Please see the following articles:

Sac Bee, (AP) Mon 5/21: New poll suggests Californians haven't been this
gloomy for years.

Sac Bee, (AP) Mon 5/21:Grid officials, others studying planned blackouts

Sac Bee, (AP) Mon 5/21:'Baseline' becoming key word for electric customers

SD Union, Mon 5/21: Grid officials, others studying planned blackouts

SD Union, Mon 5/21: Governor told to try seizure in power war

SD Union, Mon 5/21: Davis intensifies attacks on Texas firms

SD Union, Mon, 5/21: Head of PUC unveils evidence of power plant manipulation

SD Union, Mon, 5/21: California economy braces for $5.7 billion electric rate
hike

SD Union, Mon, 5/21: Price information sought from natural gas companies

LA Times, Mon  5/21: Davis Sharpens Attack on Bush Energy Plan

LA Times, Mon 5/21: PUC Allegations Detailed

LA Times, Mon 5/21: Utility Exec Rejects the Governor's Criticism

LA Times, Mon 5/21: PUC Chief Alleges Price Collusion

LA Times, Mon 5/21: Critics Say Bush Proposal Leaves California in the Dark

LA Times, Mon 5/21: Wall St. Cautious Over Energy Sector's Outlook for Next
Year

LA Times, Mon 5/21: Municipal Utilities Seek Exemptions From Blackouts

LA Times, Mon 5/21: A United Defense (Commentary)

SF Chron, Mon 5/21: Cheney blames Davis for crisis
'They knew over a year ago they had a problem'

SF Chron, Mon 5/21: Lighting technology leading the way in energy conservation

SF Chron , Mon 5/21: SAN FRANCISCO
PG&E cable failure hits Pier 39 businesses

SF Chron , Mon 5/21: THE ENERGY CRUNCH
Oakland council to vote on waiving energy permits
Residents' solar, wind power plans for their homes now face high costs, long
delays

SF Chron, Mon 5/21: ENERGY CRUNCH Investigations
Power firms fueled by greed, Lockyer says
Out-of-state generators face multiple probes

SF Chron, Mon 5/21: Davis slams Bush's energy policy
He says president should ensure 'reasonable' prices

SF Chron, Mon 5/21: Power juggling ramped up price
Insiders say manipulation also strained equipment

Mercury News, Mon 5/21: Grid officials, others studying planned blackouts

OC Register, Tues, 5/21: Planning ahead for blackouts

OC Register , Tues, 5/21: Is price gouging root of crisis?

OC Register, Tues, 5/21: Generator could help during future energy shortages

OC Register, Tues, 5/21: Energy-saving measures implemented

Individual.com, Mon 5/21: Calif. Utilities Make Accusation

Individual.com, Mon 5/21: PG&E Targets Business Customers for Energy
Reduction; Utility Steps Up
Efforts to Encourage Conservation; Awaits More State Funding

WSJ, Mon 5/21: Power Crisis May Can Northwest Aluminum

______________________________________________________________________________
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New poll suggests Californians haven't been this gloomy for years
SAN FRANCISCO (AP) -- Not since the mid-'90s have more Californians believed
the state is headed in the wrong direction.
And it may get worse. Nearly 60 percent of state residents expect the economy
to worsen in the next year, while about 40 percent see a brighter horizon,
according to a new poll.
The telephone survey of 2,001 adult Californians was done over eight days in
early May by the nonpartisan Public Policy Institute of California. The poll
was conducted in English and Spanish.
The twin culprits were the souring economy and the electricity crisis.
"Californians clearly see the electricity crisis as a harbinger of other
growth-related problems," said Mark Baldassare, the research institute's
survey director. "This crisis and general economic uncertainty have severely
undermined public confidence in California's future and in its leaders."
Change has come swiftly.
In January, 62 percent of state residents said California was headed in the
right direction, compared to 48 percent this month.
Other key findings include:
82 percent of respondents said population growth over the next 20 years will
make California a less desirable place to live.
86 percent of respondents said the electricity crisis will hurt the state's
economy.
43 percent of respondents favor building more power plants, up from 32
percent in January. The second most popular solution, re-regulating the
electricity industry, was the favored solution in January.
Traffic congestion, affordable housing, air pollution and a shortage of good
jobs top the list of negative consequences respondents foresee from the
state's population growth.

Grid officials, others studying planned blackouts
By Jennifer Coleman
Associated Press Writer
SACRAMENTO (AP) -- Could Californians be waking up to hear a weather report,
a pollen count and an electricity blackout forecast?
It's not out of the question, say some lawmakers.
"I actually think it's a thoughtful plan ... to give folks an opportunity to
understand the likelihood of blackouts on a daily basis," Assemblyman Fred
Keeley, D-Boulder Creek, the Assembly's point man on energy.
Keeley compared it to "weather forecasting, to be able to look at the next
three or four days, have a percentile about the likelihood of blackouts."
The Independent System Operator, keeper of the state's power grid, is
expected to release a report Monday detailing how such a plan would work.
The idea is "to provide a lot of information so people can make choices to
live with blackouts on a temporary basis this summer," Keeley said.
Peter Navarro, a University of California, Irvine, economics professor,
released a report last month with a consumer group that recommends the state
set a price limit on what they'll pay for power. And if generators don't
lower the price, the state should schedule blackouts to cut consumption, he
said.
The report by Navarro and the Utility Consumers' Action Network says the
state's current method of "highly disruptive random rolling blackouts" needs
to be revamped.
UCAN suggests that the state be divided into blackout zones that utilities
could notify ahead of time that power would be cut at a specific time and for
a certain duration.
Scheduling blackouts could attract criminals to outage areas, Keeley
acknowledged, and possibly could subject the state to legal liability for
traffic accidents or other incidents if power is deliberately shut off.
"That is a genuine problem and genuine concern," Keeley said. "I think we
would have to work with local governments so they could have a sufficient
advance notice to be able to foresee that and try to deploy their resources
appropriately."
Critics of the planned blackouts said power producers simply could sell their
unused electricity to other states, or trim back production to keep supplies
short.
Assemblyman Mike Briggs, R-Fresno, plans to introduce a bill this week that
would have the Public Utilities Commission notify businesses and homeowners
as much as one month ahead of time when they would have their power cut.
"We owe the people of this state some kind of schedule," Briggs said. "If
businesses and individuals knew what days their power could potentially be
shut off or blacked out, they could plan for that blackout accordingly."
The Central Valley Republican said the ability to plan for outages would be
especially benefit farmers, who need power to irrigate their crops.
Assembly Speaker Robert Hertzberg, who convened a special subcommittee on
blackouts, has also suggested the state should consider scheduling daily
blackouts to cut the state's power use and drive down prices. Democratic
Assembly members plan to introduce their own version of a blackout plan.
Sen. Debra Bowen, D-Marina del Rey, has said she envisions giving consumers
three to five days notice that their power will be cut during a particular
period, so businesses could opt to shut down or shift their operations to
nonpeak hours such as nights and weekends.
And by treating blackouts as a first option rather than a last resort, the
state could cut its peak power needs and drive down prices, Bowen said.
California power consumers would in essence form "a reverse cartel to stop
the market manipulation and the price gouging," she said.
The planned blackout suggestions come as state officials grow increasingly
concerned that power prices will keep rising this summer, even beyond the
extraordinary levels the state already has been paying on behalf of three
cash-strapped privately owned utilities.
Gov. Gray Davis said the state paid $1,900 per megawatt hour at one point
last week.
The state has dedicated $6.7 billion since mid-January to purchase power for
Pacific Gas and Electric, Southern California Edison and San Diego Gas and
Electric.
Those expenditures will be repaid this summer when the state issues $13.4
billion in revenue bonds. The bonds will be repaid by ratepayers over 15
years.

Grid officials, others studying planned blackouts

By Jennifer Coleman
ASSOCIATED PRESS
May 21, 2001
SACRAMENTO ) Could Californians be waking up to hear a weather report, a
pollen count and an electricity blackout forecast?
It's not out of the question, say some lawmakers.
"I actually think it's a thoughtful plan ... to give folks an opportunity to
understand the likelihood of blackouts on a daily basis," Assemblyman Fred
Keeley, D-Boulder Creek, the Assembly's point man on energy.

Keeley compared it to "weather forecasting, to be able to look at the next
three or four days, have a percentile about the likelihood of blackouts."

The Independent System Operator, keeper of the state's power grid, is
expected to release a report Monday detailing how such a plan would work.
The idea is "to provide a lot of information so people can make choices to
live with blackouts on a temporary basis this summer," Keeley said.
Peter Navarro, a University of California, Irvine, economics professor,
released a report last month with a consumer group that recommends the state
set a price limit on what they'll pay for power. And if generators don't
lower the price, the state should schedule blackouts to cut consumption, he
said.
The report by Navarro and the Utility Consumers' Action Network says the
state's current method of "highly disruptive random rolling blackouts" needs
to be revamped.
UCAN suggests that the state be divided into blackout zones that utilities
could notify ahead of time that power would be cut at a specific time and for
a certain duration.
Scheduling blackouts could attract criminals to outage areas, Keeley
acknowledged, and possibly could subject the state to legal liability for
traffic accidents or other incidents if power is deliberately shut off.
"That is a genuine problem and genuine concern," Keeley said. "I think we
would have to work with local governments so they could have a sufficient
advance notice to be able to foresee that and try to deploy their resources
appropriately."
Critics of the planned blackouts said power producers simply could sell their
unused electricity to other states, or trim back production to keep supplies
short.
Assemblyman Mike Briggs, R-Fresno, plans to introduce a bill this week that
would have the Public Utilities Commission notify businesses and homeowners
as much as one month ahead of time when they would have their power cut.
"We owe the people of this state some kind of schedule," Briggs said. "If
businesses and individuals knew what days their power could potentially be
shut off or blacked out, they could plan for that blackout accordingly."
The Central Valley Republican said the ability to plan for outages would be
especially benefit farmers, who need power to irrigate their crops.
Assembly Speaker Robert Hertzberg, who convened a special subcommittee on
blackouts, has also suggested the state should consider scheduling daily
blackouts to cut the state's power use and drive down prices. Democratic
Assembly members plan to introduce their own version of a blackout plan.
Sen. Debra Bowen, D-Marina del Rey, has said she envisions giving consumers
three to five days notice that their power will be cut during a particular
period, so businesses could opt to shut down or shift their operations to
nonpeak hours such as nights and weekends.
And by treating blackouts as a first option rather than a last resort, the
state could cut its peak power needs and drive down prices, Bowen said.
California power consumers would in essence form "a reverse cartel to stop
the market manipulation and the price gouging," she said.
The planned blackout suggestions come as state officials grow increasingly
concerned that power prices will keep rising this summer, even beyond the
extraordinary levels the state already has been paying on behalf of three
cash-strapped privately owned utilities.
Gov. Gray Davis said the state paid $1,900 per megawatt hour at one point
last week.
The state has dedicated $6.7 billion since mid-January to purchase power for
Pacific Gas and Electric, Southern California Edison and San Diego Gas and
Electric.
Those expenditures will be repaid this summer when the state issues $13.4
billion in revenue bonds. The bonds will be repaid by ratepayers over 15
years.

Governor told to try seizure in power war

By Philip J. LaVelle
UNION-TRIBUNE STAFF WRITER
May 19, 2001
A major San Diego business group urged Gov. Gray Davis yesterday to take
emergency steps in the energy crisis, including seizing power plants -- an
action the governor said may be in the cards.
Davis met over lunch for nearly two hours with members of the San Diego
Building Owners and Managers Association, overseers of about 250 commercial
properties here.
The meeting, at the University Club at Symphony Towers downtown, was closed
to the media.

In remarks to reporters later, Davis repeated his hard line against
out-of-state energy producers, relating a threat made to a dozen power
executives in a private meeting May 9.

"I told the generators face to face, as close as I am to you .?.?.
'Gentlemen, you are going to lose your plants, and I'm going to sign a
windfall-profits tax, unless you help us get through this summer without
blackouts and without staggering prices.'?"
Davis also said he told them: "You know you've been ripping us off, acting in
a predatory manner. If you do it this summer, you leave me no choice but to
take your plants and sign a windfall-profits tax. So the ball is in your
court, gentlemen."
Building association executive Craig Benedetto said the group had "a frank
exchange" with Davis. "We want to do our fair share (on conservation), but
we're also concerned about the supply side," he said. The group "strongly
urged him to use his emergency powers to do whatever is necessary, including
seizing plants."
Association President Cybele Thompson said Davis asked for a string of
conservation measures. Yet some cannot be implemented without state
intervention, she said. For example, Davis urged that air-conditioning
thermostats be set at 78 degrees, but "a lot of our leases don't permit it,"
she said.
While in San Diego, Davis received an honorary doctor of science degree from
Scripps Research Institute.

Davis intensifies attacks on Texas firms

By Ed Mendel
UNION-TRIBUNE STAFF WRITER
May 19, 2001
SACRAMENTO -- Gov. Gray Davis is stepping up his attacks on Texas energy
companies, shifting blame in the California electricity crisis to the home
state of President Bush.
"We are literally in a war with energy companies who are price-gouging us,"
Davis told reporters while responding to Bush's energy plan this week. "Many
of those companies are in Texas."
The governor suggested that most of the power plants that California
utilities sold under a failed deregulation plan were purchased by energy
companies in the Southwest.
Anyone could have purchased the California power plants, Davis said, "but the
people who bought them just happened to be from the Southwest .?.?. "
However, a state Energy Commission report shows that when California
utilities sold more than 20 power plants capable of producing 20,000
megawatts, Texas firms purchased plants producing about 7,000 megawatts.
Davis also suggested that the Bush administration is failing to give
California the same price relief on electricity that Texas has imposed on
itself.
"So if Texas can have some kind of price relief," Davis said, "I think
California is entitled to price relief."
But the cap that Texas adopted in March prevents energy companies from
offering to sell power for more than $1,000 per megawatt-hour -- far above
the $346 average that California expects to pay for non-contracted power this
spring.
The campaign operation for Davis, who is up for re-election next year and has
been mentioned as a potential Bush opponent in 2004, distributed a news
release yesterday saying that "Davis is emerging as a national spokesman for
the Democrats on energy issues."
The governor yesterday appointed two members of former Democratic
presidential candidate Al Gore's campaign, Mark Fabiani and Chris Lehane, as
interim communication consultants. He named Gore's former deputy chief of
staff, Nancy McFadden, as senior adviser.
The governor will give the Democratic response to Bush's weekly radio address
today.
While Davis blames the Lone Star State, none of Pacific Gas and Electric's
power plants, which produce 7,400 megawatts, was sold to Texas firms. They
were sold to Duke of North Carolina, Mirant of Georgia, and Calpine of
California.
The biggest purchaser of Southern California Edison power plants was AES
Corp. of Virginia, which obtained 4,706 megawatts. Reliant, a Texas firm,
bought plants from Edison that can produce 4,000 megawatts.
Destec of Houston and NRG Energy of Minneapolis purchased two Edison plants
with an output of 1,583 megawatts. Dynegy of Houston and NRG Energy purchased
plants producing 1,347 megawatts from San Diego Gas and Electric.
Davis has said in nationally televised interviews that there is an historic
transfer of wealth from California to Houston. A large electricity marketing
firm with close ties to Bush, Enron, also is based in Houston.
But Davis has focused much of his criticism on Reliant, whose profits soared
last year. Reliant openly rejected Davis' call last week for generators to
accept a 30 percent reduction in the debt they are owed by California
utilities.
Reliant also was the only generator that appealed a federal court order to
provide emergency power to California. Davis began singling out Reliant after
it charged the state $1,900 per megawatt hour for emergency power needed by
the California grid.
Reliant's president, Joe Bob Perkins, said in a teleconference with
California reporters yesterday that Reliant charged the high price because it
did not want to run a small reserve plant that can only be used for a limited
number of days.
The state of California, which has spent about $7 billion buying power for
utility customers since January, made emergency purchases of 336 megawatt
hours from Reliant on May 9 and 10, paying $1,900 per megawatt hour for a
total of $638,400.
In Texas, the Public Utilities Commission adopted a $1,000 per megawatt hour
cap on bids to supply emergency power as a "circuit-breaker" in case prices
somehow skyrocketed after Texas deregulates next year.
"I realize that amount has been reached in California," said Terry Hadley, a
spokesman for the Texas PUC. "Nothing close to that has been reached in
Texas."
Hadley said the most paid for emergency power by the Texas grid operator was
$500 per megawatt hour in 1999. He said the average price is $47 to $48 per
megawatt hour.
Texas has a surplus of power, unlike California, which has to import about 20
percent of its power. Texas also has a self-contained power grid that covers
about 85 percent of the state, including Houston, Dallas, San Antonio, and
Austin. California is part of a sprawling Western power grid.
Davis and others have been pushing for wholesale price caps on power in the
West. The Texas PUC rejected price caps and adopted a high bid cap as a
fail-safe, saying that would still allow prices to signal whether new power
plants are needed.
The governor yesterday also appointed a new energy adviser, Kellan Fluckiger,
who is on loan from the Independent System Operator, which operates the
California power grid.

