See natural gas price article below.  Our buddy Paul Carpenter has turned on
us (not to mention that he seems to be talking nonsense).  How about giving
him a call?
---------------------- Forwarded by Steven J Kean/NA/Enron on 04/20/2001
02:58 PM ---------------------------

Miyung Buster@ENRON_DEVELOPMENT
04/20/2001 10:22 AM
To: Ann M Schmidt/Corp/Enron@ENRON, Bryan Seyfried/LON/ECT@ECT,
dg27@pacbell.net, Elizabeth Linnell/NA/Enron@Enron, filuntz@aol.com, James D
Steffes/NA/Enron@Enron, Janet Butler/ET&S/Enron@ENRON, Jeannie
Mandelker/HOU/ECT@ECT, Jeff Dasovich/NA/Enron@Enron, Joe
Hartsoe/Corp/Enron@ENRON, John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT,
John Sherriff/LON/ECT@ECT, Joseph Alamo/NA/Enron@Enron, Karen
Denne/Corp/Enron@ENRON, Lysa Akin/PDX/ECT@ECT, Margaret
Carson/Corp/Enron@ENRON, Mark Palmer/Corp/Enron@ENRON, Mark
Schroeder/LON/ECT@ECT, Markus Fiala/LON/ECT@ECT, Michael R Brown/LON/ECT@ECT,
Mike Dahlke/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mona L
Petrochko/NA/Enron@Enron, Nicholas O'Day/AP/Enron@Enron, Peggy
Mahoney/HOU/EES@EES, Peter Styles/LON/ECT@ECT, Richard
Shapiro/NA/Enron@Enron, Rob Bradley/Corp/Enron@ENRON, Sandra
McCubbin/NA/Enron@Enron, Shelley Corman/ET&S/Enron@ENRON, Stella
Chan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steven J Kean/NA/Enron@Enron, Susan
J Mara/NA/Enron@Enron, Mike Roan/ENRON@enronXgate, Alex
Parsons/EU/Enron@Enron, Andrew Morrison/LON/ECT@ECT, lipsen@cisco.com, Janel
Guerrero/Corp/Enron@Enron, Shirley A Hudler/HOU/ECT@ECT, Kathleen
Sullivan/NA/Enron@ENRON, Tom Briggs/NA/Enron@Enron, Linda
Robertson/NA/Enron@ENRON, Lora Sullivan/Corp/Enron@ENRON, Jennifer
Thome/NA/Enron@Enron, jkradin@marathon-com.com,
rlichtenstein@marathon-com.com, syamane@marathon-com.com,
ken@kdscommunications.com, hgovenar@govadv.com, sgovenar@govadv.com,
bhansen@lhom.com, Carin Nersesian/NA/Enron@Enron
cc:

Subject: Energy Issues

Please see the following articles:

Sac Bee, Fri, 4/20:  "State might balk on power: But refusing to
pay 'ridiculous' prices could add to crisis"

Sac Bee, Fri, 4/20:  "SMUD directors vote to hike rates: A tentative
increase of 19% to 27% is blamed on rising energy costs"

Sac Bee, Fri, 4/20:  "Lieberman to Bush: Help California solve power woes"

SD Union, Fri, 4/20:  "Escondido calls a halt to power plant ideas"

SD Union, Fri, 4/20:  "Inflated natural-gas prices add to energy costs,
expert says"

SD Union (AP), Fri, 4/20:  "Davis, Congress members call for energy price
controls"

SD Union (AP), Fri, 4/20:  "Regulators open investigation into alternative
power providers"

SD Union (AP), Fri, 4/20:  "Attorney general taking two energy companies to
court"

LA Times, Fri, 4/20:  "Legislators Unite Over Energy Price Issue"

SF Chron, Fri, 4/20:  "Small fry among big fish in PG&E bankruptcy
Some unlikely businesses are listed as creditors against utility"

SF Chron (AP), Fri, 4/20:  "Developments in California"

SF Chron (AP), Fri, 4/20:  "California utility wants to boost Mohave power
plant production"
SF Chron (AP), Fri, 4/20:  "PG&E owes money to several small businesses,
unlikely creditors"

SF Chron, Fri, 4/20:  "Edison pushes lawmakers to accept deal"

Mercury News, Fri, 4/20:  "Who will pay the most for power?"

Mercury News, Fri, 4/20:  "Credit-raters put state on watch"

Mercury News, Fri, 4/20:  "Power company executives going without bonuses"

Mercury News, Fri, 4/20:  "Davis and US lawmakers call for price caps on
power"

Mercury News, Fri, 4/20:  "Generators cutting electric output; regulators
want to find out why"

OC Register, Fri, 4/20:  "FERC remains an unlikely rescuer
The federal agency hews to a hands-off policy on power rates"

OC Register, Fri, 4/20:  "Lawmakers seek bigger rollbacks, can't agree on
caps"

OC Register, Fri, 4/20:  "Energy notebook
Assembly urges federal regulation of natural gas"

OC Register, Fri, 4/20:  "Shed light on costs"                 (Commentary)

Individual.com (AP), Fri, 4/20:  "End To Deregulation of Nevada Power"

Individual.com (Business wire), Fri, 4/20:  "PG&E Co. Issues Statements On
the
Increase in the State's Cost for Power"

Indivdual.com (PR/newswire), Fri, 4/20:  "J.D. Power and Associates Reports/
Nationwide
Decline in Customer Satisfaction of Electric Utility Service Among
Midsize Businesses"

Individual.com (PR/newswire), Fri, 4/20:  "Calpine to Purchase 46 General
Electric Gas Turbines
Turbines in Place for 70,000-megawatt Program"

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

State might balk on power: But refusing to pay 'ridiculous' prices could add
to crisis.
By Dale Kasler
Bee Staff Writer
(Published April 20, 2001)
Adding to the risk of summertime blackouts, the state water department said
Thursday it might not pay "ridiculous" prices for electricity even if that
leaves California short of power.
The Department of Water Resources, which has been buying electricity for the
state's two beleaguered utilities since mid-January, wouldn't spell out what
it considers ridiculous. But if prices get too high, the state might be
better off ordering blackouts or implementing proposed new conservation
programs designed at cutting usage on short notice, said Raymond Hart, the
department's deputy director in charge of power purchases.
Gov. Gray Davis took a different view, saying: "We will continue to keep the
lights on. When you're fighting a forest fire, you don't say, 'Let me see,
how much is this going to cost me? Maybe I can't write the check, maybe I
can't put the fire out.' You put the fire out and then worry about the cost
later."
But Davis' spokesman, Steve Maviglio, said the Governor's Office indeed is
contemplating whether to refuse to buy power at any cost. "At what point does
the state say, 'Enough is enough'? Those scenarios are certainly under
discussion," Maviglio said.
The water department until recently resisted buying all the power Southern
California Edison and Pacific Gas and Electric Co. needed, refusing to
purchase electricity it deemed too costly. But lately it's had to relax that
stance because of an order by the Federal Energy Regulatory Commission, Hart
said.
That April 6 order said power generators can no longer be forced to sell
electricity to uncreditworthy entities such as the Independent System
Operator, which manages the state's power grid. Because the ISO -- which gets
its money from the utilities -- can no longer buy the power, the water
department is now buying all the electricity required by the utilities, Hart
said. But he said the department could back off if prices get out of hand.
"If the prices just get ridiculous altogether, there's a policy call to be
made, and we'll cross that bridge when we get there," Hart said.
The ISO has predicted that severe shortages could bring 34 days of rolling
blackouts this summer. The potential refusal of the water department to buy
ultra-expensive power could further strain the grid.
"On a daily basis we're dealt a set of cards," said ISO spokesman Patrick
Dorinson. "It sounds like ... we're going to be handed another set of cards,
and we're going to have to try to maintain the reliability of the grid as
best we can."
Hart's comments came amid an increasingly rancorous debate between Davis and
PG&E over the water department's power expenditures. State spending shot up
following PG&E's April 6 filing for bankruptcy protection.
Davis said generators began demanding a "credit penalty" from the water
department because of the PG&E bankruptcy proceedings. As a result, the
state's daily costs shot up last week to $73.2 million from $57.4 million in
the week before PG&E went bankrupt, the governor's office said.
Hart agreed, saying several generators raised their prices. "Every time
there's a major hiccup in the market, such as PG&E bankruptcy or a staged
alert by the ISO, there's a price run-up," Hart said.
But prices have settled down this week. After peaking at $345 a megawatt hour
April 12, prices for north state power were at $243 on Thursday, just below
what they were prior to the bankruptcy filing, according to the Enerfax news
service.
PG&E, however, said its bankruptcy filing had nothing to do with the state's
increased spending.
"This claim is simply not accurate," the utility said in a memo to reporters.
Rather, the increased spending is due solely to the fact that the water
department is buying more units of electricity in the wake of the FERC order,
PG&E said.
Regardless of the cause, the increased spending by the water department could
further strain the state's budget -- and complicate Davis' plan to finance
the power purchases through a bond offering.
The state has committed $5.2 billion from its general fund for power
purchases since January. Those mounting purchases, along with PG&E's
bankruptcy filing and other energy crisis uncertainties, prompted a third
Wall Street credit rating agency, Fitch, to place the state on a "ratings
watch" this week, meaning the rating might be downgraded.
A downgrade could raise California's borrowing costs. All three of the
leading Wall Street credit agencies now have California on a ratings watch.
Meanwhile, the state Public Utilities Commission on Thursday ordered an
investigation of why hundreds of cogenerators and other alternative energy
providers haven't resumed production even though they've begun receiving
payments again from Edison and PG&E.
These generators, under contract to the utilities, provide more than 20
percent of the state's energy supply. Hundreds shut down, worsening
California's power situation, because they'd received little or no money from
the utilities since November.
The PUC ordered Edison and PG&E to resume payments, starting this week, for
new power deliveries.
But the generators say the payments aren't enough to get them back online.
So PUC President Loretta Lynch said the commission will investigate whether
to order Edison and PG&E to begin repaying them the hundreds of millions owed
for past deliveries.

