Please see the following articles:

Sac Bee, Wed, 4/4:  "Davis' solutions may be in trouble: New plants built
 in California don't have to sell electricity here, state lawyers conclude"

Sac Bee, Wed, 4/4: "Davis' solutions may be in trouble: Skepticism is now
growing
among Democrats over a plan to purchase transmission lines"

Sac Bee, Wed, 4/4:  "PUC to probe money transfers "

Sac Bee, Wed, 4/4:  "Dan Walters: Politicians seek shelter as energy
Armageddon looms"

San Diego Union, Tues, 4/3: "Rate jump lurks for customers of SDG&E "

San Diego Union, Tues, 4/3:  "PUC expected to approve new incentives to cut
power usage"

San Diego Union, Tues, 4/3:  "Davis warns of spring problems, urges
conservation incentives"

LA Times, Wed, 4/4: "Energy Firms' Mixed Message Is Focus of Inquiry"

LA Times, Wed, 4/4:  "Probe of Utility Money Transfers Ordered"

SF Chron, Wed, 4/4:  "Worst Power Shortage Likely In May and June, Davis
Warns "

SF Chron, Wed, 4/4:  "Vocal Citizens Berate PUC
Police remove several protesters"

SF Chron, Wed, 4/4:  "PUC faces angry backlash to electricity rate increases
"

SF Chron, Wed, 4/4:  "California regulators face angry backlash to
electricity rate increases"

SF Chron, Wed, 4/4:  "Developments in California's power crisis"

Mercury News, Wed, 4/4:  "Power gap greatest in May, June"

Mercury News, Wed, 4/4:  "Already a power giant, state may build plants"

Orange County, Wed, 4/4:  "Manager of AES' Huntington Beach plant becomes a
controversial
figure amid plans to expand capacity"

Orange County, Wed, 4/4:  "PUC gives 'interruptibles' a way out"

Orange County, Wed, 4/4:  "Davis to give TV address on energy crisis Thursday"

Individual.com, Wed, 4/4:  "Power Supplier Files Lawsuit Against Pacific Gas
and
Electric Company; Dynamis, Inc. Seeks to Suspend Power Purchase Agreement
in Order to Provide Power to Grid"

Energy Insight, Wed, 4/4:  "Resurrection of Residential Energy-Efficiency
Programs"
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Davis' solutions may be in trouble: New plants built in California don't have
to sell electricity here, state lawyers conclude
By Carrie Peyton
Bee Staff Writer
(Published April 4, 2001)
California can't require builders of new power plants to sell electricity
here, even as a trade-off for super-fast environmental review, lawyers at the
state Energy Commission have concluded.
Their position, reached despite Gov. Gray Davis' vow that new megawatts "will
stay in California," emerged as part of a fast-track approval for expanding a
south state power plant.
It comes as the agency that oversees plant licensing is whittling away at the
presumption that emergency "peaking" plants installed this summer will be
temporary. Some of the peaking plants - to be used only at times of highest
energy demand - are now proposed to stay in place 30 to 40 years.
Both issues have bubbled up quietly during California Energy Commission
reviews, sometimes addressed only indirectly in staff reports.
"This is a major public policy issue for all of California. If we're building
these plants on an expedited basis and we're not getting any electricity out
of it, why are we doing it?" asked William Workman, Huntington Beach
assistant city administrator.
The answer, according to the Governor's Office and the Energy Commission, is
twofold. First, the plants are needed no matter what, because the entire West
is power poor. And second, it looks like a California sales clause would
violate federal interstate commerce law.
"We're not supposed to take protectionist action against our fellow states,"
said Bill Chamberlain, chief counsel to the Energy Commission. He said
numerous Supreme Court decisions have held that a state can't use its
regulatory powers - such as permitting processes - to give its residents an
economic advantage.
Although there is no guarantee, the Governor's Office, power plant builders
and the state Environmental Protection Agency say most of the plants being
rushed to life will probably end up selling to the state Department of Water
Resources.
"The people who are building these power plants know very well that we expect
it to be used in California, and we're confident that it will be," Davis
spokesman Roger Salazar said.
Cal-EPA Secretary Winston Hickox said the "preponderance" of new peaking
plants will devote their electricity to California.
"We will do everything that we can to encourage that the energy produced as a
result of our bending over backward to be accommodating is sold to
California. We're not there yet, but I believe we'll get there," Hickox said.
He also said the three-week reviews of peaking plants have cut no corners in
terms of fundamental environmental standards.
Two of those plants scheduled for Energy Commission votes today were praised
by environmentalists as having relatively low emissions of smog-forming
compounds, but they still were concerned by the 21-day review.
"If you're having a quick review, a plant shouldn't be allowed to continue
for more than the summer," said Gail Ruderman Feuer of the Natural Resources
Defense Counsel.
The first peaking plant approved by the commission, the United Golden Gate
Project in San Mateo County, was given permission to run for three years.
But the next two, in San Diego and Palm Springs, are being recommended for
indefinite approval, and their builder, InterGen North America, said it
intends to keep them running for 30 to 40 years.
"There's no way affected communities can know what's going on with the
processes that are so short," said Sandra Spelliscy, general counsel of the
Planning and Conservation League. "I don't want to say negative things about
that particular peaker (but) ( I think we're going to wake up in six to 12
months and realize we did a lot of stuff that we regret."
In Huntington Beach, city officials say they are largely pleased with the
fast-track process that protected most of their major concerns over a
proposal by AES to quickly revive two mothballed steam turbines at its
seaside plant.
But a slower review process would have offered even more, Workman said. It
would have delayed the plant for results of studies on sea life injured or
killed by cooling water intakes and potential increases in ocean pollution.
He worries that his city's residents gave up those protections without any
certainty that California will benefit from the extra 450 megawatts AES will
be able to crank out.
Huntington Beach sought a California buyer clause in the AES permit, which is
scheduled for an Energy Commission vote next week, but it was rejected in a
cryptic report that only notes the commission staff has taken no stand on the
issue.
AES would have opposed such a provision, because it believes the Energy
Commission has no authority to tell it where to sell, said Aaron Thomas, a
manager at AES Pacific.
"In our case, there is no need to have a shotgun to our head," he said. AES
is negotiating to sell all 450 megawatts to the state.
Meanwhile, the governor acknowledged what an Energy Commission report
outlined last week - that his goal of 5,000 more megawatts online by July
will not be met.
"We have a real challenge in the early part of the summer," Davis said
Tuesday. "We do have more than 4,000 megawatts coming online by late summer.
Usually, the challenge is in August and September. This year, the challenge
may well be in May and June."
The Bee's Carrie Peyton can be reached at (916) 321-1086, cpeyton@sacbee.com.
Emily Bazar of The Bee Capitol Bureau contributed to this report.
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Davis' solutions may be in trouble: Skepticism is now growing among Democrats
over a plan to purchase transmission lines
By Emily Bazar
Bee Capitol Bureau
(Published April 4, 2001)
A deal that Gov. Gray Davis had touted as a potential solution to the state's
energy crisis is faltering, as talks with the utilities have yet to produce
concrete results and lawmakers grow increasingly skeptical.
For weeks, the administration has claimed progress in its negotiations with
Pacific Gas and Electric Co. and Southern California Edison to purchase about
32,000 miles of the transmission grid in exchange for helping the utilities
pay off billions of dollars in debt.
Though talks are moving forward with Edison, little headway has been made
with PG&E.
Now, a new contingent of naysayers is emerging from within the Capitol -
Democratic legislators who would be asked to approve the deal.
Convinced that a takeover of the transmission grid presents too many
obstacles, some top lawmakers are suggesting utility bankruptcy or other
alternatives might be better for the state.
"The governor feels very strongly that bankruptcy should be avoided at all
costs," said state Sen. Jackie Speier, D-Hillsborough, immediately after she
and other state Senate Democrats met with Davis on Tuesday.
"But there's growing sentiment in the caucus that bankruptcy is not the worst
thing in the world. ( We'd have more control, in many respects, over our
destiny."
It has been seven weeks since Davis first publicly indicated that he favored
a takeover of the power transmission grid.
Shortly thereafter, on Feb. 23, he announced an "agreement in principle" with
Edison, laying out a conceptual deal to buy the utility's transmission lines
for $2.76 billion.
On the same day, Davis acknowledged he needed to buy PG&E's share of the
transmission grid, as well as San Diego Gas & Electric Co.'s, to make his
rescue package viable.
But Davis still has not reached an "agreement in principle" with the two
remaining utilities and continues to negotiate with Edison over details.
Administration officials presented PG&E representatives with a proposed
agreement Tuesday, the first time in three weeks the two sides had met.
Republican legislators have long opposed buying transmission lines, and
Democrats increasingly are questioning the deal.
Democratic support began to dwindle two weeks ago, when the state was hit by
two days of unexpected rolling power blackouts. The blackouts were caused in
part by the unanticipated shutdown of some alternative energy providers,
which had not been paid by utilities for months.
Many legislators expected the Democratic governor to work out a deal with the
small generators before the blackouts hit, and they blame him for letting the
situation get out of hand.
Now, many are taking critical looks at the governor's bid to purchase the
transmission lines and believe the plan contains too many pitfalls.
For example, a state purchase of transmission lines would need federal
approval because they are part of an interstate system.
By some estimates, that approval process could take as long as two years. The
state would not be able to sell bonds to finance the purchase of the
transmission lines until the deal is blessed by the federal government.
Then there's the cost. Senate President Pro Tem John Burton, D-San Francisco,
long an advocate of the deal, said the administration - which has reportedly
offered as much as $7 billion for the utilities' shares of the grid - would
be paying "too much."
"This is not supposed to be a bailout," he said. "This is supposed to be a
purchase based on fair market value."
As a result of these and other sticking points, some legislators believe the
utilities can't be saved through state intervention.
"I think we're going to end up in a bankruptcy at this point," said Sen.
Debra Bowen, D-Marina Del Rey. "I just don't see any of it coming together."
Bowen said she wants the state to be prepared if utilities opt for, or are
forced into, bankruptcy.
Should the utilities enter bankruptcy proceedings, there is a 20-day interim
period during which the state, or any other creditor, can attempt to persuade
the court to forbid bankruptcy.
Bowen said some work has been done to prepare for that, but it "needs to be
updated."
In addition, senior legislative staff members met with the governor's
negotiators a week ago, urging them to prepare contingency plans in case of
bankruptcy.
PG&E spokesman John Nelson declined comment on a report that the utility's
board recently voted narrowly against entering Chapter 11 on a voluntary
basis.
The utility still believes that bankruptcy is not a solution, he said, "but
that conclusion is re-evaluated on a daily basis in light of actions by the
(Public Utilities Commission) and the state."
Nelson said bankruptcy represents a substantial risk because the proceeding
"would turn over the utilities to a federal bankruptcy judge whose powers are
not well defined."
Speier said she and other Democrats believe the governor should consider
seizing hydroelectric or other power plants or levying a "windfall profits
tax" against generators selling electricity at exorbitant prices.
Despite growing pessimism among legislators, Davis continues to insist that
the transmission deal will prevail.
"I believe we will purchase the transmission lines, and that will allow us to
make needed improvements," he said Saturday about the status of negotiations.
On Tuesday, Davis asked television stations for time to address state
residents on Thursday evening about "California's energy emergency." The
governor had previously promised to announce his position on state utility
rate increases.
Davis also indicated he has made plans should the federal government reject a
future deal.
If that happens, he said, the state will attempt to acquire the utilities'
hydroelectric plants.
"Plan B would be to take hydro assets in lieu of the transmission lines,"
Davis said. "They are not worth as much in book value, but they generate
revenue every year, which the transmission lines don't do, so they are very
valuable."
The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com.
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PUC to probe money transfers
By Dale Kasler
Bee Staff Writer
(Published April 4, 2001)
SAN FRANCISCO - With protesters being ejected for storming the stage, state
regulators Tuesday launched an investigation into how California's two
near-bankrupt utilities shipped billions of dollars in profits to their
parent corporations.
The Public Utilities Commission voted 4-0 to determine whether the parent
companies should have to send any money back to the utilities, which have
been nearly bankrupted by soaring wholesale power costs.
The PUC also took steps to approve a formula for how much the utilities must
reimburse the state for its power purchases.
Utility executives said the formula could significantly worsen their
financial plight and vowed to fight the plan. Commissioners called the
utilities' warnings premature but said they had to act to protect the state
treasury.
The formula also sets a $13.4 billion ceiling on the bonds the state can sell
in order to finance the power purchases by the Department of Water Resources.
While the formula is a crucial if arcane element of the state's plan to fix
the energy crisis, the PUC was upstaged by several dozen activists seething
over the 30 percent rate increase the commission granted last week to Pacific
Gas and Electric Co. and Southern California Edison.
For 90 minutes, speaking one by one, the protesters from the Green Party and
other groups scolded the commissioners and urged the seizure of generating
plants. They led supporters in chanting, "Public power now!"
A Davis woman, Lellingby Boyce, led the crowd in chanting, "PG&E, stop
pimping off me." Several speakers challenged the commissioners to attend a
meeting they've organized on rate hikes. Only PUC Commissioner Geoffrey Brown
committed to attending.
Then protesters went beyond talking. Mary Bull declared, "This meeting's a
sham," and walked briskly toward the dais where commissioners sat. About a
half-dozen other protesters followed but were halted by California Highway
Patrol officers.
Officers escorted about dozen people from the building, including a man who
was dragged out. There were no arrests.
Brown called the disruption "the height of undemocratic behavior" but said
he'd still attend the activists' meeting.
Then the commissioners voted to initiate the probe into the relationship
between the utilities and their holding companies. Audits have shown that
Edison shipped $4.8 billion in profits to its parent, Edison International,
over five years, while PG&E sent $4.6 billion to parent PG&E Corp.
Edison called the probe "unnecessary and redundant," while PG&E said earlier
investigations "found nothing improper or illegal in the (parent) company's
relationship with the utility."
The two utilities said they'll be hurt by the PUC's calculation of the
California Procurement Adjustment - a measure of how much utility revenue is
available to send to the water department. The department has been buying
power on behalf of PG&E and Edison since mid-January.
Both utilities said there isn't nearly as much money available as the PUC
believes, and the calculation could cost them billions.
"Rates aren't high enough now for both (the department) and Edison," said Jim
Scilacci, the utility's chief financial officer.
Commissioners, who will determine in about two weeks just how much utility
money to send to the water department, are walking a fine line.
The two utilities are nearly bankrupt. Between them, they expect to take $6.8
billion in post-tax charges to earnings April 17, according to Securities and
Exchange Commission filings.
But with the state water department having spent more than $4 billion on
power purchases, the PUC wants to send as much money as possible to the
state.
"A lot of our focus at this point is in preserving the state Treasury,"
Commissioner Carl Wood said later.
With an eye toward summer, the PUC also approved new conservation incentives
for customers of the three big investor-owned utilities.
The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.
Bee Staff Writer Carrie Peyton contributed to this report.
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Dan Walters: Politicians seek shelter as energy Armageddon looms

