Wall Street Journal, June 4, 2001, California Companies Combine, To Influence
Power Regulation, By ?????
???MITCHEL BENSON Staff Reporter of THE WALL STREET JOURNAL

Wall Street Journal, June 4, 2001, Energy Commission, California, Clash Over
Power-Grid Control
???By REBECCA SMITH Staff Reporter of THE WALL STREET JOURNAL

Business Wire, June 4, 2001, Monday, 09:11 AM Eastern Time, 307 words,
????Tired of Constantly Changing Energy Prices? NewPower Offers California
????Natural Gas Consumers A Two-Year, Locked-In Rate, PURCHASE, N.Y., June 4,
????2001

United Press International, June 4, 2001, Monday, 08:23 AM Eastern Time,
????GENERAL NEWS, 3236 words, What U.S. newspapers are saying

CNN, CNN SUNDAY 16:00, June 3, 2001; Sunday, 5:19 PM Eastern Time,
????Transcript # 01060307V36, INTERVIEW, News; Domestic, 816 words, Are Price
????Caps a Solution for California's Energy Woes?, Barbara Shook, Stephen
????Frazier

The Gazette (Montreal), June 4, 2001 Monday, 802 words, Dim policies in
????California, P.J. O'ROURKE

Los Angeles Times, June 4, 2001 Monday, Home Edition, Page 2, 1700 words,
????Los Angeles; ; An Illuminating Look Several Light-Years Back; Utility
????Players Bat Cleanup, PATT MORRISON, TIMES STAFF WRITER

The San Francisco Chronicle, JUNE 4, 2001, MONDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 581 words, Electricity usage shrinks by 11%; ???State's consumers
????beat goal set by governor, Keay Davidson

The San Francisco Chronicle, JUNE 4, 2001, MONDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 1092 words, Eliminating night games may seem like a bright idea,
but
????. . .; ???Baseball is balking, Erin Hallissy

The San Francisco Chronicle, JUNE 4, 2001, MONDAY,, FINAL EDITION,
????EDITORIAL;, Pg. A19;, 682 words, Gloom today, glut tomorrow, Carolyn
????Lochhead

The Washington Times, June 04, 2001, Monday, Final Edition, PART A;
????COMMENTARY; Pg. A14, 805 words, Shedding light on Bush's energy plan,
Charli
????Coon

The Associated Press State & Local Wire, June 4, 2001, Monday, BC cycle,
????12:09 AM Eastern Time, State and Regional, 745 words, Developments in
????California's energy crisis

The Associated Press State & Local Wire, June 3, 2001, Sunday, BC cycle,
????State and Regional, 839 words, Critics say FERC ignored California's
????deregulation flaws, FOLSOM, Calif.

The Charlotte Observer, June 3, 2001, Sunday, STATE AND REGIONAL NEWS,
????K1149, 1806 words, Duke Energy rates spike in emergency, By Stella M.
????Hopkins and Peter Wallsten

Contra Costa Times, June 3, 2001, Sunday, STATE AND REGIONAL NEWS, K1314,
????653 words, Judge refuses to override PUC over PG&E bankruptcy, By Matt
????Sebastian

Contra Costa Times, June 3, 2001, Sunday, STATE AND REGIONAL NEWS, K1316,
????731 words, Gloomy electricity supply forecast in June may have been
????optimistic, By Mike Taugher and Rick Jurgens

Los Angeles Times, June 3, 2001 Sunday, Home Edition, Page 3, 915 words,
????Los Angeles; ; Key Figures Trade Views of Energy Picture; Forum: Most of
the
????12 discussing crisis agree only on blaming federal regulators. They find
no
????consensus on a solution., JOE MOZINGO, TIMES STAFF WRITER

Los Angeles Times, June 3, 2001 Sunday, Home Edition, Page 1, 828 words,
????Thanks for Your Concern, Wall Street, PETER H. KING, SAN FRANCISCO

Los Angeles Times, June 3, 2001 Sunday, Home Edition, Page 1, 4230 words,
????The Nation; THE ENERGY CRISIS; Watchdogs Take a Hit in State's Power Ills;
????Energy: Ex-federal officials say oversight of California's deregulation
????suffered due to a push for free-market competition., JUDY PASTERNAK, ALAN
C.
????MILLER, TIMES STAFF WRITERS, WASHINGTON

The New York Times, June 3, 2001, Sunday, Late Edition - Final, Section 4;
????Page 18; Column 5; Week in Review Desk, 788 words, The Nation; Econ 101:
????It's Right and It's Wrong, By MICHAEL M. WEINSTEIN; Michael M. Weinstein
is
????a senior fellow at the Council on Foreign Relations.

The New York Times, June 3, 2001, Sunday, Late Edition - Final, Section 4;
????Page 17; Column 1; Editorial Desk, 739 words, Reckonings; Watt Price
????Ideology?, By PAUL KRUGMAN

The New York Times, June 3, 2001, Sunday, Late Edition - Final, Section 1;
????Page 37; Column 1; Metropolitan Desk, 1065 words, One Developer's Power
????Solution: Build a Plant at the Office, By CHARLES V. BAGLI

The Orange County Register, June 3, 2001, Sunday, DOMESTIC NEWS, K1495, 757
????words, California may have already spent energy money it plans to borrow,
By
????Hanh Kim Quach

Sacramento Bee, June 3, 2001, Sunday, Pg. A3;, 491 words, State heeds call
????to conserve energy Californians trimmed their use of electricity by 11
????percent in May., Emily Bazar Bee Capitol Bureau

Sacramento Bee, June 3, 2001, Sunday, Pg. L4;, 625 words, Lone shining
????light State power authority a future market tool

San Jose Mercury News, June 3, 2001, Sunday, DOMESTIC NEWS, K1534, 2242
????words, U.S. approved California's power-deregulation plan despite flaws,
By
????Eric Nalder and Mark Gladstone

The San Francisco Chronicle, JUNE 3, 2001, SUNDAY,, FINAL EDITION, NEWS;,
????Pg. A1, 2344 words, Cutting a deal on the environment; ???Activists
accused
????of favoring cash over mission at Moss Landing, Scott Winokur, Christian
????Berthelsen

The San Francisco Chronicle, JUNE 3, 2001, SUNDAY,, FINAL EDITION,
????EDITORIAL;, Pg. C6;, 554 words, Draw a line in the sand, Debra J. Saunders

The Seattle Times, June 3, 2001, Sunday, Sunday Edition, ROP ZONE; News;,
????Pg. A1, 1633 words, the energy crisis: ground zero In Stockton, Calif.,
????where a long, hot summer looms, keeping the power on seems an easy trade
for
????saving the salmon in the Northwest, Lynda V. Mapes; Seattle Times staff
????reporter, Stockton, Calif.

The Associated Press, June 2, 2001, Saturday, BC cycle, Washington Dateline
????, 249 words, Democrat calls on Bush to cap energy prices in radio address,
????WASHINGTON

June 4, 2001 ????

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

California Companies Combine
To Influence Power Regulation

By MITCHEL BENSON

Staff Reporter of THE WALL STREET JOURNAL

SACRAMENTO, Calif. -- Some big hitters in California's business community,
angered by the pace and direction of the state government's efforts to solve
the energy crisis, are launching a massive coalition aimed at boosting their
influence on legislative and regulatory actions.

In fact, the new business group, tentatively named the Coalition for Energy
Action, is gearing up just as lawmakers here are desperately scrambling to
promote the latest in a series of so far unsuccessful plans to save the
financially crippled Southern California Edison Co. from bankruptcy. A
primary component of this latest proposal: big business -- large energy users
-- would pay nearly $3.1 billion of the utility's $3.5 billion in unpaid
wholesale electric bills.

That is just one reason why an unexpectedly large crowd of 60 representatives
of high-tech, agriculture, manufacturing, oil and natural-gas, construction
and most every other economic sector gathered here last week at the
headquarters of the California Chamber of Commerce for the coalition's first
organizational meeting. Chamber President Allan Zaremberg, who is leading the
effort, has in the past organized effective business coalitions to oppose
increased managed-health-care costs, restrictions on diesel fuel and efforts
to re-regulate the state's electricity market.

Mr. Zaremberg and others say their latest gambit is spurred by two main
concerns: Gov. Gray Davis, the legislature and the state Public Utilities
Commission are taking a worryingly scattershot approach to the state's energy
pricing and supply-and-demand problems, even as the state's economy continues
to deteriorate; and if and when policy makers do offer solutions, the
business community worries it will be left paying a disproportionate share of
the tab.

"I understand the politics here, I understand the worry," says Jack Stewart,
president of the 800-member California Manufacturers and Technology
Association and one of the meeting attendees. "But sometimes you have to look
a little bit beyond that, because the next step will be closing down plants,
laying off workers and moving production out of California."

While the coalition is just now getting off the ground, Mr. Zaremberg and
others already are working with a pair of political and public-relations
consulting firms. Those firms, in turn, recently conducted several focus
groups in Northern and Southern California, in preparation for the May 31
meeting. After a positive reception, the consultants are now discussing a
range of options for the coalition that could range from scheduling
one-on-one meetings between coalition members and public officials to
spending several hundred thousand dollars on a newspaper advertising campaign.

Consumer activists say they find it ironic that many of the business
interests who fought for the state's electricity deregulation plan in 1996
are now considering spending big bucks to seek protection from it.

"The big business lobbyists bought the politicians and propelled deregulation
through the legislature, and now they're upset because the politicians aren't
paying attention to them anymore," says Harvey Rosenfield, president of the
nonprofit Foundation for Taxpayer and Consumer Rights. "Because now, the
politicians are more worried about the voters."

Indeed, the business community feels it is being taken advantage of. As
evidence, Mr. Stewart and others point to the PUC's decision last month to
boost electricity rates for customers of the Pacific Gas & Electric Co. unit
of PG&E Corp. and the Southern California Edison unit of Edison
International. The PUC decision estimates that more than 60% of residential
customers -- those who are deemed low-income or who use relatively small
amounts of electricity -- will see no increase. Yet many small business and
industrial customers will face rate increases of 37% to 50%, while some
businesses could see their monthly bills jump by much more.

Just last week, lawmakers began circulating their latest proposal to rescue
Southern California Edison from possible bankruptcy, now that it appears an
agreement reached between the governor and the utility earlier this year has
gained no traction in the legislature, which must approve the pact. Among
other things, the latest approach calls on Southern California Edison's 3,600
largest electricity users to pay nearly $3.1 billion of the total $3.5
billion that the utility owes in unpaid wholesale-power purchases. The large
consumers would pay that debt off through a surcharge on their electric rates
over an estimated 20 years. Under the proposal, lawmakers say, large
consumers also will be permitted to buy directly from generators. As a
result, the lawmakers argue, the overall electricity costs to large consumers
actually will be less than under the new PUC rate increases.

But the business community remains skeptical. The Chamber's Mr. Zaremberg
says the approach "doesn't send conservation signals to the residential
community, and that should be paramount." Moreover, he is concerned that "the
attitude of public-policy officials [is] that business consumers have to
subsidize residential users."

Write to Mitchel Benson at mitchel.benson@wsj.com

??
June 4, 2001 ????

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

Energy Commission, California
Clash Over Power-Grid Control

By REBECCA SMITH

Staff Reporter of THE WALL STREET JOURNAL

As California politicians wade deeper into the energy crisis, the state's
electric-grid operator appears headed toward a showdown with federal energy
regulators over whether its board is independent enough.

The California Independent System Operator Friday bowed to pressure from the
Federal Energy Regulatory Commission and submitted its qualifications to
continue as a federally sanctioned grid operator. But the tardy filing is
almost certain to be challenged by federal regulators and market participants
because the ISO's governance structure has strayed from a "bedrock
requirement" that it be "independent of control by any market participant."

The market participant casting the long shadow is the state of California.
Since January, when the state of California began buying huge sums of
electricity on behalf of its nearly broke utilities, the ISO has been under
pressure to give state officials preferential treatment and unique access to
market-sensitive information. Its chief operations officer, paid $245,000 a
year according to the most recent IRS filing, is on indefinite loan to the
governor's office where he is working as an energy adviser.

This politicization of the ISO is significant because the organization's
purpose is to run a market for power needed to keep the electric system in
balance and to give buyers and sellers impartial access to the power lines on
which they depend to move electricity. Unlike other commodities, electricity
can't be stored. Transactions, therefore, depend completely on instantaneous
access to the electric superhighway of high-voltage lines. The FERC worries
that a loss of political independence by the ISO will further degrade the
state's already dysfunctional energy market.

The FERC hasn't formally accused the ISO of acting improperly, but it is
clear that a wall between the state and the ISO that once was solid has
become permeable. Last month, the ISO notified the FERC that the state of
California had asserted "it must have access to the ISO control room floor"
and "nonpublic information" as a "necessary condition" of continuing to buy
power, even though such preferential access violates ISO rules. But without
the state to back power purchases -- it has spent nearly $8 billion on
electricity since January -- the ISO's market would collapse and blackouts
and chaos likely would ensue.

The governance issue, which may appear esoteric, actually cuts to the heart
of the power crisis in California. State officials feel they have ceded too
much control to the FERC, which they accuse of shirking its duty to protect
consumers. As a consequence, the state has forced its way into the inner
workings of the formerly arcane ISO, a public-benefit corporation formed
three years ago amid California's push to deregulate its electricity market.

In January, the state legislature authorized the governor to eject a
FERC-approved board of directors and hand pick his own five-member ISO board.
The state attorney general ordered old board members to resign or face
personal fines of $5,000. Currently, one ISO board member is a former member
of the governor's staff, while another, on the governor's behalf, negotiated
the proposed purchase of utility transmission assets by the state, all the
while serving as chairman of the supposedly independent board.

The ISO's chairman says changes in the board structure have made the ISO more
answerable to the citizenry and "efficient." Michael Kahn, who is a San
Francisco attorney, added that the governance structure had to change to
reflect the fact that "we're in a state of emergency."

In its filing Friday, the ISO took the position that the tighter relationship
between the ISO's board and the state doesn't violate the FERC's requirement
that ISO boards be free of control by market participants. Even though the
state has been "required to provide financial support," the ISO asserts, this
"participation does not make ... the State a market participant." Many market
watchers scoff at that contention.

"Inevitably, this will lead to a showdown," said N. Beth Emery, former
general counsel of the ISO and now an energy attorney for Ballard, Spahr,
Andrews & Ingersoll in Washington, D.C. "Clearly, the ISO is in violation of
the independence requirement."

But the FERC doesn't have many tools for enforcing its vision of autonomy.
That may explain why it has failed to intervene. It can order the ISO to make
board changes, for instance. But if it refuses, there may not be much the
FERC can do except threaten to rescind the ISO's operating tariffs. That, of
course, is the opposite of what the FERC wants to do, which is encourage
creation of multistate grid organizations free of any political favoritism.

But California's angry isolationism appears to be growing. Gov. Gray Davis
said the ISO's filing ensured the state will "maintain control of our own
energy destiny and not be subject to the whims of federal regulators or the
interests of other states."

To date, the FERC has been steadfast in its resolve to make regional grid
operators independent organizations, free of control of utilities and power
marketers. It has rejected other grid-operator proposals because it felt
utilities that owned the power lines were attempting to retain too much
control. But Order 2000, the landmark decision issued in December 1999 that
promoted the creation of independent grid runners throughout the nation,
never contemplated a state government assuming such a huge role in a market
as has occurred in California.

If anything, that role is likely to increase. Not only is the state of
California the biggest power buyer in the nation now, but it has formed a
power authority that intends to build and operate generating plants. In
addition, Mr. Davis is promoting a plan to buy the transmission systems of
the state's investor-owned utilities. As such, a new vertically integrated
utility is forming that could be larger than any the nation has seen since
the "power trusts" of the 1930s were broken apart by Congress.

It is rife with conflicts of interest. The ISO's drift has created a fissure
in the solid support it enjoyed from the state's big utilities that
transferred control of their transmission systems to the ISO in 1998. PG&E
Corp.'s Pacific Gas & Electric Co. unit, which is in bankruptcy proceedings,
declined to join the ISO filing, which was supported by Edison
International's Southern California Edison unit and Sempra Energy's San Diego
Gas & Electric Co. unit. PG&E said in a separate grid-plan filing that it
would prefer the ISO join a multistate grid organization. It expressed
reservations about the independence of the current board.

Opposition to the state's influence is becoming more vocal. The Electric
Power Supply Association, a trade group representing power producers, warned
FERC last month that the ISO has become "a partisan advocate for the State of
California" and sought FERC intervention to defend the rights of all market
interests.

Write to Rebecca Smith at rebecca.smith@wsj.com.

Copyright 2001 Business Wire, Inc.
Business Wire

??????????????????June 4, 2001, Monday 09:11 AM Eastern Time

DISTRIBUTION: Business Editors

LENGTH: 307 words

HEADLINE: Tired of Constantly Changing Energy Prices? NewPower Offers
California
Natural Gas Consumers A Two-Year, Locked-In Rate

DATELINE: PURCHASE, N.Y., June 4, 2001

BODY:

??The New Power Company(TM), a subsidiary of NewPower Holdings, Inc.
(NYSE:NPW), the first national residential and small business energy provider,
today announced that it has begun offering consumers in northern California a
two-year, fixed-price natural gas contract. Consumers in Pacific Gas and
Electric Co.'s service territory can lock in a low fixed rate for the entire
two
years.

??"NewPower is enormously pleased to provide California consumers, who've been
buffeted by volatile energy prices, with a stable, gas contract," said H.
Eugene
Lockhart, The New Power Company's president and chief executive officer.
"Smart
energy shoppers in California will join the 600,000-plus customers we now
serve
in 19 markets."

??With today's announcement, natural gas from The New Power Company is
available in the following PG&E counties:

??Alameda, Amador, Butte, Calaveras, Colusa, Contra Costa, Fresno, Glenn,
Humboldt, Kern, Kings, Madera, Marin, Mendocino, Merced, Monterey, Napa,
Nevada,
Placer, Sacramento, San Benito, San Bernardino, San Francisco, San Joaquin,
San
Luis Obispo, San Mateo, Santa Clara, Santa Cruz, Shasta, Solano, Sonoma,
Stanislaus, Sutter, Tehama, Trinity, Yolo, Yuba

??Consumers who need additional information or who want to sign up with
NewPower can visit the Company's Web site at www.newpower.com or call
866/402-3949.

??About NewPower Holdings, Inc.

??NewPower Holdings, Inc. (NYSE:NPW), through its subsidiary, The New Power
Company, www.newpower.com, is the first national provider of electricity and
natural gas to residential and small commercial customers in the United
States.
The Company offers consumers in restructured retail energy markets competitive
energy prices, pricing choices, improved customer service and other innovative
products, services and incentives.

??SOURCE: The New Power Company

?

LOAD-DATE: June 4, 2001

??????????????????????????????2 of 143 DOCUMENTS

????????????????????????????Copyright 2001 U.P.I.

??????????????????????????United Press International

??????????????????June 4, 2001, Monday 08:23 AM Eastern Time

SECTION: GENERAL NEWS

LENGTH: 3236 words

HEADLINE: What U.S. newspapers are saying

BODY:

??Compiled by United Press International

??New York Times

??Faced with resistance from Moscow, objections among NATO allies and
opposition from Democrats about to assume control of the Senate, the Bush
administration needs to reassess its missile defense plans and scale them back
to a realistic level. The kinds of ambitious systems that Bush advisers have
described are not technologically or politically attainable today. Clinging to
these outsized concepts can only damage American diplomatic interests and
delay
the development of more modest and feasible missile defenses that could
enhance
the nation's security.

??Long-range missiles now being developed by North Korea, Iraq and Iran pose a
legitimate security concern. The Pentagon should target its missile defense
efforts on meeting that specific threat. There is a good chance that a system
designed to achieve that limited purpose could be made palatable to Russia and
America's European allies and, once tested and proved to be technologically
reliable, win funding from Congress.

??Russia's thousands of intercontinental ballistic missiles could easily
overwhelm any defensive shield the United States could build today. Moscow's
real concern is that if the restraints built into the 1972 Antiballistic
Missile
Treaty are abandoned, America might one day be able to develop more advanced
technologies that could blunt the effectiveness of Russia's strategic missile
force and leave it vulnerable to attack. It is unrealistic to expect Moscow to
agree to such open-ended development. But the Kremlin has signaled that it
might
be willing to contemplate a more limited defensive system bound by mutually
agreed restrictions.

??The Bush administration seems to recognize that an agreement with Russia on
missile defenses would help dispel European and Congressional misgivings. In
recent weeks, Washington has made constructive proposals for cooperation with
Moscow on related issues like early-warning radar and tactical missile
defenses.
But the administration has not yet addressed Russia's core concerns.

??There is ample time to pursue further diplomacy with Moscow before any
defensive system is built. Carl Levin, the Michigan Democrat who is soon to
become chairman of the Senate Armed Services Committee, has rightly stated
that
whatever technology the Pentagon decides on must be thoroughly tested and
shown
to be reliable before funds are appropriated for construction. But some
increased financing would be justified over the next few years for expanded
research and testing.

??That would allow the Pentagon to explore sea-based systems designed to shoot
down missiles soon after they are launched, as well as refining the land-based
approach pursued by the Clinton administration that is designed to intercept
enemy warheads in mid-flight. Both technologies hold some promise of
successful
development. But neither is yet far enough advanced to justify construction
of a
system within the next several years, a step that would breach the ABM treaty.
Space-based interceptors are a bad idea. As the country most dependent on
satellites for reconnaissance and communications, America has the most to lose
if space becomes a potential battlefield.

??The time needed for further testing and research should be used to try to
negotiate a deal with Moscow. The administration also ought to consult further
with its NATO allies and begin serious discussions with China. Beijing
understandably worries that an American missile shield could undermine the
credibility of its small force of long- range missiles and require it to build
many more.

??A narrowly targeted, technologically reliable missile defense is desirable
and may be possible to develop. To produce such a system, the Bush
administration must set aside its exaggerated expectations and commit itself
to
a program of careful testing and patient diplomacy.

??0-

??Christian Science Monitor

??Living as he does among many wolves of war, the kind who would send a
suicide
bomber to a Tel Aviv night club to kill young Israelis, Palestine leader
Yasser
Arafat made a bold gesture on Saturday. He ordered a cease-fire.

??Such an order -- unusual for him -- assumes a lot. It assumes the chairman
of
the Palestine Authority has the power to carry it out. It assumes Mr. Arafat
spoke from the heart rather than from international pressure or a fear that he
might be the next Palestinian official assassinated by Israel. (Israel holds
him
"responsible" for Friday's bombing that killed 20 people and injured 90.)