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.
Emily Bazar of The Bee's Capitol Bureau contributed to this report.
------------------------------------------------------------------------------
--------------------------------------------------------
SMUD directors vote to hike rates: A tentative increase of 19% to 27% is
blamed on rising energy costs.
By Carrie Peyton
Bee Staff Writer
(Published April 20, 2001)
Ten years of stable electricity bills vanished in a single unanimous vote
Thursday night as directors of Sacramento Municipal Utility District gave
tentative approval to rate hikes ranging from 19 percent to 27 percent.
The new rates will go into effect immediately after a final vote, scheduled
for May 3.
"This is quite alarming to all of us," said director Peter Keat. But praising
the value of "a community-owned electric company" that provides everything
from shade trees to public votes on rates, Keat said he saw no choice.
SMUD, which once hoped to lower electric bills this year or next as
deregulation took hold, was caught up in the spiraling wholesale costs that
helped send Pacific Gas and Electric Co. into bankruptcy proceedings.
The price of natural gas, which fuels SMUD's cogeneration plants, has risen
steeply.
Wholesale electricity, which SMUD buys to supplement power produced by its
own plants, nearly tripled between October and January.
And the weather has been dismal. Rainfall and snowmelt that feed SMUD's
hydroelectric plants on the upper American River are about 53 percent of
normal to date.
But during a two-hour hearing, a small contingent of consumers asked the
board to reconsider.
"I realize that rates have to go up, but this seems like a big percentage all
at once," said Marian Ender.
Several criticized a 6 percent surcharge that until only a few days before
had been proposed at 3 percent. Among them was Duy Tu, an engineering manager
at Intel who served on SMUD's advisory rate committee.
The increase "cannot come at a worse time" for Intel, he said, although he
understands the need for it. He urged the board to act now to make more
electricity available in the future.
"We are way too dependent on some external force to keep the lights on," Tu
said.
Overall, a base rate increase averaging 16 percent will raise about $124
million annually for SMUD, and a special
6 percent surcharge will raise about $48 million in its first year. Most of
the surcharge, scheduled to drop to 3 percent annually for two subsequent
years, will go into an emergency fund.
"We have to build back our savings account. It's been gutted," said director
Susan Patterson.
The rate increases will fall most heavily on small commercial and large
industrial power users, although households with very low electricity bills
will feel a sharp bite from the addition of a $5 monthly service fee.
The flat fee adds less than 10 percent to what was a "typical" residential
SMUD bill of $67, but it's a 25 percent rate hike for someone whose monthly
bill hovers around $20.
"I just don't think that part is right," Ender said. "We should only pay for
usage."
Tom Reavey took the board to task for "unfair and unequitable" rates that
charge agriculture and small businesses less than what they cost SMUD to
serve, while charging homeowners and renters slightly more.
But board members defended going easier on rates for the pumps that run
farmers' wells and irrigation systems.
"We all gain great benefits from living in a community that has nearby
agriculture," Keat said.
The new rates will apply throughout SMUD's service territory, which includes
a narrow slice of southern Placer County and all but the southwestern tip of
Sacramento County. They will not
affect people who receive electric service from PG&E, which last month was
granted a 29 percent hike by state regulators.
"If you want to see a bunch of folks who are really facing some stark times,
it's PG&E customers," said board member Howard Posner.
While there is widespread speculation that PG&E's rate hikes are the first of
many, Posner and other directors said they hoped Thursday's increases will be
the last SMUD needs and that rates could decline in three to four years.
To boost conservation, both SMUD and PG&E are trying to craft rates that fall
hardest on the heaviest household users.
SMUD's old residential rates were
divided into a baseline tier charged roughly 8 cents a kilowatt-hour in the
summer and one higher tier billed at 12.7 cents a kilowatt-hour.
The new rates will start at 8.6 cents in the summer, rise to a middle tier of
14.5 cents and top out at 16.2 cents for those who use more than 1,000
kilowatt-hours of electricity.
By comparison, PG&E has proposed to the state Public Utilities Commission
that its residential rates be divided into four tiers, topping out at 27
cents per kilowatt-hour. A PUC decision is expected next month.
Under the new SMUD rate structure, including the surcharge, large industries
will see their electric bills rise by an average of 27 percent, agricultural
rates will rise 22 percent, small commercial rates 27 percent and residential
rates 19 percent.
Households that qualify for special low-income or life-support rates will pay
a smaller monthly customer charge of $3.50 and will not have to pay the
surcharge on their baseline electricity usage.
Information about qualifying for the reduced rates is available from SMUD at
(888) 742-7683.

The Bee's Carrie Peyton can be reached at (916) 321-1086 or
cpeyton@sacbee.com.
------------------------------------------------------------------------------
----------------------------------------------------------
Lieberman to Bush: Help California solve power woes
By Emily Bazar
Bee Capitol Bureau
(Published April 20, 2001)
On a brief visit to the capital Thursday, former Democratic vice presidential
candidate Joe Lieberman called on President Bush to help rescue California
from its deepening energy troubles.
After attending an early-morning prayer breakfast with legislators and Gov.
Gray Davis, the U.S. senator from Connecticut met with them to discuss the
federal government's role in easing California's electricity woes.
Lieberman, a potential Democratic presidential candidate in 2004, warned that
if the Bush administration does not act quickly in California, the rest of
the nation will succumb to economic ripple effects.
"No American leader can disengage from a problem that so profoundly affects
our largest state," Lieberman told reporters after meeting with the
Democratic governor. "I call on the president to get involved. ... We can't
sit back in Washington and let California suffer."
Sacramento was the last California stop for the senator, who has spent three
days at fund-raisers and speaking engagements across the state.
In talks with lawmakers about the energy crisis, Lieberman told them he's
strongly urging the Federal Energy Regulatory Commission to impose temporary
caps on the wholesale price of electricity.
But the commission's chairman, Curt Hebert, is a fierce free-market advocate
who has long opposed price caps and has not indicated he will change his
mind.
If FERC doesn't act soon, Lieberman said he will support legislation
sponsored by Sen.
Dianne Feinstein, D-Calif., to force FERC to impose temporary caps.
He expects Feinstein to introduce her legislation early next week.
Lieberman's first stop Thursday morning was the California Prayer Breakfast,
an annual springtime gathering of religious and political leaders.
At the breakfast, speakers told Davis they would pray for him as he navigates
the state's energy crisis. Before launching into a song from "The Scarlet
Pimpernel," singer Steve Amerson called on the governor to tell Californians
the truth throughout the ordeal.
Davis was solemn in his remarks, and his calm demeanor belied his behavior
Tuesday, when he reportedly erupted in an obscene
tirade during a closed-door meeting with Senate Republicans.
"I'm going to tell you the truth, Steve. We have a problem," Davis said to
the singer. "But God has provided a path out of that problem if we all do our
part."

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

Escondido calls a halt to power plant ideas

Temporary step will give it time for overall planning
By Jonathan Heller
UNION-TRIBUNE STAFF WRITER
April 19, 2001
ESCONDIDO -- After being inundated with proposals to build power plants in
the past few months, the City Council yesterday called a timeout.
The council voted 3-2 to suspend consideration for 30 to 60 days of any
proposals to build energy generating facilities in the city. During that
period, city staff members will develop a comprehensive approval process that
will factor in the cumulative effects of such plants.
"We need to step back and look at the direction we're going in," City
Councilwoman June Rady said.

The city has been juggling four power-plant proposals since January:
?Sempra Energy Resources wants to build a 500-megawatt plant in the southwest
part of Escondido. It has not yet filed formal plans with the city Planning
Department.
?Ramco Inc. of San Diego has received approval to build a 44-megawatt plant
on Mission Avenue in west Escondido.
?CalPeak LLC of San Diego has filed plans to build a 49.5-megawatt plant on
Enterprise Street, not far from the Ramco plant.
?Another firm has expressed interest in building a 49.5-megawatt plant on
city property on West Washington Avenue, but has not submitted plans yet.
Yesterday's decision means that all the projects -- except the
already-approved Ramco plant -- are now on hold, and no new proposals can be
filed with the city.
The decision halts a mad dash by developers to bring power plants on line by
the summer to take advantage of special incentives offered by Gov. Gray
Davis.
Mayor Lori Holt Pfeiler and Councilwoman Marie Waldron opposed the move. They
said it would only delay much-needed solutions to the region's energy crisis,
which is expected to come to a head this summer.
"If (plant developers) have a chance of getting power on line by the summer,
we should not be the ones to stand in the way," Pfeiler said.
Waldron argued that cities have to be more proactive at this time, not less.
"The governor is not solving the problem," Waldron said. "It's up to local
governments to try to do what they can."
Joe Rowley, Sempra's project development director, said he doubted the
council's decision would upset his plans.
"Our timetable is still not fully defined," Rowley said. "Obviously there's a
lot of work we have to do to get to the point where an application can be
processed."
Meanwhile, council members listened to two people who made impassioned pleas
for the city to consider alternative power sources.
David Drake, a service architect for SAIC in La Jolla, urged the council to
think about solar power. There is more than enough available land -- and
rooftop space -- to install enough solar panels to power the whole city, he
said.
"Escondido has 65 square miles," he said. "But 2,500 acres could be employed
to power us forever without any reliance on imported energy."
Local inventor Arnold Lund urged the council to consider energy generated
from windmills.
The council also voted to work with San Marcos in exploring ways to seek
inexpensive, stable energy rates.
The hope is that the two cities can forge a deal with Sempra for cheaper
rates. Sempra officials have said they are willing to discuss possible rate
deals with the city.
To buy power directly, a city has to adopt a special legal arrangement, such
as forming a municipal utility district. San Diego Gas & Electric is the only
energy service provider in the county that buys and sells power from the
regional energy grid.
San Marcos has formed a municipal utility district but has not signed any
deals to buy power. It would be a more lengthy process for Escondido to form
such a district. San Marcos is a charter city and has more flexibility under
the state Constitution. Escondido is a general-law city.
------------------------------------------------------------------------------
-----------------------------------------------

Inflated natural-gas prices add to energy costs, expert says

Windfall-profits tax gets Davis' backing
By Bill Ainsworth
UNION-TRIBUNE STAFF WRITER
April 19, 2001
SACRAMENTO -- Federal regulators' failure to stop what they described as
anti-competitive practices in the natural-gas industry added $750 million to
Southern California Edison's cost of electricity, a consultant estimated
yesterday.
The consultant, Paul Carpenter of the Brattle Group, spoke to an Assembly
subcommittee investigating why California pays the highest natural-gas prices
in the nation. Natural gas is a critical part of the electricity crisis
because most of the state's generating plants run on natural gas.
Natural-gas prices have soared throughout the nation, but the bench mark
price paid at California's border has been double that paid at other bench
mark locations throughout the nation for months, according to figures
released by the Assembly Subcommittee on Energy Oversight.
Next week, Carpenter plans to testify at hearings in Washington, D.C., on
behalf of Southern California Edison and the California Public Utilities
Commission, which are asking federal regulators to intervene.
The giant utility and the state regulatory body contend that a sweetheart
deal between El Paso Natural Gas and El Paso Merchant Energy gave the sister
companies enough market power to artificially raise the price of natural gas
that flows into Southern California from Texas.
El Paso owns the major pipeline bringing natural gas from fields in New
Mexico and Texas to Southern California. El Paso Merchant Energy is an
unregulated sister company.
Carpenter called the prices paid in Southern California "simply
unprecedented" in the United States. He estimated that the sister companies
manipulated the market enough to add $2.60 to the price of a million British
thermal units of gas.
In addition, he said, El Paso Merchant Energy owns part of 20 smaller power
plants, "qualifying facilities" that get paid based on the price of natural
gas in California. The higher natural-gas prices increase the company's
revenues, Carpenter said.
El Paso company officials are expected to testify in front of the Assembly
subcommittee today, but in proceedings before the federal regulators they
have denied any sweetheart deal.
In a report they commissioned, the company blamed the higher natural-gas
prices in Southern California on increased demand and constraints on pipeline
capacity.
Gov. Gray Davis, meanwhile, gave his strongest endorsement yet to a
windfall-profits tax on generators as a Senate committee chaired by Joseph
Dunn, D-Laguna Niguel, began a series of hearings to probe possible price
gouging by generators.
"I believe the Legislature would be well within its prerogative to insist
that generators receive an appropriate reduction, whether it's 20 percent or
any other number the Legislature hit upon," Davis said.
Senate Democrats, Davis said, will form a special committee to help work on
his plan for the state purchase of the transmission system of Southern
California Edison for $2.76 billion, in exchange for state aid in paying off
the utilities' debt.
The governor said he told Senate Democrats, a number of whom are skeptical of
the plan, that Edison's parent firm has agreed to back a $3 billion upgrade
of the neighborhood distribution system retained by Edison and to return a
$400 million tax refund to the utility.
At the natural-gas hearing yesterday, state officials said that after El Paso
Merchant Energy bought a significant part of the pipeline capacity from its
sister company, it withheld natural gas to drive prices up.
"Marketers have gamed the system and figured out how to hoard capacity and
undermine competition," said Harvey Morris, an attorney for the California
Public Utilities Commission.
State regulators want the Federal Energy Regulatory Commission, which
regulates natural gas, to open the market to more competitors.
But the commission has repeatedly rejected similar complaints in the past. On
March 28, FERC ruled that the affiliates did not arrange a sweetheart deal.
"The fact that El Paso Merchant controls a large volume of capacity does not,
in and of itself, render the El Paso contracts unjust, unreasonable or unduly
discriminatory," FERC ruled.
In other cases involving natural gas, federal regulators acknowledged that
certain contract provisions allowed anti-competitive behavior, but they
approved those contracts anyway.
Lawmakers said they were puzzled by the federal regulators' lack of action.
"It baffles me that we've found the problem -- anti-competitive behavior and
market gaming, but there's no cure because federal regulators won't take
action," said Assemblyman Juan Vargas, D-San Diego.
Staff writer Ed Mendel contributed to this report.
------------------------------------------------------------------------------
-------------------------------------------------------------------------