Head of PUC unveils evidence of power plant manipulation

ASSOCIATED PRESS
May 19, 2001
LOS ANGELES ) The head of the California Public Utilities Commission provided
a state Senate committee with evidence showing three power generators reduced
electricity production and then benefited from the resulting high prices.
While testifying before the committee Friday, PUC President Loretta Lynch
displayed charts that tracked electricity prices and power generation at
three plants on a single day last November.
According to the graphs, after the plants reduced production during the
middle of the day, the state was forced to declare two separate power
emergencies which indicate electricity reserves had fallen seriously low.
After the shortfall in supply helped cause a spike in prices, the companies
operating the three plants suddenly increased their electricity production to
almost full capacity, allowing them to capitalize on the much higher rates.
"We certainly see a pattern," Lynch told the committee, which is
investigating alleged manipulation of the state's wholesale power market by
energy suppliers. "Many generators are playing on their experience and
playing, to an extent, California."
Maintenance records reviewed by investigators show that there were no valid
reasons for the plants to cut back production, Lynch said.
She would not identify the power plants involved, however, Lynch did say that
they are owned by at least two companies.
Sen. Joseph Dunn, who heads the special committee investigating alleged
market manipulation, said Lynch's testimony, on its face, is "very damning."
He said his committee has uncovered additional preliminary evidence showing
that several power companies have allegedly engaged in similar behavior.
During a break in Friday's hearing, a spokeswoman for a trade group of major
power suppliers told the Los Angeles Times that there have been no
coordinated efforts to shrink supplies to increase profits.
"There has been no collusion," said Jean Muoz of the Independent Energy
Producers Association.
The PUC and state Atty. Gen. Bill Lockyer are jointly investigating the
exorbitant wholesale power prices that have cost California billions and
brought major utilities to financial ruin

California economy braces for $5.7 billion electric rate hike

By Michael Liedtke
ASSOCIATED PRESS
May 19, 2001
SAN FRANCISCO ) Higher power costs zapped restauranteur Marino Sandoval and
his customers even before California regulators decided this week how to
allocate a $5.7 billion electricity rate hike ) the highest in the state's
history.
Faced with soaring natural gas rates that tripled his utility bill, Sandoval
last month raised the prices at his popular Mexican restaurant chain, El
Balazo, by as much as 20 percent on some items. A giant burrito that cost
$4.95 at the end of March costs $5.95 Saturday.
"We had to do it because it seemed like the price of everything, from our
beans to our tortillas, was going up almost every day. Our higher prices have
everything to do with the higher energy prices," said Sandoval, who runs six
restaurants in San Francisco and the East Bay.
From hotels to bagel shops, businesses throughout California have been
raising their prices or imposing special surcharges to offset rising power
costs. Most of the increases so far have reflected higher natural gas costs,
which utilities have been passing along to their customers throughout the
state's power crisis.
Now, businesses and households are bracing for electricity rate increases
that could balloon the bills of the largest users of the state's two biggest
utilities, Pacific Gas and Electric Co. and Southern California Edison Co.
The higher rates, which will begin appearing in June's utility bills,
threaten to jolt the state's already jittery economy.
"Pretty soon, we may see California staring down the barrel of a recession,"
said Dave Puglia, a vice president for APCO, a public affairs firm hired by
California business interests to study the economic effect of the state's
energy woes.
Until now, California businesses have only had to pay a fraction of the
state's staggering electricity bill, which is on a pace to reach $70 billion
this year ) about 10 times more than in 1999.
By itself, the $5.7 billion rate increase approved by the California Public
Utilities Commission probably isn't enough to topple the state's roughly $1
trillion economy ) the sixth largest in the world.
"It will cause some hardships, particularly for some small business owners,
but from the macro point of view, these rate increases aren't going to have a
major impact on California's output," predicted Sung Won Sohn, chief
economist for Wells Fargo & Co., which runs the biggest bank headquartered in
the state.
But some business leaders are worried the hike will represent the coup de
grace for many companies already reeling from rising expenses for gasoline,
natural gas, health care benefits and workers' compensation insurance.
Against this backdrop, many employers also face pressure to raise their
workers' wages to help pay for California's high housing costs.
"If this keeps up, at some point, we are going to reach a breaking point in
the economy," said Allan Zaremberg, president of the California Chamber of
Commerce.
The California Chamber is part of the California Alliance for Energy and
Economic Stability, a coalition that sought to shift more of the electricity
rate increase from businesses to households.
Under the plan approved by the PUC, businesses are expected to pay about $4.6
billion more for electricity and households will pay an additional $1.1
billion.
Even if they are spared on their utility bills, consumers still will be
pinched by higher prices for goods and services as businesses pass along
their electricity price increases.
Some California firms, particularly those making commodities sold around the
world, won't be able to substantially raise their prices without losing
business from customers who will buy from competitors in other states and
countries.
Manufacturers of cement, glass, paper products and steel are among the
companies that probably won't be able to pass along their higher energy
costs, Puglia said.
The rate increases mean that utility bills will consume about 25 percent to
30 percent of a big manufacturer's budget, Puglia estimated, up from about 15
percent now.
"I wouldn't be surprised if we see some companies go out of business because
of this," said Justin Bradley, director of energy programs for the Silicon
Valley Manufacturing Association, a high-tech trade group.
Even if they don't shut down completely, many companies likely will lay off
workers as they cut costs to pay for power. The California Manufacturers and
Technology Association estimates that the energy crisis will result in the
loss of 135,755 jobs ) or about 40,000 more than the entire dot-com industry
has laid off nationwide during the past 16 months.
Painful though they may be, higher electricity rates and some resulting
layoffs are a better alternative than the increased number of blackouts that
probably would have occurred if retail prices hadn't been raised, according
to most economists.
"People are wildly exaggerating how much this is going to hurt the California
economy," said Stephen Levy, director of the Center for Continuing Study of
the California Economy, a Palo Alto research firm. "The rate increases are
part of a long-term solution for California. We needed them to stabilize the
market. On balance, this is a good thing."
Even though his monthly utility bill at one of his restaurants rose from
$1,500 last year to $4,500 this year, El Balazo's Sandoval shares Levy's
optimism. After all, customers continue to pour into his restaurants, despite
his restaurant's higher menu prices.
"Business is so good that I have been too busy to think about whether I am
going to have to raise my prices again," he said. "If I have to, I will. I
don't think people are going to stop eating because of this."

Price information sought from natural gas companies

By H. Josef Hebert
ASSOCIATED PRESS
May 19, 2001
WASHINGTON ) A federal regulatory agency late Friday directed natural gas
companies selling in California to provide detailed information for better
investigations of possible price gouging and market abuses.
The Federal Energy Regulatory Commission said it viewed the unusually high
prices of wholesale natural gas in California as "a matter of serious
concern" but didn't have enough information to determine if they are illegal.
It noted that the spot price of natural gas charged at the California border
has been exceedingly high since December when it ranged between $11.79 and
$18.80 per thousand cubic feet, compared to $4 to $7 elsewhere in the county.
The most recent prices at the California border exceed $9, more than twice
the wholesale price in other parts of the country. Such a disparity over such
a long period of time would not be expected in a competitive market, the
agency said.
California officials have argued for months that FERC should intervene and
more aggressively investigate high natural gas prices, which have been a
major cause of some of the run-up in electricity costs in the state. Many of
the state's power plants run on natural gas.
The order asks for a wide range of information at the end of each calendar
quarter including volumes of gas sold, prices, transportation rates, daily
operational pipeline capacity and volumes flowing in and out of the state.
Allegations of price gouging and market manipulation have been at the center
of a hearing by a FERC administrative law judge all this week. The hearing
will continue next week.
The case involves a major natural gas pipeline owned by the Houston-based El
Paso Corp., which supplies Southern California.
California regulators, and two of the states financially troubled utilities,
filed a formal complaint with FERC, alleging that manipulation by two El Paso
subsidiaries ) one a gas marketer and the other an operator of the pipeline )
led to $3.7 billion in natural gas overcharges since March 2000.
El Paso Corp. has strongly denied the allegation.
For the past week, attorneys for El Paso have questioned witnesses from the
California Public Utilities Commission in an attempt to disprove the charges.
The witnesses admitted they failed to consider some additional factors that
could have affected prices in their analyses, but they did not back away from
their conclusion.
In support of their argument, California officials have provided internal El
Paso memos ) which have not been disclosed publicly ) that allegedly discuss
market control in connection with gas flowing through the pipeline.
Administrative Law Judge Curtis Wagner has said the documents contain
statements "that could lead one to believe there was an abuse" of pipeline
capacity. He is not expected to make a ruling on the case until later this
summer. A final decision on what action to take, if any, would be up to the
full commission.

Davis Sharpens Attack on Bush Energy Plan
Power: He also hires high-profile consultants in effort to boost his
political standing.

By DAN MORAIN and MARK Z. BARABAK, Times Staff Writers

?????SACRAMENTO--Gov. Gray Davis is going on the attack as the Democratic
Party's point man against President Bush's energy plan, even as he seeks to
bolster his drooping standing in California by hiring consultants who honed
their crisis-management skills during the scandal-ridden Clinton
administration.
?????Davis was expected to again criticize Bush's energy plan today as he
makes the official Democratic response to Bush's weekly radio address.
?????In the last week, Davis has variously blasted the president's energy
plan and Texas energy companies on an ABC talk show, on CNN, and in an
opinion piece for the Washington Post. In an interview with Associated Press,
Davis vowed to "hold everyone accountable: myself, the energy producers and
the president of the United States."
?????"We are literally in a war with energy companies who are price gouging
us," Davis said Friday. "Many of those companies are in Texas. Mr. President,
you didn't create this problem, but you are the only one who can solve it."
?????At the same time, Davis all but acknowledged his own political problems
when he announced that he has retained two political aides, Mark Fabiani and
Chris Lehane. The two, who also do work for Southern California Edison, will
be paid by taxpayers at a combined rate of $30,000 per month--more than the
$13,750 earned by the governor himself.
?????Lehane, known for his tart-tongued commentary, was Vice President Al
Gore's main campaign spokesman, and had a knack for getting under Bush's skin
during the 2000 campaign.
?????Fabiani, a Harvard law school graduate, became a highly partisan and
acerbic White House defender when President Clinton was mired in
investigations ranging from the Whitewater land deal to the Monica Lewinsky
affair. Fabiani developed his reputation for being able to handle crises
while defending Mayor Tom Bradley against various investigations near the end
of the late mayor's tenure.
?????In political circles, the nickname of their firm is Masters of Disaster.
?????Davis' decision to retain Lehane and Fabiani comes as the governor's
once-sterling poll numbers have fallen sharply and he faces persistent
criticism over his handling of the energy crisis.
?????Their arrival also corresponds to Davis' increasingly aggressive stand
on the energy crisis. In recent days, Davis for the first time has attacked
an individual generator, Reliant Energy of Houston, for charging a record
$1,900 per megawatt for electricity on two days last week. He also dared
President Bush and Vice President Dick Cheney to "stand up" to their
"friends" in the energy business by capping wholesale electricity prices
charged in California.
?????Davis' more assertive stance comes as Democrats nationwide step up their
attacks on the president, using the energy plan to launch a broader assault
on Bush's leadership and policies.
?????"One of the glaring flaws in the Bush energy plan is that it offers no
short-term relief for consumers," said Dan Pfeiffer, a spokesman for the
Democratic Governors Assn., which Davis chairs. "And there is no better
example of that than the fact he does nothing to control runaway prices in
California."
?????In addition to portraying Bush as ignoring the plight of California--the
nation's largest electoral prize--Democrats see Bush's energy response as a
way of confirming their broader assertion that he is captive to oil interests.
?????"This is a way for us to show how they are really an administration and
a party that is bought and paid for by special interests," said Jenny Backus,
a spokeswoman for the Democratic National Committee.
?????To press the case, the party has created a snide Web
site--www.grandoldpetroleum--and will soon start running TV ads attacking GOP
lawmakers over the energy issue, including in California.
?????Paul Maslin, the governor's pollster, said Davis had given the president
a grace period after he took office in January to see how Bush would address
the energy problem. But the governor grew increasingly frustrated when it
became clear "we weren't going to get any help from Washington."
?????For his part, Bush made glancing reference to California in a speech
Friday at a hydroelectric plant in Pennsylvania, part of his tour to sell the
administration's energy blueprint. The president praised Californians for
doing "a fantastic job in conservation."
?????"And yet they're lacking energy. They're having blackouts," Bush said.
"We all must be deeply concerned about our fellow citizens in the great state
of California. But the problems in California show that you cannot conserve
your way to energy independence."
?????While Bush did not mention the governor, the president's deputies have
rushed to criticize him.
?????Virginia Gov. James Gilmore, head of the Republican National Committee,
suggested Davis was hypocritical to attack Bush when "the president is the
one who came forward with the first energy plan we've seen in years."
?????"He's going to have to answer the question of what he's done as
governor," Gilmore said. "While he's in the process of attacking, one might
suspect he may be diverting attention away from his own record."
?????On Thursday, Environmental Protection Agency administrator Christine
Todd Whitman was overheard criticizing Davis to Iowa Republican Party
official Darrell Kearney.
?????"He's had plenty of time to do something, and he hasn't done anything,"
she said as she left a meeting room in Nevada, Iowa, where Bush had just
finished speaking.
?????Some more independent observers see political liabilities in the Bush
plan, namely the focus on long-term solutions at a time voters are growing
increasingly upset about high gas prices and soaring utility bills.
?????"While [the administration] talks about how we approach things in the
next five years, there's not a lot of empathy or understanding for what's
affecting people now," said Stuart Rothenberg, a nonpartisan political
analyst in Washington.
?????"Maybe it's unfair to talk about Bush and Cheney's oil backgrounds and
Texas backgrounds," Rothenberg said. "But it's an obvious thing for critics
to do."
?????Rothenberg predicted a backlash that could cost Republicans control of
Congress next year, "if the energy issue continues to grow and Americans
really become concerned. . . . It puts the burden on the White House and
Republicans to change that."
?????Davis' new aides, while considered expert in solving the kind of
political crisis threatening Davis, pose the potential of controversy on
their own.
?????As consultants, Lehane and Fabiani, unlike government officials, are not
required to file conflict of interest statements detailing their holdings and
sources of income.
?????However, in an interview on Friday, Lehane acknowledged that he and
Fabiani have worked for about two months as consultants for Southern
California Edison. He insisted there is no conflict.
?????Davis is struggling to win legislative approval of a deal he struck with
Edison to rescue the utility from bankruptcy. Several lawmakers oppose the
deal, contending that it is too rich for Edison.
?????"Both sides [Edison and Davis] are in agreement on what needs to be done
here," Lehane said. "As the governor said . . . we are literally in a war
with these out-of-state generators."
?????Although Lehane and Fabiani will be working on broader communications
issues for Davis, Harry Snyder of Consumers Union, a critic of the
Davis-Edison deal, blasted Davis' decision to hire consultants who also work
for the utility.
?????"Davis has done everything politically wrong," Snyder said. "He hasn't
done anything that is consistent with the democratic process. It is the worst
abuse of power that I have seen in 25 years of lobbying."
?????Others suggested that Davis was helping himself by bringing the duo
aboard.
?????"Mark is the premier crisis manager in the country in terms of
communication strategy," Democratic political consultant Bill Carrick said.
"He has tremendous experience. . . . He takes the incoming. You get hit with
something in the morning. He knows how to turn it around by the afternoon."
?????Lehane said the governor's decision to hire them does not suggest Davis
will become more pugnacious, although he added that Davis is "not someone
afraid to pick a fight when someone, like the out-of-state generators,
represent policies that are bad for the people of California."
?????"Gov. Davis has been very successful in politics for quite some time in
this state," Lehane said. "He has a keen understanding of how this state
works and how politics in this state works. I don't think his style is going
to change or be any different than he has been throughout his career."