??Maybe, though, one could assume Arafat has finally seen the futility of
eight
months of an increasingly violent uprising that's spinning toward wider war,
with no conceivable endgame.

??And on that slim hope -- that maybe Arafat is finally sticking his neck out
-- many nations have gone into diplomatic overdrive to push Israel and Arafat
to
again engage each other in making trade-offs needed for peace.

??Arafat's order included resuming patrols by Palestinian security forces at
points of friction, such as Israeli checkpoints. But so far he has not ordered
the arrests of known militants that he freed from jail when the current
intifada
began last fall. Without that, an Israeli military reprisal is assumed, only
re-escalating the conflict.

??For a decade, the peace process has hung on an assumption that this one man
is willing to make sacrifices and has the power to do so. Both have been in
doubt recently.

??If Arafat isn't able to end attacks on Israelis, then it may be time to try
other ways of bringing about peace without him. Perhaps the United States and
Europe can broaden their approach and reach the Palestinian people directly.

??The days when one man could deliver peace - Anwar Sadat, Yitzhak Rabin, King
Hussein - may be over in the Middle East. Flows of information, money, and
weapons now spread so far and so fast that those seeking peace must deal more
with public opinion. Encircling the wolves with hearts of peace may be the
only
way.

??0-

??Washington Post

??The recently approved tax bill, among other goodies, grants a tax break to
savings that can be used to send children to private elementary and secondary
schools. It's an expansion of what was formerly a college savings program and
allows contributions of as much as $2,000 a year to education accounts whose
earnings accumulate tax free. Some school-choice proponents hail the provision
as a first step toward vouchers. If so, it's an odd first step, because it
does
little to help the families who most need financial help. Where Congress
should
be going on vouchers is toward a pilot program that would focus on helping
poor
children stuck in failing schools.

??The House generously granted the middle and upper-middle class tuition tax
break as part of the tax bill but rejected vouchers when it passed its version
of an education reform bill. Now the Senate is expected to take up the issue
when it returns to work this week. One proposed amendment, offered by GOP Sen.
John McCain, would create a four-year test voucher program for low-income
students in the worst-performing D.C. schools. District officials weren't
consulted and are uniformly opposed to vouchers. Staffers say Sen. McCain is
reacting to persistent low achievement by D.C. students. That's a valid
concern,
but singling out the District in this fashion is an affront to home rule.

??Sen. Judd Gregg, R-N.H., has a better idea. He would create a pilot program
for which interested systems -- as many as 10 cities and three states -- could
apply. It would make vouchers available to low-income children in schools that
have been failing for three years. It allows participating districts to set
the
vouchers' value, holding out the chance that some students might get enough
money to actually meet the cost of private tuition. It provides for an outside
evaluation of students' performance and the effect on the public schools
involved. This experiment might help some individual students trapped in
failing
public schools while also providing useful data to inform the long-running
debate about vouchers' potential effects.

??Opponents argue that any available federal money should be spent on the
public system. It's true that the president's proposed budget falls short of
what will be needed to carry out the initiatives in the education bill.
Offering
vouchers does not take away the obligation to improve troubled public schools.
But it's also true that too many students pay dearly, and for the rest of
their
lives, because they have no alternative to a failing public school. Congress
should be willing to explore what might come of giving more choices to some of
those low-income students. D.C. officials, given the chance to make their own
decision, should be willing to explore that option as well.

??0-

??Omaha World-Herald

??Homosexuals in Nebraska could be forgiven for wondering if there's an agenda
by some in the state to marginalize them.

??Last year, a statewide referendum added to the state constitution a
prohibition against state recognition of civil unions or domestic
partnerships,
although there was no known move afoot to allow such formalizing of
relationships.

??Now a legislatively sustained veto by Gov. Mike Johanns has choked off an
attempt to provide them legal protection against discrimination in renting or
buying homes.

??Housing bias against gays in Nebraska is, as far as we can tell, rare. Yet
that's not exactly the point. Johanns said he opposes creating "a special
classification" based on sexual orientation. Yet the stroke of his pen
effectively did just that. Today, anyone who follows the legislature knows
that
the state had an opportunity to ban such discrimination. It had the
opportunity
and refused.

??Of course the legal situation is unchanged. But a subtext exists that did
not
exist before. Defeat of the legislation called attention to the fact that some
types of discrimination in housing are not prohibited by state law -
discrimination not only on the basis of sexual orientation but also on the
basis
of religion, sex, family status and disability (although federal law, in some
cases, applies). State law prohibits discrimination based upon race, color,
national origin or ethnic group.

??This is one of those cases in which refusing to take action makes a
statement
all its own. And the statement for gays and lesbians is extremely negative.

??Actually, Johanns didn't exactly refer to sexual orientation. He offered as
accepted fact what in reality is a hotly disputed contention: that
homosexuality
is about "sexual choices." There's a substantial body of scientific evidence
that says sexual orientation is, in fact, inborn -- not, perhaps, up there
with
eye color, but nonetheless a strong predisposition rooted in people's genetic
coding.

??Johanns is not obliged to accept such research as fact, but somewhere in the
discussion he ought to be candid enough to admit that honest minds have
disagreed and do disagree on the matter. (Food for thought: Given the amount
of
grief society often gives gays, if homosexuality is a choice, why does anyone
choose it?)

??Interestingly, the two groups that presumably could be most affected by such
legislation were for it, or at least neutral. The Nebraska Real Estate
Commission and Nebraska Board of Realtors said they had no objection to the
amendment, since they basically don't engage in such bias. And their
observation
just underscores common sense: Realtors are in business to sell property, not
shoo people away from it. (The amendment wouldn't have affected landlords or
other non-license-holders who may rent or sell property.)

??The real agenda seems to be that Johanns and other opponents of this measure
are content to let gays (whose sexual relationships are not prohibited in
Nebraska) get the cold shoulder in certain aspects of day-to-day life. Foes of
the just-vetoed measure, notably including Family First and the Nebraska
Family
Council, say they'll continue to fight against other legislation that contains
protections or concessions for homosexuals.

??Our interpretation is that gays and lesbians want to be quietly left alone
like everybody else. They seek no special privileges. They just want to be
accepted for what they are. But on such points, Governor Johanns becomes
Governor No. A pity.

??0-

??Sacramento Bee

??Years from now, when California looks back on this expensive failure of
electricity competition, one bright light will shine from this dark moment in
history. That was the decision by the California Legislature and Gov. Gray
Davis
to create a California public power authority.

??Recycling the rhetoric of decades past, when utility monopolies and holding
companies fought the creation of municipal utilities, critics today see public
power as an unwelcome, inefficient intruder into the free market system.

??But public power's role isn't to replace that market. It is to make sure
that
it behaves. Californians can adjust to price gyrations for things such as
airline tickets and cherries. Electricity, however, is too vital a commodity,
and without regulation and competitive policy, the electricity market, as
Californians have so painfully learned, is too easily gamed.

??There is now a brief window to contemplate how this state public power
authority can stay one step ahead of market manipulation. The governor has
signed the authorizing legislation, but the authority won't officially exist
for
another two months. Once in operation, its potential is enormous.

??As financial capital, the Legislature has authorized it to sell up to $5
billion worth of bonds to build new power plants to create electricity to be
sold at cost. As human capital, the governor will likely tap the wisest old
owl
in the public power trade, David Freeman. Having already run the public power
agencies of the Tennessee Valley, the state of New York, Sacramento and Los
Angeles, Freeman brings experience that likely will never be duplicated.

??Freeman's strategy is to ensure that California races to turn a shortage of
electricity into a surplus of about 15 percent. Private generators are busy
building new plants and applying to build others. Yet at some point these
companies may conclude it is not in their interests to compete so vigorously
against each other. They feast on shortage and volatility. That's where a
vigilant public authority can provide supply to keep the market balanced.

??An ideal partner in generating ventures would be the existing cities that
run
their own power authorities. The Sacramento Municipal Utility District, for
example, is looking to build a generating plant fired by natural gas at the
site
of the former nuclear plant, Rancho Seco. By partnering with the state
authority, SMUD could build a larger plant. The state could sell the surplus
at
cost. SMUD could get even more reliable power.

??With its surplus, the state may wish to direct some to new municipal
districts. Customers in several communities are mulling whether to create
their
own municipal power agencies as a way to avoid the volatility of the
deregulated
world. Davis, San Francisco, Fresno and other communities are in various
stages
of this exploration. This very threat of competition keeps down the charges of
both the private utilities and the generators.

??The cheapest power of all is that which California doesn't have to buy. The
power authority's greatest contribution to California may end up being on the
demand side of the electricity equation. It is ideally suited to lead future
conservation and efficiency initiatives. Lowering demand lowers the price for
the power that Californians do have to buy, whether their utility is public or
private.

??"We will be masters of our own destiny," says Freeman. The history of public
power's vital role in the market place suggests that Freeman is right about
the
future.

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??????????Content and programming copyright 2001 Cable News Network
?????????????Transcribed under license by Federal Document Clearing
?????????????House, Inc. Formatting copyright 2001 Federal Document
??????????Clearing House, Inc. All rights reserved. No quotes from the
??????????materials contained herein may be used in any media without
???????????attribution to Cable News Network. This transcript may not
???????????????????????be copied or resold in any media.

?????????????????????????????????????CNN

????????????????????????????SHOW: CNN SUNDAY 16:00

??????????????????June 3, 2001; Sunday 5:19 PM Eastern Time

???????????????????????????Transcript # 01060307V36

SHOW-TYPE: INTERVIEW

SECTION: News; Domestic

LENGTH: 816 words

HEADLINE: ?Are Price Caps a Solution for California's Energy Woes?

GUESTS: ?Barbara Shook

BYLINE: ?Stephen Frazier

HIGHLIGHT: ?As the U.S. deals with energy woes, there has been heated rhetoric
over price controls for power. ?But could they, in fact, make a difference.

BODY:

??THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE
UPDATED.

??STEPHEN FRAZIER, CNN ANCHOR: As the U.S. deals with energy woes, there has
been heated rhetoric over price controls for power. ?But could they, in fact,
make a difference. ?Barbara Shook joins us now from Houston to help answer
that
question. ?Mrs. Shook is the Houston bureau chief for the Energy Intelligence
Group.

??Mrs. Shook, welcome, thanks for joining us.

??BARBARA SHOOK, ENERGY INTELLIGENCE GROUP: Thank you, Stephen. It's good to
be
working with you again.

??FRAZIER: Let's talk a little bit about what happened the last time we tried
price controls, remember, in '79 or so when we had an energy crisis stretching
on. ?What do you think happened then to the price of energy?

??SHOOK: The price of energy was held artificially low in that period of time.
They actually started during 1971 under the Nixon administration, and price
caps
sent false signals to consumers, and they don't encourage consumers to
conserve
or to find alternative sources of energy.

??FRAZIER: So, historically, we had just what the president said in comments
in
week that they didn't improve -- they didn't reduce demand and they didn't
increase supply, in his words.

??SHOOK: Very true. ?I would have to agree with the president on that.

??FRAZIER: So, there's a historic precedent for that which proves it. ?Why,
then, such a call for price caps? ?Even now, Governor Gray Davis in California
saying he's going to sue the federal government for those caps.

??SHOOK: I don't understand where the governor's reasoning is on this issue
because price caps, as we have already pointed out, have not worked in the
past.
What the people are doing is trying to avoid paying the cost that they have
tried to avoid for all these years but not building additional plants. ?If
they
had had the additional facilities in place, it might have cost them a little
bit
more in the short run, but now it's going to cost them a whole lot more.

??FRAZIER: Of course, in your experience, the resistance to building new
plants
is more sort of a not in my backyard process kind of in California, isn't that
it?

??SHOOK: Well, in California, it's gone beyond the not in my backyard, or
NIMBY, syndrome. ?You can describe Californians' attitude as either BANANAS,
for
build absolutely nothing here anybody, or NOPE, not on planet Earth.

??FRAZIER: So, as result, then, they have kind of a patchwork of half
deregulation and half forces that are not market forces at all, and it's
something of their own doing, as the federal government likes to point out.

??SHOOK: Yes, it is. ?The plan that is in place right now was formulated in
1996 by a coalition of Republicans and Democrats. ?You had a Democratic state
assembly, you had a Republican executive branch under Governor Wilson. ?So,
it's
-- you can't make this a partisan issue. ?Both sides are at fault.

??FRAZIER: Now, you have spoken earlier this week with a newly- appointed
member of the Federal Energy Resource Commission, Pat Wood. What were his
thoughts on what's going to happen, how to resolve this crisis?

??SHOOK: Commissioner Wood has chaired the Texas Public Utilities Commission,
and done a very successful job. ?What he said to me that he was going to
recommend to California was first, discuss the number of plants that will be
coming on in the near future. ?They will have additional plants that start up
this summer, and then more in 2002.

??That will bring the price down just because of the expectation of additional
supply. ?It will certainly mitigate more price spikes and it should bring the
price down. ?He also recommended that the state do whatever possible to
improve
the creditworthiness of all the electricity buyers out there.

??In California, the consumers are being charged a penalty, if you will, in
the
cost of their electricity because of the credit problems, just as somebody who
has a bad credit rating pays a higher interest rate on a home or car.

??And finally, Commissioner Wood recommended that the folks in California just
turn down the rhetoric and start addressing the issues as adults, and stop
making this just a finger-pointing game.

??FRAZIER: Right, in 25 words or less, because we're running out of time, did
he think they are doing anything right there?

??SHOOK: He thinks that the fact they are building plants and expediting
process and are expanding their gas pipelines and are going to expand some of
their electricity transmission systems are steps in the right direction.

??FRAZIER: Right, that new Path 15. ?Well, Barbara Shook from the Energy
Intelligence Group, once again, we're grateful for your insights. ?Thanks for
joining us on a Sunday night.

??SHOOK: Thanks for having me. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE
CALL
800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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?????????????????????????Copyright 2001 Southam Inc.

????????????????????????????The Gazette (Montreal)

??????????????????????June 4, 2001 Monday FINAL EDITION

SECTION: EDITORIAL / OP-ED, Pg. B3

LENGTH: 802 words

HEADLINE: Dim policies in California

BYLINE: P.J. O'ROURKE

SOURCE: Knight Ridder

BODY:

??California is in the midst of an enormous stupidity crisis. Californians
have
been sitting in the dark because they didn't turn the lights on.

??They say they're short of electricity. Yes, they are. Between 1988 and 1998,
California's electricity consumption increased by 15 per cent. Meanwhile,
California's capacity to generate electricity shrank by 5 per cent, even as
the
state hesitated to build new power lines to tap into neighbouring states'
power
supplies.

??Californians didn't want dams across their rivers, derricks on their ocean,
power lines across their borders or fossil-fuel smoke in their sky. These
might
interfere with all the smart things Californians do, such as hang-gliding.
California was going to rely on so-called negawatts: dramatic power
conservation. (But California regulators put price controls on electricity
that
lowered prices, and even Californians weren't dumb enough to skip a bargain.)
And California was going to rely on alternative-power generation. With all the
puffery from Silicon Valley dot.com start-ups, wind farms wouldn't be a
problem.
But it turns out that alternative power generation is an alternative, mostly,
to
generating power.

??U.S. President George W. Bush was wrong to extend executive orders requiring
out-of-state utilities to supply power to California. And everyone is wrong to
listen to Californians whine about electricity deregulation.

??Never Deregulated

??There never was any deregulation. The California Public Utilities Commission
merely changed its regulations, which apparently weren't stupid enough to meet
Golden State standards. Under California's 1996 reregulation plan, electric
companies sold their generating plants and became distributors. They were
required to buy their power on the wholesale spot market and forbidden to
enter
into any long-term power-supply contracts. Retail electricity prices were
lowered by 10 per cent and frozen at the new rate until March 2002.

??This is like requiring A&P to sell you porterhouse at $2 a pound, no matter
what the price of beef on the hoof. Imagine how many steaks there would be,
and
how many supermarkets.

??La-la Land, however, is a state of mind as well as a state of the Union. The
world is full of mental Californians who, despite a century of socialist
catastrophes, are willing to blame the free market for things like the
California energy crisis.

??The critics of economic liberty are right: the free market did cause
California's energy crisis. Hooray. Capitalism is doing its job. The critics
are
right without knowing what they're talking about. The free market isn't a
means
"to provide for people's basic needs." It doesn't come in or out of political
fashion. The free market is a precise measurement of voluntary price settings.

??Free Market Was Ignored

??Californians devised a system of electricity sales that ignored every
dimension of the free market. (Interesting that the Information Economy is
centred in a place that's immune to information.) The free market is a
yardstick, and Californians got smacked with it. Mideast oil jitters, cold
weather, natural-gas price spikes and the plain unpredictable freedom of the
free market caused wholesale electricity costs to rise and California
utilities
to go $12 billion into the red.

??California Governor Gray Davis responded with the full force of bikini-beach
brain. In a Jan. 8 speech to the state legislature, Davis proposed creating a
state agency to buy generating plants and build new ones. He threatened to
expropriate power generators and transmission grids. He called for laws to
allow
criminal prosecution of wholesale suppliers that withheld electricity from
California markets. And he said the state's universities and community
colleges
would build co-generating plants and become energy independent. (With gas
produced by the cafeteria food?) Davis sounded like Joseph Stalin with the IQ
of
Keanu Reeves. "Everyone should understand that there are other, more drastic
measures that I am prepared to take if I have to," Davis declaimed.

??"Take" is the key word. Grabby Californians tried to regulate themselves
into
some cheap electricity. Hoggish California power companies went along because
the state-imposed retail-price ceiling was also a retail-price floor.
According
to the Los Angeles Times, during the first 28 months of the scheme, Pacific
Gas
and Electric and California Edison made $20 billion from the legally required
mark-up between wholesale and retail electric prices.

??It would be wrong to call Californians stupid. They're sleazy, too.

??- P.J. O'Rourke is H.L. Mencken Research Fellow at the Cato Institute and
foreign-affairs desk chief for Rolling Stone. This op-ed is adapted from an
article published in the latest edition of the Cato magazine Regulation.

TYPE: Business

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

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

??????????????????????June 4, 2001 Monday ?Home Edition

SECTION: California; Part 2; Page 2; Metro Desk

LENGTH: 1700 words

HEADLINE: Los Angeles;
;
An Illuminating Look Several Light-Years Back;
Utility Players Bat Cleanup

BYLINE: PATT MORRISON, TIMES STAFF WRITER

BODY:

??In the years between 1994 and 2000, California's three little pigs--its
investor-owned utilities and/or their parent companies--spent $51.6 million on
political campaigns. Most of it, about $39 million, was spent beating back
Proposition 9, which if you don't remember (and who can?) would have thrown
deregulation into reverse.

??An additional $18.6 million was shelled out for six years of lobbying the
governor, the Legislature and state agencies. The point-six part of that was
spent by Pacific Gas & Electric .tin the first quarter of this year, even as
PG&E was prepping itself to file for bankruptcy protection and make a bid for
a
bailout.

??The study by the nonprofit Center for Public Integrity found that way over
half a million went to the campaigns of three leading politicians, all of whom
have said the dough did not influence them: $171,000 to then-Gov. Pete Wilson,
who signed deregulation into law; $212,186 to state Sen. Jim Brulte, the
Rancho
Cucamonga Republican whose name topped the author list on the deregulation
law;
and $268,135 to the campaign causes of state Sen. Steve Peace, the El Cajon
Democrat held up as the Frank Lloyd Wright of deregulation (Wright's houses
always looked fabulous but didn't always function ideally).

??The utilities are, of course, PG&E, Southern California Edison and San Diego
Gas and Electric: the one that's filed for bankruptcy protection, the one that
may want to, and the one that's still carrying a torch, a lighted one.

??All Moneyed Up and Nowhere to Go

??OK, everybody: s-l-o-w-l-y take one step back.

??Now that it looks like Newport Beach Republican Chris Cox won't be taking
off
his congressional neckties in exchange for a black robe on a federal bench,
anyone who had been angling to run for his seat had better make other plans.

??This means you, Mark C. Johnson.

??With Cox staying put--his odds of surviving confirmation in a newly
Democratic Senate were shriveling anyway--Johnson has the million and a half
for
a campaign, and nothing to spend it on.

??Johnson is co-founder of Republicans for a New Majority, a bunch of people
with a bunch of money to spend on moderate GOP candidates. He won't run
against
Fullerton Republican Rep. Ed Royce, or against Orange County's solitary
congressional Democrat, Loretta Sanchez. But reapportionment might open up a
new
congressional district, or rejigger the one that now belongs to surfin' Rep.
Dana Rohrabacher, who expected to collect big at his $1,000-per Arnold
Schwarzenegger fund-raiser over the weekend.

??Think the Balkans are complicated? Look behind the Orange Curtain. "Things,"
said Johnson circumspectly, "may turn out to be a lot more convoluted than any
of us are expecting."

??Walt Yes, Al No

??Disney plus Navy equals "Pearl Harbor" the movie. The U.S. Navy gave Disney
unprecedented access, and Disney made script changes per the Navy.

??But actor Ben Affleck, aboard the carrier Constellation off San Diego on
Sept. 13, filming scenes involving Gen. Jimmy Doolittle's raid on Tokyo, took
a
break from films for . . . politics. Surrounded by sailors, he began making a
commercial on behalf of Vice President Al Gore's presidential campaign. Cut!
Cut! Military property is off limits for political purposes, sailor! A Navy
lieutenant stuck a hand in front of the camera--and it wasn't a salute.

??Biting the Hand That . . .

??Barely a month ago, the Congressional Hispanic Caucus gave a pass to Rep.
Maxine Waters, saying it wants to elect more Latino politicians but not at the
expense of simpatico non-Latinos like Waters, whose South-Central Los Angeles
district has a huge Latino population.

??But in comments last week about Antonio Villaraigosa, the man running to be
Los Angeles' first Latino mayor in more than a century, the African American
member of Congress (who endorsed Villaraigosa's opponent, Jim Hahn), demanded,
"Who is Antonio Villaraigosa? Where did he really come from? How much time has
he spent in public service? . . . We need to know these things."

??For the record, Villaraigosa has spent six years not exactly hiding in the
Legislature, including nearly two years as Assembly speaker, and years more
as a
community activist. He comes from L.A. Waters was born in St. Louis.

??The Man in Tartan Returns?

??It's the question all of Sacramento is asking: With state Sen. Tom
McClintock
considering another run at the state controller's job, will "Cousin Angus" be
back?

