Please see the following articles:

AP Wire services, Tues 3/20: "Calif. Officials Order Blackouts"

Dow Jones News, Tues 3/20: "California Panel to Order Utilities to Make $1
Billion in Back Payments"

SF Chron, 3/20: "As Davis Seeks Money, Lawmakers Want Answers
Members of both parties angry at lack of dialogue"

Fresno Bee, Tues 3/20: "Jones rips state on energy crisis "

Sac Bee, Wed., 3/21:  "Day 2 -- Battling blackouts: Payment plan sought to
restart small plants"

Sac Bee, Wed., 3/21:  "Hospitals take hit, seek power guarantee"

Sac Bee, Wed., 3/21:  "Lodi still won't pull the plug"

San Diego Union, Tues., 3/20:  "Blackouts hit for second day; break seen
Wednesday"
San Diego Union, Tues., 3/20:  "State power regulators working on energy
rescue"

San Diego Union, Tues., 3/20:  "Federal regulators scored for not ordering
more California refunds"

LA Times, Wed., 3/21:  "Second Day of Blackouts Disrupts 500,000 Home and
Businesses"
LA Times, Wed., 3/21:  "Fragile Supply Network Apt to Fail"

LA Times, Wed., 3/21:  "Elevator Anxiety is Riding High"

LA Times, Wed., 3/21:  "State says it's accelerating plan to buy Power
Utilities' Grid"

LA Times, Wed., 3/21:  "L.A., Long Beach File Suits Over Gas Companies'
Prices "

LA Times, Wed., 3/21:  "Davis OKs Subsidy of Pollution Fees"

LA Times, Wed., 3/21:  "As Losses Mount, Companies work around outages"

LA Times, Wed., 3/21:  Commentary:  "A Blackout on Answers"

LA Times, Wed., 3/21:  Commentary:  "Rolling Blackouts: Blatant Extortion"

SF Chron,  Wed., 3/21:  "Utilities' Demand Blocks Bailout
NEGOTIATIONS HIT SNAG: PG&E, Edison want end to price freeze if they sell
transmission lines to state"

SF Chron, Wed., 3/21:  "Utilities' Demand Blocks Bailout
BLACKOUTS ROLL ON: Weather, increased consumption blamed"

SF Chron, Wed., 3/21:  "Manners Go Out the Window
Pedestrians in peril as drivers turn darkened S.F. streets into free-for-all"

SF Chron, Tues., 3/20:  "Historic Blackouts in State
Bay Area learns to cope"

SF Chron., Tues., 3/20:  "Second day of rolling blackouts in power-starved
California"

Mercury News., Wed., 3/21:  "Bay Area Residents Learning to roll with
Blackouts"

Orange County, Wed., 3/21:  "Powerless, Again"

Orange County, Wed., 3/21:  "The iceman shunneth effects of hourlong blackout"

Orange County, Wed., 3/21:  "Traffic officials are seeing red over blackouts"

Orange County, Wed., 3/21:  "Alternative power producers cut back or shut
down as payments from big utilities lag"

Orange County, Wed., 3/21:  "O.C. saves its energy -- for blaming others"

Orange County, Wed., 3/21:  "Blackout readiness on agenda"

Dow Jones Energy News, Wed., 3/21:  "Calif To Order Utils To Pay Small
Generators Up Front-Gov"

Dow Jones Energy News., Wed., 3/21:  "PG&E Says It Is Negotiating With
Qualifying Facilities"

Energy Insight, Wed., 3/21:  "New York at the Crossroads"

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Calif. Officials Order Blackouts
By PAUL CHAVEZ, Associated Press Writer
LOS ANGELES (AP) - State power managers ordered rolling blackouts across
California for a second straight day Tuesday as demand for electricity again
exceeded supply.
The same factors that collided to strap California's power supply on Monday
hit again, officials with the Independent System Operator said. Those include
reduced electricity imports from the Pacific Northwest, numerous power plants
offline for repairs and higher-than-expected demand because of warm
temperatures.
A two-unit Southern California plant that the ISO hoped would be working
Tuesday had not been fixed. One of its units might go online at noon to help
the situation, the ISO's Jim Detmers said.
In addition, hydroelectric power imports from the Northwest were 800
megawatts lower than Monday, he said. The ISO oversees most of the state's
power grid.
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California Panel to Order Utilities to Make $1 Billion in Back Payments
By Jason Leopold

03/20/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dow Jones Newswires
LOS ANGELES -- The California Public Utilities Commission will order Edison
International's Southern California Edison and PG&E Corp.'s Pacific Gas &
Electric unit to pay small power generators that are qualified utilities
about $1 billion in past-due payments in order to keep the plant owners from
dragging the utilities into an involuntary bankruptcy proceedings, and to
also ensure the generation units keep pumping out electricity, people
familiar with the matter told Dow Jones Newswires late Monday.
Gov. Gray Davis, state Sen. Debra Bowen, and Assemblymembers Fred Keeley and
Robert Hertzberg, all Democrats, spent most of the day y trying to hammer out
an agreement with the so-called qualifying facilities, alternative power
producers that use the wind, sun, steam and biomass to generate electricity
for the state, on supply contracts and past payments the utilities failed to
make.
The qualifying facilities, which represent about one-third of the state's
total power supply and signed contracts to sell power directly to the
utilities under a government mandate, would then agree to sign power-supply
contracts with the utilities for a period of five to 10 years for about $79 a
megawatt hour for the first five years and about $61 a megawatt hour
thereafter, two sources involved in the negotiations said.
The PUC is expected to issue a draft resolution on the issue sometime this
week, one source said.
The lawmakers wouldn't comment on the details of their talks Monday.
Representatives with SoCal Ed (EIX) and PG&E (PCG) said they were unaware
Gov. Davis and his administration were meeting on the issue.
The utilities are more than $13 billion in debt and have failed to make
payments on their qualifying-facilities contracts since November. PG&E has
paid some of its qualified facilities just a fraction of what they are owed.

Legislation To Restructure QF Rates Stalls In Senate Energy Committee

Mr. Keeley had recently drafted legislation, along with state Sen. Jim
Battin, a Republican from Palm Desert, that would have restructured the rates
the qualified facilities charge the utilities, from $170 a megawatt hour to
$80 a megawatt hour for five years.
The bill, SB47X, stalled in the Senate Energy Committee, of which Ms. Bowen
chairs. SoCal Ed opposed the legislation, saying the rates were still too
high. A utility spokesman said the qualified-facilities rates should be
reduced to under $50 a megawatt hour.
But the lawmakers and the governor is trying to avoid the need for
legislation, largely because there isn't much support in both houses for such
a bill and the chance that it won't be passed in time to keep the qualified
facilities from dragging the utilities into involuntary bankruptcy
proceedings, the legislative source said.
The PUC will take over the issue from the Legislature, the source said.
Monday, about 3,000 megawatts of qualified-facilities generation went offline
because the companies that operate the power plants can no longer afford to
buy natural gas used to fuel the plants due to the utilities' failure to pay
money owed to the companies, said Jim Detmers, vice president of operations
for the state's Independent System Operator.
The outages triggered a major shortfall in the state which resulted in nearly
eight hours of statewide rolling blackouts Monday.
Many owners of the qualified-facilities said without immediate relief, they
would likely force SoCal Ed, and possibly PG&E, into involuntary bankruptcy,
perhaps as soon as Thursday.
One such facility, CalEnergyOperating Co., wants to be freed temporarily from
its contract with the utility and be allowed to sell its electricity to third
parties until the utility is able to pay its bills. CalEnergy is an affiliate
of MidAmerican Energy Holdings Co., which is majority owned by Warren
Buffet's Berkshire Hathaway Inc. (BRKA).
The company sued SoCal Ed last month, and the case is scheduled to be heard
Thursday in Imperial County Superior Court. If a judge delivers an
unfavorable ruling, CalEnergy and other unsecured creditors would drag SoCal
Ed into involuntary bankruptcy, three executives with the companies involved
said.
CalEnergy is said to be organizing a bankruptcy petition now circulating
among six of Southern California Edison's independent power suppliers and
could file the petition very quickly if it fails in its suit Thursday, said
executives with three of the six companies.

Write to Jason Leopold at jason.leopold@dowjones.com
Copyright (c) 2001 Dow Jones & Company, Inc.
All Rights Reserved
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As Davis Seeks Money, Lawmakers Want Answers
Members of both parties angry at lack of dialogue
Lynda Gledhill, Greg Lucas, Chronicle Sacramento Bureau
Tuesday, March 20, 2001
,2001 San Francisco Chronicle
Sacramento -- The Legislature has warned it may block further state purchases
of electricity as lawmakers' frustration with Gov. Gray Davis' handling of
the energy crisis increases.
A test may come soon because Davis asked yesterday for another $500 million
to continue buying power.
Sen. Steve Peace, D-El Cajon, chairman of the Joint Legislative Budget
Committee, wrote to Davis' Finance Department on Friday that the committee
might deny further spending requests "in the absence any discernable
progress" from the Public Utilities Commission to ensure that the state would
get its money back.
Members of the committee, both Republican and Democratic, said they supported
Peace's call for more oversight of the spending, given the lack of
information from Davis on details of the state's power purchases.
"He's been holding things close to the chest, and that bothers me," said Sen.
John Vasconcellos, D-Santa Clara. "I want to know a lot more."
Sen. Dick Ackerman, R-Fullerton, said the administration "has been
stonewalling us about how much is being spent, and how much power we're
getting for it. When the state is spending that kind of money, at a minimum,
legislators should know for what."
The state had spent $2.6 billion on electricity through March 11. Davis'
request for more money would put the state at the $3 billion mark by the
middle of April. The state is spending an average of $49 million a day.
The money is supposed to be paid back through the rates collected from
utilities' customers. It is up to the PUC to decide how to divide that money
among the state, the utilities and the utilities' debtors. The commission is
scheduled to take up the issue at its March 27 meeting.
The problem is that there appear to be more demands on the money than there
is money to go around.
The utilities have said they need the money to pay off some of their
creditors. Among those looking for cash are alternative-power generators that
were selling electricity to Pacific Gas and Electric Co. and Southern
California Edison. Half of them have shut down because they have not been
paid.
Earlier this month, the PUC granted the Department of Water Resources, which
has been purchasing electricity for the state, the power to recoup its full
costs through rates.
It's unclear whether that can be accomplished without raising electricity
prices, though Davis has insisted he can solve the crisis without boosting
rates.
Lawmakers said they approved the bill that allowed the state to buy power in
the belief such purchases would be a stopgap until the Davis administration
could sign long-term contracts with power suppliers. However, only about 19
contracts have been signed to date, out of 42 agreements. If all the
contracts are signed, they will account for about 70 percent of the power
California is expected to need.
"It was our expectation some of these contracts would kick in," said
Assemblywoman Carole Migden, D-San Francisco. "This was designed to only be
bridge money to avert a power disaster. We should hold firm and come up with
a plan.
"I recall about three weeks ago when we first asked about one of these $500
million letters," Migden said. "We said maybe this one is necessary, but
there won't be carte blanche approval of any future requests. I'm pleased
Sen. Peace is taking that approach."
To Assemblyman George Runner, R-Lancaster, Peace's letter was "another way
for the Legislature to send a message we need to be in this loop. We're just
getting a small little dribble of information, which just creates more
questions."
A spokesman for the Department of Finance said officials hoped to work with
the committee members about their concerns.
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Jones rips state on energy crisis
Secretary of state hints that he'll take on Davis in 2002.
By John Ellis
The Fresno Bee
(Published March 20, 2001)
Officially, he's Bill Jones, secretary of state for California. Unofficially,
he's Bill Jones, 2002 gubernatorial candidate.
The evidence is right there between the lines -- in the subtleties of his
speeches, their subject matter, and the way Jones carries himself when he's
in public.
Monday was no different, as Jones addressed a Rotary Club luncheon in Fresno
full of people who are assuming -- though nothing is official -- that the
Fresno native will soon announce his intention to challenge Gov. Davis next
year.
"Bill, they call me governor," Chas Looney, a former Rotary Club district
governor, quipped to Jones. "I look forward to the day we all can call you
governor."
Jones then proceeded to deliver a speech to a packed house in the DoubleTree
Hotel that touched on his accomplishments as secretary of state, but quickly
moved to his main topic: California's crumbling infrastructure and how the
energy crisis is affecting the state.
Always in the background but never mentioned by name was Davis. Jones was
careful to hew to the Rotary rule that speeches steer clear of partisan
politics.
Still, Jones looked, sounded and acted like a candidate for governor, and
near the end of his speech he promised his decision would come soon.
The Fresno Republican's speech began by highlighting his work in passing the
"Three Strikes and You're Out" initiative in 1994.
Jones also talked of his efforts to remove 2 million inactive California
voters from the rolls.
But it was clearly the energy crisis and its ramifications -- an issue
Republicans feel they can pin on Davis and the Democratic-controlled
Legislature -- that was the centerpiece of the speech.
Today, the energy crisis is being driven, he said, by a lack of power plant
construction. And while billions go to solve the crisis, he said, the state
faces $100 billion in unmet infrastructure needs -- everything from school
repair to road repair.
"Doesn't that scare you?" Jones asked.
He then recounted the warning signs -- ignored by the state, he said -- of
the looming energy crisis.
He cited the initial warnings that the deregulation bill was flawed, last
summer's request by Edison and Pacific Gas & Electric to allow forward
contracting and the Republican request for a special session to deal with the
energy crisis. All ignored, Jones said.
Now, Edison and PG&E are near bankruptcy and the state finds itself stepping
up as a creditor. "And the solution now becomes California getting into the
energy business," he said. "Or, even carrying it to a greater degree, not
just in the short term to buy power to keep the lights on. I'm talking about
basically socializing the energy business."
Jones said he prefers low-interest loans to Edison and PG&E, taking the
electric grid as collateral.
"I just do not believe in California getting into something it does not know
how to do -- has never done before -- on top of all of our other
obligations," he said.
"It really worries me that California will not be able to endure that type of
obligation."
Jones said polls now show increasing numbers of residents saying the state is
headed in the wrong direction.
"I feel obligated to speak out and say there is a better way," Jones said.
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Day 2 -- Battling blackouts: Payment plan sought to restart small plants
By Dale Kasler and Carrie Peyton
Bee Staff Writers
(Published March 21, 2001)
Blackouts rolled across California for a second straight day Tuesday,
snarling traffic, darkening businesses and sending state officials scrambling
to craft a payment plan to revive the wind farms and other critically needed
small energy producers that have shut down because of financial woes.
On a day when another 570,000 customers lost power, Gov. Gray Davis said the
Public Utilities Commission and the Legislature would move promptly to order
Pacific Gas and Electric Co. and Southern California Edison to start paying
those small energy producers for their electricity. Davis said the two
utilities will face "considerable fines" if they don't pay up.
But several of the producers, known as "qualifying facilities," said they
doubted Davis' plan would go far enough to get them back in operation. And it
wasn't clear whether the plan would keep the increasingly impatient
alternative producers from hauling one or both of the big utilities into
bankruptcy court, as some have threatened.
The shortage of power from the qualifying facilities -- plus a near-record
heat wave (downtown Sacramento topped off at 83 degrees, one degree short of
the 84 degree record set in 1960), a lack of hydropower and other problems --
prompted the state's Independent System Operator to order a second day of
blackouts starting mid-morning. But the blackouts hit only about half as many
Californians as Monday's, with late afternoon conservation efforts helping
balance supply with demand.
The blackouts, usually about an hour long, hit about 7,600 Sacramento
Municipal Utility District customers in Elk Grove and south Sacramento
County. PG&E customers in suburban counties were affected as well.
The order darkened shops in San Francisco's Chinatown and was blamed for a
crash that left two motorists seriously injured in the Los Angeles suburb of
South El Monte. A Sun Microsystems Inc. factory in Newark had to close for
several hours.
Most Californians took the blackouts in stride, though. Elk Grove High School
students filed outside to play hacky sack. Coffee shop patrons in Davis
milled outdoors, enjoying the unseasonably warm weather.
Yet the blackout order was met with outright defiance by one municipal
utility. The city of Lodi refused to cut power to its residents Monday or
Tuesday, saying it shouldn't have to suffer because of the financial crisis
afflicting PG&E and Edison.
The outlook for today and the near future was brighter, as several big power
plants came back on line after repairs. ISO officials also praised
Californians' conservation efforts, which had faltered in the morning but
came on strong in the afternoon, helping to prevent further blackouts. By
evening the grid was in a relatively mild Stage 2 power alert.
But the second day of blackouts -- plus an increasing threat of utility
bankruptcy -- pushed Davis to the brink. The governor cobbled together a
payment plan to rescue the qualifying facilities -- some 600 wind farms,
geothermal plants and other alternative-energy generators whose production
has become increasingly vital in recent days.
Under Davis' plan, the Legislature and the PUC would order PG&E and Edison to
pay the qualifying facilities for power delivered after April 1. The
utilities are required to buy power from the qualifying facilities under a
1978 federal law designed to bring cheaper and cleaner forms of electricity
to market.
Davis said the PUC would release a proposed order late Tuesday that would
require the utilities to pay the qualifying facilities $79 a megawatt hour
for five-year contracts or $69 for 10-year contracts. The Legislature also
would have to pass a law authorizing the PUC to issue such an order.
But the situation was far from resolved late Tuesday, and PG&E and Edison
were likely to oppose at least portions of Davis' plan.
Edison is willing only to make "some kind of partial payments going forward,"
said Thomas Higgins, a senior vice president with parent company Edison
International. "We have a limited amount of resources available to us in
rates, ... and that's the constraining factor."
PG&E, which has been making partial payments to the qualifying facilities,
said it could pay them in advance, in full, for future power deliveries.
But PG&E said such payments would eat up half the $400 million it has
available each month to buy power -- and unless it gets a rate hike, there
wouldn't be enough to pay the qualifying facilities and cover other expenses,
including the cost of reimbursing the state Department of Water Resources for
the power the agency is buying on behalf of the troubled utility.
PG&E's proposal could represent a challenge of sorts to state officials:
Accept less money for the water department, or raise rates.
State officials "need to resolve who they want to see paid," PG&E spokesman
John Nelson said. "There is a limited pool of money."
For his part, Davis insisted that the water department would be first in line
to be paid, and he said the PUC will issue a proposed order to that effect.
"We are getting paid before anybody else," Davis said.
Hundreds of qualifying facilities are out of commission because PG&E and
Edison haven't paid them. The situation has robbed the state of several
thousand badly needed megawatts and is a key reason blackouts have been
ordered. In normal times the facilities produce more than 20 percent of
California's electricity.
Some of the qualifying facilities have been threatening to haul one or both
of California's beleaguered utilities into bankruptcy court unless they get
paid soon, saying a bankruptcy filing might be the only way they can save
their businesses.
"You've got to take care of the QF problem or the whole thing blacks out,"
said Jerry Bloom, a lawyer representing one group of qualifying facilities.
"(State officials) are starting to understand."
One thing that was fairly certain about Davis' still-sketchy payment plan: It
wouldn't cover PG&E and Edison's existing debt to the qualifying facilities,
estimated at more than $1.48 billion.
In their current financial state, the utilities say they can't afford to pay
the existing debt. In addition, paying the debt would create a major
complication: Other creditors, including the big power generators, would
surely haul Edison and PG&E into bankruptcy court on the grounds that they
weren't being treated fairly.
"You can't give preferential payment treatment to one class of creditors over
another," PG&E's Nelson said. "You virtually assure that (the other
creditors) have to file an involuntary bankruptcy proceeding against you."
But without full payment, it wasn't clear how many of the qualifying
facilities would be able to restart.
Executives at several plants -- the ones that run on natural gas -- said
they're not sure their gas suppliers will deliver unless the existing debts
are cleared up.
"We need to convince a gas company to supply us," said Ed Tomeo of UAE Energy
Operations Corp., which had to shut off its 40-megawatt Kern County plant
Tuesday. "We're a company that already owes millions of dollars for gas
supplies. How do you coax them to sell you millions more?"
"It's wishful thinking ... that the gas suppliers are going to sell us gas,"
Robert Swanson of Ridgewood Power said.
I>Bee Capitol Bureau Chief Amy Chance and staff writers Stuart Leavenworth,
Bill Lindelof, Pamela Martineau and the Associated Press contributed to this
report.
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Lodi still won't pull the plug
By Carrie Peyton
Bee Staff Writer
(Published March 21, 2001)

