turning off
their pumps during the day, PG&E plans random inspections, Homrig said. The
utility is also counting on the honesty of their valued customers, she said.
E-mail Michael McCabe at mmccabe@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 13
------------------------------------------------------------------------------
---------------------------------------------------------------

Legislators plan to sue U.S. panel on energy
Top state Democrats want cap on prices
Jim Herron Zamora, Chronicle Staff Writer
Sunday, May 6, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/06/M
N233207.DTL&type=news
The two top leaders in the California Legislature said yesterday that they
plan to sue federal energy regulators for allowing electricity rates to
spiral out of control.
"The commission is not complying with the law," Senate President Pro Tem John
Burton said of the Federal Energy Regulatory Commission.
"The Federal Power Act requires (the commission) to make sure that energy
prices are just and reasonable," he said. "Clearly, rates are anything but
just and reasonable."
Burton, D-San Francisco, said yesterday that he and Assembly Speaker Robert
Hertzberg, D-Sherman Oaks, will file the suit tomorrow in federal court. The
suit will accuse the commission of neglecting its duty by refusing to cap the
escalating cost of electricity in the midst of the power crisis.
Gov. Gray Davis is not a party to the suit, but "is supportive of any effort
to make sure FERC does its job," said Davis spokesman Steve Maviglio.
No one answered the phones at the federal commission's media office
yesterday, and commission officials could not be reached for comment.
Late last month, the commission ordered a one-year cap on electricity sold
into the state during power emergencies, when power reserves fall below 7.5
percent, in order to avoid rolling blackouts.
But the Democratic governor and state power regulators dismissed the cap as
too little, too late.
The pending lawsuit follows months of lobbying by Davis and legislative
leaders of both parties. Hertzberg also is working on a tri-state plan to
lower electricity costs and cut the risk of blackouts in the drought-stricken
Pacific Northwest.
Burton said those efforts may bear fruit, but that legal action against the
commission is needed as well.
"California is in a crisis, and we need FERC to do its job," Burton said. "'I
don't know if they have fallen asleep or if they are trying to screw
California, but the net effect is the same -- we are being gouged by energy
wholesalers."
Joseph Cotchett, a Burlingame-based attorney with strong political
connections to Democratic leaders, will represent the legislative leaders for
$1 a month.
This will be the second suit filed in less than a week alleging that
Californians have been gouged during the power crisis.
On Wednesday, Lt. Gov. Cruz Bustamante filed a suit against wholesale energy
producers on behalf of California's taxpayers.
Bustamante's suit accuses Duke Energy Inc., Dynegy Inc., Reliant Energy Inc.
, Mirant Corp. and the Williams power company of engaging in a price-fixing
conspiracy and using unlawful trading practices to manipulate the state's
electricity market.
Chronicle news services contributed to this report. / E-mail Jim Herron
Zamora at jzamora@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 16
------------------------------------------------------------------------------
---------------------------------------------------------------

Nevada's winning hand -- power
State sees profit in California's crisis
David Lazarus, Chronicle Staff Writer
Sunday, May 6, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/06/M
N18476.DTL&type=news