??In ads for his 1994 campaign, which he lost to Kathleen Connell, the
Thousand
Oaks Republican tapped his Scottish roots to conjure the kilted cousin, who
bragged in an accent as dense as highland heather that Cousin Tom is a true
skinflint Scot, "tighter than a bullfrog's behind." Has anyone called the
Scottish Anti-Defamation League?

??But Cousin Angus, says McClintock, "is so angry about the energy situation
he
may be running himself--for governor."

??A Little Rice, A Lot of Oil

??The few, the proud, the California Republicans are desperately trying to
flush some big-name candidates out of the undergrowth, and the latest quail to
emerge is Condoleezza Rice, President Bush's national security advisor and a
former Stanford provost.

??The Capitol Hill newspaper Roll Call says state party Chairman Shawn Steele
is talking her up to run against Sen. Barbara Boxer: "There's a long list of
quality, top-flight Republicans emerging to run against Boxer [pregame big
talk,
there], and Rice would be among those ideal candidates."

??Besides saying "Condi loves" California, Rice's office demurred, with the
usual "no plans" quote that always leaves some running room.

??With gas above $2 a gallon in the state, maybe now is not the right moment
for Rice, who sat on the Chevron board and has a 150,000-ton oil tanker named
after her.

??Quick Hits

??At an Irvine fund-raiser, former GOP Assembly Speaker Curt Pringle drummed
up
$15,000 for a Democratic former colleague, L.A. mayoral candidate Antonio
Villaraigosa, whom Pringle called "an honorable guy." . . . Amid the talk of
outgoing L.A. Mayor Richard Riordan running for governor on the Republican
side,
records show Riordan donated $12,500 to Davis' campaign on March 2, 2000,
which
his wife matched a day later. . . . Two dogs, each kitted out in Hahn or
Villaraigosa political trinkets, met nose to nose in Venice to urge the
candidates to support a canine beach in Los Angeles, which has none.

??Word Perfect

??"What do you want from me, a quote that I'm going to raise taxes? That will
kill me when I run for president in New Hampshire."

??State Senate President Pro Tem John Burton, to reporters asking whether he'd
raise taxes to plug the holes left in the budget by the energy crisis.

??Columnist Patt Morrison's e-mail address is patt.morrison@latimes.com. This
week's contributors include Nick Anderson, Mark Z. Barabak, Dan Morain, Jean
O.
Pasco, Tony Perry, Margaret Talev and Jenifer Warren.

GRAPHIC: PHOTO: Numbers Game: Mayor Richard Riordan welcomed President Bush to
the World Affairs Council luncheon in Los Angeles last week by noting that he
arrived "during stressful times" . . . meaning the NBA playoffs. (The mayor
has
been working on his comedic timing with his pals at the Friars Club.) He
presented Bush with a pair of Shaquille O'Neal's shoes that could seat four,
and
a Lakers jersey, he said proudly, bearing the number 43 (it's right next to
Bush's right hand), as in the 43rd president--except the jersey bore the
number
34. Cut--propman! Was that a Bush-dyslexia joke or just a slip of the mayor's
alphanumeric tongue? PHOTOGRAPHER: BRIAN WALSKI / Los Angeles Times

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????JUNE 4, 2001, MONDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 581 words

HEADLINE: Electricity usage shrinks by 11%;

State's consumers beat goal set by governor

SOURCE: Chronicle Staff Writer

BYLINE: Keay Davidson

BODY:
By turning off lamps, turning up thermostats and buying energy-efficient light
bulbs, the people of California helped reduce the state's electricity
consumption last month 11 percent below the May 2000 level, more than was
expected, Davis administration officials said yesterday.

???The "fairly remarkable" response to the governor's appeal for energy
conservation came not only from business but from ordinary electric customers:
"If you go into any hardware store, people are buying new lighting
facilities. .
. . It's truly a tribute to the people of California who are doing this," said
Steve Larson, executive director of the California Energy Commission, in a
conference call with news reporters.

???In May, the state consumed 18,616,485 megawatt hours of electricity, a drop
of 2,289,362 megawatt hours or 11 percent from May 2000, said Gov. Davis'
press
secretary, Steve Maviglio.

???The governor called for a 10 percent reduction in May, whereas his energy
advisers forecast that only 7 would be achieved, Maviglio noted.

???In the news conference, officials also said:

???-- The state signed nine new contracts in May with out-of-state power
sources to boost Caliornia's available megawattage by 900 megawatts.
Presently,
that makes a total of 36 contracts with out-of-state energy sources.

???-- The price of electric power in May was 45 percent below the January
amount, thanks to market fluctuations.

???Prices "are much more stable today -- things are really coming together,"
said Ray Hart of the Department of Water Resources.

???-- An unknown number of rolling blackouts are ahead as the state enters
energy-hungry summertime. "Who knows?" Larson replied when asked by a reporter
to forecast the likely number of blackouts.

???"It's the job of the state to look under every rock for every megawatt
possible," Larson said. "During the month of May, we did a pretty good job."

???All in all, Maviglio concurred, it's "very good news for this month."

???"Californians exceeded the governor's expectations," Maviglio added in a
post-conference interview with The Chronicle, "and it's critical to note all
this (energy conservation) was voluntary. . . . If this is a harbinger of the
summer, it's good news."

???During the news conference, a reporter from another publication asked for
comment on Chronicle reports that certain energy providers deliberately
throttled their available supply early in the crisis.

???While declining to discuss the newspaper's charge in detail, Hart replied:
"What we do know -- I do not have specific information -- (is) the amount of
forced outages were more than double the norm, and that's never happened
(before). And (the forced outages were) up to four times (normal) some days.
That is extraordinary, in itself, (and) that really makes you wonder whether
there was (power) idling that was intentional."

???Officials also discussed the Davis administration's push to negotiate power
purchases at reasonable prices from municipal utilities. They vaguely hinted
at
legal action if the state doesn't get what it wants, namely reasonably priced
power from such sources.

???Negotiations with the utilities are continuing, said Dick Sklar, energy
adviser to the governor. "I think the first step is to see if we can get
people
(at the municipalities) to act in a reasonable way before (we start) talking
about punitive action. . . . The state has weapons I hope we never have to go
(toward using)."E-mail Keay Davidson at kdavidson@sfchronicle.com

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????JUNE 4, 2001, MONDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 1092 words

HEADLINE: Eliminating night games may seem like a bright idea, but . . .;

Baseball is balking

SOURCE: Chronicle Staff Writer

BYLINE: Erin Hallissy

BODY:
It's the way baseball was meant to be played, some say: under a summer sun
instead of huge banks of lights.

???Now, some power misers are joining baseball purists by complaining about
all
those games played at night, saying they're as wasteful as leaving the air
conditioning running when no one's home.

???From the small minor-league parks in places like Vacaville to games played
in the state's five major-league ballparks, all those light banks could be
shut
down, all those power-using concession stands and scoreboards and illuminated
billboards could be turned off.

???"It is my contention that we had better start seeing all five major league
baseball teams, and many of the other sports activities at all levels of
competition, being rescheduled to the daytime," said Blaine Nicol, who wrote
to
The Chronicle advocating the change.

???"It can be done," said Ed Moose, owner of Moose's restaurant in San
Francisco and a fan of day baseball games. "It only takes a fiat by the
president of the United States or the governor or the Legislature to say that
this is what we have to do to get through a crisis. A lot depends on how
important we say this is. Is it more important that we start a ballgame at
7:15
p.m. than at 12:30?"

???MOST LIKE SCHEDULE AS IS

???But energy crisis or no, don't look for baseball to move its night games to
daytime. The leagues don't want it, the teams don't want it, the players don't
want it and many of the fans don't want it, either.

???"Baseball during the day -- it's fabulous," Hillary Lassetter said before
an
Oakland A's night game last week. "But I can't get there."

???Like thousands of other fans, the 31-year-old Los Gatos woman works during
the day. Lassetter, who has been going to games with her father since she was
in
first grade, works at a San Jose construction office, and her job isn't
flexible
enough to let her go out for an afternoon of baseball.

???Teams at all levels of baseball say they can't change the schedule this
late
in the season. It isn't just that many fans who have already bought tickets
wouldn't be able to go to day games -- television contracts, player contracts
and stadium leases wouldn't allow it. In some cases, even the weather wouldn't
allow it.

???"On a promotional basis, once in a while, yeah, a day game is maybe fine,"
said Joe Gagliardi, president of the California League, which has 10 Class A
(low minor league) teams affiliated with major-league clubs. "But if we had to
switch to all day games, it would put at least 60 percent of our ballclubs out
of business."

???That's because some of those teams play in the high desert Southern
California towns of Lancaster and Adelanto and Central Valley cities like
Stockton and Modesto, where summertime temperatures often soar well over 100
degrees.

???Teams without hot-weather problems won't be changing their schedules,
either.

???GIANTS LIMITED TO 13 DAY GAMES

???The San Francisco Giants have a lease with the city limiting them to 13
weekday games a year because of the disruption to nearby businesses and
commuters, said Giants executive vice president Larry Baer. The team is
playing
nine weekday games this year.

???"The schedules are put out a year in advance," Baer said. "I think it's
unrealistic that we'd change after the season started."

???Fans who couldn't get to the park for day games wouldn't be the only ones
who would be upset.

???Through yesterday's game, Giants second baseman Jeff Kent was hitting .343
during the day and .230 at night. But improving his overall numbers isn't
worth
giving up his free time with his three young children.

???"I'd hate to play day games every day," Kent said last week. "I'm a big
family man, and if you play day games, your day is just burned. With all due
respect to people who work 9 to 5 -- I guess that's what people in the real
world do -- that would make it really hard to spend time with my children."

???State Sen. John Burton, D-San Francisco, toyed with the idea of introducing
a resolution calling for more day games before deciding he had to review the
legal ramifications of player and TV contracts along with season ticket sales.

???Roger Salazar, a spokesman for Gov. Gray Davis, said Davis has wanted to
minimize disruptions to businesses.

???One of the things to consider, Salazar said, is whether the power saved by
playing in the daytime "outweighs the fact that many of those people aren't at
home (using energy)."

???ECONOMIES OF SCALE

???In fact, that's an argument some major-league clubs make.

???"It's actually more economical for more people to come to a ballgame during
a crisis because it takes them away from their homes and brings them to one
place," said David Rinetti, vice president of stadium operations for the
Oakland
A's. "It's kind of like a bus scenario. The economies of scale are much
better."

???And teams say playing all day games could create new energy demands.

???"It takes eight hours to clean the ballpark," said Tim Mead, a spokesman
for
the Anaheim Angels. "If you play day games, you'd be cleaning the ballpark at
night," with the lights on.

???The Angels, who play at Edison Field, are particularly sensitive about the
energy issue. Mead pointed out that the park is actually served by the city of
Anaheim's power company, not Southern California Edison, and that the stadium
voluntarily turned off its Big A electric sign in December despite the fact
that
it's one of their primary means of advertising.

???TEAMS PITCHING IN

???Baseball teams say they are doing what they can to conserve energy. Rinetti
said concourse lighting has been dimmed at the Network Associates Coliseum in
Oakland, and field lights are not turned on during batting practice anymore.
The
lights used to be turned off a half-hour after the game ended, but now they're
turned off seven minutes after the final out.

???The San Diego Padres added day games to their schedule and will play 39
this
year, said spokesman Glenn Geffner, who pointed out that that's the
fifth-highest number in the majors.

???In Vacaville, where the Solano Steelheads of the independent Western
Baseball League play at Travis Credit Union Park at the Nut Tree, owner Bruce
Portner is being even more parsimonious about power.

???"Any profit I had in mind this year is going to PG&E," Portner complained.

???At one game this season, Portner argued with an umpire who wanted the
lights
turned on at dusk.

???"The umps aren't paying the bill," Portner said. "I am."Chronicle Staff
Writer Henry Schulman contributed to this report. / E-mail Erin Hallissy at
ehallissy@sfchronicle.com.

GRAPHIC: PHOTO (2), (1) Seven-year-old Truman Purnell, from Piedmont, was
ready
for a foul ball while sitting in the lap of his father, Dan, at Friday night's
A's game., (2) Baseball is being criticized during the energy crisis for
having
so many of its games at night, like Friday's A's game in Oakland. / Photos by
Kim Komenich/The Chronicle

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????JUNE 4, 2001, MONDAY, FINAL EDITION

SECTION: EDITORIAL; Pg. A19; WASHINGTON INSIGHT

LENGTH: 682 words

HEADLINE: Gloom today, glut tomorrow

BYLINE: Carolyn Lochhead

BODY:
WHAT GOES UP usually comes down. And few industries are more prone to boom and
bust than energy.

???Imagine the news stories a few years from now: "Crisis hangover -- energy
stocks sink as prices plunge; But California consumers still stuck with high
bills."

???"The energy industry is suffering its worst downturn since the supply glut
of the 1990s, as dozens of big new power plants come on line, and the
just-completed Alaskan gas pipeline sends natural gas prices to their lowest
levels in six years.

???"The one bright spot for Texas generators is California, where consumers
are
locked into long-term contracts for wholesale electricity that the state
signed
at the peak of its blackouts in the summer of 2001.

???"Sacramento lawmakers have appealed to President Daschle to help get the
state off the hook, arguing that California will never claw its way out of its
economic slump if businesses continue to flee to states where energy is cheap.

???"But top Enron lobbyist Gray Davis, a former governor of California, warned
Daschle that suppliers would have little choice but to go to court to enforce
the contracts the state signed."

???Washington and Sacramento are agog with the energy crisis and bursting at
the seams with plans to fix it. But the one thing no one -- even
environmentalists -- suggests is letting high energy prices discourage energy
consumption or encourage new supplies.

???"To economists, letting the price rise is the solution," said Paul Portney,
president of Resources for the Future, a Washington think tank. "To elected
representatives, having the price go up is the problem."

???Political memories tend to be selective and short. But it was the energy
glut of the 1990s that contributed to California's blackouts, $3 gasoline and
$
400-a-month heating bills. Likewise, high prices are now laying the seeds of
their own destruction.

???As a story in the New York Times noted, an energy investment boom "promises
a cyclical increase in supplies that is expected to stabilize or reduce prices
in coming months, many industry executives and private analysts say."

???Through much of the 1990s, there was a glut of energy. Fuel of all kinds
was
really cheap.

???How cheap? Adjusted for inflation, as cheap as in 1949, economists
calculate.

???Energy is the oxygen of the economy, and rock-bottom prices contributed to
the long economic boom. But low prices also caused energy production to slump
and consumption to soar.

???People ditched their economy cars for SUVs. Houses got bigger, ceilings got
higher and kitchens sprouted industrial stoves with enough BTUs to melt
aluminum. Stores, offices and homes turned into summertime refrigerators.

???Low prices discouraged energy development.

???"Oil was so cheap for so long, that people were selling their refineries,"
Portney said. "You had virtually no exploration for new natural gas when
prices
were at $2 a BTU."

???As demand soared and supply fell, prices rose. Profits have grown so robust
that green fuels, such as biomass and wind, are becoming economically viable.
The oil industry is booming. Refineries are expanding. The long-delayed
construction of a natural gas pipeline from Alaska now looks likely. So many
power plants are under construction that the market may be flooded with as
much
as 200,000 new megawatts by 2004.

???Investments in energy efficiency -- from new-age superconducting
transmission wires to better light bulbs -- are suddenly looking attractive
for
the first time in decades.

???"High prices will dampen demand, high prices will encourage supply, and
will
encourage people to make better use of what they've got," said Robert Ebel,
director of energy for the Center for Strategic and International Studies. "So
we're starting on the down slope. We're not very far down. When prices start
to
decline, I can't say how far they will go. But they will decline, because
that's
just the law of supply and demand. Prices decline, demand starts to creep up
again, there's less incentive to add to supply, and here we go again."E-mail
Carolyn Lochhead at clochhead@sfchronicle.com

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????????????????Copyright 2001 News World Communications, Inc.

?????????????????????????????The Washington Times

?????????????????????June 04, 2001, Monday, Final Edition

SECTION: PART A; COMMENTARY; Pg. A14

LENGTH: 805 words

HEADLINE: Shedding light on Bush's energy plan

BYLINE: Charli Coon

BODY:

??If the opponents of President Bush's energy policy were as quick and
creative
about finding solutions to our energy woes as they are about criticizing the
policy, we'd be exporting kilowatts to every corner of the globe by now.

??Depending on whom you talk to, the president is: pandering to the oil lobby,
masquerading as a conservationist, focusing too much on long-term solutions,
destroying the environment or creating an artificial crisis.

??They're wrong. ?The plan makes a good deal of sense largely because the
president understands basic economics. ?His plan takes a giant step toward
allowing the market to correct the current imbalance between supply and
demand.

??Some people urge more conservation. ?That's fine, and conservation should be
encouraged on a personal level (no need to run the home air conditioner on a
74-degree day). But conservation can't solve the problem by itself.

??The other 49 states can learn a lot from California, where the recipe for
blackouts has been perfected. ?Just add excessive federal regulations that
boost
the cost of electrical production and discourage new production to a flawed
deregulation plan. ?Mix in price controls, and you've got a market for
flashlights.

??But it's not just California. ?Bad energy policies have affected the whole
country, with consumers elsewhere experiencing higher gasoline prices and
rising
utility bills. ?Failing to deal with these problems will threaten America's
prosperity.

??President Bush's energy plan is designed to increase supply through a
variety
of measures, including improvements to the nation's aging energy
infrastructure.
While not perfect, his plan would move America past an energy policy based on
crisis management to one that can meet the needs of future generations.
Consider some highlights.

??More Electricity: Since 1973, U.S. ?energy consumption has increased by
about
30 percent - roughly the same as our population growth. ?Simply put, there are
more people using energy to power their homes, cars, air conditioners,
televisions and computers. ?But the number of power plants and lines hasn't
increased in proportion to the population surge, so prices have risen.

??President Bush wants to increase the energy supply by building new power
plants, opening a tiny portion of the Arctic National Wildlife Refuge to oil
and
gas development (a move supported by trade unions such as the Teamsters), and
developing new technologies for alternative fuels. ?The president supports
this
because he knows price controls don't work. ?They encourage consumption and
impede investment.

??Nuclear power now: President Bush also would increase the energy supply
through nuclear power. ?Opponents are quick to raise the specter of Three Mile
Island or even Chernobyl. ?But the Three Mile Island accident involved only a
tiny amount of leakage in the first place and no loss of life or widespread
increase in disease. ?As for Chernobyl, no plant in this country ever has or
will operate with so little regard for safety.

??Besides, nuclear power plants already supply about 20 percent of U.S.
electricity, and hardly anyone complains. ?Yes, more nuclear power means more
nuclear waste - which is why the president urges the use of a centralized
waste
site far from population centers.

??More trade for oil: President Bush wants to trade with more nations for oil,
and his proposal couldn't come at a better time. ?About 56 percent of the oil
the United States uses is imported, mostly from the Middle East. In contrast,
when we had our first energy crisis in 1973, only 35 percent of our oil came
from foreign sources.

??The president would expand oil and gas trade agreements with Canada and
Mexico, and he wants to trade more with oil-producing countries other than
those
in the Middle East, such as countries in Africa, the Caspian Sea region and
South America. ?In short, oil is a global - not a regional - commodity, and we
should shop accordingly.

??The president's plan has its weak spots. ?For example, it would throw even
more federal money at alternative fuel sources, such as clean coal technology,
wind, solar, hybrid gas-electric cars and organic waste. ?But despite the
billions of taxpayer dollars that have been spent so far on alternative
energy,
we've developed enough affordable power from those sources to meet only 3
percent of our energy demands.

??For the most part, though, the president's plan represents a responsible
approach to the energy crisis. ?Let's hope Congress gives it the serious
consideration it deserves. ?To do otherwise could carry long-term
consequences.
Any response that isn't market-based can't help but leave everyone in the
dark.

??Charli Coon is an energy policy analyst at the Heritage Foundation. ?A
longer
version of this article recently appeared in the San Diego Calif. ?Union
Tribune.

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

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

????????????????????????June 4, 2001, Monday, BC cycle

????????????????????????????12:09 AM Eastern Time

SECTION: State and Regional

LENGTH: 745 words

HEADLINE: Developments in California's energy crisis

BODY:

??Developments in California's energy crisis:

??SUNDAY:

??- The state energy commission announces that Californians sliced their
electricity use in May by 11 percent compared to the same month last year.
Residents and businesses cut their electricity demand by 3,595 megawatts in
May
compared to last year. One megawatt is enough to power about 750 homes. Energy
use during peak demand hours decreased in May by about 10 percent over the
same
period last year. In April this year, monthly electricity use was down by 7
percent over the previous year.

??- More than 6,500 businesses - from pet cemeteries to bakeries to tattoo
parlors - have applied with the state Public Utilities Commission in hopes of
being spared during rolling blackouts. The high demand prompted the PUC to
extend the deadline from Friday to Monday. Thousands of institutions, such as
fire and police stations, military bases and hospitals, are already exempted
from rolling blackouts because the PUC considers their services essential to
public health and safety.

??- The federal agency in charge of monitoring and policing California's power
system was warned by experts both inside the agency and out of potential
deregulation flaws such as the price gouging that now fuels the state's power
crisis, the Los Angeles Times and the San Jose Mercury News both report.

??Though the Federal Energy Regulatory Commission is charged with ensuring the
price of energy is "just and reasonable," just three months into the 1998
launch
of California's deregulation experiment, energy traders tested their ability
to
manipulate the market by offering a megawatt-hour of electricity for $9,999 -
the highest price they thought trading computers could accept. Electricity had
been trading below $100 per megawatt-hour.

??- California will blow through most of the $12.5 billion Gov. Gray Davis
hopes to borrow to head off summer blackouts over the next two months, the
Orange County Register reports. The state currently spends $66.9 million a day
on electricity. If it continues at this pace, it will have spent $10.4
billion -
or 83 percent - of what it plans to borrow through a bond sale by mid-August.
That leaves only $2.1 billion to buy future energy. The state estimates it
needs
at least $2.7 billion to pay for such contracts just through June 2002. Davis'
energy team says dropping energy prices and long-term contracts will help
stretch the money.

??WHAT'S NEXT:

??- Davis' representatives continue negotiating with Sempra, the parent
company
of San Diego Gas and Electric Co., to buy the utility's transmission lines.

??-In federal bankruptcy court Monday, Calpine Corp. asks U.S. Bankruptcy
Judge
Dennis Montali to order Pacific Gas and Electric to free Calpine's small power
plants from contracts to provide the bankrupt utility with electricity or else
let them stop producing electricity. PG&E will also ask Montali to stop the
manager of the state's power grid from buying future electricity for PG&E or
charging it for any electricity bought after the utility filed for bankruptcy
April 6.