(Published April 4, 2001)
There's been a subtle but unmistakable shift in the political atmosphere that
envelops California's energy crisis.
Politicians have concluded that the crisis is largely beyond their control
and the die is more or less cast. Whatever fate decrees - massive summer
blackouts, soaring utility bills or even the bankruptcy of the state's
utilities - will happen, and politicians from Gov. Gray Davis downward are
scrambling to insulate themselves from voters' anger and single out rivals
for blame.
No one is saying that publicly, of course, but the fatalistic mood is very
apparent in the Capitol, whose denizens have dropped their preoccupation with
energy and moved to other matters. Legislative committees are working on the
hundreds of bills that had been stalled for three months while the special
committees that had been holding almost daily sessions on the energy crisis
have gone into semihibernation.
Last weekend's Democratic state convention in Anaheim was dominated by fears
that when the crisis hits home, the party's dominance of the Capitol will
backfire. "Just remember Jimmy Carter," state Controller Kathleen Connell
warned fellow Democrats, adding that they will have "no excuses" for
perceived failure to deal with the crisis forthrightly. "We will be
accountable on Election Day 2002," she said.
Next year's elections are very much on Davis' mind, since he'll be seeking a
second term and polls indicate that his approval ratings have declined
sharply in recent weeks. He devoted much of the weekend to defending his
actions, saying, "I believe we've moved at warp speed to address this
problem," and trying to pin blame on Republicans.
Republicans, meanwhile, sense that the crisis gives them an avenue of escape
from the dungeon of irrelevancy to which they had been exiled by heavy losses
in the last three elections. The only remaining statewide GOP officeholder,
Secretary of State Bill Jones, is running for governor by accusing Davis of
mismanagement, and Republican Assembly members dumped their leader, Bill
Campbell, on grounds that he had been insufficiently aggressive vis-a-vis
Davis.
The political positioning reflects the reality that the crisis shows every
sign of worsening. Although Davis' office is distributing a brochure entitled
"Meeting the Energy Challenge" to defend the governor's actions, it's
apparent that none of the steps the governor has taken is bearing much fruit.
The state is spending at least $50 million a day on emergency power
purchases, but what was supposed to be a short-term program has evolved into
a monthslong drain on the state's rapidly shrinking budget reserves. The
long-term supply contracts that were supposed to replace daily spot purchases
have bogged down, and without firm contracts and a revenue stream to pay for
them, Wall Street is reluctant to market the bonds the state wants to float.
Many authorities now believe Davis' decision to step into the power purchase
market in January was a strategic error because it gave power suppliers a
deep new pocket to tap just as the utilities themselves ran out of credit.
Davis, meanwhile, is refusing to embrace a rate increase approved by the
state Public Utilities Commission, which sends a mixed message to Wall
Street, and efforts to resolve problems with unpaid bills from power
generators and have the state acquire the utilities' intercity transmission
grid have stalled, perhaps permanently.
The crisis may careen totally out of control as summer arrives, raising the
specter of elderly and/or ill Californians dying from having their air
conditioners or medical equipment shut down. And the utilities are closer to
bankruptcy now than at any other point in the nearly yearlong crisis.
Plan A isn't working, and there is no Plan B - except for bankruptcy. With
Armageddon looming, politicians have retreated into the bunker, hoping to
protect themselves from what could be a firestorm of anger.
The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com
.
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Rate jump lurks for customers of SDG&E

By Ed Mendel
UNION-TRIBUNE STAFF WRITER
April 3, 2001
SACRAMENTO -- Last year, San Diego was on the front line of the electricity
crisis, but this year it's more like a rearguard action -- a lower priority
treated with less urgency.
State regulators last week imposed the biggest rate increase in California
history on the customers of the two biggest utilities, Pacific Gas and
Electric and Southern California Edison.
But for better or worse, as the Public Utilities Commission plans to meet
today in San Francisco, it's unknown when the commission will impose a rate
increase on San Diego Gas and Electric customers or how big that increase
will be.

PUC expected to approve new incentives to cut power usage
?

The Legislature enacted urgency legislation in September that capped SDG&E
rates after bills doubled and tripled for some customers, when the utility
became the first to be deregulated.
A bill that would extend the SDG&E cap to an estimated 4,500 businesses and
some residences, which stalled when Democrats tried to use it as leverage to
get Republican votes on other issues, passed an Assembly committee yesterday.
"They are the only customers in the state who are paying the day-to-day rates
and cost of electricity," said Sen. Dede Alpert, D-Coronado, the author of
the bill.
Gov. Gray Davis proposed a "20/20" conservation plan last month, a 20 percent
cut in utility bills for a 20 percent cut in energy use when compared with
the same summer month last year.
But some say the plan is unfair to SDG&E customers, who cut energy use last
summer because of soaring bills. Assemblyman Juan Vargas, D-San Diego, wants
the comparison for SDG&E customers to be with the same month in 1999.
"We are looking into it," said Roger Salazar, a Davis spokesman. "It's a
concern."
The rate increase proposed by SDG&E -- 2.3 cents per kilowatt hour -- is
significantly lower than the 3-cent increase imposed by the PUC on the
customers of PG&E and Edison last week.
An SDG&E spokesman said the PUC has asked the utility to participate in
discussions of a rate increase, effective June 1, that is expected to
encourage conservation by imposing the highest rates on the biggest users.
"As for specifics pertaining to us, I don't know," said Art Larson of SDG&E.
Commissioner Carl Wood said the PUC is looking at a number of issues,
including the fact that SDG&E rates were capped by legislation, unlike the
rates of the other two investor-owned utilities.
"We are looking at whether we have the authority to change rates, and if we
do, by how much -- and things like that," Wood said.
PUC President Loretta Lynch said yesterday that she plans to hold hearings
throughout the state as the regulatory agency designs the specifics of the
new rate increase.
"I think it's really key and critical that we have input not just from folks
who can hire lawyers to be at the PUC in San Francisco, but from all
Californians and all businesses," Lynch said.
Businesses may get some of the biggest rate increases. Legislation exempts
residences that use up to 130 percent of the "baseline," a minimum amount of
electricity that varies with climate zones.
Lynch said a question has arisen about whether the PG&E and Edison rate
increase was effective immediately. Bills will not increase until May or
later, and the plan was to add the amount owed since March 27 to ratepayer
bills in monthly installments.
"We have asked for additional briefing on that," said Lynch, offering little
explanation.
The governor, who called the rate increase premature, may make a proposal of
his own in two weeks. He has asked for information on various factors,
including state spending to buy power for utility customers.
The state has spent about $4 billion, which will be repaid by a bond that
will be paid off by ratepayers. The PUC is taking a series of steps that will
give the state money from the monthly bills paid by utility customers.
Lynch said yesterday that the state will receive $3 billion to $3.5 billion a
year, enough for a bond of $12 billion to $14 billion -- by far a record for
the biggest municipal bond issue in the nation.
State Treasurer Phil Angelides had hoped to obtain a bridge loan of $5
billion by the end of last month, easing the drain on the state general fund.
But a spokeswoman said "obstacles" have developed that Angelides plans to
discuss tomorrow at a news conference.
The PUC also is scheduled to consider a revised program today that will
encourage businesses to agree to have their power "interrupted" this summer,
in exchange for lower bills and protection from blackouts. Some guidelines
for blackouts also may be set.
"Facing rolling blackouts on an almost routine basis is a completely new
phenomenon," Wood said. "It's not something that I think we have experience
in in any developed country, until very recent times."
Lynch also will propose an investigation into whether the parent firms of
utilities should help pay off the debt of utilities, a move urged by consumer
groups.
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PUC expected to approve new incentives to cut power usage