Reno -- California's energy crisis is possibly the best thing to happen to
Nevada since gangster Bugsy Siegel chanced upon a backwater town called Las
Vegas in the 1940s.
Construction workers are scrambling not to erect new casinos but nearly a
dozen new power plants -- an ambitious scheme hatched by state leaders and
power companies to profit from California's chronic shortages.
While California may get fresh power supplies, Nevada, by hosting the plants,
will benefit from additional tax revenues and jobs, a more stable electricity
network and a level of energy self-sufficiency the Golden State can only
dream of achieving.
And, to a great extent, Nevada's gains will be financed by California
ratepayers.
"While you guys in California have been putzing around politically, we got
together and figured out what to do," said Nevada state Sen. Randolph
Townsend,
chairman of the Committee on Commerce and Labor that oversees energy matters.
"We're bringing the same mentality to power plants that we brought to
casinos," he said. "You build, and then you build some more."
In embarking on an unprecedented energy building boom, Nevada's first
priority is to secure enough electricity to meet all its needs for years to
come.
No less importantly, though, the state is looking to position itself as the
battery pack of the West -- a regional energy hub that will be to electricity
what Texas is to oil.
California's acute need for juice, at virtually any price, is what will make
this otherwise fanciful goal a reality.
"Our strategy is to overbuild," Nevada Gov. Kenny Guinn said during an
interview in his Carson City office. "We have short-term plans and long-term
plans, and those plans affect California tremendously."
Those plans also include trade-offs that some environmentalists fear place
business interests ahead of natural resources, as well as hardball tactics
intended to force generators to provide at least a portion of their output to
Nevada, rather than sell it all across the border.
"Energy developers are looking at us with big grins and drooling chops," said
Jane Feldman, a spokeswoman for the southern Nevada branch of the Sierra
Club. "This really makes us nervous."
While California Gov. Gray Davis has been forced to take a crash course in
energy issues, Nevada's Guinn boasts 20 years of experience in the utility
business, including a stint as head of Southwest Gas Corp., a leading natural
gas supplier.
He said he has discussed California's energy troubles with Davis several
times, and each time urged Davis to be more aggressive in building new power
plants.
"I think he's frustrated that he can't move as fast as we can," Guinn said,
with a satisfied smile. The Nevada governor is a Republican. His California
counterpart is a Democrat.
Of course, Nevada's commitment to energy independence is not solely the
result of political will. It also is what the gaming industry wants, and
Nevada lawmakers take notice when the casinos flex their considerable muscle.
Today, Las Vegas is the fastest-growing city in America, and the glitzy
gaming palaces that are its lifeblood soak up about 10 percent of all
available power.
Casinos and related sales and services account for no less than 60 percent of
Nevada's economy, according to the state Commission on Economic Development.
Six of every 10 Nevadans work for a casino or a casino-related company.
"The casino industry cannot tolerate blackouts like you've had in
California," said Harvey Whittemore, legislative counsel for the Nevada
Resort Association in Las Vegas. "We need predictable and reliable energy
resources."
Not surprisingly, Nevada legislators voted last month to halt deregulation of
the state's electricity market in its tracks and to shield local utilities
from the sort of financial ruin that led Pacific Gas and Electric Co. to file
for bankruptcy protection.
They also wasted no time in rolling out the red carpet for power companies
eager to build new plants while California electricity prices remain at sky-
high levels.
The governor stood alongside executives from four leading power companies to
announce that his state will fast-track approval of new plants so it can
double Nevada's electricity output within just two years.
A licensing process that might take as long as four years in California has
been reduced to months in Nevada.
"We don't want to be like other states, like California, who can't control
their own destiny," Guinn said.
This is music to the ears of power companies, which see Nevada as an
affordable and hospitable base from which to pump electricity into the
captive California market.
"If you could, you would build all your California plants in Nevada," said
Jack Farley, president of western operations for Houston's Reliant Energy.
"The political climate is more stable, there's no state income tax and the
labor is cheaper."
Reliant will spend about $1 billion on three new plants outside Las Vegas,
which together will generate enough power to light about 1.4 million homes.
North Carolina's Duke Energy Corp., meanwhile, is looking to build a
sprawling facility near Las Vegas capable of lighting more than 1 million
homes and a second plant about half that size near Reno.
Tom Williams, a Duke spokesman, said one reason power companies are heading
into Nevada is because they hope to rapidly recover their construction costs
from California consumers.
"Clearly, building a plant rapidly in a market that has a shortfall is an
objective," he said. "The sooner you get to a market that has a desperate
need for power, the better off you will be."
In a desert canyon outside Reno, along the same path once followed by the
ill-fated Donner Party, the West's newest power plant is due to begin
operating by the end of the month.
The $130 million facility, bankrolled by brokerage Morgan Stanley, will not
only fuel Reno's lavish resorts but also pump electricity over the mountains
and into neighboring California.
Huge gray transformers and turbines dominate the construction site as workers
battle dust storms and the harsh sun to meet their deadline.
"If we could have a year to do this, it would be simple," said Ray Kaufman, a
technical consultant with Energy Services, the engineering firm hired by
Morgan Stanley to build the plant. "Doing it in four months is very
difficult."
State officials insist that no environmental regulations were waived to get
Nevada's new power plants off the drawing board in record time. They say the
normally slow bureaucratic process was simply streamlined.
Consumer activists are not so sure.
"The state is moving too fast," said Kalynda Tilges, a spokeswoman for Las
Vegas' grassroots Citizen Alert. "There needs to be more discussion."
At the same time, she and other activists worry that Nevada will be giving up
precious natural resources for power plants that will be producing
electricity for consumers elsewhere.
The new plants require groundwater for cooling -- something Nevada does not
have in abundance.
"I don't think most Nevadans realize what's happening," Tilges said. "They
have no idea how much groundwater will be used, and how much of the power
will be going to California."
To ensure that at least some of the output stays close to home, Nevada
authorities have driven a hard bargain with power companies. Access to
groundwater will be permitted in return for 25 percent of all electricity
produced, which is to be sold to Nevada utilities at low rates.
Richard Wimmer, deputy general manager of the Southern Nevada Water
Authority, said he was surprised to find that power companies seemed
comfortable with, and perhaps even respected, his state's strong-arm tactics.
"This is what these people do all the time," he observed, adding that Nevada
saw how poorly California fared when it attempted to negotiate without any
leverage.
In this sense, Nevada and the big energy companies have gotten off to a fine
start. They both speak the same language -- a readiness to seize
opportunities and to roll the dice on risky endeavors.
"Our economy may not have been built by gamblers, but it's a spirit we like,
" said Sen. Townsend. "Just turn us loose and let us get things done.
"It's not so much that we want to profit from California," he added. "We're
just trying to survive."
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
------------------------------------------------------------------------------
---------------------------------------------------------------

Share prices rise amid news of big energy deals
Posted at 7:44 a.m. PDT Monday, May 7, 2001
NEW YORK (AP) -- Share prices rose tentatively in early trading Monday as
investors tried to absorb the impact of two big energy mergers and weakness
in the hand-held computer sector.
In early trading, the Dow Jones industrial average was up 28.50 at 10,979.74.
The Nasdaq composite index rose 16.54 to 2,208.07, while the Standard &
Poor's 500 index was up 1.56 at 1,268.17.
Two energy deals were announced in the hours just before the market opening.
Williams Companies of Tulsa, Okla., said Monday it will buy natural gas
producer Barrett Resources for $2.3 billion in cash and stock, topping a $2
billion hostile bid by the U.S. unit of Royal Dutch/Shell Group.
Denver-based Barrett put itself up for sale in a formal auction after Shell
mounted its effort in March.
Shares in Barrett soared $2.79 to $70.09, while Williams' stock was down
$2.77 at $38.90.
Meanwhile, Valero Energy Corp. said it was buying Texas rival Ultramar
Diamond Shamrock Corp. for about $4 billion in cash and stock in a deal that
will make Valero the second-largest U.S. refiner of petroleum products. The
companies said the deal was approved by both boards over the weekend, but
still must be sanctioned by regulators.
Valero's shares dropped 37 cents to $45.10, while those in Ultramar Diamond
Shamrock were up $9.38 at $52.09.
In the high-tech sector, Handspring Inc. announced that it was lowering the
price of its Visor Deluxe handheld computers to $199 from $249. The company
also said it was offering two promotions: a $50 rebate on the purchase of any
new Visor Platinum and $30 rebates on select Springboard modules with the
purchase of any Visor handheld.
Investors feared the action would set off a price-war in the sector, which
has been dominated by Palm Inc.
Shares in Handspring were down 45 cents at $12.58. Palm's were up 13 cents at
$8.52.
Also Monday, 3Com Corp., which spun off Palm last year, announced a second
round of layoffs Monday, cutting 3,000 jobs. The networking company aims to
trim costs by $1 billion a year.
Its shares were up 20 cents to $7.10 on the news.
The market last week ended on an upbeat note after dismal unemployment
figures led investors to expect the Federal Reserve to aggressively cut
interest rates when it meets next week. Most analysts expect the Fed to cut
interest rates at least a half a percentage point for the fifth time this
year.
The Russell 2000 index, which measures the performance of smaller companies
stocks, was up 1.07 at 493.96.
Advancing issues were slightly ahead of declining issues on the New York
Stock Exchange, where volume came to 114.58 million shares, compared with
138.10 at the same time last Friday.
Overseas markets were mixed on Monday. In afternoon trading in Europe,
Germany's DAX index was off 0.18 percent at 6,127.15. France's CAC-40 was up
0.79 percent at 5,498.45, and Britain's FT-SE 100 was up 1.81 percent at
5,870.30.
The benchmark 225-issue Nikkei Stock Average rose 107.77 points, or 0.74
percent, to 14,529.41. It was the strongest close since the index registered
14,552.29 on Dec. 15.
------
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
AP-WS-05-07-01 1036EDT