??THE PROBLEM:

??High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and maintenance
at aging California power plants are all factors in California's electricity
crisis.

??Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices the state's electricity deregulation law bars them from
passing
on to consumers. PG&E, saying it hasn't received the help it needs from
regulators or state lawmakers, filed for federal bankruptcy protection April
6.

??Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business
customers. The state is also buying power for a third investor-owned utility,
San Diego Gas & Electric, which is in better financial shape than much larger
Edison and PG&E but also struggling with high wholesale power costs.

??The Public Utilities Commission has approved average rate increases of 37
percent for the heaviest residential customers and 38 percent for commercial
customers, and hikes of up to 49 percent for industrial customers and 15
percent
or 20 percent for agricultural customers to help finance the state's
multibillion-dollar power buys.

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

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

????????????????????????June 3, 2001, Sunday, BC cycle

SECTION: State and Regional

LENGTH: 839 words

HEADLINE: Critics say FERC ignored California's deregulation flaws

DATELINE: FOLSOM, Calif.

BODY:

??The federal agency in charge of monitoring and policing California's power
system was warned by experts both inside the agency and out of potential
deregulation flaws such as the price gouging that now fuels the state's power
crisis.

??The Federal Energy Regulatory Commission has a legal obligation to ensure
"just and reasonable" prices, and is meant to operate as an oversight agency,
similar to the Federal Securities Commission that oversees Wall Street.

??However, just three months into the 1998 launch California's deregulation
experiment, energy traders tested their ability to manipulate the market by
offering a megawatt-hour of electricity for $9,999 - the highest price they
thought trading computers could accept. Electricity had been trading below
$100
per megawatt-hour.

??FERC may have set itself up for problems by eagerly promoting deregulation,
despite red flags from one of the nation's top deregulation experts and the
agency's own staff members, including its economists, according to interviews
and a review of hundreds of documents published Sunday by the San Jose Mercury
News and the Los Angeles Times.

??"There were a lot of issues that got swept under the rug," said economist
Carolyn A. Berry, who headed FERC's analysis of the California plan. "We were
trying to point out the ugly warts, but it wasn't our job to set policy."

??But Curtis Hebert Jr., who took over as FERC's chairman in January, insists
the agency isn't failing to investigate the energy industry. FERC's job is to
make the market competitive, which will bring lower prices, he said.

??"We do have enough resources, and we are handling it in a way that's
appropriate," Hebert said of California's energy crisis.

??Before deregulation began, FERC commissioners, generating companies,
utilities and politicians argued that a deregulated market for electricity -
as
was done with natural gas - would reduce prices and increase competition. In
1992, Congress passed a law encouraging open access, and in the mid-1990s, a
draft plan was started for the California Public Utilities Commission.

??Bill Hogan, a deregulation expert from Harvard University, said he was hired
to analyze the state's plan for San Diego Gas & Electric Co. He wrote a
71-page
report citing potential price spikes and other problems to be presented at
FERC's deregulation hearings in the summer of 1996.

??That report was eventually withdrawn after the utility was pressured to join
the deregulation bandwagon if it wanted to have a say in the final plan, said
Bill Reed, chief regulatory officer for the utility's parent company.

??Once the California Legislature passed the bill in 1996, it essentially gave
FERC the sole authority to intervene when wholesale power prices soar.

??But FERC also had the final say on each part of the plan before it was
implemented. Some say the agency did not promote internal debate, and add that
the plan was already charging forward and would have been politically
difficult
to stop.

??"There was great resistance on the part of many people at the commission to
undo the process that California sent in," Berry said. "There was a reluctance
to start pulling at the threads for fear that the whole package might fall
apart."

??At that same time, FERC officials also were working on a $12.7 million plan
reorganize the agency's staff and upgrade computers.

??Then came the hot July day in 1998 when energy traders charged nearly
$10,000
for a megawatt-hour of electricity to test the waters. The Independent System
Operator, manager of California's power grid, was forced to buy the power to
keep the grid from crashing.

??The ISO then requested that FERC grant an emergency price cap, which it did.
But ISO officials continued to warn the federal agency that this was just the
beginning.

??"I don't think they had any thought of what the potential was," said Anjali
Sheffrin, the ISO's market surveillance director who visited the agency twice
in
the fall of 1999 in an effort to convince FERC officials of potential dangers.

??James Hoecker, who served as FERC's chairman during the transition to
deregulation, now disagrees with the way in which deregulation was pushed
through in California. He says more attention should have been given to
critical
analysis.

??"I would have liked for the commission to be more prepared for California,"
he said.

??FERC has approved deregulation plans in New England, New York and the
mid-Atlantic states. But FERC officials point out they only oversee wholesale
energy prices, while state officials are responsible for the local utilities
and
other retailers selling power to customers.

??Over the past few months, FERC has ordered a dozen companies to justify
their
high prices or pay $124.5 million to California utilities for January and
February. Williams Cos. of Tulsa, Okla., also settled for $8 million after
being
accused of shutting down power plants last spring to spike prices.

??---

??On the Net:

??http://www.ferc.gov

??http://www.caiso.com

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

????????????????????????????The Charlotte Observer

?????????????????????????????June 3, 2001, Sunday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K1149

LENGTH: 1806 words

HEADLINE: Duke Energy rates spike in emergency

BYLINE: By Stella M. Hopkins and Peter Wallsten

BODY:

??SACRAMENTO, Calif. _ As Duke Energy faces accusations of price gouging in
California's escalating energy crisis, the Charlotte, N.C., company
acknowledges
it has sold power to one wholesale customer for more than twice the highest
previously reported price.

??For several days in January, Duke Energy charged the California Independent
System Operator $3,880 per megawatt hour. That's about as much electricity as
the average Duke Power residential customer in the Carolinas uses in one
month.
That average Duke Power customer pays about $73 a month.

??Duke's $3,880 charge is twice the $1,900 rate that brought another power
generator harsh criticism in May from California Gov. Gray Davis, who is
battling President Bush to impose caps on the state's skyrocketing wholesale
energy prices.

??The ISO sale came to light during a Knight Ridder analysis of federal
documents that provide a rare public look at closely guarded pricing in
California's convoluted energy market. After that analysis, Duke also gave
pricing data it has previously refused to release.

??Duke says its average wholesale price in California last year was $76 per
megawatt hour.

??For the first three months this year, which includes the high ISO sale, Duke
said its average sales price was $136 a megawatt hour.

??"On average, Duke's prices are not 'gouging prices,'" said Nancy DeSchane, a
vice president with Duke Energy's trading arm in Salt Lake City.

??Wildly gyrating energy prices are the product of California's effort to
deregulate its electric industry. Legislators intended the move to foster
competition and lower prices. Instead, prices soared _ sometimes to unheard-of
extremes. Duke Energy, whose Duke Power unit is the largest Carolinas utility,
is a key player in California, where it is one of five generators accounting
for
30 percent of power production.

??In the past year, Duke's highest-priced sales seesawed, then rose sharply.
Last spring, Duke's top charge was $1,100 per megawatt hour.

??During the summer, the high dropped to $554, then rose to $1,021 last winter
and topped out at $3,880 during the first three months of this year.

??Duke said its rate for the ISO sale reflected higher fuel costs, the cost of
running an extremely inefficient unit of one plant and a poor-credit surcharge
representing up to 80 percent of the total charge to a buyer that hadn't paid
its bills. The sales came during times of extreme power shortages, including
two
days when the ISO called blackouts, Duke said.

??Duke's total sale to the ISO at $3,880 was 5,000 megawatt hours _ $19.4
million. The sale represented less than 1 percent of the 10 million megawatt
hours Duke sold in California during the first three months of the year.

??Most wholesale rate increases hadn't been passed on to Californians, but
starting today, residential consumers begin receiving bills reflecting the
largest rate increase in California history. Depending on use levels,
consumers
will pay two to three times the rate Duke Power charges its Carolinas
customers.

??The analysis of Duke's quarterly reports filed with the Federal Energy
Regulatory Commission led the company to identify significant errors in
reports.
The reports, for example, listed one sale late last year for $4,845. Duke said
the actual charge was $758. The company volunteered the $3,880 transaction,
which had been reported as $250.

??Duke will file amended reports.

??"We have a number of erroneous items," DeSchane said. "It was not
intentional."

??The commission is required by federal law to assure "just and reasonable"
prices, and the reports are one mechanism for monitoring prices.

??Despite errors, the reports remain the best publicly available source of
pricing information that Duke and other generators have fought to keep
confidential.

??The demands for pricing data come as the generators face lawsuits and state
and federal investigations into claims of profiteering and price manipulation.
The companies are resisting subpoenas from a state Senate committee
investigating their business practices. The companies say price disclosure
hurts
their ability to compete.

??"The fact that they are so insistent on confidentiality is very disturbing
to
me," said state Sen. Joe Dunn, the Orange County Democrat chairing the
committee. "If (the allegation of market manipulation) isn't true, then why
are
they insisting on secrecy?"

??In its quarterly federal reports, Duke lists the total power sold and the
lowest and highest price for each customer. But Duke doesn't have to say how
much power was sold at what price, so there's no way to calculate Duke's total
California sales from the report.

??The documents also show about 10 percent of Duke's sales volume came in
what's called the spot market, a highly volatile, daily trading market.

??The ISO sale at $3,880 was a last-minute sale, similar to those on the spot
market, driven by heavy demand. The $1,900 charge that angered the California
governor was a last-minute sale by Houston generator Reliant to avert
blackouts.

??In releasing the confidential pricing, Davis called Reliant's price
"obscene."

??He has called generators "the biggest snakes" and warned plant seizures
could
be the ultimate penalty.

??For January and February trades _ which includes Duke's $3,880 sale to the
ISO _ the Federal Energy Regulatory Commission has ordered generators to
refund
$124 million in overcharges, including $20 million from Duke. The company has
said it will gladly refund those fees _ if it ever gets paid.

??Duke stands by the credit surcharge policy it developed as cash-strapped
utilities stopped paying mounting bills. When the utilities stopped paying the
ISO, that agency couldn't pay traders such as Duke.

??The ISO, created under deregulation, oversees the state's electrical
transmission system and is charged with ensuring the system has enough power
to
meet demand.

??When the system runs short, the ISO buys power at what are typically high,
last-minute prices. If there is no power to buy, the ISO calls for blackouts.
Generators must sell available power to the ISO.

??"We were forced to sell (to the ISO) and had an obligation to our
shareholders to assess the risks," Duke's DeSchane said of the decision to
levy
a credit surcharge. "Nobody has paid bills yet."

??The company has set aside $110 million to cover anticipated refunds and
unpaid bills.

??The federal reports also show Duke sold 90 percent of its power this year
and
70 percent last year on contracts ranging from a few days to more than a
month.

??Duke says most of these contracts actually range from one to four years.

??Pre-selling power means Duke forgoes the chance to make potentially larger
profits selling that power on the spot market. If a plant shutdown or other
problem prevented the company from producing power, Duke could be forced to
buy
on the spot market to fulfill the contract.

??Duke says it wants the stability of long-term contracts. When Duke agrees to
sell power, it also buys fuel to produce that energy. That means Duke locks in
sales and its largest cost.

??Return on investment

??Duke entered the California market in 1998 by buying three power plants for
$
501 million. In 1999, the company signed a 10-year lease on a fourth plant.

??The company expected tight supplies, which likely meant strong prices,
because California hadn't seen a major power plant built in 10 years. But,
like
much of California's leadership, Duke didn't forecast the severe shortages
that
have led to blackouts.

??The result is a market in which sellers can charge prices far higher than
elsewhere in the country.

??Duke readily admits California profits have exceeded its expectations,
although the company won't say how much money it has made in California.

??This year, profits quadrupled in the unit that includes Duke's California
plants as well as plants outside its regulated Duke Power territory in the
Carolinas.

??Duke calls the unit's earnings rise to $348 million from $82 million
"stellar."

??The unit accounted for 27 percent of the Fortune 100 company's pre-tax
earnings, compared with 10 percent a year ago. Critics say generators' profits
come on the backs of Californians.

??Some economists and California politicians say generators' prices violate
federal requirements that electricity prices be "just and reasonable."

??"The generators are charging whatever they can get in the market," said
Frank
Wolak, a Stanford University economist with access to confidential pricing
data.

??"In economics, when there is a financial incentive for something to happen,
it usually does."

??The criticism haunts Duke veterans, sent from the Carolinas to make a go of
the company's California gamble.

??"We're out here on the new frontier, where they don't know Duke from Adam,"
said Randy Vigor, who helped build Duke's nuclear plants on Lake Wylie and
Lake
Norman and now heads a $500 million expansion at one of Duke's California
plants. "We're getting blamed for a lot of things that aren't Duke's fault."

??In July _ before the big run-up in prices _ Duke offered Davis the chance to
buy enough electricity to power 2 million homes at $50 a megawatt hour. Davis
did not act on the offer.

??"At that point, prices were still lower than that," said Steve Maviglio,
Davis' press secretary. "No one in a million years expected prices to rise as
much as they have since then.

??"Where is that offer today is the better question."

??The answer, Duke says, is that the power has been sold.

??"We feverishly attempted to provide a set of solutions to all the California
folks," said Duke Chief Executive Rick Priory.

??He includes in those attempts the offer Duke lawyers sent this spring to
Davis, saying it would forgive millions in utility debts in exchange for an
end
to investigations. The move backfired when the offer became public May 2,
dragging Duke into a harsh spotlight.

??"They were clearly trying to call off the dogs," Maviglio said. "They
realize
this a public relations nightmare."

??In similar past exchanges, Duke has said the "dogs won't find anything."

??Priory says he doesn't regret making the offer, that it was an attempt to
settle disputes and get on with building desperately needed power plants.

??He says California remains important _ and welcome _ in Duke's portfolio.

??"Our experiences in California have generally been positive. The one
negative
is the political rhetoric, but we know this problem will be solved, and that
will be toned down," Priory said.

??Meanwhile, he added: "We're just focused on producing every kilowatt of
electricity we can."

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

??(c) 2001, The Charlotte Observer (Charlotte, N.C.).

??Visit The Charlotte Observer on the World Wide Web at
http://www.charlotte.com/

JOURNAL-CODE: CH

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???????????????????????Knight Ridder/Tribune News Service

??????????????????????????????Contra Costa Times

?????????????????????????????June 3, 2001, Sunday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K1314

LENGTH: 653 words

HEADLINE: Judge refuses to override PUC over PG&E bankruptcy

BYLINE: By Matt Sebastian

BODY:

??SAN FRANCISCO _ Fearing "jurisdictional chaos," the federal judge overseeing
Pacific Gas & Electric Co.'s bankruptcy has refused to override the
California
Public Utilities Commission, a decision that could keep the utility's
electricity rates capped for another year.

??U.S. Bankruptcy Judge Dennis Montali, in a 30-page written ruling issued
late
Friday afternoon, declined to block state regulators from adopting new
bookkeeping rules that effectively cap PG&E's consumer rates through March 31.

??The judge found that the PUC may perform its regulatory duties even while
the
utility is in the midst of a Chapter 11 bankruptcy reorganization. PG&E had
sought an injunction against the commission, saying it will lose $4 billion
over
the next year if rates remain capped.

??In plain language, Montali addressed those who saw the proceeding as a
precursor to action by the court to raise consumer electricity rates as part
of
any future reorganization plan.

??The ruling "is not about a power struggle between a federal bankruptcy court
and an agency of the executive branch of California government nor is it about
setting retail electricity rates," Montali wrote.

??PG&E officials vowed to pursue other legal challenges to the commission's
new
accounting rules, including petitions before the PUC itself, and in state and
federal court.

??"Pacific Gas & Electric Co. is disappointed that the court did not grant
immediate relief from the unlawful and retroactive CPUC order," the company
said
in a written statement. "However, today's decision was not on the overall
merits
of the CPUC action."

??Commission President Loretta Lynch, also in a written statement, lauded the
ruling as a "ringing affirmation of our position that the CPUC will continue
to
require PG&E to serve its customers."

??Under California's deregulation of the energy market, PG&E's customer rates
have been fixed since 1998 to allow the utility to pay down "stranded costs" _
money spent on unprofitable investments like nuclear power.

??The statutory rate freeze is scheduled to end March31, although PG&E can
apply to lift the cap if it recoups its $7 billion in stranded costs before
that
date. The utility, in fact, applied to end the rate freeze last fall.

??For the first year and a half of deregulation, low wholesale costs meant
PG&E
recovered billions of dollars more from its ratepayers than it was paying for
their energy.

??But when wholesale prices exploded last summer, PG&E quickly found itself
spending far more for energy than it could legally charge its ratepayers. In
less than a year, the utility says it has been unable to pass on $8.9 billion
in
energy costs.

??The new accounting rules, adopted March 27, will force PG&E to hold its
profits from the first half of the deregulation to its losses in the last
year,
thereby quashing the utility's claims it has already met the threshold to end
the rate freeze.

??The PUC had argued that, as a state agency, it enjoys sovereign immunity
from
prosecution. The judge ruled that the commission isn't entirely immune, but he
found that the one exemption _ in cases where federal law is violated _ didn't
apply.

??Also Friday, Montali refused to free a group of alternative energy
generators
from their contracts with PG&E. The power producers, known as qualifying
facilities, had sought to sell their electricity on the open market, where
they
could command much higher prices.

??Instead, the judge ordered PG&E to pay the generators up to 20 percent of
the
tens of millions of dollars they're owed.

??"We're pleased the judge moved up the time frame under which our generators
get paid," said attorney Bruce Leaverton, who represents four cogeneration
plants in the San Joaquin Valley.

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

??(c) 2001, Contra Costa Times (Walnut Creek, Calif.).

??Visit the Contra Costa Times on the Web at http://www.cctimes.com/

JOURNAL-CODE: CC

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???????????????????????Knight Ridder/Tribune News Service

??????????????????????????????Contra Costa Times

?????????????????????????????June 3, 2001, Sunday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K1316

LENGTH: 731 words

HEADLINE: Gloomy electricity supply forecast in June may have been optimistic

BYLINE: By Mike Taugher and Rick Jurgens

BODY:

??WALNUT CREEK, Calif. _ An electricity supply forecast for gloom in June was
based on overly optimistic assumptions about how many plants would be
off-line.

??The gloomy prediction was based on an historic average of 2,500 megawatts
from power plants being unavailable for maintenance or breakdowns.

??In fact, plants producing 8,500 megawatts were off-line Friday and that
figure is not expected to get down to 3,000 megawatts until the end of June.

??Whether the 5,500 megawatt difference will translate into more blackouts
will
depend on the weather and the availability of power from other states.

??State grid managers in March predicted that California would be short enough
power to serve about 3 million homes during the hottest afternoons this month.

??Still, the Independent System Operator, originator of the March forecast,
said Friday that it does not expect the conclusions to change by all that much
in a revised forecast next week. The bottom line: California faces a shortage
of
up to 3,600 megawatts this month.

??"Things right now are extremely tight and will be through June," said ISO
vice president for grid operations, Jim Detmers.

??In the push-pull of good and bad news, some brighter elements appeared: An
1,100 megawatt nuclear powered unit in Southern California forced off-line by
fire in February was ramping up Friday, several weeks ahead of schedule.

??Despite record temperatures in Northern California _ heat that also melted
snow and temporarily increased the supply of power from electricity-generating
dams _ no rolling blackouts occurred.

??"The imports were up because of the water coming down, and the mild weather
down south, that's what made the difference," Detmers said.

??In a related development, the ISO _ under protest _ met a Friday deadline
from federal regulators to submit a plan for greater cooperation with grid
operators in neighboring states.

??But the Federal Energy Regulatory Commission's deadline was illegal and
improper, ISO General Counsel Charlie Robinson said in a conference call. The
FERC made submission of a "regional transmission organization" plan a
condition
for activating measures to rein in illegally high prices in the California
wholesale electricity market.

??Gov. Gray Davis reiterated his complaint that the FERC plan falls short.

??"There are more loopholes than Swiss cheese in FERC's order," Davis said in
a
written statement issued late Friday.

??The ISO's plan ceded no control of the transmission grid and preserved "the
limited price mitigation offered by FERC," Davis said.

??The FERC, committed to promoting competition in the electricity industry,
has
prioritized consolidation of the regulation and operation of the high-voltage
transmission lines that carry electricity thousands of miles from generating
plants to users.

??Merging the California grid into a broader network is "something we're not
prepared to even worry about" until California's electricity market has
stabilized and its utilities restored to financial health, said ISO Chairman
Michael Kahn.

??In any case, the federal agency can not create "regional institutions by
regulatory fiat," the ISO said in its filing, which also asserted that the ISO
itself already meets the FERC's criteria for such regional grids.

??Southern California Edison and San Diego Gas & Electric, which own
transmission lines operated by the ISO, signed onto its filing.

??Pacific Gas & Electric Co., the owner of a majority of the transmission
lines
in the ISO operation, dissented. In a separate filing PG&E urged federal
regulators to put more pressure on the ISO to join a regional grid.

??PG&E, which has repeatedly locked horns with Davis during the state's energy
crisis, noted that he had appointed the current ISO board and urged the FERC
to
seek "adequate assurances that the decision-making process at the California
ISO
will be truly independent." The current five-member board includes two members
of the Davis administration.

??FERC has yet to sign off on the ISO's current governance structure, which
came through legislation passed in January after FERC ruled the previous board
was "comprised of stakeholders who are perceived as being susceptible to
influence."

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

??(c) 2001, Contra Costa Times (Walnut Creek, Calif.).

??Visit the Contra Costa Times on the Web at http://www.cctimes.com/

JOURNAL-CODE: CC

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

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

??????????????????????June 3, 2001 Sunday ?Home Edition

SECTION: California; Part 2; Page 3; Metro Desk

LENGTH: 915 words

HEADLINE: Los Angeles;
;
Key Figures Trade Views of Energy Picture;
Forum: Most of the 12 discussing crisis agree only on blaming federal
regulators. They find no consensus on a solution.

BYLINE: JOE MOZINGO, TIMES STAFF WRITER

BODY:

??Some of the major players in the state's energy crisis met in a Hollywood
studio Saturday for a sometimes contentious panel discussion in which they
resoundingly criticized federal regulators and disagreed over possible
solutions.

??Although there was no clear consensus on strategy, Gov. Gray Davis' chief
energy advisor, S. David Freeman, echoed sentiments the governor has expressed
in saying the end of the electricity shortage is in sight.