ASSOCIATED PRESS
April 3, 2001
SAN FRANCISCO ) With summer and the threat of hours of rolling blackouts
drawing ever closer, California power regulators are expected Tuesday to
expand programs they hope will coerce businesses to cut electricity use in
trade for cheaper rates.
Under the Public Utilities Commission plan outlined Monday by Commissioner
Carl Wood, businesses can contribute to California's desperate cause by
volunteering to turn off their power for up to 120 hours during a three-month
period in exchange for a 15 percent discount on their electricity bills.
The power interruptions will be limited to a maximum of 6 hours per day and
24 hours per week. The caps are designed to avoid a repeat of what happened
in January when the businesses in a previous voluntary program were required
to suffer 120 hours of blackouts in a span of just a few weeks.
The frequency of the outages caught some businesses off guard and almost
caused a gasoline shortage by shutting off the power to key pipelines for
extended periods.
As the PUC work to stave off future troubles, managers of the state's power
grid continued a Stage 2 power alert early Tuesday morning. The Independent
System Operator called for energy conservation Monday after gusty winds
yanked down Southern California power lines, keeping 3,000 megawatts of
imported electricity from reaching California.
The ISO calls a Stage 2 alert when electricity reserves drop below 5 percent.
and Stage 3 when reserves drop below 1.5 percent.
It could take up to 10 days to repair all the state's downed lines, said
spokespeople for the ISO and the Los Angeles Department of Water and Power.
The downed lines crowded an already strained transmission bottleneck that
transfers electricity up the state, ISO spokesman Patrick Dorinson said
Tuesday morning.
Additionally, power plants that would have produced 12,900 megawatts were
down for repairs. Another 3,000 megawatts from alternative energy providers
who are owed more than $1 billion by two near-broke utilities were also
unavailable to grid operators.
One megawatt is roughly enough power for 750 homes.
In Sacramento, an Assembly energy committee approved six power-related bills,
including two that aim to increase electricity generation with incentives for
building power plants.
One bill would give cities and counties that approve large power plants
additional state aid equal to 25 percent of the property tax the plant brings
in.
The estimated $62.5 million in state incentives is designed to encourage
local governments to allow power plant construction within their boundaries,
said the author, Assemblywoman Rebecca Cohn, D-Sarasota.
Another bill would give $53.25 million in incentives primarily to small power
plants that can be built quickly to serve specific commercial customers. Both
bills now go to the Assembly Appropriations Committee for consideration.
There were no developments announced Monday in Gov. Gray Davis' efforts to
reach deals to buy 26,000 miles of transmission lines owned by the state's
three financially troubled investor-owned utilities.
PUC President Loretta Lynch said Monday she planned to end months of delay
and officially open an investigation into the conduct of the parent companies
of the nearly bankrupt utilities Pacific Gas and Electric Co. and Southern
California Edison Co.
The inquiry will focus on allegations that the parent companies have hoarded
cash and assets that should have been used to ease the utilities' financial
crisis.
The commission is expected to approve a key accounting benchmark that will
authorize the state to issue anywhere from $12 billion to $14 billion to buy
electricity. The maximum amount, based on a formula created by state
lawmakers, is higher than the $10 billion envisioned just a few months ago.
Lynch said she hoped the new energy-curtailment program will help cut energy
demand. The old program curtailed demand by as much as 3,200 megawatt hours.
Companies that already contributed 120 hours of voluntary power outages this
year could sign up and receive additional discounts.
Businesses also can make money by agreeing to sell part of their usual energy
load for $350 per megawatt hour during crisis periods. Regulators might be
willing to pay businesses even more for the extra energy, depending how much
money power wholesalers demand on the spot market this summer.
The California economy already has been hit with the double whammy of rising
electricity bills and an energy shortage that has triggered rolling blackouts
in January and March.
Now, regulators find themselves paying businesses to curtail their operations
so the damage doesn't become even worse this summer.
Regulators aren't sure how much the new incentive program will cost the
state, but they believe California stands to lose even more if businesses
aren't paid to reduce their energy usage.
Blackouts are "threatening to almost become an everyday experience," Wood
said Monday as he made his case for the new business incentive plan.
Depending on how much the state can conserve, California is expected to
suffer anywhere from 20 hours to 200 hours of rolling blackouts this summer,
based on the estimates of industry experts.
Because the state won't substantially increase its energy supply by this
summer, cutting electricity demand represents the state's best chance of
minimizing the expected blackouts.
In another move expected to lower energy usage, the PUC last week approved a
rate increase of as high as 42 percent for customers of Edison and 46 percent
for customers of PG&E.
Lynch said regulators are still collecting information to create a tiered
rate structure that will impose the largest increases on the biggest
electricity users.
The higher rates might not show up in customer bills until May or June, but
Lynch said she wants the higher prices to be retroactive to March 27.
With the latest incentives offered by the state, it's conceivable that some
businesses might find it more profitable to simply close their plants for
days at a time and sell their energy to the state, Wood said.
But Wood believes it's more likely that companies will remain open and make a
little extra money by slightly reducing their power usage.
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Davis warns of spring problems, urges conservation incentives

By Steve Lawrence
ASSOCIATED PRESS
April 3, 2001
SACRAMENTO ) Gov. Gray Davis urged lawmakers Tuesday to quickly approve $1.12
billion in energy conservation incentives to ease a warm-weather power crunch
he said could hit as early as next month.
The Assembly Appropriations Committee approved one conservation bill after
changing it, over the author's objections, to limit how much agricultural
customers could have power shut off during rolling blackouts.
The chairwoman of the Senate Appropriations Committee put off a vote on
another conservation measure at least until Wednesday, saying senators needed
more time to study the legislation.
Davis met for about two hours with Senate Democrats and urged them to pass
the conservation bills this week so the programs start working as soon as
possible. The two bills have been moving slowly through the Legislature for
the last month.
The governor's office announced later in the day that Davis had requested
time from television stations for a five-minute statement Thursday evening on
the energy situation.
The governor said the state could face its biggest power shortage in May or
June because new power plants capable of producing 4,000 megawatts of
electricity won't be coming online until late in the summer.
"Usually, the challenge is in August and September," he said in a dimly lit
hallway outside the Senate lounge. "This year it may well come in May or
June."
He said he hoped to avoid more rolling blackouts, but he added, "We are
hoping for the best and planning for the worst."
One of the bills, by Assemblywoman Christine Kehoe, D-San Diego, would
allocate $408 million for energy efficiency and conservation programs,
including $50 million for rebates for consumers who buy new, more
energy-efficient refrigerators.
The bill also would includes:
) $60 million to distribute subcompact fluorescent lights and other
energy-saving devices through community organizations.
) $50 million for grants or loans to low-income residents or small businesses
to make buildings more energy efficient.
) $50 million for large businesses that install electricity meters that
charge the customer more for power during peak demand periods.
The Senate Appropriations Committee discussed the bill for more than an hour
Tuesday but put off a vote at least until Wednesday.
The other measure, by Sen. Byron Sher, D-Stanford, was sent to the Assembly
floor Tuesday by the Assembly Appropriations Committee.
It would allot $710 million for conservation and efficiency efforts,
including $240 million to help low-income Californians weatherize their homes
and pay their natural gas and electricity bills.
It also includes $50 million for incentives for agri-businesses to buy
energy-efficient equipment and $50 million to install energy-saving
technology in state buildings.
Sher objected to an amendment added by the committee to allow officials to
cut off power to agricultural customers no more than four hours a day and 20
hours a month during power emergencies.
Sher said the amendment had no place in a conservation bill.
The committee's chairwoman, Assemblywoman Carole Migden, D-San Francisco,
said the amendment was pushed by Assembly leaders and refused to change it.
The meeting with Senate Democrats was the second that Davis has talked behind
closed doors with lawmakers to discuss the state's energy crisis. He met with
Assembly Democrats last week and plans to sit down with Assembly Republicans
on Wednesday.
In a speech Saturday to the state Democratic Party convention, Davis said
Republicans caused the state's power problems by pushing for utility
deregulation. He also complained they had not offered a "constructive,
comprehensive solution to the problem."
Asked what he would tell GOP lawmakers Wednesday, the Democratic governor
said he would "explain the challenge and just tell them they can be part of
the solution or part of the problem."
Although there were some raised voices during Tuesday's meeting, Sen. Tom
Torlakson, D-Martinez, said the session with Davis was "very positive" and
that he was "much more confident" about how the state is dealing with its
power problems.
"We got some good information we had not had before," he said.
But Sen. Jackie Speier, D-Daly City, said Davis and his aides didn't know if
the state's two biggest utilities had followed a Public Utilities Commission
order to set aside money to repay the state for its power purchases.
She said if the utilities go bankrupt "that money could be sucked up" by
other creditors.
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Energy Firms' Mixed Message Is Focus of Inquiry

Deregulation: Senate panel will investigate whether suppliers were being
misleading when they promised lower rates for consumers while they were also
predicting bigger profits for investors.

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

?????In the summer of 1999, a top official with a major player in
California's power market testified during a congressional committee hearing
in support of speeding up deregulation. Unleashing market forces, said the
Dynegy Inc. executive, would ensure "maximum customer savings" and "low-cost
power."
?????That same month, the Houston-based firm made a far different pitch to
Wall Street: Deregulation and major swings in electricity prices would boost
revenue and stock value. "We know how to take advantage of volatility spikes
across the gas and power market," Chief Executive Officer Charles Watson
declared in a publication targeting large investors. "The energy
marketplace," he predicted, "will simply get more volatile."
?????Dynegy was not alone, a review of federal filings, company documents and
public records shows. In the years since California's pioneering deregulation
plan was approved, other major out-of-state energy suppliers were sending
similar, seemingly contradictory signals to the public and stock buyers.
?????Now, those divergent messages--electricity prices will fall but
corporate revenue and profits will climb--will be a key focus of a special
state Senate committee charged with investigating the alleged manipulation in
the power market.
?????"How you can tell your investors you're about to make a whole ton of
money in the very short term, and tell the consumers of California you're
about to get lower rates?" said Sen. Joe Dunn (D-Santa Ana), a former
consumer attorney who is heading the legislative probe.
?????Investigations by the state attorney general and federal regulators are
continuing, but remain largely secret.
?????The Senate panel could offer the most open and wide-ranging examination
yet of alleged misconduct among power sellers. The bipartisan panel expects
to begin requesting documents from power producers as early as today and
begin hearings in a few weeks. Committee members stress that they are hoping
the power companies will cooperate but are ready to issue subpoenas if
necessary.

?????Suppliers Deny Misleading Public
?????The legislative probe comes as many state officials are moving
aggressively to expose alleged market manipulation and overcharges totaling
billions of dollars by the power suppliers.
?????"Somewhere along the line, there may be a skunk in the woodpile. And if
there is, we need to find out about it," said K. Maurice Johannessen
(R-Redding), the committee's ranking Republican.
?????Another panel member, Sen. Debra Bowen (D-Marina del Rey), noted that
all companies try to maximize profits. "But [we want] to understand how the
market was manipulated and how sellers took advantage of the market."
?????The power traders strongly deny acting improperly or sending misleading
signals to the public.
?????"Hogwash," said Tom Williams, spokesman for North Carolina-based Duke
Energy. Spokesmen for Dynegy said there was nothing inconsistent in the
statements of their executives.
?????The companies maintain that California's problems stem from soaring
electricity demand, lagging power plant construction and a faulty
deregulation plan adopted by the Legislature in 1996. "You have a flawed
structure there," said Dynegy spokesman John Sousa.
?????Sousa and executives of other power suppliers say their comments to the
general public and to Wall Street are not contradictory because unfettered
competition--not the California model--would have created opportunities to
both make money and cut rates.
?????Still, regulators, lawmakers and ratepayer groups note that only half
the promises made by the power dealers have been realized so far--their
earnings and stock prices have risen at record rates as electricity prices
have soared.
?????"The big lie was, while they were telling ratepayers to 'Trust us, we're
going to lower your rates,' they were planning the entire time to raise the
rates," said San Diego attorney Michael Aguirre, a former federal prosecutor
who specialized in fraud cases. Aguirre is representing state ratepayers in a
class-action lawsuit against the power companies.
?????Just last month, California's independent grid operator reported that
many power sellers "used well-planned strategies to ensure maximum possible
prices." Potential overcharges could total nearly $6.3 billion.
?????The Senate panel wants to track information that Dynegy and other
generators were providing to the investment community in the 1990s as a
possible way of determining whether they entered the California market with
plans to run up electricity costs. Among many other things, the committee
plans to seek internal projections of how the firms expected wholesale prices
and profits to rise under deregulation.
?????Members also want to know how the suppliers expected to recoup billions
in outlays for California power plants being unloaded by regulated utilities.
Some of the purchases were far above book value, stunning analysts.
?????"What did they know that the rest of us didn't at the time they were
purchasing those generations facilities?" asked Dunn. "They knew something."
?????One thing the power wholesalers say they did know was that tight power
supplies in California would probably boost prices, at least for a time.
?????"They were going anywhere where they thought energy [use] would spike
upward," recalled market analyst Joan Goodman, who was familiar with company
pitches. "California was one of those places because it didn't have
sufficient [power] plants."
?????Duke Energy projected that prices would rise after 2000, although the
company says it did not foresee the huge increases that occurred, according
to spokesman Williams.
?????However, when the company sealed one of the first packages of power
plant purchases in the state in 1997, Chief Executive Officer Richard Priory
said in a press release it would "deliver greater value" to California
customers.
?????The publicity spin was similar when Edison's sprawling beachfront power
plant in El Segundo changed hands the following year. "Consumers in
California will begin to benefit from more competitively priced electricity
and more vibrant economy," announced Craig Mataczynski, vice president of
Minneapolis-based NRG Corp., a partner in the purchase with Dynegy.