Davis, Congress members call for energy price controls

By Gary Gentile
ASSOCIATED PRESS
April 19, 2001
LOS ANGELES ) Gov. Gray Davis and a bipartisan group of the state's
congressional delegates agreed Thursday that the federal government must act
to control the wholesale price of energy.
"For us the big issue is how we address the unjust rates," said Rep. Mary
Bono, R-Palm Springs. "I believe we are up to it and will handle it as soon
as we can."
Davis met behind closed doors with 27 congressional representatives,
including Sen. Dianne Feinstein, D-Calif., at the Sheraton Gateway Hotel near
Los Angeles International Airport. He said after the 90-minute meeting that
the group discussed a threefold approach to the state's power crisis.
The strategy includes requiring federal agencies in the state, including
military facilities, to conserve energy this summer and asking the Federal
Energy Regulatory Commission to find a way to control the wholesale price of
electricity and increase the flow of natural gas into California.
Davis repeated his criticism of federal regulators for not acting sooner to
control the wholesale price of electricity and said he was hopeful the
state's congressional delegation could work together to find a bipartisan
solution.
"We agreed there has to be a mechanism to reduce the wholesale price of
electricity," Davis said. "We have agreed to work cooperatively across party
lines to find ways we can reduce those costs. We're in this together. Party
doesn't matter. Finding a solution does matters."
"To have the price of moving natural gas go up by a factor of 10 or more is
absurd," said Rep. Brad Sherman, D-Los Angeles. "So many of our colleagues
are telling us it's California's fault, but California does not have the
authority to regulate these two items."
The group also talked about easing environmental regulations during power
emergencies to allow small companies and even military bases to run small
generators.
"If you have generators in the state, regardless of what they run on, because
we're entering this emergency period in the summertime and will be short of
power, you should be allowed to turn them on," said Rep. Duncan Hunter, R-El
Cajon.
Hunter said small generators could produce about 500 to 600 megawatts during
a power emergency if exemptions to various clear air requirements could be
made.
Officials discussed ways to allow FERC to control wholesale prices without
violating ideological positions staked out by high-ranking Republican
officials, including Vice President Dick Cheney, who oppose price controls
and favor free markets.
Rep Jane Harman, D-Torrance, said she would support a finding by FERC that
power wholesalers should not be allowed to charge market rates, but rather
rates more tightly pegged to the cost of generating power.
"We're not talking about artificial caps," Harman said. "We should insist
that the FERC not renew their market-based rate authority. And if we go that
route, it takes us to the same place and avoids the ideological fight."
The meeting did not result in any specific proposals but participants praised
the bipartisan nature of the talks and said it would result in a unified
approach in Washington.
"We have a responsibility to make sure the federal government takes it's role
seriously," said Rep Gary Condit, D-Modesto. "We clearly understand what our
assignment is today and I think we're going to work together in a bipartisan
way to get that done."
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Regulators open investigation into alternative power providers

By Michael Liedtke
ASSOCIATED PRESS
April 19, 2001
SAN FRANCISCO ) Hoping to prevent California's bleak power outlook from
becoming even darker, state regulators Thursday launched an investigation
into why alternative energy providers aren't producing more electricity.
With the action, the California Public Utilities Commission hopes to
determine if legitimate business reasons or ulterior motives underlie the
reduced output by an independent group of small generators that provides much
of the state's energy.
These alternative generators ) known in the industry as "qualifying
facilities," or QFs ) have been scaling back or shutting down as debts owed
by California's two largest utilities pile up. The QFs are owed an estimated
$700 million by bankrupt Pacific Gas and Electric and financially crippled
Southern California Edison.
Some QFs say the unpaid bills have forced them to defer much-needed
maintenance, leading to more equipment breakdowns that reduce electricity
output. Other QFs say they simply can't afford to keep operating.
The PUC is worried some QFs are trying to take advantage of the California
crisis to get out of long-term contracts that require them to sell
electricity at prices far below the current market rate. Several QFs are
suing to get out of those contracts so they can cash in on the open market,
said PUC Commissioner Carl Wood.
All the QFs want is to be paid for bills that date back as far as November,
said Jack Raudy, a spokesman for the Renewable Energy Creditors Committee,
which consists of 10 alternative power producers owed a combined $410
million. Those 10 generators produce about 3,000 megawatts ) which Raudy said
was enough electricity for 3 million homes.
"We are outraged (by the PUC's investigation)," Raudy said. "We have heard so
much rhetoric over the past five months and still haven't been paid a dime.
That is what we are worried about."
Raudy estimated his group is operating at about 95 percent of capacity.
After the temporary closure of several QFs contributed to rolling blackouts
around the state last month, the PUC ordered PG&E and SoCal Edison to begin
paying the generators for the energy purchased since March 27.
But the order has done nothing to help the QFs recover the past debts. The
QFs are now in line in bankruptcy court with 30,000 creditors owed money by
PG&E, which expects its unpaid bills to rise to $5.5 billion by the end of
this month.
If the QFs get desperate enough, they may decide to push SoCal Edison into an
involuntary bankruptcy case, Raudy said.
PUC Commissioner Geoffrey Brown defended the alternative energy providers
during Thursday's hearing.
"Any QFs that are not operating right now are doing so for financial reasons,
not to game the system," he said.
California will need all the power that it can get from the QFs this summer
when rolling blackouts threaten to become a daily occurrence.
Combined, the QFs account for about one-fourth of California's total power
capacity, according to the PUC.
The QF output will become even more essential this summer because California
won't be able to import as much electricity from the Pacific Northwest as it
has in the past. A lack of rain has left the Pacific Northwest's
hydroelectric supply at its second-lowest level ever, and it could diminish
to a record low if the recent drought continues.
"We are not going to be able to look to the Pacific Northwest to meet our
needs," Wood said after reviewing a new report on the hydroelectricity
supply.
The looming blackouts and electricity price increases caused by California's
energy crisis is exasperating businesses and households across the state.
Fearing the frustration could boil over into terrorism, the PUC Thursday
installed metal detectors to screen everyone attending the agency's public
meetings.
In other moves Thursday, the PUC tabled a scheduled vote on whether the
regulators should become more involved in PG&E's bankruptcy case. The San
Francisco-based utility is challenging the PUC's authority in the case. The
PUC now expects to take up the matter at a May 3 meeting.
------------------------------------------------------------------------------
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Attorney general taking two energy companies to court

ASSOCIATED PRESS
April 19, 2001
SACRAMENTO ) Attorney General Bill Lockyer wants a judge to order two power
generators to hand over documents he subpoenaed last month as part of his
investigation into the state's electricity market.
Reliant Energy and Mirant Corp. failed to produce certain documents by March
19, despite assurances that the sensitive documents would be kept
confidential, Lockyer said Thursday.
Lockyer filed the request for a hearing in San Francisco Superior Court.
Lockyer says the companies are concerned the documents wouldn't be kept
confidential, even though he says they've been assured the sensitive
documents would not be released.
The attorney general is investigating allegations of price manipulation in
the state's electricity market that may have led to soaring power costs.
Mirant spokesman Bill O'Neel said the company is cooperating with the
attorney general's office.
"At this moment, we have our legal team working to pull together the
documentation the attorney general has requested," O'Neel said.
Mirant Thursday joined a complaint filed by Reliant last week in Los Angeles
Superior Court. That petition seeks assurance that the attorney general will
keep proprietary information confidential to prevent any competitive damage,
said Reliant spokesman Richard Wheatley.
"We're committed to cooperating with the investigation that Attorney General
Lockyer is conducting," Wheatley said. "It's the understanding of our
management that we do not have the proper assurance that the information will
be kept confidential."
------------------------------------------------------------------------------
----------------------------------------------------------------

Legislators Unite Over Energy Price Issue

Power: Bipartisan congressional delegation called together by Davis says U.S.
must step in to protect state from manipulation by suppliers.

