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Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 17, 837
????words, THE CALIFORNIA ENERGY CRISIS; ??PUNISHING THE PRODUCERS COULD ADD
TO
????PROBLEM; ??SHORTAGE: SOME OFFICIALS WANT 'PIRATES' TO PAY FOR STATE'S
????CRISIS. BUT THAT COULD DISSUADE THEM FROM CREATING NEEDED SUPPLY, OTHERS
????WARN., JULIE TAMAKI, TIMES STAFF WRITER, SACRAMENTO (Quotes Smutny on
behalf of IEP)

Sacramento Bee, April 16, 2001, Monday, Pg. A1;, 1389 words, Tough talk on
????energy Many Democratic lawmakers push to seize generators., Jim Sanders
Bee
????Capitol Bureau ?(Quotes Smutny on behalf of IEP)

The Bulletin's Frontrunner, April 17, 2001, 1552 words, California State
????Legislators Against Grid Buyout.

Contra Costa Times, April 17, 2001, Tuesday, STATE AND REGIONAL NEWS, K7054
????, 687 words, PG&E wrote off billions, according to earnings reports, By
????George Avalos

Contra Costa Times, April 17, 2001, Tuesday, STATE AND REGIONAL NEWS, K6844
????, 1329 words, Former governor defends his decision to deregulate
utilities,
????By John Simerman

Copley News Service, April 17, 2001, Tuesday, State and regional, 1118
????words, Suggestion is floated that Edison follow PG&E into bankruptcy, Dean
????Calbreath

Copley News Service, April 17, 2001, Tuesday, State and regional, 1142
????words, Activist pans FERC refund order; figure is called too low, Craig D.
????Rose, SAN DIEGO

Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 8, 336
????words, POWER CRISIS: WHO WILL PAY?

Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 17, 423
????words, THE CALIFORNIA ENERGY CRISIS; ??JUDGE FAVORS SMALL PRODUCER IN BOUT
????WITH EDISON, TONY PERRY, TIMES STAFF WRITER, EL CENTRO

Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 3, 1099
????words, CALIFORNIA AND THE WEST; ??THE CALIFORNIA ENERGY CRISIS; ??DEAL TO
????BUY EDISON GRID RAISES DOUBTS IN CAPITOL, MIGUEL BUSTILLO and CARL INGRAM,
????TIMES STAFF WRITERS, SACRAMENTO

Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 1, 1182
????words, DWP CHIEF TO WORK FOR DAVIS; POST AS ENERGY CZAR LIKELY, TINA DAUNT
????and RONE TEMPEST, TIMES STAFF WRITERS

Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 2, 316
????words, CALIFORNIA; ??RELIANT SEES PROFIT DOUBLE IN 1ST QUARTER, From
????Bloomberg News

The New York Times, April 17, 2001, Tuesday, Late Edition - Final, Section
????C; Page 15; Column 1; Business/Financial Desk, 659 words, PG&E Has a Loss;
????Reliant's Earnings Soar, By Bloomberg News

The New York Times, April 17, 2001, Tuesday, Late Edition - Final, Section
????A; Page 18; Column 6; Editorial Desk, 150 words, California, Neglected

San Jose Mercury News, April 17, 2001, Tuesday, SJ-POWER-COSTS, 1124 words,
????California Leaders Gain Support for Power Price Controls, By John Woolfolk

The San Francisco Chronicle, APRIL 17, 2001, TUESDAY,, FINAL EDITION, NEWS;
????, Pg. A3, 614 words, Davis Names New Top Energy Adviser; ???Freeman to
????spearhead major conservation effort, Chuck Squatriglia

The San Francisco Chronicle, APRIL 17, 2001, TUESDAY,, FINAL EDITION,
????EDITORIAL;, Pg. A18;, 1303 words, U.S. Energy Chief: No Price Caps

The San Francisco Chronicle, APRIL 17, 2001, TUESDAY,, FINAL EDITION,
????BUSINESS;, Pg. B1, 606 words, Independent Electricity Producer Posts Big
????Profits; ???Independent Power Firm Doubles Profits, Christian Berthelsen

The Washington Post, April 17, 2001, Tuesday, Final Edition, STYLE; Pg.
????C02; ART BUCHWALD, 433 words, The Power of One, Art Buchwald

The Associated Press State & Local Wire, April 16, 2001, Monday, BC cycle,
????State and Regional, 442 words, Natural gas tax could worsen electricity
????shortage, LOS ANGELES

The Associated Press State & Local Wire, April 16, 2001, Monday, BC cycle,
????State and Regional, 681 words, Davis may have trouble selling power plan,
????senators say, By DON THOMPSON, Associated Press Writer, SACRAMENTO

Copyright 2001 / Los Angeles Times

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

????????????????????April 17, 2001, Tuesday, Home Edition

SECTION: Part A; Part 1; Page 17; Metro Desk

LENGTH: 837 words

HEADLINE: THE CALIFORNIA ENERGY CRISIS;

PUNISHING THE PRODUCERS COULD ADD TO PROBLEM;

SHORTAGE: SOME OFFICIALS WANT 'PIRATES' TO PAY FOR STATE'S CRISIS. BUT THAT
COULD DISSUADE THEM FROM CREATING NEEDED SUPPLY, OTHERS WARN.

BYLINE: JULIE TAMAKI, TIMES STAFF WRITER

DATELINE: SACRAMENTO

BODY:

??Lt. Gov. Cruz Bustamante wants to empower the state to throw power producers
in jail. Atty. Gen. Bill Lockyer is offering a $ 50-million reward to anyone
who
helps him prosecute them for fraud. Senate leader John Burton is calling on
the
governor to commandeer their plants.

??As the electricity crisis has escalated, so have efforts by lawmakers to go
after the big energy companies--described as "pirates" or a "cartel"--that
they
say have brought California to its knees.

??They want the mostly out-of-state companies, which Gov. Gray Davis recently
described as "the biggest snakes on the planet Earth," punished and some of
their earnings returned to the public.

??* Bustamante proposed that the Legislature enact a law to make it a felony
for energy companies to charge unreasonable and unjust prices. Prosecutors
could
use findings of unreasonable prices by regulatory bodies, such as the Federal
Energy Regulatory Commission, to file charges against a generator. Punishment
would include restitution, jail time or fines.

??* Sen. Nell Soto (D-Pomona) and Sen. Jack Scott (D-Altadena) introduced
legislation that would tax producers' "windfall profits" and give the money to
taxpayers to offset their electricity bills. The charge would apply to a
corporation's taxable net income for 2001, using 1999 as a comparison year.

??* Offering potential rewards of hundreds of millions of dollars, Lockyer
appealed to whistle-blowers to report suspected fraud by energy providers who
sell electricity and natural gas to California government entities.

??Lockyer said he will invoke a state law under which whistle-blowers whose
information leads to the successful prosecution of a false claim may be
entitled
to a percentage of the financial penalties, which can be three times the
actual
losses.

??"Since billions of state dollars may be recovered, the award to an informant
could potentially range from $ 50 million to hundreds of millions of dollars,"
Lockyer said.

??Whether his offer results in any fraud convictions, or whether any of the
other proposals produce more than rhetoric, remains to be seen. But the
possibility exists that the actions could compound the state's problems by
dissuading companies from building new plants in California or refurbishing
existing ones to increase their output.

??Generators say the lawmakers' proposals share a common trait: None solves
California's fundamental problem, which they contend is a lack of electricity
supplies. They describe their treatment by state officials, who are desperate
for new power plants to be built in California, as contradictory at best.

??"We cannot simultaneously be the heroes and the villains in this opera,"
said
Jan Smutny-Jones, executive director of the Independent Energy Producers.

??Richard Wheatley, a spokesman for Reliant Energy of Houston, said that in
response to strong demand for power in California, his company has more than
doubled its plants' output.

??Reliant, which bought five California power plants from Edison when the
state
deregulated electricity, said the windfall profits measure could cause some
generators to reduce the amount of power they produce.

??"It would make the problem worse in California by removing financial
incentives that have prompted generators to run their plants at historically
high levels," Wheatley said.

??Duke Energy of Houston has announced plans to spend $ 1.6 billion to
refurbish its California power plants to increase production.

??But company spokesman Tom Williams said a windfall tax would have an
inflationary effect, because the expense ultimately would be passed on to
consumers. He said such measures could cause his and other companies to
rethink
their plans in the state.

??Sen. Tom McClintock (R-Thousand Oaks) said he believes some of his
legislative colleagues are doing "enormous damage" to the state by targeting
power suppliers. California, he said, suffers from a catastrophic shortage of
electricity.

??"To make electricity plentiful, we have to build more power plants, but we
cannot accomplish that by threatening every generator in the world with the
confiscation of its assets and the imprisonment of its executives the moment
they set foot in California," McClintock said. "It is no wonder that power
plant
applications in California are a fraction of what they are in states like
Texas
that welcome new power plant construction."

??Others say the shortage is a manipulated one. Lockyer noted that his
investigators have been examining whether producers have manipulated the
market
and withheld supplies to run up energy prices.

??Santa Monica consumer advocate Harvey Rosenfield welcomed word of the
windfall tax legislation, which he said embodies an idea he has been calling
for
since last fall.

??"This is a crisis of greed," Rosenfield said. "There is no solution in this
energy crisis that does not involve getting our money back from the thieves
who
have stolen it from us."

??*

??Times staff writer Carl Ingram contributed to this story.

LOAD-DATE: April 17, 2001

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

??????????????????Copyright 2001 McClatchy Newspapers, Inc.

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

??????????????????April 16, 2001, Monday METRO FINAL EDITION

SECTION: MAIN NEWS; Pg. A1; POWER CRUNCH

LENGTH: 1389 words

HEADLINE: Tough talk on energy Many Democratic lawmakers push to seize
generators.

BYLINE: Jim Sanders Bee Capitol Bureau

BODY:

??Here's what some California lawmakers see as a trump card in solving the
state's energy crisis: Gouge the public, lose your power plant.

??Faced with growing bills and dwindling options, many Democratic lawmakers
are
pushing for the use of emergency powers or eminent domain to force power
generators to negotiate lower wholesale electricity prices.

??"Step One is to seize a few power plants," said Senate President Pro Tem
John
Burton, D-San Francisco. "That would let (the generators) know we mean
business."

??"There's no negotiation when generators say, 'Pay us what we want, or we'll
shut off California's lights,' " said Phil Angelides, state treasurer. "We
ought
to levy an excess profit tax, and if they don't take their foot off our
throat,
seize a plant or two to sober them up."

??The increasingly tough talk about seizing assets, while motivated by an
immediate desire to extract concessions, fits into a longer-term push for
California to produce some of its own electricity to boost supply and protect
against spiraling prices.

??Critics blast the notion of seizure, however, as a bargaining ploy or
political grandstanding.

??"It's actually quite silly and a waste of time to consider these options,"
said Gary Ackerman, executive director of the Western Power Trading Forum, an
association of wholesale generators.

