Following is today's IEP news....thanks! ?Jean

--
Jean Munoz
McNally Temple Associates, Inc.
916-447-8186
916-447-6326 (fx)

Copley News Service, June 20, 2001, Wednesday, State and regional, 509
????words, Customers might have to pay SDG&E debt, advocate says, Craig D.
Rose,
????SAN DIEGO

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 13, 771
????words, Commentary; ; The FERC's Action Is Good, Bad,Ugly, PETER NAVARRO,
????Peter Navarro is an associate professor of economics and public, policy at
????UC Irvine. E-mail: pnavarro@uci.edu

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 7, 865 words
????, The State; THE ENERGY CRISIS; New Price Caps Not a Deterrent, Power
Firms
????Say; Regulation: Producers are unhappy with the federal action but say it
is
????unlikely to discourage them from constructing new plants., NANCY VOGEL,
????THOMAS S. MULLIGAN, TIMES STAFF WRITERS

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 7, 704 words
????, The State; THE ENERGY CRISIS; Plan Won't Raise Rates, Davis Says;
?Edison:
????Governor seeks to assure Senate, where Democrats say action is a bailout
of
????nearly bankrupt utility., CARL INGRAM, TIMES STAFF WRITER, SACRAMENTO

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 3, 771 words
????, Los Angeles; ; France and California--Vive the Differences and
????Similarities, PATT MORRISON

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 1, 820 words
????, State to Pay Electric Bill With Loan, Not Taxes, MIGUEL BUSTILLO, TIMES
????STAFF WRITER, SACRAMENTO

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 15, 1163
????words, THE ENERGY CRISIS; ; FERC Move Short-Circuits Push for Hard Price
????Caps, RICHARD T. COOPER, JANET HOOK, TIMES STAFF WRITERS, WASHINGTON

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 1, 1508
????words, NEWS ANALYSIS; Energy on Agenda, but Issue Is Blame; Politics: Gov.
????Davis will try to sway voter anger toward the GOP as he faces a Senate
????panel., RONALD BROWNSTEIN, TIMES POLITICAL WRITER, WASHINGTON

Los Angeles Times, June 20, 2001 Wednesday, Home Edition, Page 1, 2450
????words, COLUMN ONE; Blackout Forecasts' Dark Side; * If optimists are wrong
????and the power runs out, California's energy crisis could quickly cost
lives
????and cripple the economy., JENIFER WARREN, TIMES STAFF WRITER

The New York Times, June 20, 2001, Wednesday, Late Edition - Final, Section
????A; Page 14; Column 3; National Desk, 708 words, Regulators' Order Could
????Bring Broad California Power Accord, By LAURA M. HOLSON with JEFF GERTH,
LOS
????ANGELES, June 19

The New York Times, June 20, 2001, Wednesday, Late Edition - Final, Section
????A; Page 14; Column 3; National Desk, 1022 words, The Lesson of When to
Give
????Aid to Free Markets, By DAVID E. SANGER, WASHINGTON, June 19

The New York Times, June 20, 2001, Wednesday, Late Edition - Final, Section
????A; Page 22; Column 1; Editorial Desk, 503 words, At Last, Action on
????California

The Orange County Register, June 20, 2001, Wednesday, WASHINGTON DATELINE,
????K0253, 808 words, Senate Democrats drop price caps bill; energy
????commissioners go to Hill, By Dena Bunis

San Jose Mercury News, June 20, 2001, Wednesday, WASHINGTON DATELINE, K0244
????, 1181 words, Feinstein drops price caps bill; energy commissioners go to
????Capitol Hill, By Jim Puzzanghera

The San Francisco Chronicle, JUNE 20, 2001, WEDNESDAY,, FINAL EDITION,
????NEWS;, Pg. A1, 1126 words, Experts say state must seize the day;
????ANALYSIS: Price caps set stage for future, David Lazarus

The San Francisco Chronicle, JUNE 20, 2001, WEDNESDAY,, FINAL EDITION,
????NEWS;, Pg. A13, 683 words, Potrero Hill power plant hit by 2 lawsuits;
????Neighbors, city ask court to cut back hours of operation, Rachel Gordon

The San Francisco Chronicle, JUNE 20, 2001, WEDNESDAY,, FINAL EDITION,
????NEWS;, Pg. A11, 729 words, Fed price caps placate Demos; ???But
Feinstein's
????bill to regulate energy producers was more strict, Carolyn Lochhead,
????Washington

The Washington Post, June 20, 2001, Wednesday, Final Edition, A SECTION;
????Pg. A06, 1093 words, Davis Finds Hope in Calif. Power Crunch, Rene Sanchez
????and Peter Behr, Washington Post Staff Writers, LOS ANGELES, June 19

Chicago Tribune, June 20, 2001 Wednesday, NORTH SPORTS FINAL EDITION, News;
????Pg. 9; ZONE: N, 333 words, California gets loan for energy purchases,
????Reuters., SACRAMENTO

The Associated Press State & Local Wire, June 20, 2001, Wednesday, BC cycle
????, 9:23 AM Eastern Time, State and Regional, 473 words, FERC still looking
????into high Northwest power prices, By KATHERINE PFLEGER, Associated Press
????Writer, WASHINGTON

??????????????????????Copyright 2001 Copley News Service

?????????????????????????????Copley News Service

???????????????????????????June 20, 2001, Wednesday

SECTION: State and regional

LENGTH: 509 words

HEADLINE: Customers might have to pay SDG&E debt, advocate says

BYLINE: Craig D. Rose

DATELINE: SAN DIEGO

BODY:

??Despite assurances from the governor and San Diego Gas & Electric, the
threat
to local ratepayers of paying most of a $750 million debt to the utility is
not
gone, a local consumer leader said yesterday.

??Michael Shames, executive director of the Utility Consumers' Action Network,
said an agreement crafted by SDG&E and the governor to deal with the debt
might
avoid raising rates to pay it off but that it will take consumer money from
other pockets.

??Gov. Gray Davis and SDG&E officials on Monday said their two-part plan would
eliminate the debt along with transferring ownership of the utility's
transmission system to the state for $1 billion.

??Under the complex agreement, said Shames, ''It appears we will be paying 90
percent or more of the $750 million.''

??SDG&E officials underscored that the debt, which they estimated might reach
as much as $400 per residential customer, would be removed without raising
rates.

??The debt began building when the Legislature last fall capped local power
rates to contain the electricity crisis. But SDG&E still had to purchase power
at market prices higher than the capped rates collected from customers. The
utility's ''undercollection'' grew to about $750 million in a balancing
account
until California began buying power on behalf of the state's utility companies
in February.

??Shames said the two-part deal announced by the governor is devoid of
significant concessions by the utility and pays far too much for its
transmission lines. This comes from the man who first suggested the state
purchase of transmission lines from financially troubled utilities as a
component of resolving the crisis caused by electricity deregulation.

??''I could not find anything in there of benefit to consumers,'' he said.

??In particular, Shames criticized the deal for crediting SDG&E with hundreds
of millions in profits from power sales to the state. The consumer leader said
these profits belong to ratepayers, a view that had been supported by the
California Public Utilities Commission.

??Shames said further that SDG&E's payment of $100 million to settle claims
regarding its power purchasing practices allows the utility to avoid scrutiny
of
how it bought power during a six-month period at the height of the electricity
crisis.

??It remains unclear, he said, whether the agreement will win its required
approval from the PUC.

??''It depends on how independent the commission is,'' Shames said. ''If they
jump when the governor tells them to do something or if they maintain their
constitutionally mandated independence.''

??The president of SDG&E yesterday reiterated his view that the agreements
involve concessions on the utility's behalf, including a contribution of $219
million in profits that SDG&E says were due its shareholders, not its
customers.

??''We feel like we've done some great things for the customer here,'' said
Edwin Guiles, the utility company president. ''This is win-win situation for
our
customers, the state and for SDG&E.''

??WAGNER-CNS-SD-06-19-01 2224PST

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

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

????????????????????June 20, 2001 Wednesday ?Home Edition

SECTION: California; Part 2; Page 13; Opinion Desk

LENGTH: 771 words

HEADLINE: Commentary;
;
The FERC's Action Is Good, Bad,Ugly

BYLINE: PETER NAVARRO, Peter Navarro is an associate professor of economics
and
public, policy at UC Irvine. E-mail: pnavarro@uci.edu

BODY:

??The Federal Energy Regulatory Commission's new wholesale price caps will
save
the Western states literally tens of billions of dollars in electricity bills.
As wonderful as that sounds, the FERC order still allows wholesale generators
to
extract enough windfall profits to drive the region into recession.

??The FERC's approach may also perversely lead to more air pollution and
natural gas shortages.

??Let's look at what the FERC did right. First, the order approved Monday
establishes price caps on a 24/7 basis rather than simply during power
emergencies--a long overdue reform.

??Second, the order protects the entire West, not just California. This
regional cap will end "megawatt laundering," whereby in-state generators sold
power across California lines and then resold it back into the state to evade
caps.

??Third, the order closes the ridiculous broker loophole that made the FERC's
previous price caps Swiss cheese. Before, generators could redirect their
sales
from the market to energy brokers who were exempt from the price caps.

??So where did the FERC go wrong? The problem may be traced to the two
competing methods of imposing price caps and the all-important concept of
"economic rent."

??Economic rent, in the wholesale electricity market, is the market price of
electricity minus the producer's cost, where cost includes not just labor and
fuel but a "fair profit" on the invested capital as well. In traditional
regulation, this fair profit is calculated very simply as the market cost of
the
money borrowed to build the power plant.

??Under this definition, if the producer's cost is a nickel a kilowatt hour
and
he can sell it for 35 cents--as producers in the West have been doing--the
producer can extract 30 cents of economic rent from consumers.

??In California, the extraction of such economic rent through market
manipulation has taken place on a grand-theft scale. In 1999, California's
electricity bill was about $7 billion. Last year, it was almost $30 billion
for
roughly the same amount of electricity. This year, California's bill is well
on
its way to $50 billion annually.

??To stop this rip-off, Gov. Gray Davis proposed "cost-based" price caps. Such
caps are calculated on a plant-specific basis. Each generator is allowed to
recover its cost of production, including the fair profit, but not a penny
more.

??Thus, for example, a newer, highly efficient plant generating power at a
nickel per kilowatt hour would collect a nickel. The oldest, least efficient
plant that generated power for 20 cents would be allowed to collect 20 cents.

??By setting different prices for different plants, the economic rents are
driven to zero. Yet each generator still has a fair profit incentive to
produce.
From a public policy perspective, it's the best of all possible worlds. And it
was categorically rejected by the FERC. Instead, the FERC sets a single price
for all generators based on the cost of the "least efficient plant."

??The obvious problem with this umbrella pricing rule is that it still allows
generators to extract billions in economic rent from consumers.

??In our previous example, and under the FERC's rule, the least efficient
plant
still collects 20 cents a unit to recover costs. However, the most efficient
plant producing power at a nickel-per-kilowatt also collects 20 cents rather
than a nickel and thus extracts a full 15 cents of economic rent.

??Thus, under the FERC's rule, wholesale generators still will be able to
capture tens of billions of dollars more from consumers and businesses than
under Davis' cost-based rule.

??The FERC's approach is still subject to the same kind of strategic gaming
that has been the hallmark of this crisis. Generators will ensure that during
peak times, when the price cap is being established, the most expensive
possible
plant is in operation--whether it needs to be or not. This will peg the price
at
the highest level.

??In addition, the FERC provides generators with a perverse incentive to run
their least efficient units more often. Since these least efficient plants are
also the highest polluting, the result will be dirtier air. Moreover, the
excessive running of these plants may also put a strain on already stretched
natural gas supplies. These least efficient plants use up to 40% more natural
gas to produce a unit of electricity.

??The bottom line: The FERC "done good." But it could have done a lot better.
And the way things stand now, there still is a danger that higher electricity
costs could push California and the rest of the West--and eventually the
nation--into a nasty recession.

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

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

????????????????????June 20, 2001 Wednesday ?Home Edition

SECTION: California; Part 2; Page 7; Metro Desk

LENGTH: 865 words

HEADLINE: The State;
THE ENERGY CRISIS;
New Price Caps Not a Deterrent, Power Firms Say;
Regulation: Producers are unhappy with the federal action but say it is
unlikely
to discourage them from constructing new plants.

BYLINE: NANCY VOGEL, THOMAS S. MULLIGAN, TIMES STAFF WRITERS

BODY:

??The expanded electricity price limits approved by federal regulators could
squeeze big energy traders but will probably not discourage power plant
construction in California, electricity producers said Tuesday.

??Power plant owners and marketers said they had not had time to digest the
53-page order and thus could not say exactly how it would affect California
and
the 10 other Western states it covers.