In a growing rebellion against blackouts, the city of Lodi has twice refused
to cut power to its residents despite an order from Pacific Gas and Electric
Co.
The small city-run electric system is among many disgruntled utilities,
including the Sacramento Municipal Utility District, that believe their
contractual pledges to cut back during emergencies were never meant for times
like this.
"It's been a philosophical debate up to this point. Now I guess we've drawn a
line in the sand," said Lodi utility director Alan Vallow.
PG&E said it is reviewing its interconnection contract, the agreement that
links Lodi to the grid through PG&E-owned high-voltage lines, to determine
what action it will take next.
"It's unfortunate that while the city of Lodi has received the benefit of
this agreement for years, they are unwilling to bear the burden of this
statewide energy shortage," said PG&E's Jon Tremayne.
One utility coalition, the Northern California Power Agency, believes that
PG&E has already violated that agreement by not lining up enough power for
customers.
The agency wrote PG&E on Friday saying that its members -- municipal
utilities and irrigation districts -- believe they aren't required to
participate in blackouts prompted by financial disputes.
And SMUD, which has been considering dropping out of future blackouts, will
be watching the response to Lodi, said SMUD board President Larry Carr.
Some SMUD directors say they're ready to go to court to force the issue. So
is Lodi, population 58,000, said Vallow.
"I've heard an Edison executive describe this as a natural disaster akin to
an earthquake. That's crap. This is a man-made event," he said.
Lodi said it will still help in genuine emergencies, such as fires or toppled
transmission lines. But it decided that on Monday and Tuesday that wasn't the
case.
"You have 3,000 megawatts of QFs (qualifying facilities) offline because
their bills haven't been paid. Well, guess what? Somebody ought to pay those
... bills," Vallow said.
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Blackouts hit for second day; break seen Wednesday

By Audrey Cooper
ASSOCIATED PRESS
March 20, 2001
SACRAMENTO ) Rolling blackouts hit California for a second straight day
Tuesday, closing souvenir shops in San Francisco's Chinatown, snarling
traffic and plunging schools and offices around the state into darkness.
Roughly a half-million homes and businesses from San Diego to the Oregon
border faced outages, blamed on the same factors that collided to force
blackouts Monday ) unseasonably warm weather, reduced electricity imports
from the Pacific Northwest, numerous power plants offline for repairs and
less power provided by cash-strapped alternative-energy plants.
Five rounds of outages in San Diego affected about 74,000 customers. State
power grid officials expected to have enough electricity to avoid further
outages through at least Wednesday, although the supply remained tight.

State power regulators working on energy rescue
Federal regulators scored for not ordering more California refunds
?

Gov. Gray Davis blamed the blackouts in part on the failure of Southern
California Edison and Pacific Gas and Electric Co. to pay millions of dollars
they owe "qualifying facilities," power suppliers that use cogeneration )
steam from manufacturing plus natural gas ) or solar, wind and other
renewable energy to generate electricity.
State power grid officials say California this week has lost about half the
electricity QFs normally provide. Several cogeneration plants say they
haven't been paid by Edison and PG&E for weeks and can't afford to buy
natural gas to fuel their plants.
Davis said the utilities are taking in money from customers but still failing
to pay the QFs. The state has been spending about $45 million a day since
January to buy power for customers of Edison and PG&E, which are so
credit-poor that suppliers refuse to sell to them.
"It's wrong and irresponsible of the utilities to pocket this money and not
pay the generators," Davis said at a Capitol news conference Tuesday evening.
"They've acted irresponsibly and immorally and it has to stop."
Southern California Edison officials said in a written statement that the
utility is intent on paying creditors and working with the PUC to pay QFs for
future power sales. PG&E representatives were out of the office late Tuesday
night and didn't immediately return calls from The Associated Press seeking
comment.
John Harrison of the Northwest Power Planning Council, a consortium that
monitors power use in several Western states, said blackouts on the first day
of spring are an ominous sign of what lies ahead this summer.
"We're in trouble," he said. "We will likely be able to meet our needs this
summer, but there won't be much to send to California."
Tuesday's outages began at 9:30 a.m. PST and continued in 90-minute waves
until about 2 p.m., when the Independent System Operator lifted its blackout
order.
Grid officials credited an influx of power from the Glen Canyon hydroelectric
plant on the Utah-Arizona border.
The blackouts were blamed for at least one serious traffic accident.
Two cars collided at an intersection without traffic lights in the Los
Angeles suburb of South El Monte, leaving two people with serious injuries,
California Highway Patrol Officer Nick Vite said.
Ventura Foods in Industry sent its employees out for an early lunch after
blackouts shut down its phones and computers.
"This is mild weather for this time of year. I don't know what's going to
happen in the summer," manager Frank Hynes said. "This is going to have a
serious impact on the state's economy. They can't just keep shutting people
down."
Statewide, demand was higher than expected because of warm spring weather.
Temperatures reached record highs across California on Monday, including the
80s and low 90s in Southern California. They were expected to be somewhat
lower Tuesday but still in the 70s and 80s.
The ISO hoped demand would start to subside and conservation would kick in,
but that did not happen Tuesday morning.
"We have not seen the kind of conservation we saw back in January," when the
first blackouts hit, ISO spokesman Patrick Dorinson said. "If we don't have
conservation efforts, that just means that's more power we have to take off
the grid."
In San Francisco's Chinatown, souvenir shops normally bustling with visitors
were forced to shut down. Nearby, irritated customers waited for a bank to
reopen.
"It's no good for anybody ) stores or businesses or people," said Yin Sun
Chan, among those in line.
PG&E, the state's largest utility, accounted for most of the customers
affected.
At least 438,000 PG&E residential and business customers were affected as of
early afternoon, spokesman Ron Low said.
Edison cut power to about 50,000 customers. Edison was ordered to cut less
power than PG&E and saved some due to conservation programs, including one
that lets the utility shut off air conditioning for 118,500 residential and
business customers when the power supply is tight.
About 73,400 San Diego Gas & Electric customers were hit by the blackouts.
Los Angeles, whose municipal utility is not on the grid that serves most of
California, wasn't included in the blackout order.
More than 1 million homes and businesses statewide experienced outages
Monday.
California's power crisis is expected to get even worse this summer, when
temperatures soar and residents crank their air conditioning.
Natural gas supplies are tight, water supplies are down and the state is
spending tens of millions of dollars each day to buy electricity for Edison
and PG&E, who say they are nearly bankrupt due to high wholesale power costs.
Edison and PG&E say they have lost more than $13 billion since last June to
climbing wholesale electricity prices the state's 1996 deregulation law
prevents them from recouping from ratepayers.
Adding to the problems, the state this week lost about 3,100 megawatts from
QFs. One megawatt is enough power to serve about 750 households.
The plants say they are owed about $1 billion for past sales to PG&E and
Edison.
PG&E said it is offering to prepay the QFs starting next month to get them
back in operation. Negotiations were expected to continue Wednesday.
California Co-Generation Council attorney Jerry Bloom said he supports
proposals that will get the Qfs paid, but the promise of future payments may
not be enough.
PG&E and Bloom said the utility's prepayments hinge on an upcoming Public
Utilities Commission decision on whether the utility's rates are sufficient
to pay its bills and cover the state's power purchases on its behalf, which
amount to $4.2 billion since early January.
Davis said the PUC planned to issue a draft order late Tuesday directing the
utilities to pay their future QF bills.
It plans to take action on that order next Tuesday, Davis said. The
Legislature plans to approve a bill in the meantime giving the PUC the
authority to issue such an order and fine the utilities if they fail to
comply, he said.
Davis said he is confident the utilities and the state can pay their bills
without further rate increases for Edison and PG&E customers.
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State power regulators working on energy rescue

By Karen Gaudette
ASSOCIATED PRESS
March 20, 2001
SAN FRANCISCO ) State power regulators continue to delay the release of
guidelines that will determine a portion of the money the Department of Water
Resources can recoup from financially troubled utilities for electricity it
has bought on their customers' behalf.
These guidelines will help the water department determine whether it must
raise consumer power rates to reimburse the state for the more than $3
billion it has committed to buying electricity.
Assemblyman Fred Keeley, D-Boulder Creek, said Tuesday that the Public
Utilities Commission would likely have to raise rates by 15 percent to cover
the state's costs and the utilities' bills.
The PUC guidelines were most recently delayed by a letter from DWR Director
Thomas Hannigan asking that the water department receive a percentage of
ratepayer money collected by the utilities equal to the percentage of
electricity it provides to utilities.
The DWR currently buys around 40 percent of the power used by Pacific Gas and
Electric Co., Southern California Edison Co. and San Diego Gas and Electric.
Under the DWR's proposal the utilities would have to hand over 40 percent of
the money they continue to collect from ratepayers.
The DWR would then also receive whatever money remains after the utilities
subtract their own generation and long-term contract costs, the letter said.
That amount would become the "California Procurement Adjustment" ) an amount
that will help the state retrieve money spent on power purchases and help
establish the size of state revenue bonds that are currently estimated to
total $10 billion.
The state plans to issue the bonds in May to help pay off the more than $3
billion Gov. Gray Davis' administration has committed to power purchases
since January to help the utilities climb out of debt.
Ron Low, a spokesman with PG&E, said the utility objects to paying the DWR
such a large sum, claiming it would interfere with efforts to pay its
"qualifying facilities" ) power plants that use the sun, wind, biomass or
natural gas to generate about one third of the state's electricity.
The nearly bankrupt utilities owe the QFs more than $1 billion for
electricity they have produced since November, said Jan Smutney-Jones,
executive director of the Independent Energy Producers.
Hannigan also said in the letter the DWR intends to use its authority to
raise consumer electricity rates to recoup any money not reimbursed through
the CPA and other means.
The Public Utilities Commission expected to release the guidelines last week,
but was delayed by debates over legislation that would slash the rates of
environmentally friendly power plants under contract to provide electricity
to the investor-owned utilities.
Without knowing how much ratepayer money the utilities need to pay these
"qualifying facilities" for future electricity, it's unknown how much money
they'll have on hand to pay the DWR.
In a written statement, PUC Administrative Law Judge Joseph DeUlloa said that
he would issue a temporary decision on the CPA "as soon as is practical."
Pacific Gas and Electric Co. and Southern California Edison Co. say they have
lost more than $13 billion since last June to climbing wholesale electricity
prices that the state's 1996 deregulation law prevents them from recouping
from ratepayers.
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Federal regulators scored for not ordering more California refunds

By H. Josef Hebert
ASSOCIATED PRESS
March 20, 2001
WASHINGTON ) House Democrats asked federal energy regulators Tuesday why they
are not going more aggressively after alleged overcharges for wholesale
electricity in California and ordering more refunds.
The Federal Energy Regulatory Commission has asked suppliers to justify $124
million in sales during the first two months of the year or refund the money,
but critics charge that thousands of additional questionable sales are not
being challenged.
The three commissioners testifying at a hearing of the House Commerce
subcommittee on energy, were asked why they limited their refund demands to
only power sales that occurred during so-called Stage 3 alerts of acute power
shortages in California.
"It appears to me a price is unreasonable when it is unreasonable," and not
just during a power alert, said Rep. Rick Boucher of Virginia, the panels'
ranking Democrat.
The commission last week ordered six power generators to justify some 1,000
transactions during February in the California market whenever the price was
above $430 per megawatt hour and occurred during a Stage 3 emergency alert.
But the lawmakers were told Tuesday that 56 percent of another 14,168
transactions, occurring outside a Stage 3 emergency, also exceeded the $430
trigger, but are not being questioned.
"The line was drawn to limit the scope of the refund," said agency
commissioner William Massey, a Democrat, who strongly opposed the refund
actions because he said they were too limited.
Chairman Curtis Hebert, a Republican, defended the way the commission decide
on what transactions to challenge saying that it sought to replicate market
conditions as they existed at the time of the sales.
"We deserve a better explanation," retorted Boucher.
Massey said that agency's investigation of overcharges for January also
failed to consider thousands of transactions that exceeded the refund trigger
because they did not occur during Stage 3 supply emergencies.
Managers of California's electricity grid, state regulators and utilities
have accused the agency of refusing to aggressively investigate price gouging
by wholesalers who have charged from $150 to $565 per megawatt hour, as much
as 20 times what prices were in 1999.
While Hebert and commissioner Linda Breathitt defended the commissioners
attempt to investigate whole electricity prices, Massey has been highly
critical.
What message does the agency's scrutiny of prices send to the power
companies? he was asked.
"It makes clear FERC is going to be looking for the wallet under the lamp
post with the lights shining ) and nowhere else," replied Massey.
Meanwhile, Massey and his two fellow commissioners, also disagreed sharply on
whether the energy agency should impose temporary price controls on the
wholesale power market in the West to dampen further expected price increases
this summer.
Massey said he fears "a disasters in the making" if some price restraints are
not imposed by FERC, which regulates wholesale electricity sales. "We need a
temporary time out," he said.
But Massey is in the minority on the commission. Both Hebert and Breathitt
are against price caps, arguing they will have long-term detrimental impact
on power supply.
The Bush administration has made its opposition to interfering in the
wholesale markets well known for weeks. Vice President Dick Cheney's task
force is to unveil an energy plan in about a month that is expected to lean
heavily on energy production.
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Second Day of Blackouts Disrupts 500,000 Homes and Businesses

Power: Grid operators say the shortage should ease in the next few days, but
officials see a grim summer.