?????Big Growth Was Predicted
?????Utilities reaping profits from plant sales also trumpeted the consumer
windfall theme. Electricity rates would drop 20% by 2001, Pacific Gas &
Electric's top executive, Robert Glynn, said in early 1998. "There is no
product bought on a daily basis that has such a predictable downward price
trajectory into the future."
?????But to its Wall Street audience, the power suppliers emphasized climbing
revenues.
?????Atlanta-based Southern Co., now Mirant, told investors in 1999 that its
plan to buy plants and market power had brought the company to the "doorstep
of significant growth opportunities."
?????"We believe our strategies will result in the best shareholder return
available," Bill Dahlberg, then-chief executive officer, said shortly after
buying three California plants.
?????Mirant spokeswoman Jamie Stephenson said assurances given the public and
assumptions directed to Wall Street were "just a different way of delivering
the same message." The firm was saying it would be "reliable to shareholders
and reliable to consumers."
?????Now, with rolling blackouts and record electricity bill increases,
federal and state authorities are alleging that large energy suppliers played
the power market too hard.
?????Last month, the Federal Energy Regulatory Commission said it found
evidence of $124 million in "unjust and unreasonable" charges during the
severest periods of electricity shortage. The commission, often criticized
for being too lenient on private power companies, ordered the firms to refund
the money or further justify the charges.
?????Some firms are contesting the findings, saying the prices they charged
were justified.
?????Investigators and regulators have faced a vexing challenge trying to
unravel the complex financial workings of the large power traders. The
companies closely guard information, and some recently refused to comply with
subpoenas from the state Public Utilities Commission, which is also probing
the power market.
?????Whether the Senate investigating committee will have the resources and
tenacity to get much further remains to be seen. But Democrats and
Republicans alike insist they are serious about untangling how the power
market went haywire.
?????"I haven't seen that much smoke where there hasn't been a fire," Dunn
said.

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Probe of Utility Money Transfers Ordered

Finance: PUC wants to know whether payments to holding companies were proper,
and whether parent firms gave all the help they could to subsidiaries.
Companies deny any impropriety.

By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers

?????SAN FRANCISCO--After dozens of protesters assailed them for a recent
electricity rate hike, state regulators Tuesday ordered an investigation into
the transfer of billions of dollars from utilities to parent companies and
whether the parents failed to help them during the energy crisis.
?????"This order is absolutely necessary to establish the credibility for any
rate hike," said California Public Utilities Commission member Geoffrey
Brown. "We should be assured no assets were transferred imprudently to the
parent companies and no assets in the parent were available" to help
financially troubled utilities.
?????The commission adopted the order on a 4-0 vote during an uproarious
meeting that started with 1
 hours of public testimony and was disrupted
repeatedly by a few dozen protesters who chanted "public power now" and urged
state takeover of the utilities.
?????The PUC probe targets Pacific Gas & Electric Co., Southern California
Edison Co., San Diego Gas & Electric Co. and their respective holding
companies.
?????Spokesmen for the parent companies--PG&E Corp., Edison International and
Sempra Energy--denied any impropriety and said previous PUC audits have found
no wrongdoing.
?????"The commission, which is probably faced with one of the greatest
challenges since the state was formed in 1850, is wasting its time reviewing
old ground," said PG&E Corp. spokesman Greg Pruett.
?????Commissioners expressed concern that the utilities transferred billions
of dollars to their holding companies while experiencing financial
difficulties. They said the parents evidently did not help out the utilities,
which sought rate increases to cover their excess costs.
?????"We will examine whether this apparent failure violates [PUC
regulations] that the holding company give 'first priority' to the capital
needs of its utility subsidiary," the order said.
?????The PUC said the parent companies disbursed much of the money as
dividends, stock repurchases and other payments.
?????Sempra spokesman Art Larson dismissed any suggestion that the parent
neglected SDG&E, noting that it invested $324 million in the utility last
year. "It's the most in the past seven years," he said. "That speaks for
itself."
?????PG&E Corp.'s Pruett said millions of dollars in dividends and loan
repayments to shareholders would have been made whether there was a holding
company or not. "It's a specious argument [by the PUC]," he said. "It's a
smoke screen."
?????Since early February, the commission had repeatedly delayed ordering the
investigation, in part to avoid jeopardizing the state's recent negotiations
for the purchase of the power grid and other assets of Southern California
Edison and Pacific Gas & Electric Co., which say they are billions of dollars
in debt and in danger of bankruptcy.
?????Edison International Chief Financial Officer Ted Craver declined Tuesday
to say whether Edison is close to signing an agreement, noting, "Discussions
are at a critical point right now."
?????Under the proposed deal, the state would purchase Edison's massive
high-voltage transmission system for $2.76 billion and receive other assets.
The utility could use the cash to restructure debt.
?????"It is not a done deal; it is very close to final," said Joseph Fichera,
a consultant representing Gov. Gray Davis in negotiations with Edison.
?????However, a top utility executive, speaking on the condition of
anonymity, said, "There are serious disagreements on major issues."
?????The state's talks with PG&E, which had been dormant for weeks, resumed
Tuesday as that utility's negotiators met with the governor's staff,
according to a company official.
?????If a deal for transmission lines can be struck, it is subject to
approval by federal regulators.
?????Davis said Tuesday that if federal officials reject any deal, his "Plan
B" is to seek state ownership of private utilities' hydroelectric plants.
?????"We are then entitled to have assets of comparable value," Davis told
reporters. "We have told utilities by that we mean their hydro assets,
because those are moneymakers."
?????PG&E, which operates more hydroelectric plants than Edison, has
repeatedly made it clear that it does not intend to give up those operations.
?????Davis said he is buying five minutes of television time at 6:05 p.m.
Thursday to discuss California's energy situation.
?????The PUC, in other action to ease the energy crisis, on Tuesday adopted a
measure that allows the Department of Water Resources to sell $12 billion to
$14 billion in bonds to help pay for the state's power purchases for
cash-starved utilities and their customers.
?????That is a significant increase over the maximum $10 billion approved by
the Legislature.
?????The PUC next must devise a formula to divide customer electricity
revenue among the utilities, power providers and the Department of Water
Resources.
?????Edison executives said they fear that the PUC is underestimating
electricity costs--in particular those of the alternative, natural gas fired
generators that the commission recently ordered the utilities to resume
paying. Even with last week's rate increase of about 40%, Craver said
customer revenue could fall short, which may add to the utility's debt.
?????"At best, the utility is standing still: Its cash position has not
improved," said Craver. "At worst, it's going backward."
?????A controversial PUC program that pays companies to use less electricity
got an overhaul to make it more attractive to business and more useful in
helping to avoid blackouts.
?????Companies that no longer wish to participate in the so-called
interruptible power program will be allowed to leave without penalty, but
must repay any discounts received since Nov. 1.
?????Julie Puentes, executive vice president of the Orange County Business
Council, said the group is pleased that businesses will no longer be
penalized for past failures to interrupt power. But she said the decision
does nothing to help companies that did comply and lost business as a result.
?????"They were good corporate soldiers," Puentes said.
?????Companies receive discounted rates in exchange for agreeing to reduce
power use when supplies are tight, but in the last year companies have been
asked to cut power dozens of times or face big fines.
?????The new program limits power interruptions to no more than six hours a
day, four days a week and 40 hours a month. Other programs will allow
customers--even groups of residential customers--to be paid for reducing
power use, and expand a Southern California Edison operation that
automatically turns off some air-conditioners.
?????The commission heard more than three dozen speakers Tuesday during its
public comment period, and several protesters were ejected for disruptions.
?????Protesters challenged the commission to attend a community meeting at a
San Francisco school on April 18. Commissioner Brown agreed, saying, "I hope
you treat me as courteously as we tried to treat you."
---
?????Times staff writers Dan Morain and Carl Ingram in Sacramento contributed
to this story.

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Worst Power Shortage Likely In May and June, Davis Warns
Lynda Gledhill, Chronicle Sacramento Bureau
Wednesday, April 4, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/04/M
N107852.DTL
Sacramento -- Gov. Gray Davis acknowledged yesterday that the state would
fall short of its goals for increased power generation this summer and warned
that the toughest phase of the energy crisis might be just weeks away.
Davis said May and June would be the most critical time for rolling blackouts
because several planned new power plants would not be on line. He said only
4,000 megawatts of new power would be flowing by summer's end, a sharp drop
from the 5,000 megawatts he had promised in February to have on line by the
start of summer.
"I hope we don't have major disruptions," the Democratic governor said. "But
we're hoping for the best and preparing for the worst."
Davis' frank admission came after a meeting with Senate Democrats to discuss
the energy crisis. Many lawmakers have expressed frustration with the lack of
information coming from Davis and his aides as the energy crisis drags on.
The governor plans to discuss the crisis during a five-minute statewide
television address at 6:05 p.m. tomorrow.
Despite the gloomy forecast, Davis said he thought California would be
generating more power than it needs in three years, but "we have to get
through the next two (years)."
Yesterday everyone agreed that only conservation and luck would prevent
summer blackouts.
"Everyone's concerned," said Sen. Debra Bowen, D-Marina del Rey, chairwoman
of the Senate's energy committee. "It's not possible for me to be more
concerned. We're hearing from businesses about the economic impact of the
interruptions of power supply. They are more concerned with the reliability
than the price."
The Public Utilities Commission approved last week a tiered electric rate
increase averaging 40 percent in the hope that higher prices would encourage
conservation.
Lawmakers might take even more drastic action. Some senators said there is
growing support for using the state's power of condemnation to seize private
power plants.
Under the state's 1996 deregulation plan, the major utilities were required
to sell many of their power plants to private firms. State Sen Jackie Speier,
D-Hillsborough, said senators now believe the state should take over those
generating plants.
CALL FOR BOLD ACTION
State Sen. Don Perata, D-Oakland, said he and several other lawmakers have
told the governor he must take bold action so people can be confident in
their leadership.
"I told him he needs to sell energy the same way he sold education," Perata
said, adding that he supports taking over the power plants.
"If in fact we're being taking advantage of by a school-yard bully, we need
to put a roll of pennies in our fist and cold-cock the guy," Perata said.
Speier said the governor did not dismiss the condemnation idea outright.
Other lawmakers believe that there is also support for a windfall-profits tax
on private generators that have made huge profits during the power crisis.
Money raised by the profits tax could be returned to consumers or to the
state for its power purchases, which have topped $3.7 billion so far this
year.
Meanwhile, Davis aides resumed talks with Pacific Gas and Electric Co.
yesterday to purchase the utility's power transmission system.
The administration wants to buy the transmission lines to help restore
financial solvency to the state's investor-owned utilities, including Pacific
Gas and Electric Co. The utilities would then be able to use the money to pay
off their $14 billion debt.
Southern California Edison already has tentatively agreed to sell the state
its transmission lines for almost $3 billion.
Negotiations for PG&E's transmission lines have bogged down. Davis said he
also is considering a backup plan to acquire PG&E's hydroelectric plants
should PG&E or Uncle Sam scuttle the transmission system deal.
PLANS THREATENED
"Part of the negotiations is that if the transmission lines purchase is not
approved by the federal government, we would still get an asset like the
hydro plants," Davis said.
As the crisis wears on, Davis has become a leading proponent of energy
conservation. Davis has promised a 20 percent rebate on power bills to all
Californians who reduce their electricity consumption by one-fifth beginning
June 1.
Davis continued his push yesterday, encouraging lawmakers at yesterday's
meeting to pass several conservation bills this week. But two key
conservation bills faced difficult hearings yesterday.
An Assembly bill that would spend $400 million on various conservation
efforts stalled in the Senate Appropriations Committee because the Davis
administration had not agreed to it.
The second bill, by Sen. Byron Sher, D-Palo Alto, which would allocate $700
million for conservation measures, has been languishing for weeks. It passed
the Assembly Appropriations Committee yesterday over the objections of the
author, after negotiations between Democrats and Republicans the night
before.
E-mail Lynda Gledhill at lgledhill@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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Vocal Citizens Berate PUC
Police remove several protesters
David Lazarus, Chronicle Staff Writer
Wednesday, April 4, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/04/M
N196936.DTL