------------------------------------------------------------------------------
------------------------------------------------------------------------------
-----------

Florida shrugs off Calif.-blackout scenario
Posted at 7:38 a.m. PDT Monday, May 7, 2001
BY JOAN GRALLA
NEW YORK (Reuters) - Florida is confident it will not face next year the
rolling power blackouts that have bedeviled California, but one analyst who
foresaw trouble for the West Coast says the same problems may lie ahead for
the Gold Coast.
California's self-imposed black eye with deregulation has left a number of
states, from Wisconsin to Florida, disinclined to go ahead with similar
plans. That is especially true in the Southeast, where states have less
reason to deregulate because their power costs are fairly low.
Florida residents are not expected to experience soaring power prices this
summer when the thermometer rises since power companies say they have enough
supply to meet customer needs.
But whether Floridians run short of power next year might be decided by
factors beyond the state's control: how hot the summer is, whether utilities
accurately predict demand growth, and whether they can add new power as fast
as they project, analyst Mark Bernstein recently told Reuters.
``Two-and-a-half years ago we said California could face a problem. It wasn't
a prediction, it was one of our scenarios,'' said the policy analyst with the
Santa Monica, California-based think tank RAND.
But California ran into some tough luck, including a drought that dried up
hydropower. ``For California to have the problem it had, everything had to go
wrong,'' Bernstein said.
California's crisis stems from a flawed 1996 deregulation plan that allowed
wholesale energy prices to soar but capped retail rates. The result has been
rolling blackouts, soaring prices and the bankruptcy of the state's biggest
utility.
Bernstein sees an eerie similarity between what California experts said two
years ago and what Florida analysts now say. ''What they're saying in Florida
is the same thing they said in California a couple of years ago. We're not
predicting problems in Florida, but if you look at the direction they're
going in they could have the same problems as California.''
Tom Ballinger, an energy supervisor with the Division of Safety and
Electricity Reliability for Florida's Public Service Commission, said he was
confident the state could meet demand.
For 2002, for example, the peninsula area, which accounts for some 90 percent
of Florida demand, has a 19 percent reserve margin. That will climb to 26
percent by 2005 before drifting back down to 23-25 percent in the years
ahead.
``The peninsula in times past has gotten by with a 15 percent reserve
margin,'' Bernstein pointed out.
DEREGULATION LOOKS LESS DESIRABLE
Back in 1995, Wisconsin was tracking California on the path to electricity
deregulation, although it planned a slower approach. But the process ground
to a halt after California's problems singed its reputation, economy and
living standards.
``When California occurred, it froze everybody,'' said State Rep. Tim Hoven,
a Republican from Port Washington and chairman of the Wisconsin Legislature
utilities oversight committee. He said the state now was focusing more on
reliability, adding, ''We don't want to duplicate what they did in
California.''
In an interim report, a Florida study group recommended creating a
competitive wholesale market.
That would not be done by requiring utilities to divest themselves of
generators, as New York State has done, for example; Florida utilities would
transfer power sources to an affiliate or third party, said Billy Stiles,
executive director of the Florida Energy 2020 Study Commission.
Once the generators were transferred, the utilities would have long-term
contracts with their old units -- unlike California, whose utilities could
buy only on the spot market. The amount of power Florida utilities contracted
for would decline over time, opening the market up to merchant power plants,
Stiles explained.
``Once the transition is over ... they have the ability to buy (power) from
anybody selling in the market, including their own affiliate or merchant,''
he said.
Florida's deregulation proposal stalled partly because of concerns that
consumers might not get repaid for the hugely expensive power generators they
helped pay for in the form of higher electricity rates.
The study group proposed transferring power plants at their book value: how
much the plant is listed at on the utility's balance sheet. But some critics
charged the plants were worth more than their book value, and after they were
transferred they eventually might be sold to other independent power
producers.
``There was a belief that the gain on the sale of plants will escape
recognition of the regulator ... that the customers will be deprived of that
gain,'' Stiles said.
He did not agree that power plants necessarily would fetch more than their
book values. Still, he added, ``some mechanisms may need to be devised to
recognize that gain.''
FLORIDA SEES POWER SUPPLY AS SATISFACTORY
Among the concerns Bernstein raised about Florida's plans were questions
about whether its utilities might experience delays in building new power
sources.
``If those plans actually emerge on time, maybe they'll be OK, but years of
experience on things like this (shows) things get delayed,'' the RAND analyst
said.
Ballinger, the Florida Public Service Commission expert, recognized that as a
risk, but only over the longer term. He said he was confident the utilities'
demand projections, on which the state relies, were solid.
``They're looking at it all the time,'' he said, explaining that utilities
routinely analyzed population growth, customer accounts, the economy and
other factors.
Bernstein also raised the possibility Florida's weather might turn aberrant,
with a warmer winter than usual, for example, which could raise demand for
cooling. Balllinger said the state's assumptions -- compiled from data
provided by its utilities -- were based on normal temperatures.
Although parts of the Northeast such as New York have gone ahead with at
least partial deregulation, they had a fairly strong incentive to do so.
New York's retail rates ran around 14.2 cents per kilowatt hour, according to
the Energy Information Administration. In contrast, Floridians paid only
about 8 cents, and such low rates were the norm for most states in the
Southeast, giving them less incentive to deregulate.
``I don't think you're going to see deregulation in the South anytime soon,''
said John Sell, a spokesman for Southern Company, which owns power providers
in Georgia, the Florida Panhandle, Alabama and Mississippi.
REUTERS Reut10:26 05-07-01

------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------

Hot days worry energy watchers
Published Monday, May 7, 2001, in the San Jose Mercury News
BY GARY RICHARDS

Mercury News

Hot weather will cover the state today and Tuesday, and edgy energy officials
are asking people not to turn on air conditioners or fans at home or at work.
Temperatures are expected to remain in the high 80s in Silicon Valley today
and the low 90s in Sacramento and Southern California. That could lead to an
energy drain and more threats of rolling blackouts as the workweek begins.
``When it warms up, demand does skyrocket and we're definitely on guard and
asking consumers to step up their conservation,'' said Stephanie McCorkle, a
spokeswoman for the California Independent System Operator.
However, energy watchers won't know until this morning whether California has
enough power to get through these warm days. The peak demand doesn't hit
until about 4 p.m. in spring and summer. Weather forecasters say temperatures
will return to the mid-70s by Wednesday, which is normal for this time of
year. Sunday's high was 87 in San Jose, far short of the record 99 for May 6.