By MITCHELL LANDSBERG and ERIC BAILEY, Times Staff Writers

A traffic signal that stopped working during Tuesday's rolling blackouts led
to this collision be tween a car and a truck at an intersection in El Monte.
The outages ran from 9:30 a.m. to 2 p.m. AP

?????Electricity blackouts rolled through California for a second straight
day Tuesday, disrupting business in one of the world's most technologically
advanced economies and leaving schoolchildren groping in the dark.
?????Jinxed by a combination of bad luck and bad decisions, utilities were
forced to cut off power to more than half a million homes and businesses from
San Diego to the Oregon border.
?????By day's end, there was some good news from the operators of the
statewide power grid, who said the situation had eased and appeared likely to
improve for the next few days. And Gov. Gray Davis announced a proposed
solution to one vexing problem: the utilities' failure to pay the state's
small, alternative power generators, many of whom have stopped producing
power as a result.
?????Davis called the utilities "shameful" for failing to pay, and praised
the alternative power generators, which include solar, wind and geothermal
energy producers, as "good corporate citizens" who produced power although
they weren't being paid.
?????"We are anxious to pay the [small producers], who are dropping like
flies," Davis said.
?????Despite the progress, it was hard for some people to look on the bright
side after enduring outages that took place when the state's hunger for power
was almost 50% less than at its summer peak.
?????"This is a taste, almost like an appetizer, of a really unpalatable meal
that's going to be served up this summer," said Michael Shames of the Utility
Consumers' Action Network in San Diego, himself a victim of a rolling
blackout that hit his office in San Diego early Tuesday.
?????Power officials have warned that this could be a grim summer in
California, since demand for electricity sharply rises when people turn on
air conditioners. The state has been struggling to meet its power needs in
recent months because of rising prices and a flawed deregulation plan that
has left the two biggest private utilities on the brink of bankruptcy. State
leaders have so far failed to agree on a comprehensive plan to solve the
problems.

Wally Quirk teaches a business class in a borrowed classroom Tuesday at
Sonoma State after the state's rolling blackouts cut the power to his usual
classroom, which does not have any windows.
SCOTT MANCHESTER / The Press Democrat

?????The latest round of blackouts began about 9:30 a.m. Tuesday when the
California Independent System Operator, which runs the statewide grid,
determined that the demand for electricity was 500 megawatts more than the
supply--an imbalance that meant the state was short on the power needed to
supply electricity to about 375,000 homes.
?????Grid operators blamed a confluence of events, including warmer weather;
outages at several major power plants, including one unit of the San Onofre
nuclear power station; a reduction in imports from the Pacific Northwest, and
the shutdown of many alternative energy producers. Similar blackouts Monday
were the first since January.
?????The situation improved somewhat by late Tuesday morning, with some
supplies restored and Californians conserving energy, and Cal-ISO was able to
halt the rolling blackouts at 2 p.m.
?????Once again, customers of the Los Angeles Department of Water and Power
were spared, although the municipally owned utility said its electrical
surplus was smaller than usual. The DWP, like Southern California Edison, was
affected by an outage at the huge Mohave power plant in Nevada, as well as by
planned outages at several of its facilities.
?????As in the past, by far the biggest impact was felt by customers served
by Pacific Gas & Electric, the state's largest utility, which cut power to
438,000 homes and businesses.
?????Edison cut power to 47,462 customers in about 40 cities, but eventually
was able to avoid blackouts by shutting off the air conditioners of some of
the 118,500 customers who participate in a voluntary cutoff program.
?????San Diego Gas & Electric cut power to 73,400 customers.

?????Innovative Ways of Coping
?????As on Monday, most people took the outages in stride, as an annoying but
ultimately unavoidable inconvenience.
?????In Palmdale, four schools lost power during one of the hourlong
blackouts, but teachers and students pressed on in the sunlight pouring
through windows and skylights. At Barrel Springs Elementary, Principal Cruz
Earls said the biggest problem came when students had to go to the bathroom:
Hand in hand, they made their way through darkened hallways with flashlights.
?????All in all, it wasn't a terrible experience. Then again, the weather
wasn't that hot Tuesday, with a high of 79 in Palmdale, so the shutdown of
air conditioners wasn't much of a hardship. "I don't want to think about the
conditions this could create in May or June," Earls said.
?????Businesses of all kinds complained about the lack of warning for the
outages--and sometimes found innovative ways to get around the problem.
?????Rattled by news reports of Monday's rolling blackouts, El Burrito
Mexican Food Products in the city of Industry started its Tuesday shift at 2
a.m. to beat the clock in the event of an outage. That hunch paid off.
Workers had just finished cooking and packaging the last batches of salsa and
masa when the lights went out at 10:20 a.m.
?????Company owner Mark Roth said the firm will continue working odd hours to
avoid further outages. But he isn't buying the line from the utilities that
they can't provide advance warning because of concerns about looting and
rioting.
?????"We're ready to do whatever it takes to get through this thing," he
said. "But they've got to give us some notification."
?????At Big O Tires in Elk Grove, just south of Sacramento, owner Daniel Crum
had his 14 workers take an early lunch break or head to the warehouse to
reorganize the goods. Without electricity, they couldn't repair brakes or
align front ends.
?????"I'd never let them be idle," said Crum.
?????At least two minor traffic accidents were blamed on the outages.
?????The blackouts resulted from a convergence of factors.
?????Demand was slightly higher than expected, probably because of
unseasonably warm weather. Supplies were tighter than usual, in part because
of several outages, including that at the Mohave plant, half of which was
brought back on line by the end of the day.
?????The San Onofre Nuclear Generating Station was still limping along
without power from one of its two 1,100-megawatt units, which was shut down
Feb. 3 after a half-hour fire in a nonnuclear part of the plant. Edison,
which operates San Onofre, initially estimated the unit would be out for
several weeks but recently said "extensive damage" to parts of the turbine
will keep the unit out of commission until mid-June.
?????Shipments from the drought-stricken Pacific Northwest, which generates
most of its electricity from large dams, were also down.
?????"Each time we take a measurement, we're closer to the all-time record
for the driest year," said Dulcy Mahar, spokeswoman for the Bonneville Power
Administration, the network of federal dams that provides the region with
much of its electricity. "We've been doing what we can, but we simply don't
have power to sell."
?????Finally, there was the problem of the small and alternative energy
producers, which have shut down plants because they haven't been paid by the
private utilities since November. Those outages have cost the state about
3,000 megawatts of electricity, enough for about 2.3 million homes.
?????"You're seeing the system freeze up," said David Sokol, chairman and CEO
of MidAmerican Energy Holdings Co., which runs eight geothermal plants in the
Imperial Valley through its subsidiary, CalEnergy. His company hasn't shut
down yet, but Sokol said smaller companies couldn't continue to sell their
energy to utilities for free.
?????"Why should we fund Edison?" he asked. "That's just ridiculous."

?????A Choice of 2 Rate Plans
?????Davis joined lawmakers in the Capitol on Tuesday to outline his plan to
get the producers running again. He said utilities have had no right to
collect money from ratepayers and then not use the funds to repay the small
producers. The state has spent billions to buy power from large conventional
producers on behalf of the utilities but has refused to pick up the tab for
alternative energy.
?????"The utilities acted in a shameful manner by putting money in their
pockets that was designed to pay the [small producers]," Davis said.
?????The plan outlined by Davis would allow the generators to choose between
two rate plans. They could decide to be paid 7.9 cents per kilowatt-hour over
five years or 6.9 cents a kilowatt-hour over 10 years.
?????The utilities must begin paying the generators the new rates beginning
April 1 or face fines, Davis said.
?????The question of how the companies will get paid the about $1.5 billion
they are owed remains unresolved. That issue will be decided in coming weeks
as Davis' negotiators continue to work on rescue plans for the state's
financially hobbled private utilities.
?????PG&E spokesman Ron Low said the state's largest utility did not take
kindly to Davis' criticism, and noted that the governor's plan is similar to
a proposal that PG&E made last week to producers.
?????Jan Smutny-Jones, executive director of a trade group that includes some
of the small generators, described the plan as a positive step.
?????"The governor got it right in that it's not acceptable for small power
producers to continue to generate and not be paid," Smutny-Jones said. "But
we'll need to see what the order says; the devil will truly be in the
details."
?????Grid operators said the state's overall energy situation eased by midday
Tuesday because of repairs at the Mohave plant and another large plant at
Ormond Beach, and because the Western Area Power Administration came up with
300 megawatts of electricity from Glen Canyon Dam.
?????Also, grid spokesman Patrick Dorinson said conservation savings spiked
upward after earlier complaints that Californians weren't conserving.
?????"We saw the people of California probably conserve 900 megawatts today,"
he said. "That was probably the difference."
---
?????Times staff writers Andrew Blankstein, Jose Cardenas, Marla Dickerson,
Noaki Schwartz, Nicholas Riccardi, Doug Smith, Rebecca Trounson and Richard
Winton in Los Angeles, Miguel Bustillo and Julie Tamaki in Sacramento, Maria
La Ganga in San Francisco, Stanley Allison, Matt Ebnet, Scott Martelle,
Dennis McLellan, Monte Morin, Jason Song, Mai Tran and Nancy Wride in Orange
County, and Richard Simon in Washington contributed to this story.
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Fragile Supply Network Apt to Fail

By JENIFER WARREN and ERIC BAILEY, Times Staff Writers

?????A lot of people were caught off guard by the blackouts that swept over
California this week. Debra Bowen wasn't one of them.
?????As chairwoman of the state Senate Energy Committee, she is
intimately--and painfully--familiar with the state's energy supply. And she
is willing to share a secret: It's a fragile system, capable of collapse at
any time.
?????That knowledge keeps Bowen awake at night, particularly with the
approach of summer, when power demand surges as Californians get reacquainted
with their air conditioners.
?????"I sound a bit less like Chicken Little today, don't I?" Bowen said
Tuesday, as chunks of the state once again were forcibly darkened. "I know a
lot of people don't feel we have a problem. But we have a very, very big
problem."
?????With the recent slowdown in Stage 3 emergencies, a sense of calm had
settled over the energy debate, and even some legislators were speaking with
guarded optimism about the hot months ahead.
?????On Tuesday, however, a creeping sense of doom was almost palpable among
energy watchers, and previous supply forecasts--which predict that the state
may yet escape summer blackouts--were being given a second look.
?????"The outages of the last two days are something that Californians are
going to have to get used to for July and August," said Michael Zenker,
California director of Cambridge Energy Research Associates. The
Massachusetts consulting firm is predicting about 20 hours of blackouts this
summer.
?????At the California Independent System Operator, which manages 75% of the
statewide power grid, officials said the energy cushion the state had in
recent weeks was, in some ways, a phantom caused by heavy imports of power.
?????Cal-ISO spokesman Patrick Dorinson said people may have been deluded
into a false state of comfort: "Maybe there is a tendency to think things
have improved," he said. In fact, they haven't.
?????More than anything, this week's events illustrate the delicate balance
of factors that keep California illuminated, from the multitude of supply
sources to the weather.
?????Temperatures were higher than usual. Alternative-energy suppliers--who
haven't been paid in months by the cash-strapped utilities--cut their output.
Suppliers in the Northwest--which faces a drought--slashed exports. Equipment
breakdowns and maintenance at power plants--much of it unanticipated--took
13,000 megawatts offline. A utility-run program that gives businesses
discounts in exchange for cutting power during emergencies is all but dead.
?????"The fragility of the system is such that a small perturbation can turn
everything upside down very easily," said Gary Ackerman, executive director
of the Western Power Trading Forum, a group of electricity generators and
traders.
?????One factor receiving particular attention is the dip in supply caused by
unscheduled maintenance. To help officials predict available supply,
generators provide an annual maintenance plan that is updated regularly.
?????In addition, however, facilities sometimes shut down for unexpected
reasons: leaking tubes, burnt-out transformers, cracked turbines and faulty
feed pumps. At one point Tuesday, about 8,200 megawatts were unavailable
because of unscheduled shutdowns. That's enough to supply about 6 million
households, and up from 5,700 megawatts a week ago.
?????The huge 1,400-megawatt Mohave power plant near Laughlin, Nev., which
supplies Southern California Edison and the Los Angeles Department of Water
and Power, was felled Monday by a transformer problem. That was enough to
push the state into blackouts.
?????A growing number of skeptics, however, question whether those reasons
are always valid, accusing generators of withholding power to shrink supply
and drive up prices.
?????"There's no way to verify it, so you've got to take their word for it,"
said Frank Wolak, a Stanford University economist who studies California's
electricity market. "And given that it's very profitable for these things to
occur, you start to wonder if they're creating an artificial scarcity."
?????Tom Williams of Duke Energy said the Houston-based company is working
hard to keep its California power plants, which are capable of producing
3,351 megawatts of electricity, in operation after months of near-continuous
operation.
?????"It's like riding a moped across the country," he said. "They're just
not meant to run this hard."
?????Last week, the state Senate formed a committee to investigate charges of
market manipulation by power suppliers. The chairman, state Sen. Joe Dunn
(D-Santa Ana), says the issue of unscheduled plant shutdowns is on his agenda.
?????"The problem is: How does one prove that a particular outage was part of
a deliberate strategy to deprive the state of kilowatts, rather than a result
of normal business operations?" Dunn said.
---
?????Times staff writer Nancy Rivera Brooks contributed to this story.
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Elevator Anxiety Is Riding High

Emergencies: Workers in skyscrapers worry about blackouts trapping them in
their buildings. Some take the risk in stride; others make plans to take the
stairs.

By JOHN M. GLIONNA and JOE MOZINGO, Times Staff Writers

?????SAN FRANCISCO--In Susan Clifton's highly placed opinion, sunny Tuesday
would have been a picture-perfect day to work atop one of the tallest
buildings in San Francisco, a scenic city littered with soaring skyscrapers.
?????But Clifton--like many other high-rise office dwellers in blackout-prone
parts of California--couldn't help but feel some high anxiety at the prospect
of being stranded by electrical outages that were sweeping across the state
for a second day.
?????"I think about it all the time," said Clifton, a 21-year-old
receptionist at Deutsche Bank's offices on the 48th floor of a tower in the
city's financial district who recently moved from rural Virginia. "The way I
see it, Californians take a lot of things on faith, working atop tall
buildings with all these earthquakes and power outages."
?????For Long Beach office worker Dave Suhada, the anxiety has taken the form
of elevator phobia: a fear of getting stuck on an 80-degree day crammed in a
pod of sweating, heavy-breathing humans, with no way out.
?????"I'm just eyeing the buttons to see which one I could push as fast as I
can if the power goes out," he said.
?????For 20-year-old Lisa Riley, it means entering the elevator each day in
her Long Beach office building with a prayer. "I just could not get stuck for
an hour and a half," she said, nodding nervously. Often she now opts for the
stairs.
?????In San Francisco, emergency services officials say that most of the
city's office buildings are equipped with backup generators to run elevators
and security equipment in the event of a blackout.
?????Fire Department spokesman Pete House said the city has 19 trucks with
experts trained to extricate people trapped in elevators. Firefighters
handling blackout-related emergencies rescued a person trapped in a downtown
building Tuesday and handled five elevator mishaps Monday.
?????Christopher Stafford didn't get caught inside an elevator Monday, but
suffered the next-worst thing: being stranded in his 15th-floor apartment
after the power failed when he went home for lunch.
?????So the 41-year-old real estate worker trooped down the stairs to the
lobby and even made some new friends along the way, helping a few elderly
women who were struggling down the stairs.
?????"It was a pain," he acknowledged. "But I have to tell you: I really like
my panoramic view, so it's worth the hassle."
?????Nowadays, Sherrie Tellier makes sure her cellular phone is in hand when
she gets in the elevator. She got trapped once before, and the emergency
phone didn't work. It's amazing, she said, how small an elevator seems when
you can't get out. "It's like a broom closet.Now there's a sigh of relief
every time the door opens."
?????Some high-rise office workers said Tuesday that they preferred not to
think about the perils of going without power and being vulnerable and
isolated so high up.
?????But on the 42nd floor of San Francisco's Transamerica Tower, Sasha
Monpere wasn't fazed by the chance that during a blackout, her building's
backup generators wouldn't kick in.
?????"Hey, I'm young and I'm healthy. I can always walk down the stairs,"
said the 29-year-old receptionist. "I've done the Statue of Liberty. It can't
be any worse than that. And walking down 42 flights is a lot easier than
walking up all those stairs."
?????Likewise with Phil Ip, who works on the 52nd--and top--floor of San
Francisco's tallest skyscraper. The 25-year restaurant veteran says he has
the utmost faith in modern technology.
?????"We're safe, even up here," said Ip, assistant general manager of the
Carnelian Room, a restaurant atop the Bank of America building. "You should
see the engineer's room in this building. It's like a big steamship. They're
equipped for anything that could happen."
?????One floor below, Cheryl Martin hears every day about people's fear of
heights. In the year since she began answering phones in a law office, she
has often escorted clients afraid of express elevators that shudder and rise
so fast that passengers' ears pop from the altitude gain.
?????"Everybody, and I mean everybody, asks, 'So, what happens during a power
outage?' " she said.
?????Rory Thompson said he believes in karma and is sure that if the rolling
blackouts come calling, his office will be spared. In July 1993, Thompson's
building was the site of an incident known as the 101 California St.
massacre, in which gunman Gian Luigi Ferri killed eight people and wounded
six before killing himself.
?????"This building has already had its bad day," he said. "They say that the
day after a crash is the safest day to ride an airline. So I'll take my
chances with the rolling blackouts."
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State Says It's Accelerating Plan to Buy Power Utilities' Grid

Government: Talks with Edison are reported near completion, but agreement
with heavily indebted PG&E has a way to go.