??"Seizure would mean the state would pay top dollar for an Edsel - old, tired
plants that are past their prime," he said. "What happens if these people are
wrong and they're taking the people of California down a dead end?"

??But others say the time is ripe for radical reform, with the state paying up
to $50 million a day for electricity and facing prospects of rolling power
blackouts this summer.

??"The generators will only respond when we take their golden eggs: the plants
they own," said Douglas Heller of the Foundation for Taxpayer and Consumer
Rights. "They're the ones cheating us, and they're the ones we must target."

??Lawmakers have raised the following two seizure possibilities, each aimed at
ensuring that more electricity is available at lower than spot-market prices:

??* Take over private power plants, perhaps contract with utilities to run
them
and let the courts decide what fair market price should be paid to the
companies
that now own them.

??* Leave the plants alone, but seize their contracts with marketers, thus
controlling where the power is sold while reducing price markups by
eliminating
the middleman in spot-market transactions.

??State Sen. Debra Bowen, D-Marina Del Rey, chairwoman of the state Senate's
Energy Committee, recently suggested a third way for California to acquire
existing electricity assets, without seizing them: Purchase the entire Pacific
Gas and Electric Co. in Bankruptcy Court.

??Such a move could benefit the state and keep PG&E property out of the hands
of private companies that already have too much influence over the electricity
market, Bowen said.

??All sides agree that takeovers would be an extraordinary, unprecedented
intervention into California's electricity industry.

??But Burton said his support for seizures is "very serious." The state could
pay acquisition costs through revenue from electricity sales, he said.

??"People make money on power plants," he said. "It ain't like they're loss
leaders."

??Gov. Gray Davis hasn't ruled out the seizure of power generators' assets or
the acquisition of PG&E. But such possibilities raise a million questions,
ranging from taxpayer exposure to technical issues regarding use of any asset
acquired, Davis spokesman Steve Maviglio said.

??Seizure, in particular, can be a "risky gamble" that should not be done in
haste, Maviglio said. Private companies targeted by the state could respond by
withholding power or deciding not to invest in new plants at a time when
California is scrambling for more electricity.

??"Clearly, the governor doesn't want to send a message that California
doesn't
want increased generation," Maviglio said. "Even though generators are gouging
us now, they're also the people that build plants."

??While the Democratic governor has not committed himself to seizure, he
supports legislation - SB 6x - written by Burton and supported by Angelides
that
would create a public power authority to construct state-owned plants and help
finance conservation and renewable-energy projects.

??"The notion that we should let electricity be traded by profiteers like a
sheer commodity is ludicrous and dangerous," Angelides said. "Public power is
the public's defense against the greed and dysfunction of a market run amok."

??Power plants aren't cheap, but with the $5.2 billion it has spent or
allocated since January to buy energy on the spot market, the state could
generate enough electricity to serve more than 10 million homes. A
1,000-megawatt plant burning natural gas would cost about $500 million,
according to the California Energy Commission.

??"We ought never again be in the position of having no ability to control at
least part of the supply and hedge the market," said Darrell Steinberg,
D-Sacramento, a member of the Assembly's Energy Committee.

??S. David Freeman, general manager of the Los Angeles Department of Water and
Power and an adviser to Davis, said he solidly supports building public
plants.
He likes the idea of a windfall profits tax but is less enthusiastic about
asset
seizures.

??"All those things are worth considering and they're part of a common theme:
The state has to take control of its own destiny," Freeman said. "We need to
conserve and build our way out of this mess. The Lord helps those who help
themselves."

??But Republican legislators, who have long opposed Davis' efforts to buy
statewide electricity transmission, think the state would be making a big
mistake by seizing private plants or building its own.

??"There's no reason to believe the state of California can run the power
business or the transmission business as good as, or better than, the private
sector," said Assembly Republican leader Dave Cox of Fair Oaks.

??The concept of seizure is particularly controversial.

??"How far can you take this?" Cox asked. "If we have a natural gas shortage,
do we then seize those pipelines?"

??Jan Smutny-Jones of the Independent Energy Producers Association said state
officials need to stop their "constant haranguing of generators."

??"Seizing private property didn't work in Cuba, and I don't think it would
work in California," he said.

??Private electricity companies are investing billions to generate more power,
and are running their plants as hard as possible to meet the crisis,
Smutny-Jones said.

??Soaring electricity prices have been due largely to high demand, scarce
supply, extremely high costs for natural gas to run turbines, and financial
risks tied to the instability of PG&E and Southern California Edison, industry
officials say.

??But state officials claim that market manipulation has contributed as well.

??The California Independent System Operator, which manages the statewide
transmission grid, has accused power generators of overcharging Californians
by
$6.2 billion since May.

??In response, the Federal Energy Regulatory Commission recently threatened to
order generators to refund a portion of the contested charges, $134.8 million,
mostly covering state purchases in January and February.

??Tom Williams, a spokesman for Duke Energy Corp., a North Carolina-based
company that operates four California power plants, said the company is
spending
$1.6 billion to upgrade and expand those facilities in an attempt to ease the
energy crunch.

??State seizures would discourage investment and hurt the industry, Williams
said.

??"The governor has said that two things need to happen: The state needs more
supply and lower prices," he said. "Seizing power plants would do nothing to
help those two objectives."

??Any attempt to take Duke's property through eminent domain would spark a
lawsuit, Williams said. "We would fight it vigorously, I can assure you, to
ensure we got fair market value."

??But Duke would not object to the state building power plants of its own, he
said.

??"We support any effort, public or private, to add generation to California,"
he said. "The state needs it - and needs it fast."

??l l l

??The Bee's Jim Sanders can be reached at (916) 326-5538 or
jsanders@sacbee.com.

Copyright 2001 Bulletin Broadfaxing Network, Inc.

??????????????????????????The Bulletin's Frontrunner

????????????????????????????????April 17, 2001

LENGTH: 1552 words

HEADLINE: California State Legislators Against Grid Buyout.

BODY:

??The Los Angeles Times (4/17, Bustillo, Ingram) reports, "Gov. Gray Davis may
face a bigger challenge selling legislators on his deal to keep Southern
California Edison out of bankruptcy than he did in forging the agreement with
the utility. Legislators returning to Sacramento on Monday after their spring
break openly voiced objections to and concerns about the deal to purchase
Edison's power lines in exchange for $2.76 billion and a variety of state
guarantees." The Times continues, "Some Republicans and Democrats called
Davis'
deal too generous. Others questioned whether a state- financed rescue of
Edison
still makes sense after the bankruptcy of Pacific Gas & Electric Co.,
California's largest private utility." The Times quotes several state
legislators who are against the deal. Assemblyman Tony Cardenas (D- Sylmar)
said, "There are lots and lots of questions. With the (PG&E) bankruptcy, the
world changes. We have to reconsider how this deal fits into the new world we
are living in." Assemblyman Tony Strickland (R- Moorpark) said, "It's a
bailout.
Why would the people of California want to own this thing? That's money that
could be better used on schools, health care and tax cuts." Sen. Don Perata
(D-Alameda) added, "I haven't talked to anybody who is for it."

??PG&E Reports Fourth Quarter Losses Of $4.1B. The AP (4/17), "PG&E Corp.,
parent of the bankrupt northern California utility, reported a $4.1 billion
fourth-quarter loss Monday, acknowledging the company may be unable to recover
soaring electricity costs it was unable to pass on to consumers last year. The
San Francisco-based company recorded a before-tax charge of $6.9 billion, the
difference between what it paid for wholesale electricity last year and what
state regulators allowed the utility to charge its 4.5 million customers. The
pre-tax charge produced a loss of $4.1 billion, or $11.34 per share, in the
three months ended Dec. 31." The San Francisco Chronicle (4/17, Lazarus)
reports, "Marking its worst performance in almost a century of operation, San
Francisco's PG&E Corp. last night reported a quarterly loss of $4.1 billion.
The
huge loss was reported at the same time that the corporation wrote off nearly
$7
billion in outstanding debt as uncollectable." The Chronicle continues, "Blame
for the quarterly loss is tied to the financial woes of its utility
subsidiary,
Pacific Gas and Electric Co., which filed for bankruptcy protection this month
after racking up $9 billion in unrecovered expenses. Those deficits mounted as
the utility was forced to pay more for electricity than it was able to recover
from customers under the state's deregulation plan." The Chronicle adds,
"While
the corporate parent is writing off the loss, the subsidiary is not abandoning
its claim to the billions in past debt. The company said it will press ahead
with a federal lawsuit asking for total recovery of the costs through higher
electricity rates."

??Utilities Took Different Paths In Negotiations With State. The Washington
Post (4/17, E1, Behr) reports, "For six months, California's two largest
utilities were roped together, sliding steadily toward bankruptcy with
billions
of dollars in electricity costs they could not recover from consumers. Then,
at
a crucial crossroads, they diverged. Pacific Gas & Electric leapt -- or was
pushed, it says -- into bankruptcy court on April 6. Rather than wrestle any
longer with Gov. Gray Davis and his staff over a rescue plan, the utility put
its operations, debts and destiny into the hands of US Bankruptcy Judge Dennis
Montali. Three days later, Southern California Edison, the state's No. 2
utility, jumped the other way. It signed an agreement with Davis in which the
state agreed to buy SoCal Edison's transmission lines, promising the utility $
2.76 billion to help pay down debt. The plan would also permit SoCal to issue
bonds, backed by rate payments, to cover more debt." The Post adds that "the
two
companies clearly followed divergent paths in their negotiations with the
state.
After PG&E's executives met with Davis's staff in February, the company
issued a
statement that spelled out a hard-nosed challenge to Davis and his
negotiators.
'PG&E wants to make clear that it is not seeking a rescue or a bailout,' the
company said. 'We are asking the state simply to follow the law, which allows
us
to recover wholesale power costs incurred for our customers.' A bankruptcy
reorganization -- the route PG&E ultimately took -- offered an opportunity to
isolate the utility company's debts from the parent company. . PG&E also moved
to protect the rest of the company from the utility's woes through a corporate
restructuring called 'ring-fencing,' which federal regulators approved in
December. The strength of those protective walls will be tested in the
bankruptcy process by creditors' lawyers seeking to capture some of the parent
company's assets, experts predict. Meanwhile PG&E's negotiations with Davis's
staff faltered from the start, said Stephen Maviglio, the governor's
spokesman."
The Post continues, "The negotiations between Davis's staff and SoCal Edison
started out better and ultimately reached a tentative deal, announced April 9.
In contrast to the tough relationship between Davis and PG&E executives,
Edison's chairman and chief executive, John E. Bryson, and Davis both had
served
on the staff of former California governor Jerry Brown, and Bryson had been
president of the CPUC. PG&E's instinct is to battle regulators; Edison's is to
seek an agreement, one veteran state regulator said. In addition, because
Edison
is smaller than PG&E, with half its debt, its issues were easier to deal with
than those of its counterparts."