??A combination of new power plants and increased conservation, along with
long-term, lower-rate contracts between the state and energy providers, should
create a 15% power surplus within several years, he said.

??"The same companies that are charging an arm and a leg now are negotiating
five- and 10-year contracts at prices that are reasonable," Freeman said,
though
not specifying which producers. "By 2003, I'm certain we will have this
problem
behind us."

??Critics have widely disputed this claim. And some of Saturday's other
panelists--including the president of Southern California Edison, the
president
of Sempra Energy, a state utilities commissioner and the speaker of the state
Assembly--said they were not as confident about the future, especially if the
federal government doesn't step in with price caps.

??During last week's visit to California, President Bush reiterated his
opposition to such intervention.

??The Federal Energy Regulatory Commission "is on a sit-down strike," said
Carl
Wood, of the state Public Utilities Commission. "They should start regulating
or
just announce they are out of the business."

??Several of the 12 panelists also complained that the federal agency is not
regulating the cost of transporting natural gas through pipelines--a price
that
has skyrocketed by a factor of 30 in recent years.

??Natural gas is the primary fuel for most new power plants.

??John Stout, senior vice president of Texas-based Reliant Energy, blamed
those
exorbitant fuel costs for the high prices his company has been charging on the
spot market in California.

??Half-jokingly introduced by the moderator as the "bad guy," Stout said the
company's rates--if the cost of natural gas were factored out--would be lower
than those the investor-owned utilities like Edison had charged before
deregulation.

??"Two-thirds of every dollar we get goes to natural gas," he said.

??Stout was the sole panelist to also defend the federal regulators, saying
they audit Reliant every time its prices go up.

??Freeman disputed Stout's assertions and math, saying there is no
proportional
correlation between high electricity prices and the increase in costs of
natural
gas--a business, he noted, Reliant is also involved in.

??"You're in the gas business and the gas people are ripping us off as bad as
the electrical people," he said.

??Loretta Lynch, president of the Public Utilities Commission, found evidence
that power generators scaled back electricity production and then benefited
from
the resulting high prices. Documents uncovered by The Times in April showed
Freeman's own agency at the time, the Los Angeles Department of Water and
Power,
may also have engaged in driving the electricity prices skyward.

??As a municipal utility, the DWP has so far avoided the perils of
deregulation, and managed to profit from it by selling its excess power on the
market. Now, Freeman is in the ironic position of pushing his former agency to
sell its surplus power this summer to the state, instead of on the open market
where it could generate larger profits.

??The current assistant general manager of DWP said he is negotiating such a
contract, but there are risks. "We are purchasing on the spot market the gas
we
need to produce the power," he said.

??Freeman sounded more confident about the contract. "We want one and we're
going to get one."

??Asked afterward if he would have made such an agreement if he were still at
the DWP, Freeman said, "Of course."

??Saturday's KFWB (AM-980) Energy Summit was held in the CBS studio that most
recently housed the sitcom "Two Guys and a Girl" and consisted of two panels
of
six speakers each. Freeman gave the keynote address and joined the first
discussion.

??The second forum dealt with a wider range of ideas on how to cope with the
crisis, but was noticeably short on concrete plans. One speaker said "two guys
and a girl" could do a better job finding a solution, while actor and
conservationist Ed Begley Jr. discussed the potential of solar and wind power
and recounted a drive he took across the country in a hybrid car recently,
which
cost him $72 in gasoline.

??Assembly Speaker Bob Hertzberg (D-Sherman Oaks) proposed a plan in which
large power consumers would negotiate their own contracts with energy
suppliers,
while residents and small business owners would still get their electricity
from
the utilities.

??And a UCLA economist claimed that speculation of major economic fallout from
the rate increases is overstated. "Even if you pay higher rates, the average
consumer is going to pay less overall than the consumer in Arizona and
Nevada,"
said Chris Thornberg. "It's not going to have the economic impact that some
people think."

??The president of the California Chamber of Commerce, Allan Zaremberg,
disagreed. He said companies that use lots of power--drywall manufacturers and
food processors, for example--would be compelled to leave the state, creating
a
vacuum that could have dire economic effects.

??"Nobody has got an endgame here," he said.

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

??????????????????????June 3, 2001 Sunday ?Home Edition

SECTION: California; Part 2; Page 1; Metro Desk

LENGTH: 828 words

HEADLINE: Thanks for Your Concern, Wall Street

BYLINE: PETER H. KING

DATELINE: SAN FRANCISCO

BODY:

??A few odds and ends, mostly odds, from the energy front:

??The first comes via Bloomberg News, the financial information service. In a
dispatch filed Thursday--a day that saw California slide to within minutes of
yet another round of rolling blackouts--Bloomberg offered, without a whit of
irony, an upbeat near-term analysis of the U.S. energy industry.

??Profits among energy traders and generators, a Wall Street analyst told
Bloomberg, could rise by as much as 30% this year. The reason, the dispatch
explained, was that "electricity and natural-gas traders are profiting from
deregulation. . . ." What's more, "many benefited last quarter as increased
demand sent prices surging in California and other parts of the U.S."

??This belaboring of the obvious was followed by a quote from the Merrill
Lynch
& Co. analyst. Looking ahead to the summer, Steven Fleishman could hardly
contain his enthusiasm: "Hot weather," he chirped, "could be the cream on the
top."

??So there it is, Californians.

??Our crisis is their cream.

??Wall Street loves us.

??The energy companies love us.

??We are making so many wonderful people so wonderfully rich.

??Last Friday was the deadline for Californians seeking exemptions from
blackouts to file their case with the state Public Utilities Commission. Among
the applicants is John Lee Hooker's Boom Boom Room, a blues club in San
Francisco's Fillmore district. Because exemptions will be granted only to
those
who provide "essential" services--who can demonstrate, for example, that a
power
cutoff might cost lives--the Boom Boom Room's case is hardly a dunk by Shaq.

??Still, Boom Boom owner Alex Andreas gamely gave it a shot.

??"If the lights went out during a show," he told a San Francisco Chronicle
reporter, "there would be a huge panic, and people would freak out."

??As it happens, a similar stampede of exemption-seekers occurred during
California's power crisis of 1948. (Yes, we are living a rerun, even down to
the
absurdities.) In a study conducted for the Institute of Government Studies at
UC
Berkeley, researcher Stuart A. Ross found that the 1948 roll call of those
seeking to avoid service interruptions included:

??The California Bakers' Assn., which noted that "bread was essential to
community health" . . .

??Union Ice Co., which argued that its ice was "used almost entirely for the
preservation of food and hence was essential to the public health and safety"
.
. .

??The California Brewers Institute, which fretted about what might happen to
"its vast quantities of beer in fermentation" . . .

??And the Market Street Assn. of retailers, which sent a representative to
argue that lighted store-window displays deserved the same consideration as
agricultural irrigation pumps: "Both bring sustenance and both depend on
electricity."

??About a week ago, the idea of switching to regular, planned power
outages--as
opposed to unpredictable rolling blackouts--appeared to be gaining momentum.
Alas, the governor and the energy bureaucrats instead have settled, at least
for
now, on a system in which warnings will be issued an hour or so in advance of
any potential blackouts. In its debut Thursday, this approach seemed only to
add
to the general confusion, as the alarm turned out to be false.

??"It's a crapshoot," a state Chamber of Commerce official said afterward.
"We're not going to get the level of precision that would be optimal, that
would
allow you to make a decision that would be foolproof."

??Let me make once again, briefly but with feeling, the case for scheduled
outages. These outages would last, say, three or four hours and would unfold,
on
schedule, one or two workdays a week, whether they were needed or not--same
days, same times for each customer. Just like garbage pickup day.

??In a single stroke, such a system--if properly calibrated and
coordinated--could undermine any peak-hour manipulations by generators, saving
truckloads of money, and spare Californians the inconvenience and even fear
that
comes from not knowing if the power will stay on through any given day.

??Factories, shops, agricultural concerns and the like could make plans.
Backup
generators could be rented rather than purchased. Shifts could be split.
Retail
store jewelry could be locked away safely in anticipation of the outage hours.
Traffic officers could be dispatched in advance, not on the fly, to affected
intersections. Invalids needing electricity for medical devices could be moved
elsewhere. And so on.

??It requires no great feat of intellect to build a list of ways in which
scheduled blackouts would be superior to rolling ones, even with one-hour
warnings. A more difficult riddle is this: Why don't they want to do it? Every
expert seems to agree that blackouts in some form are inevitable, so why not
plan them out, beat the generators to the punch, seize control of the
situation?
What's to be gained by keeping Californians on edge through a long, hot
summer?
Just curious.

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

??????????????????????June 3, 2001 Sunday ?Home Edition

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

LENGTH: 4230 words

HEADLINE: The Nation;
THE ENERGY CRISIS;
Watchdogs Take a Hit in State's Power Ills;
Energy: Ex-federal officials say oversight of California's deregulation
suffered
due to a push for free-market competition.

BYLINE: JUDY PASTERNAK, ALAN C. MILLER, TIMES STAFF WRITERS

DATELINE: WASHINGTON

BODY:

??California was the first test, and right from the start economists at the
Federal Energy Regulatory Commission saw trouble coming. Their bosses were
worried too. In hindsight, some admit they could have done better.

??But five years ago, when California officials were rushing to deregulate
electricity, the federal watchdog charged by law with overseeing the process
and
guarding against runaway prices decided not to bark.

??In their zeal for free-market competition and their ideological commitment
to
shifting authority away from Washington to the states, FERC's commissioners
brushed aside their qualms and let the process roll forward.

??"There were a lot of issues that got swept under the rug," said economist
Carolyn A. Berry, who headed FERC's analysis of the California plan. "We were
trying to point out the ugly warts, but it wasn't our job to set policy."

??Former FERC Chairman James J. Hoecker, who presided over the approval, said
the agency "should have been far less deferential." John Rozsa, a state
legislative analyst who played a key role in the deregulation law, laughed
when
he heard that. "FERC wanted it badly," he said.

??Today, FERC stands accused of failing to exercise its oversight, enforcement
and political muscle just when they were needed most. The agency, critics on
the
inside and outside agree, helped launch a radical economics experiment without
sufficient preparation, adequate staff or a clear sense of how to carry out
its
mission.

??With fully half the states considering deregulation, the story of what a
previously obscure federal agency did not do has become more than a case study
in regulatory shortcomings. It has become a warning shot across the bow of the
whole country.

??FERC has approved deregulation plans in New England, New York and the
mid-Atlantic states. At stake is a reliable supply of a commodity that fuels
virtually every home and workplace in America. California's example is hardly
encouraging: months of blackouts and an electric bill that has rocketed from
$7
billion in 1999 to as much as $50 billion this year.

??Now the commission is caught in what some see as an identity crisis, divided
and uncertain as politicians in California and Washington call for mutually
contradictory action.

??"I think the commission needs to decide what it wants to do when it grows
up," said Hoecker, who headed the agency during a critical period ending in
January. His own leadership, he concedes, was not always all it might have
been.

??Without question, there is ample blame for everyone, not just FERC.
Certainly
in California, state officials devised a flawed deregulation scheme and then
insisted on carrying it out. Some power company executives have extracted
windfall profits. Politicians have wilted when things went awry.

??And, as FERC officials continually point out, its authority is limited to
wholesale markets. State officials are responsible for the local utilities and
other retailers selling power to consumers.

??Nonetheless, it is FERC that Congress charged with overseeing electricity
markets and assuring "just and reasonable" prices.

??How did FERC choose the course it took? What factors influenced its
decisions?

??Certainly energy companies, consumer advocates, lawmakers and others lobbied
the agency.

??Yet even FERC critics say such influence was not dominant. FERC is not
insulated from lobbying, but David Nemtzow, president of the Alliance to Save
Energy, a coalition of business, consumer and environmental leaders, said:
"They
are less sensitive to those forces than a lot of other players."

??Rather, this seems to have been a case of government decisions driven by
ideology. The commissioners, both Republicans and Democrats, were wedded to
the
idea that deregulation at the wholesale level would lead to lower retail
bills.
The market, they believed, would inexorably produce greater competition,
greater
efficiency and falling prices.

??To Mark Cooper of the Consumer Federation of America, the primary problem
was
"their excessive faith in the market."

??Even after price spikes occurred across the Midwest and in California as
early as 1998, FERC officials dismissed suggestions the surges might reflect
market instability or manipulation.

??And as California's situation worsened, FERC's response was shaped by a
continuing commitment to market forces with a minimum of government
intervention--witness its April order allowing temporary price caps but only
in
narrowly defined emergencies.

??In the last few months, under enormous pressure, FERC has ordered a dozen
companies to justify high prices or refund $124.5 million to California
utilities for January and February. It won an $8-million settlement from
Williams Cos. of Tulsa, Okla., which it had accused of shutting power plants
last spring to drive up prices. Williams did not admit guilt.

??Detractors, including California officials, howl that FERC's actions are too
little too late. They have called for a range of solutions, from flat-out
price
caps, as in the old days of full regulation, to much higher rebates from
generators caught price-gouging, to retractions of individual firms'
permission
to charge market-based rates.

??If the agency chose to wield all of its authority, it also could force
witnesses to testify under oath and subpoena tapes of phone calls among power
traders, and even force the state to change the way the market operates.

??Curtis L. Hebert Jr., the free-market champion who succeeded Hoecker as
chairman, insisted "FERC is being vigilant in its efforts to ensure just and
reasonable rates, while at the same time ensuring" that it fosters new energy
supplies.

??"I would vehemently disagree with anyone who says otherwise," he added,
noting he transferred 75 attorneys--half of the agency's litigators--into
market
oversight.

??Still, a consensus that it's time for aggressive action seems to be forming
among commissioners, including two nominees confirmed by the Senate last
month:
Patrick H. Wood III and Nora M. Brownell.

??Wood, a Texas utility regulator nominated by Bush and probably FERC's next
chairman, said the agency needs to evolve into a "market cop with a great big
old stick," adding: "There is a role that only the federal government can
take.
. . . The free market ain't a free and full market yet."

??Already named FERC's special liaison for California, Wood remains dedicated
to market principles but vows to take a fresh look.

??Commissioner Linda Breathitt, a Democrat, also talks of change. And
commissioner William L. Massey describes agency officials as naive in their
past
actions, in contrast to what he calls the "very sophisticated players" on the
industry side.

??If some commissioners are starting to sound more like watchdogs, that's
partly because they feel the tug of two conflicting ideas in their mandate to
open markets while assuring fair prices.

??Americans have always loved the way capitalism gives opportunities to the
shrewd and energetic. At the same time, the country has repeatedly turned to
government regulation when it thought particular industries, such as the
railroads, waxed too powerful.

??How well FERC deals with this intrinsic conflict and meets its challenges
may
have a sizable effect on the country's energy future.

??Frightened by events on the West Coast, some states have slowed their
progress toward deregulation. Others have decided not to try at all, at least
for now.

??"If the commission wants to have competitive markets," Hoecker said, "it's
going to have to pull the bacon out of the fire."

??Though it traces roots back to the Federal Power Commission and development
of hydroelectric power in the 1920s, FERC began its present incarnation in the
1980s, with the Reagan administration's deregulation campaign.

??FERC undertook to deregulate natural gas, then, spurred by a Democratic
Congress and the first President Bush, it moved on to electricity.

??The problem is that electricity and its markets differ significantly from
natural gas. Electric power cannot be stored to meet future shortages, as gas
can. Its markets are more volatile. And the effect of shortages or price
spikes
cascades through the economy much faster.

??Without anyone quite realizing it, FERC was sailing into uncharted waters.

??Moreover, as FERC's staff took up the original California deregulation plan,
it faced a significant constraint: The commissioners had made a conscious call
to let the state have its way most of the time.

??As state officials saw it, so much power was available for the Western
electrical grid that prices would surely come down. FERC economists, on the
other hand, saw myriad problems.

??For example, the state's scheme called for generators to submit blind bids
with a separate quote for each hour of the coming day. With any power plant,
the
unit cost is highest when a generator is started up and declines as it runs.
So
the price charged for later hours should be lower than for the first--but only
if the operator can sell both the beginning and the later hours.

??Under the California blueprint, though, bidders could not be sure which
hours
the purchaser might buy. That meant bidders would have to load the higher
start-up costs into each hour throughout the cycle to make sure those costs
were
recovered. By contrast, the mid-Atlantic market requires the power purchaser
to
add separate payments to cover start-up costs.

??Other issues were deferred rather than solved before FERC granted approval,
including such questions as how to manage congestion on the grid and what the
transmission rights should be for municipalities that generated and sold
power.

??State legislative aide Rozsa argues that such matters were not crucial and
that the biggest flaw in the plan--the insistence that the system operator not
have any generators of its own--was conceived with FERC guidance. Both FERC
and
the state, he said, had "an exaggerated sense of their knowledge and ability."

??As the California launch, originally scheduled for January 1998, drew near,
FERC's nervousness increased. As late as the Christmas holidays, the state was
still tinkering. The agency ordered the state to provide two weeks' written
notice before taking the final step, even though FERC had already approved the
plan.

??When California finally "went to market," FERC analysts snickered at the
timing: The first electricity auction was held March 31 for power to be
delivered the next day--April Fool's Day.

??As for the commissioners, "We were somewhat naive," Massey said. "The
commission believed there was so much inefficiency built into the
old-fashioned
. . . regime that any new market would be better."

??With the nation's largest state deregulating, FERC began blessing plans on
the East Coast. Hundreds of companies lined up for permission to charge market
rates in various open trade zones.

??FERC, according to its rules, was supposed to reject any firm that held a
big
enough share in a market--generally defined as about 20%--to influence prices
for a sustained period. But doing the necessary market analyses proved
impractical.

??For one thing, the rising workload was overwhelming the staff, which had
shrunk by more than 25% from its 1980 high of 1,600 employees. The agency, as
critics see it, simply buckled.

??"Once it got going, it took over," Berry said of the momentum behind
deregulation. "FERC was handing out [permission] to anybody who walked in."

??FERC economist Steven A. Stoft was infuriated. He wanted to start
cautiously,
opening one small market, testing before expanding nationally.

??"To put in markets everywhere, to affect a lot of people, to just wait and
see how it turns out, that's completely irresponsible," said Stoft, who now
lives in California and is writing a book for regulators about how to design
markets.

??At first, the staff Cassandras seemed wrong. Prices generally headed down.

??But during the summer of 1998, prices spiked twice--once in the Midwest,
once
in California.

??In the Midwest, several aging nuclear plants shut down for maintenance just
as a heat wave sent air conditioners into overdrive. Wholesale electricity
rose
past $7,000 per megawatt-hour, 100 times normal. Consumers and politicians
screamed.

??The weather cooled and new supply came in fast. Prices ebbed.

??To consumer groups and several FERC economists, the sudden increase
suggested
the worst can happen. Hoecker and FERC member Vicky Bailey drew a different
lesson, as did a staff investigation: The market worked to correct an unusual
confluence of events that was unlikely to recur.

??About the same time, a strange thing happened in California's reserve
market,
where the state's independent system operator pays generators with extra
capacity to stand ready to meet unexpected surges in demand.

??So few companies offered to sign such contracts that the ISO sometimes had
little choice but to accept whatever bid came in. It was just a matter of time
before someone took advantage. One day in that summer of 1998 someone did: The
only offer to provide reserve power was an astronomical $9,999 per
megawatt-hour.

??To some, it was proof that the California market could--and would--be
manipulated. "I was horrified," Berry said.

??FERC quickly granted California's request for permission to cap prices in
the
reserve. The authority quietly expired in November. There was no outcry about
this spike because reserve costs are spread around to the states' utilities,
thus diffusing their effect.

??"Of course, it should have been a warning that the sellers were several
steps
ahead of us," commissioner Massey says.

??In a memo last June, Ron Rattey, a senior FERC economist who has been with
FERC since 1975, complained that the staff was "impotent in our ability to
monitor, foster and ensure competitive electric power markets." He added in an
interview: "FERC doesn't want todiscover that the policy changes it's making
aren't working."

??Commissioners at the quasi-judicial agency are forbidden by law from
privately discussing pending cases. So companies and Congress must officially
content themselves with filing briefs, writing letters and testifying at
hearings.

??No such restraints apply to the issue of who sits on the commission. There,
the jockeying for influence can be intense.

??Commissioners are appointed by the president and confirmed by the Senate to
staggered five-year terms, with a limit of three members of a political party
on
the panel. The president can also designate at any time which commissioner
serves as chairman, a position that bestows broad authority over the FERC's
agenda and staff.

??When Bush took office, he picked Hebert, then the lone Republican on the
commission, to the chairmanship and named his choices for the two vacancies.
It
was unclear whether Hebert would keep the chair once Bush's nominees were
confirmed.

??Soon afterward, Hebert talked by telephone with Kenneth L. Lay, who heads
Enron Corp., a Houston-based energy marketing giant that recently saw its
profits triple in a year. FERC policy decisions could have a huge influence on
its future.

??Enron spokesman Mark Palmer says Lay, whose friendship with Bush is well
known, was returning a call from Hebert. Palmer says Hebert wanted Lay's
support
for remaining chairman.

??Hebert told a FERC official, who heard the new chairman's end of the
conversation, that Lay offered support but only if the chairman changed his
views in ways that would aid Enron. The official says he heard Hebert decline
and characterizes him as offended. The discussion was first reported in the
New
York Times.

??Lay has never been shy about offering advice, nor about courting political
access. He golfed with President Clinton, and Palmer wrote a letter to
Clinton's
personnel chief touting Hoecker for chairman. The Enron executive's ties with
Bush bind especially tight; Lay raised and donated hundreds of thousands of
dollars to Bush's campaigns and related efforts.

??Power companies also scouted candidates for the two slots. Enron went so far
as to send the White House a list of a dozen people Lay considered qualified
(the two new commissioners were on it).

??In the end, however, the evidence suggests that such lobbying mattered less
than the faith in free markets and less federal intervention shared by two
presidents and just about every recent FERC member. "FERC is filled with true
believers," Rozsa said.

??The agency's recent California orders underline the point. In December, FERC
concluded the market was dysfunctional and ordered a limited version of the
price caps that free marketers abhor.

??Still, prices remained above $300 a megawatt-hour--10 times the pre-crisis
average. So in April, FERC concluded it had to take further action.

??But the new version of price caps, approved 2 to 1, actually narrowed the
circumstances under which they could be imposed, though it gave the state more
flexibility. Even temporarily, the commission would not abandon its market
principles.

??"I was reluctant to stop in my tracks," said Breathitt, the swing vote. She
didn't want "to go back to a form of regulation that this commission and I had
departed from five or six years ago."