Copyright 2001 Los Angeles Times

PUC Allegations Detailed
Hearing: The commission president tells a Senate panel that maintenance
records show no valid reason for generators to cut power production.

By ROBERT J. LOPEZ and RICH CONNELL, Times Staff Writers

?????The head of the California Public Utilities Commission Friday provided
fresh details showing that power generators scaled back electricity
production and then benefited from the resulting high prices.
?????In sworn testimony before a state Senate committee, PUC President
Loretta Lynch said the companies' behavior helped drain so much electricity
from the state's grid that officials were forced to declare emergency alerts.
?????Lynch's testimony followed her comments Thursday to The Times that state
investigators have found evidence of power plants being shut down
unnecessarily to create "artificial shortages," often when the state was most
desperate for electricity.
?????During her testimony Friday, Lynch went beyond her assertions about
unnecessary plant shutdowns and accused generators of also needlessly
throttling back generation.
?????The PUC and state Atty. Gen. Bill Lockyer are jointly investigating the
exorbitant wholesale power prices that have cost California billions and
brought major utilities to financial ruin.
?????Generators have said they never engaged in any conduct intended to
manipulate wholesale electricity prices, including unnecessarily shutting
down their plants or reducing supply. The facilities, theysay, are aging and
have run so hard during the state's crisis that they often require extensive
maintenance.
?????But the details released by Friday by Lynch added to the questions
surrounding the generators' activities.
?????Lynch displayed charts that track electricity prices and power
generation at three plants on a single day last November. After the plants
reduced production during the middle of the day, the graphs show, the state
was forced to declare two separate power emergencies because electricity
reserves had fallen seriously low.
?????The shortfall in supply helped cause a spike in prices. With that, the
companies operating the three plants suddenly increased their electricity
production to almost full capacity, allowing them to capitalize on the much
higher rates.
?????"We certainly see a pattern," Lynch told the committee, which
isinvestigating alleged manipulation of the state's wholesale power market by
energy suppliers. "Many generators are playing on their experience and
playing, to an extent, California."
?????Maintenance records reviewed by investigators show that there were no
valid reasons for the plants to cut back production, Lynch said. She declined
to identify the power plants involved, saying only that they are owned by at
least two companies.
?????Sen. Joseph Dunn (D-Santa Ana), who heads the special committee
investigating alleged market manipulation, said Lynch's information, on its
face, is "very damning."
?????He said his committee has uncovered additional preliminary evidence
showing that several power companies have allegedly engaged in similar
behavior.
?????"We are looking at data that is suspicious," Dunn said.
?????During a break in Friday's hearing, a spokeswoman for a trade group of
major power suppliers said there have been no coordinated efforts to shrink
supplies to increase profits.
?????"There has been no collusion," said Jean Muoz of the Independent Energy
Producers Assn.
?????She said many of the plants bought by out-of-state generators under
California's flawed deregulation plan are more than 30 years old. The plants
have been running at high levels to help the state with its energy crunch,
she said.
?????Muoz told reporters that the plants owned by out-of-state companies
last year produced 60% more electricity than the previous year.
?????Although no firm has been singled out by the PUC or the attorney
general's office, Atlanta-based Mirant Corp. said inspectors have visited
company plants more than 100 times this year and have found no wrongdoing.
"Mirant has run its plants voluntarily and continually throughout the
crisis," the company said in a statement Friday.
?????But Lynch said Friday that visits to more than 80 plants by PUC
investigators since December show that generators are not always producing
all the power they can.
?????"It appears that there have been numerous instances within the past
half-year where generation units were not producing the amount of electricity
that they were capable of producing," Lynch said.

Copyright 2001 Los Angeles Times

Utility Exec Rejects the Governor's Criticism
Power: Leader of Reliant Energy defends policies and says Davis' rhetoric
could harm California.

By NANCY VOGEL, Times Staff Writer

?????SACRAMENTO--The top executive of a Houston-based energy company singled
out for criticism this week by Gov. Gray Davis defended his company Friday
and warned that the governor's rhetoric will ultimately hurt California.
?????"On Wednesday we were called obstructionist," said Joe Bob Perkins,
chief executive of Reliant Energy, which bought five Southern California
power plants when the state launched deregulation in 1998.
?????"I don't think it's obstructionist to supply record amounts of power
from old plants in order to keep the lights on," Perkins said. "I don't think
it's obstructionist to invest more than $80 million in 2000 alone to upgrade
the plants and reduce emission levels. I don't think it's obstructionist to
continue to run our facilities at times when there's been no guarantee of
payment."
?????In a telephone conference call with reporters, Perkins said, "California
officials must lessen the rhetoric and focus on efforts to mitigate the
impacts of summer blackouts."
?????Perkins said threats of windfall profits taxes and plant seizures could
scare off substantial business from California.
?????For months, Davis has disparaged private power plant owners in
California as gougers and profiteers, but until last week he did not single
out individual companies.
?????Last Thursday, after state power buyers paid an extraordinary $1,900 per
megawatt-hour, Davis broke the confidentiality he had maintained on state
power purchases and named Reliant as the seller.
?????Reliant has sued to get out of its obligation to sell power to the state
and refused to discuss forgiving some portion of the $307 million it is owed
by California utilities.
?????"They're one of only a couple of generators that say absolutely no way,
no how are they going to negotiate for anything less than 100%," Davis
spokesman Steve Maviglio said after the Reliant executive's remarks.
?????The governor's recent attack has made some Reliant officials wonder if
he is building a case to seize control of its power plants. Davis has
threatened to commandeer plants to bring down wholesale power costs.
?????Perkins said his company set a high price last week to discourage the
state from buying the power, which was produced at a small, inefficient plant
near Santa Barbara that cannot run more than nine days a year because of air
pollution regulations.
?????Reliant officials said they wanted to reserve the plant for use later
this summer.
?????Maviglio said Reliant's argument "defies logic."
?????"When you make a bid . . . you want somebody to buy the power."

Copyright 2001 Los Angeles Times

PUC Chief Alleges Price Collusion
Power: She cites evidence that plants were shut down to create "artificial
shortages." An industry spokesman calls the accusation "idiocy."

By RICH CONNELL and ROBERT LOPEZ, Times Staff Writers

?????State investigators have uncovered evidence that a "cartel" of power
companies shut down plants for unnecessary maintenance to ratchet up prices,
the head of the California Public Utilities Commission asserted Thursday.
?????PUC President Loretta Lynch said her agency, working with the state
attorney general's office, is probing patterns of plant outages that have
created "artificial shortages," particularly when the state has issued
emergency alerts because of seriously low levels of electricity.
?????"There are instances where plants could have produced, and they chose
not to," Lynch said in an interview at The Times.
?????"And it is clear that there are instances that plants, when called to
produce, chose not to produce," even when they were obligated to do so under
special contracts with the state and utility companies.
?????Lynch said the ongoing investigation has already produced enough
information for the PUC and attorney general's office to take legal action
against the generators next month. The exact nature of that action, she said,
is still under review.
?????Lynch, who is an attorney, did not name specific suppliers or provide
documentation of her assertions. She said that information will remain
confidential until court proceedings are undertaken.
?????Generators have long denied any attempt at manipulating the power market
in any unlawful way, including orchestrating plant shutdowns. They say the
facilities are so old and have been run so hard during the power crisis that
breakdowns are a recurring problem.
?????Lynch and Gov. Gray Davis, who has been particularly critical of
out-of-state generators, have not suggested that every plant shutdown has
been unwarranted.
?????In fact, the governor's top advisor on power plants released a statement
last week saying inspectors determined that a Bay Area plant shutdown was
justified and that the company's officials were "accommodating."
?????State Atty. Gen. Bill Lockyer was not available for comment on his joint
investigation with the PUC. A spokesman would only confirm that Lockyer's
office is investigating plant shutdowns as part of a wide-ranging probe of
possible civil and criminal violations.
?????So far, the attorney general's office has subpoenaed documents in 91
categories from generators, including records of plant operations, pricing
practices and information the merchants may have shared with one another
about California's power market.
?????"We're looking for behavior that would violate antitrust or unfair
business practice laws," Lockyer has told The Times.
?????Although he has not provided details of his office's findings, he
recently said the inquiry is "beginning to get interesting."
?????Lynch said evidence of allegedly unnecessary plant shutdowns was amassed
during interviews by investigators and in a review of the voluminous
subpoenaed records, obtained after intense legal battles with the power
companies.
?????In addition, investigators have been entering plants where unplanned
shutdowns have occurred to examine operations and maintenance records, Lynch
said. At times, the investigators have been denied access and have had to
exert legal pressure to get in, she said.
?????The plant shutdowns are a key factor in the soaring power prices, which
have gone from $200 a megawatt-hour in December to as high as $1,900 last
week.
?????"I would argue it's no accident," Lynch said of the high prices. "That
in fact it's [due to] the coordinated behavior of a cartel."
?????The power generators have repeatedly said they have acted within the
rules of California's flawed deregulation program, which allowed them to buy
power plants formerly run by the state's three largest utilities.
?????Gary Ackerman, a spokesman for a trade association of large power
producers, said Lynch's allegations were "the height of idiocy."
?????The reason many plants have been down in recent months, he said, is that
power producers must perform maintenance now in anticipation of heavy summer
demand.
?????He said he doubted that state investigators could prove wrongdoing
because there was no conspiracy to turn off supplies.
?????"My members do not make money by shutting down their plants so their
competitors can make money," said Ackerman, executive director of the Western
Power Trading Forum.
?????State analysts have argued, however, that power traders can reap
extraordinary profits by withholding power because the prices for the power
that is sold are so high.
?????According to Lynch, investigators have found that some companies were
more aggressive than others in allegedly using plant shutdowns to manipulate
the state's power market.
?????She said investigators have also found a suspicious pattern: When
operators of the state electricity grid declare a Stage 1 alert--meaning that
electricity reserves have dropped below 7%--plants that do not need repairs
suddenly are yanked offline. That, she said, aggravates the shortages, and
the cost of wholesale electricity soars.
?????Before December, state analysts alleged that power traders had driven up
prices primarily through bidding. At the time, the market was designed to pay
all power suppliers the highest amount accepted by the state's grid operator.
?????That changed in December, when new federal regulations restructured
California's wholesale power market to loosen price controls, Lynch said.
Since then, a new pattern of plant shutdowns has emerged--"not coincidentally
in my view," she said. Now, she added, the state has endured "historically
high levels of unplanned plant outages."
?????The investigation is not focusing on power plants still operated by
utility companies because they have not been "going off [line] at record
levels," Lynch said.
?????The California Energy Commission reported last week that the state's
electrical grid has been sorely tested by plant shutdowns at a rate several
times higher than in the last two years.
?????A Times analysis of state data found that, throughout the last two
months, about 12,000 megawatts of production was offline, more than a third
of the peak power used in California on a typical day. That has been about
evenly divided between scheduled and sudden plant shutdowns.
?????By contrast, shutdowns in the same period of 1999 and 2000 took only
3,300 to 5,700 megawatts offline.
?????Last month, the Federal Energy Regulatory Commission ordered electricity
supplier Williams Energy Marketing and Trading to pay $8 million in
connection with allegations that plants were improperly shut down to raise
prices. The company agreed to settle the case without admitting any
wrongdoing.
?????However, FERC released a study in February of closures at three other
California plants that it concluded were not undertaken to create a scarcity
of power.
?????After talking to plant operators by telephone, reviewing documents and
visiting the three plants, federal inspectors concluded that "the companies
appeared to have taken whatever steps were necessary to bring the generating
facilities back online as soon as possible by accelerating maintenance and
incurring additional expenses."
---
?????Times staff writer Nancy Vogel in Sacramento contributed to this story.

Copyright 2001 Los Angeles Times

Critics Say Bush Proposal Leaves California in the Dark
Effect: President's energy plan may not even offer a silver lining for the
power-deprived Golden State.