??But the companies generally asserted Tuesday that the order would not deter
them from investing in the vast, power-starved Western region--though they
have
often raised such a prospect in arguing against price controls.

??Whatever its long-term effects, Monday's order by the Federal Energy
Regulatory Commission appeared to have an immediate effect in dampening prices
in California's volatile daily, or spot, market.

??The order does not take effect until today, but the prospect of new measures
aimed at limiting prices appeared to tame markets Tuesday. Californians used
more electricity at the late-afternoon peak than on any day this year, yet
market prices hovered around $100 a megawatt-hour.

??That is well below the average of $284 a megawatt-hour that the state paid
for electricity from January through April, with prices soaring as high as $
1,900 at times of tight supply.

??"All the markets in the West have come down," said Mike Wilczek, senior
power
markets reporter for Platts, the energy market information division of the
McGraw-Hill Cos. "It's bearish news."

??Nevertheless, several generators minimized the effects of the FERC order,
contradicting earlier warnings from some industry sources and officials of the
Bush administration who consider price limits to be impediments to future
investment in power plants.

??"Calpine will have no problem operating under this order," said Joe Ronan,
vice president of regulatory affairs for San Jose-based Calpine Corp., which
has
three power plants under construction in California and plans to build at
least
three others.

??The federal order lasts only until September 2002, he said, and because it
sets prices based on the cost of running the most expensive, inefficient power
plant in the market, it should guarantee the owners of modern plants a profit.

??Another company planning major investments in California, Duke Energy Corp.
of North Carolina, said it will not be seriously affected by the federal order
because it has sold the output of its four California plants well into the
future.

??"We've already forward-sold 90% of our generation for 2001 and 70% for
2002,"
company spokesman Pat Mullen said.

??Reliant Energy Inc. of Houston, which owns five power plants in California,
was not so sanguine about the federal order, but it has not backed away from
plans to install more generators.

??"We remain committed to California, as hard as it is to do business here
today," spokesman Richard Wheatley said. "We have plans that are on the
drawing
boards for at least one, possibly two projects."

??On Monday, Reliant Chief Executive Joe Bob Perkins called the FERC action
"more of a political response" than an acknowledgment of the gap between
electricity supply and demand in California.

??"Price caps don't work," Perkins said, and he warned California consumers
against assuming that the energy crisis is over simply because wholesale
electricity prices have recently dropped to their lowest levels in a year.

??Prices are falling because of mild weather, not price controls, he said.

??"Without sound economics that increase available supply and reduce peak
demand . . . consumers can only hope for favorable weather and look forward to
[rolling blackouts]," Perkins said.

??Energy analyst Frederick Schultz of Raymond James & Associates in Houston
called the FERC order "a nonevent to the California generators" because so
much
of their power is now being sold through long-term contracts.

??However, every long-term deal reduces the size of the electricity market,
which supplies about 20% of California's needs. And that, in turn, limits
trading opportunities for such firms as Enron Corp., which profit on the daily
market's ups and downs, Schultz said.

??Enron representatives did not respond to calls for comment.

??The federal order imposes round-the-clock price curbs on wholesale
electricity sold in 11 Western states that are connected by transmission
grids.

??Under the order, traders say, market prices will probably hover around $100
a
megawatt-hour, depending upon the price of the natural gas that fuels most of
the state's electric generating plants. Though that is well below recent
market
prices, it is higher than the average of about $32 a megawatt-hour that
California utilities paid in 1999, before the state's deregulated market
spiraled out of control.

??The FERC order dictates that the price for spot market electricity across
the
West will be based on the cost of producing one megawatt-hour of power at the
least-efficient plant selling to California grid operators. May 31, when a
previous FERC order based on a similar formula took effect, the price set was
$
127 a megawatt-hour.

??Vogel reported from Sacramento, Mulligan from New York.

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

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

????????????????????June 20, 2001 Wednesday ?Home Edition

SECTION: California; Part 2; Page 7; Metro Desk

LENGTH: 704 words

HEADLINE: The State;
THE ENERGY CRISIS;
Plan Won't Raise Rates, Davis Says;
Edison: Governor seeks to assure Senate, where Democrats say action is a
bailout
of nearly bankrupt utility.

BYLINE: CARL INGRAM, TIMES STAFF WRITER

DATELINE: SACRAMENTO

BODY:

??Gov. Gray Davis sought to assure the state Senate on Tuesday that his plan
to
save Southern California Edison from threatened financial collapse would work
without increasing customer rates.

??Davis sent assurances to the Senate Energy Committee through his top
attorney, Barry Goode, who helped negotiate the controversial proposal with
the
utility.

??Senate Republicans have taken a wait-and-see attitude on the plan. But they
generally contend that the business of utilities belongs in the hands of
private
enterprise.

??But Democrats in both houses have charged that the deal between Democrat
Davis and Edison represents a state bailout of the nearly bankrupt
Rosemead-based utility. The analysis is shared by leading consumer activists.

??At the first in a series of Senate hearings on the package, which is
considered all but dead in its current form, Sen. Byron Sher (D-Palo Alto)
voiced concerns about political problems with the plan.

??He asked Goode, who was flanked at a witness table by Edison executives,
whether monthly bills of the utility's customers would increase as a
consequence
of approval of the governor's package.

??"Our models say there will be no additional impact on the ratepayers," Goode
replied.

??Other members appeared ready to pursue rate increase questions, but
Chairwoman Debra Bowen (D-Marina del Rey) cut them short. She said the issue
would be fully examined at a later hearing.

??To spare Edison from going into bankruptcy and to restore its credit-
worthiness, Davis and executives of the utility reached a complex compromise
in
April, the centerpiece of which was a state purchase of Edison's transmission
grid for about $2.8 billion, more than twice its book value.

??Edison has estimated that it owes $3.5 billion to creditors, including
wholesale power generators, as a result of deregulation of retail electricity
prices in 1996.

??Because of a freeze in retail rates, Edison was prohibited from passing its
energy costs to customers.

??Other features of the deal include dedicating a portion of consumer rates to
help pay off the debt, a guaranteed 11.6% rate of return to Edison on its
sales
and investments, and termination of an ongoing Public Utilities Commission
investigation into financial dealings of Edison's parent company, Edison
International.

??The energy committee held the hearing for fact-finding purposes and did not
consider the Edison bill, SB 78x by Sen. Richard Polanco (D-Los Angeles).

??But the Davis-Edison deal has angered consumer activists, who contended that
bankruptcy for Edison would be preferable.

??They deplored it as a bailout that would cost Edison customers $5 billion to
$7 billion.

??"If the Legislature makes the mistake of forcing the ratepayers of
California
to pay one more penny to bail out these companies, we will put [an initiative]
right on the ballot," said Harvey Rosenfield of the Foundation for Taxpayer
and
Consumer Rights.

??Consumer organizations in 1998 put to the voters an initiative to junk the
1996 deregulation law. The measure failed.

??Rosenfield, Harry Snyder of Consumers Union and Matt Freedman of the Utility
Reform Network all asserted at a news conference that the Davis rescue program
should be killed.

??Snyder, who opposed deregulation, said the governor's bill is shaping up as
a
replay of 1996.

??"It's too big, too complicated. . . . This is the same process that brought
about this [deregulation] disaster," Snyder said.

??Separately, San Diego Gas & Electric agreed Monday to sell its transmission
grid to the state for about $1 billion on the same terms as Edison.

??With all the controversy surrounding the Edison deal, the chance of SDG&E
winning legislative approval of its sale is slightly better than 50%, said
Stephen L. Baum, chief executive of Sempra Energy, parent of SDG&E.

??"I think there's a widely shared view in the Legislature that they don't
want
the state in the long-term business of power procurement. . . . In order to
get
Edison back into that business there has to be this infusion of capital" to
pay
off past electricity debts and make the utility credit-worthy, Baum said.

??Times staff writer Nancy Rivera Brooks contributed to this story.

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

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

????????????????????June 20, 2001 Wednesday ?Home Edition

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

LENGTH: 771 words

HEADLINE: Los Angeles;
;
France and California--Vive the Differences and Similarities

BYLINE: PATT MORRISON

BODY:

??Did you happen to feel it? That sudden impulse to buy gas by the liter? A
furtive urge to smoke a foul, unfiltered cigarette? Did you wonder what was
going on?

??I'll tell you what it was: California has burst out like Lance Armstrong
passing the pack in the fiscal Tour de France. The Bear Flag Republic, all by
itself, has overtaken La Belle France to become the Chanel No. 5 of the world
of
wealth, the fifth most powerful economic force du monde and gaining on Germany
and Japan and Mother England and the other 49 states put together. In sum, our
GDP now is bigger than their GDP.

??But California is not Bismarck's Germany. So the Golden State was more
gilded
than Gaul by about 50 billion; it is not our style to grind the loser
ignominiously into the dust. We are more than a benevolent nation-state; we
are
the world. We bestowed Euro Disney on France, and allowed Marcel Marceau into
the country.

??Differences? Bien sur. Californians cavort in the streets for a champion
basketball team; the French break out the confetti for poets.

??The French get six weeks' vacation, your average Californian gets two. Maybe
that's why we are the world's cinquieme economic engine and France is sucking
our low-emission fumes. (The laid-back Californian was the malicious invention
of East Coast pundits. Farmers and movie stars, our rugged pioneer forebears,
both start work at the crack of dawn.)

??France gets its electricity from nuclear power, we get ours from Texas'
power.

??California was glad to let nuclear bombs be tested in Nevada, home of a fake
Eiffel Tower; France tries out its nuclear arsenal in the South Pacific, far
from the real Eiffel Tower.

??The French very sensibly take their dogs to restaurants and leave their
children at home. Californians, regrettably, do it the other way around.

??France is pretty creeped out by Scientology. Here it's the state religion of
Hollywood.

??The French revere their language. We treat ours like Silly Putty.

??Hollywood grinds out the entertainment that makes the French intelligentsia
scream about cultural imperialism (even as your average Jean eats it up). Last
week, Sumner Redstone, that ubermaster of Viacom, Paramount, MTV, UPN and half
the known entertainment world, told me with breezy contempt, "People all over
the world . . . they want American movies. They don't want French movies."

??In France you can get red wine at McDonald's. Until recently, in Orange
County you couldn't order red wine at the Performing Arts Center lest you
spilled it on the white carpets. (The vines that made Los Angeles a winemaking
powerhouse in the 19th century were imported by a French immigrant named
Vignes.)

??France preens itself on the Concorde. California birthed the Stealth bomber.
Paris has the Jeu de Paume museum, and a museum of locks. Los Angeles has
MOCA,
and a bra museum.

??A French company named Vivendi makes movies at Universal. A California
company named Kaufman and Broad builds suburbs in France.

??The French believe in public transit. Californians believe in the sanctity
of
one-man, one-car. L.A. is considering hiring a French firm to build its bus
shelters. During Los Angeles' transit strike, Mayor Riordan set a good example
by bicycling--except that he did it in France.

??And yet we look in the mirror and see something of each other. California
goes its own stubborn way in the U.S. just as France charts its own wayward
course in Europe.

??Parisians feel kinship with San Franciscans; both have miserable summer
weather. Southern California is more south-of-France-friendly; Cannes and
Beverly Hills are sister cities.

??California and France are the makers of fashion and food style. Maitres
Splichal and Puck trained in the best kitchens in France; Alice Waters, the
mother of California cuisine, was invited to open a restaurant near the sacred
precincts of the Louvre.

??France and California both have moderate-minded Roman Catholic cardinals
named Roger. Marie Antoinette, important Frenchwoman, lost her head to the
mob.
Rose Bird, important California woman, had her head handed to her by voters.

??So rest easy, France. We may have passed you, but we won't forget you. We
are
too much alike.

??Charles DeGaulle observed pungently that "Only peril can bring the French
together. One can't impose unity out of the blue on a country that has 265
different kinds of cheese."

??Gray Davis, governor of a nation-state with a hundred different kinds of
athletic shoes, united only by perils natural and man-made, would understand
perfectly.

??*

??Patt Morrison's column appears Wednesdays. Her e-mail is
patt.morrison@latimes.com

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

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

????????????????????June 20, 2001 Wednesday ?Home Edition

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

LENGTH: 820 words

HEADLINE: State to Pay Electric Bill With Loan, Not Taxes

BYLINE: MIGUEL BUSTILLO, TIMES STAFF WRITER

DATELINE: SACRAMENTO

BODY:

??California taxpayers, who have had to bankroll billions of dollars in
electricity purchases for the teetering power utilities, will soon no longer
see
their money evaporate at record rates, under an executive order by Gov. Gray
Davis.

??As early as next week, the order will stop the hemorrhaging of the state
budget by allowing Treasurer Phil Angelides to borrow $5 billion to buy
electricity. That money is expected to cover power purchases until this fall,
when the state plans to sell an unprecedented $12.5 billion in bonds to repay
the general tax fund and buy future electricity.