The normally subdued San Francisco chambers of the state Public Utilities
Commission rang out with chanting, song and even poetry yesterday as Bay Area
consumers turned out in force to protest an average 40 percent rate increase.
About half a dozen protesters were escorted or dragged from the auditorium by
California Highway Patrol officers.
"You no longer represent the public," Oakland resident Joel Tena told the
commissioners. "You represent big business. You are cronies for the
corporations."
Most speakers called on the PUC to support seizure of power plants by the
state and a tax on energy companies' profits. They also criticized the
commissioners for what protesters termed "back-room deal-making."
"Every one of you people should wake up in a prison cell for robbery," said
San Francisco resident Judy Brady.
The commissioners remained expressionless throughout nearly two hours of
public testimony. At the end, though, after repeated interruptions and
chanting, PUC member Geoffrey Brown voiced his irritation.
"A disruption of this body represents the height of undemocratic behavior,"
he said. "The Green Party should be aware that if they want to be taken
seriously, they must abide by the legal processes."
A man in a Green Party T-shirt shouted back, "Civil disobedience is a
response of necessity." He was immediately escorted from the hall by a CHP
officer.
VOTES ON SEVERAL ISSUES
Protests aside, the PUC also found time for some important business. Among
yesterday's actions:
-- The commission approved a series of measures intended to promote
conservation and ease the threat of blackouts this summer. However, it
remained unclear who will pay the multibillion-dollar price to implement the
programs.
-- An investigation was begun into money transfers between California's
near-bankrupt utilities and their affluent parent companies. The PUC wants to
know if the transfers violated state law.
-- Pacific Gas and Electric Co. was blocked from selling off a Kern County
power plant and ordered to restore the mothballed facility to operational
status.
-- PG&E was ordered to study the environmental effect of upgrading power
lines running between the southern and northern halves of the state. A
midstate bottleneck now leaves Northern California more vulnerable to power
failures.
Consumers were equally displeased yesterday with the PUC, utilities, power
companies and Gov. Gray Davis, who has portrayed himself as having been out
of the loop when his appointees on the commission approved the largest rate
increase in state history last week.
SONG OF PROTEST
Lellingby Boyce, a retired Oakland schoolteacher, got the audience singing
along with her original song, "PG&E Stop A-Pimping Off Me."
Among the lyrics: "It's clear to us consumers we're the jokers getting
screwed. I'm reading now by candlelight, wrapped in blankets day and night."
Meanwhile, San Francisco poet David Alt offered a loftier critique of the
PUC's rate increase. "Your stench of unspoken arrogance disgusts us," he read
aloud.
A number of speakers took the commissioners to task for overlooking the
hardship of rate increases on low-income and elderly people.
"I thought you would look out for our best interests," said Marie Harrison, a
resident of San Francisco's Bayview-Hunters Point district. "But my faith is
gone. I can't believe you overlooked us."
"It makes me angry when the utilities tell us to cut back," agreed Berkeley
resident Jenna Woloshyn. "We're already using less electricity, and we can't
pay for it."
Eva Skoufis said she moved to the United States from Greece in 1968 to escape
the military dictatorship that had taken control of the country. She now owns
a coin laundry in San Francisco's Noe Valley and said her energy bills have
tripled in recent months.
'CAPITALISTIC DICTATORSHIP'
"I came from one dictatorship," Skoufis said. "Now I face a capitalistic
dictatorship. I want to believe that democracy in this country works."
Mary Bull, a San Francisco computer consultant, addressed the PUC with a
plastic handcuff attached to her $243 PG&E bill.
"Anyone who believes that you are anything more than Gov. Davis' political
lackeys are gravely mistaken," she said. "This hearing is a sham."
Bull then called on the crowd to join her in taking over the commissioners'
dais and declaring the meeting adjourned.
As protesters swarmed forward, CHP officers raced down the aisles and began
herding people outside.
One protester, San Francisco student David Russitano, had to be dragged from
the hall.
RULES OF BATTLE
Before yesterday's meeting, CHP Sgt. Ed Saenz had spoken quietly with
consumer activist Medea Benjamin. He politely told her that she would not be
able to return if he was forced to throw her out.
Benjamin said she understood but noted that her left shoulder was hurt. "You
can pull on this one," she told Saenz, "but not this one."
"OK," the officer replied.
After Bull brought the raucous hearing to a close, Saenz made sure he was the
one to escort Benjamin outside.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 6
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PUC faces angry backlash to electricity rate increases
MICHAEL LIEDTKE, AP Business Writer
Wednesday, April 4, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/04/state0
345EDT0115.DTL
(04-04) 06:37 PDT SAN FRANCISCO (AP) -- While California Gov. Gray Davis
urged lawmakers to approve $1.12 billion in energy conservation measures,
state power regulators bore the brunt of the public's outrage over rising
electricity rates during an animated hearing Tuesday.
In strident remarks delivered in crowd-pleasing rap songs, indignant poetry
and pleas of poverty, utility customers blasted the Public Utilities
Commission for its March 27 decision approving electricity rates increases of
more than 40 percent on average for customers of Pacific Gas and Electric Co.
and Southern California Edison Co.
While the details differed during 90 minutes of venting, the gist of the
statements shared a common theme. Virtually everyone portrayed the state's
energy watchdogs as the lapdogs of both the utilities and the power
generators reaping huge profits at California's expense.
``You are cronies for big business,'' sneered Oakland resident Joel Tena.
``Your stench of unspoken arrogance disgusts us,'' said San Francisco
resident David Alt as he read from an acerbic poem.
The backlash aimed at the PUC came on the same day that the regulators ended
months of delay and agreed to investigate for signs of financial misconduct
at the parent companies of PG&E, SoCal Edison and San Diego Gas and Electric.
The inquiry will focus on whether the holding companies, PG&E Corp., Edison
International and Sempra Energy Corp., milked the nearly bankrupt utilities
for cash and hoarded profits from their unregulated businesses that should
have been used to help bail out the utilities.
Forced to pay more for electricity on the wholesale market than they could
charge their customers, the two utilities say they have run up combined debts
of about $14 billion in 10 months.
If the PUC probe finds evidence of wrongdoing, the holding companies could be
fined and forced to inject more cash into the ailing utilities, a move that
might reverse the recent rate increases.
Insisting that they have done nothing wrong, the utility holding companies
described the PUC investigation as a waste of time.
Meanwhile in Sacramento, the Assembly Appropriations Committee sent three
power-related bills to the full Assembly that would fund energy efficieny
programs and speed up the siting of power plants and cap the rates of large
business customers of San Diego Gas and Electric Co., the only customers in
the state currently paying the full market rates for power.
Independent power producers say Davis' hopes for 5,000 more megawatts of
power by summer will probably fail to emerge because existing plants that
produce thousands of megawatts are going off-line because they haven't been
paid in months.
A megawatt is enough electricity to power about 750 homes. The state was free
of power alerts Wednesday morning as reserves stayed above 7 percent.
In other actions, the PUC also approved measures meant to encourage more
businesses to volunteer for power outages of up to 40 hours per month in
exchange for year-round 15 percent discounts on their bills.
The new program also will expand the power customers exempted from future
energy-saving blackouts to include all hospitals. Previously, utilities were
allowed to cut power to hospitals with backup generators or fewer than 100
beds.
With the expanded ``voluntary interruption'' program, the PUC hopes to free
up more power and reduce the frequency of blackouts expected to bedevil
California during the heat of the summer.
But the program also threatens to worsen the financial condition of the
utilities because it doesn't include financing provisions to cover the 15
percent discounts.
The program will cost SDG&E about $1.5 billion annually, estimated PUC
Commissioner Henry Duque, who proposed adding a new surcharge to finance the
plan.
PG&E and SoCal Edison also said the voluntary program will hurt them
financially, but couldn't provide a specific breakdown on the additional
expense.
PUC Commissioner Geoffrey Brown said the surcharge was a good idea, but the
timing was bad. ``The psychology of (a surcharge) would be disastrous for the
commission right now,'' he said. ``I could just see the newspaper headlines''
if the surcharge were passed.
The PUC rejected the surcharge 3-1.
Retired school teacher Wellingby Boyce of Davis drew the biggest reaction
when she sang a song titled ``PG&E Stop Pimping Off Me.''
``I'm reading now by candlelight, wrapped in blankets day and night,'' Boyce
rapped to a cheering audience that included protesters from the Green Party
and a grass-roots group called ``Public Power Now.''
Both groups are pushing the state to seize control of the regulated utilities
and California's electricity plants.
Other speakers told more somber stories. San Francisco Laundromat owner Eva
Skoufis, who immigrated to California from Greece in 1968, said her
electricity bill is already 2 1/2 times higher then a few months ago and
wonders whether her business can survive another price shock.
``I came here because I wanted to escape a (Greek) dictatorship,'' she said
during an interview. ``But I think we are living in a capitalist dictatorship
here.''
PUC President Loretta Lynch said she believed the protesters conveyed
widespread frustration over the rapidly rising price of power.
``I'm glad people are upset because it means they are paying attention,''
Lynch said. ``Hopefully, we can all band together against the energy
wholesalers responsible for this mess.''
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California regulators face angry backlash to electricity rate increases
MICHAEL LIEDTKE, AP Business Writer
Wednesday, April 4, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/04/nation
al0008EDT0402.DTL
(04-04) 07:23 PDT SAN FRANCISCO (AP) -- Some Californians have turned to song
and rhyme to vent their anger at the commission that approved electricity
rate increases for customers of the state's cash-strapped utilities.
``Your stench of unspoken arrogance disgusts us,'' said San Francisco
resident David Alt, reading an acerbic poem.
``I'm reading now by candlelight, wrapped in blankets day and night,'' rapped
retired teacher Wellingby Boyce of Davis, drawing applause Tuesday at a
meeting of the Public Utilities Commission.
The commission last week approved rate increases of more than 40 percent for
customers of Pacific Gas and Electric Co. and Southern California Edison Co.
On Wednesday morning, the state was free of power alerts as reserves stayed
above 7 percent. State power grid officials issued a Stage 2 alert -- meaning
reserves were below 5 percent -- on Monday after transmission lines were
downed by high wind, interfering with electricity imported from the
Northwest.
Commissioner Geoffrey Brown dismissed the protesters at Tuesday's meeting as
unruly ``self-appointed activists'' who were long on rhetoric and short on
solutions.
Commission President Loretta Lynch said she believed the protesters conveyed
widespread frustration over the rapidly rising price of power.
``I'm glad people are upset because it means they are paying attention,''
Lynch said. ``Hopefully, we can all band together against the energy
wholesalers responsible for this mess.''
The majority of protesters belonged to the Green Party and a group called
``Public Power Now,'' which are pushing the state to seize control of the
regulated utilities and California's electricity plants.
Also Monday, the commission agreed to investigate the parent companies of
PG&E and SoCal Edison, as well as Sempra Energy Corp., the holding company
for San Diego Gas and Electric, for possible financial misconduct.
The companies said they have done nothing wrong and described the PUC
investigation as a waste of time.
The inquiry will focus on whether PG&E Corp. and Edison International milked
the nearly bankrupt utilities for cash and hoarded profits from their
unregulated businesses that should have been used to help bail out the
utilities.
Forced to pay more for electricity on the wholesale market than they could
charge their customers under the state's 1996 energy deregulation law, the
two utilities say they have run up combined debts of about $14 billion over
the last 10 months.
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Developments in California's power crisis
The Associated Press
Wednesday, April 4, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/04/state0
907EDT0141.DTL
, , -- (04-04) 07:47 PDT Here is a look at developments in California's
electricity crisis:
WEDNESDAY:< ?-- An Assembly committee are expected to hear a bill by Assemblyman Dean ?Florez, D-Shafter, that he calls an alternate to Davis' plan to buy the ?utilities' transmission lines. ?Florez' bill would create special districts of each utilities' properties, ?including their land, transmission lines, power plants and even their ?corporate offices. Each district would issue bonds against the property, and ?the state would assess a tax on that property to repay the bonds. If a ?utility defaulted on the taxes, the state would be first in line to take the ?property after paying the balance of the bonds. ?-- The state remained free of power alerts early Wednesday morning as ?reserves stayed above 7 percent. ?-- The University of California, Los Angeles, is expected to release a report ?on how the state's energy problems have effected the state and national ?economies. ?-- Energy Commission lawyers have decided that California cannot require ?builders of new power plants to sell electricity to California, even in ?exchange for a rushed environmental review of their projects, The Sacramento ?Bee reports. ?TUESDAY:<
-- Gov. Gray Davis asks television stations statewide to cover a live 6:05
p.m. five-minute broadcast from his office Thursday for what a spokesman says
will be a statement on energy.
-- Davis launches a new public relations effort, sending national and
California media daily updates on his efforts to solve the state's energy
problems.
-- Davis says California's hot-weather power crunch could hit as early as May
or June because new power plants will not be up and running until July or
August. He's urging lawmakers to approve more than a billion dollars in
energy conservation incentives this week to reduce the likelihood of more
rolling blackouts.
Meanwhile, Sen. Jackie Speier, D-Daly City, says after Senate Democrats meet
privately with Davis that there is growing support among senators for seizing
power plants.
-- A committee sends three power-related bills to the full Assembly: one
funding energy efficiency programs; one speeding up the siting of power
plants; and one capping the rates of large business customers of San Diego
Gas and Electric Co., the only customers in the state currently paying the
full market rates for power.
-- Independent power producers say Davis' hopes for 5,000 more megawatts of
power by summer will probably fail to emerge because existing plants that
produce thousands of megawatts are going off-line because they haven't been
paid in months.
-- Power grid managers ease the state's Stage 2 alert as demand drops and
supplies increase. The alert was declared Monday when downed transmission
lines complicated the flow of electricity up the state and about 13,000
megawatts of electricity remained off-line for repairs or maintenance.
Some 3,000 megawatts of alternative energy remains unavailable because the
generators have not been paid by utility companies in months. One megawatt
can power about 750 homes.
-- Customers and consumer advocates lambast the Public Utilities Commission
for last week's huge electric rate hikes, delivering their criticism in
everything from rap songs to indignant poetry.
-- Ending months of delay, the PUC agrees to investigate for signs of
financial misconduct at the parent companies of PG&E and SoCal Edison. The
inquiry will focus on whether the holding companies, PG&E Corp., and Edison
International, milked the nearly bankrupt utilities for cash and hoarded
profits that should have been used to help bail out the utilities.
-- The PUC approves measures meant to encourage more businesses to volunteer
for power outages of up to 40 hours per month in exchange for year-round 15
percent discounts on their bills. With the expanded ``voluntary
interruption'' program, the PUC hopes to free up more power this summer and
reduce the frequency of expected blackouts.
--The PUC approves a biological study to determine whether a critical Central
Valley transmission line known as ``Path 15'' can be expanded to ferry more
power from Southern California to Northern California.
--The PUC orders PG&E and San Diego Gas and Electric to develop a program
that will enable the utilities to turn off household air conditioners during
periods of energy shortages. Households that participate in the program,
scheduled to be introduced in the summer of 2002, would receive rebates of
$25 to $100.
-- The PUC exempts all hospitals from rolling blackouts, after urging from
the California Healthcare Association calls on the PUC to exempt hospitals
from rolling blackouts. The association says more than a dozen hospitals lost
power during two days of blackouts last month.
-- Officials at Southern California Edison Co. announce two more lawsuits
from alternative energy suppliers, bringing the total to eight. The suppliers
are suing for payments owed since November.
-- Edison says it will file its annual earnings information with the
Securities and Exchange Commission on April 17. Edison said last week that
its filing would be late.
-- In a conference call with bondholders, Edison officials say the recent PUC
rate increase of 3 cents per kilowatt hour won't do anything to help Edison
pull out of its financial problems.
An Edison analysis of the increase indicates that all of that money will go
to the state to pay for power, not to the utilities, Edison's Ted Craver
said. ``I believe that is the practical conclusion,'' Craver said. ``The
phrase `Show me the money' comes to mind. We don't know whether they intend
to take additional action, but it appears that we are standing still.''
-- A group of 10 alternative power providers issues a statement increasing
the amount they are owed by $150 million to more than $700 million. The
suppliers said they are owed by Edison and PG&E for power supplied since
November. The companies, which include EnXco, Caithness and Coram, say they
supply 3 million homes' worth of power to the state grid.
-- Western States Petroleum Association calls on lawmakers to approve a bill
exempting fuel refineries from rolling blackouts. The association says it
takes days for refineries to reopen, endangering gasoline production.
-- State Sen. Jim Battin, R-Palm Desert, warns Gov. Davis in a letter that
people could die unless the state enacts his bill to bar rolling blackouts in
areas where the temperature exceeds 105 degrees.
-- California Poultry Federation and Pacific Egg and Poultry Association warn
that summer blackouts could kill millions of chickens within minutes if power
for ventilation and cooling is cut off.
-- Crews dismantling the Rancho Seco nuclear power plant near Sacramento
begin removing radioactive fuel rods from a pool where they were cooled for
more than 10 years.
-- The stock of PG&E's parent, PG&E Corp., drops 19 cents a share to close at
$11.56. Edison's parent, Edison International, sees its stock fall 9 cents a
share to close at $12.55.
<
WHAT'S NEXT:< ?-- The Davis administration continues negotiations with Edison, PG&E and San ?Diego Gas & Electric Co. over state acquisition of their transmission lines. ?-- FERC holds a conference April 10 in Boise, Idaho, on Western energy ?issues. ?-- The House Government Reform Committee plans energy hearings in three ?California cities, including April 10 in Sacramento, April 11 in San Jose and ?April 12 in San Diego. ?< ?THE PROBLEM:<
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices that the state's electricity deregulation law bars them from
passing onto ratepayers, and are close to bankruptcy.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers.
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Power gap greatest in May, June
Posted at 10:09 p.m. PDT Tuesday, April 3, 2001
BY JOHN WOOLFOLK AND DION NISSENBAUM