By RONE TEMPEST and DAN MORAIN, Times Staff Writers

?????SACRAMENTO--As blackouts hit California for a second day Tuesday, a key
consultant to Gov. Gray Davis said negotiations to buy the power grid owned
by the state's largest utilities "are proceeding at an accelerated pace."
?????Wall Street consultant Joseph Fichera said talks with Southern
California Edison could be wrapped up within days, although those with PG&E
are much less advanced.
?????The administration and PG&E have not reached even an agreement in
principle, he said. PG&E, which has more debt than Edison, says its
transmission lines are more extensive than those of its Southern California
counterpart.
?????The state wants to buy the utilities' transmission lines and other
assets for about $7 billion to provide cash to the utilities, help stabilize
the electricity supply and ease the power crunch that has plagued California
for months. To research the grid purchase, Fichera said, the state has had to
pore over 80,000 documents just to assess the utilities' liabilities.
?????"We are working at a good pace," said Fichera, chief executive of the
New York firm Saber Partners. " . . . If we get to a deal-breaker, it might
be longer."
?????By making Fichera, who is also a consultant to the Texas Public
Utilities Commission, available to reporters Tuesday, the Davis
administration was clearly trying to reassure the public that progress is
being made on the governor's plan to pull the state out of the crisis.
?????Since mid-January, when the big utilities' credit failed and suppliers
stopped selling to them, the state has spent nearly $3 billion buying
electricity from a handful of large suppliers in Texas, Oklahoma, Georgia and
North Carolina. Not a cent has gone to the hundreds of alternative energy
suppliers in California who provide about a quarter of the state's
electricity.
?????The Monday and Tuesday blackouts occurred partly because many of the
cash-strapped alternative suppliers, including solar, biomass and wind power
units, cut their normal supply to the system in half. They say Edison and
PG&E have not paid them since November; the utilities say they are out of
cash.
?????Assemblyman Fred Keeley (D-Boulder Creek) said the plight of the
alternative suppliers has dragged on because of the complexity of dealing
with "almost 700 individual contractors."
?????Another delaying factor, said Keeley, who with state Sen. Jim Battin
(R-La Quinta) worked for almost three months to come up with a legislative
plan to lower the small producers' prices, was "the huge enmity . . .
manifested between the utilities and the qualifying facilities. These people
just don't like each other."
?????This week's blackouts provided two painful lessons for the Davis
administration:
?????* When it comes to electricity, size doesn't matter--every kilowatt
counts. During peak use, a small wind power facility in Riverside County can
make the difference between full power and blackouts.
?????* There is no such thing as a partial solution. Unless the whole energy
equation is balanced, the parts don't work.
?????For the Davis plan to work, several key elements need to come together
or utility customers will almost certainly face rate increases above the 19%
already set in motion:
?????* The cost of power purchased by the state must be reduced through
long-term contracts with the big out-of-state producers.
?????These contracts, the details of which the Davis administration has kept
confidential, are still being negotiated by Davis consultant Vikram Budhraja
of the Pasadena firm Electric Power Group. The administration says it has
concluded 40 contracts with generators, about half of which have been signed.
?????According to the most recent statistics released by the Department of
Water Resources, which buys power for the state, current prices are still
well above the rate state Treasurer Phil Angelides says is necessary for a
planned $10-billion bond offering to succeed.
?????The bonds, set for sale in May, will be used to reimburse the state for
the money it will have spent by that time to buy electricity. The state is
currently spending at a rate of $58 million a day to buy power. If prices
stay high, the $10 billion in bonds will not cover the state's power
purchases by the end of the summer.
?????Angelides says he cannot proceed with bridge financing for the bonds
until the Public Utilities Commission devises a formula to guarantee that a
portion of utility bills will be dedicated to bond repayment. Angelides has
estimated that, under the January law that put the state in the power buying
business, the state must be reimbursed $2.5 billion annually, and that $1.3
billion is needed to service the debt.
?????PUC Administrative Law Judge Joseph R. DeUlloa is expected to announce
his ruling on the reimbursement rate later this week, leading to a PUC vote
on the matter as early as next week.
?????* The rates charged for electricity by the alternative producers, known
as qualifying facilities, must be cut at least in half, down from an average
of more than 17 cents per kilowatt-hour. In his news conference Tuesday,
Davis said he will ask the PUC to set QF rates at 6.9 cents for 10-year
contracts and 7.5 cents for five-year contracts.
?????Meanwhile, PUC Chairman Loretta Lynch, a Davis appointee, said Tuesday
that the commission will vote next week on a proposed order requiring
Southern California Edison and Pacific Gas & Electric to pay the QFs for
electricity in the future. Lynch said a recent PUC assessment showed that the
utilities have enough cash on hand for that.
?????"We are trying to make sure the folks providing the power get paid,"
Lynch said. "The qualified facilities have demonstrated that they haven't
been paid and that it is impairing their ability to provide power."
?????The utilities contend that if they pay the small providers what they owe
them, there will not be enough money left to pay other creditors.
?????"There is not enough money in the current rate structure to pay the
[alternative producers], pay the [Department of Water Resources] and pay the
utilities for their generation," said John Nelson, a spokesman for PG&E.
?????* The utilities must sell to the state the power they produce
themselves, mainly from hydro and nuclear sources, at a rate only slightly
above the cost of producing it. This is tied to the ongoing negotiations
between the Davis administration and the utilities to restore the
near-bankrupt utilities to solvency.
---
?????Times staff writers Julie Tamaki, Miguel Bustillo and Tim Reiterman
contributed to this report.
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L.A., Long Beach File Suits Over Gas Companies' Prices

Energy: Separate actions allege a conspiracy and gouging. Suppliers blame
rising demand and a fluctuating market.

By TINA DAUNT and DAN WEIKEL, Times Staff Writers

?????Seeking damages that could reach "into the billions of dollars," the
cities of Los Angeles and Long Beach on Tuesday filed separate lawsuits
alleging that a coalition of gas companies illegally conspired to eliminate
competition, drive up natural gas prices and discourage the construction of
electricity generating plants in California.
?????Officials from the two cities alleged that Southern California Gas Co.,
San Diego Gas & Electric and El Paso Natural Gas Co. violated the state's
antitrust law and engaged in unfair and fraudulent business practices that
caused gas prices to skyrocket.
?????The cities are the first California municipalities to take action
against the gas companies. A number of similar lawsuits filed by antitrust
attorneys, state regulators and private citizens are pending elsewhere.
?????The energy companies deny any impropriety. They contend that California
is the victim of its own soaring electricity demand and overreliance on
fluctuating spot markets for natural gas.
?????"The conspiracy theories that have been promoted have no basis in
reality," said Denise King, spokeswoman for Southern California Gas' parent
company, Sempra Energy, which also was named in the suits. "Southern
California Gas continues to look out for the best interest of its customers."
?????The lawsuits filed in Los Angeles County Superior Court accuse the
companies of conspiring to manipulate the price of natural gas by agreeing to
kill pipeline projects that would have brought ample supplies of cheaper
natural gas to Southern California.
?????They allege that executives for the energy companies made the pact
during a meeting in a Phoenix hotel room five years ago to discuss
"opportunities" arising from the state's newly deregulated electricity market.
?????"The fulfillment of the illicit plan has had devastating effects on
Southern California gas consumers," according to Los Angeles' suit. "Gas
prices in the Southern California market have skyrocketed, and the Southern
California gas consumers are paying the highest prices in the nation."
?????In recent months, natural gas prices have tripled across the nation for
a number of reasons, including a shortage of supplies to meet demands for
home heating. Prices have increased far more in California, where natural gas
is a central factor in the state's energy crisis. The state relies on the
clean-burning fuel to generate half its electrical power.
?????"This not only led to price-gouging of all natural gas consumers, from
homeowners to government to industry, but it contributed to the current
electrical power crisis in California," said City Atty. James K. Hahn, a
mayoral candidate who urged the City Council to pursue the case.
?????Chris Garner, Long Beach's utility director, said that since November,
the average residential bill for gas in Long Beach has more than doubled, to
$175 a month. Some customers, he said, have seen rate increases of 500%.
?????"The people of Long Beach are being gouged by energy conglomerates who
are artificially manipulating the supply of natural gas and reaping excess
profits at the expense of the public," said City Attorney Robert Shannon.
?????Holding a special meeting, the Los Angeles City Council voted 12 to 0
Tuesday to file the suit.
?????"If the allegations are true, they are extremely serious," said
Councilman Mike Feuer, who is a candidate to succeed Hahn as city attorney.
"And there appears to be some important evidence that substantiates the
allegations in the complaint, which means that this lawsuit is, I think, more
than a viable lawsuit."
?????Councilman Mark Ridley-Thomas added: "We cannot tolerate this and we
must use the full weight of the law to try to correct it."
?????A growing number of lawsuits around the state are targeting California's
natural gas suppliers. El Paso Corp., which owns the main pipeline
transporting out-of-state gas to Southern California, has been targeted
repeatedly by utility companies, state regulators and antitrust attorneys.
?????Some of the first antitrust lawsuits were filed against Sempra Energy in
December. They were brought by Continental Forge Co., a Compton-based
aluminum forging business, and Andrew and Andrea Berg, who own a business in
San Diego.
?????The cities' lawsuits request that the defendant companies be barred from
such conduct in the future, and they seek civil penalties and damages.
?????Shannon estimates that Long Beach could collect more than $100 million
in damages, including triple penalties for antitrust violations.
?????"We are filing this for our citizens," Shannon said. "They include the
poor, the elderly, people living on fixed incomes and small business owners."
?????The Los Angeles suit was filed on behalf of all Californians. Officials
place damage estimates "in the billions."
?????Hahn, however, warned council members that it could take the city a year
or more to resolve the suit.
?????"Lawsuits take time," Hahn said. "We are hopeful we can enter into
meaningful discovery to disclose what's been going on."
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Davis OKs Subsidy of Pollution Fees

Smog: As part of secret deal to get long-term energy contracts, state would
pay for some of the credits that allow excess power plant emissions. Critics
renew call for full disclosure.

By DAN MORAIN , Times Staff Writer

?????SACRAMENTO--As part of his closed-door negotiations to buy electricity,
Gov. Gray Davis has agreed to relieve some generators from having to pay
potentially millions of dollars in fees for emitting pollutants into the air,
Davis said Tuesday.
?????Davis announced two weeks ago that his negotiators had reached deals
with 20 generators to supply $43 billion worth of power during the next 10
years.
?????However, the Democratic governor has refused to release any of the
contracts or detail various terms, contending that release of such
information would hamper the state's ability to negotiate deals with other
generators and therefore ultimately would raise prices Californians pay for
electricity.
?????Sources familiar with the negotiations, speaking on condition of
anonymity, said the agreement reached with Dynegy Inc., a power company based
in Houston, is one that includes language requiring that the state pay the
cost of credits that allow emissions. Dynegy spokesman Steve Stengel declined
to discuss the company's deal with the state.
?????"We couldn't get them to sign contracts; it was a sticking point," Davis
said of the decision to pay the fees of some generators. "We had to lock down
some power so we were not totally dependent on the spot market."
?????The fees in question are part of an emission trading system known as
RECLAIM. Under the system, companies are allotted a certain amount of
allowable pollution. If their operations pollute more, companies are required
to purchase credits on an open market. Currently the credits cost about $45
per pound of pollution--an amount that can lead to a bill of well over $10
million a year for a power plant.
?????The South Coast Air Quality Management District, which regulates
pollution in the Los Angeles Basin, is considering steps to significantly
lower the cost of the system--a step that could considerably cut the state's
potential cost, Davis said.
?????Senate Energy Committee Chairwoman Debra Bowen (D-Marina del Rey)
defended the decision to cover the power company's costs.
?????"It is a question of whether it brings down the price of power," she
said. "If it brings down the price of power, I don't have a problem with it."
?????Nevertheless, word that the contracts could bind the state to pay
pollution fees caused some critics of Davis' policy to renew calls for Davis
to reconsider the secrecy surrounding the power negotiations. The payment
provision underscores the fact that the contracts involve more than merely
the prices the state will pay for its megawatts, the critics note.
?????"The Legislature should have known about it," said Senate President Pro
Tem John Burton (D-San Francisco). "It is going to cost taxpayers money. It
makes you wonder. . . . This was a policy issue that was never discussed with
the Legislature."
?????V. John White, a lobbyist for the Sierra Club, who also represents
alternative energy producers, called the contract proposal "a horrible
precedent."
?????"Until we know exactly what the state has agreed to and how much of a
subsidy this represents, we can't determine how serious the breach of
principle this is," White said.
?????Another critic of the secrecy of the negotiations, Terry Francke,
general counsel for the California First Amendment Coalition, said the
provision in question "raises the possibility that there are other
[concessions]" that have not yet come to light.
?????In the summer, when demand for power is highest, some generators
probably will exceed pollution limits set by regional air quality management
districts.
?????To avert blackouts, state officials might ask the companies to keep
plants running. In such cases, some sources familiar with aspects of the
contracts said, the contract language could be interpreted to suggest that
the state would cover any fines--although Davis said Tuesday the state will
not cover the cost of fines.
?????A recent Dynegy filing with the Securities and Exchange Commission
underscores the rising cost of pollution-related measures. The company, which
is partners with NRG Energy in three California plants in El Segundo, Long
Beach and Carlsbad in San Diego County, said its "aggregate expenditures for
compliance with laws related to the regulation of discharge of materials into
the environment" rose to $14.3 million in 2000, from $3.6 million in 1999.
?????A South Coast Air Quality Management spokesman said Dynegy's facilities
appear to be fairly clean--although Sierra Club lobbyist White said Dynegy
has been seeking a permit at one of its plants to burn fuel oil, which is
dirtier than natural gas.
?????Davis said he intends to "make this information public," but he added
that "we do not want to put the public's interest in jeopardy by asking them
to pay higher prices."
?????"Nobody likes the notion that [the administration is] not being fully
forthcoming," Davis said. "But I also have a corollary responsibility that I
don't stick these generators with a higher rate."
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As Losses Mount, Companies Work Around Outages