By JENIFER WARREN and ROBIN FIELDS, Times Staff Writers

?????California lawmakers, analysts and others waist-deep in the state's
power crisis reached a single conclusion Thursday about the White House
energy plan:
?????By the time many of President Bush's proposals kick in, it will be too
late to do the Golden State much good.
?????"This plan does absolutely nothing to help California get through the
next critical 18 months," groused state Sen. Debra Bowen (D-Marina del Rey).
"You can't focus just on the long term here. Because the patient will be dead
before we get the life-support systems in place."
?????Gov. Gray Davis and others say the single best step Bush could take to
help the state is to impose controls on runaway electricity prices that are
draining California's treasury and forcing massive utility rate increases.
?????Instead, the president has offered an energy blueprint anchored by an
expansion in drilling for natural gas and oil, increased reliance on nuclear
power and more than $10 billion in tax credits for conservation and energy
development.
?????Most of Bush's proposals, however, are slow-acting remedies, and many
others already are being applied in California, which was hit by energy woes
far ahead of other states.
?????The plan's dozens of incentive programs designed to boost output or
promote conservation cannot be ramped up in time to protect the state from
blackouts and painful spikes in electricity prices, experts say.
?????"Overall, the message in this plan is, 'Drop dead, California,' " said
Eric Heitz of the Energy Foundation, a San Francisco-based research and
advocacy group.
?????"I don't think it delivers another megawatt to California," added
Loretta Lynch, president of the California Public Utilities Commission.
?????State economic analysts say the plan fails California by viewing the
power crisis as an ongoing emergency, rather than a temporary one.
California's supply crunch should ease dramatically by summer 2003, once 27
new power plants--15 of them licensed, 12 in the pipeline--start churning.
?????"It's not that we don't have long-term problems," said Stephen Levy,
director of the Palo Alto-based Center for Continuing Study of the California
Economy. "It's just that energy isn't among them."
?????Others, including many environmentalists, say Bush could have made a
noticeable impact by, for example, beefing up energy efficiency programs--a
quick, clean and relatively inexpensive way to cut demand.
?????"Why not provide aggressive incentives [rebates] to get people to
purchase more efficient air conditioners?" asked Dan Reicher, assistant
Energy secretary in the Clinton administration. "Over the course of the year,
a program like that can make a dramatic difference" because air conditioning
consumes nearly one-third of California's peak energy supply.
?????Instead, Reicher noted, Bush earlier this year rolled back efficiency
standards for air conditioners, a move that critics say will require the
country to build 43 new power plants.
?????Even the few elements of the plan that looked promising for California
were clouded by doubt.
?????Bush, for example, directed the Energy secretary to explore ways to
relieve a key transmission bottleneck, known as "Path 15," between Northern
and Southern California. But he specified that the upgrade, which requires
building a 90-mile line at an estimated cost of $225 million, be funded by
"nonfederal contributions"--meaning the financially strapped utilities might
be expected to bear the cost.
?????Gov. Davis, who lately has stepped up his pleas for help from
Washington, said the Bush plan offers too little too late for California and
criticized the president for allowing "the price-gouging energy companies,
many of which reside in Texas, to get away with murder."
?????Davis said the state is "doing everything possible to build and conserve
our way out of the problem," but it desperately needs federal price controls
on energy costs. In 1999, California energy users spent about $7 billion;
this year, even with consumption down 5%, the bill could top $50 billion.
?????But Bush and Vice President Dick Cheney, who led the task force that
prepared the plan, are opposed to price caps, preferring to let market forces
reign.
?????Davis said that laissez faire approach puts California's economy in
peril.
?????"Just saying, over the long haul, everything will work out is turning a
blind eye to the bleeding and hemorrhaging that exist in this state," Davis
said. "Small businesses . . . literally will go out of business because they
can't afford these rates."
?????Analysts who studied the Bush plan say they are particularly
disappointed because it covers a lot of ground already plowed by California.
?????Bush recommends building 1,900 power plants over the next 20
years--about eight plants a month. But California is already on a
plant-building spree that will give it a comfortable supply within two years.
?????The president also wants to streamline approval of plants and is pushing
for a renewed commitment to nuclear power. The California governor, however,
has already ordered expedited licensing of new plants under an executive
order issued in February.
?????There is little evidence, meanwhile, that Californians are eager to
approve an expansion in nuclear power. Nationwide, not one new nuclear plant
has been licensed in more than 20 years. And a Times Poll in February found
that 60% of Californians oppose more nuclear reactors in the state.
?????"You can barely build clean-burning gas plants here, let alone nuclear
plants," said Edward Kahn, a San Francisco-based energy consultant with
Analysis Group/Economics.
?????Among other elements of the plan that could affect California is a
proposal to allow federal authorities to take private land for power lines.
Currently, the U.S. government's power to forcibly acquire private property
applies only to highways and gas pipelines. Expanding that power is likely to
enrage property owners and property-rights advocates, who typically expect
backing from Bush-style conservatives.
?????"I'm just surprised that this administration would want to preempt the
state's [authority] over its own land," said Lynch of the PUC.
?????The issue is already heated in California. Communities in southwestern
Riverside County have mobilized to resist San Diego Gas & Electric's attempts
to use eminent domain to obtain private land for 31 miles of transmission
lines. The Legislature is considering a bill that would require state energy
officials and utilities to grab public land first before reaching for private
acreage.
?????Bush also proposed a unified, private national electricity grid, an idea
that seems at odds with Southern California Edison's effort to sell its
transmission lines to the state. But Edison officials said they hope to have
their deal worked out long before the president's idea comes to fruition--if
it ever does.
?????Unveiling his energy program in St. Paul, Minn., Bush said he is "deeply
concerned about the impact of blackouts on the daily lives of the good people
of the state of California."
?????But S. Davis Freeman, the former Los Angeles Department of Water and
Power chief who is now the governor's energy advisor, said Bush has let down
the state by failing to "answer the 911 call."
?????"It's like your house is on fire," Freeman said. "You call the fire
department, and they say, 'No, we're not coming, but we're building a
super-duper firetruck that will be ready five years from now.' "
---
?????Times staff writers Dan Morain and Richard Simon and researcher Patti
Williams contributed to this story.

Wall St. Cautious Over Energy Sector's Outlook for Next Year
Stocks: Earnings for many oil and natural gas producers are expected to top
out in 2001 as prices stabilize.

By JOSH FRIEDMAN and TOM PETRUNO, Times Staff Writers

?????President Bush's energy plan, unveiled Thursday, helped spark a broad
rally across the energy sector and among firms that stand to benefit by
selling equipment and services to oil and natural gas companies.
?????Yet Wall Street has been taking a cautious stance toward energy shares
in recent months, and Thursday's rally doesn't change much, some analysts and
money managers say.
?????Despite the long-term earnings boost the sector could get under Bush's
plan, many oil and gas companies are expected to post lower earnings in 2002
than in 2001, analysts estimate.
?????That reflects expectations that crude oil and natural gas prices will at
best stabilize at current levels--which are down sharply from their 2000
peaks--or head lower.
?????Thus, after heady gains in 1999 and 2000 as oil and gas prices rocketed,
many energy stocks have stalled this year.
?????The American Stock Exchange index of 15 major natural-gas-related
stocks, for example, is down 4% year to date. The Standard & Poor's index of
six large oil and gas exploration and production companies has lost 5.3%.
?????Schlumberger (ticker symbol: SLB), a leading oil-field services company,
has seen its shares pull back 15% since Jan. 1, even with a gain of $1.78 to
$67.99 on Thursday.
?????By contrast, the blue-chip S&P 500 index is down 2.4% this year.
?????Craig T. Callahan, manager of Icon Energy stock mutual fund and chief
investment officer at the Icon Funds group, said investors need to be choosy
to find good buys today in the energy sector.
?????"We're leaning more toward the refiners than the drillers because
they're the better bargains," he said. "And at this point the good news looks
fully priced into the services and equipment group."
?????After betting big on the energy sector in early-1999, Callahan took
profits earlier this year. "We just don't see energy as a leader anymore--its
leadership days are done," he said.
?????Callahan shrugged off any potential windfalls from Bush's proposal. "We
look at these companies from the bottom up and pretty much ignore the macro
trends," he said.
?????For the near term, investors have to cope with the prospect that
earnings at many energy companies will decline in 2002.
?????Chevron (CHV), for example, is expected to earn $7.20 a share this year,
according to analysts' consensus estimate as tracked by IBES/Thomson
Financial. But next year the company's earnings are expected to fall to $6.20.
?????At the stock's current price--it rose 41 cents to $95.66 Thursday--the
price-to-earnings ratio based on estimated 2002 results is 15. That is lower
than the average blue-chip stock P/E of 21, but experts note that energy
stocks generally have lower P/Es because of the inherently cyclical nature of
the business.
?????Still, some analysts believe the Bush energy plan could revive interest
in many energy shares, if investors take a longer-term view.
?????Companies that explore for, produce and refine oil and gas could be
among the biggest beneficiaries of Bush's initiatives, said Corey McElveen,
stock analyst at Morningstar Inc. In particular, he cites Phillips Petroleum
(P) and Exxon Mobil (XOM), which already have operations in energy-rich
Alaska. Phillips rose $1.72 to $65.87 on Thursday, while Exxon Mobil eased 77
cents to $88.73.
?????Callahan, however, favors companies that focus on refining. Ashland
(ASH), Pennzoil-Quaker State (PZL) and Sunoco (SUN) are among the refining
stocks with reasonable valuations and plenty of upside, he said.
?????Ashland eased 17 cents to $43.50 Thursday, Pennzoil-Quaker added 5 cents
to $15.96 and Sunoco rose 98 cents to $41.45.
?????Some money managers prefer to leave the traditional oil and gas stocks
for others--in favor of alternative energy issues.
?????John Hammerschmidt, manager of Turner New Energy & Power Technology
Fund, likes the potential of companies such as Energy Conversion (ENER),
which is seeking to develop cheaper and sturdier solar panels, and AstroPower
(APWR), another solar firm.
?????Energy Conversion jumped $3.53 to $31.28 on Thursday while AstroPower
leaped $3.38 to $54.93.
?????In the fuel cell industry, Hammerschmidt pointed to Ballard Power
Systems (BLDP), whose products are being used in clean-running buses in Los
Angeles and elsewhere, and FuelCell Energy (FCEL). A tax credit for fuel-cell
vehicles, as proposed by Bush, "could be huge" for such firms, he said.
?????Ballard jumped $8.37 to $57.60 and FuelCell rose $4.98 to $85.28.
?????But fuel cell companies, are, for the most part, far away from
profitability, Hammerschmidt warned, so they may make for an especially
speculative and risky investment.
?????Many alternative-energy shares also rallied strongly in 2000--only to
tumble.

Municipal Utilities Seek Exemptions From Blackouts
Power: Those connected to state grid, L.A. not among them, say their
customers should not be deprived to aid others.

By SCOTT GOLD, Times Staff Writer

?????A group of California cities that run their own electric utilities and
have plenty of power to weather the energy crunch this summer will ask the
federal government today to exempt them from blackouts.
?????Their quiet campaign challenges the very foundation of the power grid in
California, and could change the dynamics of how electricity is doled
out--just as the state is bracing for a summer of rolling outages.
?????Most Californians pay large, investor-owned utilities like Southern
California Edison Co. for power. But about a quarter of households, from the
tiny desert city of Needles to the state capital, are billed for electricity
by cities, counties or local districts that run their own nonprofit
utilities. There are 30 "municipal" utilities.
?????Four of them--serving Los Angeles, Burbank, Glendale and the Imperial
Valley, east of San Diego--are independent of the state power grid and do not
face any outages. But the others are required by contract to give electricity
back to the California Independent System Operator, which runs the grid, by
participating in rolling blackouts--although they have plenty of power to
serve their customers.
?????"It makes them wonder why they went out and did their jobs," said
California Municipal Utilities Assn. attorney Tony Braun.
?????These utilities argue that they are suffering for the myopic decisions
behind the deregulation of California's electricity market and the power
shortage.
?????"We believe our power was purchased for the citizens of Riverside and
that we don't have the right--nor does anyone else--to take it away from them
when they need it," said Riverside Utilities Director Tom Evans. "Our
customers are being denied something that they are fundamentally entitled to."
?????Leading the campaign is the tiny Los Angeles County city of Vernon,
which filed a complaint last week asking the Federal Energy Regulatory
Commission to exempt it from rolling blackouts.
?????Vernon's public utility has 2,000 customers, all but 30 of which are
industrial operations such as glass manufacturers and meatpacking plants. The
city launched its own distribution system primarily to lure industry with
electric rates that are typically among the lowest in the state, said Jorge
Somoano, Vernon's assistant director of resource management.
?????FERC set a deadline today for other municipal utilities to support the
campaign. Up to half, including Riverside, are expected to either file their
own complaints or file documents supporting Vernon, said Washington attorney
Bonnie Blair, who represents municipal utilities in Azusa, Banning and Colton.
?????Even the campaign's supporters are unsure whether it will succeed. Blair
acknowledged that there is no precedent for presenting this type of legal
challenge to FERC, which is expected to decide on the issue by mid-June. And,
she said, municipal utilities might have a tough time proving they have done
enough to insulate themselves from the energy crisis.
?????Some cities with municipal utilities, such as Anaheim, are not planning
to join the campaign.
?????Marcie Edwards, general manager of Anaheim Public Utilities, said the
relationships between municipal utilities and Cal-ISO are too complicated to
make a clean break. She said it is rare that a power shortage can be blamed
entirely on the large investor-owned utilities--including this summer's
energy crunch. And until that can be proved, she said, municipal utilities
still have an obligation to support California's power grid.
?????"It's not right to go either way 100%," she said. "The fact remains that
municipals still have an obligation to serve."
?????Most of the municipal utilities are linked to the grid through
agreements with Cal-ISO that call for them to share electricity in an
emergency.
?????Those utilities tend to believe that the agreements were reserved for
natural disasters, such as earthquakes, or other sudden and monumental
problems, such as a plane running into a transmission line.
?????"The failure or inability of other utilities to schedule sufficient
supplies," Vernon contended wryly in its papers filed with FERC, does not
constitute an emergency.
?????"The obligation to share in [rolling blackouts] did not contemplate
situations where some utilities were not meeting their basic obligation to
provide resources to serve their customers," Blair said. "If they are forced
to participate in rolling blackouts, the effect is that the ISO is taking
energy that has been bought and paid for by some customers and effectively
giving it to somebody else that has been unable to buy it."
?????Jim Detmers, Cal-ISO's vice president of operations, said the
organization plans to fight the campaign. He said emergency provisions of
Cal-ISO's agreements with the municipal utilities cover the current energy
crunch.
?????Detmers said that exempting municipal utilities from blackouts would
increase the share of those events shouldered by communities that do not have
their own electricity distribution. He compared the exemption request to a
homeowner declining to fight a fire at a neighbor's because he wants to keep
his water for himself.
?????"What we're dealing with is an overall shortage," Detmers said. "We want
to make sure that we are making the right choices when everyone's lives are
at risk."
?????Ronald Nunnally, Edison's director of federal regulations and contracts,
said the municipal utilities have an obligation to uphold the integrity of
the power grid to which they are connected.
?????"The ability to use the grid requires to keep it whole, if you will,
under all circumstances," he said.
?????Blair said those arguments don't hold up. Indeed, she said the municipal
utilities will argue that the California Constitution expressly prohibits
giving public property, such as electricity bought by a municipal utility, to
a private enterprise, such as investor-owned electric companies.
?????"Our customers are paying for it," she said. "That's the bottom line."