By MITCHELL LANDSBERG and MIGUEL BUSTILLO, Times Staff Writers

?????This may be the surest sign yet of the depth of California's energy
crisis: A bipartisan cross-section of the state's congressional delegation,
brought together Thursday by Gov. Gray Davis, not only agreed about the
severity of the problem but also about the need for swift federal
intervention.
?????"This meeting did not have the word 'Democrat' or 'Republican' used
once," Rep. Darrell E. Issa (R-Vista), said of the unusual spirit of
cooperation at the meeting near Los Angeles International airport.
?????Members of both parties said the Federal Energy Regulatory Commission
must slash wholesale electricity prices so California utilities can once
again afford to buy power. Since January, the state government has been
buying electricity on their behalf, as skyrocketing wholesale prices put
Pacific Gas & Electric Co. and Southern California Edison billions of dollars
into debt and many power suppliers refused to sell to them; PG&E has since
filed for Chapter 11 bankruptcy protection.
?????Although the Bush administration has said repeatedly that it is strongly
opposed to price caps, and FERC has refused to grant them, California
Republicans at the energy meeting said they are optimistic that the
administration will agree to some other form of price regulation. They
brushed aside the notion that such regulations might conflict with their
ideological belief in a free market.
?????"This is not a free-enterprise situation," Rep. Duncan Hunter (R-Alpine)
said after the meeting. "In fact, it's just the opposite."
?????Specifically citing the huge disparity between natural gas prices
charged to California and those charged in other Western states, he said
California clearly has been the victim of unreasonably high energy costs.
Under federal law, the FERC must regulate the prices of companies if it finds
they are exerting "market power" to drive prices to unreasonable levels.
?????Executives from two Texas energy companies, meeting with legislators in
Sacramento, denied Thursday that they had caused natural gas prices in
California to artificially skyrocket by hoarding access to a critical
pipeline into the state.
?????After the extraordinary meeting in Los Los Angeles, Rep. Brad Sherman
(D-Sherman Oaks) said the biggest disagreement between California Democrats
and Republicans appeared to be their relative faith--or lack thereof--in the
ability of President Bush and his administration to help California. There
has been much speculation that Bush, who lost California in November, has no
political motive to help the state.
?????"We Democrats," said Sherman, "hope very much that our skepticism is
proven wrong."
?????Davis--who sat flanked by Democratic U.S. Sen. Dianne Feinstein and the
governor's newly appointed chief energy advisor, S. David Freeman--said he
used the meeting mainly to discuss the importance of conservation by
Californians this summer and to ask the congressional delegation to pitch in.
Five Republicans and more than a dozen Democrats attended the gathering.
?????Feinstein said Thursday that she has asked for a third time to meet with
Bush to discuss the energy situation. Meeting with Times reporters and
editors Wednesday, she described a recent meeting with Vice President Dick
Cheney in which, she said, he "ignored" her appeal for federal assistance.
?????Feinstein has been among those critical of natural gas companies, saying
they appear to have constricted access to a California-bound pipeline to run
up prices.
?????The Brattle Group, a respected consulting firm, alleged Wednesday before
an Assembly committee that Dynegy Inc. and El Paso Natural Gas Co. had
manipulated the market by charging so much for the rights to their pipeline
capacity that they had, in effect, withheld access to it.
?????That action, the experts said, directly forced companies trying to
deliver gas to California to look for alternatives, clogging other pipelines
and causing a surge in prices.
?????The explanation, El Paso executives said, was simple: Demand for gas
soared in California because generators that use gas to make electricity
increased production last year in response to the energy crisis.
?????"We're not withholding capacity--no one is," said El Paso Merchant
Energy President Ralph Eads. "With these prices, you want to sell every
molecule."
?????In other developments Thursday:
?????* The agreement between Davis and Edison International to return its
ailing utility arm to financial health is in "deep trouble and could be
rejected by legislators," the Standard & Poor's credit rating agency said in
a note to clients, citing legislative and other sources. A rejection of the
deal "would be a humiliating setback for the governor," S&P said.
?????The agreement calls for, among other things, the sale of Edison's
transmission grid to the state for $2.76 billion and the sale of $2 billion
in bonds--both designed to pay off the utility's huge electricity debt.
Edison agreed to several constraints, including the sale of electricity to
the state at prices tied to the cost of producing power.
?????Since they returned Monday from a two-week recess, state legislators
have been sharply critical of the Edison agreement and have indicated a
desire to tinker with aspects of the deal. Some lawmakers have said publicly
that a bankruptcy protection filing by Edison, like that of PG&E, might not
be such a dire outcome.
?????But a senior Edison executive said it is "way too early" to give up on
passage of the proposal, which legislators have not yet seen in official form.
?????"There is an education process to do here," the executive said of the
highly detailed 38-page document. "The legislators should be asking
questions. That is appropriate."
?????* The Public Utilities Commission voted to investigate whether
alternative energy providers violated contractual agreements by withholding
supplies from PG&E and Edison, which owe them hundreds of millions of dollars.
?????The action, Commissioner Carl W. Wood said, was prompted in part by
lawsuits some providers have filed seeking release from their contracts with
the cash-starved utilities. The producers of solar, wind and geothermal
energy account for more than 25% of California's electricity supply.
?????"The question is whether we will be able to rely on them in the long,
hot days of summer," Wood said.
?????Jack Raudy of the Renewable Energy Creditors Committee said the PUC
needs to address the $700 million the producers are owed. "All we have gotten
is rhetoric from the governor, the PUC and the utilities," he said.
?????* An $850-million plan to entice Californians to conserve precious
megawatts appears to be running into roadblocks, compounding predictions by
state officials of tighter than expected energy supplies in May and June.
?????Davis signed the conservation spending package last week, earmarking
$242 million of the new funds for the Public Utilities Commission to
distribute to the state's investor-owned utilities to support existing
conservation programs.
?????But Barbara Hale, director of the PUC's Division of Strategic Planning,
said Thursday that since Pacific Gas & Electric Co. filed for bankruptcy
protection April 6, the utility has stopped releasing conservation funds.
?????Hale, testifying before a state Senate committee, said PG&E's
decision--coupled with the threat that Southern California Edison could
follow a similar route to U.S. Bankruptcy Court--has complicated her agency's
efforts.
?????PG&E spokeswoman Staci Homrig said her company plans to petition the
Bankruptcy Court to have the conservation funds designated as a trust and
separated from assets tied up in the bankruptcy proceedings. She said if the
court denies the request, PG&E would ask to be permitted to pay the expenses
anyway. The process, she added, could take about a month--too long in the
view of some legislators, given increasingly gloomy energy forecasts for late
spring and early summer.
?????Deputy Director Bob Therkelsen of the California Energy Commission said
his agency had been counting on a number of small power producers to bolster
their output during that period. But he said some producers did not purchase
the necessary equipment because PG&E and Edison have failed to pay them in
full for earlier electricity deliveries.
?????"It's not a huge amount," he said of the anticipated production
shortfall, "but every little bit helps."
---
?????Landsberg reported from Los Angeles, Bustillo from Sacramento. Times
staff writers Nancy Rivera Brooks in Los Angeles, Carl Ingram and Julie
Tamaki in Sacramento and Tim Reiterman in San Francisco contributed to this
story.

Copyright 2001 Los Angeles Times
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Small fry among big fish in PG&E bankruptcy
Some unlikely businesses are listed as creditors against utility
Steve Rubenstein, Chuck Squatriglia, Chronicle Staff Writers
Friday, April 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/20/M
N185589.DTL

A San Francisco ice cream parlor, a karate studio and a costume shop are all
in the same boat, and that goes for a Divisadero Street psychiatrist, too.
They're all in the fortunate position of having money coming to them.
And they're all in the tough spot of having that money owed by the sort-of
bankrupt Pacific Gas and Electric Co.
Many of the 47,894 creditors that PG&E owes money to, according to a list
filed with the bankruptcy judge, are banks, power companies, lawyers and the
like.
But a surprising number are businesses that, at first blush, might seem
unlikely to be power company creditors. Many businesses -- like the ACT
costume rental shop -- didn't know or had forgotten that PG&E had run up a
tab.
And since the list didn't say how much they're owed, businesses had to guess.
"How about that?" said costume shop manager Callie Floor, when told she had
PG&E money coming to her.
Floor, checking her books, said it looks like PG&E forgot to pay its $100
bill to cover a costume rental for a corporate dress-up party in 1992.
"We rent a lot of costumes for corporate events," she said. "That's probably
what it was."
Psychiatrist Richard Lieberman says he does not know why or how much PG&E
owes him.
"But I'll take it," he said. "PG&E has taken advantage of the consumer for so
long. As far as I'm concerned, PG&E can go under and stay under."
Of course, PG&E may wind up paying pennies on the dollar, if anything,
because that's how bankruptcies work. The notion is depressing, which
psychiatrists are used to.
KARATE STUDIO GETS HIT
Karate master Scott Morton, whose Karate One studio on Van Ness Avenue is
also a creditor, said karate is all about fairness and integrity, which PG&E
seems to be even shorter on than cash.
"I think the bankruptcy stinks," Morton said. "All the money is going around
and around, it's all the same company."
The karate studio conducted a self-defense class for about a dozen workers at
PG&E headquarters. Morton, a black belt who does not take treachery lightly,
said he was "pretty sure" the check cleared, but maybe not.
NO BIG DEAL FOR SOME
At Beauchamp's Welding and Repair in Petaluma, owner Dean Beauchamp wasn't
concerned.
"They don't owe us enough to worry about," he said. "Less than $100, I'd
guess."
Beauchamp's shop does small jobs for the big utility. "They've been really
good about sending us a check. Once in a great while, something will get
misplaced, and I guess that's how our name got on the list."
Yolanda Fletcher, the owner of Red Shoes Slide Service, says the utility
probably owes her about $100 for preparing some photographs for a corporate
slide show.
Larry Mitchell, proprietor of the award-winning Mitchell's Ice Cream shop on
San Jose Avenue, believes that PG&E may owe him $500 for a corporate ice
cream social.
"That would cover the ice cream, the toppings, the dishes and the spoons," he
said.
The utility's rocky road may be metaphorical, but an ice cream store's rocky
road is the real thing, he said, and being owed $500 by a bankrupt company is
not peaches and cream.
UNEXPECTED NAMES
The list of creditors also includes such strange bedfellows as the San
Francisco Fire Department, the Yosemite Fund, The Chronicle and PG&E's own
library petty cash fund. Perhaps the strangest bedfellow of all is the
perpetual PG&E foe known as TURN, or The Utility Reform Network, which stands
to lose thousands of dollars in state-mandated legal fees from PG&E for its
work as an "intervener," or utility watchdog.
Among the utility's more sensible business partners is the Beale Street
sandwich shop a few steps from the main entrance to PG&E's headquarters
building in San Francisco.
Unlike the big banks and power companies that are on the hook for millions,
proprietor Kenneth Chen does business with PG&E on a strictly pay-as-you-go
business.
Chen, the owner of Cafe Leah at 25 Beale St., is often hired to send up a $40
tray of sandwiches to PG&E corporate officers. When he does so, he insists on
cash up front because PG&E, who is the restaurant's landlord, insists on cash
every month from Chen.
"That's the way we've always done it, payment right away," he said. "That way
there's no hassle later on."
E-mail Steve Rubenstein at srubenstein@sfchronicle.com and Chuck Squatriglia
at csquatriglia@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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Developments in California's energy crisis
The Associated Press
Friday, April 20, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/20/state1
004EDT0161.DTL&type=news
, , -- (04-20) 07:04 PDT Developments in California's energy crisis:
FRIDAY:< ?-- The state remains free of power alerts as reserves stay above 7 percent. ?-- Southern California Edison plans a 1:30 p.m. conference call with its ?creditors. ?-- Edison executives discuss the state's move to buy thier transmission lines ?at a 9:30 a.m. briefing in Sacramento. ?< ?THURSDAY:<
-- The Public Utility Commission launches an investigation into whether a key
block of independent generators are purposely keeping their plants off line.
-- The commission tables until May 3 a vote on whether the PUC should become
more involved in Pacific Gas & Electric's bankruptcy case. The San
Francisco-based utility is challenging the PUC's authority in the case.
-- Texas-based natural gas companies defend themselves before an Assembly
subcommittee against accusations they created a virtual monopoly on gas
flowing into California and used it to jack up prices sharply.
-- Attorney General Bill Lockyer says he will go to court to force two
electricity generators to hand over documents he subpoenaed as part of his
probe of the state's electricity market.
-- Gov. Gray Davis and a bipartisan group of the state's congressional
delegates agree that the federal government must act to control the wholesale
price of energy, but offer no specific proposals.
-- The Assembly passes a resolution asking the federal government to regulate
the price of natural gas, which has been deregulated since 1992. The Assembly
also approves a bill to encourage natural gas exploration in the tidelands
off Long Beach. Both measures go to the Senate.
-- The Senate approves a resolution asking Congress and the president to let
California use daylight-saving time year-round to help lower energy use. The
measure now moves to the Assembly. A bill pending in Congress would give
Western states the authority to expand daylight-saving time.
-- The Electric Power Supply Association tells the Federal Energy Regulatory
Commission that the California Independent System Operator, which runs the
state's power grid, is not independent enough. The association alleges in a
FERC filing that the ISO favors the state over electricity generators in its
actions and rule-making.
-- The California Energy Commission allows Pacific Gas & Electric Corp. to
build a $350 million power plant in San Diego County capable of supplying
electricity to 500,000 homes.
-- The Escondido City Council votes to suspend for 30 to 60 days its
consideration of proposals by developers trying to build plants before peak
summer demand. The council wants to develop a comprehensive approval process
that looks at the cumulative effect of such plants.
-- Edison International's stock closes at $10.98, down 42 cents, while stock
in PG&E's parent closes down 31 cents at $8.73.
-- The state remains free of power alerts as reserves stay above 7 percent.
<
WHAT'S NEXT:< ?-- Davis' representatives continue negotiating with Sempra, the parent ?company of San Diego Gas and Electric Co., to buy the utility's transmission ?lines. Davis says he expects to have an agreement within two weeks. ?-- An Assembly subcommittee meets Monday to discuss bills aimed at improving ?California's natural gas market. ?-- Senate Select Committee to Investigate Price Manipulation of the Wholesale ?Energy Market continues its investigation next week. ?< ?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 on to consumers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers. The state is also buying power for a third investor-owned
utility, San Diego Gas & Electric, which is in better financial shape than
much larger Edison and PG&E but also struggling with high wholesale power
costs.
The Public Utilities Commission has raised rates up to 46 percent to help
finance the state's multibillion-dollar power-buying.
,2001 Associated Press ?
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California utility wants to boost Mohave power plant production