??Los Angeles Power And Water Chief Expected To Head New California Energy
Agency. The Los Angeles Times (4/17, Daunt, Tempest) reports, "S. David
Freeman,
the wily 75-year-old general manager of the Los Angeles Department of Water
and
Power, will resign soon to become Gov. Gray Davis' chief energy advisor and is
widely believed to be a leading candidate to head a new California power
authority. Freeman, who has been credited with making the Los Angeles
municipal
utility an island of electrical stability in a statewide sea of crisis, will
become the Governor's 'chief energy czar for conservation,' Davis spokesman
Steve Maviglio said Monday. Maviglio refused to confirm that Freeman would
head
the yet-to-be-formed power authority. He said that Davis did not rule out
such a
move, but that an announcement would be premature because the Legislature has
yet to pass the bill that would put the authority in business. Los Angeles
Mayor
Richard Riordan, however, said Monday night that Davis has told him that
Freeman
would be appointed to the power authority job once the agency is created.
Regardless of his specific job title, Freeman is expected to be in position to
significantly shape the state's energy policy as Davis struggles to keep
prices
under control and prevent widespread blackouts this summer." The Times adds,
"A
power authority has been proposed as the vehicle by which the state could
purchase the electrical transmission grid now owned by California's private
utilities. The agency also could have broad power over conservation programs,
construction of new power plants and rehabilitation of current power
facilities.
Freeman would bring unparalleled experience to a state energy post. In a long
and storied career, the wisecracking Tennessee native has run three of the
largest public power authorities in the United States -- the Tennessee Valley
Authority, the New York Power Authority and the Lower Colorado River Authority
in Texas. He also served as energy advisor to President Jimmy Carter. Earlier
this year, Freeman worked for Davis as California's chief energy negotiator,
hashing out the prices and terms of long-term electricity contracts for the
state."

??Carnahan And Lieberman Ask GAO To Investigate Market Power In Wake Of
California Problems. The St. Louis Post Dispatch (4/17, Branch-Brioso)
reports,
"Sens. Jean Carnahan, D-Mo., and Joseph Lieberman, D-Conn., called Monday for
an
inquiry into the federal agency that oversees wholesale sales of electricity
between states. Their letter to the General Accounting Office, Congress'
investigative arm, cited California's power woes -- and a fear that the same
could befall other states contemplating deregulation, such as Missouri." The
Post quotes the letter, "We have been watching with dismay as the state of
California suffers sporadic rolling blackouts with impacts on electricity
supplies and prices throughout the United States. With the possibility of
electricity deregulation occurring soon in additional states such as Missouri,
we are concerned whether there is adequate federal oversight to guard against
potential abuse of market power by suppliers." The Post continues, "Carnahan
and
Lieberman asked the GAO to find out whether the Federal Energy Regulatory
Commission has properly fulfilled its responsibility 'to ensure just and
reasonable prices for interstate wholesale transmission.' They cited recent
price-gouging allegations by the California Public Utility Commission as
potential evidence that the federal commission had fallen down on the job."

LOAD-DATE: April 17, 2001

??????????????????????????????4 of 66 DOCUMENTS

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

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

???????????????????????????April 17, 2001, Tuesday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K7054

LENGTH: 687 words

HEADLINE: PG&E wrote off billions, according to earnings reports

BYLINE: By George Avalos

BODY:

??WALNUT CREEK, Calif. _ PG&E Corp., the parent of California's bankrupt
utility, posted a $3.4 billion loss in 2000 as it wrote off billions in
power-purchase costs that it might never be able to collect, the company
reported Monday evening.

??San Francisco-based PG&E disclosed a charge, before taxes, of $6.9 billion
to
cover its losses for wholesale power purchases last year.

??The charge effectively represents the difference between what PG&E paid for
wholesale power and the amount that the Public Utilities Commission determined
that PG&E could charge its residential and business customers for electricity.

??The charge helped to plunge PG&E into a $3.4 billion loss for all of 2000
and
$4.1 billion during the fourth quarter of last year.

??Had it not been for the charges, PG&E and its various units, including the
bankrupt utility and an unregulated power company called National Energy
Group,
would have recorded healthy profits.

??"While overshadowed by the extraordinary impacts of the California energy
crisis, we demonstrated continued solid performance on an operating basis,"
said
Robert Glynn, PG&E's chairman and chief executive officer. "We are proud of
that
accomplishment, even as we are deeply dissatisfied at reporting a substantial
net loss due to the uncertainty around the recovery of our wholesale power and
transition costs."

??The multibillion-dollar setback for PG&E extended what has been a bleak
several months and string of financial reverses for the once-proud utility.

??"It's almost like a perfect storm," said Michael Worms, an analyst with
Gerard Klauer Mattison. "Everything that could have gone wrong has gone wrong
for PG&E."

??Overall, and excluding the huge charge, the entire company earned $925
million, or $2.54 a share, from its continuing operations during 2000. Those
operating profits were up about 12 percent from 1999.

??The bankrupt utility unit managed a profit of $769 million, or $2.11 a
share,
from ongoing operations, not counting the charge, during 2000. Those profits
were up by less than 1 percent from 1999.

??National Energy Group, an unregulated wholesale power company that is a unit
of PG&E, harvested a profit of $162 million, or 45 cents a share, during 2000.
Those earnings represented a hefty 165 percent increase, or more than double
the
totals in 1999. National Energy has prospered by purchasing power plants in
the
Northeast and natural gas pipeline facilities in Texas.

??"The fortunes of National Energy point out how well that unit is doing by
expanding outside of California," said Arthur O'Donnell, editor of California
Energy Markets, a newsletter in San Francisco.

??With the operating profits as a backdrop, PG&E executives insisted they will
pursue every effort to recover the company's losses in the wholesale market,
despite taking the one-time charges. These include legal challenges in the
courts, ongoing negotiations with regulators and political leaders such as
Gov.
Gray Davis, and discussions with lenders and creditors as its bankruptcy case
unfolds.

??"Taking this charge does not diminish our conviction that the utility is
entitled under law to recover these costs, nor does it diminish our ongoing
lawsuit" in the federal courts, Glynn said.

??Nettie Hoge, executive director of the Utility Reform Network, said that if
PG&E is willing to take the $4.1 billion after-tax write-down, the company
should halt its quest to recover its reported losses.

??"They want it both ways," Hoge said. "If they're willing to tell investors
they're writing it off, they should quit trying to take it out of my pocket."

??The huge loss and charges being swallowed by PG&E are a reminder of the
extent of the utility's financial wreckage in California's shattered
electricity
market.

??"We're already well down the road of how bad can it get for PG&E," O'Donnell
said.

??(Staff writer Mike Taugher contributed to this report.)

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

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

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

JOURNAL-CODE: CC

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

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

???????????????????????????April 17, 2001, Tuesday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K6844

LENGTH: 1329 words

HEADLINE: Former governor defends his decision to deregulate utilities

BYLINE: By John Simerman

BODY:

??WALNUT CREEK, Calif. _ The man who prodded California into the wobbly world
of utility deregulation sat in a well-lit meeting room in Beverly Hills last
week, apologizing to no one.

??"Blame, hell," said Pete Wilson. "I take credit for having been the driving
force to launch deregulation."

??The former governor, 67, watches from private life as old rivals rake his
political legacy across a landscape of rolling blackouts, PG&E bankruptcy and
billowing power bills that threaten to capsize the state's economy.

??Now, as momentum builds in Sacramento for more government control over
power,
Wilson has begun to defend himself and a plan for deregulation that, even its
most faithful boosters admit, never heeded the prospect of too little power
supply.

??In an interview with last week, Wilson admitted to some major mistakes in
the
1996 deregulation that the legislature passed in a unanimous vote, and which
some have labeled the worst policy miscalculation in California history.

??Among them:

??_ Installing a cap on retail electricity rates that backfired on the private
utilities, drowning them, and ultimately the state, in billions of dollars in
bills as wholesale energy costs soared.

??_ Forcing the utilities to sell off their power plants while prohibiting
them
from locking in favorable long-term rates with the suppliers who bought the
plants.

??Not among them: deregulation itself, says Wilson.

??"I will not pretend to you that (the legislation) was a perfect, free-market
mechanism. It wasn't. I knew that at the time. I signed it knowing that," said
Wilson. "I thought whatever flaws would emerge they would be addressed by our
successors."

??These figured to be the golden days for Wilson, now a managing director at
Pacific Capital Group, a commercial banking and venture capital firm in
Beverly
Hills. A Hoover Institution fellow, Wilson could have retired to the lecture
circuit with the confident glow that comes from leading California out of a
dark
recession and into an era of prosperity and surpluses.

??That was before one of his most aggressive economic initiatives spun wild,
threatening to drain those surpluses dry.

??Wilson now finds himself defending deregulation, saying the state's supply
problem, if not PG&E's bottom line, would be worse off without it.

??It was the recession, he said, that led him to stack the Public Utilities
Commission with free-market advocates.

??Back then, the regulated power industry found itself with a 30 percent power
surplus, yet with prices far higher than most other states, partly due to bad
investments that the utilities passed on to consumers.

??Officials from dozens of other states had launched an aggressive raid on
California. Competition would bring lower prices and smooth the economic
recovery.

??The concern: how to manage oversupply and help PG&E recover its
government-imposed investments in a free market. If anyone suggested a future
power shortage, it sounded like a bleat.

??"At one point there was a discussion of what would happen if the wholesale
price went up. Someone said if rates ever got to 10 cents a kilowatt-hour,
this
whole thing would fall apart," said Dan Howle, chief of staff for Sen. Steve
Peace, D-El Cajon, a key driver of the legislation.

??"There was a lot of laughter, and a response of, 'That'll never happen.""

??The average PG&E customer now pays 10.4 cents per kilowatt hour, not
including a 3-cent hike the PUC approved March 27. Residential users pay 11.4
cents. The wholesale price now equates to 30 to 35 cents a kilowatt-hour. Just
who picks up the difference remains the $9 billion question that helped propel
PG&E into bankruptcy court.

??Clearly, the laughter has ended.

??In its place, Gov. Gray Davis has adopted the mantra that he inherited the
energy crisis from a Wilson administration that never fostered the
construction
of a single major power plant.

??"When you preside over the birth of the high-tech industry as governor, and
you don't have the vision to realize there's going to be more supply needed
while population is soaring, that says a lot," said Davis spokesman Steve
Maviglio.

??If it were up to him, Wilson said, he'd muzzle "NIMBY" voices and
aggressively site power plants on the state's contaminated brownfields,
ladling
out fat bonuses for private power generators to build plants quickly. To him,
Davis' plan to create a state power authority that would build and run its own
power plants seems an idle threat, or a gross mistake.

??"If they do that, they can look forward to having to rely almost exclusively
on public power because no one in the private sector is going to want to touch
California," said Wilson.