A United Defense

?????The big bad wolf of California's electric power crisis is the private
power generators, accused of manipulating the market to drive wholesale power
rates into the stratosphere out of pure greed. Their pricing is insane, but
only the federal government can fix wholesale prices. The Bush administration
refuses to do that, leaving the state virtually helpless to deal with what
many are now calling an energy cartel.
?????Gradually, however, the state is arming itself in other ways to do
battle with the big power bullies, who appear more and more to have acted in
concert to affect prices. Not as blatantly as the oil producers' cartel,
OPEC, but with even more dramatic results.
?????What is California considering?
?????* A new state power agency could build and run its own plants;
?????* Lawmakers might, as they are threatening, impose a windfall profits
tax.
?????* The state could join with other Pacific states in a buyers cartel that
would simply refuse to purchase power if the price got too high. The idea
seems a bit desperate, but it has a "Star Wars" allure to it and just might
work.
?????The focus is on six big private companies. They produce only about
one-fourth of the state's electricity, but they are the ones that have power
available when it is needed the most, as the heat rises, air conditioners go
on and blackouts are threatened. The private and municipal utilities
naturally use their own power first, then turn to the outside generators to
meet additional demand.
?????The state has forked over $7.2 billion to keep the lights on since the
biggest private utilities went broke. The cost of power has hit an obscene
peak of nearly $2,000 a megawatt-hour, charged by Reliant Energy of Houston
during a recent hot spell. This price, more than 60 times the going rate a
year ago, prompted a furious Gov. Gray Davis to threaten to use his emergency
powers to commandeer Reliant's power or even seize one of its power plants.
?????No one is eager for the state to take over private power plants. That
smacks of dictatorship. But if the generators can get away with charging so
much during a brief hot spell in May, what will the cost be in August?
?????The state is continues to investigate allegations that the six producers
colluded to control the market or that they shut down plants to create a
false shortage. The state may take legal action next month. However, even
that may not force prices down.
?????The buyers cartel has possibilities. California would get Oregon and
Washington to join in deciding the highest rate they are willing to pay for
power this summer, a price still providing the producers a generous profit.
If the generators wouldn't sell at that level, the states would refuse to
buy. This would mean more blackouts for a time, but the generators would be
left with power they could not sell.
?????This extreme action would not be necessary, of course, if the Federal
Energy Regulatory Commission accepted its responsibility under federal law
and imposed a reasonable temporary cap on wholesale power prices. That is not
likely If the states are left to their own devices, they can at least join
forces. Then, for a change, let the seller beware.
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Cheney blames Davis for crisis
'They knew over a year ago they had a problem'
Zachary Coile, Chronicle Political Writer
Monday, May 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/21/M
N67797.DTL&type=news
Washington -- Vice President Dick Cheney, in his most blunt and partisan
assessment yet of California's energy crisis, faulted Democratic Gov. Gray
Davis for failing to act quickly enough and called the state's purchase of
nearly $6 billion worth of energy "a harebrained scheme."
Cheney, the administration's point man on energy issues, went on a pair of
Sunday morning news shows to help sell a national energy plan that President
Bush proposed last week. The discussion inevitably turned to California.
"They've bankrupted the biggest utility in the state, destroyed the state's
credit rating and squandered a significant portion of the state's financial
surplus in a harebrained scheme to try to use the state to purchase power,"
the vice president told Tim Russert of NBC's "Meet the Press."
A spokesman for Davis responded that the vice president's remarks yesterday
were "grossly misinformed" and meant to divert attention from the
administration's neglect of the state and its power woes.
"The Bush administration has refused to address California's problem, and now
they're washing their hands of it," Davis spokesman Steve Maviglio said.
The tit-for-tat remarks culminated a week that has seen an escalation in the
war of words between the Democratic governor and the Republican White House.
The two administrations are increasingly engaging in a blame game as they
confront a worsening crisis with enormous political stakes for both sides.
Responding to critics -- including Davis -- who say the White House has done
little to help California, the vice president pointed the finger back at the
state's top Democratic official.
"They knew over a year ago they had a problem, and Gray Davis refused to
address that problem," Cheney said. "(They) kept putting it off and putting
it off and putting it off, with the notion that somehow price caps could be
maintained.
"Now, today, where are they in California? Well, rates are having to go up.
The PUC just had to increase the rates themselves in California. They've got
rolling blackouts, they've had some already. They'll have them across the
state this summer," Cheney said.
Cheney's remarks referred to the state's purchases of almost $6 billion worth
of energy, which began after the major utilities could no longer afford
skyrocketing wholesale prices for energy.
Earlier this month, the Democrat-controlled California Legislature approved a
bill, opposed by GOP lawmakers, to issue $13.4 billion in bonds to repay the
state's general fund to avoid making deep cuts in other state programs.
KEEPING THE LIGHTS ON
"That's the governor keeping the lights on," Maviglio said. "Because of the
failure of the federal government to act (to impose price controls), the
state had to move to keep the lights on."
Cheney's comments came just days after Davis sharply criticized Bush's energy
plan, saying it wouldn't help California consumers facing rising energy
bills.
"Mr. President, you didn't create this problem, but you are the only one who
can solve it," Davis said in a letter released to the press. "With all due
respect, Californians want to know, Mr. President, whether you're going to be
on their side."
Davis also suggested that by refusing to ask federal regulators for price
caps, Bush was effectively allowing price-gouging by oil and gas producers in
his home state of Texas. Cheney dismissed the allegation last week as
"goofy."
CALIFORNIA A BAD EXAMPLE
In speeches on his energy plan, the president has mostly used California as
an example to the nation of what not to do. He warned last week that the
state's blackouts were a preview of what other states could face if the
country doesn't boost energy supplies.
Some California Republican leaders have warned Bush, who will visit Southern
California later this month, to soften the administration's rhetoric on the
energy crisis to avoid being seen as unsympathetic to the state's plight.
Cheney explained yesterday that the administration opposes even short-term
price controls because they could discourage energy suppliers from selling
energy into California and building more plants in the state.
"In the final analysis, it's going to be the private sector's response that
generates the power we're going to need long-term," Cheney said.
The vice president did offer an olive branch to Davis, noting that both
Democratic and Republican lawmakers approved the state's deregulation
legislation, precipitating the state's energy problems.
"In fairness to Governor Davis, the screwy regulatory scheme they put in
place was supported on both sides of the aisle out there," Cheney said. "But
he was the one who was in charge when it went haywire."
Sen. Barbara Boxer, D-Calif., who followed Cheney on CBS' "Face the Nation"
yesterday morning, put the blame back on the White House. She recalled that
President John F. Kennedy called steel company executives into his office
when they were accused of price gouging. She urged Bush and Cheney to do the
same with energy suppliers.
"You have the vice president sitting there, sounding like an oil man," Boxer
said. "The energy companies are blameless here, he says. And the truth is
that the facts belie that.
"He's doing nothing in the budget to help us at all, not even a phone call to
FERC, not even a jawboning of some of the executives."
E-mail Zachary Coile at zcoile@sfchronicle.com

Lighting technology leading the way in energy conservation
Keay Davidson, Chronicle Science Writer
Monday, May 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/21/M
N208452.DTL&type=news
Imagine replacing your living-room lights with walls that gently glow, or
your plain glass windows with electronic ones that darken at the press of a
button.
Some day, such gee-whiz technologies might save California and the nation
plenty of energy -- besides bringing (for better or worse) the aesthetic
taste of the Jetsons into tomorrow's homes.
In the meantime, researchers are designing less futuristic energy-saving
gadgets that might be ready in time to help ease the energy problems
California is facing now.
Among the technologies under development: unusual ceiling lamps being tested
in a Bay Area post office; miniature fluorescent lights that offer better
luminescence than their drab, low-glow ancestors; luminous, flexible plastic
tubes that emit neat little beams of light; and indoor versions of the
brilliant sulfur lamps that presently illuminate giant parking lots at night.
If the history of the past three decades is any guide, energy-saving
technologies aren't just wacky schemes like the flying cars and
atomic-powered blimps ballyhooed in 1950s editions of Popular Science and
like magazines.
Rather, energy-saving technologies are already an unheralded hero of late
20th century technology, having saved the nation the energy equivalent of
numerous nuclear power plants since the last "We're running out of energy!"
freakouts of the 1970s.
The next time your smug friends and relatives back east mock California as an
"energy hog," you can inform them that, in fact, we only use half as much
electricity per capita as the rest of the United States. A major reason:
prescient energy-conservation rules developed under then-Gov. Jerry Brown two
decades ago, according to veteran energy-conservation scientist Art
Rosenfeld.
Widely ridiculed as "Governor Moonbeam," Brown and the California Energy
Commission thought it was wiser to develop tough energy-conservation
standards for buildings and appliances than to build new nuclear power plants
-- "and it turns out it was," says Rosenfeld, a current member of the Energy
Commission and former czar of energy conservation science at Lawrence
Berkeley National Laboratory, which is funded mainly by the U.S. Energy
Department.
Undaunted by the changing political winds of the past three decades,
scientists at the lab have continued designing energy-conserving
technologies, even though, at first glance, the new technologies don't look
that exciting.
NEW LIGHTING TECHNOLOGIES
Witness, for example, the lamps being tested at the post office in Rodeo. The
lamps are long, thin tubes that aim light directly onto each carrier's
mail-sorting station, rather than wastefully spreading it all over the place.
It's a simple innovation, yet it reduces energy costs for lighting by up to
70 percent, Lawrence Berkeley researchers have calculated.
Likewise, they have recently invented a new type of high-performance,
energy-efficient table lamp that "could greatly reduce the current power
problems we have in California while increasing the quality of the lighting,"
says researcher Michael Siminovitch of the Berkeley lab.
The lamp consists of compact fluorescent lights that can be manipulated to
direct light in different directions -- toward the ceiling, for example. That
allows the users to fine-tune lighting conditions to their precise needs,
overcoming common complaints about the dimness and poor design of first-
generation power-saving lights.
The new lamps use only one-fourth as much energy as a 150-watt incandescent
table lamp or a 300-watt halogen lamp. Unveiled in March, they are being
field- tested by the lab in collaboration with the Sacramento Municipal
Utility District (SMUD), Southern California Edison and Pacific Gas and
Electric.
LIGHT-EMITTING DIODES
Looking farther into the future, the old-fashioned incandescent light bulb
may be challenged by electronic LEDs, or light-emitting diodes, commonly used
for VCRs and alarm clocks. Those dim little lights may eventually be made
bright enough, and white enough, to begin replacing traditional lighting
sources.
One problem: the refraction or bending of light. Everyone has seen what
happens when one inserts a straw into a glass of water -- the submerged
portion of the straw appears to bend. In the semiconductor materials used in
LEDs, much of the internally generated light is bent so much that it reflects
back into the LED -- that is, it can't escape. Hence, present LEDs don't emit
enough light to attract a large commercial market.
However, engineers at Lawrence Berkeley and elsewhere are designing new LEDs
that would emit far more light. One of them is physicist Steve Johnson, who
is confident that LEDs can eventually be made brighter than ordinary light
bulbs. He points out that colored LEDs are already used in some traffic
lights.
By mixing together LEDs that emit different wavelengths of light, one could
create a white light-emitting LED, Johnson says. (White light is a mixture of
all other optical wavelengths.)
Johnson maintains LEDs could make a difference to the energy bill.
"One-third of our energy used in commercial buildings goes into lighting
those buildings. So anything we do to reduce the lighting bill is going to
help the energy crisis."
SUPER-EFFICIENT APPLIANCES
All sorts of strategies are being tried in labs all over the country.
Forget to turn off the iron before you drove out of town? Appliances that can
be switched off remotely, via computer modem, are being developed by the
Media Lab at MIT as part of its "Kitchen Sync" project.
The same project is figuring out how to create electronically interconnected
homes in which the appliances will switch themselves on to perform
nonessential work -- say, washing the clothes -- only when there's no risk of
a circuit overload.
Super-efficient refrigerators that use "magnetic" refrigerants are being
tested at Ames Laboratory, a federally financed lab in Ames, Iowa.
Scientists there are using "magnetic cooling" methods to replace the
compressed gases deployed by typical refrigerators. Physicists have long
known that some materials get hotter when magnetized and cool off when
demagnetized.
Even today's refrigerators consume energy far more efficiently than they once
did.
Federal energy standards for refrigerators that took effect in July 2000
require that they burn only one-fourth as much energy as did their
predecessors, 25 years ago, Rosenfeld notes.
Even better, he adds, modern refrigerators are bigger and don't use
chlorofluorocarbons, chemical compounds that are believed to damage the ozone
layer, which shields the Earth from cancer-causing ultraviolet radiation.
"It's all just a matter of designing them properly," Rosenfeld says.
E-mail Keay Davidson at kdavidson@sfchronicle.com

SAN FRANCISCO
PG&E cable failure hits Pier 39 businesses
Vallego
Monday, May 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/21/M
N1690423.DTL&type=news
The malfunction of a Pacific Gas and Electric Co. underground cable left
about 5,000 customers, including businesses at San Francisco's Pier 39,
without power for more than an hour yesterday afternoon, a company
spokeswoman said.
A bad underground cable, called a splice, that connects wires was the cause
of an outage that began about 4 p.m., said Maureen Bogues of PG&E.
Customers in North Beach and at Pier 39 were affected, she said. All
customers had power back by 5:50 p.m. after workers replaced the splice at
the intersection of North Point and Stockton streets.