By MARLA DICKERSON,JERRY HIRSCH and NANCY CLEELAND, Times Staff Writers

?????As blackouts moved from theory to reality, many Southern California
businesses spent Day 2 assessing their losses and digging in for what they
expect to be a long, hot summer.
?????An hour without electricity may be an inconvenience for most residents.
But for manufacturers and many other businesses, even a brief loss of power
can generate tens of thousands in losses.
?????Whether shaping metal or making salsa, businesses of all kinds
complained Tuesday about the lack of warning of impending outages, even as
they sought sometimes creative ways to work around the loss of power.
?????Rattled by news reports of Monday's rolling blackouts, Industry-based El
Burrito Mexican Food Products started its Tuesday shift at 2 a.m. Workers had
just finished cooking and packaging the last batches of salsa and masa when
the lights went out at 10:20 a.m.
?????"We dodged a bullet," said El Burrito founder Mark Roth. "Losing a day's
production of salsa would have cost me $15,000 to $20,000."
?????But other companies weren't so fortunate.
?????Long Beach-based Delco Machine & Gear was still totaling up its losses
from Monday's blackout, which amounted to at least $30,000 in lost wages and
production, said Nick Campanelli, vice president of manufacturing. The
company, a division of Florida-based B/E Aerospace Inc., makes parts for the
aerospace industry. The sudden loss of power caused its sophisticated metal
cutting and grinding machines to crash, ruining precision parts in production.
?????But the losses don't end there. He said employees will need to spend
hours resetting the equipment. Campanelli is particularly irked that the
company received no warning.
?????"Five minutes' notice," he fumed. "That's all I needed."
?????Although businesses such as Campanelli's typically receive no warning
that they are about to lose power, insurance companies count the rolling
blackouts as "planned events," a determination that in most cases
disqualifies a business from making a claim.
?????"I know it must be frustrating for businesses who have the power go off
suddenly, but these outages are planned by the grid operators," said Pete
Moraga of the Insurance Information Network of California. "That means it
would not be a covered peril in a traditional business insurance policy."
?????Typically, business insurance covers loss of profit and damage from
unforeseen events such as fires or windstorms. The component of the policy
that covers interruptions in business kicks in after a given amount of time
elapses, usually 24 to 48 hours.
?????Business polices can be written to include unusual coverages, Moraga
said, but he has never heard of a policy that covers losses from a rolling
blackout.
?????Some companies are taking measures not to get caught in a situation
where a blackout can hurt them.
?????The region's largest steel supplier shut down for two hours Monday after
Southern California Edison called to warn of tight supplies.
?????"We just can't take a chance," said Lourenco Goncalvez, president of
California Steel Industries Inc. in San Bernardino County. "We have a lot of
safety issues. People could get hurt."
?????Goncalvez said the plant has multiple 20-ton and 25-ton overhead cranes
that operate with electromagnetic devices, which would fail if they lost
power suddenly. Falling materials could injure workers below, he said. "We
have been asking to be exempt from rolling blackouts," he said.
?????Goncalvez said he couldn't put a price on the lost production at the
24-hour plant and said he worried more about the long term.
?????"Two hours is nothing," he said. "My concern is this thing will start to
happen almost every day. If it will be like this all summer, you can be sure
it will have dramatic consequences for the entire economy. . . . We're going
to have a shortage of steel products in California. Maybe the government does
not consider this is serious. We'll see."
?????At Sport Chalet, a La Canada Flintridge-based chain of 22 sporting goods
stores in Southern California, an administrative assistant monitors the state
power situation, hoping to warn any stores that are in danger of losing
power, said Craig Levra, the company's chief executive.
?????Levra said the assistant was assigned the monitoring duties last year,
when rolling blackouts were still only a threat.
?????The chain put in place an emergency plan--similar to what it would do in
a major earthquake. Backup power will kick on emergency lights and allow the
cash registers to complete transactions. Employees are instructed to escort
customers from the building safely, Levra said.
?????Other businesses, however, have plans to remain open during the 60- to
90-minute blackouts.
?????When power went out at two Cheesecake Factory restaurants in Orange
County on Monday afternoon, the eateries switched to serving cold dishes such
as sandwiches and salads, said Howard Gordon, senior vice president of the
Calabasas Hills-based chain.
?????The restaurants had enough backup power to operate emergency lights and
cash registers. Large windows provided the rest of the light, Gordon said.
?????So far, the 99 Cents Only Stores chain has missed the shotgun pattern of
the blackouts. But with nearly 100 stores in California, company President
Eric Schiffer believes it is only a matter of time before the lights go out
at one of its outlets.
?????Though the stores have some backup power, the chain has systems in place
to operate without it. Its cash registers can open mechanically, Schiffer
said. Because an item sells for a multiple of 99 cents, sales clerks are
equipped with "blackout sheets" that calculate a customer's tab, including
tax. All the clerk has to do is count the number of items in the shopping
cart and check the tables on the sheet.
?????This week's power crunch has been exacerbated by the fact that so-called
interruptible electricity customers no longer face large penalties if they
decline to shut down their operations when supplies get critically low.
?????The Public Utilities Commission suspended the fines in January to ease
the burden on about 1,400 businesses that found themselves bearing the brunt
of the crisis to prevent rolling blackouts in the rest of the state.
?????According to Edison, about 10% of its interruptible customers are
complying with requests to curtail electricity usage during crunch time. But
Scott Keller isn't among them.
?????The owner of Chino-based STC Plastics Inc. said he was forced to shut
down more than 20 times since September, costing him as much as $10,000 in
lost production per day. He ignored requests Monday and Tuesday to curtail
usage and said he doesn't feel a twinge of remorse.
?????"If I'm shut down, I can't pay my workers," he said. "I'd feel more
guilty about that."
?????But this is one area where insurance eventually might help. Moraga said
some carriers are developing plans that would cover penalties for continuing
to use power after they have been asked by a utility to cut back.
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Wednesday, March 21, 2001
A Blackout on Answers
Davis needs to do a better job in communicating to Californians about the
electricity crisis. In the absence of that, cynicism grows.

?????The oil shocks of the 1970s, from the Arab oil embargo to the Iran-Iraq
war, were dead simple compared with the California power shortage. Then, the
problem was a lack of imported oil and the chief symptom was long lines and
high prices at gas stations. Politicians urged conservation: Turn down the
heat, drive fewer miles, buy more efficient cars. People understood the cause
of the crisis and the benefit of their actions. Today it's a different story
and a damnably complicated one that gives consumers no place--or actually,
too many places--to focus their anger.
?????The last two days of rolling blackouts, including previously exempt
Southern California, have not reduced power demand, or at least not enough.
Consumers are suspicious: Are out-of-state power companies holding back
production? Did utilities really not have enough money to pay alternative
energy producers--the little guys who, combined, could produce enough power
to prevent the blackouts? And what happened to long-term power contracts, the
state-bargained deal that was supposed to stabilize the crisis?
?????The frustrations are vast, and there are too many gaps in the story. If
it's just a pack of thieves creating an artificial shortage, as even some
consumer organizations charge, why should anyone sacrifice to conserve? That,
in a nutshell, is the problem that Gov. Gray Davis, the state Legislature and
the Public Utilities Commission face.
?????Davis, for one, has to level with the public and stop acting as if he
can fix the crisis. He has proved he can't, at least not without reductions
in usage and, most likely, rate increases. If Davis, who is notoriously
averse to delivering bad news, had leveled with the public about the
fragility of the current system, the last two days of blackouts statewide
(except in places with full municipal power, like Los Angeles) might not have
come as such a shock.
?????The Legislature tried and failed earlier to solve the alternative energy
producers' nonpayment problems with a very complicated bill. Tuesday night,
Davis and legislators announced a simpler plan that would set lower, more
flexible rates for alternative power but also force the utilities to pay for
future purchases.
?????Which leads to the utilities themselves. With the state shelling out
billions for power from the major generators, how could Southern California
Edison and Pacific Gas & Electric still not have the cash flow to pay the
alternative producers? That motley collection of biomass, solar, wind and
cogeneration companies has been shutting down for nonpayment--some of them
because natural gas suppliers have cut them off. PG&E has made some payments,
but SCE has paid zilch, though a spokesman says it hopes to strike a deal to
start paying this week.
?????Without enough honest information, conspiracy scenarios fill the holes.
Bad news is better than no news, something Davis seems not to quite realize.
By today or Thursday, the weather will cool and some plants taken down for
repair will come back online. The blackouts may cease but the crisis will be
just as deep as it was Monday and Tuesday. It is up to Davis to do a better
job of persuasively explaining why. Otherwise, the cynicism grows.
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Wednesday, March 21, 2001
Rolling Blackouts: Blatant Extortion

?????* Re "Rolling Blackouts Hit Southland for First Time as Production
Falls," March 20:
?????So here we are, 22 years after the notorious gas shortage, having
another gun held to our head by an opportunistic energy consortium. Back in
1979, we all had to wait in long lines just to pay more for gasoline. Now, we
have to face food in our freezers thawing and simmering in our homes during
hot summer days, just to earn the honor of paying more for electricity.
?????Of course, as soon as the rates are up and the environmental concerns
are shoved aside, watch how plentiful power will be. When is somebody in
government going to stand up for the consumer and stop this blatant form of
extortion?
?????JOHN JOHNSON
?????Agoura Hills
* * *
?????So customers of PG&E and Edison are "shielded from soaring wholesale
prices"? Some shield: turning off all our power without so much as a moment's
notice, endangering lives and disrupting businesses just to keep our
electricity prices unreasonably low. Let's lift the rate caps to get the
lights back on. And if I need to be shielded from soaring prices, I'll turn
my own lights off.
?????ANDREW LOWD
?????Claremont
* * *
?????This state needs adequate, reliable electricity to run a diverse
economy. Both political parties and business interests are at fault. This
crisis demands top priority, aimed at lasting solutions.
?????The most immediate solution is fast-tracking of added generating
capacity. Freeway bridges were rebuilt in record time after the Northridge
quake, so we know it can be done. That is the type of effort that is needed,
immediately.
?????Since Democrats hold the governorship and control both state legislative
houses, they are in the driver's seat. If the lights go out, the Democrats go
out. If this state government can't solve the problem, we need a new
government that can.
?????STEVE ANDERSON
?????Huntington Beach
* * *
?????The alleged energy crisis in California is entirely contrived to relax
environmental pollution standards and to raise energy rates. It's curious
that the L.A. Department of Water and Power, which was not deregulated, is
not currently experiencing an energy crisis. PG&E and Edison are both part of
national and multinational corporations. Why should utility customers have to
pay for their economic problems or gross mismanagement?
?????Several power plants were taken off-line for "routine maintenance,"
which may not have been so routine. Energy is a vital necessity; if these
companies can't provide it at a reasonable, affordable rate then they should
be replaced by companies that can, be taken over by the government, or
de-deregulated. There is an abundance of solar energy in California, of which
only a small fraction is being utilized. There is no shortage of energy in
California, only a shortage of intelligence, will and honest politicians.
?????CHARLES B. EDELMAN
?????Los Angeles
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Utilities' Demand Blocks Bailout
NEGOTIATIONS HIT SNAG: PG&E, Edison want end to price freeze if they sell
transmission lines to state David Lazarus, Chronicle Staff Writer
Wednesday, March 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/21/M
N114450.DTL
California's near-bankrupt utilities are demanding that higher electric rates
be a part of any deal to sell the state their power lines, The Chronicle has
learned.
A rate increase -- perhaps of more than 50 percent, according to earlier
industry estimates -- would certainly draw a firestorm of protest from
consumer groups and force Gov. Gray Davis to backtrack from earlier pledges
that rates would remain unchanged.
Nevertheless, sources close to negotiations on the deal said Pacific Gas and
Electric Co. and Southern California Edison are attempting to make higher
rates a condition for agreeing to a bailout scheme in which they would sell
the state their transmission systems and some land.
The sources said the talks hit a new snag this week when state officials
realized that fine print sought by the companies could require the Public
Utilities Commission to pass along all of the utilities' costs to ratepayers.
The sources said this would end a rate freeze that shields consumers from
runaway wholesale electricity prices.
The inclusion of potential rate increases in the talks reflects the growing
complexity of a deal originally intended by Davis to stabilize the finances
of PG&E and Edison so banks would resume loans to the cash-strapped
utilities.
The negotiations subsequently have expanded to involve a state purchase of
the utilities' transmission networks and acquisition of utility-owned land,
including spectacular coastal property near PG&E's Diablo Canyon nuclear
power plant.
Now they also have embraced further deregulation of California's
dysfunctional electricity market.
"Clearly, one of the terms being discussed is the regulatory environment,"
said Joseph Fichera, head of Saber Partners, a New York investment bank that
is advising Davis in the talks.
"The past situation has not worked well," he added. "The utilities want some
certainty about their future."
TENTATIVE DEAL WITH EDISON
To date, the governor has announced a tentative agreement with Edison for the
state to buy the utility's power lines for almost $3 billion. Discussions
with PG&E for a similar accord have dragged on for weeks.
An Edison official, asking that his name be withheld, acknowledged yesterday
that an end to the rate freeze is an expected result of the power- line sale.
"Once the details of the pact are complete, dominoes will fall," the official
said. "One of the dominoes is the rate freeze."
A PG&E spokesman declined to comment.
In fact, both Edison and PG&E have been aggressively seeking an end to the
rate freeze for months.
The two utilities have a lawsuit pending in federal court demanding that the
PUC immediately raise rates so the utilities can recover almost $13 billion
in debt accrued as a result of the freeze.
"They have been trying a lot of things to get the rate freeze ended in
various forms," said Carl Wood, who sits on the PUC. "Adding it to the
present talks is consistent with past behavior."
Wall Street has taken note that the negotiations no longer appear to be
making progress.
Paul Patterson, an energy industry analyst at Credit Suisse First Boston,
told clients on Monday that the discussions "may have lost some momentum in
recent days." He did not give a reason.
For his part, the governor sounded unusually cautious about the course of the
talks when asked late last week if a breakthrough was imminent.
SECRET STICKING POINTS
"We are going to take the transmission systems and the land that's deeded,
and we will work out an agreement," Davis said at an appearance in San Jose.
"But there are a number of sticking points in the talks with PG&E that I'm
not going to reveal."
One of those sticking points apparently is an insistence that the sale of
utility assets include a long-sought lifting of the rate freeze.
Sources said lawyers from both PG&E and Edison had inserted the related terms
into draft accords affecting each utility, and that the full impact of the
additions was not realized by state officials until this week.
One source said the language was just convoluted enough to slip beneath the
radar screen of state negotiators. But the upshot, once the words had been
parsed, was that the PUC effectively would lose control over power rates.
CREDITWORTHINESS ON THE TABLE
In Edison's case, the terms of the tentative deal include the governor asking
the PUC "to support the creditworthiness" of the utility.
"This would ensure that future investments in both utility distribution and
utility generation plants are provided fair returns of and on capital,
consistent with current authorized returns and capital structure provisions,"
it says.
Sources said the provision could be interpreted as a guarantee from the state
that Edison would be permitted to recoup all outstanding costs from
ratepayers.
"There may be some assumptions about this language that the rate freeze ends
if it is adopted," the Edison official said, adding that he saw no reason to
disagree with such assumptions.
But Fichera, Davis' adviser in the talks, insisted that nothing is set in
stone, and that the negotiations are proceeding without a hitch.
"This is a very complex transaction," he said. "God and the devil are in the
details."
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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Utilities' Demand Blocks Bailout
BLACKOUTS ROLL ON: Weather, increased consumption blamed
David Lazarus, Chronicle Staff Writer
Wednesday, March 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/21/M
N156508.DTL

Hundreds of thousands of Californians went without electricity for a second
day yesterday as unusually warm weather and a high number of idle power
plants prompted blackouts throughout the state.
State officials said electricity usage rose yesterday even though conditions
were largely unchanged from a day before. They surmised that fewer
Californians were conserving power.
"We need people to really focus on that," implored Patrick Dorinson, a
spokesman for the Independent System Operator, manager of the state's power
grid. "The more people can do, the better it will be."
Rolling blackouts were ordered by the ISO about 9:30 a.m. and were suspended
at 2 p.m. after several plants that had been down for repairs returned to
service. Additional power also was obtained from a plant in Arizona.
Utilities estimated that about 560,000 customers were affected yesterday,
compared with more than 1 million a day earlier.
This week's blackouts marked the first time that people in Los Angeles shared
the pain with those in San Francisco. Blackouts in January were confined to
the northern part of the state.
FEWER AFFECTED IN SOUTH
However, Southern California Edison's burden was considerably lighter
yesterday than that of Pacific Gas and Electric Co.
Karen Shepard-Grimes, a spokeswoman for the Southern California utility, said
only about 50,000 customers went without power, compared with nearly 440, 000
for PG&E.
Affected areas in the south included Palm Springs, Santa Monica, Long Beach
and Pomona.
"We're not in the business of turning customers' lights off," Shepard- Grimes
said. "We're in the business of keeping lights on."
In PG&E's case, things were tougher because low rainfall means that less
power is currently available from dams throughout the Pacific Northwest.
Ron Low, a spokesman for the utility, said blackouts were experienced by PG&E
customers from Eureka to Bakersfield.
"Our goal was to carry out the ISO's order with minimal impact on customers,
" he said.
For its part, San Diego Gas & Electric said about 75,000 customers were
darkened.
Yesterday's blackouts began with PG&E customers in Block 12 and halted midway
through Block 14. Customers in each block -- defined by power circuits rather
than geography -- typically will lose power for about 90 minutes before the
service interruption "rolls" elsewhere.
Some cutoffs can last more than two hours, however, because of technical
problems switching individual blocks on and off.
NEXT UP: BLOCK 14
If additional blackouts are ordered today, they will commence with the
remaining portion of Block 14 customers. (PG&E customers can determine their
block by looking at the bottom left-hand corner of their monthly bill.)
The ISO's Dorinson said it is hoped that cooler weather and increased
generation will help avert further cutoffs this week.
"Units are coming back into service that have been out," he said. "That will
help a great deal."
Roughly 15,000 megawatts of generating capacity was offline yesterday,
including half of the alternative-energy plants, which are unable to afford
natural gas to run their turbines.
Many of the plant owners say they have not been paid by PG&E and Edison since
November. They are asking federal regulators for permission to sell their
electricity elsewhere.
At the same time, one of two units at the Mohave Generating Station in Nevada
damaged in a fire Monday returned to service yesterday, easing the load on
California's grid.
The plant, partly owned by Edison, is not expected to return to full output
until tomorrow.
PROBING SHUTDOWNS
Nearly a third of California's generating capacity is currently down for
scheduled or unexpected maintenance. State regulators are investigating
whether some plant owners might be deliberately shutting down to drive prices
higher or reduce operating costs.
Loretta Lynch, president of the Public Utilities Commission, on Monday called
the number of idle plants "highly suspicious."
Dorinson at the ISO said that about 12,000 megawatts of mainstream capacity
was offline yesterday, compared with roughly 10,000 megawatts last year at
this time.
--
Tell Us What You Think
Can you save 20 percent on your energy usage? Gov. Gray Davis is offering
rebates for Californians who save on power starting in June, and if you've
got a strategy for conserving, The Chronicle wants to hear it. We'll be
writing about the hardest-working energy savers in a future story. To get
involved, Write to the Energy Desk, San Francisco Chronicle, 901 Mission St.,
San Francisco, 94103; or e-mail energysaver@sfchronicle.com.
--
THE ENERGY CRUNCH
-- Blackouts: About 560,000 Californians, including 440,000 in Northern
California, lost electricity yesterday for 90 minutes at a time.
-- Areas affected: Blackouts hit parts of blocks 12 and 14 and all of block
13 yesterday. In the event of further blackouts, the remainer of block 14
would be next, followed by block 1.
-- Outlook: Officials say blackouts are less likely today as temperatures are
expected to cool and power plants that have been offline for maintenance
resume generating electricity.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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Manners Go Out the Window
Pedestrians in peril as drivers turn darkened S.F. streets into free-for-all
Steve Rubenstein, Chronicle Staff Writer
Wednesday, March 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/21/M
N173178.DTL