Friday, April 20, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/20/state0
926EDT0156.DTL&type=news
(04-20) 06:26 PDT BULLHEAD CITY, Ariz. (AP) -- With many opposed to allowing
Southern California Edison to increase power production at the Mohave
Generating Station, the City Council wants Nevada regulators to meet here.
The plant Edison operates is located across the Colorado River in Laughlin,
Nev. Edison is seeking a variance that would allow it to exceed the current
cap of 70 percent of the plant's capacity and to do so for more than 20
hours.
``We just want to do this in dire circumstances to avoid the rolling
blackouts (California has experienced recently),'' Edison spokesman Steve
Hansen said.
Any is too much for former City Councilman Victor Urso.
``That plant is one of the worst air pollution violators in the United States
already, and now they want variances to do even more damage,'' Urso said.
Mohave County Supervisor Tom Sockwell, who presents the Bullhead City area,
doesn't see it that way.
``They'll only run it up to full power for very short periods, and we need
that for the power shortages,'' Sockwell said this week. ``We've already got
pollution anyway, so what's another hour of a darker plume every now and
then?''
Rick Moore of the Flagstaff-based Grand Canyon Trust, which monitors the
plant's operation, said the plant exceeded its permissible emissions level
1,200 times during the last calendar year. The trust sued, and the company
was fined $180,000.
The City Council wants the Nevada Environmental Commission to meet in
Laughlin next month rather than in Carson City so members can hear local
opponents of Edison's request.
Hansen said the commission approved a variance last year but that the plant
exceeded the emissions limit for only six minutes.
At peak capacity, the plant can produce 1,580 megawatts of electricity but is
required to stay below that level because of air quality concerns
Edison owns 56 percent of the plant. The rest is owned by the Los Angeles
Department of Water and Power (20 percent), Nevada Power (14 percent) and the
Salt River Project in Phoenix (10 percent).
Nevada Power has been trying to sell its share in the generating station to
AES Corp. of Arlington, Va., has been trying to purchase both Edison's and
Nevada Power's shares but has run into snags. The Nevada Public Utilities
Commission approve the Nevada Power sale in October but suspended that
approval on Marcy 29 for at least 60 days. In January, the California Public
Utilities Commission suspended sale of the Edison share and placed a
five-year moratorium on such sales about the same time.
,2001 Associated Press ?
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PG&E owes money to several small businesses, unlikely creditors

Friday, April 20, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/20/state0
503EDT0125.DTL&type=news
(04-20) 02:03 PDT SAN FRANCISCO (AP) -- Several small fry are among the big
fish in a pond full of creditors to which ailing Pacific Gas and Electric
owes money.
A San Francisco ice cream parlor, a costume store, a psychiatrist's office
and a karate studio are among a number of small businesses that should be
receiving payments from the near bankrupt utility.
After checking her books, ACT Costume Shop manager Callie Floor was surprised
to find that the utility owes her $100 for a costume rental for a corporate
dress-up party in 1992.
Karate One Studio on Van Ness Avenue may be owed for a self-defense class it
conducted for about a dozen workers at PG&E headquarters.
Of course, PG&E may only have to pay pennies on the dollar to the small fry,
since that's how bankruptcies work.
,2001 Associated Press ?
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Edison pushes lawmakers to accept deal
David Lazarus, Chronicle Staff Writer
Friday, April 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/20/M
N190213.DTL&type=news
Although lawmakers are skeptical of the state's multibillion-dollar deal to
acquire the power lines of Southern California Edison, the head of the
utility's parent company warned yesterday that failure to approve the accord
could lead to a "long and costly" bankruptcy.
But John Bryson, chief executive of Edison International, told The Chronicle
that he thought legislators would "want to do the right thing" by approving
the multibillion-dollar agreement and preventing Edison from following
Pacific Gas and Electric Co. into bankruptcy court.
Bankruptcy for California's two largest utilities could have severe
consequences for consumers. Financial analysts said a worsening of the
state's energy mess would increase the possibility of higher electricity
rates.
Nevertheless, lawmakers are unlikely to accept the Edison deal -- at least
not in its present form.
"We are going to go through this thing extensively," said state Senate
President Pro Tem John Burton, D-San Francisco. "There are a lot of concerns
about the valuation."
Still, he said, legislative backing for the accord remains possible as long
as Edison is open to amending some of the terms.
"The Edison people are smart enough to know that the Legislature is going to
have its say," Burton said.
Indeed, sources familiar with the matter said Edison expected a certain
amount of tinkering with the deal and would not resist efforts to reach
common ground with lawmakers.
"The Assembly members do not view bankruptcy as a favorable alternative,"
said Assemblyman Herb Wesson, D-Los Angeles. "There will be a big effort to
try and work something out."
Edison's Bryson seems eager at this point to present himself and his company
as reasonable business partners who are willing to negotiate in good faith.
This contrasts sharply with the state's relations with PG&E, which turned
acrimonious after PG&E blindsided the governor with its bankruptcy filing.
Each side blamed the other for the collapse of earlier negotiations.
"We made the decision at an early stage that this was a massive problem for
the state and that the best course was to find a practical solution that
would allow us to get on with operating our power system," Bryson said.
Bankruptcy, he said, "is absolutely a last resort. It's a long and costly
process."
It is also the last thing Wall Street wants to see. On Wednesday, rating
agency Fitch Inc. joined Standard & Poor's and Moody's Investor Service in
warning that California's credit rating could be lowered because of the
state's energy mess.
"The state may be forced to issue junk bonds," said Carol Coale, an energy-
industry analyst at Prudential Securities in New York. "This could lead to a
surcharge on electricity bills to guarantee the bonds."
Bryson, not surprisingly, defended Edison's agreement with the governor as a
prudent alternative to bankruptcy.
"This is a very good deal for the state," he said. "It is not a bailout.
Edison gives up a lot to make all this possible."
Southern California Edison will sell its power lines to the state for $2.8
billion. It also will provide low-cost power to California for 10 years and
drop a federal lawsuit seeking full recovery of nearly $5 billion in past
debt.
Critics say the state is paying far too much for Edison's transmission system
-- more than two times book value -- and that the power lines are of little
use unless PG&E's grid also can be acquired.
"It's a multibillion-dollar ratepayer bailout of Edison," said Doug Heller, a
spokesman for the Foundation for Taxpayer and Consumer Rights in Santa
Monica. "Edison gets off scot-free."
Under the most likely scenario, lawmakers will seek to reduce the amount paid
for Edison's power lines and to increase the role of the California Public
Utilities Commission in regulating the utility.
They also will try to come up with a workable contingency plan for the state
if PG&E remains adamant in its refusal to sell off its part of the power
grid.
"The deal on the table is still salvageable," said Michael Shames, executive
director of the Utility Consumers' Action Network in San Diego. "But Edison
needs to understand that what it got from the governor is only a framework,
not set in stone."
For his part, Bryson signaled that plenty of room existed for give and take
on the issue.
"We're just at the initial stage," he said. "We always have accepted the
notion that Edison is a California regulated utility and is subject to the
laws of the Public Utilities Commission."
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 4
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Who will pay the most for power?
Posted at 9:46 p.m. PDT Thursday, April 19, 2001
JOHN
WOOLFOLK

AND MICHAEL
BAZELEY
Mercury News

State regulators last month announced an electric rate increase that would
average a whopping three cents per kilowatt-hour, hit bills beginning in May
and punish power pigs while sparing energy misers.
Now, much of that is up in the air.
Higher rates are surely coming -- but not before June. And exactly which
consumers and businesses will pay how much is uncertain as regulators rush to
forge a rate structure from a tangle of more than 20 proposals.
Their task has been complicated immeasurably by Gov. Gray Davis' decision to
weigh in with a competing rate plan and Pacific Gas & Electric Co.'s move
into bankruptcy court.
``Little details are moving billions of dollars around,'' said Nettie Hoge of
the Utility Reform Network, a consumer advocacy group.
All the proposals assume a ``tiered'' structure that forces the heaviest
users of energy to pay the most. But key details yet to be decided mean
consumers could see their average rates go up anywhere from 7 percent to 30
percent or more.
Among them:
?How much of an overall increase? The Public Utilities Commission approved a
three-cent per kilowatt-hour increase last month, which would boost utility
revenue by $4.8 million. Davis' proposed increase -- left vague in his April
5 television address -- averages 2.8 cents for PG&E customers but only 2.3
cents for customers of Southern California Edison.
?What regions of the state will pay? The commission agreed to raise rates
only for PG&E and Southern California Edison, but Davis would include the
additional 1.2 million San Diego Gas & Electric customers.
?Should heavier users of electricity subsidize those who are exempt from the
new rate increase? If so, those users will find themselves paying much more
than any of the average increase figures being tossed about.
?How will utilities bill customers retroactively for the increase? At the
time of the PUC vote on March 27, commissioners said their increase would
take effect immediately.
PUC vote May 14
Various plans are being presented this week to an administrative law judge
working for the commission. The judge is expected to recommend a rate
structure to the PUC on May 4. Public hearings would follow May 7-11, and the
commission would vote on a plan May 14, condensing to a few weeks a process
that normally lasts nearly a year.
Each of the major proposals before the commission assumes that residential
customers using less than 130 percent of their baseline -- which is the
average basic level of use for each region of the state -- would be exempt
from higher rates. That's mandated under a new law that allows the state to
buy power. Customers already pay higher rates for exceeding their baseline.
Each major proposal also sets new ``tiers'' with progressively higher rates
for ``medium'' use at 130 to 200 percent of baseline and ``heavy'' use over
200 percent of that level.
But that's where the similarities end.
Differences
The first distinction among the leading plans comes in the form of an
assumption: How many residential customers will avoid any increase because
they don't exceed 130 percent of their baseline? Davis says more than half,
commissioners say a little under half and PG&E says less than a third.
The second difference among the plans is a real difference: What happens to
everyone else?
Under the plan by utilities commission President Loretta Lynch, medium PG&E
users would see average bills rise 9 percent and heavy users would see bills
increase 36 percent.
Davis' plan says medium PG&E users would see average bills rise 11 percent
while heavy users would pay 37 percent more. But the average total bill
increase for PG&E residential customers, including those who are exempt,
would be 20 percent under his plan and 24 percent under Lynch's, according to
a statement on the governor's Web site.
Business customers would see proportionately greater increases, averaging 30
percent under Lynch's proposal and 26 percent under Davis'.
The most consumer-friendly of the various proposals comes from
consumer-rights group TURN. They suggest an overall average residential
increase of 7.5 percent.
TURN's plan assumes utilities cannot charge other customers more to make up
for the energy misers shielded from rate increases under state law.
PG&E disagrees with that interpretation. The utility wants other residential
users to make up for any lost revenue from exempted customers through higher
rates. Under the utility's plan, residential customers would see an average
rate increase of nearly 30 percent.
``The proposal these folks are pushing rips the heart out of that law,'' said
Matthew Freedman, staff attorney for TURN.
Another issue affecting consumers is how the utilities can bill for
electricity used in April and May, before the final plan is approved.
Utilities want surcharge
Utility officials have objected to making the rate structure retroactive.
Instead, to recoup the revenue, they are proposing a flat surcharge that
everyone would pay, regardless of how much they use.
Edison proposes a higher surcharge added to bills for a shorter period of
time -- in this case, June through August. PG&E officials are suggesting a
smaller surcharge that would be spread out over 12 months.
``It'll probably be something closer to the PG&E proposal,'' said Paul
Clanon, the commission's director of energy issues.
All the rate increase proposals stem from a commonly understood problem:
California's current, frozen rates don't generate enough money to cover the
wholesale price of power. The PUC raised rates 10 percent -- or one cent per
kilowatt-hour -- in January in an attempt to help, but that turned out to be
far from enough.
In March, the commission approved an additional three-cent increase. But
Davis followed quickly with an alternative proposal. The next day, PG&E filed
for bankruptcy, raising the specter that a federal judge could order even
higher rates.
Although the PUC has sole authority to raise rates under state law, Davis'
proposal has complicated an already complex process. The governor appointed
three of the five members of the commission, and his appointees seem inclined
to show him deference. But Davis has been slow in filing the details of his
plan, which has made it hard for the PUC to proceed.