THE ENERGY CRUNCH
Oakland council to vote on waiving energy permits
Residents' solar, wind power plans for their homes now face high costs, long
delays Janine DeFao, Chronicle Staff Writer
Monday, May 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/21/M
N112477.DTL&type=news
Oakland -- Already seeing red over rising utility bills, Oakland residents
have found themselves mired in red tape when they have sought energy
alternatives such as solar power.
It can take up to eight weeks and cost more than $1,000 to get the required
city permits to install solar panels.
But the City Council is expected to change that tomorrow when it considers an
emergency ordinance, proposed by Mayor Jerry Brown, to eliminate design
review requirements for renewable energy installations including solar panels
and wind devices.
"Energy is an issue on everybody's plate these days. . . . We want to make it
easy for people to get their permits and get their panels," said Gary Patton,
the city's deputy planning director.
Oakland officials said they know of no other city taking similar steps to
promote alternative energy generation, although cities throughout the Bay
Area and the state are increasingly looking to renewable energy sources.
San Francisco, for instance, is considering placing solar energy bonds on the
November ballot that would fund installation of solar panels on municipal
property and could provide low-cost loans for homeowners and businesses to do
the same. Berkeley also is working on a loan program for renewable energy
sources for residences.
The Oakland measure, which would remain in effect for two years, also would
apply to businesses interested in pursuing alternative energy generation.
As Californians already hit by the state's energy crunch face the prospect of
more rolling blackouts this summer, Oakland city officials are receiving a
growing number of inquiries from residents interested in installing solar
panels, Patton said.
The city also has heard complaints about the cost and time it now takes to
get systems approved.
Gary Gerber, president of Sun Light & Power in Berkeley, said he complained
when he learned that it would cost more than $1,200 to install a solar system
on a home in the Montclair area. The project is on hold, awaiting the new
ordinance.
"The process didn't really fit our situation. . . . It's pretty cumbersome
and is the same type of process you might go through for a major remodel,"
Gerber said.
City officials "responded beautifully" in drafting a "solar-friendly" policy,
he added.
Calvin Wong, director of building services, said the city has received a
dozen applications for solar panel installations in the last month -- up from
only a few applications before the energy crisis hit. "We anticipate a lot
more," he said.
Gerber said he gets five to 10 calls a day from interested customers. He has
done as much business in the first three months of this year as he did all of
last year, he said.
"I don't think solar panels have been a significant issue for (Oakland) up to
now," said Councilman Dick Spees, who backs the proposed change. "We want to
encourage it by making it simple, direct and less costly."
Oakland also is exploring installing solar panels on city buildings.
A household solar unit -- which can heat water or produce electricity
directly -- can cost $10,000 to $30,000, although state rebates can reduce
the price by half. President Bush's energy plan, released last week, proposes
a 15 percent tax credit for residents who install solar panels.
Patton said the "main target" of Oakland's emergency ordinance was solar
panels, but it would apply to other "renewable energy production facilities,"
including those using wind and water.
Currently, design review for such installations can cost between $397 and
$1,088 and take between three and eight weeks, depending on a property's
location.
Under the proposal, design review would be waived once an owner submits
drawings to the city showing that the equipment installation meets certain
requirements, such as matching the pitch of a sloped roof or, if
freestanding, being no taller than 6 feet. For certain structures, such as
designated landmark sites, design review still would be required, but at no
cost and lasting no more than five days.
Building permits and inspections, costing between $85 and $170, still would
be required to make sure the additions are safe, Patton said.
Brown has long been considered an alternative energy advocate, pioneering
state solar and wind tax credits when he was governor.
E-mail Janine DeFao at jdefao@sfchronicle.com

ENERGY CRUNCH
Investigations
Power firms fueled by greed, Lockyer says
Out-of-state generators face multiple probes
Greg Lucas, Sacramento Bureau Chief
Sunday, May 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/20/M
N172739.DTL&type=news
Sacramento -- Up the road in Folsom, at the nondescript headquarters of the
Independent System Operator -- monitor-in-chief of California's energy grid
-- they have a new job: responding to more than 40 detailed subpoenas.
The data the ISO keeps on electricity transactions are central to the half-
dozen investigations initiated by state and federal agencies into various
parts of the state's energy mess, including possible criminal activity by
power generators.
"They're asking for everything and then some," a spokeswoman for the ISO,
Stephanie McCorkle, said, sighing.
The Federal Energy Regulatory Commission, the state Public Utilities
Commission, the Assembly, the Senate, the state attorney general and a
phalanx of state and federal auditors all are boring into California's energy
mess.
The main thrust of the most significant investigations is the conduct of
power generators that have reaped record profits selling electricity to the
electron-starved state.
Although most investigators say the ISO's logs and bid records show the
various generators used their market share to drive up prices, the issue is
whether they did so acting collaboratively, either directly or indirectly.
Generators deny any manipulation of the market. They say their prices simply
reflect a lack of supply, plant breakdowns and the high cost of natural gas.
But that hasn't stopped the state from trying to prove them wrong.
Attorney General Bill Lockyer has been probing the actions of the generators
since August to see if they manipulated the market or engaged in unfair
business practices or if their executives engaged in criminal behavior.
"We all feel we've been taken advantage of, been gouged," Lockyer said. "The
question is whether it's legal greed or illegal greed. There's no question
it's greed."
Lockyer is in court fighting energy companies like Reliant Energy Inc. and
Dynegy, which have refused to disclose internal company information that
Lockyer subpoenaed Feb. 15.
The power companies say they are not receiving assurances the documents
Lockyer wants will be kept confidential.
Lockyer said he hopes to complete his spadework on the generators this
summer.
The PUC also is probing whether generators timed maintenance and shutdowns to
drive up prices.
On Thursday, PUC President Loretta Lynch said investigators found patterns of
plant shutdowns that created "artificial shortages."
Lockyer insisted that "no one yet has sufficient evidence to win a civil or
criminal suit. But we're probably further along than any other investigative
effort."
Generators say they are cooperating with the investigations -- except for
worries about proprietary information becoming public -- and flatly reject
the notion they have been gaming the market or acting in concert.
"We naturally would take serious issue with some of those allegations," said
Richard Wheatley, a spokesman for Reliant Energy in Houston. "It doesn't
compute because we all compete against each other. We don't cooperate, share
information or anything of that nature. It's not only illegal but unethical
to do so."
Said Chuck Griffin, a Mirant Corp. spokesman: "Any patterns would exist
because of the rules they established long before Mirant was in California."
A new investigation of the generators is being done also by the aptly named
Senate Select Committee to Investigate Price Manipulation in the Wholesale
Energy Market. It too is meeting resistance from generators in handing over
documents they consider confidential.
"Discussions thus far in that regard have been disturbing, and right now
we're at an impasse," said Sen. Joe Dunn, D-Santa Ana, the committee's
chairman.
Dunn's committee can only gather facts and make recommendations on new laws
if it uncovers some kind of anti-competitive activity not already covered by
the law.
So far, the Federal Energy Regulatory Commission is the only entity to impose
any economic pain on generators.
After a probe of California's power market last summer, the commission issued
an order in December that created a mechanism by which generators would have
to justify prices above a certain level determined by the commission.
In March, the commission said generators had to justify $124 million in
charges -- or reimburse the money.
It also reached an $8 million settlement with AES Southland and Williams
Energy Marketing & Trading over power plants that were supposed to be running
but weren't.
Critics, from Gov. Gray Davis down, say that generators owe many millions
more in refunds.
Several other investigations are either under way or completed.
The PUC is investigating whether the holding companies of Pacific Gas and
Electric, Southern California Edison and Sempra Energy in San Diego violated
the requirement that the utility be their first spending priority.
The investigation came after discoveries that while PG&E and Edison were
accumulating huge debts buying power, they were also transferring hundreds of
millions to their parent companies.
Probes sparked by power crisis
Here's a look at some of the investigations California's power crisis has
sparked and their status:
Market manipulation by power generators -- The Public Utilities Commission,
attorney general and a special Senate committee are all investigating
allegations.
High prices charged by generators -- The Federal Energy Regulatory Commission
said in March that generators must justify $124 million in possible
overcharges or refund the money. The investigation is still open.
Investor-owned utilities transferring large sums to their holding companies
-- The PUC is examining whether any regulations were violated.
The flaws of electrical deregulation -- The state auditor general completed a
report in March.
Audits of the utilities -- A report concluding utilities transferred millions
to parent companies was released in January by the PUC.
Price spikes in natural gas -- An Assembly committee issued its report last
week, saying El Paso Corp. manipulated the market.
E-mail Greg Lucas at glucas@sfchronicle.com.

Davis slams Bush's energy policy
He says president should ensure 'reasonable' prices
Tyche Hendricks, Chronicle Staff Writer
Sunday, May 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/20/M
N166290.DTL&type=news
Gov. Gray Davis blasted President Bush's energy strategy yesterday, saying it
will fail to rein in galloping energy prices and insinuating that Bush's
close ties to the oil industry are behind his unwillingness to regulate
prices.
Davis, in delivering the Democratic response to Bush's weekly radio address,
called on Bush to place a cap on wholesale energy prices, which, he said, are
imperiling California's economy.
"I urge you to stand up to your friends in the energy business and exercise
the federal government's exclusive responsibility to ensure energy prices are
reasonable," said Davis.
California consumer advocates and utility officials alike endorsed the call
for rate caps.
Bush has rejected such caps, although in his radio address yesterday, he
noted that the average family energy bill has climbed by 25 percent over the
past three years.
"That's a hardship for every family," he said. "We need to act to protect
family budgets."
His prescription, however, was not for restricting how much energy producers
can charge, but for increasing energy production by building more power
plants and drilling for oil in Alaska's Arctic National Wildlife Refuge.
Yesterday, Bush put into action by executive order two of his
recommendations, including ordering federal agencies to speed permit
approvals for new plant and pipeline construction. Still other proposals,
such as tax credits for hybrid vehicle purchases, will require congressional
action.
"It's time to leave behind rancorous old arguments and build a positive new
consensus," Bush said in the radio address. "With new technology, sound
regulation and plain good sense, we can expand our energy production while
protecting the environment."
Last spring, Davis said, California was paying an average of $30 for a
megawatt of power. By last week, the price had spiked to nearly $2,000 per
megawatt.
"What's going on here, pure and simple, is unconscionable price-gouging by
the big energy producers -- most of them, incidentally, located in Texas," he
said.
Davis criticized Bush's argument that limiting energy prices will deter
producers from increasing the supply of energy.
"That's as ridiculous as saying we need to pay dairies $300 a gallon to
motivate them to produce milk," he said.
Pacific Gas and Electric Co. officials said they are pleased with Bush's
emphasis on increasing electricity and natural gas generation and his call
for improving energy efficiency.
But a prepared statement by PG&E went on, "We continue to believe that (the
Federal Energy Regulatory Commission) must stabilize the Western market this
summer through circuit breakers, price caps or cost-based rates."
Mindy Spatt, spokeswoman for The Utility Reform Network, a San Francisco-
based consumer advocacy group, said Davis must realize Bush is not going to
implement price caps.
"In the absence of federal action, the governor needs to take action
himself," said Spatt. "He could take plants by the power of eminent domain,
impose an excess-profits tax (on energy producers), or start a buyers cartel,
where Western states get together and refuse to pay over a certain price for
electricity.
"Davis should take his own advice to the president and stand up to these
energy companies. The state has spent $7 billion already. He's got to put a
stop to it or they'll bleed us of every penny we have."
House Democrats, meanwhile, said yesterday that they intend to begin airing
television advertising in California beginning tomorrow that accuses Bush and
Republican lawmakers of failing to combat the rising cost of energy.
It is unusual for a campaign committee such as the Democratic Congressional
Campaign Committee to air political advertising more than 18 months before
elections. But the move was clearly intended to exploit consumer anger over
rising prices and rolling blackouts.
Chronicle news services contributed to this report. / E-mail Tyche Hendricks
at thendricks@sfchronicle.com

Power juggling ramped up price
Insiders say manipulation also strained equipment
Christian Berthelsen, Scott Winokur, Chronicle Staff Writers
Sunday, May 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/20/M
N121438.DTL&type=news
Large power companies have driven up electricity prices in California by
throttling their generators up and down to create artificial shortages,
according to dozens of interviews with regulators, lawyers and energy
industry workers.
Those sources say the unusual maneuvers not only jacked up prices but also
wore down equipment and contributed to the record levels of plant shutdowns
that are depriving the state of much-needed electricity. The accounts are
supported by an independent review of shutdown data by The Chronicle.
The California Energy Commission calculates that an average of 14,990
megawatts of generating capacity, nearly a third of the state's total, was
unavailable each day in April because of plant shutdowns, more than four
times as much as a year ago.
Such shutdowns are the subject of increasing scrutiny as California enters
another period of high demand, the warm spring and summer months of May to
September, when electricity usage normally grows by a third.
Loretta Lynch, president of the California Public Utilities Commission, said
last week the agency has found considerable evidence of suspicious plant
shutdowns. And the California Independent System Operator, which manages the
state's power grid, says plant shutdowns have now become the primary means of
constricting supply.
But an extensive investigation by The Chronicle has found that not only were
generators shut down to boost prices but these "gaming" tactics contributed
to the plants' deteriorating condition.
"We suspected it," said Jim MacIntosh, the manager of grid operations for the
ISO. "It was a sure factor in driving up prices." Such swings in unit output,
he said, "would only make sense in a scenario when they're trying to game
something. Otherwise, why would they do that? They're tearing their units
up."
Unusual phone calls
Operators at a San Bernardino County power plant owned by Reliant Energy Inc.
say a complex plan to manipulate the California energy market began early
last year with a series of unusual telephone calls from the company's
headquarters in Houston.
According to the accounts of three plant operators, Reliant's operations
schedulers on the energy trading floor ordered them to repeatedly decrease,
then increase output at the 1,046-megawatt Etiwanda plant. This happened as
many as four or five times an hour. Each time the units were ramped down and
electricity production fell, plant employees watched on a control room
computer screen as spot market energy prices rose. Then came the phone call
to ramp the units back up.
"They would tell us what to do, and we would do it," said one of the men, who
only agreed to speak on condition they not be identified because they fear
being fired. "Afterward, we would just sit there and watch the market
change."
The workers said frequent and large swings in electricity output began at a
number of California power plants just as the state's power crisis began in
earnest. The workers and state power authorities assert the swings were one
of the primary means of gaming the wholesale energy market.
"It appears the control rooms are responsive to direction from the trading
floors in Houston, rather than the reliability needs of the ISO," said Carl
Wood, a commissioner with the utilities commission who is overseeing that
agency's investigation into plant outages. "Instead of being responsive to
demands for reliability, they're responsive to demands for profitability."
Corporate denial
Reliant officials adamantly deny using this tactic or any other mechanism to
game the California energy market. They and other power companies, including
AES Corp. and a partnership between NRG Energy Inc. and Dynegy Inc., have
asserted that skyrocketing electricity demand forced them to run aging,
decrepit power plants harder than ever to meet California's needs.
While acknowledging that the company issued changes in output levels as
frequently as every 10 minutes, company officials said it was done at the
instructions of the ISO to maintain supply-demand balance.
"As a part of routinely doing business within California and the California
market design, we are required to do that," said Kevin Frankeny, an
operations official with Reliant. "When the ISO (issues dispatch orders),
they dispatch on a 10-minute basis. It can go up and down many times within
an hour."
Frankeny said he was not aware of any instances in which Reliant schedulers
in Houston ordered dispatch changes without the ISO directing them to do it
first.
The ISO refused to comment on operations at any specific facility, but
Stephanie McCorkle, an ISO spokeswoman, said the ramping tactics were used
beyond dispatch instructions during periods of tight supply. And one of the
plant operators said the orders to vary output came independently of the grid
managers. "ISO was not calling Reliant every 10 minutes for that," said one
of the operators. "Not for an individual unit."
Officials with the California attorney general's office declined to comment
on the legality of the ramping practice, citing a continuing investigation
into whether wholesale energy prices are being manipulated. One source
familiar with the state of various inquiries said the ramping, if proved to
have been done to drive up prices, could violate the state's unfair business
practices laws.
Invisible practice
How could companies such as Reliant tinker with output and not get caught?
One of the plant workers said the practice was designed to be virtually
invisible to regulators and grid operators.
When power companies bid on hourly contracts, they agree to produce a certain
amount of electricity over the given hour. Generators are paid based on an
average of the spot market prices for that hour. By driving up the spot
price, they can increase their hourly profits and still produce the total
amount of energy required.
The plant worker said the units would be ramped down immediately after their
output measurement, which was performed at the top of each hour by the ISO.
Then, he said, it was brought back up as the spot market price of electricity
rose in response to the reduced output. By the time the ISO measured again,
the output was back at the expected level.
Another operator said the units were not always ramped up and down - that if
the price reached a satisfactory level, generators would raise output and
remain at that level as long as the price was right. Other times, if the
price was low, output was brought down and kept down.
The same operator said the amount of ramping appeared to be a matter of
individual will of the company schedulers in Houston, with some being more
aggressive than others.
"What they would do, especially late at night, is if the price tanked, they
would undergenerate," an operator said. "Then, mysteriously, the price would
go up.
"Then, if the schedule was at 70 (required megawatt hours of output), they'd
say, 'Go up to 90.' That would cause the price to tank. And they'd say,
'Bring it down again.' "
Rapid changes
These fluctuations occurred within time spans of as little as 10 to 15
minutes, the operators said. But acceptable rates for bringing a unit from
minimum to maximum levels when the plant was owned by Southern California
Edison were more like 80 minutes, to avoid stressing the machinery, one of
the workers said. Moreover, they were typically run at constant levels, which
also reduced wear and tear.
"They were basically ramping up as fast as they can, and then slamming the
brakes on," said one of the operators. "They were increasing the fatigue on
the units."
ISO officials say they changed market operations last fall to crack down on
gaming tactics, including instituting a so-called 10-minute market, rather
than the hourly market, so that it could be more easily detected when
companies were withholding power.
But the ISO says generator outages have now become the primary tactic in
driving up energy prices.
A computer analysis by The Chronicle of shutdown data over a recent 39-day
period shows Reliant and three other generating companies topped the list of
plant shutdowns. Reliant also represented the largest amount of wattage lost
among those companies.
Plants owned by Reliant, AES, Mirant Corp. and Duke Energy Inc. accounted for
more than half of the state's unplanned shutdowns, even though their
generating capacity was no more than 25 percent of the state's total capacity
from all sources.
Reliant, one of California's largest and most profitable out-of-state
generators, reported 319 shutdowns during the period in March and April. It
was followed by Mirant Corp. of Atlanta (310), AES Corp. of Arlington, Va.
(278) and Duke Energy North America of Charlotte, N.C. (261).
Reliant's unplanned shutdowns deprived the system of more than 53,000
megawatts over the 40-day period, an average of 1,368 per day - enough power
for 1.4 million homes for one hour.
Its Ormond Beach plant in Oxnard, with one generating unit down for 26 days,
accounted for more than 30,000 of those missed megawatts. However, an
operator who worked in that plant said the outages there appeared to be the
result of legitimate equipment failures.
Reliant says there are valid reasons for its plants now to be in need of
repair. They are old: At 48, Etiwanda is the oldest of Reliant's five
California plants. And the company says routine maintenance was deferred so
the plants could remain in service during times of high summer demand.
But the operators said the issue is not so clear-cut. One problem at
Etiwanda, a tube leak, had been present for about a month and was previously
reported to management, they said, but it had not deteriorated much, it was
operating at full capacity and there was no immediate need to take the unit
offline because of the problem.
Moreover, at the time of the shutdown, the ISO had expressly asked Reliant to
keep the unit online, the operators said. Richard Wheatley, a spokesman for
Reliant, denied that any Reliant unit was taken offline for unnecessary
maintenance.
Ramping may be rampant
Sources say Reliant was not alone in using the ramping practice. A source
familiar with the state utilities commission investigation said output logs
obtained from AES' Alamitos plant also reflected production fluctuations. And
an operator who has worked at the El Segundo plant co-owned by NRG and Dynegy
said the practice was used there, although less frequently. The scheduling
calls came from Dynegy's trading floor in Houston, rather than NRG in
Minneapolis, he said.
Steve Stengel, a spokesman for Dynegy, said changes in output at El Segundo
were a normal function of changing demand levels throughout the day, and
denied the company was engaged in gaming the California market.
In a May 2000 report, the California Energy Commission cited Reliant's
Etiwanda plant, as well as the Alamitos and El Segundo plants, as some of the
"major beneficiaries of high real-time prices" that spring.
One way to obtain those high prices, the plant workers said, was the simple
method of demanding a sky-high price and refusing to deliver power if that
price was not met.
On one occasion, one operator said, Reliant ordered a unit at Etiwanda to be
shut off because the ISO would not meet the price of $1,000 per megawatt
hour, even though the legal price cap at the time was $750.
"The operator said, 'It's our unit, shut it off,' " the source said.
E-mail Christian Berthelsen at cberthelsen@sfchronicle.com and Scott Winokur
at swinokur@sfchronicle.com