Contact Gary Richards at mrroadshow@sjmercury.com or (408) 920-5335.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------

Unplugged
Mankind has lived thousands of years without electricity. The Amish still do.
Californians may have to. We called an Ohio hardware store to find out how.
May 7, 2001
By ANDRE MOUCHARD
The Orange County Register
This spring, nearly 16 months after Y2K failed to unplug our
electricity-addicted world and just weeks before we figure to get browned out
by our erratic power suppliers, Southern California is turning its eyes to
the Amish of northern Ohio.
The Amish, like us, are busy. They run farms and small manufacturing
companies and even dabble in real estate. And while they might shun things
like SportsCenter and Marilyn Manson, they're not totally without comfort.
The Amish, like us, like their clothes clean, their food hot and their coffee
beans ground to a powder suitable for drip-style brewing.
What the Amish don't like is electricity. They live as plug-free as possible.
Here in backward Southern California (where an almost totally non-Amish
population sucks down more electricity than anybody in the world) many wonder
how. Hence our sudden interest in northern Ohio.
"Nowadays, we get calls nearly every day from people in Southern California,"
says Glenda Lehman-Ervin, marketing director of Lehman's Hardware and
Appliances Inc., a Kidron, Ohio-based retailer that, since 1955, has
specialized in selling non-electric appliances to, among others, the Amish,
survivalists and Martha Stewart.
Lehman's, which is privately held, says only that its non-electric appliance
sales to California have "dramatically increased" in the past year,
particularly as power outages and rate hikes have become the norm.
"Apparently, there is some concern out there about electricity."
Apparently.
So even with a blackout summer only weeks away, it's not too late to go
plugless. The process might not be cheap. It might involve some damp
undergarments. And it almost certainly won't include a curling iron or a hair
dryer. But some unplugging - without batteries even - is possible.
Here's a breakdown of some non-battery-powered devices that can unplug the
most electric of all events - the morning ritual:
STEP 1: WAKING UP
One way to save a lot of electricity would be to sleep in so long that you
get fired. You could then hang out all day by a pool or the ocean and live
almost exclusively on solar power.
Sigh.
Let's assume you're not yet so dedicated to easing our strained power grid.
Let's assume you've got to wake up. To do that, unplugged, you'll need a
mechanical alarm clock.
Mechanicals are no oddity. They dominated time keeping from about 1000 AD
until just after World War II. Most run on power generated by gravity or
springs. And when they're attached to bells, they double as extremely loud
alarm clocks.
Some companies still make mechanicals (one way to find them is to look on the
Internet under the words "mechanical alarm clocks"). Some say new mechanicals
aren't as good as old mechanicals. But one company that made the old
mechanicals is still around.
A new Westclox mechanical will cost about $20, and a near antique - from the
early 1900s - will run around $50, according to Aaron Kaplan, owner of
Friendly Clock and Watch Repair in Santa Ana.
"They're still pretty functional," Kaplan says. "If you maintain them
properly, they'll keep time to within a minute or two."
Amishness rating: 100
STEP 2: CLEAN DUDS
In the larger world of waking up and putting on clothes, one thing is always
true: clean and dry is better than dirty and wet.
In Southern California, most clean, dry clothes come out of a washer and
dryer, two machines that also are electricity hogs.
But it doesn't have to work that way.
An Amish family, for example, might get its clean, dry clothes from a
washboard (technology circa 500 AD) and a clothesline. That's fine if you've
got about eight hours to get ready for work and you don't mind a T-shirt that
crunches.
Other unplugged washing options are hand-cranked, mechanical washers followed
up by hand-cranked ringers that make line-drying faster. Lehman's sells a few
of these products. There are also dozens of alternative energy washers and
dryers on the market. Like clocks, those can be found over the Internet.
A San Diego company, Explorer Appliances, even sells an alternative energy
combo device, a washer/dryer that runs on propane, natural gas or even
wind-created power. The machine also drinks less water than conventional
washer/dryer combos, according to Explorer VP Paul Real.
What it doesn't provide, necessarily, is socks that come out of the dryer
toasty warm.
"Centrifugal force," Real says, describing how the washer-dryer dries. "That
gets almost all the moisture out."
Unplugging other parts of the morning's clothing thing isn't that tricky. You
can find irons that reuse heat from the stove. Lehman's also sells an iron
that runs on burning embers. "You need a small shovel or something to get the
embers in there. It's kind of fun," spokeswoman Lehman-Ervin says.
Amishness rating: 75 (subtract 25 points if your clothes are synthetic or
brightly colored.)
STEP 3: VITTLES
Eating plug-free isn't as easy as it looks. You can eat raw stuff, but that's
probably going to involve a refrigerator and, in most homes, that involves a
plug. You can decide to cook some stuff, look at your gas-powered range, and
think you're OK. But you're not. Check out the oven. Electric. Bummer.
Anyway, all of this gets particularly tricky in the morning. Breakfast is a
huge electricity user. Milk (if it's cold) needs a plug. Toast has its own
plug-in machine. Same for waffles. And coffee, the absolutely must-have drink
for most morning routines, needs a plug-in machine for brewing and another
plug-in machine to grind the beans.
Or not.
See, the good news is there are non-electric versions of virtually every
kitchen appliance. The fridge can run on propane or natural gas or wind if
you're so inclined. (Check the Internet under "alternative energy
appliances.") And Lehmans, among others, sells wood stoves, including a model
that has a catalytic converter that'll make your wood-stove electricity free
and a smog-buster at the same time.
"Think about your car 30 years ago. You didn't have airbags or seat belts and
things like that. And it didn't get good mileage. Well, wood stoves have
gotten a lot better over the years, just like cars," Lehman-Ervin says.
Lehman's and others also sell toasters that toast using the heat from the
stove and a waffle iron that does the same thing. The company (as well as
some coffee shops) also sells hand-cranked coffee bean grinders, something
that's quiet and, because it doesn't generate a lot of bean-burning heat,
better for the coffee. After that, you can use a water-drip device to make
the coffee without a plug.
If you care to go further, you can grind your own grain and churn your own
butter with non-electric devices.
"We even have a hand-crank blender," Lehman-Ervin says.
"The Amish like it for milkshakes, but out there, in California, maybe you
could use it for margaritas."
Not before work.
Amishness rating: 10
STEP 4: BLOW DRYING
"Sacrifices must be made."
That's not the opening line to your pink slip. It's what Lehman-Ervin and
others say when asked about how to unplug the morning routine. Essentially,
there are parts of waking up and getting ready for work that must be changed,
not unplugged.
"There is no non-electric blow dryer, except maybe when you stick your head
out the window of your car or something," Lehman-Ervin says.
Curling irons fall into this category. Electric shavers, too, but they're
easy to replace with foam and hot water and a razor.
Television, CD and DVD players, Nintendo - they all need a plug or a battery
which, for our purposes, rule them out. Same for microwaves and trash
compactors.
Eventually, unplugging - even in the morning - boils down to a question of
"what you really need vs. what you simply want," Lehman-Ervin says.
"The biggest benefit is self-sufficiency. As you're finding out in
California, it's not always great to rely on somebody else to maintain your
lifestyle.
"But there are many, many people in this country who don't have electricity
or who have unreliable electricity, and they manage to wake up and get ready
for work.
"If you absolutely have to have something, there is probably a non-electric
version of it."
So how can you find out more?
"Uh, with a computer," Lehaman-Ervin says, laughing.
And that, she adds, "needs a plug."
Amishness: 0