Nobody got plowed into yesterday at Fifth and Howard streets in San
Francisco. Many came close.
The power outage that darkened the traffic lights at the frenetic South of
Market intersection for more than an hour also darkened the souls of untold
numbers of drivers, sending motoring manners into the toilet.
The law says motorists are supposed to treat an intersection with
nonfunctioning traffic lights as a four-way stop. That means everyone stops,
then takes turns -- one by one -- creeping through the intersection.
Tell that to the two people in motorized wheelchairs who were nearly creamed
by two eastbound SUVs.
Or to the young Swedish couple who had traveled halfway around the globe,
only to scamper through the intersection barely ahead of an office supply
truck.
Or to the New Jersey tourist, who proclaimed that California drivers during
power outages were proof positive that the Chaos Theory lives and breathes.
Some motorists stopped and took turns, but many didn't. Some sped into the
intersection immediately behind the vehicle in front, without themselves
stopping at the white line. Some sailed through with a rolling stop and a
warning honk. Some blasted through without stopping or honking.
"I'm scared to death," said Brian Walters of Dorchester, N.J., after making
it across Howard Street. "This is organized madness. I subscribe to the Chaos
Theory, and this is what it looks like."
Sydney Freedman, a tourist from Sydney, walked briskly across the darkened
crossroads, smiling grimly.
"I'll chance it," he said.
He looked back and saw a woman in a motorized wheelchair nearly get squished
by a westbound Chevy.
"You have to be authoritative in this town when you cross the street," he
said. "Especially that lady."
Therese Anderson and Andreas Sandstrom, from Sweden, raced across as quickly
as their backpacks would allow.
"In this country, everyone is in such a hurry," said Anderson.
"Everybody drives like a madman," added Sandstrom. "They say, 'I want to be
home right now, and I don't care what happens to anyone else.' "
The couple paused to gaze in wonder at the intersection, learning more about
America in five minutes than a pile of guidebooks could tell them.
"This intersection," said Sandstrom, "reminds you not to take life for
granted."
A few minutes later, Parking Control Officer Tom Butz arrived in his meter
minder wagon and pulled his orange vest and whistle from the saddlebag. He
strode brave and true into the center of the bullring, planted himself
between the whizzing cars and began waving his arms as if conducting "The
Rite of Spring."
"I'm all by myself," he said. "I know it's a little risky. I'd better keep my
angels with me."
At that moment, the angels were on duty in Menlo Park, where a blacked-out
intersection at El Camino Real and Santa Cruz Avenue backed up traffic so far
that it stretched into neighboring Atherton.
"It's a large intersection and traffic is slow anyway, but now it is severely
impacted," said Police Sgt. Terri Molakides. "We don't get any warning
either. When the power is out, the power is out. It's not like we can make
any plans."
In general, motorists seemed more likely to obey the four-way-stop rule on
the Peninsula and in the East Bay than in San Francisco.
In San Mateo County, some police departments have stopped trying to make
advance plans to cover darkened intersections. San Mateo Police Sgt. Kevin
Rafaelli said putting up signs and posting officers sometimes caused problems
rather than solving them.
"If people just follow the law (and) stop at the intersection, they can
handle it better than we do if we're out there," he said. "People are sort of
getting used to it and are dealing with it."
In Berkeley and Emeryville, motorists stopped one at a time at temporary stop
signs, with no apparent problems. At University Avenue and Sacramento Street
in Berkeley, Officer Matt Meredith said motorists were behaving themselves.
That wasn't the case a while back, when a driver who didn't stop at an
intersection during a blackout was broadsided by someone who did, Meredith
said.
"The thing to remember is to stop and look," he said.

TRAFFIC TIPS
To avoid a collisions during blackouts, the California Highway Patrol offers
this advice to motorists:
-- Treat any intersection with inoperative traffic lights as a four-way stop.
Each vehicle must stop when arriving at the white limit line, then proceed
only when safe, taking turns.
-- If two vehicles arrive at the intersection at the same time, the motorist
on the left must yield to the motorist on the right.
-- Never insist on taking the right of way, even if you are entitled to it.
-- Follow the directions of a police officer or traffic control officer,
whose directions take precedence over lights or signs.
Chronicle staff writers Henry K. Lee and Matthew B. Stannard contributed to
this report. / E-mail Steve Rubenstein at srubenstein@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 8
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Historic Blackouts in State
Bay Area learns to cope
Jonathan Curiel, George Raine, Justino Aguila, and Matthew B. St
Tuesday, March 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/20/M
N219412.DTL
Today's rolling blackouts caused concern throughout the Bay Area, including
Colma, where the sudden lack of power apparently caused a fire.
A light fixture at the Home Depot store in Colma caught fire around 10:45 a.
m., 15 minutes after Pacific Gas and Electric Co. ordered blackouts for the
area. No one was hurt.
"I was in the back of the store when the power outage started," said Dave
Cole, a consultant from Pacifica who was shopping for bolts and screws. "We
lost maybe 90 percent of the lights, then maybe 10 percent of the lights came
up. Then I heard a guy saying, 'Get a ladder, get a ladder!'
"One of the lights on the ceiling had caught on fire, and a couple of people
were getting ladders and fire extinguishers."
Store managers whisked everyone out of the store, and Colma firefighters
arrived to make sure the blaze was extinguished.
At 11 a.m., Cole was waiting to get back into the store, which was still
closed.
"I need my bolts," he said.
Elsewhere, the San Francisco Fire Department had to rescue people stuck in an
elevator at 2001 Embarcadero North, said fire department spokesman Pete
Howes.
Scores of residents and businesses near the Embarcadero, including the Levi
Strauss & Co. headquarters, were affected by the blackout.
At Levi Strauss this morning, Phil Marineau, the president and chief
executive officer, led his 1,300 employees by example, using only minimal
lighting for a meeting in his office at 10 a.m.
Employees were sent e-mails minutes after PG&E's 9:30 a.m. notification that
a blackout was possible. The e-mails said workers should frequently save work
on their computers, and that they should remain in the building and stand by
for further instructions.
Emergency lighting in hallways and stairwells were operated by generators.
All elevators descended to the ground floor but one remained operating,
through a generator.
"Worked nicely," said Jeff Beckman, a company spokesman.
Yesterday -- the first day that rolling blackouts returned -- Shannon
Cashman's home in Walnut Creek was a difficult place to be.
Cashman's 4-year-old daughter, Madison, suffers from a brain defect that
stops her from breathing during sleep. The girl depends on a ventilator that
runs on electricity.
Recently hospitalized and with a weakened immune system, Madison badly needed
a nap yesterday afternoon. But when the Cashmans' power went out about noon,
it meant reading and coloring instead of rest for the girl and a little more
anxiety than normal for her mother.
"If this was a major earthquake or something like that and we couldn't use
the ventilator, we'd take her to the hospital," said the 33-year-old Cashman.
"Otherwise, we'll just wait for the power to come back on."
In a stroke of irony yesterday, the lights went out and computer screens went
dark at the San Francisco offices of the state Public Utilities Commission,
the agency some people blame for the energy crisis and others look to for the
solution.
At a Petco animal store in Redwood City, nocturnal leopard geckos that
weren't familiar with the state's power woes thought it was night and awoke
from their routine daytime slumber.
The geckos clung to the glass of their cages as manager Sally Daine and her
employees misted lizards and watched frozen mealworms melt.
"The worst thing is some of the reptiles need heat, but it's so hot, I don't
think it will matter," she said.
At Auto Pride Car Wash a few blocks away, Dan Giudici watched as the team of
employees he supervised washed cars the old-fashioned way -- with buckets and
hoses. The company's big mechanical car wash went unused.
Customers didn't seem to mind the manual wash, said Giudici, who was charging
half-price. But he was running out of towels.
Even those who hoped they were immune to power problems were affected.
Palo Alto runs its own utility, but the electricity began winking out about
12:30 p.m.
The city depends on a distribution line of the state grid, so it is
vulnerable to blackouts, said Linda Clerkson, public relations manager for
Palo Alto Utilities. In addition, the city relies on PG&E for some of its
power, she said.
Businesses were caught by surprise.
"Well, at least it happened in a better time than the morning," said Nick
Badiee, owner of the Lytton Roasting Co. coffee house. "My toaster went out
and the coffee began getting cold, so I lost three or four people who walked
out the door. I'm not angry, yet, but I would say I am concerned."
For one Milwaukee woman visiting San Francisco, the blackout was an
unexpected lesson in the problems of electricity deregulation.
Cindy Wilburth, a financial consultant who advises Wisconsin utilities, came
to the Bay Area for vacation but left yesterday with important research for
her job.
"This has been a huge learning lesson for Wisconsin," Wilburth said as she
waited for a bus outside the powerless Comfort Inn by the Bay in Cow Hollow.
Wilburth said her state and others that once eyed deregulation are now
backing off.
"It just makes me realize how we've gotten ourselves in a pinch in a free
economy," she said.
As she mused about the predicament in which the state has found itself, her
friend was just thankful to get out of here.
"I love the cold, compared to this," said Cindy Stuckey of Milwaukee. "At
least I know I can stay in my home, secure and warm."
Across the street, at the Travelodge By the Bay, Rolando Gutierrez had
already lost three guests just an hour into the blackout.
"This is the richest state and this is a rich city -- plenty of people want
to come here," he said. "We shouldn't be suffering these blackouts."
Chronicle staff writers Jaxon Van Derbeken, Mark Martin, Henry K. Lee,
Michael McCabe, Bernadette Tansey and Marshall Wilson contributed to this
report.
,2001 San Francisco Chronicle ? Page?A - 1
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Bay Area residents learning to roll with blackouts
Posted at 9:58 p.m. PST Tuesday, March 20, 2001
JOHN
WOOLFOLK
AND STEVE
JOHNSON
Mercury News

As rolling blackouts swept the state for a second straight day Tuesday,
Californians already seasoned by droughts and earthquakes were learning to
live with yet another upheaval: periodic power outages.
Blackouts are still a novelty in Southern California -- hit for the second
time Tuesday -- but they're almost routine for Bay Area residents who have
seen four days of outages this year and now expect many more as temperatures
rise. Toting flashlights, avoiding certain roads and even shutting off their
coveted hot tubs, they're adjusting to life in California's new Dark Age.

?

?
Karen T. Borchers--Mercury News
When the lights went out at Grant Elementary School in San Jose on Tuesday
morning, teacher Renee Johnson took her second-grade students out to the lawn
to read to them.

Marjorie Meagher now looks at her clock before taking the elevator she needs
to get around her two-story San Jose home, fearing she'll get stuck during
rolling blackouts.
``They tend to happen on the hour or half-hour, so I try not to use it
then,'' said Meagher, 74, who is disabled. ``I'm very careful. My own
personal fear is getting stranded in the elevator.''
From 750,000 to about 1 million customers lost power for an hour or so in
stages Tuesday as a rash of power plant outages and record temperatures in
San Jose and elsewhere triggered a critical shortage.
As was the case Monday, when 1.2 million to 1.8 million customers were
affected, Tuesday's outages were split between the northern and southern
parts of the state. Blackouts began at 9:30 a.m. and lasted until 2 p.m. when
authorities obtained extra power from other Western states. Outages were
considered less likely today.
But people are preparing anyway. Like low-flow toilets and earthquake kits,
flashlights and generators may be emerging as another fact of life in the
Golden State.
In San Francisco's Inner Sunset district, Han Yong Park had the satisfied
smile of a well-prepared man having bought a portage generator for his Park's
Farmers Market five months ago.
Tuesday morning, the generator churned loudly on the sidewalk, positioned
between the tomatoes and green beans. Inside, clerks tallied purchases on
electric cash registers.
Park motioned down the street, where neon signs were dark and some
restaurants closed. ``No one else in the area has a generator,'' he said.
Energy officials say such equipment will come in handy this summer. Power
supplies are expected to be so strained that Californians should expect many
more rolling blackouts.
``I don't want to kid anybody,'' said Patrick Dorinson, spokesman for the
California Independent System Operator, which manages the power grid for most
of the state. ``Supplies are very, very tight. When you look at such a big
state and such a large shortfall, I think we have to prepare ourselves. It's
very possible that going into this spring and summer we're going to see some
very difficult days.''
Combination of factors
The multiple causes that conspired to darken California on Tuesday
underscored the difficulty officials face in keeping the lights on.
The thermometer shot to record-breaking levels at some locations in the Bay
Area, driving up power demand. San Jose hit 83, compared with an average 66
degrees for March 20, and breaking the record high of 80 set in 1960.
What's more, 12,000 megawatts of power were unavailable because plants had
shut down for maintenance or because cash-strapped utilities haven't paid
them.
And consumer conservation has been spotty. While state energy officials say
conservation rose from 5 percent in January to 8 percent in February, grid
managers said this week Californians weren't saving enough energy. They even
revised their estimate of how much homes a megawatt can power, down from
1,000 homes to 750 to reflect greater consumption.
Improved conservation later in the day helped stave off a second wave of
outages, they said.
Many shrug off the threat of rolling blackouts.
``I think I've gotten used to it,'' said Mary Carlson, 58, of San Jose, who
took her granddaughter for a walk and read the paper during blackouts in
January. ``I just go with the flow. I'm not going to get too excited about
it. If they turn the power off, it's no big thing.''
Erica Finn, secretary at Acacia Glass in San Francisco, said she wasn't too
upset when blackouts shut down the credit card machines, electric sanders and
phones. She bought coffee, pulled a chair into the sun and popped Madonna
into her portable CD player.
``I have to brush up on my tan, and get paid for it,'' she said.
But for others, the consequences are potentially serious.
At a Palo Alto dental office, the blackouts interrupted root canals for three
patients. Dentists Darrell Dang, Robert McWilliams and Kurtis Finley inserted
temporary fillings by hand, rescheduled the procedures, and went to lunch.
The receptionist used a cell phone to cancel the afternoon's appointments,
frustrated that there's no way to prevent a repeat of Tuesday's fiasco if the
blackouts continue.
A new routine
Others have taken everyday steps to cope with the threat of losing power.
Stephen O'Reilly, a 34-year-old San Jose engineer who often drives to see
clients, said he avoids side streets because blackouts could darken signal
lights and tie up intersections.
``I used to take back roads to avoid traffic, but I'm trying to use the
freeways more because there are no lights,'' said O'Reilly, adding that he's
shut down his electric hot tub to help conserve power.
At Pasta Primavera in San Mateo, manager Chris Harris has stocked up on
candles and has plans to buy a generator for his restaurant. When blackouts
arrived just before the lunch crowd Tuesday and cut power to ventilation
fans, he even considered revising his menu, replacing smoke-producing chicken
and shrimp with simple marinaras and alfredos.
``I don't know if you'd want to dine with the smell of smoke,'' Harris said
as customers trickled into his darkened restaurant on Fourth Avenue. ``If
this is going to continue through the summer, it's going to affect our
pockets.''
San Francisco International Airport, which agreed months ago to shut down its
massive air conditioners to save power during shortages, is now routinely
stuffy.
On Tuesday the temperature reached a steamy 85 degrees inside the airport's
North Terminal, which serves most of United Airlines' flights.
``It's become uncomfortable if not intolerable,'' said Ron Wilson, airport
spokesman. ``It's like getting in a car that's been left in the sun all day.
It's much hotter inside. .?.?. We've turned on the fans but they're just
moving the hot air.''
Hospitals cut off
Several hospitals complained they lost power Tuesday, saying they thought
they were exempt. PG&E said hospitals with sufficient backup generation to
power themselves can be turned off. But state regulators said they could not
confirm that statement, and hospital officials scoffed at the suggestion.
``Every hospital has backup power generation, but it only covers 30 to 40
percent of the hospital,'' said Roger Richter, a senior vice president with
the Hospital Council.
Nonetheless, hospitals are coping with the situation.
``Our patients are concerned, for sure,'' said Jackie Floyd, head nurse at
the Satellite Dialysis Center South in San Jose, which lost power. ``But
while it's a pain, we can handle the blackouts. We're kind of getting the
idea here that this a problem and we have to adjust.''
But while Californians may be adjusting, they're not at all pleased.
``I'm frustrated with this power thing,'' said Ana Rivera, who manages the
Wash Club in San Francisco, where washers and dryers had stopped mid-cycle.
``Who do you blame? No one wants to accept blame.''