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Credit-raters put state on watch
Posted at 9:41 p.m. PDT Thursday, April 19, 2001
BY JENNIFER BJORHUS

Mercury News

All three of the nation's influential judges of credit risk now have
California on a credit watch, saying they are deeply concerned about the
economic impact of the state's power crisis.
The Fitch credit rating agency made it unanimous Wednesday when it warned
that the thickening electricity quagmire, as well as lower than expected tax
revenues in February and March, could mean broader risk for the state's
budget.
The announcement is a signal that Fitch, too, may downgrade its ratings on
California's nearly $30 billion in public debt, a move which could cost
taxpayers millions.
The announcement comes as state lawmakers consider a bailout plan for
Southern California Edison, Pacific Gas & Electric Co. sits in bankruptcy and
state officials bleed through the state's general fund as they buy expensive
electricity for consumers.
Earlier this week, Gov. Gray Davis announced that the average bill for
electricity purchases has risen from $45.8 million a day in the last week of
March to $73 million a day.
Moody's Investors Service and Standard & Poor's have already issued their own
credit warnings, although none of the three agencies has downgraded the
state's very good double-A credit rating.
Bond ratings are important yardsticks that bankers and investors use to price
municipal and corporate bonds. A downgrade would force California to offer
bond buyers higher interest rates going forward, costing taxpayers.
The state was last at a lower A rating back in 1994.
Moody's changed California's Aa2 general obligation bond rating outlook from
stable to negative on April 6, the day PG&E filed for bankruptcy. Standard &
Poor's has had the state's AA rating outlook at negative since January, when
the state began buying electricity for the utilities.
The deciding factor for Fitch, said Fitch vice chairman Claire Cohen, was the
disagreement over how the money from the new electricity rate increase will
be spent.
The California Public Utilities Commission ruled in late March that money
generated by higher electricity bills should go first to pay the state
Department of Water Resources, which has been buying electricity for the
utilities. PG&E has argued that if the state is paid first, there won't be
any money left for the company.
The utility is formally challenging the PUC decision, and the move threatens
to hold up the estimated $12 billion to $14 billion of bonds the Department
of Water Resources plans to issue to buy more electricity.
``With that being appealed, you don't have a clean authorization,'' Cohen
said. ``It signals to me that it could delay the financing process.''
A second concern is that the state isn't collecting as much in taxes as
expected, Cohen said. Tax collections for both February and March were below
forecast. The amount of personal income tax the state collected in those
months fell short by $455 million, or 14 percent less than expected.
Cohen said she made her decision before hearing that the state's power costs
now exceed $70 million a day. Cohen and David Hitchcock, the California
analyst for Standard & Poor's, agreed those rising costs are a definite
concern.
``It doesn't take much of a change in economic growth to make some of these
projected fund balances disappear and so we're very worried about what the
current economic activity is, particularly in Northern California with some
of the problems with the high-tech area,'' Hitchcock told analysts and
investors last week in a conference call.
Other economy-watchers expressed concern.
Sandy Harrison, assistant director of the state Department of Finance, said
the move reinforced the importance of solving the power problems soon.

Contact Jennifer Bjorhus at jbjorhus@sjmercury.com or (408) 920-5660.
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Power company executives going without bonuses
LOS ANGELES (AP) -- Senior executives at Southern California Edison and its
parent company went without hundreds of thousands of dollars in bonuses in
2000 because of California's power crisis.
Edison International's chairman and chief executive, John Bryson, was paid
$950,000 in 2000, compared with salary and bonus totaling $2.16 million in
1999.
Stephen Frank, the chairman and chief executive at Southern California
Edison, was paid $617,000 in 2000, compared with salary and bonus totaling
$1.3 million in 1999, according to the company's proxy statement filed with
the Securities and Exchange Commission.
The company also said Thursday it would not award merit increases to
executives in 2001 because of the continuing crisis.
In a similar statement released Tuesday, Pacific Gas and Electric Corp.
revealed it also withheld bonuses for its top two executives, although they
did receive raises.
Edison and PG&E say they have lost nearly $14 billion since June to high
wholesale prices that the state's electricity deregulation law bars them from
passing on to consumers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Edison is continuing to work with state officials and its creditors.

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Davis and U.S. lawmakers call for price caps on power
LOS ANGELES -- Half of California's congressional delegation gathered with
Gov. Gray Davis on Thursday to pressure the federal government to impose
energy price caps.
Limiting wholesale prices, they argued, is essential if the state is to avert
the energy crisis threatening California's economy.
``A big piece of this solution is federal. It's a four-letter word:
F-E-R-C,'' said U.S. Rep. Jane Harman, D-Redondo Beach, referring to the
Federal Energy Regulatory Commission, the agency that would have to approve
price caps.
The governor has blamed FERC for allowing energy producers to charge
California stratospheric prices for electricity and natural gas.
The delegation met behind closed doors at an Los Angeles airport hotel, but
Davis and several legislators met with reporters afterward.
``The signal that has to come from FERC,'' Davis said, ``is, `You're charging
too much for electricity. The electricity is not worth driving California
into an economic grave.'?''
Curt H,bert Jr., the FERC chairman, has argued that caps would encourage
generators to sell their power elsewhere and discourage them from building
new plants in California.
The bipartisan group of lawmakers agreed with the governor that the state is
getting gouged on the open market.
``There is an anti-free market enterprise mechanism in play here,'' said U.S.
Rep. Duncan Hunter, R-El Cajon, noting that natural gas in parts of New
Mexico costs one-third what it does in California.
The generators maintain that they are charging fair prices that are the
simple result of supply and demand.
Rep. Mike Honda, D-San Jose, and Rep. Zoe Lofgren, D-San Jose, attended, but
left before speaking with reporters.

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Generators cutting electric output; regulators want to find out why
Published Friday, April 20, 2001, in the San Jose Mercury News
BY MICHAEL BAZELEY

Mercury News

State regulators launched an investigation Thursday into why some alternative
energy providers are withholding electricity from the state's stressed power
grid.
The California Public Utilities Commission in San Francisco said it wants to
determine whether the small power generators -- which provide about
one-fourth of the state's electrical power -- have legitimate business
reasons for scaling back their output.
Known as ``qualifying facilities,'' or QFs, many of the generators have been
either scaling back output or shutting down entirely -- contending that the
state's two largest utilities owe them $700 million.
``The critical question is: Will we be able to rely on these facilities into
the high-demand summer months?'' PUC Commissioner Carl Wood said.
The financially strapped utilities, Pacific Gas & Electric Co. and Southern
California Edison, stopped paying the power generators several months ago.
The PUC ordered the utilities to resume payments, and some generators started
receiving payments this week.
But many generators are still hurting because of all the back payments they
are owed, said Jack Raudy, a spokesman for the Renewable Energy Creditors
Committee, which consists of 10 alternative power producers.
``We're outraged,'' Raudy said.

Contact Michael Bazeley at mbazeley@sjmercury.com or (408) 920-5628.
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FERC remains an unlikely rescuer
The federal agency hews to a hands-off policy on power rates.
April 20, 2001
By DENA BUNIS
The Orange County Register
Washington - Californians who see federal re-regulation of the state's
crisis-bound energy market as an answer to the impending summer emergency
better look for some other solution.
Even the possible short- term price fix that the Federal Energy Regulatory
Commission may consider at its Wednesday meeting might be too little, too
late.
Lobbyists, lawmakers and other FERC-watchers say they have seen a slight
shift in recent weeks among commission staff and at least one member. There
is some willingness, they say, to consider some price controls, even though
the Bush administration is adamantly opposed to such measures.
And many are looking to see if President George W. Bush's choices for the two
vacancies on FERC will provide a margin for change.
But the commission's basic philosophy that open, unregulated markets are best
is not likely to change soon, members say.
"I've been championing a revamping of FERC's antiquated standards for
determining market-based rates,'' Commissioner Richard Massey said Thursday.
But with no success. " My agency is not on the verge of turning on a dime on
this market-based pricing."
The standards are a joke, Massey added, because the commission never turns
down requests for such pricing authority. More than 600 power sellers have
been given that authority, he said.
For a power company to be allowed to charge whatever the market will bear, it
must show FERC, for example, that it doesn't have the power to manipulate the
market and drive prices up.
"Any seller that can't pass our screen needs to fire their consultants and
lawyers,'' Massey said.
While the overall philosophy remains consistent, FERC staff has proposed to
the commission that a Stage 3 electricity emergency in California should
trigger cost-based rates, a form of price controls. Such triggers would be in
place for one year, under the staff proposal.
The commission may decide Wednesday whether to accept that proposal. It has
to make some decision by May 1 on how the market will be monitored from now
on.
The theory behind controlling prices in Stage 3, says a FERC staff report, is
that during such an emergency generators have the greatest opportunity to
manipulate the market and drive prices up.
But generators have that power during Stage 2 and Stage 1 emergencies, says
Les Starck, Southern California Edison Co.'s manager of federal regulatory
affairs. Price caps during Stage 3 might avert the rolling blackouts
associated with that level of crisis, but they wouldn't do anything to stop
generators from jacking up prices the rest of the time, he said.
And it is not clear how long it would take for such price controls to take
effect, should the commission go along with the staff recommendation.
"We're close because summer is approaching,'' Commissioner Linda Breathitt
said Thursday. Breathitt, who had firmly opposed any form of price controls,
said in an interview last month that given the worsening crisis in California
she was open to considering some short-term measures.
"It's important to me that we address the summer,'' Breathitt said, but she
said she could not predict what the commission would do Wednesday.
Even if an order is approved, Massey said, there could be delays while the
power sellers file their costs with regulators and disputes over those
filings are handled.
Sen. Dianne Feinstein said Thursday such a move by the commission would be
"better than having no controls at all. There's no question that we're going
to be in a Stage 3 emergency.''
Feinstein, D-Calif., and other Western lawmakers have been urging FERC to
step in sooner and with price controls that extend beyond just the emergency
period.
Waiting for Stage 3 to intervene "is putting the whole grid at risk,'' said
Roger Hamilton, a member of Oregon's Public Utility Commission. "We have a
real stability problem when you cut it that close.''
Feinstein says the future could well rest with the new commissioners,
particularly Patrick Wood, the head of the Texas PUC who many believe will
replace Curt Heber as FERC chairman if he is confirmed by the Senate.
Even if Massey and Breathitt agree on broader price controls, as chairman,
Heber could block consideration of such a move. It's unclear what stance Wood
would take as chairman.
"The thing that deeply concerns me about Pat Wood is that he's from Texas,''
Feinstein said. "What's reassuring is that it appears from my personal
discussion with him is that he appears to be pragmatic.''
But once again, timing could be a problem.
Bush has said he intends to nominate Wood and Nora Brownell, a member of the
Pennsylvania PUC, but has not formally sent their nominations to the Senate.
"The Federal Energy Regulatory Commission is of vital importance right now,
and to let the time go on without filling the spots makes no sense,''
Feinstein said.
"Please, please, please, President Bush, process your nominees.''