??Angelides said Tuesday that he has already lined up $3.5 billion in loans
from two Wall Street firms, and expects to secure at least another billion by
next week, when he plans to close the deal and obtain the money.

??The loan is critical, he said, because without it, electricity purchases
would completely deplete state coffers as early as October.

??"In essence, it stops the general-fund bleeding," Angelides said. "What this
interim financing does is take the pressure off the general fund and,
hopefully,
avert a cash crisis."

??The loan could also ease concerns on Wall Street that California's risky
entry into the power business has placed the state budget in a precarious
position. Those concerns were one of the main reasons two major credit rating
agencies downgraded the state earlier this year.

??"We have been looking forward to this day," said Ray Murphy, a vice
president
at Moody's Investors Service, one of the two firms that downgraded
California's
credit rating. "We view this as a positive first step toward getting the state
out of the power business. We wanted the state to get the general fund out of
the business as quickly as possible."

??California has allocated $8.2 billion in taxpayer money for electricity
since
January because the state's private utilities became too saddled with debt to
continue purchasing power on the open market. and massive blackouts loomed.

??Under a plan devised by Davis and approved by the Legislature, the state
budget is supposed to be reimbursed for the power purchases with the bond
issue,
the largest in American history. The bonds, in turn, are to be paid off by
utility ratepayers through their monthly bills.

??The bond issue, however, has been delayed by partisan politics and complex
legal issues raised by the bankruptcy of Pacific Gas & Electric Co., the
state's
largest private utility.

??A bond sale initially planned for May is now scheduled for late September,
according to Angelides' latest estimate. The state's Public Utilities
Commission
still needs to take a number of technical actions before the sale can take
place.

??As a result, the state budget has been drained for power purchases far
longer
than initially anticipated--a situation that has imperiled spending on
education, transportation and other critical needs, at least temporarily.

??Angelides had earlier sought to secure a $4-billion bridge loan to repay the
state budget for power purchases until the bonds were sold, but was rebuffed
by
Republicans in the Legislature, who argued that the loan was not necessary.

??Davis' executive order, issued late Monday as part of the Democratic
governor's emergency powers during the energy crisis, gives Angelides the
authority to press ahead.

??But it does not allow the treasurer to use the loan to repay the budget for
the billions spent so far this year on electricity, as he had originally
intended. Rather, it permits Angelides to use the loan proceeds to assist the
Department of Water Resources, the state agency buying power, with its future
electricity expenses.

??If the bond issue is further delayed, Angelides estimated, the loan would
gives California another four to six months before it would begin to run out
of
money. Furthermore, the loan closes a potential loophole that existed in the
long-term contracts Davis had signed to stabilize the cost of electricity,
which
would have let power suppliers walk away from the deals if the state had not
secured a source of financing by next month.

??But Republicans warned that by entering into a bridge loan deal without
knowing when the bonds would be sold, Davis and the Democrats were incurring
major risks that could further drive up the price tag of the crisis.

??The loan carries a blended interest rate of about 4.5%, but if it is not
repaid by Oct. 31, the rate jumps to 7%. Because the loan is to be repaid by
the
bonds, which have been marred by a history of delay, GOP officials Tuesday
were
already calling the bridge loan a "bridge to nowhere."

??"The thing that is most troubling is that the governor did not bother to
consult with anyone," said Assembly Republican leader Dave Cox (R-Fair Oaks),
who learned of Davis' order from reporters. "It's disappointing, but the
governor does not seem to recognize there is a legislative branch."

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SECTION: Part A; Part 1; Page 15; National Desk

LENGTH: 1163 words

HEADLINE: THE ENERGY CRISIS;
;
FERC Move Short-Circuits Push for Hard Price Caps

BYLINE: RICHARD T. COOPER, JANET HOOK, TIMES STAFF WRITERS

DATELINE: WASHINGTON

BODY:

??The Federal Energy Regulatory Commission's decision to impose full-time
price
ceilings on wholesale electricity in California and the West appears to have
deflated the congressional drive for a return to traditional utility
regulation.

??Sen. Dianne Feinstein (D-Calif.), calling the "price mitigation" system FERC
unveiled Monday "a giant step forward," announced Tuesday that she is pulling
back her bill to force a return to the "cost of service" pricing system that
prevailed before deregulation. Republican Sen. Gordon Smith of Oregon, a
co-sponsor, agreed, as did Sen. Jeff Bingaman (D-N.M.), chairman of the Senate
Energy Committee.

??House Democrats vowed to fight on for tougher controls, but they were given
little chance to succeed.

??As a result, although the political blame game will rage on, the reality of
a
long, ugly summer for California appears to have arrived: at least several
months of tears, toil, sweat--and fast-rising electric bills.

??California consumers are likely to face an unpleasant paradox, energy
analysts said: Given present power shortages, blackouts are virtually
inevitable
this summer. And, since state authorities are beginning to let high wholesale
prices flow through into retail bills after months of subsidies, many
consumers
could face higher charges at the same time their lights begin to flicker.

??Even if FERC's order succeeds and wholesale prices fall, as they have begun
to do in recent weeks, consumers' bills are likely to rise. Since retail
charges
lag well behind wholesale prices, closing the gap will probably mean a period
of
higher costs for consumers, regardless of what happens in wholesale markets.

??There is light at the end of the tunnel, energy analysts said, but it is
probably a year away. And reaching it, they said, depends in part on
government
officials taking no action that might spook investors and disrupt present
plans
for expanding the region's capacity to generate and deliver more power.

??The new FERC system, which its designers said would provide temporary price
relief while preserving incentives for energy investment, imposes cost-based
curbs on wholesale prices throughout the West and covers all such sales, not
just those during periods of extreme shortages, as did the order issued in
April.

??FERC Chairman Curtis L. Hebert Jr. told the committee the new system will
prevent "megawatt laundering" and other potential abuses. He said his agency
is
"committed to ferreting out any forms of market misbehavior 24 hours a day,
seven days a week."

??With the apparent collapse of demands for more intervention, Congress now
seems ready to give FERC a year or more of leeway to see whether its plan will
curb wholesale prices and create what FERC member Linda Breathitt, a Democrat,
called "a breathing spell" in which California and the West can "repair their
dysfunctional markets."

??"It still remains to be seen whether there can be manipulation, but I think
we should wait and see," Feinstein said Tuesday at a Senate Energy Committee
meeting attended by all five FERC members. The commissioners call their new
system "price mitigation," not price caps, but Feinstein said it amounts to
the
same thing.

??"Whether you call it price mitigation or something else, a rose is a rose is
a rose," said Feinstein, a member of the energy committee.

??And Sen. Barbara Boxer (D-Calif.), appearing before the committee as a
witness, said: "I was very pleased with [Monday's] about-face by FERC. I
believe
they have a new tone."

??Democrats on the other side of the Capitol pledged to keep fighting for
traditional regulation, but with Republicans in control of the House, the
struggle appears to be largely symbolic.

??House Democrats wanted to introduce amendments on price controls and other
energy policy to a mid-year supplemental appropriation bill due to come before
the House today. However, GOP leaders expected to block Democrats from even
offering the amendments on procedural grounds.

??The most sweeping of the amendments would set cost-based limits on wholesale
energy prices in the West. Rep. Henry A. Waxman (D-Los Angeles) and other
sponsors insisted that the measure is still needed in spite of the FERC
action,
which he said would continue to provide windfall profits to generators,
encourage suppliers to withhold power and do too little to restrain the price
of
natural gas.

??He called the FERC policy an "experiment" that is using California and other
Western states as subjects.

??Similarly, Rep. Nancy Pelosi (D-San Francisco) said: "Although the FERC
decision [Monday] is a step in the right direction, I am concerned it does not
remove incentives for energy suppliers to withhold power, drive up prices and
gouge consumers."

??The commission went as far as it did in part because of the specter of
broader price control legislation, Pelosi said. "They felt the heat, they saw
the amendments coming and decided to act."

??And Rep. Bob Filner (D-San Diego), in an interview Tuesday, said he will
press ahead with legislation to impose hard price caps. "I would advise the
senators that after a year of dealing with these price gougers that they will
easily manipulate this latest order," he said, calling it a "Swiss cheese
order--full of holes."

??Feinstein's shift put House Democrats in an awkward political position
because it came just as they prepared to make their big push for tougher
controls. But the Democrats tried to minimize the differences in legislative
strategy.

??"She too is waiting to see if the FERC experiment works," Waxman said. "I'm
a
little more skeptical, but we're both watching carefully."

??As a political matter, a Democratic leadership aide acknowledged, the FERC
order muddies the debate at a time when Democrats have been working hard to
make
it a defining issue--and one they had hoped would help them win control of the
House in the 2002 elections.

??"It's hard to describe to people what the difference is between what we want
and what FERC has done," said the aide.

??And Republicans said FERC's action had clearly taken the wind out of the
sails of price control efforts that some GOP strategists feared might have
passed the House.

??"I would have thought [it would pass] last week," said John Feehery,
spokesman for House Speaker J. Dennis Hastert (R-Ill.). "But now, with what
FERC
did, it takes a lot of air out of the balloon."

??"I think the FERC action will dissipate that strong push," agreed Emily
Miller, a spokeswoman for House Majority Whip Tom DeLay (R-Texas). "It will
take
the heat off."

??House Majority Leader Dick Armey (R-Texas) said the message to Democrats
was,
"It's time to come off your political high horse."

??He said he wanted to keep Democrats from offering their price control
amendment to Wednesday's supplemental appropriation bill because the proposal
is
"a political statement, not a policy statement."

??*

??Times staff writers Megan Garvey and Richard Simon contributed to this
story.

GRAPHIC: PHOTO: (lead photo) Federal energy regulators testify before the
Senate
Energy Commission on power prices. From left are Patrick H. Wood III, Linda
Breathitt, Curtis L. Hebert Jr. and William L. Massey. PHOTOGRAPHER:
Associated
Press

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

LENGTH: 1508 words

HEADLINE: NEWS ANALYSIS;
Energy on Agenda, but Issue Is Blame;
Politics: Gov. Davis will try to sway voter anger toward the GOP as he faces a
Senate panel.

BYLINE: RONALD BROWNSTEIN, TIMES POLITICAL WRITER

DATELINE: WASHINGTON

BODY:

??When California Gov. Gray Davis testifies at a high-profile Senate hearing
today, the issue formally on the table will be the expanded electricity price
controls that federal regulators approved this week. But the session's
political
subtext will be the escalating struggle between Davis and national Republicans
to determine where California voters look for solutions--and blame--for the
state's power woes.

??In both California and Washington, Republican strategists believe Davis is
trying to manufacture a succession of conflicts with the White House that will
allow him to run in 2002 as much against President Bush as against whomever
the
state GOP nominates in the gubernatorial race. In return, Republicans are
trying
to shift the focus back toward Davis--most aggressively through a
California-wide television advertising campaign organized by Scott Reed, a
former executive director of the Republican National Committee.

??"Our goal is to get the focus back to Sacramento, where it belongs," Reed
said.

??Both sides see the same prize in this tug of war: the opportunity to
determine where most Californians direct their anger during what could be a
long, hot summer of power shortages.

??"The situation is that the public's minds are not made up on this
issue--whether it is Sacramento or Washington who has acted too little, too
late," said Mark Baldassare, a pollster at the independent Public Policy
Institute of California. "That gives both sides an opportunity to get their
messages out. The stakes are fairly high in terms of how the public in
California ends up assessing blame over the next few months."

??A Slight Uptick in Davis' Popularity

??Overall, Davis' political situation appears to be stabilizing. After months
of runaway power costs, the prices the state pays for wholesale electricity
are
falling and new plants will come online next month. And following a free fall
in
private polls, Davis has seen his numbers tick back up slightly. Similarly, a
poll financed by independent power generators showed that in mid-June, for the
first time in months, Californians were becoming slightly more confident that
the crisis is easing.

??Within the state Capitol, Davis is asserting himself, demanding that
lawmakers hold hearings on his rescue plan for Southern California Edison. On
Monday, he released details of a similar plan for San Diego Gas & Electric.
Last
week, he announced an agreement that is likely to increase generation by
alternative energy producers, who account for about a fourth of the state's
supply.

??"This guy is changing," said state Sen. Steve Peace (D-El Cajon), who a few
months back had been urging that Davis take a more aggressive stance on the
crisis. "There is a difference in his demeanor and focus."

??Yet the energy crisis still looms as a vast cloud over a reelection campaign
that once looked like a stroll on the beach.

??The paradox for Davis is that the substantive victory for price-control
advocates at the Federal Energy Regulatory Commission meeting this week may
complicate his political goal of maintaining a heavy focus on Washington.
Though
Davis and some congressional Democrats portrayed FERC's decision as
insufficient, it appears to have lanced the pressure for federal legislation
to
impose the tighter price controls that Davis supports.