------------------------------------------------------------------------------
------------------------------------------------------------------------------
-------------------------------

Mexico Continues Power Exports To California

MEXICO CITY, May 4, 2001 (El Economista/Infolatina via COMTEX)  via NewsEdge
Corporation  - Mexican
state-owned power utility the Federal Electricity Commission (CFE) will
continue
to supply the U.S. state of California with electricity, in light of the
state's
ongoing power shortage, CFE head Alfredo Elias Ayub said Thursday. Speaking
to a
gathering of California officials and business leaders, Elias said excess
electricity supply from the northern Mexican state of Baja California would
continue to be exported to the United States, Mexican financial daily El
Economista reported. Baja California, for geographical reasons, is not
connected
to Mexico's national power grid, and the state's excess supply, therefore,
cannot be channeled to areas of the country suffering supply shortfalls or low
operating reserve margins, explained Elias. He said rapidly rising demand for
electricity on both sides of the border made expansion of interconnection
capacity a priority. Interconnection capacity currently stands at 400
megawatts,
he said. New transmission lines, to be completed by 2002, will boost
cross-border interconnection capacity to 2,000 megawatts, he said.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
-----------------------------------

Charged Up:
Texas May Face a Glut
Of Electricity, but That
Won't Aid Rest of U.S.
---
Pride and Policy Make State
A Magnet for Power Plants
And an Island Unto Itself
---
A Wire Enshrined in Lucite
By Alexei Barrionuevo and Russell Gold
?
05/07/2001
The Wall Street Journal
Page A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)
While California struggles to keep its lights on and New York City braces for
possible electricity shortages this summer, Texas utilities could soon face
the opposite problem: a power glut.
Texas' wide-open spaces and relatively weak zoning and environmental rules
have helped make the Lone Star state a magnet for power-generation companies
as it prepares to deregulate its electricity market next year. The result:
Texas' electricity-production capacity this summer is expected to exceed its
peak power demand by 11,000 megawatts -- nearly enough to light up New York
City. By the summer of 2002, the excess may be closer to 15,000 megawatts,
enough to power 15 million homes. And with 27 new generating plants under
construction, more than any other state, some power producers fear that
overbuilding ultimately could send Texas' wholesale electricity prices into a
tailspin.
All this sounds like good news for the electricity-starved East and West
Coasts -- but it isn't. That's because the U.S. is divided into three major
power grids -- with the West on one, the East on another and most of Texas on
a third, with very few links to the rest of the country. In the world of
electricity, that makes Texas "an island with a couple of little footpaths
over to it," says Larry Makovich, senior director for electric power research
at Cambridge Energy Research Associates, a Cambridge, Mass., consulting firm.
Some Texas utility executives argue that their state's island status is
principally an accident of geography. But no one disputes the fact that good
old Texas pride -- and a deep-seated skepticism toward federal regulation --
also played a role in shaping the state's grid. So, too, did a renegade
utility's desperate 1976 bid to save itself from a corporate breakup and the
resulting four-year legal battle, which the industry later dubbed the "Texas
Range War."
Texas' isolation isn't expected to end anytime soon. If Texas became fully
interconnected, its big utilities say, the state could become more
susceptible to blackouts, if other regions drew off too much power. "From a
reliability standpoint, it would be a degradation to the Texas grid," says
Steve Schaeffer, a senior vice president at Reliant Energy Inc., the former
Houston Lighting & Power Co.
Moreover, the utilities estimate that building the transmission lines needed
for a full connection to the nation's other grids would take at least three
years and cost Texas ratepayers about $600 million. They don't want to invest
that much money to sell power to California or New York to ease what they
view as temporary imbalances.
Some in the state also believe low rates and excess power could give it an
advantage in persuading businesses to locate there. "America will be shy
enough electricity that this will be one of our greatest inducements for
growing Texas," says Matthew Simmons, president of Houston investment bank
Simmons & Co.
Texas is an extreme example of the haphazard way electricity grids developed
in the U.S. Until the 1960s, most power plants were built near the customers
they served. Then, utilities began building larger, more-efficient coal and
nuclear plants, connecting them with their neighbors to ensure that if one of
these big plants went down, there would be a backup ready to keep the power
flowing.
But the old-line Texas utilities, which have long benefited from the state's
plentiful supplies of fuels such as natural gas and lignite coal, were
reluctant to join in this wave of interconnections. Back then, in the mid- to
late 1970s, electricity outside Texas was generally more costly. And
surrounding states weren't planning big enough plants to back up the huge new
ones Texas was building to power its fast-growing cities and energy-thirsty
petrochemical industry. "There was no big money to be made by shipping power
one way or the other over the lines," says Reliant's Mr. Schaeffer.
By confining their grid to Texas, state utilities also avoided oversight by
the Federal Energy Regulatory Commission. Thus, FERC couldn't force Texas to
send power out of state in case of an emergency.
The state's dominant utilities -- Texas Utilities Inc., the Dallas-based
predecessor of what is now TXU Corp., and Houston Lighting -- went to great
lengths to ensure there were no interstate connections. The switches at a
hydroelectric plant on the Texas-Oklahoma border were wired to prevent power
from flowing between the states. Elsewhere along the border, a system of
relays was installed to prevent unauthorized interstate transmissions.
Only one big utility didn't like the setup: Central & South West Corp., a
Dallas holding company that owned power plants in both Texas and Oklahoma. In
1976, it faced a crisis. If it couldn't show that its plants in both states
were interconnected, it ran the risk of being broken up under a federal law.
The law, which barred holding companies from owning unconnected utilities in
separate states, was decades old. But, until then, it hadn't been strictly
enforced.
On May 4, 1976 -- eight days before the Securities and Exchange Commission
was set to consider the matter -- Central & South West took an extraordinary
step. At 5:30 a.m., it sent one of its line crews to secretly rewire a
substation in Vernon, Texas, near the Oklahoma border, allowing power to flow
freely between the two states. For a few hours, the grids were connected by a
minuscule thread. Later that morning, officials at Central & South West
phoned other Texas utilities to tell them the company was engaged in
interstate commerce.
Texas' other major utilities reacted angrily. "The sons of bitches are trying
to steal my lignite!" Texas Utilities Chairman Louis Austin bellowed,
according to former Texas Public Utility Commissioner George Cowden, who