??FERC at a Glance

??1920: The Federal Power Commission created to oversee development of
hydroelectric power.

??1977: Power Commission replaced by the Federal Energy Regulatory Commission
to oversee interstate transmission of natural gas, oil and electricity and
regulate wholesale electric rates.

??1992: Congress gives FERC authority on electricity, opens door to full-scale
deregulation.

??1996: FERC approves California deregulation plan.

??1998: Prices spike briefly; FERC puts temporary price caps on California's
emergency reserve.

??2000: FERC orders staff investigation of market conditions nationwide,
declares California market seriously flawed in November; in December, a form
of
price caps introduced.

??2001: Rolling blackouts hit California. FERC orders $124.5 million in
refunds
from power companies alleged to have overcharged utilities. Agency says
California price caps can apply in narrowly defined circumstances

??*

??Source: Federal Energy Regulatory Commission; Times reports

??Federal Energy Regulatory Commission

??FERC Members Chosen by Bush

??*

??Patrick H. Wood III, GOP

??Nominated by Bush, March 27; confirmed by Senate May 31.

??Age: 38

??Term: Expires June 30, 2005

??Career: Chairman of the Public Utility Commission of Texas, 1995-2001.
Attorney for the law firm Baker & Botts in Washington, 1989-1991. Legal
advisor
to FERC member Jerry Langdon, 1991 to 1993.

??Personal: Native of Port Arthur, Texas.

??Education: Texas A&M University, B.S., 1985. Harvard Law School, J.D., 1989.
*

??*

??Nora M. Brownell, GOP

??Nominated by Bush, March 27; confirmed by Senate May 31.

??Age: 53

??Term: Expires June 30, 2006

??Career: Pennsylvania Public Utility Commission, 1997 to 2001. Senior vice
president at Meridian Bancorp, 1992-1996. Current president of the National
Assn. of Regulatory Utility Commissioners.

??Personal: Native of Erie, Pa.

??Education: Attended Syracuse University, 1966-1969.

??*

??FERC Members Chosen by Clinton

??Curtis L. Hebert Jr., GOP

??Nominated by Clinton, 1997. Named chairman by Bush in January.

??Age: 38

??Term: Expires June 30, 2004

??Professional career: Chairman of the Southern District of the Mississippi
Public Service Commission, 1994 to 1996. Member of the Mississippi House of
Representatives, 1988-1992.

??Personal: Native of Pascagoula, Miss.

??Education: University of Southern Mississippi, B.S., 1985; Mississippi
College School of Law, J.D., 1990.

??*

??Linda Breathitt, Democrat

??Nominated by Clinton, 1997.

??Age: 49

??Term: Expires June 30, 2002

??Professional career: Chairwoman of the Kentucky Public Service Commission,
1995-1997. Past president of the Southeastern Assn. of Regulatory Utility
Commissioners. Executive director of Kentucky's Washington office, 1980-1993.

??Personal: Native of Lexington, Ky.

??Education: University of Kentucky, B.A., 1975.

??*

??William L. Massey, Democrat

??Nominated by Clinton, 1993, 1998

??Age: 52

??Term: Expires June 30, 2003

??Career: Practiced law in Washington, 1989 to 1993. Served on the
presidential
transition team for the Department of Energy, December 1992. Served as chief
counsel to Sen. Dale Bumpers (D-Ark.), 1981 to 1989.

??Personal: Native of Little Rock, Ark.

??Education: University of Arkansas School of Law, JD, 1973; Georgetown
University Law Center, master of laws, 1985.

??*Compiled by SUNNY KAPLAN/Los Angeles Times

??Q&A

??Differences in the approaches of the three most senior members of the
Federal
Energy Regulatory Commission were apparent during recent interviews with The
Times. Following are excerpts:

??*

??How do you define FERC's role as a regulator of wholesale electricity?

??HEBERT: "What the commission has attempted to do here since I've been
chairman is to provide a balance--making certain that we have just and
reasonable rates and, at the same time, making certain that we have given
proper
opportunity to build out infrastructure and to add much-needed supply so as to
correct the flawed market that California has put in place."

??BREATHITT: "It is being an effective referee. It's being a cop on the beat.
It's being a nurturer of competition. It's being an arbiter of disputes. And
it's overseeing a level playing field. And, also, its role--more than we've
seen
in the past--is going to be a place to listen to the energy consumer."

??*

??Is FERC effectively monitoring wholesale electric markets and enforcing
"just
and reasonable" rates?

??HEBERT: "I think FERC is using any and all tools available to it to
adequately monitor the markets, continue to look 24 hours, seven days a week
for
market manipulation, and ensure just and reasonable rates. I would vehemently
disagree with anyone who says otherwise."

??MASSEY: "We need more people dealing with the monitoring function. The
monitoring function requires skills that are precise. I think we need more
people involved in hard-nosed investigation work . . . everyone here realizes
we
still have to do better in that regard."

??BREATHITT: "This is new to us. We've been monitoring markets in an old way.
We have to get better at monitoring markets within the current framework."

??*

??Should FERC revise the test it uses to determine whether a power generator
has "market power"?

??HEBERT: "Obviously, if I thought we needed to change it, we would have."

??MASSEY: "We have this old horse-and-buggy methodology for determining
whether
generators have market power. Everybody passes, nobody ever fails. If we've
learned nothing else, it's that the screen is not sensitive enough to pick up
the exercise of market power in California. . . . I don't know how you can say
you see no reason for change."

??*

??Have wholesale power generators exercised market power to manipulate rates
in
California?

??HEBERT: "I know there are several people in the state of California that
continually make remarks, some of them that are completely unnecessary [about
manipulation of markets]. If they have information and real evidence, this
commission wants to know about it . . . But this anecdotal evidence that they
bring forward and is not real is not helpful."

??MASSEY: "In a capacity-short market where they need all the generation, even
a small company can exercise market power. I'm not talking about some kind of
conspiracy. I'm talking about the kind of conduct you would expect from a
tough,
hard-nosed, profit-maximizing company that owns generation."

??*

??Did FERC's April 26 order imposing price caps in California during emergency
hours go far enough?

??HEBERT: "I embrace the order; I think it will make a real difference. And I
wish there was some way to take California through the experience without the
price mitigation and show the proof that the price mitigation is going to bear
in trying to level out prices while at the same time giving signals to build
out
infrastructure and needed supply."

??MASSEY: "I don't think we've moved quickly enough. Generally, our solutions
have been too little too late. We've been hoping the market will settle down,
and it just hasn't . . . we should have imposed a timeout . . . on that market
to cool it off."

??BREATHITT: "I wanted it to mitigate against high prices. I wanted it to have
a market orientation. And I wanted it to be effective in controlling what I
thought would be high prices this summer. . . . We did control prices on April
26."

??*

??Has FERC resolved the question of "just and reasonable" rates in California?

??HEBERT: "When it comes to just and reasonable rates, you cannot just pick a
price at which no one should pay over, or be allowed to pay over, because you
have to give the proper opportunity for infrastructure and supply. . . . We
are
addressing it and we will fully address all the legal arguments on it in these
rehearings pending on recent California orders."

??BREATHITT: "This order, I think, will produce just and reasonable rates
given
the shortage of supply in California."

??MASSEY: "We haven't really defined it. I would define it as cost-of-service
regulation or price disciplined by a well-functioning market. We don't have
either of those."

??*

??MORE INSIDE

??Jury still out: No smoking gun yet in natural gas rate hearing. A23

GRAPHIC: PHOTO: Patrick H. Wood III PHOTO: Nora M. Brownell PHOTO: Curtis L.
Hebert Jr. PHOTO: Linda Breathitt PHOTO: William L. Massey

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

??????????????????June 3, 2001, Sunday, Late Edition - Final

SECTION: Section 4; Page 18; Column 5; Week in Review Desk

LENGTH: 788 words

HEADLINE: The Nation;
Econ 101: It's Right and It's Wrong

BYLINE: ?By MICHAEL M. WEINSTEIN; Michael M. Weinstein is a senior fellow at
the
Council on Foreign Relations.

BODY:

??ELECTRICITY deregulation -- allowing power companies to set wholesale prices
on their own -- has gone seriously awry in California. Severe shortages have
led
to rolling blackouts and soaring prices, with wholesale prices rising about
700
percent in a year, jolting the state's economy. Last week, Gov. Gray Davis
grabbed for instant relief. When President Bush visited his state, Mr. Davis
lobbied hard for federal regulators to impose a price cap on power companies
--
a maximum price that wholesalers would be permitted to charge.

??The president dismissed the governor's demand, offering an economics lecture
instead. "I oppose price caps," he explained, because, "price caps do nothing
to
reduce demand and they do nothing to increase supply."

???That's a pretty sound argument, based on Economics 101. If price caps don't
increase supply, they cannot relieve shortages. Besides, economics professors
tirelessly preach about the evils of price controls. Applied to a competitive
market, caps threaten to reduce output -- the opposite of what California
needs
-- by driving out companies that can't make a profit selling at the lower
prices
set by the government. Indeed, economics students who persist in thinking that
price caps are pro-consumer risk being taken aside by their college advisors
and
urged to switch to another major.

??Yet while Mr. Bush's lecture would sit well in most introductory Econ
classes, it did not sit well with some of the nation's leading authorities on
regulation. Ten prominent economists -- including Paul Joskow of the
Massachusetts Institute of Technology, Severin Borenstein of the University of
California at Berkeley and Alfred Kahn, the architect of airline deregulation
under President Carter -- have sent a letter to the president calling for the
federal government to clamp down on wholesale energy prices. Nostrums suitable
to the textbook world of perfect competition, they argue, do not fit the messy
facts of electricity markets.

??It might seem like a man-bites-dog story, but the idea of economists calling
for price controls isn't nearly as zany as it appears.

??Electricity prices skyrocketed in California in part for standard
supply-and-demand reasons. The supply of power fell as rising prices for
natural
gas, used to produce electricity, drove up its cost of production. Supplies
dwindled further as power companies in neighboring states exported less
electricity to California. And demand rose swiftly along with the increasing
use
of computers and other electricity-guzzling hardware.

??The most contentious question is whether another factor has also been at
play: manipulation by power companies of the rules set up by the state to
enforce deregulation. Specifically, have the companies withheld supply in
order
to jack up the price that authorities pay for power?

??In truly competitive markets, attempts to withhold supply to raise prices
are
fruitless. If Farmer Brown withholds her 10 bushels of corn from a market of
billions of bushels, corn prices would not rise one cent. But the market for
electricity, California style, is different. The complex rules have provided
an
unintended incentive for power companies to fool regulatory officials. By
withholding electricity at the price offered in the morning of a typical day,
the power companies can count on the officials to come back later in the day
and
plead for power at a substantially higher price.

??This is not just a theoretical possibility. Mr. Joskow says he has found
evidence. There is probably nothing illegal going on; the power companies do
not
appear to have conspired to withhold supply. Each acted alone.

??If the 10 economists are right, Mr. Bush needs a refresher course in
economics. Price caps, they say, can indeed increase supply. Once they are in
place, prices can no longer rise. So power companies would have nothing to
gain
by withholding supply. They would sell more electricity, easing the shortage.
The economists warn against setting price caps so low that power companies
quit
the industry. Instead, they call for setting caps somewhat above the actual
costs of production -- which would allow companies to make a profit.

??The gang of 10 have not taken leave of their professional senses. The
economists don't advise adopting price caps indefinitely. Left in place, the
controls would discourage investors from building new power plants -- which,
along with fixing perverse incentives under deregulation, is the best
near-term
solution to California's energy crisis. Fortunately, price caps won't be
needed
very long because enough power plants are under construction to ease the
shortage in 18 months or so. Then, the lessons of Econ 101 might start making
sense again.

??http://www.nytimes.com

GRAPHIC: Photo: President Bush looking at the grid in California. (Agence
France-Presse)

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

??????????????????June 3, 2001, Sunday, Late Edition - Final

SECTION: Section 4; Page 17; Column 1; Editorial Desk

LENGTH: 739 words

HEADLINE: Reckonings;
Watt Price Ideology?

BYLINE: ?By PAUL KRUGMAN

BODY:

??I once had a math teacher who responded to student errors by saying "Save
that answer -- I may ask that question someday." I thought of him after George
W. Bush's apparently pointless trip to California.

???During that trip, Gov. Gray Davis asked for a temporary cap on wholesale
electricity prices -- a request that gained extra force because it was backed
by
economists with strong pro-market credentials, including Alfred Kahn, who
oversaw the deregulation of airlines, trucking and other industries in the
1970's. Mr. Bush, however, was unmoved. Again and again he declared that a
price
cap would do nothing either to increase supply or to reduce demand.

??Save that answer, Mr. Bush. We might ask that question someday.

??Actually, Mr. Bush's assertion may have been wrong even on its own terms.
I'll come back to that in a minute. But the most striking thing about his
declaration was that it had nothing to do with the actual problem.

??For the issue facing California right now is not how to increase supply and
reduce demand. It's too late for that; summer is almost upon us, and it is
simply a fact of life that there will be power shortages in the months ahead.
It
is important that the state build power plants as quickly as possible, so that
this shortage is only temporary. But not to worry: power plants are being
built
at a furious rate, in California and in the nation at large. Indeed, last week
the credit agency Standard & Poor's expressed concern that electric generating
capacity is being added so quickly that the industry will soon face a glut.

??Meanwhile, however, the temporary lack of capacity has led to incredibly
high
wholesale electricity prices, which are a huge financial burden on the state,
over and above any disruption that may be caused by physical shortages of
power.
Nobody knows exactly how much California will pay for power this year, but
reasonable estimates suggest that it will pay at least $50 billion more than
two
years ago -- an increase of more than $1,500 for every resident. The great
bulk
of that represents not an increased cost of production but windfall profits
for
a handful of generating companies.

??The main purpose of a temporary price cap would be to reduce -- though by no
means eliminate -- this transfer of wealth away from California residents.
That
is, we're talking about dollars, not megawatts. And Mr. Bush's response is
therefore almost surrealistically beside the point.

??You could argue that any financial benefit from price caps would be more
than
offset by a worsened physical shortage. But that's a hard case to make. Nobody
has proposed capping prices at a level that would prevent power producers from
making extraordinarily high profits; why should this reduce the supply of
power?

??It's true that Econ 101 teaches that price controls tend to produce
shortages. But this would be a minor effect in this case, since neither
production nor consumption would be much affected. And anyway, students who go
beyond Econ 101 learn that strictly speaking the standard argument against
price
controls applies only to a competitive industry. A price ceiling imposed on a
monopolist need not cause a shortage, if it is set high enough; indeed, price
controls on a monopolist can actually lead to higher output. That's not an
argument you want to use too often, but given the extraordinary prices now
being
charged for electricity, and the considerable evidence that producers are
exercising monopoly power, if ever there was a case for a temporary price
ceiling, California's electricity market is the place.

??I am actually somewhat surprised by Mr. Bush's obtuseness on this whole
subject. No doubt his determination to answer the wrong question is
deliberate:
misrepresenting policy issues is, after all, standard operating procedure for
this administration. But even on a cynical political calculation, Mr. Bush's
remarks seem to be foolish, only reinforcing the sense that he neither
understands nor cares about California's problems.

??Maybe Mr. Bush's advisers are knee-jerk ideologues who believe that the
market is always right, even when textbook economics says it is wrong. Or
maybe
they are so close personally to energy industry executives that they believe
that whatever is good for Enron is good for America.

??Whatever the real story, it's clear that this administration not only has no
answers for California, it won't even listen to the question.

??http://www.nytimes.com

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

??????????????????June 3, 2001, Sunday, Late Edition - Final

SECTION: Section 1; Page 37; Column 1; Metropolitan Desk

LENGTH: 1065 words

HEADLINE: One Developer's Power Solution: Build a Plant at the Office

BYLINE: ?By CHARLES V. BAGLI

BODY:

??With state officials scrambling to stave off power shortages this summer, a
New York developer has come up with his own solution: building a sophisticated
power plant, complete with gas turbines and smoke stacks, inside his planned
West Side office complex.

??Power experts and real estate brokers said the project might be the first
privately owned one to generate the kind of high-quality, reliable power
needed
for computer operations.

???Gas turbines are among the cleanest power generators. The heat exhaust from
the turbines would be used to drive steam generators for the building's
air-conditioning system. Any surplus steam would be sold to Consolidated
Edison.

??The developer, Douglas Durst, is proposing to build a 47-megawatt generating
station, with six gas turbines and enough power to light 40,000 homes a year.
The power plant would serve his planned $200 million NYCyberCenter, a
six-story
building on a block bound by 11th and 12th Avenues between 57th and 58th
Streets.

??The complex would be for tenants needing huge, air-conditioned spaces for
computers and electronic equipment used for the Internet or data storage.

??But these kind of buildings, known variously as telecom hotels, server farms
and data centers, require enormous amounts of electricity to power the
computers
and air-conditioning systems, typically 10 times as much as a comparable
office
tower.

??Given the current concerns about power shortages, Mr. Durst, whose family
owns 10 Manhattan skyscrapers, said he decided to build his own cogeneration
plant rather than rely primarily on Con Ed. He has brought in the Trigen
Energy
Corporation of White Plains to build, own and operate the turbines.

??"It's the most innovative and exciting project we have worked on," Mr. Durst
said, "but it's also the most difficult. It has taken an effort by more than
40
people to come up with a solution that will enable companies with dense power
requirements to secure premium power with unparalleled reliability."

??Mr. Durst still needs permits from the state and the city, but government
officials say they are intrigued by the proposal.

??"It's a novel program," Deputy Mayor Anthony P. Coles said. "It seems to
bring with it a number of benefits, but the city has to complete its due
diligence before reaching a final decision."

??Kevin Corbett, chief operating officer of the Empire State Development
Corporation, said, "Anything that can help reduce emissions and provide energy
more efficiently is certainly worth looking at."

??Mr. Durst said he planned to begin demolition on the site in August for the
first phase of the project, a 420,000-square-foot building. He will add office
space and possibly a residential tower in two successive stages, he said. If
the
project is successful, experts said, other Internet data centers might quickly
use the same technology, especially with tightening power supplies in
California
and the Northeast.

??"With California facing a white-knuckle summer of up to 200 hours of rolling
blackouts, every kilowatt of energy reduction is critical," said Dr. William
M.
Smith, a manager of the Electric Power Research Institute, a nonprofit
development organization for the electricity industry. "This cogeneration
facility may be a forerunner of things to come as the digital economy tries to
keep the lights on."

??Demand for electricity has soared in recent years in New York as well, but
private power companies have been slow to build new power plants since the
deregulation of the electricity industry in the mid-1990's.

??The first two of 21 proposed large and medium-size plants around the state
will not begin operating until at least late 2003. Meanwhile, the state is
spending $510 million to build six small gas turbine plants in the city and
one
on Long Island this year, some of which have encountered opposition.

??The administration of Gov. George E. Pataki has also encouraged hospitals,
factories and colleges that have their own backup generators to run them when
demand for electricity is high and there is a threat of power shortages. But
environmentalists have criticized the effort because most of those power
plants
are diesel generators, which would create more pollution, and most of them are
in New York City, which already violates federal clean air standards.

??That is what makes Mr. Durst's use of energy-efficient gas turbines and
steam
generators as his primary source of power attractive to environmentalists who
oppose diesel generators and nuclear power plants.

??"They're demonstrating that you can have high-quality, reliable power and do
it in a very clean way," said Ashok Gupta, senior energy economist for the
Natural Resources Defense Council. "We'd support expediting the permits if
they
met clean air standards."

??According to Con Ed, Mr. Durst's project is one of 22 proposals it has
received for telecom hotels or Internet data centers. But the other projects
rely chiefly on Con Ed for their power, requiring 60 to 120 watts per square
foot, compared with 7 to 10 watts for an office building. In addition, the
tenants typically have a series of diesel generators and battery systems for
backup power in the event of a breakdown.

??Tenants at the telecom hotel at 75 Broad Street, for instance, have 44
diesel
generators, each of which can cost millions of dollars to build and maintain
and
take up as much as 30 percent of each company's space.

??Mr. Durst said that tenants in his building would save money because they
would not need to rent the extra space or buy backup systems. His power plant
would have backup turbines and in the event of a breakdown would immediately
switch to Con Ed power. The electricity in his building, he said, would cost
no
more than what Con Ed charges.

??"Customers won't have to worry about storms, lightning or Con Ed," said
Richard A. Ubaldi, a vice president of Trigen Energy.

??Still, there are risks in Mr. Durst's plans. Many Internet-related companies
have collapsed over the past year, while those that survive are finding it
hard
to get financing for new projects. Real estate brokers said that few tenants
were now willing to sign leases for space that has yet to be built.

??That is one reason the developer has expanded his list of potential
occupants
to corporate data centers. Mr. Durst said he expected the market to recover in
the 18 to 24 months it took to build his complex.

??http://www.nytimes.com

GRAPHIC: Photo: A rendering shows a proposed office complex that would
include a
47-megawatt power plant between 11th and 12th Avenues at 57th Street.

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???????????????????????Knight Ridder/Tribune News Service

??????????????????????????The Orange County Register

?????????????????????????????June 3, 2001, Sunday

SECTION: DOMESTIC NEWS

KR-ACC-NO: ?K1495

LENGTH: 757 words

HEADLINE: California may have already spent energy money it plans to borrow

BYLINE: By Hanh Kim Quach

BODY:

??SACRAMENTO, Calif. _ Almost all of the $12.5 billion California hopes to
borrow this summer to buy cheap power for the future will be spent before the
state sees the first dime, according to a projection of the state's numbers by
The Orange County Register.

??If California continues to spend money on high-priced emergency electricity
at the current pace _ $66.9 million a day _ it will have spent $10.4 billion,
or
83.2 percent, of what it plans to borrow through a bond sale by mid-August,
the
time it hopes to have the cash in hand. That $10.4 billion would be
immediately
repaid to the state treasury.

??That leaves only $2.1 billion left to buy future energy. But according to
the
state's own estimates, its needs at least $2.7 billion to pay for such
contracts
just through June 2002. The state estimates, it actually needs enough new
money
to secure such power through at least 2003.

??That means, to meet Gov. Gray Davis' energy goals, the state would have to
either raise taxes, cut programs funded by the general state budget or borrow
more money on the bond market _ which would mean yet another hike in
electricity
rates for all customers of Southern California Edison, San Diego Gas &
Electric
and Pacific Gas & Electric. Those customers will already face an increase to
pay
back the $12.5 billion in bond borrowing.