??"The goal is to get more power online and doing what it takes to get more
online," said Maviglio. "(Wilson) is an apologist for deregulation. He's proud
of it."

??What stifled new plant construction during Wilson's tenure was not
deregulation, he claims, but the 1998 campaign to repeal it, which left power
companies queasy. At the same time, Wilson said no one could have anticipated
the energy drain of the Internet economy.

??"The growth outstripped the expectations of the people who are paid to
project supply and demand," said Wilson. "In fairness to them, it was
difficult
to understand that a server farm could be erected and, in four months' time,
add
as much demand to the grid as another San Jose."

??The theory that the Internet sucked up the power grid and launched an era of
rolling blackouts is staunchly rebuked by academic experts, who say much of
today's demand follows population and economic growth trends. Indeed, as early
as 1988, the California Energy Commission issued forecasts for peak
electricity
demand in 2000 that overshot reality.

??"When people say the high electricity demand is causing the California power
crisis and the Internet is causing the high electricity demand, it's a
multi-part false statement," said Jonathan Koomey, a staff scientist and group
leader at Lawrence Berkeley Laboratory.

??"It sounds plausible. People believe it when you tell them, but actually
it's
one of these cases of urban legend becoming conventional wisdom."

??As for the utilities, Wilson said he regrets the price caps that helped
drive
PG&E to bankruptcy but "not nearly so much as the people who were pushing for
it."

??At the time, retail price caps seemed fairly innocuous and made for a shrewd
political move that helped win the legislation a unanimous vote.

??But Wilson, who harbored presidential hopes at the time, says he agreed to
the caps largely because the utilities begged for them as a mechanism to help
them recoup their earlier investments.

??The utilities "didn't just acquiesce. They embraced it, they lobbied for it,
lobbied everyone. I mean, I remember when my chief of staff ... came to me and
said, 'You're not going to like this, but I think maybe (a rate cap) is a
necessary part of the deal," said Wilson. "That's the irony. They wound up
getting stung by the provision."

??PG&E officials paint a different picture, saying the price caps were a
compromise solution.

??To be sure, credit for the energy debacle covers vast territory, from Davis
to Wilson to environmentalists to the utilities to Bush and around again.

??Wilson, who said he harbors no further ambitions for elected office, chose
at
first not to enter the fray, saying, "When you leave office you ought to
permit
your successor a decent interval and not constantly be a kvetch."

??But that was before Davis and PUC president Loretta Lynch homed in on the
past, he said.

??"After the PUC voted to increase the rate, Ms. Lynch came down and did the
talk show circuit here and said, 'Wilson did it, Wilson did it, Wilson did it.
It's all de-reg, it's all de-reg.' Just like a parrot," said the former
governor.

??"I don't suffer in silence."

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

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

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

JOURNAL-CODE: CC

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

???????????????????????????April 17, 2001, Tuesday

SECTION: State and regional

LENGTH: 1118 words

HEADLINE: Suggestion is floated that Edison follow PG&E into bankruptcy

BYLINE: Dean Calbreath

BODY:

??Ten days after Pacific Gas and Electric declared bankruptcy, some key
legislators and corporate chieftains are toying with the notion that the
state's
next-largest utility, Southern California Edison, should follow its example.

??In Sacramento, some lawmakers have suggested that bankruptcy might be
preferable to Gov. Gray Davis' plan to buy power transmission lines from the
state's heavily indebted utilities. Any move toward bankruptcy would make it
tougher for Davis to push his plan through the Legislature.

??Meanwhile, state officials learned yesterday of a new problem affecting
another aspect of the intricate plan to resolve the energy mess.

??Late Friday, PG&E followed through on its threat to challenge a Public
Utilities Commission action that gives the state money from utility customers'
bills. The state needs the money to repay a proposed bond for power purchases.

??PG&E wants a larger share of the monthly ratepayer revenue. The state cannot
obtain a $4.1 billion short-term bridge loan or issue the main $12.4 billion
bond until the legal challenge is removed.

??As the state struggled with that new wrinkle, some of the state's biggest
energy suppliers are saying bankruptcy court might be a useful vehicle for
collecting their bills.

??Gary Ackerman, executive director of the Western Power Trading Forum, an
industry group, said electricity suppliers increasingly see bankruptcy in a
positive light.

??''It's a chaotic situation, and what bankruptcy does is bring order to the
process,'' Ackerman said.

??Electricity generators once raised dire warnings against letting the
utilities fall into bankruptcy.

??In a report to investors last week, Bank of America bond analyst Faith Klaus
warned that Edison's creditors may force the utility into involuntary
bankruptcy
to collect their debts.

??Already, Edison faces at least 10 lawsuits from small energy generators who
have been waiting to be paid for several months. And it faces a May 16
deadline
to repay borrowings from an $818 million credit line.

??Even if the Legislature approves Davis' transmission-line buyout, it will be
autumn before Edison receives any money from the deal, raising the possibility
that some of its creditors may try to force it into bankruptcy in the interim.

??The governor's office is trying to ward off the bankruptcy talk. Over the
next several days, Davis will meet with legislators to lobby for his package.

??''He's going to try to convince them that it's not in the state's best
interests to let another utility fall into bankruptcy,'' said his spokesman,
Steve Maviglio.

??But Davis might find that a hard sell, even in his own party.

??''Bankruptcy should have always been one of the options with the
utilities,''
said state Sen. Dede Alpert, D-Coronado. ''The fact that the governor kept
talking about the need to keep the utilities out of bankruptcy sent a message
to
the generators that they could keep charging as much money as they wanted. I'm
not sure it was very smart on our part.''

??PG&E and Edison began warning they might fall into bankruptcy last December,
after they incurred billions of dollars in debt paying sky-high prices for
electricity. Because San Diego Gas and Electric was allowed to pass more of
those debts on to customers, it is not now in danger of bankruptcy.

??To keep the utilities solvent, Davis crafted a plan to buy their
transmission
lines for 2.3 times their book value. Nevertheless, PG&E filed for Chapter 11
bankruptcy protection last week, declaring $9 billion in debt.

??Despite PG&E's bankruptcy, Davis went ahead with an offer of $2.76 billion
for Edison's transmission system. Under the terms of the deal, Davis has until
Aug. 15 to push it through the Legislature.

??''The utilities are getting a sweetheart deal while the state is assuming
the
liabilities of a dilapidated transmission system,'' said state Sen. Bill
Morrow,
a Republican from Carlsbad.

??Assemblywoman Christine Kehoe, a San Diego Democrat, said that throughout
the
past few months, members of the Legislature have been talking about the
possibility of bankruptcy at the utilities.

??Kehoe said she is willing to hear the governor's pitch about his proposal to
buy the transmission lines. But she added that some elements of the plan make
her ''very skeptical.''

??Edison spokesmen did not respond to queries yesterday.

??But in a conference call with Wall Street analysts last Friday, Edison
lobbyist Bob Foster conceded that it would be an uphill battle for Davis to
push
his deal through the Legislature.

??''The initial indications are that consumer groups are going to oppose the
agreement,'' he said, adding that Edison would have to ''martial our forces
and
build up some coalitions'' to help push the plan through the Legislature.

??On the bond matter, State Treasurer Phil Angelides said yesterday he
believes
the PG&E challenge can be resolved either through a PUC process or by
allocating
the revenue through legislation.

??A decision by PG&E to abruptly file for bankruptcy earlier this month had
already raised the question of whether a federal bankruptcy judge's control
over
ratepayer revenue could delay or even block the bond.

??''We are meeting with both the lenders and the credit-rating agencies this
week,'' said Angelides.

??One problem is that the legislation in January that authorized the state to
begin buying power for customers of the utilities requires that the bonds be
investment grade.

??It's not clear whether the credit-rating agencies Standard & Poor's, Moody's
and Fitch will give the proposed bond an investment-grade rating, given the
unknown risks posed by bankruptcy.

??''I don't think we want to be in the junk-bond business,'' Angelides said.

??The state expects to have spent $4.7 billion buying power by the end of the
week. If the general fund is not repaid by the bond, the state would have to
consider borrowing by other means or cutting funds for other programs.

??Even if the bond is issued, some consumer groups are predicting that the
state budget could still be seriously undermined when power demand and prices
increase this summer.

??The state was forced to begin buying power in mid-January after PG&E and
Edison, whose rates were frozen under deregulation as wholesale power costs
soared, ran up a combined debt they said reached $13 billion.

??Davis plans to resume negotiations today for the state purchase of the San
Diego Gas and Electric transmission system, said Maviglio.

??The governor hopes to reach an agreement with SDG&E within a week and then
ask a federal bankruptcy judge to approve the sale of the PG&E transmission
system to the state.

Staff writer Craig D. Rose contributed to this report.

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

???????????????????????????April 17, 2001, Tuesday

SECTION: State and regional

LENGTH: 1142 words

HEADLINE: Activist pans FERC refund order; figure is called too low

BYLINE: Craig D. Rose

DATELINE: SAN DIEGO

BODY:

??Federal regulators say California may have been overcharged for electricity
purchases in March by $587,000, a sum criticized as ''insultingly low'' by a
local consumer leader.

??Mandated by law to ensure wholesale prices are ''just and reasonable,'' the
Federal Energy Regulatory Commission issued its March refund order late
yesterday after setting $300 per megawatt hour as a cutoff for unlawful
prices.

??The threshold translates to a retail price of 30 cents per kilowatt hour, or
nearly five times the current rate paid by SDG&E customers.

??Attempts to reach FERC officials for comment were unsuccessful.

??Michael Shames, executive director of the Utility Consumers' Action Network,
said the March order continues a ''hard line'' by FERC toward helping
California
deal with sky-high electricity prices.

??''This is not a legitimate or reasonable effort toward righting a wrong,''
Shames said.

??''Why bother issuing a refund order for $587,000? They spent more than that
issuing the order.''

??FERC's March order targets Dynegy for a potential refund of $470,000; Mirant
for $93,000; and Williams Energy Services Corp. for a potential refund of
$26,000.

??FERC's March order follows similar reviews for January and February that
resulted in potential refunds of $124 million. For all months, electricity
generators have the opportunity to justify their prices and avoid the
potential
refund.

??FERC's overcharge estimates for earlier months fall short of estimates from
other sources, including the California Independent System Operator, which
manages most of the power grid.

??The ISO, which estimates California was overcharged by more than $6 billion
for a recent 10-month period, said yesterday it had not calculated overcharges
for March. But a spokeswoman noted the ISO believes federal regulators are
using
too narrow a methodology for assessing potential overcharges and setting too
high a price threshold.

??An electricity suppliers' association representative, on the other hand,
said
federal regulators are doing a commendable job.

??''FERC is doing its level best to demonstrate its concern about possible
market manipulation in the West,'' said Gary Ackerman, executive director of
the
Western Power Trading Forum.

??''I'm surprised the refund order is so low, but I'm pleased.''