recalls Mr. Austin making the remark during a private meeting between the two
men.
Around noon, Houston Lighting cut its system off from the rest of the state's
utilities. Texas Utilities followed suit hours later. By day's end, the
state's utilities had broken the grid into a half-dozen pieces.
That same day, one of Texas Utilities' chief lawyers, a 6-foot-6 former
college-football star named J.A. "Tiny" Gooch, dispatched one of his
company's crews to disconnect the link Central & South West had made between
Vernon and Altus, Okla. "They made it so it was physically impossible to
[connect] it again," says Mr. Gooch's son, Gordon, then a lawyer representing
Houston Lighting. The elder Mr. Gooch, who died in 1986, is considered the
patron saint of Texas' electrical independence.
At an emergency meeting of the utility commission three days later, Mr.
Austin of Texas Utilities expressed disgust at the prospect of having to burn
Texas lignite and natural gas to satisfy "Yankees," according to a
transcript. And, he added: "I don't like federal regulations." (Mr. Austin
died in 1997.)
A wire reputed to have formed part of Central & South West's brief
Texas-Oklahoma interconnection later was cut into pieces, encased in Lucite
and given out as paperweights by Dallas law firm Worsham, Forsythe &
Woolridge, which represented Texas Utilities.
Alan Erwin, a state utility commissioner in 1976 who still has the souvenir
on his desk, used the wiring episode as fodder for a 1979 novel, "The Power
Exchange," in which a winter storm cripples Northeast power production and
the nation turns to Texas for electricity. Texas refuses to ship the
electricity, fearful that other regions would drain it of "what little cheap
fuel was left." Ultimately, Texas becomes a scapegoat and ends up seceding
from the union.
In reality, the outcome was less dramatic. The grid conflict wound its way
through many courtrooms. Central & South West -- recently acquired by
American Electric Power Co. of Columbus, Ohio -- lost almost every round.
After about four years, the utilities hashed out a compromise, at the urging
of the federal government.
Rather than link the Texas grid to the East, so that electricity could flow
freely across state borders through alternating-current cables, they agreed
to build two direct-current lines. Operators could control the flow over
these bridges, which at peak capacity could carry a mere 820 megawatts. The
parties to the deal, which included the federal government, agreed these
links wouldn't bring the Texas grid under federal jurisdiction. Today, Texas
power continues to be regulated in Austin, not Washington.
"It's just a Texas thing," says Pat Wood III, chairman of the state utility
commission and a recent Bush administration nominee to FERC. "We want control
of our own destiny."
That independent attitude has extended in recent years to Texas'
business-friendly approach to deregulating its power industry. Unlike
California, with its stringent emissions and zoning rules, Texas has made it
quick and easy for power companies to locate their plants almost anywhere
they can find a place to hook up to the grid. Last year, Texas completed a
major upgrade to alleviate bottlenecks on the grid, and it has six similar
projects under way. Unlike most other states, it decided to charge grid users
a flat rate to move power anywhere in the state, so they could put plants in
low-cost rural areas, far from their customers.
Those policies, as well as projections that the state's electricity demand
would grow by a robust 3.5% a year, set off a flurry of power-plant
construction, beginning in 1998. Since then, $11 billion worth of power
plants have been completed or started in Texas, and more are on the drawing
board.
By contrast to California's approach to deregulation, which largely failed to
bring new plants online, Texas' strategy "encouraged an overbuild," says Mr.
Makovich, of Cambridge Energy Research Associates.
Consider tiny Seguin in south central Texas, where Constellation Energy Group
Inc. of Baltimore is building an 800-megawatt gas-powered plant in a former
cornfield. Fifteen miles to the west, Texas Independent Energy LP of Dallas
recently finished a 1,000-megawatt plant. About the same distance to the
north, American National Power, a Houston-based unit of Britain's
International Power PLC, is building a 1,100-megawatt plant.
If generators don't get cold feet, Texas is on track to have a capacity
surplus of 9% this summer and 11% by summer 2002, says Cambridge Energy
Research Associates. That's in addition to the 15% surplus that most experts
consider an adequate cushion. Some areas of the country, including parts of
the Southeast, Upper Midwest, New York City and the West, are struggling with
razor-thin capacity margins. After factoring in a similar 15% cushion, the
West has an 8% capacity deficit and the Upper Midwest has a 4% deficit.
As a result, while electricity futures prices for summer are running at as
much as $400 per megawatt hour in the Northwest and around $100 in the
Northeast, Texas futures prices are averaging only $72 to $74 per megawatt
hour.
Calpine Corp. of San Jose, Calif., is making the boldest wager that
overcapacity and a lack of export possibilities won't sink Texas' wholesale
electricity prices. The company has six plants under construction in the
state, two of which are expected to come on line next month. And it plans to
add an additional five plants over the next two years. Altogether, Calpine
plans to spend about $2.8 billion in the state, its largest investment
outside California.
"People from day one probably thought Calpine was crazy," says Darrell
Hayslip, a company vice president. "But so far, we are absolutely convinced
that this is the right bet." He says Calpine's newer gas-fired plants are 40%
more efficient than older plants in the state, a third of which are at least
30 years old. Calpine expects that edge to force rivals to retire older
plants, thus keeping electricity prices from sagging.
Others aren't so sure. After initially planning new plants in Texas, Duke
Energy Corp. began to worry that the state was getting overbuilt. Last May,
Duke, of Charlotte, N.C., sold its 80% stake in a plant under construction in
south Texas to Calpine. "We sized up the market early, and then realized too
many followers were doing the same thing," says Jim Donnell, president and
CEO of Duke Energy North America.
If the electricity situation outside Texas grows too grim and too much supply
sinks prices in the state, there could be "renewed pressure" for Texas to
study interconnection options, says John Stauffacher, vice president for
regulatory affairs at Houston-based Dynegy Inc., which has 1,000 megawatts of
capacity in Texas.
Calpine, for one, wouldn't mind sharing Texas power with the East and West.
"I would love to be able to wheel power from Texas to California," says Mr.
Hayslip. But, so far, the Texas utilities haven't budged in their opposition
to exports.
A few generators are trying to find the best of both worlds. Tenaska Inc. of
Omaha, Neb., is building plants at the border between the Texas and eastern
grids. Though utilities aren't allowed to be connected to both grids at once,
the plants are designed to allow the company to switch between grids as
demand and prices warrant.
In rural Grimes County, about 90 miles outside Houston, Tenaska plant manager
Frank Carelli boasts that his 830-megawatt plant could disconnect from one
grid, connect to the other and be back at full power within an hour. A
similar Tenaska plant is slated to begin operations this month in Rusk
County, near the Louisiana border.