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Lawmakers seek bigger rollbacks, can't agree on caps
They promise to meet in Washington with a plan that would require federal
agencies to conserve power this summer.
April 20, 2001
By DENA BUNIS
The Orange County Register
Los Angeles - Gov. Gray Davis and a bipartisan sampling of the congressional
delegation put politics aside Thursday and agreed something must be done
about runaway wholesale power prices in California.
"We agreed that there has been unreasonable or unearned enrichment by the
energy providers of natural gas and electricity" said Rep. Darrell Issa,
R-Vista. "And we agreed that there needs to be significantly greater
rollbacks than there already have been."
The lawmakers did not, however, come to a consensus over the issue of price
caps - something Davis and other Democrats, particularly Sen. Dianne
Feinstein, D-Calif., have been pushing the Federal Energy Regulatory
Commission to institute.
Davis met behind closed doors for 90 minutes with Feinstein and 27 of the 52
House members at the Sheraton Gateway Hotel near LAX.
Participants from the Orange County delegation included Issa; Rep.
Christopher Cox, R-Newport Beach; Rep. Loretta Sanchez, D-Santa Ana; and Rep.
Gary Miller, R-Diamond Bar.
They emerged with a promise to meet again soon, this time in Washington, and
with a four-pronged strategy to avert disaster this summer.
The strategy includes requiring federal agencies in the state, including
military facilities, to conserve energy this summer, and asking FERC to find
a way to control the wholesale price of electricity and increase the flow of
natural gas into California.
Cox said much of the meeting was spent reviewing Davis' $850 million
conservation program.
Members promised to get the word out in their districts about conservation
measures.
Cox said he expects emergency legislation dealing with the energy crisis to
pass the Energy and Commerce Committee in the coming weeks.
That measure, he said, will include a direction to FERC to expand its
investigation of whether existing rates are just and reasonable.

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Energy notebook
Assembly urges federal regulation of natural gas
April 20, 2001
From Register news services
Sacramento - The California Assembly asked the federal government Thursday to
regulate soaring natural gas prices once again.
A resolution passed 48-7 asked President George W. Bush, Congress and the
Federal Energy Regulatory Commission to restore the regulation of natural gas
that ended in 1992.
Natural gas rates at the California border have been as much as 11 times
higher than elsewhere in the nation since November, an industry consultant
told an Assembly subcommittee Wednesday.
"I think it's only rational in one of the biggest crises to befall this
country in the last 100 years. We're not seeing adequate action from the
federal government," said the author, Assemblyman Dennis Cardoza, D-Atwater.
Republicans refused to vote for the resolution, complaining that it was an
attack on the GOP Bush administration.
Top Edison officials forego bonus, take 45% pay cut
Rosemead - Edison International's top officers received no bonuses in 2000
and generally took pay cuts of about 45 percent as the Southern California
company's utility segment was forced to write off $4.2 billion spent buying
overpriced power in the state's deregulated electricity market, according to
SEC disclosures the company filed Thursday.
Edison International Chief Executive Officer John E. Bryson received $1.62
million in salary and other compensation, compared with $3.04 million last
year. Southern California Edison CEO Stephen E. Frank received $760,000 in
salary and other compensation, compared with $1.35 million last year. And
Edison Mission Energy CEO Alan J. Fohrer received $584,000 in salary and
other compensation, compared with $922,000 last year.
Edison's compensation committee did give Bryson an incentive to pull the
company out of its quagmire, awarding stock options with a present-day value
calculated at $7.26 million. But Bryson won't be able to profit from those
options -- which vest over the next five years -- any time soon. The lowest
price he can exercise the options at is $20 -- and Edison stock is trading at
$11.
PUC seeks to shed light on meager energy alternatives
Sacramento - Hoping to prevent California's bleak power outlook from becoming
even darker, state regulators Thursday launched an investigation into why
alternative energy providers aren't producing more electricity.
With the action, the California Public Utilities Commission hopes to
determine if legitimate business reasons or ulterior motives underlie the
reduced output by an independent group of small generators that provides much
of the state's energy.
These alternative generators - known in the industry as "qualifying
facilities," or QFs - have been scaling back or shutting down as debts owed
by California's two largest utilities pile up. The QFs are owed an estimated
$700 million by bankrupt Pacific Gas and Electric and financially crippled
Southern California Edison.
In other developments:
California's Public Utilities Commission delayed until May 3 a decision on
whether it will investigate how Pacific Gas & Electric's bankruptcy is going
to affect customers.
Unbowed by Gov. Gray Davis' endorsement of Calpine's proposed power plant,
San Jose officials said they may yet have the last word on the controversial
project. The city could sue the California Energy Commission or attempt to
block the project by refusing to extend water and sewer lines or annex
several acres of needed land, they said.
PG&E Corp. won final approval to build a $350 million power plant in San
Diego County capable of supplying electricity to 500,000 homes.
The Escondido City Council has decided to take a break from considering a
rush of proposals by developers trying to build plants before peak summer
demand.
The council voted 3-2 Wednesday to suspend consideration for 30 to 60 days of
any proposals to build energy plants in the city.
Register staff writers, The Associated Press and Knight Ridder Newspapers
contributed to this report.

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Friday, April 20, 2001

Shed light on costs
Unfortunately, California citizens will remain in the dark for at least
another month about the details of Gov. Gray Davis' long-term contracts with
power producers.

This is the sort of crisis the public needs to scrutinize and for which the
Public Records Act was designed.

At a Tuesday hearing in a Los Angeles County Superior Court in Pasadena on
whether the documents should be released under the California Public Records
Act, Judge Michael J. Byrne said the case could better be heard in a Los
Angeles court.
The case was brought by Judicial Watch, a Washington-based public interest
law firm with its West Coast office in San Marino.
"The case was reset for May 22 in a Los Angeles County Superior Court in the
city of Los Angeles although we're going to try to move it up a bit,"
Judicial Watch and General Counsel Larry Klayman told us.
Mr. Klayman remains hopeful. "We're confident any judge who sees this will
have to release the documents," he said.
A similar but separate case, brought by several newspapers, will be heard May
18 in a San Diego Superior Court.
"This is a huge financial burden on the taxpayers without an opportunity for
the taxpayers to scrutinize the terms," Hal Fuson, chairman of the government
affairs committee of the California Newspaper Publishers Association, told
the San Diego Union-Tribune. "The general climate surrounding the governor's
approach to this has been one of secrecy."
The governor's position is that releasing the details now could make it
harder for the state to get the best prices for electricity.
But given that the governor has mismanaged this crisis so far, it's clear
that this is precisely the sort of crisis the public needs to scrutinize and
for which the Public Records Act was designed.
The governor should end this legal wrangling and release the documents to
which citizens are entitled.

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End To Deregulation of Nevada Power

CARSON CITY, Nev. (AP) via NewsEdge Corporation  -
Gov. Kenny Guinn signed a bill
Wednesday that would stop the sale of Nevada power plants, halt
deregulation and bail out struggling utilities with a new rate
system.

The Senate and Assembly gave the measure final approval earlier
in the day and rushed it to the governor. The bill was crafted to
keep Nevada from suffering from a power crisis similar to
California's.

``I must tell you this is a great relief,'' said Guinn, a former
utility executive, as he signed the bill into law. ``Nothing can
control escalating costs, but we're in the best position to protect
ourselves.''

Legislators made a last-minute change to add language that
ensured consumers would get a break on rates if utilities profit
from sales of excess power to other states.

Guinn said the bill takes care of the most pressing energy
issues, but other deregulation-related bills are sure to follow.
That includes a plan that would allow major power users, such as
casinos and mines, to buy power on the open market.

Legislators also are working on plans encouraging energy
conservation and ensuring the poor can pay their utility bills.
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PG&E Co. Issues Statements On the Increase in the State's Cost for Power

SAN FRANCISCO--(BUSINESS WIRE)--April 18, 2001 via NewsEdge Corporation  -

FROM:   John Nelson, Director of the News Department Pacific Gas and

Electric Company

There seems to have been some confusion yesterday over the effect
Pacific Gas and Electric Company's bankruptcy filing may have had on
energy prices. I thought it might be helpful to provide a few useful
facts and figures, to help you pin down the truth behind what may be
driving the state's energy costs higher.

Yesterday, Governor Davis claimed that the state was paying
roughly $20 million more for electricity every day as a direct result
of the bankruptcy filing by PG&E. While it's understandable, even
laudable, that the Governor would want to fully explain the downsides
of utility bankruptcy, this claim is simply not accurate. The Governor
should know better.

Consider the facts:

--  On January 19, the credit ratings of California's two largest

investor-owned utilities -- PG&E and SCE -- were downgraded to

below investment grade by every major rating agency.

Generators immediately raised concerns about continuing to

sell power to such non-creditworthy entities.

--  The state reacted by passing AB7x, which authorized the state

Department of Water Resources to make $400 million in power

purchases. Less than two weeks later, on February 1, the

Governor signed AB1x, which authorized DWR to buy power on an

ongoing basis at least through 2002, until the utilities could

be restored to creditworthiness. The clear understanding in

the legislative debate was that the DWR would purchase the

full "net open position", which is the amount of additional

generation needed, beyond what the utilities themselves own or

have under contract, to meet customer demand.

However, a few weeks later, in spite of the clear intent of

state law, it was revealed that DWR was not buying the full

net open position, and had no intention of doing so. It was

only buying power that it considered "reasonably priced" and

was leaving the ISO to buy whatever was necessary to keep the

lights on -- an amount that most estimates place at 10- to

20-percent of the state's daily electricity need.

--  The ISO, in turn, revealed its intention to attempt to pass

along the costs of these last-minute, high-cost, spot-market

purchases to the state's non-creditworthy utilities (despite

existing FERC tariffs which precluded the ISO from doing so).

PG&E has estimated that its share of these costs was roughly

$10 million a day; SCE has a similar estimate. (We don't know

for sure, because we haven't seen the bill. The DWR won't say

how much power it's buying, and at what cost, and neither will

the ISO.)

--  On February 14, the Federal Energy Regulatory Commission

informed the Independent System Operator that it could not

force generators to sell to non-creditworthy entities (namely,

both PG&E and SCE). This order appeared to force the DWR to

purchase the full net open after all. The ISO responded the

next day with its own interpretation of the FERC order, saying

the order was limited to "emergency" power only. The ISO also

sought and obtained in federal court a temporary restraining

order (issued by Judge Damrell), forcing generators to

continue selling to it.

--  On February 22, five power generators filed a complaint with

FERC seeking to clarify that the ISO's interpretation of the

February 14 order was contrary to FERC's intent.

--  On April 5, the Ninth U.S. Court of Appeals reversed Judge

Damrell's lower court order affecting one of the generators,

Reliant, saying the generator was no longer required to sell

electricity to the ISO without assurances of payment.

Presumably this order would apply to other generators, if they

sought such assurances.

--  On April 6, PG&E noted in the announcement of its Chapter 11

filing that one of the reasons for the decision was the

"financial exposure to unreimbursed wholesale energy

procurement costs" caused by the state's failure to assume the

full procurement responsibility.

--  On April 6, unrelated to PG&E's bankruptcy filing, FERC issued

an order responding to the generators' Feb. 22 complaint

against the ISO. In this new order, FERC reaffirmed its

February 14 order that the ISO could only buy power on behalf

of creditworthy entities, meaning neither PG&E nor SCE.