??"It's like the emperor's new clothes," said consumer advocate Doug Heller.
"Everybody's saying we have to protect schools, law enforcement and
infrastructure, when the reality is the (general fund) will be used to buy
energy, yet again."

??In response to The Register's projection, Davis' energy team says it is
wrong
to assume that spending for emergency energy will continue at the same pace
into
the summer.

??The administration says the outlook is brightening for the energy supply
because of new energy contracts _ some taking effect this month _ continued
conservation and new power plants. The increased supply should drive down
prices, thus reducing the average amount the state is spending each day on
energy.

??"We'll have room to spare," said Davis spokesman Steve Maviglio.

??According to the Davis administration, it will need to repay itself only
$7.9
billion of the bonds it plans to issue Aug. 14 _ $2.5 billion less than The
Register's projection. That would leave $4.6 billion, presumably enough to buy
an adequate supply of relatively cheap electricity on long-term contracts.

??But Davis' predictions have been criticized as too rosy.

??"There's certainly a vulnerability to these assumptions," said Brad
Williams,
chief economist in the non-partisan Legislative Analyst's Office. "The
administration assumption that prices will fall is very risky."

??One of Davis' assumptions, for example, is that spot-market prices will be
cut in half, from $346 a megawatt-hour in the spring to $195 a megawatt-hour
during the summer. The state reasons that this is because it will have secured
more power under long-term contracts, under which prices are cheaper.

??But if there is only a finite amount of power in California, and the state
has secured a good portion of it under contract, the law of economics says
that
intense demand could push the price of the remaining un-contracted power up.
And
summer power has traditionally been more expensive, not less.

??State Controller Kathleen Connell, a Democrat like Davis, has her doubts.

??"We don't know whether the governor's estimates are correct. They haven't
been correct to date. ... I have always argued that $12.5 billion is not going
to be enough."

??Assembly Speaker Robert Hertzberg, D-Van Nuys, speaks plaintively about the
future. He's hoping the state won't have to dig too deep into its treasury to
keep lights on, putting extra emphasis on hope.

??"Look, who in a million years thought the prices would be $1,900 a
megawatt-hour?" Hertzberg asked, touching on the unpredictability of the
crisis.
The state paid that then-unprecedented price for power for six hours over May
9
and 10.

??Sen. Joe Dunn, D-Santa Ana, believes that power generators have been
manipulating the market since the beginning of the crisis _ and continue to _
and that could keep prices artificially high this summer.

??"Some of us were saying back in January that you can't go that route" and
sell bonds because " the bonds will be eaten up before they're even sold,"
Dunn
said.

??(c) 2001, The Orange County Register (Santa Ana, Calif.).

??Visit the Register on the World Wide Web at http://www.ocregister.com/

JOURNAL-CODE: OC

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

???????????????????June 3, 2001, Sunday METRO FINAL EDITION

SECTION: MAIN NEWS; Pg. A3; CAPITOL & CALIFORNIA POWER CRUNCH

LENGTH: 491 words

HEADLINE: State heeds call to conserve energy Californians trimmed their use
of
electricity by 11 percent in May.

BYLINE: Emily Bazar Bee Capitol Bureau

BODY:

??Californians used 11 percent less electricity in May than they did during
the
same month last year, giving Gov. Gray Davis hope for a summer of continued
conservation and limited blackouts throughout the state.

??In a news conference scheduled for today, Davis administration officials are
expected to release the latest California Energy Commission figures, which
show
state residents used 11 percent less electricity overall and 10.4 percent less
energy during peak times last month than in May 2000.

??Throughout the energy crisis, Davis has implored Californians to save
energy,
particularly during daytime hours when demand for electricity is at its
highest.

??"Clearly conservation is making a difference," Davis said of the May
figures.
"We are getting the job done."

??This summer, the state could face a shortfall of several thousand megawatts,
depending on summer temperatures. One megawatt is enough to power about 1,000
homes.

??Though the state has begun entering into long-term contracts for electricity
and several power plants are in the process of being built, not all of the
power
from either source will be available this summer.

??To make up the difference, the Democratic governor has asked Californians to
reduce their electricity use by 10 percent, even though he is factoring a more
conservative figure - 7 percent - into his financial forecasts.

??"Until we get the generation that's in the works online, conservation is our
only way out of this to avoid blackouts and disruptions," said Davis spokesman
Steve Maviglio. "So far Californians are heeding the call, and then some."

??Californians were more successful at reducing demand last month than they
were any other point this year.

??For example, Californians conserved the least in January, using 5.4 percent
less electricity overall than they did in January 2000 and 6.2 percent less
during peak times. In April, state residents reduced their overall usage by
6.9
percent and their peak usage by 9 percent.

??Their 10.4 percent peak reduction in May translates to saving 3,595
megawatts
over the year-ago period, adjusted for weather and growth.

??Michael Shames, executive director of Utility Consumers' Action Network,
called the May numbers "promising," particularly because some conservation
programs had yet to fully kick in.

??For instance, the governor's 20/20 program - which will give some
Californians a one-time, 20 percent rebate off their summer bill if they cut
their electricity use by at least 20 percent during the hottest summer months
-
did not begin until this month.

??Shames cautioned, however, that Californians need to conserve more in order
to avoid blackouts and to significantly reduce the cost of the state's power
purchases. He also encouraged some skepticism of the Energy Commission's
numbers
until its analysis can be reviewed by peers in the industry.

??* * *

??The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com
.

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

???????????????????June 3, 2001, Sunday METRO FINAL EDITION

SECTION: FORUM; Pg. L4; OUR VIEWS

LENGTH: 625 words

HEADLINE: Lone shining light State power authority a future market tool

BODY:

??"One only can speculate what the cost of electricity would be were it not
for
these public power system yardsticks. It can be understood why the power
companies want to get rid of public power."

??Bee editorial Jan. 8, 1959

??Years from now, when California looks back on this expensive failure of
electricity competition, one bright light will shine from this dark moment in
history. That was the decision by the California Legislature and Gov. Gray
Davis
to create a California public power authority.

??Recycling the rhetoric of decades past, when utility monopolies and holding
companies fought the creation of municipal utilities, critics today see public
power as an unwelcome, inefficient intruder into the free market system.

??But public power's role isn't to replace that market. It is to make sure
that
it behaves. Californians can adjust to price gyrations for things such as
airline tickets and cherries. Electricity, however, is too vital a commodity,
and without regulation and competitive policy, the electricity market, as
Californians have so painfully learned, is too easily gamed.

??There is now a brief window to contemplate how this state public power
authority can stay one step ahead of market manipulation. The governor has
signed the authorizing legislation, but the authority won't officially exist
for
another two months. Once in operation, its potential is enormous.

??As financial capital, the Legislature has authorized it to sell up to $5
billion worth of bonds to build new power plants to create electricity to be
sold at cost. As human capital, the governor will likely tap the wisest old
owl
in the public power trade, David Freeman. Having already run the public power
agencies of the Tennessee Valley, the state of New York, Sacramento and Los
Angeles, Freeman brings experience that likely will never be duplicated.

??Freeman's strategy is to ensure that California races to turn a shortage of
electricity into a surplus of about 15 percent. Private generators are busy
building new plants and applying to build others. Yet at some point these
companies may conclude it is not in their interests to compete so vigorously
against each other. They feast on shortage and volatility. That's where a
vigilant public authority can provide supply to keep the market balanced.

??An ideal partner in generating ventures would be the existing cities that
run
their own power authorities. The Sacramento Municipal Utility District, for
example, is looking to build a generating plant fired by natural gas at the
site
of the former nuclear plant, Rancho Seco. By partnering with the state
authority, SMUD could build a larger plant. The state could sell the surplus
at
cost. SMUD could get even more reliable power.

??With its surplus, the state may wish to direct some to new municipal
districts. Customers in several communities are mulling whether to create
their
own municipal power agencies as a way to avoid the volatility of the
deregulated
world. Davis, San Francisco, Fresno and other communities are in various
stages
of this exploration. This very threat of competition keeps down the charges of
both the private utilities and the generators.

??The cheapest power of all is that which California doesn't have to buy. The
power authority's greatest contribution to California may end up being on the
demand side of the electricity equation. It is ideally suited to lead future
conservation and efficiency initiatives. Lowering demand lowers the price for
the power that Californians do have to buy, whether their utility is public or
private.

??"We will be masters of our own destiny," says Freeman. The history of public
power's vital role in the market place suggests that Freeman is right about
the
future.

LOAD-DATE: June 4, 2001

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???????????????????????Knight Ridder/Tribune News Service

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

?????????????????????????????June 3, 2001, Sunday

SECTION: DOMESTIC NEWS

KR-ACC-NO: ?K1534

LENGTH: 2242 words

HEADLINE: U.S. approved California's power-deregulation plan despite flaws

BYLINE: By Eric Nalder and Mark Gladstone

BODY:

??SAN JOSE, Calif. _ The federal agency charged with ensuring the stability of
the nation's power system gave California the go-ahead to deregulate its
electric utilities despite critical flaws evident to its own experts. And once
deregulation was under way in 1998, the agency did little to police the
state's
market, even though it has a legal obligation to ensure that prices are "just
and reasonable."

??Far from being the innocent bystander that top federal officials portray,
the
Federal Energy Regulatory Commission has played a central role in California's
deregulation disaster, weighing in more than 80 separate times with orders
approving, revising or rejecting parts of the plan.

??To examine the role this small agency has played in California's
deregulation, the San Jose Mercury News reviewed hundreds of documents and
interviewed energy experts and FERC employees, some of whom talked publicly
for
the first time.

??The review found that FERC, eager to promote deregulation and reluctant to
cross California politicians, generating companies and utilities pushing the
state's groundbreaking plan, ignored detailed criticism from one of the
nation's
top deregulation experts and its own staff members, including its chief
economist.

??More important, the review reveals the most critical mistake federal
regulators made in ushering in electricity deregulation: They set the stage
for
a new energy-trading market every bit as complicated as Wall Street but failed
to monitor it. With California ceding its regulatory role, FERC had the
critical
responsibility to stop market abuses, but it failed to hire enough experts,
obtain the data or install the computers needed to keep the market honest.

??In contrast to the Securities and Exchange Commission, which frequently
takes
aggressive action to enforce stock-market rules, FERC almost never uses
subpoenas in staff investigations to acquire data on electricity trading that
could include evidence of anti-competitive practices that boost prices.

??Curtis Hebert Jr., a confident 38-year-old Mississippi lawyer who became
FERC's chairman in January, dismisses claims that the agency does not gather
enough data on prices or investigate the energy industry thoroughly.

??"We do have enough resources, and we are handling it in a way that's
appropriate," he said of the agency's role in California's crisis. An ardent
supporter of free markets, he said FERC's primary job is to create a
competitive
market for electricity and keep the lights on. Low prices will follow, he
promised.

??But James Hoecker, FERC's chairman when California adopted its plan, has
become more critical of the decisions the agency made under his leadership and
now says FERC should have more aggressively scrutinized the plan rather than
moving it along.

??"I would very much have liked for the commission to be more prepared for
California," he said.

??FERC has a responsibility to rule on deregulation plans because, under a
66-year-old federal law, it regulates wholesale electricity. The law says the
agency must ensure that wholesale prices are "just and reasonable," though
neither Congress nor the courts have made clear what that means in a
deregulated
market.

??For decades, FERC's responsibilities were much simpler. The agency set rates
for wholesale electricity using a formula based on generating costs plus a
fair
profit.

??But the agency took steps to change its role in the early '80s, when it
helped set into motion the forces that would lead to California's
deregulation.
In 1982, two years after President Reagan's election, a FERC lawyer named
Robert
Angyal wrote an internal memo assuring commissioners that the ambiguity of
"just
and reasonable" gave them ample room to experiment with free-market sales of
electricity.

??"We thought we were the good guys then," said Steve Greenleaf, who joined
the
agency in 1986 as a regulatory specialist. Greenleaf, who now works for
California's power grid operator, said recent events "certainly make me go
back
and consider what we did."

??What he and others did was clear a path for the deregulation bandwagon. FERC
commissioners, generating companies, utilities and politicians _ both
Democrats
and Republicans _ all argued that competition could both reduce rates and
boost
profits, just as it had for natural gas, airlines and other markets.

??In 1992, Congress passed a law encouraging open access. FERC took the next
key step when Chairwoman Betsy Moler, a free-market Democrat, sat down at her
kitchen table one morning to begin drafting Order 888, named after the
agency's
address in Washington.

??The order, finalized in April 1996, encouraged the emergence of free markets
by requiring utilities to open their transmission lines to competing power
companies, but it did little to prepare the agency to monitor the markets and
make sure companies competed fairly.

??Daniel Fessler, a former University of California-Davis law professor
appointed to the state Public Utilities Commission by Republican Gov. Pete
Wilson, drafted California's deregulation plan in the mid-'90s. In a brief and
reluctant interview _ the first he has granted since the energy crisis began _
Fessler said that he consulted with FERC officials while he worked on the plan
and testified several times before the commission.

??"Our dialogue was extremely public," he said.

??But FERC officials say the agency took a hands-off approach, despite
conducting hearings and receiving thousands of documents.

??Hoecker, who took over from Moler in June 1997, said the agency viewed
California's plan as an experiment that raised questions that could not be
answered until it was in place. "Fundamentally, the commission took the stance
that no one had experience in the United States anyway with this comprehensive
restructuring," he said.

??At several crucial junctures, the agency's commissioners passed on the
chance
to explore the advice of critics, both academic and in-house, that could have
helped shape California's plan.

??One of the nation's top experts on electricity deregulation, Bill Hogan of
Harvard University, witnessed how commissioners let a detailed critique of
California's plan slip by them at FERC's summer 1996 hearings.

??San Diego Gas & Electric, California's third-largest investor-owned utility,
had hired Hogan to analyze the plan, which the utility opposed. His 71-page
report offers a blueprint for some of what eventually would go wrong.

??Hogan did not predict the disaster _ nobody did _ but he criticized key
aspects of the plan: a market structure that made it possible for companies to
boost prices, and a complex power auction that opened the door for gaming.

??At a hearing, the San Diego utility's chairman presented Hogan's paper to
the
commission. San Diego's opposition was the last major obstacle the plan faced,
and the utility says it came under pressure to get in line so California could
meet a start-up date of January 1998.

??State lawmakers and other energy executives told San Diego to get on board
if
it wanted to have a "meaningful role" when the Legislature wrote the final
plan,
said Bill Reed, chief regulatory officer for the utility's parent company.

??"I believed, naively as it turned out, that FERC would exercise the ultimate
judgment as to what needed to be done," Reed said. "Unfortunately, FERC has
taken deference to an extreme that I never considered."

??The San Diego utility withdrew Hogan's report, and the commissioners signed
off on the deregulation plan.

??"San Diego stopped talking," Hogan said. "I wasn't invited to speak."

??After the San Diego utility dropped its opposition, Steve Peace, a
loquacious
Democrat from San Diego, led legislators on 18 days of hearings to craft the
final details of California's plan.

??The Legislature passed the bill unanimously, and Wilson signed it Sept. 23,
1996, hailing it as "a major step in our efforts to guarantee lower rates."

??To a degree that few seemed to grasp at the time, it was an unprecedented
transfer of power from the state to the federal government. Prior to the
bill's
passage, state regulators had control over most of the power generated in
California, setting prices and making sure enough electricity was available.
Now
much of the power is generated by private companies _ not state-regulated
utilities _ and only FERC has the authority to step in when wholesale prices
climb.

??FERC also continued to rule on each additional step in the state's
complicated deregulation plan as it was implemented. Again, the agency missed
chances to overhaul the plan, this time based on flaws pointed out by its own
experts.

??FERC's chief economist, Richard O'Neill, openly called the California plan a
Rube Goldberg contraption in conversations with colleagues and California
officials, according to sources inside and outside the agency.

??Carolyn Berry, a FERC economist who has since left the agency, also reviewed
the plan. She, too, saw flaws _ and worried especially that the odd market
structure might encourage companies to manipulate prices.

??"There was great resistance on the part of many people at the commission to
undo the process that California sent in," Berry said. "There was a reluctance
to start pulling at the threads for fear that the whole package might fall
apart."

??The flaws the two cited, including some of the same ones Hogan flagged, are
now widely acknowledged as contributing to the collapse of California's
scheme.

??The deep concerns of the staff members, however, were never impressed on the
commissioners. FERC does not foster a culture of internal debate, insiders
say.

??Hoecker said the agency made few changes in the plan because "the commission
was too highly deferential" to California's industry leaders and politicians.

??In addition, he said, the agency simply did not have the clout to stop a
plan
hurtling along on a political fast track.

??FERC, like other agencies in Washington, is highly political and, acutely
aware of what industry leaders want, often delivers. As far back as 1960, a
presidential commission labeled the agency's predecessor "a virtual Chamber of
Commerce for the oil and gas companies."

??Corporate executives have considerable sway over the agency, to the point of
helping the White House decide who is appointed to the five-member commission
and who becomes chairman.

??And there is an active revolving door. Hoecker was an industry lawyer before
he was a commissioner, and now he is again. Former Chairwoman Moler consulted
for Enron and other energy companies after leaving the agency, and now she is
a
utility executive.

??Industry leaders wanted deregulation, and they pressed hard for California's
plan, which they thought would open the door for unfettered markets
nationwide.

??Several other factors kept FERC from playing a stronger oversight role.
While
the California plan was being put into effect, many FERC officials were
focused
on a $12.7 million plan to reorganize their staff and upgrade computers.
Hoecker
was so proud of the result, he spent $100,000 to have a historian write a book
about it.

??But key employees say they were distracted by the reorganization for months.
More important, a half-dozen employees who were versed in deregulation issues
left, leaving FERC handicapped in its ability to police the new market it had
created.

??Some staff members sought a single, larger enforcement division resembling
the one at the Securities and Exchange Commission, where 900 people, half of
the
agency, handle market investigations and enforcement. But FERC decided to keep
its enforcement split between two offices that had a total of about 75
employees
at the time _ a fraction of its 1,200 employees.

??The agency was confronted with its first clear warning of the coming
disaster
soon after California's deregulation took effect.

??On a hot day in July 1998, three months after the market opened, energy
traders whose names state officials have refused to release decided to test
whether the new market could be manipulated. Although electricity had been
trading well below $100 a megawatt-hour, they offered a megawatt-hour at
$9,999
_ the highest number the traders thought the computer system would accept,
they
later told regulators.

??Desperate for power to keep the grid from crashing, the Independent System
Operator _ which monitors the system and buys some power _ paid it. The ISO
then
made an emergency request for a price cap, and FERC granted it.

??Worried that federal regulators were not alert to the potential for market
shenanigans, the grid operator repeatedly warned FERC that trouble was ahead.
The ISO's market surveillance director, Anjali Sheffrin, was so concerned that
she visited the agency twice in the fall of 1999 to try to explain to FERC
officials that California's fledgling market needed the protection. "I don't
think they had any thought of what the potential was," Sheffrin said.

??But at least one FERC economist did.

??Ron Rattey, one of the agency's most experienced analysts, made a
presentation to his colleagues in March 2000, shortly before the California
crisis began. He noted an increase in price spikes nationwide from 1997
through
1999. Among other factors, he blamed regulatory policies and market abuses.

??His conclusion: "We should expect another tumultuous summer in 2000."

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

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

JOURNAL-CODE: SJ

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????JUNE 3, 2001, SUNDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 2344 words

HEADLINE: Cutting a deal on the environment;

Activists accused of favoring cash over mission at Moss Landing

SOURCE: Chronicle Staff Writers

BYLINE: Scott Winokur, Christian Berthelsen

BODY:
Eager to placate environmentalists, the Duke Energy Corp. agreed to pay more
than $12 million to Monterey Bay area groups whose objections could have
scuttled the controversial expansion of its Moss Landing power plant, destined
to be the state's largest.

???Most of the groups are now being accused of taking financial advantage of
the situation and betraying their mission as environmentalists to defend the
Monterey Bay area's fragile harbors, sloughs and wetlands. The environmental
groups protested until Duke put up money, then dropped their opposition.

???The result, opponents say, is that the very things the groups originally
protested, including the discharge of heated water into fragile aquatic
environments, will still happen.

???Donna Solomon, co-owner of Solomon Live Fish in Moss Landing, fears that
the
heated exhaust water will shrink catches of two commercially important fish,
cabezon and bolina.

???"They say they are environmentalists, but they are not -- they are frauds,"
Solomon said of the groups.

???The funds include $8 million for "monitoring" environmental quality and for
land acquisition -- an amount dwarfing the nonprofit groups' budgets, in some
cases.

???The fighting that broke out at the local level over Moss Landing,
energy-industry critics say, is an inevitable consequence of authorities'
failure to establish a broad, coherent energy policy and their desperate
search
for quick fixes to the crisis.

???The deals, critics add, were a predictable corporate response to a
situation
that invited financial exploitation.

???"Local groups quickly succumb to corporate money," said Doug Heller, a
consumer advocate with the Foundation for Taxpayer and Consumer Rights in
Santa
Monica. "When we become dependent on them to take up statewide issues, the
corporation is given the upper hand."

???Two prominent Monterey County politicians took part in behind-the-scenes
negotiations involving the 239-acre plant, sources who participated in the
talks
told The Chronicle.

???Assemblyman Fred Keeley, D-Boulder Creek (Santa Cruz County), brokered a $1
million deal between Duke and the four environmental groups. Keeley, who plans
to run for the state Senate in 2004, has accepted donations from the energy
industry in the past, but says he stopped accepting the industry's
contributions
in January, after assuming a leadership role in dealing with the crisis.

???County Supervisor Louis Calcagno pressed regulators to approve the power
plant and held a meeting called to devise a way to transfer $3.4 million from
Duke to the Moss Landing Chamber of Commerce. Calcagno is a Moss Landing
dairyman with substantial agricultural, commercial and residential properties.
He acknowledges that those holdings could grow in value as a result of Duke
-funded projects in the area.

???"There was money all around," said Gary Shallcross, chairman of the Central
Coast Regional Water Quality Control Board.

???Environmentalists who negotiated with Duke say they made the best of a bad
situation. Rather than fight a project they believed likely to get speedy
approval regardless of what they did, they accepted money from Duke. They
contend that the funds will be used to benefit the environment.

???"The bottom line is, we were looking at a locomotive coming down the
track,"
said Steve Shimek of the Otter Project in Marina, one of the groups that
negotiated with Duke. "We made the decision to do the best we could. Do I
wonder
if we did the right thing? I question myself."

???The three other groups that opposed Duke, then made a deal with the energy
company, are Save Our Shores and the Center for Marine Conservation, both in
Santa Cruz, and Friends of the Sea Otter in Pacific Grove.