Sara Neufeld, Ann Marimow, Kim Vo, Frank Sweeney, Barbara Feder, Aaron Davis,
Gil Duran, and Dave Beck contributed to this report.
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Powerless, again
Outages were lighter after generators came back online and conservation
efforts kicked in. Blackouts may be averted today.
March 21, 2001
By TONY SAAVEDRA, JOHN HOWARD, CHRIS KNAP and JEFF COLLINS
The Orange County Register

The Ridgewood Power methane-burning plant at the Olinda Alpha landfill in
Brea is producing 3.3 megawatts, down from five, because Edison owes it $1.5
million and cranking up to full power is no longer a priority
Photo: H. Lorren Au Jr. / The Register
?
?

A second day of statewide blackouts ratcheted up the frustration level
Tuesday on the streets of Orange County and in Sacramento, as consumers
demanded solutions from politicians unable to give them.
There was a bit of good news, though: Blackouts may be averted for the rest
of the week after temperatures moderated, two stalled generators came back
online and conservation efforts kicked into gear.
?

Some Orange County residents took the blackouts in stride. In Mission Viejo,
above, the West Coast Football Club's under-16 boys team scrimmages under
gas-powered lights Tuesday. The club has been running to conserve energy
Photo: Kevin Sullivan / The Register

?
?

Consumers were able to save 900 megawatts - enough to light about 675,000
homes - by cutting power usage, said Patrick Dorinson, spokesman for the
Independent System Operator, which oversees 75 percent of the state's
electricity grid. That helped the ISO halt the blackouts Tuesday afternoon.
"Californians are back on the conservation trail, and we appreciate it,"
Dorinson said.
Power regulators Tuesday morning predicted there would be twice as many
outages as Monday, when more than 1 million consumers statewide lost power in
one-hour to 90-minute increments.

Luis Pagan, an assistant at the Santa Ana Animal Shelter, waits out the
blackout Tuesday with one of the shelter's dogs up for adoption
Photo: Paul E. Rodriguez / The Register
?
?

Beginning at 9:30 a.m. Tuesday, blackouts tangled intersections in Costa
Mesa, forced Huntington Beach students to study by flashlight and stilled
cash registers in Santa Ana. About a half-million homes and businesses were
unplugged statewide before 2 p.m. Power was restored to most of Southern
California by 11:30 a.m. Outages affected more than 9,200 consumers in Orange
County.
The ISO had expected more severe outages to hit at the peak hour of 7 p.m.,
but was able to keep the lights on as downed power plants came back online
and imports from other states increased.
While outages were lighter than Monday, the blackouts aggravated consumers
who doubted that Gov. Gray Davis, lawmakers and electricity officials are
doing enough to keep the power flowing in California.
?

Zulema Avarez, left, and Erica Ramirez said they were caught off-guard when
the power went out, so they closed the fashion store in Santa Ana where they
work Photo: Paul E. Rodriguez / The Register

?
?

"I think this is insane," said Charlee Lang, 63, of Costa Mesa. "Gray Davis
didn't do his job for a long time; he didn't get serious until November. We
need to demand immediate action be taken."
Bill Brannick, 65, of Costa Mesa, added: "There's a lot of complicity here
and we're just innocent victims."
Davis, in a Sacramento news conference, said he inherited California's failed
experiment with electricity deregulation, enacted in 1996 under former Gov.
Pete Wilson.
"I think a fair assessment of this situation is that we were dealt a pretty
bad hand here," Davis said. "No (new power) plant was approved in the 12
years prior to my being governor."
With summer peak demand expected to be 16,000 megawatts higher than Monday
and Tuesday, more days of blackouts are forecast for coming months. Though
Davis has signed long-term contracts to provide California with reliable
energy, the deals haven't yet taken effect. Some suppliers won't start
providing electricity until the state reaches a so-far elusive agreement to
help the utilities pay off billions in debt by buying their transmission
lines.
Assembly Republican Leader Bill Campbell, R-Villa Park, said that the effort
to resolve the "state's energy crisis was floundering in the midst of unpaid
bills, stalled negotiations and rolling blackouts."
Tuesday began with 29 percent of California's power supply off line, mostly
from generating plants suddenly down for unscheduled maintenance. About 3,000
megawatts was missing from so-called qualifying facilities, or small power
producers who have not been paid $1.8 billion by cash-strapped utilities and
say they can't afford to operate. Davis said he would ask the PUC to order
utilities to begin paying the qualifying facilities for any energy supplied
beginning April 1, but the payments would not apply to the outstanding debt.
Some smaller producers threatened to force Edison into involuntary bankruptcy
if they are not paid soon.
Blackouts began Tuesday two hours earlier than on Monday, as the ISO called
on utilities to dump 500 megawatts. It was only the second day of blackouts
for Southern California, but the fourth for Northern California since
January.
The Disney Resort, which includes Disneyland and the new California
Adventure, voluntarily cut back one megawatt of electricity on Monday and
again Tuesday, said Anaheim Public Utilities.
All of the reductions were in backstage areas not seen by guests, said Disney
spokeswoman Chela Castano-Lenahan.
In other workplaces, people tried to make do.
Flashlight beams bobbed in aisles at a Target in Santa Ana, where the power
stopped at 10:30 a.m. Workers escorted customers, who continued shopping and
made their purchases at battery-powered cash registers. Customers were
eventually asked to leave when the batteries ran low.
"Oh well; no soda, no sunglasses," said one woman as she headed back to her
car.
The Metro Pointe shopping center in Costa Mesa also went dark.
"I was in the middle of making a reservation when everything went out," said
Peggy Thomas, a sales executive for Travel of America, along South Coast
Drive. "All of us here went, 'Oh no, it's happened to us.' "
Said one Costa Mesa police officer, as he headed for his motorcycle and a
blackout-related fender bender: "You can thank the governor for that one."
At Hawes Elementary School in Huntington Beach, Principal Marie Smith was
demonstrating to her third-grade class what would happen in a blackout. But
before she could flip off the light switch, the power died.
The kids thought she was joking.
Register staff writers Tiffany Montgomery, Sarah Tully Tapia, Nancy Luna, Jim
Radcliffe, Binh Ha Hong, Theresa Salinas, Eric Johnson and Danielle Herubin
and the Associated Press contributed to this report.
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The iceman shunneth effects of hourlong blackout
March 21, 2001
By JIM RADCLIFFE
The Orange County Register

Ken Ackerman, owner of ABC Ice House in Laguna Niguel, checks on his frozen
inventory during Tuesday morning's rolling blackout. The ice managed to
endure the hourlong power outage
Photo: Jebb Harris / The Register
?
?

Ken Ackerman didn't sweat much when a blackout struck his Laguna Niguel ice
business at 10:30 a.m. Tuesday.
The walk-in freezer at ABC Ice House held 8 tons of ice. And for an hour, the
temperature in there rose from 20 degrees to 45 degrees.
But very little melted.
Ackerman said most refrigerators can handle blackouts as long as outages are
less than two hours.
"I think people are going to get used to one-hour blackouts and realize it's
not a problem,'' Ackerman said.
The blackouts actually were profitable for Ackerman.
An Irvine laboratory struck by a power outage bought 100 pounds of dry ice to
preserve human tissue.
More blackouts through the summer could be a boon for the ice business - or a
bust.
It could mean more ice sales -- or that his supplier has trouble filling his
orders.
"It's going to be an interesting summer,'' Ackerman said.
"I have no idea if we'll make more or less.''
Traffic will be the biggest problem if blackouts continue, Ackerman said.
On Monday, a nearby Costco that had lost power ordered 200 pounds of ice to
keep its refrigerated goods cold.
But dead traffic lights and congested roads made it impossible to deliver the
ice before the outage ended. Costco canceled the sale.
"We pride ourselves on getting our deliveries made in an hour," Ackerman
said.
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Traffic officials are seeing red over blackouts
Battery backups are planned by several cities to aid confused drivers.
March 21, 2001
By HEATHER LOURIE
The Orange County Register

Traffic backs up Tuesday at Crown Valley Parkway at Forbes Road in Laguna
Niguel as drivers had to navigate their own way
Photo: Jebb Harris / The Register
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Toby Tran approached an Aliso Viejo intersection and wasn't sure what to do.
Ahead of him, the traffic signal was dark, a casualty of the rolling
blackouts that struck Orange County on Monday and Tuesday.
So Tran kept driving, smacking into an oncoming car at the corner of Aliso
Creek and Enterprise.
"It just happened," a shaken Tran, 29, said from his Aliso Viejo home. "I
tried to stop and I couldn't. There was no light. Nothing."
Tran's accident Monday afternoon, and several others like it, underscore one
of the most significant dangers looming in the threat of future blackouts.
Traffic signals that fade to black when the power goes out, instead of
converting to flashing red, make wrecks far more likely because drivers
become confused and frustrated, traffic engineers and experts said Tuesday.
"I didn't know what to do," said Tran, who was on his way to a high school
jogging track. "Luckily I'm alive, but I'm very scared."
On Day 2 of Southern California's power outages, worried city officials
across Orange County hunted for ways to respond to paralyzed intersections
when state regulators pull the plug.
"We need to be ready," said Hamid Bahadori, traffic engineer in the city of
Orange. "This thing is only going to get worse in July and August."
One popular idea: installing emergency battery-backup units at traffic
signals to keep lights flashing red during blackouts. Several Orange County
cities, including Irvine, Laguna Niguel and Orange, are already moving to
install the devices as early as this summer.
"In our minds, (a flashing light) is a vast improvement over a blacked-out
signal," said Dave Rogers, Laguna Niguel traffic engineer. On Tuesday night,
his city was expected to approve the purchase of the battery packs for all 74
of its traffic signals.
"Timing, in this case, seems to be everything," Rogers said. "A lot of cities
had contemplated it. We just took it that extra step."
John Thai, an Anaheim traffic engineer, cautioned that cities need to do
adequate research and testing before they launch into such projects.
"There is nothing that is foolproof," Thai said. "All this is new territory."
Some cities are also considering rolling out temporary stop signs and sending
police officers to more intersections.
Although the state's vehicle code requires motorists to treat dead traffic
signals like a four-way stop, motorists often blow through the intersections,
police said.
"It's dangerous," said Tustin police Lt. Mike Shanahan, after several
near-wrecks in his city during Monday's outages. "People are not very good at
reacting to changes in their conditions.
"Flashing red is something that catches your eye. It's a warning that
something is amiss, but the absence of all lights is worse."

RELATED STORIES
 How to contact your Representatives
 'Current' events
 The iceman shunneth effects of hourlong blackout
 Powerless, again
 Alternative power producers cut back or shut down as payments from big
utilities lag
 O.C. saves its energy -- for blaming others
 Blackout readiness on agenda

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Alternative power producers cut back or shut down as payments from big
utilities lag
That is a factor in blackouts
March 21, 2001
By HANH KIM QUACH
The Orange County Register
Every megawatt of electricity counts in this deregulated energy market -
including the five megawatts generated from the Olinda Alpha landfill in
Brea.
The methane-burning plant is producing only 3.3 megawatts now because
Southern California Edison owes it $1.5 million and cranking up to full power
is no longer a priority, said Martin Quinn, executive vice president of
Ridgewood Power, which runs the plant.
"We're doing maintenance now when we ordinarily wouldn't do it. Because we're
not being paid, it was a good time to cut back,'' Quinn said.
That scenario has been playing out across the state in the past two weeks and
was a major factor in Monday's and Tuesday's blackouts.
Those who provide electricity through alternative means - burning methane or
wood chips, or using cleaner-burning technology with traditional fossil fuels
- are not being paid for what they sell to the big utilities. So they either
can't afford to produce energy or see little incentive to do so.
On Monday, their absence from the statewide electricity grid created a
1,300-megawatt shortfall -- enough to power 1.3 million homes.
Taking that much power offline meant that any burp in the system would put
the state under the minimum amount of electricity needed to avoid blackouts.
When one conventional Southern California plant went down because of a
transformer fire Monday, the blackouts began.
"If all of California's (alternative) generators were operating yesterday and
today, rolling blackouts would have been avoided,'' Quinn said Tuesday.
Within the next couple of weeks, as the weather warms and alternative energy
producers continue to try and operate without money, California could see
twice as many of those producers go offline, further increasing the potential
for blackouts, said Jan Smutny-Jones, executive director of Independent
Energy Producers.
The alternative energy producers, which provide about a third of the state's
energy, are deemed so crucial that Gov. Gray Davis wants the Public Utilities
Commission to order the utilities to pay them. As drafted, though, the order
would only include payment on future sales; it doesn't address existing debt.
The Legislature has been working since January to halve the rates that
alternative producers charge utilities and to require utilities to pay for
November's energy by April 1. But that bill is still moving through the
Legislature.
Small plants threaten Edison with bankruptcy
Smutny-Jones said that if the small generators are not paid promptly, several
will attempt to force Edison into bankruptcy, probably within a week.
Unlike the large natural-gas generators that have been paid by the state
Department of Water Resources, alternative energy producers are locked into
contracts with utilities. Collectively, Pacific Gas & Electric and Edison owe
alternative energy producers about $1 billion.
PG&E has paid about 15 cents for each dollar it owes.
"Obviously, they're a source of generation, and looking at how much load our
customers need, they're a source that has provided energy,'' said Jon
Tremayne, Pacific Gas & Electric spokesman. "We've been trying, in good
faith, to make payments on energy.''
But Edison has not paid any money. Edison's alternative energy director, Lars
Bergmann, said the company will not pay until larger reforms are made in how
the producers' rates are calculated.
But the company recognizes that its nonpayment is causing problems.
"To the extent that there are hundreds of megawatts that are idled here, it
just exacerbates the (energy) problem. ... They're facing similar problems to
what we faced - they don't have sufficient (income) coming in the door,''
Bergmann said.
Plants go into mothball mode
Millenium Energy in Kern County is owed $40 million total by PG&E and Edison.
On March 1, the company shut down both of its coal and petroleum coke-burning
plants and doesn't plan to bring them back up until it is paid.
Millenium's plants, which use a special technology to reduce emissions,
generate 150 megawatts of energy.
"We've gone into mothball mode; our machinery just sits there on cold
standby,'' said President Mike Hawkins. "We've been delivering free electrons
to the system in the hope that the system would resolve itself. But we can't
do that anymore."
One biomass plant in Lassen County has scaled back from 31 megawatts to
eight. Burney Forest Power burns wood chips to produce energy and has only a
couple weeks' supply of chips left.
"When you don't even know what you'll get paid, it's hard to say, 'Let's go
out and get a bunch of fuel,''' said Milt Schultz, the plant's general
manager.
"The sad thing is, (the state) really can't afford to lose us.''
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O.C. saves its energy -- for blaming others
March 21, 2001
By RICHARD CHANG
The Orange County Register

Darkened stores were forced to turn away customers, as stock manager
Bridgette Kelly, left, does here at a Linens 'n Things in Costa Mesa. The
store closed for 45 minutes Tuesday morning
Photo: Michael Kitada / The Orange County Register
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Orange County residents are making efforts, large and small, to conserve
electricity as they face rolling blackouts and surging energy bills.
Reactions to the early spring crisis - with blackouts throughout the state
Monday and Tuesday - are ranging from confusion to rage.
Many residents have taken practical steps, such as turning off lights they're
not using, waiting until off-peak hours to do their laundry and opening
windows instead of using air conditioning.
"My house is full of Philips energy-saving light bulbs," said Ray Rutledge,
48, of Buena Park. "Our light bill has dropped 7 1/2 percent. We use
low-voltage outdoor lighting. We've got an energy-saving thermostat. It's set
back to 65 (degrees) in the wintertime."
Kim Wilson, who lives in an unincorporated area of Orange County near Santa
Ana and Tustin, said he has cut down on lighting in his house and has reduced
by half the time his pool cleaner runs. Still, his energy bill remains about
$400 a month.
"I don't know what ... to do," Wilson, 57, said. "We've cut back."
Wilson added that he is not pleased with the way government or the energy
companies have handled the crisis.
"I think it's disgusting. It's such political garbage. Who was it that made
these decisions? Who got us into it?"
'TRYING TO CONSERVE'
Jenny Hann, 60, of Costa Mesa said her workplace has devised an emergency
plan for conservation and future blackouts.
"We're definitely trying to conserve as much as we can," the bank
administrator said. Hann expressed frustration with the energy companies.
"When you see these executives that have been running the show and the money
they're making, it's bothersome," she said.
Jennifer Souto, 27, of Tustin said even though she's a stay-at-home mother,
she keeps the lights off all day. She doesn't use her air conditioning,
either.
Souto said she was locked out of her house for 90 minutes Monday because a
blackout cut power to her garage door. She says she's not sure who to blame.
Paul Finch, 38, of Westminster blames Edison and Gov. Gray Davis.
"I don't believe info I get from Edison or from our illustrious governor,"
Finch said. "There's more to it than how they've represented it."