??In other developments yesterday:

???A state judge postponed action until June on CalEnergy Operating Corp.'s
request for $120 million from Southern California Edison. Based in Brawley,
CalEnergy generates power from geothermal facilities. The company has gone
unpaid for the power it formerly provided Edison under contract.

???Gov. Gray Davis named S. David Freeman to lead implementation of a spate of
recently passed conservation programs. Freeman, who will resign his post as
general manager of Los Angeles Department of Water and Power, has led the
state
effort to negotiate long-term contracts with electricity suppliers. He will
carry the title of chief energy adviser to governor.

??Davis says conservation will be critical to averting blackouts in California
this summer.

??He released California Energy Commission figures that indicate Californians
cut their electricity usage by 9.2 percent in March. Davis said that is more
conservation than occurred in January or February. He has said the state needs
to reduce power consumption by at least 10 percent this summer.

??WAGNER-CNS-SD-04-16-01 2233PST

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

????????????????????April 17, 2001, Tuesday, Home Edition

SECTION: Metro; Part B; Page 8; Letters Desk

LENGTH: 336 words

HEADLINE: POWER CRISIS: WHO WILL PAY?

BODY:

??* Re "Experts Doubtful About Rush to Build Small Power Plants," April 15: We
don't need 5,000 more megawatts this summer, we need to use 5,000 less. San
Diego allowed rate increases last summer and cut usage by 16%. The rest of the
state will begin to conserve when utility bills send the message to use less
energy.

??Whether we like it or not, Californians unwittingly made the decision to
accept higher prices rather than build power plants. We made this bargain and
now we have to pay for it.

??TOM ECKER

??Los Angeles

??*

??Re "Davis Says All Power Costs to Be Recovered," April 14:

??Were your editors and reporters asleep when Gov. Gray Davis was telling them
that it will be the ratepayers and not taxpayers who will shoulder the cost of
the state's energy crisis? Except for customers of municipal electric
companies,
call them ratepayers or taxpayers, they are the same people.

??Using the governor's logic, I'm sure he will soon be telling car owners not
to be concerned that gasoline now costs more than $ 1.75 a gallon. It will
only
be car drivers who will have to pay the higher fuel cost.

??WALTER BAILEY

??Encino

??*

??If the Federal Energy Regulatory Commission refuses to rein in the predatory
suppliers and wholesalers of electricity ("Price Caps Excluded in FERC Plan,"
April 12), could somebody please explain to me what this commission pretends
to
"regulate"? Maybe, to cut the federal budget, President Bush should just
abolish
the commission, which clearly refuses to do its job.

??ALLAN E. IRISH

??Glendora

??*

??Re "Energy Cost Study Critical of Public Agencies Too," April 11:

??I find it most interesting that Los Angeles' own DWP has been "overcharging"
the California investor-owned utilities during times of electricity shortage
and
that a major portion of the DWP's power comes from a nuclear power plant in
Arizona. Forget about those greedy Texans. Let's talk about hypocrisy; the
greed
starts with public-owned utilities in this state.

??STEPHEN HASELTON

??Hesperia

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

????????????????????April 17, 2001, Tuesday, Home Edition

SECTION: Part A; Part 1; Page 17; Metro Desk

LENGTH: 423 words

HEADLINE: THE CALIFORNIA ENERGY CRISIS;

JUDGE FAVORS SMALL PRODUCER IN BOUT WITH EDISON

BYLINE: TONY PERRY, TIMES STAFF WRITER

DATELINE: EL CENTRO

BODY:

??An Imperial County judge said Monday he is leaning toward a decision
ordering
Southern California Edison to pay $ 33 million to a geothermal power producer,
but will allow Edison lawyers a final opportunity to talk him out of it.

??CalEnergy asserts it is owed the money for electricity it sold Edison from
eight geothermal plants near the Salton Sea.

??Cash-strapped Edison last year stopped payment to a variety of small
producers, who now say they are owed $ 1.8 billion by Edison and Pacific Gas &
Electric.

??If Superior Court Judge Donal Donnelly is unconvinced by Edison's arguments
at a June hearing and follows through with an order favoring CalEnergy, it
will
represent the first victory for a small producer against the giant utility.

??CalEnergy alleges that it is owed more than $ 120 million for energy it
provided from November, when Edison stopped making monthly payments, until
late
March, when Donnelly allowed CalEnergy to sever its contract with Edison and
sell energy to the highest bidder.

??The $ 33 million represents payments for November and December. The
remainder
of the $ 120 million involves months earlier this year for which Edison plans
to
dispute the billing rate.

??CalEnergy and other small producers have complained that the tentative deal
struck between Edison and Gov. Gray Davis does not address the back payments
owed them by Edison.

??Edison on Monday failed to persuade Donnelly to order CalEnergy to resume
selling power to Edison now that Edison is willing to pay for new energy
received.

??CalEnergy said it does not want to resume selling to Edison until the
utility
pays for energy already received. CalEnergy has instead been selling to its
business partner, El Paso Merchant Energy Co.

??Edison lawyers said El Paso Merchant has manipulated the market to drive up
natural gas prices. For that reason, they said, Edison should be allowed to
argue that CalEnergy has acted improperly and should not be able to collect
the
$ 33 million.

??Donnelly, who had been on the verge of a tentative ruling for CalEnergy,
agreed that Edison should be able to make such an argument, setting a hearing
for June.

??It remains to be seen whether the final arbiter will be Donnelly, the Public
Utilities Commission or a Los Angeles judge selected to deal with a dozen
similar suits against Edison. The PUC is set to discuss the issue of small
producers this week.

??"Things keep happening," said James Polish, lawyer for Edison. "Things could
dramatically change this week or the following week."

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

????????????????????April 17, 2001, Tuesday, Home Edition

SECTION: Part A; Part 1; Page 3; Metro Desk

LENGTH: 1099 words

HEADLINE: CALIFORNIA AND THE WEST;

THE CALIFORNIA ENERGY CRISIS;

DEAL TO BUY EDISON GRID RAISES DOUBTS IN CAPITOL

BYLINE: MIGUEL BUSTILLO and CARL INGRAM, TIMES STAFF WRITERS

DATELINE: SACRAMENTO

BODY:

??Gov. Gray Davis may face a bigger challenge selling legislators on his deal
to keep Southern California Edison out of bankruptcy than he did in forging
the
agreement with the utility.

??Legislators returning to Sacramento on Monday after their spring break
openly
voiced objections to and concerns about the deal to purchase Edison's power
lines in exchange for $ 2.76 billion and a variety of state guarantees.

??Some Republicans and Democrats called Davis' deal too generous. Others
questioned whether a state-financed rescue of Edison still makes sense after
the
bankruptcy of Pacific Gas & Electric Co., California's largest private
utility.

??If the Edison deal came to a vote right now, several legislators said, it
would almost certainly fail.

??"I think the governor understands that," said Assemblyman Tony Cardenas
(D-Sylmar). "There are lots and lots of questions. With the PG&E bankruptcy,
the
world changes. We have to reconsider how this deal fits into the new world we
are living in."

??Davis is meeting this week with Senate Republicans and Democrats in both
houses.

??Republicans strongly oppose the Edison deal and say it will be dead on
arrival when it finally reaches the Legislature, which could still be days
away.

??"It's a bailout," said Assemblyman Tony Strickland (R-Moorpark). "Why would
the people of California want to own this thing? That's money that could be
better used on schools, health care and tax cuts."

??Other legislators are somewhat less pessimistic, noting that a governor can
wield great negotiating clout with legislators.

??"I haven't talked to anybody who is for it," said Sen. Don Perata
(D-Alameda), who has become a vocal critic of Davis' approach to the energy
crisis. "I'm not saying he can't sell it; I'm saying he has to sell it."

??Yet amid increased grumbling from legislators concerned about their
political
futures, and threats of a ballot initiative by angry consumer groups to
re-regulate electricity, even a full-court press by Davis may not be enough.

??State Senate leader John Burton (D-San Francisco) said the Edison deal will
probably be a "take it or leave it" arrangement in the Legislature that leaves
legislators little room to make changes without affecting the pact Davis
reached
with the firm. Burton said Monday that the legislation will not be introduced
until it passes muster from Edison's attorneys.

??"I've got some questions--serious questions," Burton said.

??Among his concerns is a guarantee that Edison be allowed to generate an
11.6%
return on equity until 2010--a concession that takes that decision out of the
hands of the California Public Utilities Commission, which usually adjusts the
rate.

??"What is the impact of limiting the role of the PUC?" Burton said.

??Legislators, eager to avoid controversy, promise that, after the deal
becomes
a bill in the Legislature, it will get a thorough vetting that could last
weeks.
In that airing out process, some now say it could be picked to death.

??Perhaps the biggest question they have about the Edison deal is whether it
would still accomplish what it was intended to do: buy out, not bail out, the
nearly bankrupt utility.

??Davis' plan originally called for California to purchase the transmission
grid owned by the state's big private utilities in exchange for helping the
debt-strapped companies survive.

??Legislators saw state ownership of the power grid as a way to gain at least
some control over a runaway electricity market by obtaining leverage over the
suppliers that sell electricity to California. Burton, an early proponent of
the
concept, called it getting a hot dog for your dollar, which quickly became a
political sound bite.

??PG&E's bankruptcy filing has complicated that scenario, and may make it
impossible for the state to acquire its part of the system. This has raised
questions among legislators about whether the Edison deal alone--what
Assemblyman Bill Leonard (R-San Bernardino) called "not even half a hot
dog"--has any merit.

??"The real question here is whether it makes any sense for the ratepayers to
buy one-third of the transmission system," said Sen. Debra Bowen (D-Marina del
Rey). "Normally, if you buy one-third of a bridge, you get very wet. We feel
that the ratepayers are already getting soaked."

??Another question being pondered by legislators is whether they need to keep
Edison out of bankruptcy. Much of the focus in Sacramento has been on keeping
the utilities from going to bankruptcy court, an outcome many legislators
believed would have catastrophic consequences for California.

??But after PG&E's decision to file for bankruptcy rather than continue
negotiating with Davis on a state rescue--a move that embarrassed the
governor--a growing group of legislators is rethinking that position. Some now
believe a federal court may be a better place for Edison to sort out its
problems.

??"Regardless of who blinked first, the governor or PG&E, the fact of the
matter is he let them go bankrupt," Perata said. "All these dire things that
were initially predicted have not occurred."

??Power Points

??Background

??The state Legislature approved electricity deregulation with a unanimous
vote
in 1996. The move was expected to lower power bills in California by opening
up
the energy market to competition. Relatively few companies, however, entered
that market to sell electricity, giving each that did considerable influence
over the price. Meanwhile, demand has increased in recent years while no major
power plants have been built. These factors combined last year to push up the
wholesale cost of electricity. But the state's biggest utilities--Pacific Gas
&
Electric and Southern California Edison--are barred from increasing consumer
rates. So the utilities have accumulated billions of dollars in debt and,
despite help from the state, have struggled to buy enough electricity.