??Sen. Dianne Feinstein (D-Calif.), a principal sponsor of that bill, on
Tuesday announced she would shelve the measure for six months to give the new
FERC plan time to work.

??As a result, the political effect of the FERC ruling could be to shift the
focus away from Washington back toward decisions in Sacramento, which is
exactly
what Republicans prefer. "Gray Davis is the dog that finally caught the car,"
said Dan Schnur, a San Francisco-based GOP consultant. "Davis is going to keep
screaming about price caps and refunds, but now Republicans can point to
substantive action."

??Davis: 'Much More They Should Do'

??For months, Davis has criticized Bush for refusing to support electricity
price controls and other measures that the governor says could ease
California's
energy crunch. At almost every opportunity, Davis offers the same message:
California is taking the steps it needs to, but Washington has failed to help
enough. That was precisely Davis' message Monday when FERC significantly
expanded the limited price caps it had imposed previously.

??While saying that FERC had "finally taken a step in the right direction,"
Davis added: "There is much more they should do"--including providing refunds
to
California for alleged overcharges. The overall tone of Davis' statement was
much more skeptical about FERC's action than the remarks from Feinstein, who
described the decision as "a giant step forward."

??Aides say Davis plans to repeat that two-part message in his appearance
today
before the Senate Governmental Affairs Committee, chaired by Sen. Joseph I.
Lieberman (D-Conn.). In his testimony, and in a round of scheduled television
appearances, Davis will demand that FERC order refunds in the range of $5
billion to $6 billion to the state, aides said. Davis also will distribute to
every member of Congress a 177-page book chronicling the state's response to
the
crisis.

??Inside the Bush White House, some officials see in Davis' cool response to
FERC's decision more evidence that the governor is determined to use the White
House as a foil in his reelection campaign. The prevailing view, one official
said, is that, no matter what concessions the administration offers, Davis
will
immediately raise the bar and demand something else--the way he did by talking
about rebates as soon as FERC offered tougher price controls.

??"That is Davis' M.O.," said one official involved in the White House's
energy
strategy. "He asks the administration to do something, the administration does
it, and then he attacks the administration for not doing enough. . . . He
needs
someone to blame."

??Davis aides reject that characterization, arguing that the governor is
merely
representing the state's interests against an administration that they
maintain
is favoring energy producers over consumers. But Davis advisors acknowledge
that
they have used focus groups to test campaign messages that pin the blame for
the
energy crunch primarily on Davis' Republican predecessor, Pete Wilson, and a
"Republican president who has failed to stop his rich friends in the energy
industry" from gouging consumers, one aide said.

??"You don't have to tell people in focus groups more than once how this is
connected," the Davis aide said.

??Gubernatorial Rivals Are Free of Blame

??Baldassare, the independent pollster, notes it may be especially imperative
for Davis to keep Bush's energy decisions in the spotlight because none of his
potential Republican opponents in 2002--California Secretary of State Bill
Jones, former Los Angeles Mayor Richard Riordan or businessman William E.
Simon
Jr.--is easily tagged with complicity in the problem. "None of them were
really
involved in the decision-making over deregulation," Baldassare said. "The only
one else to blame, in a political sense, is Washington and the Bush
administration."

??The new independent advertising campaign against Davis was inspired largely
by the fear of that strategy succeeding--damaging the standing in California
not
only of Bush but also of other Republicans, particularly those in Congress.
Reed, whose American Taxpayers Alliance is funding the ads, said he decided to
launch the campaign after Davis appeared to gain the upper hand in the media
debate following Bush's visit to California late last month.

??"The Bush trip really changed the terms of debate about Davis' problem and
made it more of a possible national Republican problem," Reed said. "The
entire
terms of debate turned around and was focused on the issue of price caps as
opposed to negligence on Davis' behalf. Our group is attempting to go out and
engage Davis."

??To "engage" Davis, Reed's group, which has not revealed its donors, is
spending what he said would be $1.5 million on an initial ad criticizing Davis
this week, though a spot check of TV stations around the state indicated a far
more modest buy. Reed said the group is planning to air a new ad as soon as
this
week.

??Democrats plan to answer the ads with attacks of their own and will be
filing
complaints with the IRS and other federal agencies about the anonymous funding
of the Reed ad.

??Today's Senate hearing will give Davis another chance to respond to the GOP
and make his case for greater help from Washington. But Lieberman aides
acknowledge the hearing is likely to be much less confrontational than it
would
have been if FERC had not acted Monday. The agency's decision "changed the
dynamic," the aide said.

??That assessment may apply not only to the conflict between FERC and its
critics but also equally to the hostilities between Davis and the White House.

??*

??Times staff writers Dan Morain in Sacramento and Mark Z. Barabak in Los
Angeles contributed to this story.

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

LENGTH: 2450 words

HEADLINE: COLUMN ONE;
Blackout Forecasts' Dark Side;
* If optimists are wrong and the power runs out, California's energy crisis
could quickly cost lives and cripple the economy.

BYLINE: JENIFER WARREN, TIMES STAFF WRITER

BODY:

??It's here. Summer 2001, the blackout season, is only a day away.

??Already Californians anticipate power outages when temperatures rise. By
August, the occasional annoyances endured so far--stoplights gone dark,
computers, air conditioners and elevators idled--could seem almost quaint.

??Gov. Gray Davis insists we needn't worry. Four large new power plants are
firing up soon, he said, and government's best and brightest are locking up
still more megawatts to help meet our peak summer need. Californians, Davis
predicts, will valiantly heed his call to conserve, helping the state survive
the hot months, no sweat.

??With luck, he'll be right. Power prices have stabilized, and some energy
analysts are wondering whether California may have tamed the blackout beast.

??But what if those plants don't get built in time, people don't trim their
electricity use 7% and energy imports are more meager than expected?

??And what if the state gets hit by a summer that is not moderately hot, as
Davis bets, but blistering, record-setting hot?

??Government experts who ponder such questions don't expect disaster in the
coming months. But they are planning for it nonetheless.

??At best, they say, Californians can expect some gridlocked intersections, an
occasionally overloaded 911 system, perhaps some business bankruptcies,
certainly inconvenience. At worst, the Western power grid could crash, causing
uncontrolled blackouts that might lead to looting, contaminated water
supplies,
even civil unrest.

??"How bad could this summer get?" said state Sen. Joe Dunn (D-Santa Ana).
"This summer could be the worst disaster to ever hit the state of California."

??Imagine it's a Thursday morning in the third week of July. Relentless heat
grips California, the curse of a stubborn high-pressure ridge that just won't
budge.

??As air conditioners from Redding to Chula Vista lumber to life, managers of
the state's power grid in Folsom gulp their third and fourth cups of coffee,
stare at a bank of computers and begin to fret.

??Demand is jumping. Supply is static, Canada and Arizona have nothing to
sell.
It's looking tight.

??Thirty minutes later, the picture is gloomier. A brush fire shuts down
transmission lines near Fresno, squeezing supply in the Central Valley. In the
Bay Area, the unusual heat drives demand well past projections.

??By noon things look bleak. Operators of the Diablo Canyon nuclear power
plant
near San Luis Obispo have cut output by 80%. The trouble? Chunks of kelp have
lodged in one of the plant's seawater intake valves, creating a clog like one
that plagued the facility in January.

??With a chorus of groans, the grid's keepers scour the market for power to
offset the Diablo loss. No luck. As the mercury climbs and the Golden State
economy roars into full swing, electricity consumption ticks upward, minute by
minute. And when managers of a power plant near Long Beach cut output because
of
a cracked turbine, everyone knows what it means.

??Alert the utilities. It's lights out, California, for the fourth day in a
row.

??Dr. J. Michael Leary dreads blackouts--not personally, but professionally.
Leary is an emergency room physician in the desert city of Rancho Mirage. When
air conditioners go on the blink there, the victims--scores of them, mostly
old
folks--wind up in his ER.

??In a normal year, 75% of his emergency patients are geriatrics. Like
infants,
the elderly are unusually vulnerable to the heat. When blackouts hit, they are
most at risk.

??"It's as if you lived in Maine and they turned the heat off in January,"
Leary said. "This is an extreme environment we live in. The effects can be
devastating."

??Many desert seniors are on fixed incomes and live in mobile homes, some of
them poorly insulated boxes that turn into ovens under the brutal summer sun.
Take away the air conditioning and the humans inside start baking, quick.

??For Leary, the specter of continual, back-to-back blackouts in July--and,
some predict, in June and August too--conjures images of an 82-year-old man,
living alone in one of those mobile homes, taking medication for heart
disease.
The cardiovascular drugs plague the man with numerous side effects; one
inhibits
his body's ability to cool itself.

??When a person gets overheated, body temperature eventually rises
uncontrollably. Then comes a nasty spiral of effects, and pretty soon "you go
into shock," Leary said. "Everything just shuts down."

??On average each year, 371 Americans die from heat-related causes, more than
the number killed by earthquakes, tornadoes, hurricanes, lightning and floods
combined. In 1995, a record hot spell in Chicago killed 465 people. Eleven
Californians died from the heat in 1998.

??A new report by the United Seniors Assn. predicts that more than half a
million elderly Californians could need hospitalization for heat-related
ailments this summer.

??Some communities have laid plans for cooling shelters, wading pools and
other
measures to provide relief. But will all who need help get it? Or get it in
time?

??Out in the desert, paramedics expect a crush of 911 calls when the power
goes
out and the ill, frail and frightened seek help. Leary and others at
Eisenhower
Medical Center will be waiting, armed with ice packs, cooled IVs and
ventilators.

??"I am very, very worried," the doctor said. "I think we'll see a great toll
in human suffering, even mortality."

??California's tomato processors are no less anxious. They wash, cook, peel,
chop, mash and can about 1 million tons of tomatoes a week from July to
October--enough to account for half the world's supply. For them, a string of
unexpected power losses could mean economic ruin in a matter of days.

??The reason lies in the peculiar nature of food processing--a sterile system
instantly contaminated if the power fails and the plant's precise temperature
is
disturbed.

??Once a batch of tomatoes is tainted, it must be thrown out--all 50,000
pounds. The plant must then be sanitized, a painstaking process that takes
about
36 hours.

??"If you get hit by blackouts every third day for, say, two weeks, you're
starting, stopping, cleaning, restarting--it's a nightmare," said Jeff Boese,
president of the California League of Food Processors. "You could lose three
batches and be out $40 million before you knew what hit you."

??Meanwhile, farmers with still more truckloads of tomatoes line up outside
the
plant, waiting to be paid for their crop: "If we can't process them, the
farmers
have spent an entire season growing them for nothing," Boese said.

??In Sonoma County, the object in peril is the chicken. Egg producers equip
their laying houses with fans and swamp coolers to keep the hens comfortable.
Power is also needed to run giant refrigerators filled with eggs.

??"In a blackout, those hens can overheat in no time," said Rich Matteis of
the
Pacific Egg and Poultry Assn. "In 20 or 30 minutes, you could have 100,000
birds
die."

??Many large producers have backup generators, but they are not designed for
ongoing, intensive use. Will they hold up? Small-scale egg producers often
have
no backup power at all.

??Hundreds of other California businesses could suffer if summer shapes up as
bad as some predict.

??The Valero Refining Co. of California, northeast of San Francisco, produces
115,000 barrels of gasoline a day. Because restarting a refinery is a
complicated task, two or three blackouts close together could prompt officials
to shutter it until electricity supplies stabilize--costing California about
10%
of its gasoline supply.

??At a Berkeley medical laboratory, doctors say power losses to their freezers
could destroy bone marrow needed to give young leukemia patients lifesaving
transplants. The state's 400 dialysis centers, where patients without kidney
function go to have their blood cleansed every other day, are in the same fix.
Few have backup generators, so when an outage hits, technicians must crank the
machines by hand.

??Most Californians, of course, face far more ordinary consequences. The
scoreboards will fizzle at summer softball games, joggers on treadmills will
be
stopped in their tracks, electric organs will go silent, leaving choirs to
sing
without accompaniment.

??Parents will be asked to retrieve children from day-care centers when the
lights and cooling systems conk out. Anniversary lunches may be ruined when
restaurants cannot grill salmon or blend margaritas.

??Most people will tolerate occasional disturbances, psychologists say, doing
their part in a time of crisis. But what if such irritations become an
everyday
fact of life?

??Hundreds of "essential" energy users--including prisons, fire departments
and
airports--are protected from blackouts, and hundreds more have applied for
exemptions. That means the pool of people bearing the blackout burden is
shrinking, so more frequent outages are likely.

??Blackout predictions vary widely, but at least one forecaster, a consultant
for California water districts, anticipates an outage almost every afternoon
of
every workday this summer if temperatures are unusually warm.