--  On April 9 in remarks reported in the press, the Governor's

office acknowledged the State's "bill for energy purchases

will increase by upward of $8 million a day after a ruling

last week by the Federal Energy Regulatory Commission," once

DWR started buying the full net open position, rather than

force the ISO to try to bill the utilities. It seems likely

that the $8 million was an estimate based on only one of the

utilities' costs, not the combination of both.

--  On April 11, the ISO discontinued its daily practice of

publishing the total amount it spent on energy the day before.

--  Despite the history, the state continues to try to avoid

buying the full net open position. On April 13, in response to

the FERC order -- NOT the PG&E bankruptcy filing -- the ISO

sent a "murky" notice to generators promising that "any bid

accepted by the ISO will be deemed to have the financial

support of another Qualified Party or DWR as specified in this

notice." Generators were reportedly underwhelmed by the

assurances contained in the letter.

--  Yesterday, in response to the Governor's claim that bankruptcy

was driving up the state's costs, Gary Ackerman, spokesman for

the Western Power Trading Forum, said "I don't believe, nor

have I ever heard, of a bankruptcy surcharge being added to

the cost of power.... If anything, I think that generators and

marketers would take solace in the fact that bankruptcy brings

order to an otherwise volatile situation."

What does it all mean? Clearly, the increase in the state's costs
have come as a result of the DWR finally covering the state's energy
needs, as promised in AB1x. This change in DWR's buying habits has
come as a direct result of the February 14 and April 6 FERC orders
that the ISO only sell to creditworthy entities. These orders were
issued independent of PG&E's bankruptcy filing and apply equally to
PG&E and SCE.

Neither PG&E nor SCE have been creditworthy since mid-January,
when their credit ratings were reduced to below investment grade, and
the DWR, ISO and Governor's office have been aware of the effect of
the FERC order since mid-February.

Some generators have suggested that California has been paying a
credit penalty since December, when the utilities' deteriorating
financial situation gave rise to payment concerns. There appears to be
far more evidence that the state's coy approach to AB1x implementation
has created far more uncertainty in the marketplace than has PG&E's
Chapter 11 filing.

CONTACT: PG&E Co. |              News Department, 415/973-5930
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J.D. Power and Associates Reports/ Nationwide Decline in Customer
Satisfaction of Electric Utility Service Among Midsize Businesses

Price and Value Performance Hit Hard Across Nation;

Satisfaction in California Continues to Plummet

AGOURA HILLS, Calif., April 19 /PRNewswire/ -- Midsize business customers,
who are responsible for approximately fifteen percent of the nation's
electricity consumption, are very critical of electricity prices, according to
the J.D. Power and Associates 2001 Electric Utility Midsize Business Customer
Satisfaction Study(SM) released today.  Consequently, the study's nationwide
customer satisfaction index fell -- from 100 points in 2000 to 97 in 2001.

(Photo:  http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-a

http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-b

http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-c

http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-d

http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-e )

"The entire country was affected by higher natural gas prices this winter,
and with more states re-evaluating deregulation, midsize business customers
are especially sensitive to electricity prices," said Jeffrey Conklin, senior
director at J.D. Power and Associates.

The 2001 study shows that average overall customer satisfaction with
California's "big three" investor-owned utilities -- Pacific Gas and Electric,
San Diego Gas and Electric, and Southern California Edison -- fell an
astonishing 14 index points among midsize businesses compared to the
2000 study.

"In California, electric utility satisfaction among midsize business
customers has virtually fallen into the Pacific," said Alan Destribats,
executive director of the utility practice at J.D. Power and Associates.

The study finds that the chief determinants of satisfaction among electric
utility midsize customers are a provider's company image, price and value, and
power quality and reliability.

As expected, midsize business customers were extremely critical of
performance in the areas of company image and price and value.  Even outside
of California, satisfaction in the price and value component fell more than
any other factor -- from an index score of 100 in 2000 to 93 in 2001.

Power Quality and Reliability

Utility performance in power quality and reliability is improving, with
the national index increasing by 3 points.  Although the number of
interruptions and outages experienced was relatively the same in 2001 as it
was in 2000, midsize businesses report much shorter outage durations, falling
from an average of seven hours for the longest outages in 2000 to four hours
in 2001.

Retail Competition

"Opening utility markets to competition has proven to be a difficult
process and, so far, midsize business customers are giving the industry poor
marks," said Destribats.

The study shows that midsize business customers located in states with
competition not only are less satisfied than are customers in other states,
but they are also significantly less satisfied now than last year.  The study
also shows that more midsize businesses have switched electricity providers.
Of midsize businesses eligible to switch power suppliers, 9 percent have done
so, up from 5 percent in 2000.

J.D. Power and Associates interviewed representatives from more than
7,200 midsize businesses, including manufacturers, retailers, business and
consumer services firms, health care providers and other midsize businesses
throughout the United States.  Midsize business owners are defined as those
who normally spend $1,500 to $25,000 per month on electricity.  The study
shows that midsize businesses are now spending an average of $4,827 per month
on electricity.

The study shows that utilities in the south region of the United States
consistently receive higher ratings across all factors of customer
satisfaction.  Likewise, these midsize business customers also report the
lowest levels of monthly electricity expenditures, on average.  Midsize
businesses in North Carolina spend the least for electric usage ($3,885 per
month on average), while those in New Hampshire, Nevada and Utah spend the
most ($5,700 to $5,800 per month on average).  The study also shows that
midsize businesses in Alabama and Florida report the most service
interruptions and outages within the past 12 months, and those in Washington
report the fewest.

East Region

PPL Utilities, serving east Pennsylvania, ranks highest in overall
customer satisfaction with midsize businesses in the eastern United States.
PPL Utilities ranked highest in the East Region in four of the six factors
that comprise customer satisfaction, with its primary strength in price and
value.  Other solid performers in this region include Public Service Electric
and Gas, Allegheny Power and GPU Energy.

Midwest Region

LG&E Energy, the parent company of Kentucky Utilities and Louisville Gas
and Electric, ranks highest in overall customer satisfaction with midsize
business electric service in the Midwest.  LG&E Energy midsize business
customers give high ratings for power quality and reliability, customer
service, and billing and payment.  Alliant Energy, AEP-Midwest and Xcel
Energy-NSP also rank high in midsize business customer satisfaction in the
Midwest Region.

South Region

Southern Company ranks highest in overall customer satisfaction for
midsize business electric service in the South Region and received the highest
customer satisfaction index score among all utilities included in the study.
Southern Company dominates all other electric utility service providers,
achieving the highest ratings in the nation in five of the six components
(2 in a tie).  Other strong performers in the South Region include Duke Power,
Florida Power & Light and Progress Energy (Carolina Power & Light and
Florida
Power).

West Region

Sierra Pacific Resources ranks highest in overall customer satisfaction
with midsize business electric service in the West Region.  This utility
significantly leads the region by rating highest in all six components (1 in a
tie).  The Los Angeles Department of Water and Power also ranks high in this
region.

Headquartered in Agoura Hills, Calif., J.D. Power and Associates is a
global marketing information services firm operating in key business sectors
including market research, forecasting, consulting, training and customer
satisfaction.  The firm's quality and satisfaction measurements are based on
actual customer responses from millions of consumers annually. J.D. Power and
Associates press releases and media information can be accessed through the
Internet at www.jdpa.com.  Media e-mail contact: michael.greywitt@jdpa.com.

This press release is provided for editorial use only.  No advertising or
other promotional use can be made of the information in this release or of
other J.D. Power and Associates survey results without the express prior
written consent of J.D. Power and Associates.

SOURCE  J.D. Power and Associates

CONTACT:  Michael P. Greywitt, 818-707-9526 or John Tews, 248-267-6800,
both of J.D. Power and Associates
Photo:  NewsCom:  http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-a
http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-b
http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-c
http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-d
http://www.newscom.com/cgi-bin/prnh/20010419/LATH066-e
AP Archive:  http://photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or 201-369-3467
Web site:  http://www.jdpa.com
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Calpine to Purchase 46 General Electric Gas Turbines  Turbines in Place for
70,000-megawatt Program

Turbines in Place for 70,000-megawatt Program

SAN JOSE, Calif., April 19 /PRNewswire/ --
Calpine Corporation (NYSE: CPN), the nation's fastest growing independent
power producer, announced today it will purchase 35 model 7FB and 11 model 7FA
gas-fired turbines from GE Power Systems. With this announcement, Calpine has
firm orders in place for the delivery of 203 turbines. When operated in a
combined-cycle application, this represents 50,000 megawatts of baseload
capacity.

The agreement marks the company's second large volume turbine acquisition
from GE and is an important component of Calpine's five-year strategic plan to
have 70,000 megawatts of generation on line by the end of 2005. Calpine will
take delivery of 5 turbines in 2002, with the remainder of the contract to be
filled by the end of 2005.

"This purchase significantly strengthens Calpine's leadership position in
project development," said Doug Kieta, senior vice president-construction for
Calpine. "Calpine's aggressive turbine procurement program also strengthens
Calpine's first-mover advantage as we expand our development program and enter
new electricity markets across the country."

"GE Power Systems is pleased to provide Calpine today's technology of
choice for power generation," said Delbert Williamson, President of GE Power
Systems Global Sales. "Our FA technology is the most proven advanced
technology available, and we're confident our evolutionary FB technology which
has been designed using GE's Corporate-wide Six Sigma initiative will provide
Calpine highly competitive power generation."

GE's current fleet of F technology gas turbines recently surpassed
3.8 million hours of operation around the globe. GE's 7FB turbine is an
evolution of the current 7FA model and is designed for higher efficiency,
lower life-cycle cost power generation. By employing this new technology,
Calpine will continue to generate electricity competitively while consuming
less natural gas and producing fewer emissions than a typical power plant of
comparable size.

GE Power Systems (http://www.gepower.com) is one of the world's leading
suppliers of power generation technology, energy services and management
systems with 2000 revenue of $15 billion. The business has the largest
installed base of power generation equipment in the global energy industry.
GE Power Systems provides equipment, service and management solutions across
the power generation, oil and gas, distributed power and energy rental
industries.

Based in San Jose, Calif., Calpine Corporation is dedicated to providing
customers with reliable and competitively priced electricity.  Calpine is
focused on clean, efficient combined-cycle, natural gas-fired generation and
is the nation's largest producer of renewable geothermal energy.  To date,
the company has approximately 31,200 megawatts of base load capacity and
6,800 megawatts of peaking capacity in operation, under construction and
announced development in 28 states and Alberta, Canada.  The company was
founded in 1984 and is publicly traded on the New York Stock Exchange under
the symbol CPN.  For more information about Calpine, visit its Website at
www.calpine.com.

This news release discusses certain matters that may be considered
"forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the intent, belief or
current expectations of Calpine Corporation (the "Company") and its
management. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve a number of
risks and uncertainties that could materially affect actual results such as,
but not limited to, (i) changes in government regulations and anticipated
deregulation of the electric energy industry; (ii) commercial operations of
new plants that may be delayed or prevented because of various development and
construction risks, such as a failure to obtain financing and the necessary
permits to operate or the failure of third-party contractors to perform their
contractual obligations (iii) cost estimates are preliminary and actual cost
may be higher than estimated, (iv) the assurance that the Company will develop
additional plants, (v) a competitor's development of a lower-cost generating
gas-fired power plant, (vi) receipt of regulatory approvals or (vii) the risks
associated with marketing and selling power from power plants in the newly
competitive energy market. Prospective investors are also referred to the
other risks identified from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission.

SOURCE  Calpine Corporation

CONTACT:  press, Kent Robertson, 408-995-5115, ext. 1144, or investors,
Rick Barraza, 408-995-5115, ext. 1125, both of Calpine Corporation
Web site:  http://www.gepower.com
Web site:  http://www.calpine.com
(CPN)