??*

??Daily Developments

??* The governor's new chief energy advisor and perhaps the head of the
state's
new power authority will be S. David Freeman, manager of the Los Angeles DWP.

??* The Federal Energy Regulatory Commission has begun deciding whether to
revoke energy producers' right to sell to California at any price.

??* State legislators returning from spring break voiced objections to the
governor's deal to buy Edison's power lines for $ 2.76 billion.

??*

??Verbatim

??"If we are going to be in the business of building power plants and selling
energy, he's the man."

??-- State Senate President Pro Tem John Burton

??on S. David Freeman

??Complete package and updates at www.latimes.com/power

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

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

????????????????????April 17, 2001, Tuesday, Home Edition

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

LENGTH: 1182 words

HEADLINE: DWP CHIEF TO WORK FOR DAVIS; POST AS ENERGY CZAR LIKELY

BYLINE: TINA DAUNT and RONE TEMPEST, TIMES STAFF WRITERS

BODY:

??S. David Freeman, the wily 75-year-old general manager of the Los Angeles
Department of Water and Power, will resign soon to become Gov. Gray Davis'
chief
energy advisor and is widely believed to be a leading candidate to head a new
California power authority.

??Freeman, who has been credited with making the Los Angeles municipal utility
an island of electrical stability in a statewide sea of crisis, will become
the
governor's "chief energy czar for conservation," Davis spokesman Steve
Maviglio
said Monday.

??Maviglio refused to confirm that Freeman would head the yet-to-be-formed
power authority. He said that Davis did not rule out such a move, but that an
announcement would be premature because the Legislature has yet to pass the
bill
that would put the authority in business. Los Angeles Mayor Richard Riordan,
however, said Monday night that Davis has told him that Freeman would be
appointed to the power authority job once the agency is created.

??Regardless of his specific job title, Freeman is expected to be in position
to significantly shape the state's energy policy as Davis struggles to keep
prices under control and prevent widespread blackouts this summer.

??A power authority has been proposed as the vehicle by which the state could
purchase the electrical transmission grid now owned by California's private
utilities. The agency also could have broad power over conservation programs,
construction of new power plants and rehabilitation of current power
facilities.

??Freeman would bring unparalleled experience to a state energy post. In a
long
and storied career, the wisecracking Tennessee native has run three of the
largest public power authorities in the United States--the Tennessee Valley
Authority, the New York Power Authority and the Lower Colorado River Authority
in Texas. He also served as energy advisor to President Jimmy Carter.

??Earlier this year, Freeman worked for Davis as California's chief energy
negotiator, hashing out the prices and terms of long-term electricity
contracts
for the state.

??"I don't think you could find a better qualified guy than David Freeman,"
said state Senate President Pro Tem John Burton (D-San Francisco). "There
aren't
a . . . lot of guys around who have done half of what he has done.

??"If we are going to be in the business of building power plants and selling
energy, he's the man," Burton said.

??Although many Republican lawmakers oppose the creation of a public power
authority, few have any criticism of Freeman.

??"Dave Freeman is a smart person who has forgotten more about energy than
most
people have ever learned," said Senate Minority Leader Jim Brulte
(R-Cucamonga).
"If you are going to create a public power authority, someone like Freeman is
the type of guy you want running it."

??In a brief interview Monday evening, Freeman said he expects to start his
new
job by May 1.

??"I'm going to have a role in getting people to understand that we have to
conserve energy this summer," Freeman said. "Conservation has been my life's
work."

??Freeman declined to comment on the power authority, but said he wasn't
surprised that Davis offered him the conservation job.

??"I spent four or five weeks on power purchasing and long-term contracts," he
said. "We worked real well together. . . . We are going into a crisis this
summer, and frankly I think everyone understands that the L.A. DWP is in great
shape now. They don't need me."

??The idea that Freeman might head a California power authority has been
discussed for months--he was one of the original proponents of such an agency.
But the speculation moved into the open Monday when Los Angeles City
Councilwoman Ruth Galanter sent a letter to her council colleagues saying
Freeman was quitting the DWP to head the state authority.

??"Gov. Davis will make a public announcement to this effect either today or
tomorrow," wrote Galanter, who heads the council's Energy and Natural
Resources
Committee.

??Davis, apparently caught off guard, responded with a statement naming
Freeman
to oversee the state's newly expanded, $ 850-million electricity conservation
program. Freeman has been a strong proponent of conservation during his 3 1/2
years at the DWP, and earlier as head of the Sacramento Municipal Utility
District.

??Davis has touted energy conservation and the creation of a state power
authority as two major planks in his program to address the power emergency.
Soaring wholesale prices for electricity have beached California's two largest
private utilities, Pacific Gas & Electric and Southern California Edison,
which
have been unable to make enough money to pay their bills. PG&E recently filed
for protection in federal Bankruptcy Court, and Edison has been kept running
only through massive infusions of state cash.

??Under a bill working its way through the Legislature, a state power
authority
would have the responsibility of issuing revenue bonds for as much as $ 5
billion for the purchase of the statewide electrical transmission grid and
other
assets from Edison, PG&E and San Diego Gas & Electric. The bonds would be
repaid
with transmission charges on utility bills.

??Edison has reached a $ 2.7-billion agreement to sell its transmission assets
to the state. San Diego Gas & Electric is still negotiating with the state,
but
talks with PG&E broke down after that utility, the state's largest, filed for
Chapter 11 bankruptcy reorganization.

??In addition to owning the grid, the proposed authority would have the power
of eminent domain under certain conditions, allowing it to seize land and
existing power facilities. In the current bill there is no estimate of the
amount of funding needed to create the authority and pay its staff.

??Davis said last week that the authority would build and operate new power
plants only if private companies fail to build enough to give the state a 15%
cushion on top of its basic electricity needs. That could happen, Davis said,
since private companies have no incentive to create enough of a surplus to
dramatically lower prices.

??The governor joked that his "fallback plan, if all else fails, is to have
the
Department of Water and Power annex the rest of the state, and we'll all be
served by the Department of Water and Power, and we'll have low rates, and I
won't worry about it."

??As head of the DWP, Freeman underwent no small amount of criticism for
building up power supplies that critics believed were unnecessary--at least
until the rest of the state was plunged into an electricity supply crisis.

??Since the crisis began, he has luxuriated in the adulation of many political
leaders and ordinary ratepayers, who see the DWP manager--with his trademark
white cowboy hat, arching eyebrows and Tennessee twang--as an energy seer.

??But as reaction poured in to his pending resignation, it was obvious Monday
that he still has enemies.

??"The sooner the better," said Councilman Nate Holden, who has strongly
criticized Freeman for, among other things, trying to sell a city-owned,
coal-burning power plant in the Mojave Desert. "He should leave right away."

GRAPHIC: PHOTO: S. David Freeman PHOTOGRAPHER: Los Angeles Times

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

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

????????????????????April 17, 2001, Tuesday, Home Edition

SECTION: Business; Part C; Page 2; Financial Desk

LENGTH: 316 words

HEADLINE: CALIFORNIA;

RELIANT SEES PROFIT DOUBLE IN 1ST QUARTER

BYLINE: From Bloomberg News

BODY:

??Reliant Energy Inc., the owner of Houston's utility and a power supplier in
California and other states, said Monday that first-quarter earnings more than
doubled on higher profit from energy-trading and natural-gas businesses.

??Profit from operations rose to $ 273.5 million, or 94 cents a share, from $
133.7 million, or 47 cents, a year earlier, Reliant spokeswoman Sandy Fruhman
said. ?Revenue more than tripled to $ 13.3 billion.

??Soaring power prices pushed California's largest utility, PG&E Corp.'s
Pacific Gas & Electric unit, into Bankruptcy Court and may cost the state as
much as $ 70 billion in electricity-buying costs this year, lawmakers
estimate.
Most of that money went to power sellers such as Reliant's trading unit, which
had a first-quarter operating profit of $ 216 million compared with a $ 22
million loss a year earlier.

??"It's driven principally by the way-over-average pricing environment in
California," Jefferies & Co. analyst Paul Fremont said.

??Reliant shares rose $ 1.46 to close at $ 47 on the New York Stock Exchange.

??Houston-based Reliant said last year that it would sell 20% of its
non-utility businesses, including wholesale power sales and energy trading, to
the public by early this year and spin off the rest to shareholders. The $
1.46-billion initial stock sale will take place early next month, Chief
Executive Steve Letbetter said Monday.

??Rival power sellers Enron Corp. and Dynegy Inc. are expected to follow
Reliant later this week in reporting higher earnings.

??Power prices along the California-Oregon border averaged more than $ 288 a
megawatt hour in the quarter, more than nine times the year-earlier average.

??The high prices put generators at risk of not collecting payment from
utilities. Reliant set aside $ 38 million before taxes in the first quarter in
case it can't collect money owed for California power sales.

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??????????????????Copyright 2001 The New York Times Company

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

????????????????April 17, 2001, Tuesday, Late Edition - Final

SECTION: Section C; Page 15; Column 1; Business/Financial Desk

LENGTH: 659 words

HEADLINE: PG&E Has a Loss; Reliant's Earnings Soar

BYLINE: ?By Bloomberg News

BODY:

??The PG&E Corporation said yesterday that it had a fourth-quarter loss of
$4.12 billion because of a charge at its Pacific Gas and Electric unit,
California's largest utility, which filed for bankruptcy protection this
month.

??But a company that supplies power in California and other states, Reliant
Energy Inc., which owns Houston's utility, said that its first-quarter
earnings
more than doubled on gains from its energy-trading and natural gas units.

???At PG&E, the company's loss was $11.34 a share, compared with a loss of
$611
million, or $1.67 a share, in the period a year earlier. Sales rose 69
percent,
to $8.08 billion from $4.80 billion in the quarter ended Dec. 31.

??California's biggest utilities, Pacific Gas and Electric and Southern
California Edison, a unit of Edison International, have debts of more than $14
billion from buying power at higher prices than they could pass on to
customers.

??The state has been buying power for the two utilities since January. Some
generators have said that they want more assurances the state will pay them
and
that it will help them collect past debts from the utilities.

??The Pacific Gas and Electric Company filed for Chapter 11 bankruptcy
protection on April 6, saying it could not agree with Gov. Gray Davis of
California on a plan to repay $9 billion in losses from buying wholesale power
at a higher price than it could recover from its customers. The company said
it
took a fourth-quarter charge of $4.1 billion.

??Excluding the charge, Pacific Gas & Electric's profit would have been $114
million, a 57 percent drop from $265 million in the period a year earlier.
PG&E's National Energy Group, which generates and trades electricity, had
earnings of $32 million, up 10 percent from $29 million in the quarter a year
earlier.

??Shares of PG&E closed at $8.84, up 19 cents, before it posted its results.