------------------------------------------------------------------------------
------------------------------------------------------------------------------
----------------------------------

By David Wagman
dwagman@ftenergy.com
"And it never failed that during the dry years the people forgot about the
rich years, and during the wet years they lost all memory of the dry years.
It was always that way."
-John Steinbeck
East of Eden, 1952

Electricity in the West this summer will rise and fall on the whim of
nature's elemental forces: water for power generation, weather for its effect
on demand, and fire*or the threat of it*for its potential damage to
transmission lines and the grid.

And then there's Harvey Rosenfield.

A force of nature in his own right, perhaps no one wields more clout over
California's politicians and the rest of the West than Rosenfield. Political
watchers say his skill as a consumer advocate and master of California's
potent ballot initiative process is so great that he has all but sapped Gov.
Gray Davis' ability to act decisively in this crisis.

Given California's role as the West's largest state and biggest economy, this
leadership gridlock leaves the region facing a virtual political vacuum even
as it gropes to find a broader solution to problems of supply and price that
are poised to infect at least Oregon and Washington.

Running for cover
California's political gridlock is so bad that one observer equates the
situation to the uncertainty and confusion of a mob during a riot.

"Politicians respond when there is a quantifiable problem," said Dan Walters,
political columnist for the Sacramento Bee newspaper. But the energy crisis
is a "fourth-dimensional problem that mutates every day," making it tough for
politicians to respond. Walters said a growing sense within the California
state legislature is that the die is cast for this summer and it's time to
run for political cover.

But a governor and a legislature bent on self-preservation may be unwilling
or unable to act on a number of important energy issues.

"We hope the legislature doesn't become dysfunctional because there's some
stuff that's gotta move," said Tom Williams, a California-based spokesman for
Duke Energy.

One of many priorities is legislative action on the proposed Southern
California Edison (SoCal Ed) transmission asset buyout and what observers say
is an almost mandatory fix to the imbalance between wholesale and retail
markets. Approval of this item has been clouded by questions about the value
of owning only a portion of the state's transmission system. Members of
Davis' own party appear unconvinced by arguments that SoCal Ed could follow
PG&E into bankruptcy protection.

"I've never been afraid of bankruptcy from the beginning," Democratic Senate
leader John Burton told the Orange County Register in mid-April. "Bankruptcy
court is a better venue for open discussion and investigation."

The outlook for action on the second big legislative item may be even worse
as California politicians hope to shield the consuming/voting public from
market forces for as long as possible.

"Californians are paying for a product below cost. Customers need to see the
link between wholesale and retail prices," said Alex Papalexopoulos,
president of ECCO International, a San Francisco-based company that designs
regional market structures.

News reports also revealed the state spent nearly $5 billion buying power
between January and mid-April. In one two-week stretch from late March to
mid-April, the state's average weekday power costs rose from $45.8 million to
$73 million, a 60% increase. Gov. Davis blamed generators for the higher
costs, saying they face greater risk of not being paid. But observers worry
the state itself may be headed toward bankruptcy if it continues to spend for
electric supplies.

CALIFORNIA'S RISING DAILY ELECTRICITY BILL

Against this fast-changing backdrop, annual assessments for summer power
supplies for California and the West are being released. Perhaps more than at
any other time, the politics of energy are as critical for industry insiders
to understand as the more traditional forecasts of hydro flow, gas
availability and transmission constraints.