Mercury News

Californians bracing for acute power shortages and rolling blackouts this
summer may see the worst of the crisis as early as next month, Gov. Gray
Davis acknowledged Tuesday.
Urging lawmakers to pass power conservation measures, Davis noted what many
energy officials have been eyeing with growing concern: that state efforts to
secure more power won't bear much fruit until late summer or fall.
Plans to obtain power contracts and portable generators for the summer are
falling short. In addition, supplies from northwest dams and alternative
energy generators are drying up.
``Usually the challenge is in August or September,'' Davis said. ``This year,
the challenge may well be in May and June.''
Underscoring the severity of the crisis, Davis announced he has asked
television stations to grant him five minutes of airtime at 6:05 p.m.
Thursday to talk about energy. The last time a governor asked to address the
public in a special broadcast was nine years ago when Gov. Pete Wilson talked
about the state's budget problems.
The state's sense of urgency comes amid growing evidence that California's
gap between power demand and available supply may be greatest in late spring
and early summer.
Meanwhile, state regulators on Tuesday adopted a rash of proposals aimed at
easing the pain of coming shortages and blackouts at a raucous hearing packed
with protesters and others seeking exemptions.
When Davis announced a series of initiatives in February to pull California
out of the crisis, he expected to have 95 percent of the state's unmet power
needs secured in long-term contracts with energy suppliers.
He launched financial incentives and streamlined approval measures to bring
new power supplies online by early to mid-summer, hoping to alleviate peak
shortages and curb runaway power prices.
Two months later, much of that has failed to materialize. The state so far
has signed contracts for just half the amount needed, and most of that power
won't be available for a few years. This year, the state has signed up about
a third of what is needed.
In addition, initiatives to put a host of small, portable generators in place
to meet peak summer power demand are lagging. Plans by the California
Independent System Operator, which runs the main transmission grid, to get
3,000 megawatts of power from these ``peaker'' plants came up with less than
half that amount.
Likewise, Davis' initiative to get an additional 1,000 megawatts of peaker
power online by the end of August has netted just 362 megawatts, with the
first plants firing up in July. The Davis administration last month extended
the deadline to the end of September, a move expected to boost the amount of
peaker power to 960 megawatts.
Other major power sources coming this summer, two Calpine Corp. plants
totaling 1,060 megawatts in July and 360-megawatts in August, have long been
in the works. They remain on schedule, but won't do anything for May and
June.
Meanwhile, supplies once counted on are evaporating. A severe drought in the
Pacific Northwest has dried up the dams that are a major source of imported
hydroelectric power for California.
And small alternative-energy producers that provide a third of the major
utilities' power have been cutting off supply, pulling some 3,000 megawatts
off the grid and contributing to blackouts last month.
The generators say they can no longer supply power because the nearly
bankrupt utilities haven't paid them, and are not satisfied with efforts by
the governor and regulators to fix that problem.
``You could easily see another 1,000 megawatts off-line by the end of the
month,'' said Jan Smutny-Jones, executive director of the Independent Energy
Producers Association.
An updated forecast from the system operator last week predicts a loss of
1,000 megawatts of hydroelectric power and the most severe shortage occurring
in June rather than August. The state is expected to be short nearly 6,000
megawatts in June, a figure that will drop to 3,500 megawatts in August as
new power sources come online.
``Because of new generation coming online later in the summer, it is May,
June and July that are going to be the tougher months,'' said system operator
spokeswoman Lorie O'Donley.
The new report did not calculate shortages for May, but shortages during that
month are certainly possible. Last year's first acute power shortage was
recorded May 22, prompting a Stage 2 alert that forced businesses to trim
power usage.
Davis spokesman Steve Maviglio downplayed the significance of the governor's
warnings about May and June. He noted that the system has proven
unpredictable and that no one expected blackouts would hit in January and
March.
``I wouldn't read too much into that,'' Maviglio said. ``It's just going to
be tight in general, and people are just going to have to conserve, beginning
now.''
To stave off a spring crisis, Davis urged Senate Democrats to pass two bills
providing more than $1.1 billion to pump up programs that provide rebates and
other financial incentives to conserve energy in homes and small businesses.
``The only way to fight back against the generators is to use less of their
product,'' Davis said. ``The less we use, the less money they make.
``The hope is, we don't have major disruptions. We're hoping for the best and
planning for the worst.''
The California Public Utilities Commission agreed to exempt all hospitals
from rolling blackouts, in which utilities cut power for an hour or so from
one circuit to the next to prevent total system failure.
The move came after hospitals, once considered exempt, complained of being
shut off during two days of outages last month.
Commissioners also revamped a program that gives rate discounts to businesses
that reduce power use on demand during shortages. They also told utilities to
implement a program that gives customers a discount in exchange for having
their air conditioners remotely switched off.