???GROUPS WAIVE RIGHT TO SUE

???Although fierce initially, key opposition to Duke vanished between the late
summer and Nov. 6 -- when a document laying out the company's agreement to pay
for "monitoring" and additional "mitigation" was finalized.

???The environmental groups agreed by that date that they would "not
participate in any lawsuit, regulatory challenge, regulatory appeal or any
other
action . . . that might obstruct, delay, or prevent Duke's construction" of
the
plant.

???This contrasted with a Sept. 22 letter to the Regional Water Quality
Control
Board in which they said they were "deeply concerned" about impacts; had
"serious reservations" about the amount of money Duke agreed to put up, to
that
point, to offset damage; and "strongly" believed the company should do more.

???The Moss Landing plant will be the state's largest after its completion
next
summer. With an output of 2,538 megawatts, it's expected to account for 30
percent of all new electricity generated in California next year, serving
about
2.5 million households in the Monterey, Santa Cruz and southern Santa Clara
County areas, including San Jose.

???At issue for the environmentalists is Duke's intention to use a relatively
cheap "once-through" cooling system as part of the modernization and expansion
project.

???The cooling system would suck up to 1.2 billion gallons of salt water a day
out of Moss Landing Harbor and two of the state's ecological gems, Elkhorn
Slough and Monterey Bay. This amount would cover nearly 3,700 acres of land
to a
one-foot depth.

???Duke contends that "once-through" is cleaner than lower-impact alternatives
costing tens of millions of dollars more. The company also says studies show
its
impact on marine organisms won't be unacceptably high.
Environmentalists uniformly disagreed.

???About two things, however, there has been no dispute.

???The "once-through" process will exterminate a substantial portion of the
aquatic food chain, chiefly the smallest organisms, before the slightly
chlorinated water is returned to Elkhorn Slough, nearby Moro Cojo Slough, Moss
Landing Harbor and Monterey Bay.

???Moreover, the process will allow the discharge of large amounts of water
600
feet offshore in Monterey Bay at temperatures up to 20 degrees warmer than
natural water temperatures.

???For some of the delicate organisms that survive the previous stages of the
process, this may mean the equivalent of death by boiling. As one
environmentalist told regulators, " 'Cooling water' is a euphemism . . .
'Heated
exhaust water' is a more accurate description."

???Duke spokesman Tom Williams said the company did nothing wrong and
contended
that the expanded plant will be better for the environment than the current
one.
He said Duke had gone "the extra mile" to address community concerns.

???Madeleine Clark, a Prunedale environmentalist, disagrees. "In Monterey
County, Duke can waltz in and buy everybody off, and everyone looks the other
way," she said.

???A last-ditch challenge to the project by Clark and other protesting
environmentalists will be heard by the State Water Resources Control Board in
Sacramento on Wednesday.

???DUKE'S DEALS

???Duke acquired the 30-year-old, 1,478-megawatt gas-fired plant from Pacific
Gas and Electric Co. in July 1998 as part of a half-billion dollar package,
including plants in Oakland and Morro Bay (San Luis Obispo County).

???Five months later, the Charlotte, N.C., energy company announced plans to
spend $475 million modernizing Moss Landing, a figure that would rise to $525
million. This was followed by an application to the California Energy
Commission
for permission to add 1,060 megawatts.

???Despite environmentalist opposition, the project generally had an easy time
of it in hearings before the Regional Water Quality Control Board and the
state
Energy Commission. When Duke broke ground on Nov. 16, about three weeks after
the commission gave its final approval, the company had made the following
side
arrangements, totaling $12,435,000:

???-- $1 million, in five annual installments, to the Monterey Bay Sanctuary
Foundation "to monitor water quality in the Elkhorn Slough."

???This is the deal that sparked the controversy. The funds were obtained for
the foundation by the four environmental groups that opposed Duke, then
dropped
their opposition when the company put up the money.

???An additional $425,000, in three annual installments, will be given to the
foundation "to monitor the power plant's heated seawater discharge in the
ocean." Most of the money will be used, the groups say, to pay experts to take
water and marine-life tissue samplings for five years.

???-- $610,000 to local agencies for air-pollution control, marine mammal care
and trail building.

???-- $7 million to the Elkhorn Slough Foundation for land acquisition and
management.

???Foundation Director Mark Silberstein said the money would be partly used to
add to the 1,700 acres under the foundation's control and to pay for
conservation chores such as removing weeds and planting native grasses.

???Some environmentalists don't consider Silberstein's plan genuine
mitigation.
Carolyn Nielson of Aptos, a foundation docent, quit in September after the $7
million deal was announced.

???"The groups made a cynical decision that never again would there be an
opportunity for such financial benefit," Nielson said.

???Supervisor Calcagno also could benefit from the Elkhorn Slough deal by
selling property or property easements to the newly enriched foundation.

???He owns MoonGlow Dairy, a 110-acre farm adjoining the slough and the power
plant. The farm includes a 22-acre pond frequented by bird-watchers.

???As chairman of the Monterey County Board of Supervisors last year, Calcagno
went on record in state hearings supporting Duke. He also said he had
confidence
in the Elkhorn Slough Foundation's ability to use the company's money to
benefit
the environment (Calcagno had been one of the organization's founders).

???There's no indication that a transaction involving Calcagno and the
foundation is imminent. But Silberstein didn't deny the possibility of an
eventual deal.

???"You need a willing seller, and Lou Calcagno owns that property," he said.
"The door is open."

???Calcagno said he would consider a transaction.

???"That will probably be in a long-range plan. There is no doubt about that,"
he said.

???-- $3.4 million to the Moss Landing Chamber of Commerce, in 20 annual
installments, for "infrastructure improvements," including power-line
undergrounding, storm drains and street lighting.

???Here, too, Calcagno could benefit.

???Since the late 1980s, he has been planning a large commercial project on
Highway 1, not far from Elkhorn Slough. The project has been dropped, but
Calcagno still owns the land on which it would have been built, as well as
stores and apartments nearby.

???Calcagno held a meeting at his office in Castroville last July to discuss
how Moss Landing businesses would deal with the money Duke was offering,
according to Jim Stillwell, harbormaster of the Moss Landing Harbor District.

???Stillwell -- who opposes the plant and contends that it will increase toxic
sedimentation in the harbor -- said at the meeting that he believed the
district
was best suited to handle the money because it is authorized to undertake
public
works.

???He offered the district's services. He was rebuffed.

???"We proposed this," Stillwell said. "Next thing I know, they give it to the
chamber."

???Calcagno confirmed the meeting and acknowledged that his properties could
grow in value as a result of the Duke-funded projects chosen by the chamber,
to
which he belongs. He said, however, that he didn't care about the potential
gains.

???"The Duke project in no way benefits me," he said. "I can't get out of my
driveway when the traffic is coming in the morning."

???ASSEMBLYMAN BROKERS DEAL

???The four groups that made the deal with Duke insist they won't benefit. But
the Monterey Bay Sanctuary Foundation, which will benefit, has connections to
at
least two of the groups.

???Sanctuary Foundation President Warner Chabot of San Francisco is also
regional director of the Center for Marine Conservation, which led the way in
making the Duke deal. The Sanctuary Foundation, additionally, has accepted
cash
grants from both the Center for Marine Conservation and another party to the
Duke accord, Friends of the Sea Otter, tax records show. Chabot said the links
are of no significance.

???"The great conspiracy does not exist," he said.

???Vicki Nichols of Save Our Shores and Kaitilin Gaffney, Central Coast
program
director for the Center for Marine Conservation -- both parties to the Duke
accord -- echoed Chabot.

???But Gaffney admitted that there had, in fact, been much coordination
between
the groups before reaching an agreement with Duke. Gaffney's group and the
Otter
Project demanded $3.75 million -- $750,000 a year for five years -- within a
week of each other in late October. Gaffney said this had been planned.

???Duke countered with offers no higher than a few hundred thousand dollars,
according to people who participated in the talks. As negotiations between
Duke
and the groups bogged down in early November, Assemblyman Keeley was asked to
intervene.

???"Fred prevented what could have been a bloody negotiation," Nichols of Save
Our Shores said. "When he came in on behalf of the environmental community,
Duke
listened."

???Keeley was no stranger to the energy industry. As speaker pro tem of the
Assembly, he has been prominent in attempts to deal with the energy crisis.
And
state records show that he has received nearly $50,000 in campaign
contributions
from energy companies since 1998, including $5,500 from the Duke subsidiary
running the company's power plant in San Luis Obispo County, Duke Energy Morro
Bay. According to Keeley, the total amounted to less than 10 percent of all
the
political contributions he received.

???"The things that drive me as a legislator are environmental protection,
higher education and social justice," Keeley said, "and so when I get a call
from two well-established environmental organizations saying we need help to
get
a better deal for the environment, I'm pleased to help."E-mail Scott Winokur
at
swinokur@sfchronicle.com and Christian Berthelsen at
cberthelsen@sfchronicle.com.

GRAPHIC: PHOTO, MAP, PHOTO: The expanded Moss Landing power plant is expected
to
account for 30 percent of all new electricity generated in California next
year.
/ Associated Press 2000, MAP: Chronicle Graphic

LOAD-DATE: June 3, 2001

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?????????????????Copyright 2001 The Chronicle Publishing Co.

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

?????????????????????JUNE 3, 2001, SUNDAY, FINAL EDITION

SECTION: EDITORIAL; Pg. C6; DEBRA J. SAUNDERS

LENGTH: 554 words

HEADLINE: Draw a line in the sand

BYLINE: Debra J. Saunders

BODY:
The irony is that while Gov. Gray Davis keeps demanding that President Bush
impose wholesale price caps to save his state, Davis has made it easier for
Dubya not to.

???By the time Davis was ready to take action on the electricity crisis, the
only solution he could come up with was to spend his way out of a hole. At his
behest, Sacramento started spending the budget surplus -- your tax dollars --
on
power. As a result, while big power bills may squeeze some people, TV news
broadcasts are not saturated with stories about California businesses
receiving
business-busting electricity bills and laying off workers to pay PG&E, which
makes it easier for Bush to say no to price caps.

???Bush is right to say no to price caps. Even if the Federal Energy
Regulatory
Commission were to set price caps, the price caps would apply to less than
half
the electric market. Municipal utilities, federal power plants and Canadian
outfits would be exempt. The Los Angeles Department of Water could still ask $
1,400 for a megawatt hour that cost $30 two years before.

???So, when the Dems demand price fixing, know that they're not trying to fix
the problem. They are trying to shift the blame onto Bushdom.

???Too bad Bush had made himself such an easy target. More Californians might
get behind him on price caps if they believed that the administration would do
something about price gouging.

???But Bush can't even look miffed about it. When I asked Veep Dick Cheney in
March if there was price gouging, he answered, "There's no way for me to make
a
judgment."

???With such tepid rhetoric, it's hard to believe that the administration is
doing much about the problem, even though Bush/FERC saw gouging when it
ordered
suppliers to pay $124.5 million in refunds for overcharging -- which
Clinton/FERC never did.

???Asked what the administration was doing about gouging, White House
spokesman
Ken Lisaius recited the litany we've heard before: Tax cuts, $150 million more
in assistance for low-income energy consumers, the need to increase supply.
Also, Bush told FERC to get tough on "illegal price gouging."

???They don't get it. FERC should get tough on legal price gouging too. As
Davis electricity czar S. David Freeman noted, "Even if the action is not
criminal, what's happening is a crime." Let FERC use its regulatory arsenal to
make life difficult for the high rollers.

???There's a little thing here called fundamental fairness. As FERC
Commissioner William L. Massey noted, when cabbage spikes to $50 per head,
people don't buy it and prices drop. That's the market at work. But an economy
can't do without electricity, and there is no free market when the state is
buying juice for utilities.

???Bushdom says the Davis price caps aren't the answer because they don't
increase supply. Nonetheless, FERC has ordered very modest price controls to
kick in during shortages. This is supposed to stop price spiking.

???Freeman says it won't help. If he's right -- hell, even if he isn't -- the
president should invite key natural gas providers and other electricity
biggies
to Washington for a powwow. Let them know that there are limits. Let them know
that regulation can be more onerous for bad guys. Draw a line in the
sand.E-mail
Debra J. Saunders at E-mail Debra J. Saunders at dsaunders@sfchronicle.com.

LOAD-DATE: June 3, 2001

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???????????????????Copyright 2001 The Seattle Times Company

??????????????????????????????The Seattle Times

?????????????????????June 3, 2001, Sunday Sunday Edition

SECTION: ROP ZONE; News; Pg. A1

LENGTH: 1633 words

HEADLINE: the energy crisis: ground zero
In Stockton, Calif., where a long, hot summer looms, keeping the power on
seems
an easy trade for saving the salmon in the Northwest

BYLINE: Lynda V. Mapes; Seattle Times staff reporter

DATELINE: Stockton, Calif.

BODY:

??STOCKTON, Calif.--It's the time everyone here has been dreading: the hot
time, the dark time--summertime in California.

??This is ground zero in the West Coast energy crunch. Washington's concerns
over salmon and increased electric rates--still among the cheapest in the
country--seem pale by comparison to people worried about sewage backing up
into
streets when pumps won't run.

??But California's problems hit home in Washington.

??When California botched its experiment in electricity deregulation,
Northwest
ratepayers also felt the effects of the high wholesale power prices. Seattle
City Light borrowed $250 million to pay its debt for power purchases and has
increased residential rates 37 percent since January to help pay it off.

??The Bonneville Power Administration--which supplies about 46 percent of the
region's power and is also planning a rate increase in the fall--is still owed
about $90 million for power it sold to California utilities last winter.

??And when California temperatures soar and power demand jumps by as much as
40
percent in summer, it's typical for the Northwest to send as much as 1,000
megawatts of power southward every hour. That's nearly enough to light Seattle
at any given time.

??BPA also is selling about 725 megawatts of power to California, even in this
time of shortage, under long-term contracts.

??With the Northwest facing the second-driest year in its history, using water
to generate power to send south this summer could also hurt salmon, which need
enough water to aid their migration to the sea.

??But to some living at ground zero, fish seem an easy trade for power.

??"I'm not too much on the salmon," said Carl Swanson, an $8-an-hour security
guard in Stockton, a town of about 250,000 on the San Joaquin River, 45 miles
south of Sacramento.

??Swanson is facing up to an 80 percent increase retroactive to March in his
power rate, already about double what the average Seattle City Light ratepayer
is charged.

??"If they could give us some power to help people out I'd say go with it," he
said of the Northwest. "It's getting ready to get hot. I believe human beings
have to come first; the Lord put salmon here to eat. If you are a human, you
have to feel for the next person."

??California, hit six times since January by rolling blackouts, has become a
place where pets and people are panting at the veterinary clinic and the vet
worries about losing power during surgery; where retirees on fixed incomes
don't
dare turn on the oven.

??Where the director of the municipal waste-water plant fears sewage backing
up
in the streets when the pumps stop running.

??Where workers at the city's port are scaring the crickets out of moribund
World War II-era generators to keep its cargo cranes working.

??Where no one knows quite how all this happened, but where they are sure of
one thing: Summer is about to roast some 32 million souls at the mercy of
utilities that couldn't even keep the lights on in the lower-demand seasons of
winter and spring.

??Long, hot summer ahead

??Hector Dominguez's restaurant, with its dozen tables and scuffed vinyl
banquettes, is dim and stuffy. Half the lights are out and the thermostat is
set
at 80. Dominguez has unplugged the icemaker. He buys cubes these days to save
on
his power bill.

??His is a typical small business in Stockton. He has been paying $350 more a
month for power this year than last, and that was before rates went up. He's
wondering if the restaurant, in the family 17 years, can stay in business.

??Dominguez is the little guy: too small to be notified by the utilities when
the power is about to go out, and operating on margins too thin to absorb the
loss from a blackout. Like many, he's aghast to find himself so vulnerable.

??"At least in Mexico you kind of expect this. One day you have power, one day
you don't. But not here. I expect them to be able to keep the electricity on."

??Capt. Allen Anton, assistant director of Stockton's emergency services,
pulls
a thick notebook off his shelf, the city's emergency plan. But it's not much
use
in a rolling blackout. Like everywhere else in the state, city and county
managers are outgunned by uncertainty.

??Blackouts are triggered when operators of California's power grid see
reserves dip below 1-1/2 percent of total statewide supply.

??When the power goes out, water pressure in the city's system can drop by
half, depending on how long the power stays off and how much water residents
use. "From a fire standpoint, your response is nil," Anton said.

??City police are outnumbered by the number of signaled intersections, and
officials think staffing some and not others could be a liability problem.
Motorists go it alone when the traffic lights blink out.

??The power company, Pacific Gas & Electric, has promised a 15-minute warning
before shutting off the electricity. It doesn't always happen.

??"We get very little warning," said Ronald Baldwin, director of emergency
operations for San Joaquin County.

??Baldwin doesn't fear brief rolling outages. He figures any community can
handle those. But an extended breakdown of the power grid in 105-degree summer
temperatures isn't something he rules out, or something he can really plan
for.

??Just staying informed is a challenge. Some California legislators are
proposing an electrical-supply forecast on the radio along with the weather
and
pollen count.

??Officials say they have been told to expect outages as short as 90 minutes
and as long as six hours. They're bracing for a statewide total of anywhere
from
300 hours to more than 1,000 hours of blackouts this summer, depending on
whether they listen to utility officials, independent watchdogs or legislative
analysts.

??Morris Allen, director of the city's water and waste-water-treatment
services, faces the summer armed with nothing more than an 800 number to reach
an electric-company recording if the power goes out.

??But he doesn't think California should rely on Washington's power to ease
the
crisis this summer.

??"Why should people in the Northwest pay for the fact that we haven't planned
well for our growth here?" Allen said.

??"If it were a natural disaster, that would be one thing. But it isn't."

??At Sumiden Wire Products the power will stay on, because the company is on
the same circuit as a hospital, one of the facilities exempt from blackouts in
California.

??But while the power is reliable, the company can't afford it.

??One of the largest power users in San Joaquin County, the company has turned
its shifts upside down to avoid costly peak power times. Workers now run the
plant on weekends, at night, and in the morning. The plant shuts down at
midday.

??CEO Bob Olson's contract won't be renewed come July. After 22 years at the
plant, he's philosophical about the need to cut costs. Last year the plant
just
broke even; this year it will lose millions. Energy costs are the nail in a
coffin of overseas competition.

??Dairy owners Mario and Ann Silva had just finished milking 750 cows when the
power went out last month.

??"We have a generator but it blew up on us," Mario Silva said. When the milk
truck came, they couldn't pump their milk into it.

??Their generator is being fixed, so a loaner is parked at the ready.
Suddenly,
in a state known for high-tech, a diesel generator is a necessity.

??Asked whether the Northwest should send power to California, Ann Silva
doesn't hesitate. "Oregon and Washington, screw the fish. We can't conserve
our
way out of this. If that is the plan, we are dead ducks. We have to generate
more power."

??For some, the question of survival is visceral. At Sheba's Liquors and
Groceries, an unsteady parade of folks comes in for the bottles they'll sip
from
brown paper sacks as owner Nageb Algazali considers his summer ahead.

??When the power goes out, Algazali worries not about his ice cream
melting--he's worried about getting robbed. "How will you protect yourself?
The
alarm will not go off."

??Lois Bond, 58, has stopped baking. She's stopped using the air conditioner
that used to run from May until October. Now it's on 10 minutes in the morning
and 10 minutes at night.

??She helps wrap her housemate with freezer packs to combat the heat.

??Bond unplugs every appliance in the house before she goes to work. She's
replaced her electric clocks with battery operated ones; put compact
fluorescent
light bulbs in every fixture they fit, and cleaned out and unplugged the
freezer
in the garage.

??Across town, Victoria Garcia and her husband, Jose, loaded up their trunk
with sacks of groceries from the Greater Stockton Emergency Food Bank. It is
assistance that helps feed their family of seven on Jose's $14-an-hour welding
job.

??A charity picked up $435 of the $1,000 they owed to the power company, but
they still face monthly bills of $235 to whittle down the back payment, on top
of current charges.

??Food-bank staff member Michael Mueller said three out of four people he
interviews in line for eligibility these days need help in part because of
their
power bills.

??For the Garcias, blackouts and cutting back power use are frightening. Their
2-year-old son has asthma and requires treatments on an electrically powered
nebulizer. His attacks are more frequent in hot weather.

??"I must give him treatments twice or four times a day, and with rolling
blackouts, what if he has an attack? What am I supposed to do then?" Victoria
Garcia said.

??"I'm a mom, I have to think of everything. And with five kids it's hard not
to use power."

??She is looking for help anywhere she can find it to get through this summer,
including Northwest reservoirs.

??"People," she says, "are more important than fish."

??Lynda V. Mapes can be reached at 206-464-2736 or lmapes@seattletimes.com.

GRAPHIC: map; The Seattle Times: Stockton, Calif. (map not available
electronically).: the energy crisis: ground zero (map not available
electronically)

LOAD-DATE: June 4, 2001

?????????????????????????????48 of 143 DOCUMENTS

?????????????????????????????The Associated Press

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

???????????????????????June 2, 2001, Saturday, BC cycle

SECTION: Washington Dateline

LENGTH: 249 words

HEADLINE: Democrat calls on Bush to cap energy prices in radio address

DATELINE: WASHINGTON

BODY:

??Democrats are pressing their demand that President Bush set price limits on
gas and electricity to help Californians deal with the energy crunch.

??In the weekly Democratic radio address Saturday, Rep. Anna Eshoo of
California blasted Bush's speech during his recent trip to the state.

??"Californians were deeply disappointed about what President Bush didn't
say,"
Eshoo said. "We were hoping that he would announce that he is taking immediate
action and that price relief is on the way right now.

??"Westerners would immediately see relief from generators who are gouging and
gaming the system by withholding power we have available right now to drive up
prices five, 10, even 20 times its market value."

??Bush has rejected California Gov. Gray Davis' plea for federal caps on
soaring electricity bills. Instead he has offered federal money to stimulate
the
building of more electrical lines running north and south through the state.

??"Price caps do nothing to reduce demand, and they do nothing to increase
supply," the president told business leaders in California.

??But Eshoo said Bush's plans won't stop electric companies from raising
prices
to capitalize on the energy shortage.

??"All Americans are shouldering runaway prices at the gas pump," Eshoo said.
"In the Midwest, people are paying as much as $2 a gallon for gas and some
people are predicting prices could go as high as $3 a gallon before the end of
summer. Please Mr. President, stand by consumers."

LOAD-DATE: June 4, 2001