Grid officials, others studying planned blackouts
Posted at 6:43 a.m. PDT Monday, May 21, 2001
BY JENNIFER COLEMAN

Associated Press Writer

SACRAMENTO (AP) -- Could Californians be waking up to hear a weather report,
a pollen count and an electricity blackout forecast?
It's not out of the question, say some lawmakers.
``I actually think it's a thoughtful plan ... to give folks an opportunity to
understand the likelihood of blackouts on a daily basis,'' Assemblyman Fred
Keeley, D-Boulder Creek, the Assembly's point man on energy.
Keeley compared it to ``weather forecasting, to be able to look at the next
three or four days, have a percentile about the likelihood of blackouts.''
The Independent System Operator, keeper of the state's power grid, is
expected to release a report Monday detailing how such a plan would work.
The idea is ``to provide a lot of information so people can make choices to
live with blackouts on a temporary basis this summer,'' Keeley said.
Peter Navarro, a University of California, Irvine, economics professor,
released a report last month with a consumer group that recommends the state
set a price limit on what they'll pay for power. And if generators don't
lower the price, the state should schedule blackouts to cut consumption, he
said.
The report by Navarro and the Utility Consumers' Action Network says the
state's current method of ``highly disruptive random rolling blackouts''
needs to be revamped.
UCAN suggests that the state be divided into blackout zones that utilities
could notify ahead of time that power would be cut at a specific time and for
a certain duration.
Scheduling blackouts could attract criminals to outage areas, Keeley
acknowledged, and possibly could subject the state to legal liability for
traffic accidents or other incidents if power is deliberately shut off.
``That is a genuine problem and genuine concern,'' Keeley said. ``I think we
would have to work with local governments so they could have a sufficient
advance notice to be able to foresee that and try to deploy their resources
appropriately.''
Critics of the planned blackouts said power producers simply could sell their
unused electricity to other states, or trim back production to keep supplies
short.
Assemblyman Mike Briggs, R-Fresno, plans to introduce a bill this week that
would have the Public Utilities Commission notify businesses and homeowners
as much as one month ahead of time when they would have their power cut.
``We owe the people of this state some kind of schedule,'' Briggs said. ``If
businesses and individuals knew what days their power could potentially be
shut off or blacked out, they could plan for that blackout accordingly.''
The Central Valley Republican said the ability to plan for outages would be
especially benefit farmers, who need power to irrigate their crops.
Assembly Speaker Robert Hertzberg, who convened a special subcommittee on
blackouts, has also suggested the state should consider scheduling daily
blackouts to cut the state's power use and drive down prices. Democratic
Assembly members plan to introduce their own version of a blackout plan.
Sen. Debra Bowen, D-Marina del Rey, has said she envisions giving consumers
three to five days notice that their power will be cut during a particular
period, so businesses could opt to shut down or shift their operations to
nonpeak hours such as nights and weekends.
And by treating blackouts as a first option rather than a last resort, the
state could cut its peak power needs and drive down prices, Bowen said.
California power consumers would in essence form ``a reverse cartel to stop
the market manipulation and the price gouging,'' she said.
The planned blackout suggestions come as state officials grow increasingly
concerned that power prices will keep rising this summer, even beyond the
extraordinary levels the state already has been paying on behalf of three
cash-strapped privately owned utilities.
Gov. Gray Davis said the state paid $1,900 per megawatt hour at one point
last week.
The state has dedicated $6.7 billion since mid-January to purchase power for
Pacific Gas and Electric, Southern California Edison and San Diego Gas and
Electric.
Those expenditures will be repaid this summer when the state issues $13.4
billion in revenue bonds. The bonds will be repaid by ratepayers over 15
years.

Planning ahead for blackouts
Business, services plan for summer crises.
By LOIS EVEZICH
Aliso Viejo News
No sooner did Aliso Viejo become the newest city in Orange County than
California was hit with an energy crisis, threatening rolling blackouts
across the community. Energy issues have already taken a priority with the
council-elect and the city manager.
"We've had some meetings to familiarize ourselves with the situation," said
Interim City Manager William Woollett. "We've hired an engineering firm to
take a look at what kind of organization we need and what kind of budget we
must have for this issue."
Woollett added that they haven't done anything specific yet, as Aliso Viejo
is not a formal city until July 1.
Hilary McAllister, head librarian at the Aliso Viejo branch of the Orange
County Public Library, said, "All the branches have a plan. We plan to
continue checking out books, only doing the work by hand, as long as it is
safe. Safety is the main issue, and if that is a concern we might have to
close."
Branches in the library system received instructions, said McAllister, and
much of what they decide will have to do with how much warning time they
have.
"We're hoping the power company will warn us," she said.
The library, at 1 Journey, has been exempt from blackouts so far, even when
other areas in Aliso Viejo were hit. McAllister isn't sure if that has
anything to do with their location right across the street from the fire
station.
Fluor Corporation, with a large facility in Aliso Viejo, which houses 2,300
employees in its corporate headquarters and the five-building campus a
block away, is well prepared for a blackout, according to Lorie Serrato,
media representative.
"We even have blackout kits for the elevators," said Serrato. "They include
bottled water, snacks, and flashlights." She didn't know if there were also
tranquilizers included for those who are claustrophobic.
"We're getting used to taking the stairs," she said. "And we're learning to
save our work on computers more often. That's important."
Barnes & Noble experienced a blackout this winter. For safety reasons,
customers were asked to gather at the front of the store, and business went
on, though not as usual. Customers who knew what books they wanted to buy
asked employees to find them, and sales were registered on calculators.
For safety reasons, customers were not allowed where there was not adequate
light.
Barnes & Noble has cut lights in the back room to save energy, and set the
air conditioners to slightly higher temperatures.
Wendy Mortensen, skating school director at the Ice Chalet at 9 Journey,
said, "We've been told that we are on the same power grid as the Sheriff's
Substation and the Fire Department, and that we won't lose power."
Mortensen said that in 90 minutes, not much would happen to the ice, and if
there is a blackout, there is enough light during the day.
"We are only running half the lights," said Mortensen. "And we keep the
offices and the hallways dark to conserve energy."
United Parcel Service is tight-lipped about conservation measures. They
consider it proprietary information, as the measures give them a
competitive edge.
Overall, the company said they can work during blackouts, though it takes a
little longer. The facility does not have much activity during the peak
energy hours, but if it should happen during heavy work loads, the facility
can transfer the work to other shifts, or to another UPS facility.
UPS in Aliso Viejo is part of the Edison "Beat the Peak" program, designed
to help companies conserve and prepare. The facility has motion sensors in
the offices, and all employees have flashlights and other equipment as a
safety precaution.
Kmart was awarded a $2 million grant from the California Energy Commission in
February. It used some of that money to retrofit the Aliso Viejo store with
energy-conserving store lights that reduce consumption by 40 percent.
The project is still under way, with expected completion in the next several
weeks. Kmart also has uninterruptible power sources it uses as backups, in
case there is a blackout. These backups provide 40 minutes worth of energy,
used for the pharmacy and the cash registers. In the event of a blackout, the
store would close for new customers, but could still service the customers
already in the store.

Is price gouging root of crisis?
The president is "allowing the price-gouging energy companies, many of whom
reside in Texas, to get away with murder," Gov. Gray Davis said on Thursday
in response to a George W. Bush energy plan that doesn't call for caps on the
price of electricity sold by out-of-state generators to California.
This remark captured the essence of the Davis approach to the energy
problems: Blame everybody else, call for government price controls even
though they historically have reduced the supply of energy, and use divisive
and even conspiratorial rhetoric.
On the same day Governor Davis was blasting the Bush energy plan, his
appointee who runs the Public Utilities Commission, Loretta Lynch, told a
newspaper that power generators purposefully keep their plants idle to jack
up prices. Attorney General Bill Lockyer said that he found evidence of what
Ms. Lynch called "artificial shortages."
We're interested in seeing the evidence, of course. But it looks suspiciously
like politicians are using the "power-gouging" theory as a way to bluster
rather than come up with concrete solutions. It also is a way for those who
are ideologically hostile to deregulation - perhaps cynical of business and
capitalism in general - to demonize merchant generators and pave the way for
a government takeover.
No doubt, wholesale electricity prices have skyrocketed. Prices zoomed from
$200 a megawatt hour late last year to nearly $2,000 last week, according to
the San Francisco Chronicle. The newspaper reports that plant shutdowns are a
cause of the price spike.
Yet a number of analysts have found the price-gouging theory to be dubious. A
Dow Jones Newswire column analyzed Federal Energy Regulatory Commission data
on the amount of forced outages over the past two summers. Yes, there were
nearly four times as many plant closures by plants owned by five big
producers in summer 2000 than in summer 1999. But, as writer Mark Golden
pointed out, outages for all plants - including municipally owned ones and
small Qualifying Facilities that have no incentive to game the system - were
658 percent higher in summer 2000 than in summer 1999. The writer notes that
"four of the Big 5 are either constructing big new generators in California
or have applied for permits to do so. That would seem to fly in the face of a
withholding strategy."
An April paper co-authored by William Hogan, a professor at the John F.
Kennedy School of Government at Harvard University, could not prove there
wasn't manipulation, but explained, "it is unlikely to be the dominant factor
and may not even be significant."
The bigger issue, the Hogan paper argued, is the "seriously flawed"
restructuring system that caused the electricity market collapse. "[T]he
principal policy focus should be on fashioning workable solutions for the
other more serious problems in the market design that relate to the
underlying causes of the market meltdown."
Other analysts argue that, to whatever degree price-gouging has taken place,
it is solely the fault of the retail price caps and other government rules
that have distorted the market.
The large number of shutdowns has not been the result of any conspiracy, the
power generators say, but the result of needed maintenance on facilities that
have been overworked. Many of these are older plants that require more
shutdowns for maintenance than new ones.
"People can invest money in various different markets," Jan Smutny-Jones told
us; he is executive director of the Independent Energy Producers Association
in Sacramento, which represents QFs and merchant generators. With politically
charged hearings, demonization of power generators, proposals for
excess-profits taxes and threats of seizing property made by California
Democrats, he said generators may conclude that California is a dangerous
place to invest.
Gov. Davis said the Bush plan won't add any new electrical power. But neither
will Davis' grandstanding about price-gougers.
In fact, it may even dissuade electricity investment. The governor needs to
apply his "will it create new power?" standard to his own rhetoric, then get
busy leading the state out of this mess

Generator could help during future energy shortages
City is the first field-trial customer for low-emission device.
By ANNALISA BURGOS
Anaheim Bulletin
Anaheim has taken several innovative measures to secure reliable power
sources for its customers.
One such measure, approved unanimously by the City Council on April 24, is to
be the first field trial customer for Indiana-based Cummins Inc. and
Vancouver-based Westport Innovations Inc.'s joint venture 1.5 megawatt,
low-emissions natural gas power generator.
The Anaheim Convention Center will test the Westport natural gas fuel
injection technology on a Cummins QSK 60-litre diesel engine generator. The
technology allows diesel engines to operate on natural gas, reducing
emissions and allowing longer hours of operation, up to 4,000 hours per
year, compared to 200 hours per year from other generators.
"Public utilities is always looking for new environmentally efficient
technologies," spokeswoman Melanie Nieman said.
The generator will not be installed until this fall, which means it will not
be available to help during this summer's power crisis. But officials believe
it will be a valuable asset.
"The Cummins-Westport generator provides much-needed electricity that meets
environmental regulations and during peak periods can produce power for less
than the market cost of power," general manager Marcie Edwards said.
"The use of such onsite generators enables us to respond to customer needs
while reducing California's system demand."
The generator will provide off-site, distributed generation that will be able
to supplement Anaheim's utility grid with power that may be called upon
during state power emergencies or when the cost of wholesale market power is
high.
Anaheim gets 80 percent of its energy supply from long-term, power generation
contracts and 20 percent on the daily wholesale market. In addition, the
generator can provide about 25 percent of the center's energy load and will
serve as a source of backup, emergency power.
Westport spokesman Alan Bayless said California's energy shortage made it
an ideal location to test the new technology.
Nieman said the city chose the Convention Center because it needed extra
backup for its expansion.