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Already a power giant, state may build plants
Published Wednesday, April 4, 2001, in the San Jose Mercury News
BY DION NISSENBAUM

Mercury News Sacramento Bureau

SACRAMENTO -- Step by step during the energy crisis, California has
transformed itself into a power baron, spending billions on electricity and
looking to buy 26,000 miles of transmission lines.
But the state is about to take a far more significant step in trying to gain
control of its energy destiny: adopting a sweeping plan to build its own
power plants and become one of the largest public power authorities in the
nation.
Under the proposal, a new group of seven state officials could spend $5
billion or more to build enough generators to supply about 15 percent of the
state's power. It would also have the extraordinary power to seize existing
plants around the state.
``This is the one place where we're actually crafting an energy policy in
response to a crisis,'' said Doug Heller, a consumer advocate with the
Foundation for Taxpayer and Consumer Rights.
Although the measure has drawn little attention in a capital focused on
preventing disruptive blackouts this summer, it has moved swiftly through the
Legislature and could reach Gov. Gray Davis as soon as today. Davis, who has
repeatedly promised that the state will take control of its energy future,
has endorsed the idea.
``It comes down to a choice,'' said state Treasurer Phil Angelides, who is
sponsoring the plan. ``Do we want to hope and pray that the private sector
builds enough, or do we exercise some prudence to build enough so that we can
control our own destiny?''
The goal for supporters like Angelides is to make sure the state builds and
owns enough energy capacity so that it no longer finds itself at the mercy of
a dysfunctional market that has forced the state to spend $50 million a day
to buy electricity.
Senate President Pro Tem John Burton, D-San Francisco, and other public power
advocates view this proposal as a hammer California can use to drive down the
prices charged by out-of-state power companies, which state and federal
officials have accused of gouging California.
How it worked elsewhere
But critics worry that the proposal may create an inefficient and expensive
bureaucracy that could end up as the kind of financial boondoggle that nearly
toppled public power agencies in New York and Washington.
``I am skeptical of the idea,'' said Severin Borenstein, director of the
Energy Institute at the University of California-Berkeley. ``I am far from
convinced that the state should own generation facilities.''
As a model, supporters of the public power authority idea point to New York,
where the state has spent 70 years building a power company that produces
about a quarter of the state's energy needs.
But even members of the New York Power Authority have a hard time seeing the
similarities.
``I can't say that it wouldn't work, but I have a hard time envisioning it,''
said Jack Murphy, a spokesman for the authority.
``It's like it's going to be a grown-up power authority from the start,'' he
said. ``We kind of grew one plant at a time and the purpose was not a
crisis.''
New York set out in the early 1900s to prevent private companies from
harnessing the famous waters that cascade over Niagara Falls. At the time,
former President and New York Gov. Theodore Roosevelt backed the plans to
combat ``waterpower barons'' from taking over state rivers.
But it took decades to get the project off the ground and the agency has been
criticized for offering poor service, making bad business decisions and
creating an inefficient bureaucracy.
Even now, the agency is drawing criticism for not building enough plants in
recent years and for scrambling to prevent blackouts this summer by setting
up emergency plants in places being challenged by environmental groups.
Ashok Gupta, senior energy economist with the Natural Resources Defense
Council in New York, said the state public power programs did a good job for
years in backing conservation. But he said the board appointed by the
governor isn't acting in the public interest. Consumer activists have sued
the state agency and accused it of ignoring environmental and health concerns
to set up emergency power plants to get through the summer.
``It doesn't work that well because there is little or no accountability,''
Gupta said. ``In New York state our public power authority basically ignores
public input and that says a lot.''
Critics also point to a debacle even closer to home: Washington state. In
1983, the state public power authority was forced into what was then the
largest bond default in the nation's history in a failed bid to build two
nuclear plants.
The financial disaster has left the Washington Public Power Supply System
tagged with an unwanted nickname: ``Whoops!''
Supporters say they understand the dangers. Whether it is a public authority
or a private business, anything run by human beings runs the risk of failing.
But Angelides and others contend that the benefits far outweigh the risks.
L.A. example of success
Some point to Los Angeles, where the head of the local power authority, S.
David Freeman, has emerged as a kind of folk hero in the energy crisis. In
1997, Freeman stepped in to head a beleaguered and nearly bankrupt Los
Angeles Department of Water and Power. He slashed jobs, cut debt and is
credited with keeping cheap electricity flowing to the city's 3 million
residents.
Freeman has become a close adviser to Davis on the energy crisis, led the
negotiations with power companies for long-term contracts and is mentioned as
a possible candidate to run the new state power authority.
The new California power authority aims to work with private companies, not
drive them out of the market, and follow in the footsteps of other public
power authorities that have a strong track record of providing the cheapest
power available.
Advocates of public power are not bothered by the contention that such
entities would deter the private power companies that have been making
millions in profits during the energy crisis from building more plants.
``I find it difficult to think of anybody shedding tears for these guys,''
Burton said during the Senate floor debate over his bill. ``There has been no
one since the days of the robber barons that has gotten away with what these
guys have gotten away with.''

Contact Dion Nissenbaum at dnissenbaum@sjmercury.com or (916) 441-4603.
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Power player
Manager of AES' Huntington Beach plant becomes a controversial figure amid
plans to expand capacity.
April 4, 2001
By KATE BERRY
The Orange County Register

Ed Blackford, who runs the AES Huntington Beach power plant, is facing local
outrage over the state's fast track for a plan to bring two dormant
generators online by this summer
Photo: Paul E. Rodriguez / The Register
?
?

HUNTINGTON BEACH It appears as if everyone is against Ed Blackford.
Surfers hate the sight of the Huntington Beach power plant that he operates,
saying it destroys the beauty of the coastal landscape. Environmentalists
worry about the plant's effect on air and water quality. And local residents
complain that his company is driven by corporate greed and refuses to "give
back" to the community.
"Let's face it, no one wants to live near a power plant," said Blackford, a
soft-spoken chemical engineer who is president of AES Huntington Beach. "On
the other hand, everyone wants the lights to go on when they walk into a
room."
As the local public face of Arlington, Va.-based AES Corp., Blackford, 53, is
at the center of a controversy provoked by California's electricity crisis.
Residents and city officials are outraged that the Huntington Beach plant won
approval from the California Energy Commission for speedy review of a plan to
revive two dormant generators. Obtaining the proper permits for the plant
would usually have taken more than a year. But state regulators cut the
process to just 60 days under an emergency order from Gov. Gray Davis to get
more megawatts online by this summer.
The energy commission will hold a daylong hearing Monday at Huntington Beach
City Hall. The capacity expansion could receive final approval as soon as
April 18.
The quick review has struck an emotional chord in Huntington Beach, where
homeowners and beach-goers would rather see the plant, which has anchored the
coastline since the early 1960s, shut down than expanded.
"I don't think the plant has been a very good neighbor. It's a big, ugly
thing in the community," said Connie Boardman, a Huntington Beach
councilwoman. "There's no way the CEC staff and our city staff can adequately
analyze bringing these units online by this summer."
The fast-tracking means the two generators are likely to be up and running
before any environmental studies are completed.
Scientists at the University of California, Irvine, have a theory that ties
the power plant to a rash of beach closures in recent years.
The plant sucks in ocean water as part of a cooling process, and heated water
is then discharged into the ocean. There is concern that the heated water may
set up currents that draw in plumes of bacteria-laden sewage from a
sanitation outflow pipe five miles offshore. With the capacity expansion, the
plant would suck in and discharge more ocean water, possibly exacerbating the
problem, experts fear.
"We've been trying to figure out what it is about the area that makes it
contaminated," said Stanley Grant, an environmental engineer at UCI who first
hypothesized in November a link between the AES plant and contamination. The
Orange County Sanitation District followed up with a field experiment, also
in November.
Nearly a dozen studies or surveys will be conducted this summer in the area,
Grant said.
The CEC has recommended requiring AES to pay to clean up any pollution
created by the planned expansion.
Blackford is the first to admit that relations with the city are strained.
"I think there are true issues in the water and the air," he said. "There's
going to have to be conditions to make sure it doesn't create anyone's
nightmare of beach closures."
AES is taking steps to mitigate air pollution. The plant's two existing
generators are scheduled to be shut down starting this month as it installs
catalytic converters - scrubbers that could reduce smog emissions by 90
percent.
Blackford blames Southern California Edison, the plant's previous owner, for
not taking steps earlier to reduce emissions.
"Not a lot has been done at this plant for a number of years," he said.
"Clearly, Edison didn't put much money into this facility other than
maintaining the electric generation."
HAD PLANNED TO RETIRE
Blackford moved to California three years ago with plans of early retirement.
He said the white sandy beaches remind him of his grandfather's cottage in
New Jersey. He has two grown children and lives in Huntington Harbour with
his wife, a retired schoolteacher.
"Ed basically came out west to do his last stint, and it turned out to be a
hotbed of politics," said Aaron Thomas, a lobbyist for AES Corp.
Blackford found himself in the spotlight when the city launched an
unsuccessful attempt two years ago to pass Measure Q, which would have
generated millions in revenue for the city by taxing the plant's sales.
Blackford has no experience in politics. He is more a product of an
industrial corporate culture, having worked at an AES coal-fired power plant
in Pennsylvania for more than 15 years.
"Suddenly there was all this interest in the plant," he said. "And I really
wasn't that comfortable with it in the beginning."
Bill Workman, an assistant city administrator, said the state's energy crisis
has given Blackford and AES "justification" to rebuild the plant's two
dormant boilers - rather than overhaul the entire plant, something the city
has advocated for years.
"More than anything, we want a commitment that we would see the plant
eventually torn down and replaced with a contemporary,
environmentally-friendly plant, like those in Redondo Beach and Morro Bay,"
Workman said. "It's difficult because of the weak relationship the plant has
had with the community in the past."
AES' plant in Huntington Beach is not reaping the enormous profits of other
power generators. Before electricity prices soared last year, AES signed a
20-year contract to sell all power produced at the Huntington Beach plant and
its two other Southern California plants to Williams Cos. AES gets only the
contractual price from Williams, which can sell the power at much higher
market-based rates.
AES has incentive to get its two dormant units up and running quickly.
Those units would not be subject to the Williams contract, and AES could sell
the power to the state at much higher prices.
"Ed has a love for the community," Workman said. "But he also is a senior
member of the corporate staff for AES, and he's certainly seeking what's best
for the corporation and trying to balance out as best he can what's good for
the community."
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PUC gives 'interruptibles' a way out
The agency's S.F. hearing is disrupted by consumers protesting last week's
rate increase.
April 4, 2001
By KATE BERRY
The Orange County Register
Consumer advocates and ratepayers denounced state energy regulators at a
raucous meeting in San Francisco on Tuesday at which the California Public
Utilities Commission approved an opt-out provision for companies and schools
in so-called interruptible contracts with Southern California Edison.
Scores of demonstrators tried to break up the meeting to protest a rate hike
of as much as 36 percent approved by the commission last week. Chanting "Heat
and light are a right,'' the protesters forced PUC President Loretta Lynch to
demand twice, over a chorus of voices: "We will have order in this
commission.''
After almost two hours of comments from 34 ratepayers and consumer activists,
the commission approved several measures, as expected.
Regulators dramatically revised a decade-old program in which businesses and
schools received discounted electricity rates in exchange for curtailing
power use when requested during periods of peak demand. Business groups,
including the Orange County Business Council, had lobbied heavily for the
changes in the interruptible contracts, which impose heavy penalties on users
that don't cut power when requested. Customers will now be allowed to opt out
of the program and avoid paying penalties accrued since November.
"It is mostly good news,'' said Julie Puentes, OCBC executive vice president
of public affairs.
But she said businesses are still upset that they will be notified only
minutes before a rolling blackout occurs, making interruptions difficult for
manufacturers with sensitive equipment.
In all, three new programs to encourage energy conservation by businesses
were adopted. The PUC also allowed Edison to expand a program in which
residential customers agree to have their air conditioning automatically shut
off in times of power shortages.
Among the business options, one proposal will pay customers $350 a
megawatt-hour to reduce usage by at least 100 kilowatts on a same-day or
day-ahead basis. Another exempts customers from rolling blackouts if they
agree to reduce usage during each Stage 3 power alert.
Customers currently in interruptible contracts with Edison can opt out of
their contracts, either retroactive to Nov. 1, 2000, or at the start of the
next billing cycle. Those dropping out can either pay penalties accrued since
November or reimburse their utility for a 15 percent discount on rates.
The commission also launched a formal investigation into the financial
relationships between the state's two cash-strapped utilities, Edison and
Pacific Gas & Electric, and their parent companies, which have received
billions of dollars from the subsidiaries in recent years. Both corporations
objected.
"The CPUC should be taking steps to restore the credit-worthiness for
California utilities so they can build, maintain and operate a reliable
electric system,'' said Thomas Higgins, an Edison senior vice president. The
companies have said that the cash transfers from the utilities, for
dividends, taxes and other payments, were normal business practice and were
in keeping with rules set by regulators.
The commission also approved the maximum size of a state bond issue, allowing
State Treasurer Phil Angelides to move forward on selling bonds to pay for
power purchases. The bond issue, set at $13.4 billion, will enable the
state's Department of Water Resources to pay for power purchases.
The commission also voted for all acute-care hospitals to be exempt from
rolling blackouts. Previously, only hospitals with 100 beds or more were
exempt. Residential customers on life-support equipment will be notified by
their utility prior to a blackout.