??Californians are accustomed to trash compactors, giant-screen TVs and having
the Internet at their fingertips. How much deprivation will they tolerate?

??"So far, the version of blackouts we've experienced hasn't looked too scary
to people--it happens on a workday, in the afternoon, and you basically have
to
come home and reset your VCR," said Dan Kammen, a professor of energy and
society at UC Berkeley.

??But if outages become daily events, and start to invade the evening hours,
the public mood could change abruptly.

??"When there's a disaster or crisis or trauma, people tend to act heroically
and work together," said Robert Butterworth, a Los Angeles psychologist and
trauma specialist. "But the civilized behavior only lasts a short period. Then
people start acting in unpredictable ways."

??That tendency may be exacerbated, Butterworth said, by the nature of the
energy crisis--not a natural disaster, but a man-made one.

??"People start to look for a scapegoat," he said. "People will look for a
target, and there's a tendency to strike out at whoever is closest to you."

??One place that tendency may surface, Butterworth said, is on traffic-clogged
roads. Blackouts already have led to scores of accidents. Add summer heat to
the
mix, and repeat the pattern day after day at rush hour, and motorists'
patience
could wear thin, law enforcement officials say.

??"We're bracing for . . . possible acts of violence and road rage," said
Sacramento County Sheriff's Lt. Larry Saunders.

??Lon House is the water consultant who predicts California could see
blackouts
almost every summer weekday. Among the worries for the 440 water agencies he
represents: losing the ability to pump water during wildfire season.

??"I'm telling them to be ready for a major earthquake every day this
summer--meaning all your power is out throughout your district for multiple
hours," House said.

??House insists he isn't an alarmist. But on top of the fire fears, he warns
that blackouts of more than a few hours would allow air into water pipes,
contaminating supplies. If that happens, Californians would be urged to boil
their water until the system can be disinfected from one end of the pipe to
the
other.

??Though rolling blackouts are risky, they remain essentially a controlled
phenomenon, occurring when and where the grid managers and utilities decide.
Far
more frightening--and devastating--are unexpected, cascading outages that
could
shut down the entire Western power grid. It happened in August 1996, leaving 4
million people without power during a triple-digit heat wave.

??The problem began when power lines in Oregon sagged into trees and shut
themselves off. That triggered a chain reaction of automatic switch-offs and
oscillating surges of energy that ultimately shut down all four of the main
power arteries between California and the Pacific Northwest.

??That robbed the system of thousands of megawatts--enough to power four
cities
the size of Seattle for four days--and scattered outages across California and
six other Western states. Thousands of customers were without power for more
than a day.

??Though such an episode is rare, California grid managers say it is more
likely today because the system is taxed by the ever-increasing load of
electricity it bears.

??"The system is very dynamic, and when it's heavily loaded and highly
stressed, like it is now, the smallest little thing could cause big trouble,"
said Kevin Bakker, who oversees California's connection to the greater Western
power grid.

??If a massive, uncontrolled outage should hit, the ramifications could be
dizzying, said Mike Guerin, chief of law enforcement for the state Office of
Emergency Services. Police departments would probably go to tactical alert,
guarding against looting by criminals who might take advantage of disabled
alarm
systems and darkened street lights.

??In hot areas, cities might convert municipal buses--parked with air
conditioners running--into cooling shelters, Guerin said. The state would
provide emergency generators to nursing homes and others in need, while the
California National Guard might be called into action.

??"With this kind of blackout scenario, you're not worried about the bologna
going bad in the refrigerator," Guerin said. "We're talking about doctors
doing
surgeries on backup generators for three days. We're talking about a lot of
things we don't like to think about."

??*

??Times staff writers Nancy Vogel and Alexander Gronke and researcher Patti
Williams contributed to this story.

??Heat-Related Deaths in the U.S.

??371 Average number of heat-related deaths annually

??*

??1,700 Most heat-related deaths in a single year (1980)

??*

??465 Number of people in the Chicago area who died during a July 1995
heatwave

??*

??11 Number of Californians who died of heat-related causes in summer 1998.

??*

??62% Percentage of heat-related fatalities 55 and older

??*

??Sources: U.S. Centers for Disease Control and Prevention, United Seniors
Assn.

??*

??Large Power Plants Coming Online This Summer

?????Plant ????????????????????????????Megawatts ??Online
??Sutter Power Project ??????????????????500 ??Aug. 1
???Los Medanos Energy Center ?????????????500 ??July 1
??Sunrise Power Project ?????????????????320 ??Aug. 1
??Huntington Beach Power Station ????????450 ???Aug. 1

??*

??Another 827 megawatts of power are expected to be available by Sept. 30 from
10 smaller "peaker" plants, designed to run at times of peak demand, usually
late afternoon.

??*

??Note: One megawatt is enough to serve between 750 and 1,000 homes.

??Source: California Energy Commission

GRAPHIC: PHOTO: Dr. J. Michael Leary, an emergency room physician in Rancho
Mirage, fears "a great toll in human suffering" during power outages.
PHOTOGRAPHER: BRYAN CHAN / Los Angeles Times GRAPHIC: Heat-Related Deaths in
the
U.S., Los Angeles Times

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

????????????????June 20, 2001, Wednesday, Late Edition - Final

SECTION: Section A; Page 14; Column 3; National Desk

LENGTH: 708 words

HEADLINE: Regulators' Order Could Bring Broad California Power Accord

BYLINE: ?By LAURA M. HOLSON with JEFF GERTH

DATELINE: LOS ANGELES, June 19

BODY:

??An order by federal regulators that power generators enter settlement talks
with the State of California could open the door to a sweeping compromise of
the
financial issues in the state's power crisis, energy industry analysts and
executives said today.

??But the question that remains -- and it is a vital one, they said -- is
whether the Federal Energy Regulatory Commission has the wherewithal to force
the warring parties to hammer out an understanding that, at its heart, is as
much about politics as about money.

???The commission on Monday gave California regulators and power generators
until July 9 to come up with a plan for settling accounts between the
generators
and California's struggling utilities. The power companies are owed billions,
but the state has accused them of price-gouging. If the parties cannot reach
some agreement, an administrative judge will step in and recommend a
settlement
to the commission instead.

??Asked at a Senate hearing in Washington today to clarify what he hoped to
accomplish as a result of the two weeks of settlement talks, the commission's
chairman, Curtis L. Hebert Jr., was noncommittal. The parties, he explained,
need two things for the talks to succeed: a deadline and uncertainty.

??Senator Dianne Feinstein, Democrat of California, expressed skepticism about
the undertaking. Ms. Feinstein said at the hearing, held by the Senate Energy
and Natural Resources Committee, that she was concerned that the commission
had
laid out "no rules" for the talks.

??"Very little, if any, money has changed hands as a result of prior
settlement
conferences," she said.

??Many industry executives and state officials have not yet seen the
commission's order, and they were scrambling today to figure out exactly what
they were being asked to do.

??"Without seeing what exactly is in the order, who knows?" said Sean
Gallagher, a staff lawyer for California's Public Utilities Commission. "But
we
wouldn't turn our noses up at participating in negotiations."

??Gary Ackerman, executive director of the Western Power Trading Forum, a
coalition of energy traders and electricity generators, noted that the federal
regulators' timetable "has a very short fuse." And the fact that the state's
biggest utility, the Pacific Gas and Electric Company, has filed for
bankruptcy
will complicate efforts to reach a comprehensive agreement, he added.

??"I don't hold high hopes that a settlement would work out," Mr. Ackerman
said, "but I commend the FERC for taking a stab."

??Moreover, the parties to the settlement talks may lack an element vital to
successful negotiations: trust.

??Several California entities, including the Public Utilities Commission, are
investigating whether generators took advantage of consumers by charging
excessive prices for power. ?The Independent System Operator, which runs the
state's power grid, released a study in March concluding that Californians
might
have been overcharged for electricity by more than $6 billion. One state
government negotiator said the California attorney general's office could
file a
suit against the power generators in the next few weeks.

??And as state officials, including Gov. Gray Davis, continue to hurl attacks
at the generators, calling them pirates and profiteers, the companies and
California utilities are blaming legislators, saying they failed to address
the
power crisis quickly enough.

??In March, Duke Energy, one of the companies the state has accused of
profiteering, offered to negotiate a broad settlement, but Governor Davis
ruled
out calling off the state's inquiries as part of any agreement.

??The outlines of Duke's proposal included a compromise on the money owed by
California utilities, in exchange for the dropping of private lawsuits,
California's complaints to federal regulators and the state investigations.
Duke
would have admitted no wrongdoing.

??In formal proceedings, the power generators to date have vigorously fought
discounting the debts they are owed by California.

??The Federal Energy Regulatory Commission has ordered generators to refund
nearly $130 million in what it judged to be overcharges. Today one of the
commissioners, William L. Massey, said 80 percent of that money had not been
collected.

??http://www.nytimes.com

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

????????????????June 20, 2001, Wednesday, Late Edition - Final

SECTION: Section A; Page 14; Column 3; National Desk

LENGTH: 1022 words

HEADLINE: The Lesson of When to Give Aid to Free Markets

BYLINE: ?By DAVID E. SANGER

DATELINE: WASHINGTON, June 19

BODY:

??Three weeks ago George W. Bush addressed a sympathetic audience of business
executives at the Century Plaza Hotel in Los Angeles and declared that his
administration "will not take any action that makes California's problems
worse,
and that's why I oppose price caps" on electricity.

??As he spoke, the Democratic governor of California, Gray Davis, sat
impassively on the dais, preparing to meet Mr. Bush and then denounce him for
failing to protect California consumers from an electricity market gone wild.

???Today, the White House halfheartedly welcomed action by federal regulators
to impose throughout the West a system that looks and smells a lot like price
caps -- though the White House said it was something different.

??"This is not a price control," Ari Fleischer, the White House spokesman,
said. "This is a market-based mitigation plan that now will extend to 11
Western
states."

??In fact, it bore some resemblance to a proposal made by 10 leading
economists
who urged a middle ground between fixed prices and a deregulated electricity
market. Mr. Davis used their proposal to support his position in favor of
limited price restraints when Mr. Bush visited California.

??The White House shift from outright opposition to price controls to its more
nuanced position today exemplifies how Mr. Bush has tempered his embrace of
completely unfettered markets in recent weeks. He didn't have much choice.

??As the threat of blackouts loomed, demands for action rose from officials of
both parties and from consumers in the West. It was almost possible to hear
sighs of relief at the White House today that the Federal Energy Regulatory
Commission -- an independent body in the Energy Department -- had moved to
turn
down the political heat.

??In fact, while some House Democrats are still pressing for firmer caps on
prices, Senators Dianne Feinstein, Democrat of California, and Gordon H.
Smith,
Republican of Oregon, withdrew a bill that would have placed strict price
controls on electricity sold in Western markets.

??Senator Feinstein said the White House could call yesterday's regulatory
action "mitigation" or anything else it pleased.

??"A rose is a rose by any other name," she said today.

??And a free market is not always free. Two weeks ago the administration said
it would rescue steel companies and steelworkers who have long complained
about
unfair competition from South Korea, Taiwan, China, Brazil, Germany, Russia
and
Ukraine. The White House defended the action by saying it was the only way for
the industry to adjust to a new competitive environment.

??Last month, with no major announcements at the White House, the Bush
administration voted for International Monetary Fund aid to two countries,
Turkey and Argentina, that (like California) had made some economically
disastrous political decisions.

??In each case, Mr. Bush's economic orthodoxies were tempered by political
realities.

??The California crisis was one thing when it involved a Democratic governor
in
a state Mr. Bush lost by a million votes; it was another, one of his aides
conceded today, when congressional Republicans from around the West were
warning
Mr. Bush that blackouts and sky-high prices could blow up in his first year in
office.

??"We heard from a lot of members of Congress who feared that Republicans
would
be tarred with worsening the problem, even though it happened on Gray Davis's
watch," the political aide said. "The president took that on board."

??Similarly, the steel decision was partly about enforcing laws against
"dumping" foreign products in the market -- and partly about Mr. Bush's desire
to convince labor unions not to block his trade agenda. Like Californians
coping
with higher energy prices, the steelworkers need time to adjust to a new
world,
the administration said.

??"Open markets improve the lives of people by increasing opportunity, choice
and economic freedom," Robert B. Zoellick, Mr. Bush's trade representative,
said
in an interview today. "But compassionate conservatism also recognizes the
reality that the effects of rapid change fall harder on some communities and
industries," which, he said, need "vital breathing space to adapt to change."

??While Mr. Bush expressed deep reservations about I.M.F. bailouts during the
presidential campaign, the situation seemed a bit more complicated once he got
to Washington. The State and Defense Departments feared that if Turkey were
engulfed in economic chaos, and blamed the United States for failing to come
to
its aid, its leaders might be less inclined to let American fighter jets use
its
territory to mount missions over Iraq.