Energy-saving measures implemented
By THERESA SALINAS
The Orange County Register
Stanton City Manager Terry Matz said that energy-saving measures have been
implemented at City Hall, including the installation of light sensors that
turn the lights on when people enter a room.
The city also has received a $37,000 grant from Southern California Edison to
replace current traffic signals with energy-saving diode lights. Matz said
the city is also looking at the possibility of equipping major intersections
with battery back-up systems to keep signal lights functioning.
Matz said that he is requesting $100,000 be set aside in the 2001-2002
budget to purchase new emergency generators for the Civic Center.

Calif. Utilities Make Accusation

LOS ANGELES (AP) via NewsEdge Corporation  -
There is evidence that a ``cartel'' of power
companies shut down plants for unnecessary maintenance to increase
energy prices, the head of the California Public Utilities
Commission said. An energy official called the allegation
``idiocy.''

PUC President Loretta Lynch told the Los Angeles Times on
Thursday that her agency and the state attorney general's office
are probing plant outages that she said created ``artificial
shortages'' that contributed to skyrocketing power prices.

``There are instances where plants could have produced, and they
chose not to,'' Lynch said. ``And it is clear that there are
instances that plants, when called to produce, chose not to
produce.'' She said that happened even when plants were obligated
to do so under special contracts with utility companies and the
state.

Gary Ackerman, executive director of the Western Power Trading
Forum, dismissed Lynch's allegations as ``the height of idiocy.''

Power generators have repeatedly said they have been acting
within the rules of the state's deregulation system. The reason
many plants have been down in recent months, Ackerman said, is that
power producers must perform maintenance now in anticipation of
heavy summer demand.

``My members do not make money by shutting down their plants so
their competitors can make money,'' said Ackerman, who represents a
trade association of large power producers.

But Lynch said the probe has produced enough information for the
PUC and attorney general to take legal action next month against
some power generators. She did not identify them, and the exact
nature of the legal action is still under review, she said.

Investigators conducted interviews and reviewed subpoenaed
records, obtained after legal battles with the power companies, to
gather evidence of allegedly unnecessary plant shutdowns, Lynch
said.

Power plants where unplanned shutdowns have happened also were
visited to examine operations and maintenance records, Lynch said.

Power prices have gone from $200 a megawatt hour in December to
as much as $1,900 last week, and plant shutdowns have been a key
factor in the soaring prices.

``I would argue it's no accident,'' Lynch said. ``That in fact
it's due to the coordinated behavior of a cartel.''

Lynch said one suspicious pattern has emerged: When operators of
the state's electricity grid declared a Stage 1 alert, which means
that electricity reserves had dipped below 7 percent, plants that
didn't need repairs were suddenly pulled off-line.

PG&E Targets Business Customers for Energy Reduction; Utility Steps Up
Efforts to Encourage Conservation; Awaits More State Funding

SAN FRANCISCO--(BUSINESS WIRE)--May 18, 2001 via NewsEdge Corporation  -
In conjunction with
its customer education campaign called "The More You Know About
Conserving Energy, the Less Energy You Need," Pacific Gas and Electric
Company has stepped up its efforts to update business customers on the
energy crisis and provide tools to help them conserve energy -
especially in the coming months when power shortages are likely.

The utility is also working with state officials to determine how
best to use the additional funding for conservation and energy
efficiency which is contained in SB5x, signed into law by Governor
Davis on April 11.

The California Independent System Operator has forecast power
shortages of 600 to 3,700 megawatts between now and the end of summer.
Shortages that significant may result in blackouts for millions of
Californians. With little new generation available in time for summer
peak use, along with a continuing reduction of hydroelectric power
from the Pacific Northwest, Californians must adopt rigorous energy
conservation habits if outages are to be minimized.

"The energy crisis has taken its toll on all of us, with higher
energy costs and blackouts, but we recognize that our business
customers are especially hurt because they use a lot of electricity
and outages not only mean a loss of productivity but can damage
expensive, sensitive equipment," said Bev Alexander, Pacific Gas and
Electric Company vice president over energy management programs.
"Since businesses account for about half of customer electricity
consumption, their efforts to conserve have a great impact on
statewide energy use. So, we want them to utilize all the tools
available to reduce their energy use."

Pacific Gas and Electric Company offers advice and incentives to
help consumers make their businesses more energy efficient. Rebates
are available for installing more efficient lighting, HVAC,
refrigeration and other mechanical equipment. The utility has budgeted
$62 million for business energy management programs in 2001. The
funding comes from ratepayers via the Public Purpose Programs charge
on all customers' utility bills and is not impacted by the company's
Chapter 11 proceedings.

In addition, Pacific Gas and Electric Company has proposed to the
CPUC how it could spend approximately $35 million to support
business-related energy efficiency programs from SB5x funds, which set
aside $800 million in taxpayer dollars to encourage residential and
non-residential energy conservation.

The utility also is encouraging customers to take simple steps
such as turning off lights and equipment and adjusting thermostats to
reduce the air conditioning load.

"On a hot summer day, 40 percent of California's energy use is air
conditioning and commercial lighting, " Alexander said. "For example,
if commercial office buildings turned out every other light and set
their thermostats to 75 degrees, we could save roughly 3,500 megawatts
or the equivalent of seven large power plants. Measures like these
could virtually prevent blackouts this summer."

To educate business customers on the energy crisis and steps they
can take, the utility holds informational workshops throughout its
service area, sends newsletters, includes bill inserts, utilizes paid
advertising, the Internet and news stories. Business customers can
obtain information about energy efficiency programs by visiting
www.pge.com/123 or calling the Business Customer Center at
1-800-468-4PGE.

The business outreach program is just one element of Pacific Gas
and Electric Company's customer education campaign called "The More
You Know About Conserving Energy, the Less Energy You Need."

Note to reporters and editors: for details on the available
programs, please also see the fact sheet entitled: "Energy Efficiency
Programs for Business Customers."

ENERGY EFFICIENCY PROGRAMS

FOR BUSINESS CUSTOMERS

In March 2001, Pacific Gas and Electric Company launched a
customer education campaign entitled "The More You Know About
Conserving Energy, the Less Energy You Need." Along with advertising,
the Internet and news stories, staff from the utility are holding
workshops throughout the service area to educate business consumers on
the seriousness of the problem and what they can do to conserve.

--  With demand for electricity expected to climb in the coming

months and little new generation available, the California

Independent System Operator is forecasting severe power

shortages that will likely result in blackouts for thousands

of Californians.

--  The only way to reduce the threat of blackouts is for all

consumers to reduce their electricity usage. Because Pacific

Gas and Electric Company's 500,000 commercial customers

account for about half of the power used, the business

community has the ability make a big impact with its

conservation efforts.

Programs Available for Business Customers

For 2001, Pacific Gas and Electric Company has enhanced its energy
efficiency programs for business customers to achieve both energy
savings and demand reduction. The company has budgeted $62 million in
2001 to provide energy efficiency programs for business customers, and
is hoping for additional funding to come from SB5x, which the Governor
signed on April 11. The CPUC is currently reviewing how to allocate
the funds.
-0-
*T
No Cost/Low Cost Programs
Assistance and Advice

--  Energy audits and benchmarking tools - Company's technical

consultants conduct targeted, on-site, phone and mail-back

energy surveys at customer's request; identify immediate and

potential energy savings measures.
Information

--  Website (www.pge.com/123) - Offers business customers

information about the company's energy efficiency programs.

--  Business Customer Center (800-468-4743) - Helps business

customers with energy efficiency program information and

related technical resources.

--  Pacific Energy Center - Provides up-to-date technical

information and consulting support to utility customers, as

well as the commercial building design and engineering

community through its educational programs and design tools

services.

--  Food Service Technology Center - Gives impartial, reliable and

useful information about energy-efficient design and operation

of commercial food service facilities and equipment.

--  SmarterEnergy Online (www.pge.com/smarterenergy) - Features an

online, searchable listing of vendors of energy-efficient

products within the company's service area and provides

purchasing guidelines for customers.
Design Tools

--  Commercial Refrigeration System Simulation Tool - Helps

designers make efficiency comparisons between alternative

hardware and control systems under a full range of operating

conditions for commercial refrigeration systems.

--  CoolTools: A Tool Kit to Optimize Chilled Water Plants -

Compares the energy impact of chilled water plant equipment

and control options with an integrated set of simulation and

design tools and usage guidelines.

--  Daylighting Program - Provides design tools, case studies,

consultations and other information to help designers and

vendors predict the performance and appearance of daylit

spaces in commercial and industrial buildings, both new

construction and retrofit. Offers information for designing,

specifying, calibrating and commissioning integrated lighting

control systems.
Investment Programs
Express Efficiency Program:

--  Provides cash rebates to utility customers for installation of

new energy efficient equipment, such as high efficiency

lighting, air conditioning and refrigeration.

--  Rebates are paid to help customers plan, finance and install

new energy-saving equipment.

--  Rebates are limited to $100,000 per account and $2 million per

corporate parent.

--  Available to customers on commercial, industrial or

agricultural rate schedules.

--  Retailers and distributors can also get rebates for selling or

purchasing qualifying energy-efficient equipment.
Standard Performance Contract:

--  Program pays up to $500,000 per utility customer site and $2

million per corporate parent.

--  Cash payments are made for measured energy savings and demand

reduction that result from installation of custom tailored

energy-efficient facility retrofits.

--  Covers facility retrofit projects for commercial, industrial,

and agricultural utility customers.

--  Special financial incentives are available for projects that

deliver "on-peak" demand reduction.

--  Standard prices are paid to customers or qualifying third

parties for verified energy savings.
Targeted Rebate Programs:

--  LED Traffic Signals - cities qualify for cash incentives to

encourage them to replace incandescent signals with LEDs,

which use 85-90% less energy and last up to 10 years.
*T

CONTACT: PG&E |              News Department, 415/973-5930

Power Crisis May Can
Northwest Aluminum
By Robert Guy Matthews
?
05/21/2001
The Wall Street Journal
Page A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)
PITTSBURGH -- The list of victims of California's botched power-deregulation
plan keeps growing.
When California's electricity shortage surfaced last fall, it caused spot
prices of electricity to skyrocket all along the West Coast. Some aluminum
companies profited by temporarily closing their massive smelters in the
Pacific Northwest and selling back their electricity to the spot market or to
the Bonneville Power Administration, the region's biggest power provider.
The aluminum industry, which produces nearly 40% of the nation's output in
the states of Oregon, Washington and Montana, commands a huge amount of
electricity, enough to power Seattle daily. Closing the smelters freed up a
lot of power and significantly reduced Bonneville's reliance on the
electricity spot market.
But Bonneville now wants the 10 smelters in the region to stay closed for two
years; business executives, economists and union leaders are just now
assessing the economic impact of the plan. And for the most part, things
don't look good for the small Pacific Northwest towns whose livelihoods
revolve around aluminum.
For the aluminum companies, closing plants isn't such a bad thing, at least
in the short term. Besides getting a big chunk of cash from Bonneville, the
closures will cut nearly 5% of the world's aluminum smelting capacity. Alcoa
Inc., Pittsburgh, the world's leading aluminum producer, says it's closing
its Ferndale, Wash., smelter, idling 270,000 metric tons, or 7% of its annual
capacity.
With that much aluminum off the market, prices, once expected to drop amid a
slowing economy, have instead firmed and are expected to rise. Pechiney SA of
France, the world's third-largest aluminum maker, expects prices to jump at
least 11% by the end of the year as a result of supply-side bottlenecks.
Current spot prices for aluminum hover around 69 cents a pound. Alcan Inc. of
Montreal, the second-largest aluminum maker in the world, says it expects
more growth and better profits from many of its operations, including its
specialty-packaging business, rolling mills and production of primary
aluminum. Meanwhile, producers in India said they plan to take advantage of
the bottleneck in the U.S. by boosting exports.
Outside the Pacific Northwest, "existing smelters in the U.S. are pretty much
operating at capacity," says Michael F. Gambardella, metals analyst for J.P.
Morgan Securities Inc. "The problems in the Pacific Northwest have kept
aluminum prices relatively stable despite the current period of weak demand
for aluminum. The icing on the cake will be when the U.S. economy starts to
recover. You will see aluminum prices skyrocket."
For companies using aluminum as a raw material, rising prices may become
another burden, just as labor and energy costs and dwindling revenue damp
profits. But the biggest victims will be the rural towns in the Pacific
Northwest whose economies have relied on aluminum since after the Great
Depression, when the U.S. government supplied cheap power to run smelers in
hopes of easing high unemployment.
Economists believe that if aluminum plants close for two years, they will
likely stay closed. Operating aluminum smelters isn't like opening or closing
a 7-Eleven. It costs a lot of money to shut the metal-making operations down
and then even more money to reboot the entire operation. This is why aluminum
smelters and similar factories run 24 hours a day.
Additionally, the way that the smelting operations are configured, aluminum
companies rack up losses if the plants operate at low capacities. And
remaining open isn't much of an option after Bonneville signaled that power
rates will rise sharply in October, when current contracts with the aluminum
companies expire. Sharply higher rates will make aluminum production
unprofitable.
For now, Alcoa said it will not immediately lay off the 900 employees at the
shuttered Ferndale plant, primarily because Bonneville agreed to reimburse
Alcoa for employee wages and benefits.
Still, the news of plant closings is sending shock waves through communities
such as Goldendale, Wash., a small town on the banks of the Columbia River.
Together, Goldendale Aluminum Co. and Northwest Aluminum Co. employ about
1,300 people, more than one-third of the immediate area's working population.
Those aluminum jobs pay about $58,000 a year in salary and benefits. "The
jobs created by these industries are the lifeblood of our communities," says
Mark Sigfrinius, Goldendale's mayor. "They cannot be written off."
To ease the pain, Bonneville is hoping that it can strike a deal so that the
aluminum makers in the region will take payments received for shutting down
and use that money either to retrain the work force or to provide a lump-sum
payment to help them make it through the two years. But the United
Steelworkers of America, representing 6,000 workers in the affected Oregon,
Montana and Washington region, says that its skilled work force would
probably just leave the region and find work elsewhere under the BPA plan.
"The union is jumping up and down about this," says David Foster, a
negotiator for the union. "We intend to make absolutely sure that money comes
to the union workers. Two years is a long time."