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Blackout readiness on agenda
O.C. companies braced for outages Tuesday in different ways. Not all were
struck, but they felt the effects.
March 21, 2001
By TAMARA CHUANG
The Orange County Register
In case of a power failure Tuesday, the Fluor Corp. in Aliso Viejo stocked
elevators with homemade blackout kits, filled with cookies, flashlights and
bottles of water.
"They're in the elevators, although we've been told not to use the
elevators," said Lori Serrato, a company spokeswoman. "We're using the
stairwells, waiting for our time of darkness."
Tales of anxious preparation were more common than actual blackouts for
Orange County businesses Tuesday.
Edison told some companies, as special power users who've agreed to cut back
when asked, to expect to do so. Conexant Systems Inc. got a warning from
Edison and immediately shut down air conditioning and equipment not in use,
and stopped production. The blackout never came.
Kingston Technology Co., when notified by Edison on Tuesday morning,
broadcast the warning on the company intercom. The company also e-mailed
employees a guide explaining the blackout.
"It's already affected productivity. We've been busy getting all our e-mails
out before it happens," said Heather Jardin, a spokeswoman for the Fountain
Valley computer memory maker.
Kingston still had power by day's end, but in an emergency, the company's
manufacturing plants revert to Kingston's own power generators, Jardin said.
Heart valve maker Edwards Lifesciences turned on its backup generators
Tuesday morning, "because of the potential for there to be a blackout in our
area," said company spokesman Scott Nelson. But (as of 3:30 p.m.) the
blackout didn't materialize, Nelson said.
At the regional office in Irvine, Verizon Wireless implemented conservation
efforts, such as motion sensors that shut off lights after 30 minutes of
inactivity, and separate heating and air conditioning units on all floors.
Some of the company's cell sites in Orange County and Los Angeles did lose
power Monday and Tuesday, but they automatically switched to backup battery
sources.
Other companies - PacifiCare, ICN Pharmaceuticals, Beckman Coulter and
Allergan - said they took precautions, turning out some hallway lights and
communicating safety procedures to employees.
Disneyland, Ingram Micro in Santa Ana and Western Digital Corp. in Lake
Forest all were prepared.
But none reported blackouts by day's end.
Some county businesses did get hit.
Businesses along the 900 block of South Coast Drive - including 14 stores at
the Metro Point shopping center in Costa Mesa - went dark about 10:20 a.m.
"All of a sudden it was dark," said Henry Gonzalez, manager of Boudin Bakery.
"We ran out of coffee. We couldn't bake anything. We tried to accommodate as
best as we can."
Other stores simply closed during the blackout, frustrating shoppers.
"We walked over to (Marshalls) and it was dark and there was a sign on the
door that said 'Due to the blackout, we're closed,'" said shopper Roberta
Allison, a West Virginia tourist. "Don't they warn people here? Do they just
whack the power off?"
Marshalls employees escorted customers out of the store when the power went
out. Other stores, including Nordstrom Rack and Best Buy, were not affected.
Across the street from the center, employees spilled out of office buildings
cheering and waving their hands in victory as power outages forced them to
halt work.
"Lots of people just walked out of the office to run errands," said Amy
Bateman, a loan officer at Capital Funding Group in Costa Mesa.
She said her office building, at 940 South Coast Drive, went dark for about
70 minutes. Like dozens of others in the building, she was working at her
desk when the computers and lights went dark.
"We've just been sitting around. We can't do anything," said Bateman.
The blackout hit other businesses on Monday.
Buy.com employees spent their hour without power using their wireless
Blackberry pagers to answer and send e-mail.
The Crazy Horse Steakhouse in Irvine lost power after the lunch rush, said
Donna Mulkey, the restaurant's manager. Since the broilers remained hot, the
cooks kept cooking and the customers kept eating. When they finished, waiters
calculated the bills by hand.
At Broadcom Corp. in Irvine, the power went out just before Rep. Christopher
Cox was to tour the facility.
"It struck me as particularly ironic," Cox told members of the House
subcommittee on energy and air quality Tuesday, that Broadcom's co-founder,
Henry Samueli, "spent the hour before the meeting using a letter opener to
open his paper mail and sitting by the window so he could get some sunlight
to read."
Cox, R-Newport Beach, told the panel, which was holding a hearing on
California's electricity crisis, that "the entire company could not function
during this period of time and the same was true for more than a million
people," he said. "It's a Third World experience in California."
Register reporters Chris Farnsworth, Dena Bunis, Bernard Wolfson, Nancy Luna,
Eric Johnson, Elizabeth Aguilera and Jennifer Hieger contributed to this
story.
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Calif To Order Utils To Pay Small Generators Up Front-Gov

03/21/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
SACRAMENTO, Calif. (AP)-- California regulators will order the state's two
largest utilities to pay small, independent power generators in advance, a
move Gov. Gray Davis hopes will bring a quick end to the blackouts that
darkened California this week.
Davis accused PG&E Corp. (PCG) unit Pacific Gas & Electric Co. and Edison
International (EIX) unit Southern California Edison of taking in money from
customers while failing to pay the generators, known as qualifying
facilities, which produce up to one-third of the state's power. As a result,
he said, the utilities are partly responsible for this week's blackouts.
"It's wrong and irresponsible of the utilities to pocket this money and not
pay the generators," the governor said at a Capitol news conference Tuesday
evening. "They've acted irresponsibly and immorally and it has to stop."
The state lost about 3,100 megawatts, or enough electricity to power 3.1
million homes, on Tuesday from alternative energy plants that say they can't
afford to keep operating because the utilities haven't paid their bills in
weeks. The utilities, which are near bankruptcy, owe the QFs about $1
billion. Pacific Gas & Electric has made partial payments.
As reported by Dow Jones Newswires, Southern California Edison met with
representatives of the governor Tuesday to discuss plans to begin making
partial payments to the QFs. Pacific Gas & Electric , which called Davis'
statements "inappropriate and unjustified," said it has informed the QFs and
the governor's office that it plans to begin paying the QFs in full going
forward.
Davis said the PUC planned to issue an order next week directing the
utilities to prepay future bills to the QFs.
Edison and PG&E say they have lost more than $13 billion since last June to
climbing wholesale electricity prices, which the state's 1996 deregulation
law prevents them from passing on to ratepayers. California has been spending
about $45 million a day since January to buy power for the utilities'
customers, but hasn't included QF-generated power in its purchases.
Keepers of the state's power grid were cautiously optimistic that California
might get through Wednesday without another day of rolling blackouts after
two idle plants were returned to service. A Stage 1 power alert, the mildest
of three forms of alerts, was called around 6 a.m. Wednesday as power
reserves fell to around 7 percent.
About a half-million customers were hit by Tuesday's blackouts, which snarled
traffic and plunged schools and businesses into darkness from San Diego to
the Oregon border. Tuesday's outages began at 9:30 a.m. and continued in
90-minute waves until about 2 p.m., when the ISO lifted its blackout order.
They were blamed for at least one serious traffic accident.
The blackouts were caused by a combination of problems, including
unseasonably warm weather, reduced electricity imports from the Pacific
Northwest, numerous power plants being shut down for repairs and the loss of
power from QFs.
Meanwhile, a leading lawmaker on energy issues said the PUC may soon have to
raise rates by about 15% to cover the state's costs and its utilities' bills.
"My sense is that people will appreciate having some certainty and being able
to plan for it," said Assemblyman Fred Keeley. "They don't have to like it,
but I think they'll appreciate it."
Davis has said he is confident the utilities and the state can pay their
bills without further rate increases.
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PG&E Says It Is Negotiating With Qualifying Facilities

03/21/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
(This article was originally published Tuesday)

LOS ANGELES -(Dow Jones)- PG&E Corp. (PCG) unit Pacific Gas and Electric Co.
said Tuesday it is offering small generators, or "qualifying facilities",
prepayment of $200 million per month so they will have the funds to return to
the state power grid.
But high level sources at the qualifying facilities who are involved in the
negotiations said PG&E's proposal is incomplete and doesn't address the issue
of past due payments.
The sources said PG&E had discussions with some qualifying facility operators
last week regarding the plan and it wasn't accepted at that time.
About 3,000 megawatts of power from qualifying facilities, or QFs, have been
off the state's grid since Monday because the generators weren't being paid
by utilities and couldn't afford to continue operating. The QFs unavailable
power was partly responsible for Monday and Tuesday's statewide rolling
blackouts.
Also Tuesday, California Gov. Gray Davis will hold a press conference to
discuss progress made in negotiations with the QFs to revise their contracts
with the state's two nearly-bankrupt utilities so that the utilities pay less
for power.
Edison International (EIX) unit Southern California Edison also said Tuesday
it intends to make partial payments on an ongoing basis to some QFs.
Edison executives met with Gov. Gray Davis' negotiating team Tuesday to
discuss how and when SoCal Ed can begin to make payments, and a spokesman
said they hope to have a plan in a matter of days.
Pacific Gas & Electric Co. has made partial payments of about $51 million to
the QFs it contracts with, but owes much more. Edison owes the QFs hundreds
of millions of dollars and hasn't paid the QFs since November. Together, the
two utilities owe QFs about $1 billion.
PG&E said it has been collecting about $400 million per month from ratepayers
to pay QFs and other generators with which it has bilateral contracts, the
state grid operator for spot power purchases, and costs of its own
generation.
The average combined bill for those costs exceeds $1.4 billion per month,
PG&E said.
"This mismatch between revenues and costs requires tough choices. Since there
isn't enough money in rates to cover all these costs, the Public Utilities
Commission decision on how this $400 million will be allocated going forward
will determine our ability to make advance payments to QFs," said Gordon R.
Smith, the utility's president and CEO.
The PUC is responsible for implementing the legislation which allows the
state to buy power and will decide how much of utilities' ratepayer revenue
will go to the state for power purchases and how much will go to the
utilities.
For several weeks, a number of QFs have taken their generating units offline
because they can no longer afford to buy fuel needed to run their units.
QFs supply California with one-third of its total power supply.
PG&E and SoCal Ed have almost $13 billion in purchased power undercollections
because they cannot collect full costs from customers protected by a
state-mandated rate freeze.
-By Jessica Berthold, Dow Jones Newswires; 323-658-3872;
jessicaberthold@dowjones.com
-(Jason Leopold contributed to this article.)
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Wednesday, March 21, 2001

By Dave Todd
dtodd@ftenergy.com
U.S. Energy Secretary Spencer Abraham declared this week that the Big Apple
is on the verge of being bitten hard by power cuts and rising energy prices.

Delivering the keynote address at the U.S. Chamber of Commerce's national
energy summit in Washington Monday, Abraham said, "California is not the only
state facing a mismatch between supply and demand," what with "electricity
shortages predicted for New York City and Long Island this summer" and low
capacity margins threatening electricity reliability elsewhere across the
country. But how likely is it that New Yorkers will face blackouts of the
sort confronting Californians?

Not very, says energy trade specialist Edward Krapels, managing director of
Boston-based METIS Trading Advisors. Krapels, a consultant helping major
Northeastern utilities, such as Consolidated Edison, design market-hedging
programs, adamantly decried what he said are facile comparisons between
conditions in New York and California, there being "more differences than
there are similarities" between those two industrial cornerstones of the
country's economy in respect to energy security management.

"First of all, New York has a more varied portfolio of energy generation
sources than California," he said. California has hydro, nuclear and gas, but
when it lost a lot of hydro, the state needed gas to pick up the slack, and
the "capacity just wasn't there." In New York's case, the state has oil and
coal still in the mix and its overall dependence on gas is much lower than
California's, Krapels added.

New York avoids making same mistakes
Portfolio diversity is one pillar of any effective plan to help New York
avoid the same errors made in redesigning California's marketplace. New
York's Independent System Operator (ISO), in a new report warning that the
state is at an "energy crossroads" in terms of its capacity adequacy in the
immediate future, argues that a concerted effort is required to arrest
declining in-state generation capacity reserve margins, and a strategy must
be put in place, whether or not new generation comes on-line, in accordance
with current anticipated scenarios.

A measure of New York's essential difficulty is that, between 1995 and 2000,
statewide demand for electricity grew 2,700 MW, while generating capacity
expanded by only 1,060 MW. With no major new generating plants in downstate
New York fully approved, the gap is expected to continue to widen. To avoid
"a replication of California's market meltdown" the New York ISO calculates
the state's daily generating capacity needs to grow by 8,600 MW by 2005, with
more than half of that located in New York City and on Long Island.
Expressing concern this may be too big a burden for the current bureaucratic
process to bear, the ISO wants to see a state-appointed ombudsman named to
help would-be merchant power plant investors plow through red tape.

"Increasing New York's generating capacity will also lessen the state's
escalating and risky reliance on out-of-state sources of electricity," the
ISO added. "Since 1999, New York State has been unable to cover its reserve
requirements from in-state sources."

Not everyone agrees with that analysis, insofar as it argues for circling the
wagons inward. Some analysts believe the ultimate solution lies not in tying
in more inwardly dedicated power, but in expanding the marketplace by
breaking down inter-jurisdictional barriers. In any case, New York energy
regulatory authorities and those responsible elsewhere in the U.S. Northeast,
such as PJM (Pennsylvania-New Jersey-Maryland) Interconnection and the New
England Power Pool, are in vastly better shape in terms of "cross-border"
cooperation than California and its neighbors in that efforts are being made
among various authorities toward developing an integrated regional
electricity market. In California, by contrast, the state's focus*for
example, in the case of new gas-fired power plant development*has been to
ensure dedicated supply to the California market alone, rather than on a
regional marketplace.

The New York ISO's new broad-based analysis of market-restructuring needs
argues that the relatively stronger health of its reformed environment is
"due in large part to the ability of New York's utilities to enter into
long-term power contracts."

What needs to be done most, it says, is to move aggressively to build some of
the more than 29,000 MW of "proposed new generation in the siting pipeline."

In the meantime, the 30,200 MW of electricity New Yorkers used on a peak day
last summer shouldn't be eclipsed on too many days this coming summer (given
early long-range weather forecasts). Demand, however, is expected to increase
at an annual average rate of up to 1.4%.

So while New York City, the rest of the state and adjacent parts might
breathe easy this year, it could be a brief rest from the fray. Meanwhile, a
4% shortfall is still being planned for this summer that is not yet provided
for, as authorities hurriedly seek to arrange new generation plants around
Manhattan, on Long Island and even on barges offshore.

One way or another, whether it is the weather or the politics of siting new
energy facilities, it's going to be a hot time in the city.

Long-term solutions hit brick wall
Meanwhile, attempts at longer-term solutions continue to run into trouble.
Last week, Connecticut state regulators came out against a proposal to run a
new underwater cable under Long Island Sound that Hydro-Quebec subsidiary
TransEnergie U.S. Ltd. wants to build to pump more juice into Long Island
Power Authority's load pocket. Despite strong promises from TransEnergie to
be diligent in avoiding damage to oyster beds in Long Island Sound, the
proposal failed to convince authorities, who were persuaded the pipeline
project could lead to diversion of electricity from Connecticut.

In similar fashion, private companies wanting to build 10 small independent
power plants and temporary generators offshore New York City are running into
intense opposition from environmental groups and citizen organizations*some
of whom have taken their cases to the state assembly in Albany.

The David vs. Goliath nature of such controversies has further alerted energy
companies to the difficulties of addressing complex energy supply issues that
may ultimately devolve to people not wanting things in their backyard,
regardless of what the alternative might mean to their fellow citizens or the
greater public good.

But suddenly, in New York, California's troubles*while still distant in their
intensity* may not be so far away. By some estimates, this summer's bills for
Consolidated Edison customers could be up as much as one third or more over
last year's charges.

Letting the time slip when it comes to building new infrastructure isn't
going to make the pain go away.