??So given the choice between letting the Turkish people pay a high price for
political mistakes -- Californians take note -- and weakening American
pressure
on Saddam Hussein, Mr. Bush decided that economic niceties were less important
than political consistency. Mr. Bush chose the Pentagon over the Treasury.

??Administration officials said these actions did not represent a retreat from
let-the-markets-prevail orthodoxy.

??Lawrence B. Lindsey, Mr. Bush's chief economic adviser, said in an interview
today that he opposed price caps at the beginning of the California crisis and
that he opposed them now. But he would not criticize the federal commission
for
"mitigating" price spikes in the market.

??"What they are trying to do is achieve two incompatible missions --
preserving what is called 'just and reasonable pricing' and assuring an
adaquate
supply of electricity," Mr. Lindsey said. Yet the reality, he added, is that
new
supplies of electricity will not become available for a year or more. "FERC is
doing its best to square that circle in the face of the fundamental problem,
which is inadequate supply," he said.

??That is the kind of argument that keeps economists happily arguing for
hours.
It is not likely to be the kind of argument Mr. Bush himself is likely to
engage
in for long. As one of his political advisers said the other day, "Don't think
about this purely in terms of megawatts. We need to produce more electricity,
but we also need to produce some more seats in the House."

??http://www.nytimes.com

GRAPHIC: Photo: Senators Gordon H. Smith, Republican of Oregon, and Dianne
Feinstein, Democrat of California, spoke yesterday before a hearing on
electricity prices. The chart showed power rates in two parts of California.
(Associated Press)

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

????????????????June 20, 2001, Wednesday, Late Edition - Final

SECTION: Section A; Page 22; Column 1; Editorial Desk

LENGTH: 503 words

HEADLINE: At Last, Action on California

BODY:

??After months of dithering, the Federal Energy Regulatory Commission took
some
potentially meaningful steps on Monday to contain the wholesale price of
electricity in California and elsewhere in the Western United States. Anxious
not to be seen as caving in to public pressure or abandoning its fidelity to
the
free market, the White House described the new policy as "consistent with
where
the president has been all along." Gov. Gray Davis of California, for his
part,
said the policy did not go far enough, and of course only time will tell
whether
it does. But to many others, including Senator Dianne Feinstein of California,
the move amounted to the first significant federal intervention in the
California wholesale market since the crisis began last year. Ms. Feinstein
withdrew her own price-cap bill pending the outcome of the new plan.

??Under the new arrangement, approved unanimously by a reshuffled five-member
Regulatory Commission, price limits will be based on the cost of producing
electricity at the least efficient generator. The formula covers the sale of
electricity for immediate delivery -- the so-called "spot market" that
supplies
about 20 percent of California's needs and that California turns to when it is
desperately trying to keep the lights on. The companies will be allowed to
charge higher prices during peak periods, but not the huge sums they command
today.

???In addition, the constraints will apply throughout 10 other Western states,
presumably eliminating any incentive for generators to withhold power from the
California market in order to obtain a higher price elsewhere. The controls
are
to expire in September of next year, which should relieve some of the
administration's earlier fears that constraints of any kind would discourage
investment in new and badly needed sources of supply.

??The benefits will not immediately be felt by California consumers. Both
individuals and businesses have recently been hit by rate increases belatedly
imposed by the state's Public Utilities Commission at Mr. Davis's request. But
the new plan should ultimately benefit taxpayers by lessening the impact of
higher energy costs on the state government, which has been buying power on
behalf of the state's two largest utilities, both essentially insolvent.
Recent
estimates have suggested that California, which paid $7 billion for
electricity
two years ago, could pay as much as $50 billion this year.

??Until quite recently the president and his energy czar, Dick Cheney, had
seemed almost indifferent to California's needs. But Republican members of
Congress from California and other Western states have been growing
increasingly
restive as they contemplate the potential political fallout in the midterm
elections of 2002. In addition, the two newest members of the regulatory
commission, both Bush appointees, have expressed sympathy for California's
plight. Whatever the reason, the administration appears to have seen the
light,
even though it is reluctant to admit it.

??http://www.nytimes.com

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

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

???????????????????????????June 20, 2001, Wednesday

SECTION: WASHINGTON DATELINE

KR-ACC-NO: ?K0253

LENGTH: 808 words

HEADLINE: Senate Democrats drop price caps bill; energy commissioners go to
Hill

BYLINE: By Dena Bunis

BODY:

??WASHINGTON _ Federal regulators could turn out to be heroes or goats
depending on whether Monday's price cap ruling helps California turn the
corner
on its electricity crisis.

??It could be years before anyone can legitimately make that call. Meanwhile,
spin abounds and Californians who ultimately pay the energy bills will have to
sit tight and hope.

??Several factors combine to make it difficult, experts say, to predict how
much good the soft price cap ordered by the Federal Energy Regulatory
Commission
will do.

??"I can think of an awful lot of different reasons" that would affect energy
prices, said Robert Michaels, professor of economics at UC Fullerton and a
consultant to power producers.

??The weather, lower natural gas prices, new power coming on line,
conservation
and long term contracts all contribute to lower prices. Those things all
figure
into the price the state _ and, if they get back into the market, utilities _
pay for electricity.

??Experts poured over the order when it was finally released late Tuesday,
saying the fine print is crucial to how the market will be affected.

??"It's a positive development, but it's just half the battle," said
California
Gov. Gray Davis' spokesman, Steve Maviglio. "The other half is getting the
refunds to back to California," he added, referring to alleged generator
overcharges.

??"The fight is not over."

??Davis will testify Wednesday morning before the Senate Committee on
Government Affairs, along with the FERC commissioners.

??Not everyone was happy with FERC's turnaround.

??Julie Simon, vice president of policy at the Electric Power Supply
Association, the national trade association for power, said the order is
"incredibly intrusive. It worries me that this could have a detrimental impact
on California getting the investment that it needs and the type of market
structure, so people can get the benefits of competition."

??Whatever happens with prices, nothing in the order will do anything to ease
the chances of blackouts, says a former California Public Utilities Commission
chairman.

??"Blackouts are in the short term and have nothing to do with the price of
electricity," said Mitch Wilk, a utility consultant who ran the PUC from 1986
to
1991.

??Despite the uncertainties, there was enough confidence that the FERC action
would at least stabilize a chaotic market that even Sen. Dianne Feinstein,
D-Calif., a fierce critic of the agency, thanked the commissioners who
appeared
before the Senate energy committee on Tuesday.

??She and Sen. Gordon Smith, R-Oregon, pulled back their bill that would have
established cost-based price caps in the West.

??"Let's watch and wait and see how this order works," Feinstien said.

??As the pressure mounted politically for price controls two things happened:
Republicans _ even President Bush _ began talking about caps that weren't
really
caps. And energy analysis and economists normally opposed to such regulation
began to soften.

??"I would fear price caps which don't have any market connection," said
Steven
Fetter a utility bond rater with Fitch Inc. in New York. Fetter testified
before
the Senate energy panel on Tuesday. This plan, he said, "maintains a
connection
to the supply and demand patterns. That is definitely a positive."

??Fetter predicted that if the order, once implemented in all 11 states in the
West, "should ramp down some of the volatility.

??"I came all ready for a brawl over price caps," he said. "And instead got a
love fest regarding regulations."

??FERC Chairman Curt Hebert, whose turnaround on this issue has been
attributed
to political pressure and the presence of two new GOP commissioners committed
to
helping California, continued to insist Tuesday that the price controls were
not
caps. He said May and June's low prices are proof that the more limited price
controls put on in April are working.

??"The approach has been working and I believe it will work better," Hebert
told the senators. "Spot prices in California and the rest of the West are
lower
than at anytime in the last year."

??Lower prices do eventually filter down to consumers. Stable prices mean
large
rate increases can probably be avoided.

??But long term, Wilk said, "electricity rates are going to go up, no matter
what happens. The days of cheap electricity and no power plants are long
over."

??Regardless of whether the caps themselves serve to keep prices at least in
check, this order has changed the playing field, says Wilk.

??"It's a new ballgame," he said. This order sends a signal to generators,
Wilk
added, that " to the extent they were trying to play around, either legally or
illegally (with prices) thinking they have sympathetic ears in Washington,
that
those days are over."

??(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

LOAD-DATE: June 20, 2001

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

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

???????????????????????????June 20, 2001, Wednesday

SECTION: WASHINGTON DATELINE

KR-ACC-NO: ?K0244

LENGTH: 1181 words

HEADLINE: Feinstein drops price caps bill; energy commissioners go to Capitol
Hill

BYLINE: By Jim Puzzanghera

BODY:

??WASHINGTON _ Like a steam valve on an overheating boiler, the move by
federal
regulators to enact broad new electricity price controls in the West has
relieved much of the growing political pressure for stronger action _ for now.

??Sen. Dianne Feinstein removed one major source of that pressure on Tuesday.
Satisfied that the Federal Energy Regulatory Commission has taken "a giant
step
forward" in curbing California energy prices, Feinstein withdrew her
legislation
to enact price caps on wholesale electricity prices throughout the West.

??"Let's watch and wait and see how this order works," Feinstein told members
of the commission during a Senate hearing.

??But while the battle over the actions of federal regulators may have
subsided, the larger political war over energy prices continues.

??California Gov. Gray Davis, who has been pounding away at the Bush
administration for weeks for not providing enough help for the state, will
step
into the fray here today. The governor will appear at a Senate hearing where
he
will praise federal regulators for moving in the right direction with their
new
plan. But he's expected to continue to press for harder price caps and
criticize
federal regulators for taking months to act while the state drained billions
from its budget to pay for electricity.

??Davis will question some aspects of the plan, such as lack of strong action
on forcing refunds from suppliers. "He wants to make sure that Congress gets
the
message loud and clear that we want our money back from the overcharges by
generators," said Davis spokesman Steve Maviglio.

??But the Republicans are just as eager to lay responsibility for the
electricity crisis on Davis, who is up for re-election next year. A
hard-hitting
Republican-backed television advertising campaign in California organized by
Scott Reed, a former executive director of the Republican National Committee,
blames the Governor for failing to act quickly when the crisis first emerged.

??The politics of shifting blame are likely to set the tone for the hearings
organized by the new Democratic chairman of the Senate Governmental Affairs
Committee, Sen. Joe Lieberman, D-Conn. Davis and all five FERC commissioners
have been invited to the hearing to determine if the commission has lived up
to
its legal obligation to ensure "just and reasonable" electricity prices in
California.

??With that oversight hearing pending this week, the commission called a
special meeting Monday and took stronger action. It expanded existing
electricity price controls around the clock and to all 11 Western states.
Under
the commission's plan, ceiling prices will be set that suppliers can exceed as
long as they provide justification for the higher price. A hard price cap
would
set a price that could not be exceeded.

??Commission Chairman Curt Hebert, a Republican, said politics played no role
in enacting the new plan. But Commissioner William Massey, one of two
Democrats
on the five-member commission, acknowledged that political pressure in recent
weeks from Republicans and newly empowered Democrats in the Senate had an
impact.

??"We are an independent agency but we operate in a highly charged political
environment. I would not imply that we did not rule on an independent basis
here, but you know, this is Washington, D.C. for God's sake," Massey told the
San Jose Mercury News Tuesday. "I think that it was enlightening to the agency
that this wasn't just a Democratic question, this was Democrats and
Republicans
throughout the West saying, 'My God, solve this problem.' And so we hope we
have."

??The White House, which had opposed any form of price controls, also moved to
adjust to this political reality.

??"To the degree that it is a market-based program, this is in keeping with
what the president said, and the president is pleased to be able to help
California in that manner," White House spokesman Ari Fleischer said. "It does
not change the president's fundamental view that a separate economic matter,
which would be price controls, would not be productive."

??But Democrats are eager to point to the shift in stance as evidence that the
White House realized it was paying too high a political price for its earlier
position, insisting that the electricity crisis was largely California's
problem
to solve.

??"The Bush administration is realizing the jig is up. The game is over,"
Boxer
said. "They're attitude of hands-off has hurt them deeply."

??Democrats in the House of Representatives have vowed to continue pushing for
a vote on their own price caps bill. The legislation is adamantly opposed by
Republican leaders in Congress, who believe the Federal Energy Regulatory
Commission's actions on Monday are enough government intervention.

??"I hope that its actions are based on market principles- not political
half-measures," said House Majority Whip Tom DeLay, R-Texas. "It's now time
for
Gov. Davis to stop pointing fingers and shifting blame."

??Feinstein has vowed to quickly resurrect her bill if electricity prices
shoot
up dramatically again. Sen. Barbara Boxer, D-Calif., said she will introduce
legislation to force FERC to order power suppliers to refund what the state
says
are billions of dollars in overcharges for electricity sales.