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Energy notebook
Davis to give TV address on energy crisis Thursday
April 4, 2001
SACRAMENTO Gov. Gray Davis plans to deliver a five-minute statewide
television address Thursday evening to discuss California's energy crisis and
make what his office described as a major announcement.
Davis will "speak in detail about California's energy emergency," his office
said. The address will originate in the governor's Capitol office.
Also Tuesday, Davis said late spring and early summer will be the most
difficult periods for power shortages.
"Usually, the challenge is in August or September; this year, the challenge
may be in May or June," Davis said after a two-hour private meeting with
Senate Democrats. He said new power plants that are scheduled to go into
operation by late summer, including "peaker" plants, could provide 4,000
megawatts to cushion against outages. A megawatt is enough to light from 750
to 1,000 homes.
The governor also said the state would seek to acquire the utilities'
power-generating dams if federal regulators do not approve California's plan
to purchase the companies' transmission lines.
"The hydro assets would be Plan B," the governor said.
The state has spent nearly $4.2 billion to buy power for the beleaguered
utilities. A bond sale to recover that money, as well as pay for cheaper
power under long-term contracts, is planned for next month.
Investors weigh petitioning for Edison's bankruptcy
Rosemead An investor holding defaulted debt sold by Southern California
Edison told utility executives on a conference call he and other investors
are closer to having a bankruptcy court decide how to reorganize the cash-
strapped utility.
The comment came after Ted Craver, the chief financial officer of the
utility's parent, Edison International, told investors that he agreed there
has been "frustration" in waiting for a solution.
Craver said he was "somewhat amazed at how disciplined" the investors have
been holding off seeking a remedy in the bankruptcy courts.
Any three unsecured investors holding more than $10,000 in defaulted debt can
file a petition with the court to put the company into involuntary
bankruptcy. The state's second-largest investor-owned utility holds
conference calls every Tuesday and Friday for holders of the more than $696
million of debt it has defaulted on since Jan. 16.
Register staff writer John Howard and Bloomberg News contributed to this
report.

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Power Supplier Files Lawsuit Against Pacific Gas and Electric Company;
Dynamis, Inc. Seeks to Suspend Power Purchase Agreement in Order to Provide
Power to Grid

SANGER, Calif.--(BUSINESS WIRE)--April 3, 2001 via NewsEdge Corporation  -
In the continuing
saga of California's energy crisis, yet another power supplier remains
non-operational because of PG&E's failure to pay for past deliveries
of power.

Dynamis, Inc. filed a lawsuit today in Fresno Superior Court
seeking payment from Pacific Gas and Electric Company (PG&E) for over
$3 million for past deliveries of power and to suspend its electric
power purchase agreement in order to allow Dynamis to resume
delivering electric power to the California electrical grid. Dynamis,
a natural gas-fired cogeneration facility located in Sanger, Fresno
County, was forced to shut down operations in February of this year
after PG&E paid it only a small portion of the amounts due for the
deliveries that Dynamis had made in December 2000 and January 2001.

"Unless Dynamis is enabled to sell power in the open market, the
facility will be forced to remain idle," said Michel Gaucher, Director
and Owner, Dynamis, Inc. "Dynamis simply does not have the financial
resources to continue extending credit to PG&E, particularly given
PG&E's refusal to make any past due payments and with no assurance of
payment for any future deliveries."

"In light of our state's recent rolling blackouts (on March 19 and
20), and given the predictions of further rolling blackouts as we
approach summer, Dynamis remains committed to finding a method to
operate its facility and sell much-needed power to the California
electrical grid," Gaucher said.

The Dynamis facility has provided power to PG&E and California
consumers since 1991 with a reliability approaching 100 percent. The
42 megawatt "qualifying facility" has the capacity to produce
electricity to supply over 40,000 homes. Dynamis is one of the largest
taxpayers in Fresno County, and provides significant financial and
community resources to the City of Sanger. Dynamis provides employment
to 25 people at the facility.

CONTACT: Dynamis, Inc. |              Michel Gaucher, 514/866-2801 | or |
Steven Greenwald, 415/276-6528

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Wednesday, April 4, 2001

By Kathleen McFall
kmcfall@ftenergy.com

While much of the current dialogue about the national energy situation
focuses on supply-side solutions, interest is growing in energy-efficiency
actions and real-time pricing as a means of reducing demand.

"These efforts are far more than public relations," said Michael Reid,
consulting director at E Source, a unit of Financial Times Energy in Boulder,
Colo. "I view energy efficiency as a significant resource. It's not the
solution, but it's part of a solution that also includes new generation and
transmission."

"The cheapest megawatt you can buy this summer is the one you don't have to
purchase," California Gov. Gray Davis said recently when announcing new
conservation programs.

The California Energy Commission estimates that, without more conservation or
new plants this summer, California will be short up to 10% of expected demand
on peak use days. Farther north, the Northwest Power Planning Council in
Portland, Ore., said the hydropower-dependent region was experiencing "the
driest or second-driest (year) on record."

Buybacks and related financial incentives for large industrial customers,
such as for the aluminum industry in Washington and Oregon, were ramped up
this past summer (see "Interest in energy efficiency growing," Energy
Insight, Feb. 9, 2001). Now, in light of the continuing power crisis, the
efficiency focus is expanding to residential customers.

Resurrection of tradition
What some analysts dub "traditional" energy-efficiency programs, rebates for
appliances and windows, for example, were more common when utilities were
subject to the least-cost planning efforts of a structured regulatory
framework.

"These programs were not the result of a crisis situation. They were seen as
the right thing to do from an economic and environmental perspective. Within
the framework of least-cost planning, it made sense for the utility to pursue
energy-efficiency measures rather than develop new power," said Reid. "Over
the past few years, however, utilities pulled back from traditional
energy-efficiency programs as the industry restructured. Had the old-style
programs continued, they would have achieved a lot more by this time."

Instead, funds from traditional programs were funneled into more fashionable
"market transformation" approaches in California and elsewhere. For example,
in a 1997 decision, the California Public Utility Commission (CPUC) scaled
back rebate programs and, instead, offered incentives to manufacturers and
builders. Making energy efficiency profitable to businesses was assumed to be
a more permanent solution.

Market transformation approaches take a long-term view, but now, as
regulators and utilities need an immediate response, traditional approaches,
combined with rate hikes and innovative new real-time pricing schedules, are
once again on the table.

Using prices to encourage conservation
Some analysts believe transparent pricing is the only effective way to send
the right signals to consumers to decrease demand. In keeping with that
thinking, the CPUC raised electricity rates for millions of retail customers
by more than 40% recently, citing the need to get "electricity hogs" to
conserve power and stave off blackouts this summer. The CPUC established that
a "tiered" pricing structure, still undefined, will be put into place that
will reward customers who conserve energy and penalize those who do not.

In Seattle, the city is seeking a demand decrease of 10%. At the end of
February, Seattle City Light said weather-adjusted demand was down by 6.2%.
The utility attributes this to price-responsive conservation due to a 10%
rate increase effective in January. It expects even more savings given the
18% increase that took effect in March.

Not everyone agrees that rate increases are essential to achieving greater
energy efficiency. "Even without a price hike, there's a lot of untapped and
cost-effective efficiency measures in California and elsewhere," said Reid.
"I think the price hikes are more about keeping utilities solvent than about
encouraging conservation. The CPUC approved a huge increase because the
accountants said the utilities are in dire straits. Conservation will be a
byproduct of the higher rates; it's not the main reason for raising them."

The time-of-use pricing strategy, already common for large industrial and
commercial users, is an alternative cost-based approach that's fast gaining
converts. It encourages residential customers to decrease use while allowing
utilities to improve load management.

Last week, the Oregon Public Utility Commission (OPUC) ordered the state's
two largest private utilities, Portland General Electric and PacifiCorp, to
offer 1.2 million residential and small-business customers alternative
pricing plans, including a time-of-use approach. Customers who opt for this
plan will receive a new meter that allocates consumption into peak, mid-peak
and off-peak hours.

"These (pricing) options are important to our energy future," said Commission
Chairman Ron Eachus.

Rebates, mandates
Traditional energy-efficiency rebates also are gaining momentum as utilities
in the West resurrect programs or strengthen existing ones. In California,
PG&E recently announced new rebates for energy efficient light bulbs,
refrigerators, clothes washers and dishwashers.

"It is very likely that California will experience severe power shortages in
the coming months, and our customers' conservation efforts are going to be
critical in helping the state get through the crisis with as few blackouts as
possible," said Beverly Alexander, PG&E vice president of energy management
programs.

In keeping with California style, the state is adding twists to the
traditional approach by also offering rebates to residential users who
decrease their consumption this summer. Businesses and homeowners can earn a
20% rebate on their summer electric bills if they cut their use by 20%
compared to last year. The one-time discount will apply to bills for June
through September only.

According to the governor's press office, if only 10% of the utilities'
customers achieve the 20% reduction, it could result in approximately 3,500
GWh reduction in consumption and 2,200 MW reduction in peak consumption. This
would result in an avoided power purchase cost of $400 million to $1.3
billion.

"Instead of paying exorbitant rates to out-of-state generators, I'd rather
pay California consumers to conserve," Davis said in a statement.

While innovative, these programs present challenges. "Will the 20% reductions
be adjusted for weather, for example?" asked Reid. "How will consumers know
if they have achieved 20% before they get their bill? Consumers lack the
sophisticated meters that can give them feedback on their conservation
efforts in real time."

Gov. Davis also is invoking emergency authority to mandate even more power
savings from business and residential customers.

"All the malls, shopping centers, everything is lit up at night like it's the
middle of the day," he said to a group of investors. In response, the state
is requiring that retailers reduce their consumption of electricity on
outdoor lighting for estimated reductions of at least 40% to 60% after
business hours.

It's too soon to assess the outcome of the renewed push in the West for
energy efficiency and load management in terms of savings achieved. This
summer, obviously, will be the acid test. However, the crisis situation may
result in energy-efficiency measures and pricing innovations taking a
permanent seat at the policy discussion table. While some of the more
innovative, short-term programs may unravel as the price of power declines
with new supply, it's unlikely that demand management strategies will ever be
relegated to the sidelines again.