??PG&E delayed reporting fourth-quarter earnings after an accounting-rule
change by the California Public Utilities Commission. The commission ordered
PG&E and Edison International to offset losses from buying power with profit
from power-plant sales and revenue from remaining plants. PG&E's earnings had
been scheduled for release by April 2.

??Reliant Energy said profit from operations rose to $273.5 million, or 94
cents a share, compared with $133.7 million, or 47 cents a share, in the
quarter
a year earlier. Analysts had expected earnings of 70 cents a share, according
to
Thomson Financial/First Call.

??Revenue more than tripled, to $13.3 billion from $4.2 billion.

??Shares of Reliant rose $1.46, to $47.

??Reliant took a charge of $7.3 million, or 3 cents a share, for discontinued
operations in Latin America and a charge of $65.4 million, or 22 cents,
related
to employee benefits. It had a gain of $61.7 million, or 21 cents, for an
accounting change. Net income was $262.5 million, or 90 cents a share. In the
period a year earlier, a $663,000 charge for discontinued Latin American
operations made net income $133.1 million, or 47 cents a share.

??Reliant said last year that it would sell 20 percent of its nonutility
businesses, including wholesale power sales and energy trading, to the public
by
early this year and spin off the rest to shareholders. The $1.46 billion
initial
stock sale will occur early next month, R. Steve Letbetter, the company's
chief
executive, said.

??Reliant, based in Houston, has about 3,800 megawatts of generation in
California, enough to light 3.8 million homes. It did not break out profit
from
California separately from its earnings from the western United States.

??Soaring power prices, which pushed Pacific Gas and Electric into bankruptcy,
may cost California as much as $70 billion to buy electricity this year,
lawmakers estimate. Most of that money is going to power sellers like
Reliant's
trading unit, which had a first-quarter operating profit of $216 million in
contrast to a $22 million loss a year earlier.

??http://www.nytimes.com

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??????????????????Copyright 2001 The New York Times Company

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

????????????????April 17, 2001, Tuesday, Late Edition - Final

SECTION: Section A; Page 18; Column 6; Editorial Desk

LENGTH: 150 words

HEADLINE: California, Neglected

BODY:

??To the Editor:

??President Bush's refusal to come to California (news article, April 15) may
be the result of good staff intelligence: Many Californians are furious that
Mr.
Bush has refused to call for price caps on wholesale energy.

??When the 40 percent electricity rate increases go into effect in May, Gov.
Gray Davis will take a beating from consumers. But Republicans merely complain
that he should have imposed rate increases earlier and support dismantling the
regulatory process for locating new power plants -- not a position that wins
favor with the state's millions of environmentalists.

???Californians are so disgusted with the bankruptcies, bailouts and blackouts
that they are ready for a party that advocates public power.

MEDEA BENJAMIN
San Francisco, April 15, 2001

The writer was the Green Party candidate for United States senator from
California in 2000.

??http://www.nytimes.com

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??????????????Copyright 2001 Knight Ridder/Tribune Business News
??????????????????????Copyright 2001 San Jose Mercury News

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

???????????????????????????April 17, 2001, Tuesday

KR-ACC-NO: SJ-POWER-COSTS

LENGTH: 1124 words

HEADLINE: California Leaders Gain Support for Power Price Controls

BYLINE: By John Woolfolk

BODY:

??With little hope left of containing runaway power costs this summer,
California's leaders are calling as never before for regional price controls,
sparking the biggest debate over energy market intervention since the 1970s.

??The Bush administration, key federal regulators and most Western states
oppose price caps, arguing controls just make things worse by discouraging
needed conservation and power plant construction.

??But resistance is weakening as pressure grows to staunch a spreading crisis.
Last week, three Western states softened their opposition to price caps and
one
federal regulator offered qualified support.

??"The worm may be turning a little bit," said Sen. Dianne Feinstein,
D-Calif.,
who is co-sponsoring a bill this week with with Republican Sen. Gordon Smith
of
Oregon calling for a temporary Western cost-based price cap. "This situation
has
run amok."

??Wholesale power prices continue to soar as state efforts to contain them
fall
short. California is on pace to spend $ 70 billion on electricity this year --
10 times the cost two years ago, and well above the state's $ 50 billion K-12
education budget. Similar prices are punishing Oregon and Washington, where a
drought has drained hydro-electric power supplies.

??State officials are appealing to Washington because only the federal
government has authority to cap wholesale power prices and to oversee
interstate
electricity trade.

??In recent years, federal regulators have reluctantly capped prices in some
local markets, including California. But never have they applied such controls
as broadly as the entire Western grid, which spans 14 states and parts of
Canada
and Mexico. That alone makes the outcome of such a move hard to predict.

??"All the ramifications would be unknown," said Dennis Eyre, executive
director of the Western Systems Coordinating Council, which oversees the grid.

??Price caps have been controversial since the 1970s, when they were blamed
for
gas shortages and fuel lines that still haunt many on Capitol Hill. While
reasons for those shortages are complex, most economists agree price controls
at
least contributed to the problems.

??"In some cases it was more profitable to sell your oil than to make it into
gas," said Severin Borenstein, director of the University of California Energy
Institute.

??Those crises helped spawn deregulation in the 1980s. Reaganomics swept the
country with a creed that energy markets freed of government controls would
produce lower consumer prices. Debates over lifting controls on oil and
natural
gas raged. But feared runaway costs never materialized when controls lifted.

??As electricity markets began deregulating in the late 1990s, officials
viewed
locally imposed price caps as a necessary crutch to protect consumers during
the
transition.

??Authorities experimented with several price caps in California, but they
failed to tame prices. Because the cap only applied to sales within the
California grid, authorities noted troubling side-effects. Neighboring states,
also plagued by shortages but not subject to the cap, could outbid California.

??With needed power flowing out of the state, California's grid operators
often
were forced to abandon their price limits in last-minute buys to avert
blackouts. With such rules in place, power companies aware that the state
would
pay any price in an emergency could manipulate the market to their advantage.

??Falling price caps seemed to have no bearing on power costs, said Lorenzo
Kristov, market design manager for the California Independent System Operator,
which oversees the state's main power grid.

??The price cap fell last summer from $ 750 a megawatt hour to $ 500 and then
$
250. But the average cost of electricity rose from $ 125 a megawatt hour last
September to $ 161 in November, Kristov said.

??In December, authorities attempted to correct the problem with a new "soft
cap" of first $ 250 and then $ 150. Under the new rule, companies could bid
higher if they showed a need for the price. With demand exceeding supply,
prices
soared, averaging more than $ 300 ever since.

??The ineffectiveness of a California-only cap and the meteoric rise in
Western
prices has fueled cries for a regional limit.

??Joining West Coast leaders in support are California's major utilities,
Pacific Gas & Electric and Southern California Edison, the state power grid
operator.

??But other Western states remain opposed. Siding with power generators, they
argue that price spikes send market "signals" for consumers to cut back demand
and power companies to build more plants.

??A price cap still faces long odds in Washington. President George Bush has
made clear his distaste for such measures, and the head of the Federal Energy
Regulatory Commission, Curt Hebert, is a free-market enthusiast who staunchly
opposes price controls.

??Hebert says a regional price cap would be cumbersome and ineffective because
federal regulators don't have authority over government-run utilities,
including
Los Angeles Department of Water and Power, Bonneville Power Administration and
Canada's BC Hydro. Federal regulators would have authority over only about
half
of power sales into California.

??Even experts are divided on caps.

??Berkeley's Borenstein says that with runaway prices threatening economic
catastrophe in California, a limited regional cost-based price cap is needed.
Designed correctly, it could protect consumers while allowing reasonable but
not
excessive profit, he said.

??"I think we should have a price cap and it has to be done in a careful and
thoughtful way by people who actually understand how markets work," Borenstein
said. "Not by ideologues on one side or the other who think price caps are
always the right thing to do or never the right thing to do."

??Others say California should press for another solution.

??Frank Wolak, a Stanford University economist and market analyst for the grid
operator, says regulators instead should force generators to sell 70 percent
of
their power to the state in cheap, cost-based contracts. Generators then could
sell the rest of their power on the pricey daily spot markets with no limits,
he
said.

??That would protect most of California's supply, while allowing generators to
profit from excessive use, Wolak said.

??A regional price cap, Wolak said, would give power companies little
incentive
to sell to California during shortages.

??"I think it would certainly help us in terms of the cost," Wolak said. "But
if we want to keep the lights on in California, we have to be willing to pay
what it costs."

??-----

??To see more of the San Jose Mercury News, or to subscribe to the newspaper,
go to http://www.sjmercury.com

JOURNAL-CODE: SJ

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

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

????????????????????APRIL 17, 2001, TUESDAY, FINAL EDITION

SECTION: NEWS; Pg. A3

LENGTH: 614 words

HEADLINE: Davis Names New Top Energy Adviser;

Freeman to spearhead major conservation effort

SOURCE: Chronicle Staff Writer

BYLINE: Chuck Squatriglia

BODY:
Gov. Gray Davis yesterday named S. David Freeman, head of the Los Angeles
Department of Water and Power and a longtime force within the energy industry,
his top energy adviser.

???As California's energy czar, Freeman will spearhead the sweeping $850
million conservation effort Davis is banking on to help ease the state's
energy
crisis and avoid summertime blackouts.

???"To kick start the most aggressive energy conservation program in the
nation, I can think of no one better than David Freeman," the governor said
yesterday. "He gets results."

???Freeman, 75, could not be reached for comment. No deadline was given for
his
resignation as general manager of the Los Angeles utility he has led since
1996.

???Described by friends and colleagues as a resourceful and tireless worker,
Freeman has decades of experience in the energy game.

???He has served under four presidents and was among the men Gov. Pete Wilson
turned to as California embarked on its failed deregulation experiment. This
year, he has been a key player on Davis' energy team.

???The governor selected him in January to negotiate long-term electricity
contracts when the state Department of Water Resources began buying juice on
behalf of the state's cash-strapped utilities.

???He will continue to sit at the bargaining table even as he implements the
broad conservation initiatives Davis signed into law last week.

???Freeman seems well-suited to the task. His career has been marked by
steadfast dedication to conservation, and he was among the first in the nation
to heavily promote the idea.

???"Our lives are an exercise in conspicuous consumption," Freeman told The
Chronicle in February. "We produce to throw away. So how can you expect kids
to
be concerned about turning off lights when the waste is so prevalent here."

???Cutting out that waste will be Freeman's top job. He will work with
businesses, municipal governments and the public to launch Davis' "20/20"
program. The program will offer 20 percent rebates on summertime energy bills
to
consumers who cut consumption for three months by 20 percent.

???Freeman will head up implementation of two laws that created more than $500
million in conservation initiatives and incentives. The program will reimburse
homeowners and business owners for money spent on things like energy efficient
appliances, low-wattage lightbulbs and other energy-saving measures.