??The commission has set up a settlement conference for the state, suppliers
and utilities to settle the contentious refund issue by July 10. If no
settlement can be reached under the auspices of an administrative law judge,
the
judge will make a recommendation to the commission and it will resolve the
dispute, Hebert said.

??Massey had supported Feinstein's legislation to force him and his fellow
commissioners to enact price caps. But after the commission unanimously
approved
its expanded price control plan, he joined the other five commissioners on
Tuesday in urging the Senate Energy and Natural Resources Committee not to
pass
such a law.

??The commission's chairman, Curt Hebert, strongly warned against legislative
action, saying, '"I believe in my heart, and I know in my educated mind, that
we
are on the right track."

??But the issue disappeared Tuesday as Feinstein and the Republican co-sponsor
of the price cap legislation tabled their plan.

??"I think it renders substantially moot the legislative efforts that she and
I
were pursuing," Sen. Gordon Smith, R-Ore., said of the commission's new price
control plan. "And I do believe that effort would have won large majorities in
the Senate and the House, and so I think what you are doing is reflecting the
will of the elected representatives of the American people."

??Feinstein said that whatever the commission calls the plan, it is close
enough to hard price caps to merit a chance to work.

??"I view this action by FERC as a giant step forward and I'm very grateful to
you," she told the commissioners. "I also view the fact that Sen. Smith and I
have worked hard on this bill perhaps has been helpful in urging you along."

??(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 20, 2001, WEDNESDAY, FINAL EDITION

SECTION: NEWS; Pg. A1

LENGTH: 1126 words

HEADLINE: Experts say state must seize the day;

ANALYSIS: Price caps set stage for future

SOURCE: Chronicle Staff Writer

BYLINE: David Lazarus

BODY:
One day after federal authorities ordered long-sought electricity price caps
throughout the West, analysts said yesterday it is up to California to respond
with measures to bring an end to the state's long, frustrating experiment with
deregulation.

???Possible steps the experts point to include raising power bills, easing
pollution controls and spending billions of dollars in taxpayers' money on new
plants.

???"Gov. (Gray) Davis and his team have been making this up week by week,"
said
Paul Joskow, director of the Center for Energy and Environmental Policy
Research
at the Massachusetts Institute of Technology.

???"It's time for them to get together with the Federal Energy Regulatory
Commission (FERC) to come up with some solutions," he said. "The state needs
to
get down to business and decide how the power market is going to look 18
months
from now."

???Easier said than done. To date, California's strategy for tackling its
energy woes largely has consisted of wheedling, cajoling and all but begging
federal officials to come to the rescue.

???Now that the federal regulators have gone much of the way toward granting
the state's wishes, analysts said Davis and other officials must act swiftly
and
decisively to further remedy California's prolonged power troubles.

???For his part, however, the governor feels that federal regulators have not
done enough. He will push today during congressional hearings in Washington
for
billions of dollars in refunds for California ratepayers.

???"FERC has taken some first steps, but the proverbial fat lady hasn't sung,"
said Steve Maviglio, a spokesman for Davis.

???This persistent focus on federal assistance could slow progress toward a
lasting solution to California's problems, some analysts believe.

???"We are still likely to experience blackouts this summer," said Michael
Zenker, director of Cambridge Energy Research Associates in Oakland. "It's not
yet clear that the state will do what it can to address other aspects of the
problem."

???Put simply, such steps would require enormous political courage -- and
would
be very expensive. In the end, taxpayers and ratepayers will bear the burden
for
this prolonged fiasco.

???Among measures under consideration:

???-- Raising electricity rates even higher. Although Californians got the
largest rate increase in state history last month, even higher charges would
promote conservation and lessen the need for California to borrow billions of
dollars in the bond market.

???-- Loosening emissions restrictions for power plants statewide. This would
provide more electricity during shortages but turn back the clock on
California's strict environmental standards.

???-- Building new plants at taxpayers' expense. This would guarantee a steady
supply of juice but would leave the state struggling for years to recoup the
huge investment costs.

???Of the three, easing pollution controls is the easiest first step and the
most likely, analysts said. Such environmental protections have been roundly
criticized by power industry officials who claim the restrictions have
hampered
the construction of new generating plants.

???Taxpayer-financed power plants are possible under a new state power
authority backed by the governor, but the timing and financing remain
undecided.

???Higher electricity rates could be the toughest move to make, analysts
agree.
They note that Davis will seek re-election next year and doesn't want to be
seen
as the governor who sent voters' power bills into the stratosphere. Already,
critics are trying to paint him as the governor who was asleep at the power
switch.

???As federal regulators were moving at last on the price-cap front this week,
another big development took place closer to home Monday when Davis disclosed
a
tentative deal with Sempra Energy's San Diego Gas & Electric Co. The plan
calls
for the state to purchase the utility's 1,800 miles of power lines for nearly
$1
billion.

???As with a similar accord reached with Southern California Edison, the
Sempra
deal is intended to counter the catastrophic effects of California having
deregulated wholesale power prices but not allowing the state's utilities to
pass on costs to customers.

???Between them, California's three major utilities have rung up more than $15
billion in debt.

???Here, too, the state appears unsure how to proceed. Both the Sempra and
Edison agreements require approval from the Legislature. It's anyone's guess
whether such approval is forthcoming.

???"It's going to be a really, really tough sell," said Nettie Hoge, executive
director of The Utility Reform Network in San Francisco. "These aren't
fabulous
deals."

???ONE SCENARIO FOR UTILITIES

???Rather, she believes the agreements will be reworked so that less taxpayer
money changes hands while allowing the utilities to retain possession of their
power systems.

???Hoge said this could subsequently influence a speedy resolution of Pacific
Gas and Electric Co.'s bankruptcy proceedings. If it can avoid selling off key
assets like power lines, PG&E may be more open to any settlement plans put
forward by the state.

???"The utilities are all going to end up with similar deals," Hoge forecast.

???State Senate President Pro Tem John Burton, D-San Francisco, isn't so sure.
He observed that the Edison deal hinges on a sale of the utility's power lines
to the state, while the Sempra accord could stand even without such a
transaction.

???"The two deals are totally unrelated," Burton said, adding that approval of
the Edison accord is "very much in flux." A bankruptcy filing by the state's
second-largest utility remains a distinct possibility, he said.

???This would only increase the importance of price caps in bringing some
stability back to California's power market.

???While the state's current rate freeze will continue cushioning consumers
from the volatility of wholesale electricity prices, the caps -- or "price
mitigation," as federal regulators are calling it -- will limit the amount
that
power generators can charge on the open market.

???SYSTEM HAS FLAWS

???It is not a perfect system: Power companies can base prices on the cost of
running the least-efficient -- and thus costliest -- generating facility. But
this amount almost certainly will be below some of the more outrageous prices
seen when the sky was the limit.

???On at least one occasion this year, California's wholesale power price
topped $3,000 per megawatt hour, compared with just $30 about a year ago.

???"This is a plan that is good for California, good for the Pacific Northwest
and good for the entire West," said FERC Chairman Curt Hebert.

???That remains to be seen. As it stands, the price caps will remain in effect
through next summer.E-mail David Lazarus at dlazarus@sfchronicle.com.

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

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

???????????????????JUNE 20, 2001, WEDNESDAY, FINAL EDITION

SECTION: NEWS; Pg. A13

LENGTH: 683 words

HEADLINE: Potrero Hill power plant hit by 2 lawsuits;

Neighbors, city ask court to cut back hours of operation

SOURCE: Chronicle Staff Writer

BYLINE: Rachel Gordon

BODY:
The San Francisco city attorney joined forces with environmental and community
groups and sued in federal court yesterday to force the operator of the
Potrero
Hill power plant to cut its ramped-up electricity output until more rigorous
pollution controls are installed.

???The plant, run by Mirant Corp., increased its output in response to Gov.
Gray Davis' move to relax environmental laws on power producers and generate
more electricity for Californians.

???The lawsuits, filed against Mirant in U.S. District Court, allege the
company is illegally operating its so-called peaker plants. The suits appear
to
be the first challenge in California to Davis' efforts to produce more power.

???The Potrero Hill plant, which runs during times of peak demand, has a total
of six turbines that generate 156 megawatts of electricity, enough to power
156,000 homes. Each turbine is permitted to operate 877 hours a year -- a
threshold that already has been exceeded.

???Mirant struck a deal March 30 with administrators of the Bay Area Air
Quality Management District -- the regional agency that regulates air
pollution
-- to run the plants as much as needed to keep up with the energy demand. In
return, Mirant will pay $20,000 per ton of excess emissions of nitrogen
oxides,
a pollutant that causes smog. The company placed $400,000 on deposit.

???"The Mirant Corporation is behaving like an outlaw and the air district is
their willing accomplice in violating clean air laws," said Mike Thomas, an
organizer with Communities for a Better Environment, one of the plaintiffs.

???The other groups that sued are Bayview-Hunters Point Community Advocates
and
Our Children's Earth.

???The city filed a separate suit over the same issue.

???The lawsuits ask the court to order Mirant to stop operating beyond the
877-hour cap until it obtains new permits. The city and environmental groups
argue the permits for expanded operation are required by the federal Clean Air
Act.

???The lawsuits also demand that more stringent pollution controls be
installed
on the peakers. The increased power production poses a potentially serious
health risk to the people who live and work in the surrounding neighborhood,
the
plaintiffs charge.

???Because the peaker plants weren't originally intended to run full time,
they
aren't equipped with the most up-to-date pollution controls.

???The plaintiffs also allege the air district regulators violated the
California Environmental Quality Act by failing to conduct thorough reviews of
the expanded operation and not allowing for public comment.

???"We as a city are not saying no to power. We're saying there's a process
and
they need to follow it," said San Francisco Supervisor Sophie Maxwell, who
represents District 10 where the power plant is located.

???Terry Lee, a spokesman for the air district, said her agency and Mirant did
nothing illegal. Mirant spokesman Patrick Dorinson concurred.

???They pointed to Davis' executive orders earlier this year that gave power
companies the right to step up production without going through the normal
permit process and adhering to the stricter pollution controls.

???William Rostov, an attorney for Communities for a Better Environment,
contends Davis does not have authority to override federal air quality laws.
Lee
said the U.S. Environmental Protection Agency signed off on the governor's
plan.

???The plant, near 23rd and Illinois streets, long has been a target of
neighbors trying to close it. Mirant is hoping to build a new 540-megawatt
plant
on the site that uses cleaner-burning natural gas. The existing plant burns
highly polluting distillate oil.

???Lee said the money Mirant is paying for the extra emissions will help
reduce
air pollution in Potrero Hill. The efforts include placing filters on Muni
diesel fuel buses that operate in the neighborhood and installing a
lower-polluting engine on a tug boat that runs off the nearby shores.

???"Is this a perfect situation? No," Lee said. "But under the governor's
executive orders this is the way we're proceeding."E-mail Rachel Gordon at
rgordon@sfchronicle.com.

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

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

???????????????????JUNE 20, 2001, WEDNESDAY, FINAL EDITION

SECTION: NEWS; Pg. A11

LENGTH: 729 words

HEADLINE: Fed price caps placate Demos;

But Feinstein's bill to regulate energy producers was more strict

SOURCE: Chronicle Washington Bureau

BYLINE: Carolyn Lochhead

DATELINE: Washington

BODY:
With federal regulators moving to cap prices on wholesale electricity,
California's Dianne Feinstein and other Senate Democrats yesterday withdrew
their threat to do it for them.

???"A rose is a rose by any other name," Feinstein declared to the five
members
of the Federal Energy Regulatory Commission, the day after they unanimously
imposed a sweeping price ceiling on electricity throughout eleven western
states.

???"I'm very grateful," Feinstein told the commissioners, who were called to
testify to the Senate Energy and Natural Resources Committee. "Let's watch and
wait and see how this order works."

???Feinstein had been leading the Democratic charge in Washington to force
FERC
to impose price controls; indeed, yesterday's hearing had been intended to
highlight the agency's inaction. Gov. Gray Davis is still billed to appear
today
at another Senate panel headed by Sen. Joe Lieberman, D-Conn., to investigate
price gouging.

???The 60-page FERC order, which takes effect at midnight tonight and remains
until September 2002, limits prices based on the cost of the least-efficient,
and therefore highest-cost, generating plant. It is intended to mimic the way
a
competitive market functions.

???While Democrats hailed FERC's move, power generators and marketers warned
that it would backfire, leading to more blackouts and stifling investment in
new
power plants.

???"It doesn't create or conserve a single megawatt in California or the
West,"
said Enron spokesman Mark Palmer. "Government price controls always have
unintended consequences, and history has proven that those have never been
good
for consumers."