Bleak assessment
By those more traditional measures, the summer power assessment is bad
enough. Below-normal precipitation in the Northwest has led power planners to
say for months the region will be short of power. The California Independent
System Operator (ISO) said if consumers use the same amount of electricity
this summer as last the state could face 34 days of rotating blackouts.

The Western States Coordinating Council's summer assessment forecasts a peak
demand of 53,893 MW in the U.S. portion of its California-Mexico subregion.
Load management and interruptible demand are expected to account for almost
1,000 MW of demand, leaving a net internal demand of 52,899 MW, expected for
August.

But California's tight power supply market may be squeezed further by
conditions in the Pacific Northwest. There, electricity prices have recently
outpaced California's, according to daily prices reported by Megawatt Daily.
Those high prices suggest the Northwest's hydro shortage is driving the
region's crisis, said Doug Logan, principal with RDI Consulting.

MONTHLY PEAK PRICE TRENDS IN THE WEST SPREADSHEET

"California is screaming, but the Northwest is desperate" for power, he said.

Market vulnerabilities
Published reports also suggest that almost anything short of a cool summer
will overtax supplies and lead to rolling blackouts in California. Unexpected
power plant outages also could trigger blackouts and price spikes, a
possibility some say points to market manipulation by power generators.
Others say the outages are a natural result of running older plants harder
and longer than ever before.

For example, Duke Energy's 165-MW Oakland plant, built in 1895 and
revitalized in 1978, typically ran no more than 70 hours a year, said
spokesman Tom Williams. During 2000, Oakland ran for 800 hours before its
turbines burned up. Its loss prompted a call from the California ISO, which
said the plant was still needed for baseload operation, Williams said.

The danger for much of California is that as the state's older generating
plants are called on to run harder and longer this summer, they will break
down more often and add to the supply problem. With supplies constrained, the
loss of even a single plant could throw the market into turmoil.

"It doesn't matter what the market demand is like if supply is tight," said
Papalexopoulos. Under tight supply conditions, "every market breaks down."

Another critical factor will be environmental controls mandated by the
federal Clean Air Act and administered by state air quality management
districts. Plants whose NOx emissions exceeded permitted levels last year had
to enter the market to buy emission credits. At one point, demand for the
credits was so high they were all but unavailable at any price. When credits
were available, their price left some power generators paying almost as much
for them as for wholesale power. Thus, a crucial factor to watch will be the
willingness (or ability) of air quality management districts to ease or
modify environmental restrictions.

CALIFORNIA SUPPLY & DEMAND FROM ECONOMIC FORUM SPREADSHEET

Kern River rescue
One bright spot seems to be natural gas supplies, which appear adequate or
even improved compared with last year. The improved outlook is due in part to
the fast-track approval by the Federal Energy Regulatory Commission of a 135
million-cubic-foot per day expansion to the Kern River pipeline into
California. The expanded capacity will import relatively low-cost natural gas
from the Rocky Mountain region for use in California's gas-fired power
plants. This should help deflect some price pressure that built up last year
at a pipeline choke point on the California-Arizona border.

HOW HIGH COULD CALIFORNIA'S ELECTRIC BILL GO? SPREADSHEET

But even this bright spot looks a bit cloudy, said Mike Farina, a power
consultant with RDI Consulting in Boulder, Colo. Uncertainty remains over
whether Kern River's extra gas capacity can make it through a second
unrelated congestion point at Wheeler Ridge, Calif. There, the pipeline
connects with a web of in-state distribution pipes. What's more, low hydro
supplies will lead to even more reliance on gas-fired power plants for
electricity. And, Farina said, a cold snap could boost demand for natural gas
for space heating. That could cause an unexpected twin demand peak coincident
with electric generation demand. A similar dual peak occurred last summer,
adding to upward pressures on natural gas prices.

READ MORE ABOUT THE GAS FACTOR

Sending price signals
On the demand side, a key factor will be how effective the recent rate
increase approved by the California Public Utilities Commission is at
dampening consumer demand.

The rate hike could send a powerful price signal for consumers to reduce
demand, said John Egan, director of strategic and marketing issues for
Boulder, Colo.-based E Source, the retail consulting division of Financial
Times Energy. Reports already have made much of the fact that California's
market lacks a good set of demand-side tools to send price signals to
consumers. One exception has been in the industrial sector where
interruptible contracts and real-time metering have regularly forced
conservation responses.

AVERAGE ELECTRIC WHOLESALE PRICES SPREADSHEET

Indeed, large energy users have already reacted to the crisis by moving away
from interruptible contracts and toward aggressive energy hedging strategies
just to remain in business, said Brennan Higgins, market intelligence manager
for Louisville, Ky.-based Summit Energy. His clients include large end-users
nationwide. "Manufacturers have quit looking at rates in terms of saving
money and now are looking at their ability to run their plants," he said.

READ MORE ABOUT CALIFORNIA'S CAPACITY ISSUES

Looking beyond the summer, a primary factor for California's recovery will be
how much new generating capacity is added. As one gauge, insiders watch to
see how lenders and developers respond to what some say are frequent and
numerous rule changes within the state.

"The rules change almost on a real-time basis," said Jerry Pfeffer, a
Washington, D.C.-based attorney who specializes in utility finance. As a
result, risk premiums have risen and may work against the state's efforts to
expand its generating capacity.

In the past, baseload coal or nuclear plants were all but impossible to move
once they were approved for a specific location. Today, natural gas turbine
technologies*and the money to build them*are more mobile. With other parts of
the country growing anxious for new generating capacity, lenders and
developers can take their turbines to states offering less political
volatility and uncertainty.

The power supply assessment for California and the Pacific Northwest this
summer appears bleak. Uncontrollable forces of nature*temperature, rainfall
and fire*may make or break a market where political blunders have exposed
gaping vulnerabilities. As a result, the "Harvey factor," as the game of
energy politics in California is coming to be known, emerges as a central
theme for California and the West.

READ MORE ABOUT THE HARVEY FACTOR

In California this summer, said E Source's John Egan, "there is a much
shorter list of things that could go right."

To read more analysis about the California energy situation, click on the
links below.

READ MORE ABOUT CONSERVE

READ MORE ABOUT HYDRO

READ MORE ABOUT MONEY TALKS

READ MORE ABOUT SOLUTIONS