???Joe Bob Perkins, president and chief operating officer of Reliant Energy,
bluntly called the price caps "a political response" to California's crisis
that
ignores the basics of supply and demand.

???"Price caps don't work," Perkins said in a statement. "This fact has been
proven over and over in the context of virtually every business sector in
which
government regulators have experimented with such measures."

???The Bush administration, which has fought electricity price caps since
taking office in January, yesterday insisted that FERC had actually spurned
them.

???"It's important to note that FERC rejected price controls," said White
House
spokesman Ari Fleischer, who instead called it "a market-based mitigation
plan."

???He added the order is "in keeping with the president's desire to help the
state of California and to make certain that there is no illegal price gouging
carried on by any companies."

???FERC's action coincided with the arrival of two new Bush appointees to the
agency, Patrick Henry Wood III, a former Texas utility regulator, and Nora
Mead
Brownell, a former Pennsylvania regulator.

???The soft-spoken, boyish-looking Wood yesterday sought to allay Feinstein's
lingering concerns that the new price control scheme would still permit
generators to manipulate the market.

???Feinstein's bill would have gone further than the new FERC plan, imposing a
cost-of-service based price cap that would return California to the regulatory
regime it had before its 1996 electricity restructuring.

???"I am personally not allergic to that sort of remedy," Wood told the panel
-- a position that is toxic to the Bush administration's former opposition to
price caps. "The cost-of-service regime was good enough for 80 years," Wood
said. "We're trying to move away from it but we can still do it."

???FERC's action, followed by Feinstein's bill withdrawal, quickly defused a
mounting political confrontation between the Bush White House and Democrats
over
price caps -- one that saw Capitol Hill Republicans beating a retreat.

???Democrats argued that Bush, by refusing to impose price controls, was
allowing out-of-state generators based mostly in Texas to gouge California
consumers.

???The administration, especially Vice President Dick Cheney and Energy
Secretary Spencer Abraham, had insisted that price controls would backfire by
reducing electricity sales and power plant investment, making the state's
blackouts worse.

???Yesterday, Sen. Gordon Smith, an Oregon Republican who co-sponsored
Feinstein's bill, as much as said the White House would have lost the fight.
Smith said their measure "would have won large majorities in both the Senate
and
House" had it gone to a vote.E-mail Carolyn Lochhead at
clochhead@sfchronicle.com

GRAPHIC: PHOTO, Sens. Gordon Smith, R-Ore., and Dianne Feinstein, D-Calif.,
conferred on Capitol Hill yesterday. / Associated Press

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??????????????????????Copyright 2001 The Washington Post

?????????????????????????????The Washington Post

???????????????????June 20, 2001, Wednesday, Final Edition

SECTION: A SECTION; Pg. A06

LENGTH: 1093 words

HEADLINE: Davis Finds Hope in Calif. Power Crunch

BYLINE: Rene Sanchez and Peter Behr, Washington Post Staff Writers

DATELINE: LOS ANGELES, June 19

BODY:

???Sinking in the polls, under attack by a new Republican advertising campaign
and still struggling to avert a summer of blackouts, California Gov. Gray
Davis
(D) nevertheless seems heartened about the latest developments in the power
crisis that has engulfed his state and threatened his political career.

???On his first trip to Washington in months, Davis will detail California's
plight Wednesday in testimony to a Senate committee newly led by sympathetic
Democrats -- one important reason for his optimism.

???But he has others: Conservation is taking hold in the state, and prices for
power on the daily spot market are dropping. California has managed to avoid
rolling blackouts so far this month, in part because it has been spared a heat
wave.

???Federal regulators, under pressure even from Republican lawmakers, decided
Monday to impose more controls on prices that energy suppliers can charge
California. Two new power plants are scheduled to begin producing electricity
in
weeks. California also has recently secured more than a dozen deals for power
over the next decade, a move Davis contends will stabilize the volatile
wholesale market for energy.

???In short, Davis and his aides say their concerted political strategy and
efforts to ease the crisis are beginning to pay off.

???"The bottom line is that we're stabilizing prices and assuring the power
will be there without additional rate increases," said Steve Maviglio, a
spokesman for the governor. But he added: "We're not ready to say the war is
over. It's still going to be a tight summer."

???Whether any or all of those steps will keep the lights on in California
this
summer, or help solve an array of other financial problems the crisis has
caused, is hardly clear.

???In fact, California's power shortfall could produce 113 hours of rotating
outages this summer, according to a U.S. Department of Energy study scheduled
to
be released Wednesday.

???Since California's two largest utilities fell into financial ruin this
year,
forcing the state to spend nearly $ 5 billion to buy power directly and
saddling
residents with huge new rate increases, the support that Davis once had from a
majority of voters has vanished. Recent polls suggest that he could have
trouble
winning a second term.

???Consumer advocates here are besieging him, saying that the $ 43 billion in
long-term power deals that Davis has signed could lock residents into paying
artificially high utility rates for years. Some contend that all he has gained
from Washington is political cover.

???"The Bush administration has created this toothless price cap mechanism
that
will be used as political protection but certainly not consumer protection,"
said Doug Heller, a director of the Foundation for Taxpayer and Consumer
Rights.

???Davis has stuck mostly to the same political script. He is demanding more
federal help for California -- on Monday he called the Federal Energy
Regulatory
Commission's decision merely "a step in the right direction" -- and he is
denouncing out-of-state energy suppliers and their Republican allies.

???Today, Republicans launched a $ 1.5 million advertising offensive that
blames Davis for the state's energy crunch. The spots, running on English and
Spanish-language media, describe the crisis as "Grayouts from Gray Davis."

???Scott Reed, the GOP strategist who runs the American Taxpayers Alliance,
which funded the ad campaign, said his group wants to counter the governor's
spin. "The blame game has to end," said Reed.

???But Davis's aides say the ads are a sign that Republicans sense
California's
energy predicament could deepen GOP political troubles in the state.
Privately,
some Republican lawmakers pushing for more federal assistance say they are
worried that in midterm congressional elections next fall the GOP could lose
House seats in California that it needs to hold a majority.

???Today's hearing will bring both Davis and his adversaries on the Federal
Energy Regulatory Commission before the Senate's Governmental Affairs
Committee,
chaired by Sen. Joseph I. Lieberman (D-Conn.).

???Instead of a committee debate on California's electricity prices, the focus
of the session may be shifting toward the billions of dollars of alleged
overcharges by energy suppliers.

???Under growing pressure from both parties in Congress, FERC's commissioners
responded Monday with far more extensive price controls than they had been
willing to consider previously. They extended April price controls that had
applied only to times of power emergencies to all hours of the day, through
September 2002. And they expanded the controls to cover 10 other western
states.

???California Sens. Dianne Feinstein and Barbara Boxer, both Democrats, said
FERC's action was a positive step and agreed to delay efforts to direct the
commission to clamp down on California's energy prices. "We're willing to give
them a chance to see if it works," Boxer told reporters.

???Now, Davis will press his demands that FERC recover some $ 8 billion in
alleged overcharges by wholesale power suppliers since the crisis began -- a
far
larger amount than the $ 124.5 million in refunds that FERC has so far
assessed.

???Whether there is even a chance of a peace process is unclear. Just last
week, California Attorney General Bill Lockyer announced plans to convene a
criminal grand jury to investigate whether power generators illegally
conspired
to drive up electricity and natural gas prices.

???The governor could face other new problems. Several of California's major
independent power generators said the price controls and state lawsuits
against
the generators made it more difficult to justify expanding operations in
California, a warning echoed today by Energy Secretary Spencer Abraham.

???But heading into the summer, California's power prices are much lower than
they were a month or two ago, with daily or "spot" power prices averaging $ 78
per megawatt hour in June, compared to $ 372 in April.

???Both Davis and the FERC commissioners are taking credit. S. David Freeman,
Davis's energy adviser, said that the long-term power contracts the state has
signed, the new power plants and favorable weather have tamed prices.

???FERC Chairman Curt Hebert Jr. said Monday that the limited price restraints
that the commission imposed on wholesale electricity sales in April have been
a
key reason for the price decline.

??Sanchez reported from Los Angeles and Behr from Washington. Staff writers
Mike Allen and Juliet Eilperin contributed to this report from Washington.

LOAD-DATE: June 20, 2001

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

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

?????????????June 20, 2001 Wednesday, NORTH SPORTS FINAL EDITION

SECTION: News; Pg. 9; ZONE: N

LENGTH: 333 words

HEADLINE: California gets loan for energy purchases

BYLINE: Reuters.

DATELINE: SACRAMENTO

BODY:

??California has secured a $3.5 billion bridge loan to pay for emergency power
purchases in a bid to protect the state's fiscal position during its crippling
energy crisis, state Treasurer Phil Angelides announced Tuesday.

??The loan is also aimed at ensuring that the state does not run out of cash
before officials sell $12.5 billion in power bonds that will repay a state
treasury drained of $7 billion during the energy crisis, he said.

??Angelides added the state would seek another $1 billion in financing before
next week when the loan with J.P. Morgan Chase & Co. and Lehman Brothers
closes.
The bridge loan will be paid back from the proceeds of the power bonds.

??The loan carries an interest rate of 4.5 percent, which would rise to 7
percent if the bonds are not issued by Oct. 31, a punitive clause that would
cost the state another $5 million to $10 million a month in interest payment,
Angelides said.

??The financing was made possible after Gov. Gray Davis issued an executive
order this week authorizing the treasurer to seek a loan of up to $5 billion
that will fund Department of Water and Power energy purchases.

??California also needs the money to keep power generators from opting out of
lower-priced, long-term electricity contracts with the state. Many of these
suppliers signed deals that became void if the state did not secure financing
for the energy purchases by July 1.

??The state's energy woes are rooted in a bungled 1996 deregulation plan that
allowed wholesale power prices to soar but capped retail rates. The result has
brought rolling blackouts, spotty power supplies and sent the state's biggest
utility into bankruptcy protection.

??A previous interim financing agreement was scuppered in April when moves in
the state Legislature delayed the power bond sale until after Aug. 15.

??But Angelides said the new loans will now give the state a four- to
six-month
cushion until it can bring the $12.5 billion power deal to market, even if
there
are further delays.

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?????????????????????????????32 of 120 DOCUMENTS

???????????????????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 20, 2001, Wednesday, BC cycle

?????????????????????????????9:23 AM Eastern Time

SECTION: State and Regional

LENGTH: 473 words

HEADLINE: FERC still looking into high Northwest power prices

BYLINE: By KATHERINE PFLEGER, Associated Press Writer

DATELINE: WASHINGTON

BODY:

??Federal regulators are still looking into high power prices in the Northwest
as they determine what, if any, relief to offer the region's consumers.

??At a Senate Energy and Natural Resources Committee hearing, Democratic Sen.
Maria Cantwell of Washington asked the top official at the Federal Energy
Regulatory Commission whether power prices in the Northwest are fair. She
pointed out that the region's consumers have already seen a 50 percent
increase
in electricity prices.

??"Prices are high," Commission Chairman Curt Hebert told her. But "there has
been no judgment on the reasonableness and the justness of prices for the
Northwest."

??Earlier in the hearing, Hebert said the commission does not entirely
understand the Northwest market and is learning more about it.

??But the region will soon see some short-term relief, as part of a broad
effort to help the West.

??The commission announced on Monday that it would establish price ceilings on
wholesale electricity sales on spot markets in 11 Western states, including
Idaho.

??The five commissioners outlined details of their plan at the Senate hearing.
They said the price ceilings, which will be in effect through September 2002,
should protect consumers against price-gouging until California increases its
electricity supply.

??Senate Democrats who called for power price caps said earlier 0this week
that
they would not continue to push for stringent price controls on Western
electricity sales and instead would allow the commission's plan time to work.

??Oregon Sen. Gordon Smith agreed. He is the only Senate Republican to support
price caps and is the author of a bill to impose them.

??"This order goes a long way," Smith told the commissioners. "What you have
done addresses the short-term problem of price-gougers, but long-term the
problem is supply and demand."

??Smith and other Northwest lawmakers were also displeased that the order did
not offer a refund for overcharges paid by the region's consumers, as offered
to
California ratepayers for charges before July 2.

??The entire West is struggling under a power crunch, brought on in part by a
botched effort to deregulate the energy market in California.

??If the market is working properly, the Northwest sends power to California
during the summer heat and California, in turn, ships power to the Northwest
during the winter.

??The Northwest relies heavily on hydropower and is experiencing an abnormally
dry year.

??Smith said he was concerned that the commission's 15-month order would cover
California for two summers, but the Northwest for just one winter.

??"I hope you'll be willing to look at this again if Mother Nature doesn't
turn
the rain on and we are in a situation where we just simply do not have the
power," Smith said.

??---

??On the Net:

??FERC: http://www.ferc.fed.us/

LOAD-DATE: June 20, 2001