???Freeman has led the Los Angeles municipal water and power utility since
1996, when he was appointed to the post by Mayor Richard Riordan.

???The agency was $8 billion in debt when Freeman took over; today it is on
such stable financial footing that it has been selling surplus electricity to
the state.

???But the agency has been accused by the Independent System Operator of
over-charging the state for the power. Freeman steadfastly denies the
allegation.

???"We've been selling electricity to the state (at) cost plus 15 percent
basis," Freeman told The Chronicle last month. "I don't say were angels, but
we're being neighborly. We're not giving you a cup of sugar, we're selling it,
but not at exorbitant prices."

???The ISO is reviewing whether to pursue legal recourse against the utility,
but has not said when that review might be completed.

???Freeman's ties to the energy industry date to the Kennedy administration,
when he served on the Federal Power Commission. He continued in that role
under
Presidents Lyndon Johnson and Richard Nixon.

???He was back in Washington a few years later, when President Jimmy Carter
chose him to lead the Tennessee Valley Authority -- the largest public power
agency in the nation.E-mail Chuck Squatriglia at csquatriglia@sfchronicle.com

GRAPHIC: PHOTO, S. David Freeman is head of the Los Angeles Department of
Water
and Power.

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

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

????????????????????APRIL 17, 2001, TUESDAY, FINAL EDITION

SECTION: EDITORIAL; Pg. A18; LETTERS TO THE EDITOR

LENGTH: 1303 words

HEADLINE: U.S. Energy Chief: No Price Caps

BODY:
Editor -- Your recent editorials criticizing the Bush administration on
California and the energy budget are without merit.

???From our first hours in office, the president has worked to keep the lights
on in California. We have responded to virtually every California request to
expedite new generation and transmission and prevent production shutdowns by
extending emergency orders on gas and electricity sales to the state. Gov.
Gray
Davis has expressed his appreciation to both the president and me.

???The Federal Energy Regulatory Commission, now led by a Bush-appointed
chairman, has ordered refunds of more than $100 million of excessive charges
for
wholesale electricity.

???Our opposition to price caps has been claimed by some to suggest the
administration does not care about California and the West or is doing nothing
to address the problem. This is simply untrue. We have opposed price controls
because they would not prevent blackouts and would drive away the new supply
California and the West need.

???In your editorial ("Energy: The Next Steps," April 13) you incorrectly
suggest that in California "shovels are busily heaving cash into a wind that
whips right into Texas." The "shovels" are also "heaving cash" into California
municipal power authorities not subject to FERC's authority.

???Your editorial fails to indicate how price caps would increase supply,
decrease demand or prevent blackouts this year.

???President Bush has appointed a Cabinet-level task force to develop the kind
of long-term energy plan needed to address the crisis. It will focus on
increasing supply as well as on conservation and efficiency. When the task
force
completes its work in the next few weeks, Americans will understand our
challenge and pull together to confront and surmount this crisis.

???SPENCER ABRAHAM

???U.S. Secretary of Energy

???Washington, D.C.

??--------------------------------------------

???A LANGUAGE FOR ALL

???Editor -- Vivek Malhotra of Chinese for Affirmative Action (Letters, April
13) proclaims, "It is beyond time that our public officials recognize that
language rights are civil rights."

???It is beyond time, all right -- it is beyond time that we recognize that
multiculturalism has a dark side.

???English is the language of this nation and of its government services.
There
is no country in this world that you can emigrate to and demand that
government
services be provided in your language.

???We are one nation, indivisible, with liberty, justice and the English
language for all!

???JOHN SOMERVILLE

???Rohnert Park

??--------------------------------------------

???WATERFRONT PROJECTS

???Editor -- Numerous interest groups, advisory committees and citizen
activists look after San Francisco's waterfront. When they are in agreement
they
are very powerful, as evidenced by the demise of the Malrite Co.'s proposed
history museum at Pier 45.

???With regard to the two teams now competing for the development of Piers
27-31, these waterfront interests are lining up behind the Chelsea Piers
recreation project with near-unanimous votes of support by the boards of the
Fisherman's Wharf Association, the North Beach Neighbors and the port's
Northeast Citizens Advisory Committee.

???The competing Mills Corp. project is considered to be poorly designed,
containing vast amounts of unneeded retail space and prohibited office space.
The YMCA part of that plan is window dressing burdened with the task of
raising
$30 million to build its recreation facilities.

???JAMES W. HAAS

???San Francisco

??--------------------------------------------

???IGNORED HEROES

???Editor -- While it's wonderful to see the recognition and heroes' welcome
given for our service men and women at Whidbey Island, I can't help think of
what our Vietnam veterans must feel when they see such displays.

???No one can minimize the trauma that the crew of that plane experienced
after
the collision and emergency landing on Chinese territory. But in many ways it
pales in comparison to the horrors our Vietnam vets endured for so much
longer.
It breaks your heart that similar homecomings were never given for these
heroes.

???PAUL FORREST

???Danville

??--------------------------------------------

???YEE'S FISCAL CLAIM

???Editor -- When Supervisor Leland Yee called for a probe of the San
Francisco
Unified School District's finances -- over which the Board of Supervisors has
no
authority -- he did not mention having spent eight years on the Board of
Education, which is supposed to monitor those very finances.

???In defending himself (Letters, April 14) against the charge of hypocrisy
(Letters, April 7), Yee says, "Because of my efforts, the school district's
fiscal house was in order when I moved to the Board of Supervisors."

???Yee is claiming that five years ago the district had accurate financial
accounts and sound financial policies, and that as soon as he left his former
colleagues messed it all up. When they did so, what did Yee do about it?

???His attention was so given to higher concerns that he didn't bother to warn
the public of the misuse of their money. Or else, no one connected with the
school district thought it was worth telling Yee about the undoing of all his
work.

???It's easier to believe that the schools' accounting system has been a
shambles for years, and Yee and his former colleagues on the school board
never
paid enough attention to notice.

???I am willing to change my opinion if any members of the Board of Education
who served with Yee testify that Yee's departure from the board released them
from his reign of fiscal sobriety and allowed them to go on a real fiscal
toot.

???DAVID BROWNELL

???San Francisco

??--------------------------------------------

???MAYOR'S CHEATERS

???Editor -- Regarding your article, "Come to S.F. for Hot Time, Mayor Urges"
(April 13): It's so refreshing to see that the spirit of the Barbary Coast is
alive and thriving in the gutters of Willie Brown's mind.

???"You can lie and cheat and steal . . . and we don't ask you about those
things. We accept you as you are."

???Exactly how far does this acceptance extend? We know Brown has nothing but
contempt for the people who work to make San Francisco a jewel for the tourist
and convention industries. Obviously, he could care less how rich party-goers
abuse the waitresses, maids, clerks, janitors, cab drivers and others who
can't
afford to live here anymore.

???KAREN S. WOOD

???Santa Rosa

??--------------------------------------------

???WELCOME MAT

???Editor -- It is difficult to imagine what Mayor Willie Brown had in mind
when he invited those who "lie, cheat and steal" from all over the country to
come to San Francisco. We can only hope, when he alluded to the "places and
places we have for you to go," that he had our new county jail in mind.

???We find it difficult to imagine what useful purpose was served by spending
the city's Convention and Visitors Bureau funds on sending the mayor to
Washington to promote criminal activity in what remains of our beautiful city.

???DOUG COMSTOCK

???San Francisco

??--------------------------------------------

???KILLING MCVEIGH

???Editor -- We should thank Attorney General John Ashcroft for allowing the
families of the Oklahoma City bombing victims to watch the execution of
Timothy
McVeigh. This act finally lays bare the true purpose of capital punishment.

???No, the federal government is not going to kill McVeigh to make the country
safer. That could be accomplished by locking him up for the rest of his life.

???And it's not about deterrence. McVeigh will become a martyr and hero to his
bitter, paranoid fellow travelers, some of whom are sure to emulate him.

???No, it's about vengeance. We are going to kill him to make people feel
better.

???That's why Ashcroft had to be certain all the victims' families get to
watch.

???RIK ELSWIT

???San Francisco

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??????????????????????????????22 of 66 DOCUMENTS

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

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

????????????????????APRIL 17, 2001, TUESDAY, FINAL EDITION

SECTION: BUSINESS; Pg. B1

LENGTH: 606 words

HEADLINE: Independent Electricity Producer Posts Big Profits;

Independent Power Firm Doubles Profits

SOURCE: Chronicle Staff Writer

BYLINE: Christian Berthelsen

BODY:
Reliant Energy of Houston, the largest independent electricity generator in
California, posted huge profits yesterday in what may portend another quarter
of
record gains for the power industry.

???The company reported first-quarter earnings of $274 million, a 100 percent
increase over its earnings of $134 million in same period last year, before
California's energy crisis began to spiral out of control. The company's
per-share earnings of 94 cents were about one-third higher than average Wall
Street estimates of 70 cents, according to a survey of analysts by Thomson
Financial/First Call.

???Reliant attributed the growth to a strong performance by its wholesale
energy division, which supplies California and other regions with
electricity.
The wholesale unit produced operating income of $216 million, compared with a
loss of $22 million during the same period last year.

???"What Wall Street is reading into this is that the wholesale market has
just
been so strong now for three consecutive quarters in California," said Carol
Coale, an analyst with Prudential Securities Research in Houston. "The margins
on selling wholesale power in that state have continued to rise."

???The report also raises a troubling possibility for California taxpayers.
Reliant's first-quarter earnings have come at a time when the state government
has replaced the utilities as the buyer for wholesale electricity. Many in the
industry say California is paying far more for power now than the utilities
ever
did. And Reliant's recent earnings suggest that might be the case.

???For example, Reliant reported net income of $73 million during the fourth
quarter last year, compared with $274 million during the first quarter of this
year. Sandy Fruhman, a Reliant spokeswoman was unable to disclose whether the
company's strong profits were due to higher payments from the state of
California. However, she cautioned against making adjacent quarter comparisons
because conditions such as weather and costs of raw material vary.

???California is said to be spending as much as $58 million a day in taxpayer
money to keep the lights on, though it refuses to release details on the
grounds
that such a disclosure would raise prices even more.

???Reliant's earnings also show that California's continuing energy crisis
will
do well for the bottom line of power companies that now have control of
California's energy market. They are scheduled to report earnings throughout
the
remainder of the month. Reliant and Dynegy both have told Wall Street to raise
their first-quarter earnings expectations, and Reliant still exceeded them.

???According to a California Energy Commission power plant survey last year,
Reliant holds 6 percent of California's generating capacity. Of the
independent
energy companies that have bought a presence in the state after its
deregulation
plan that took effect in 1998, Reliant holds the largest stake. Duke Energy,
Southern Energy and Dynegy each hold 5 percent, and Calpine holds about 2
percent.

???The regulated utilities, such as Pacific Gas & Electric Co., still hold the
largest amount of generation, with more than a quarter of the system combined.
But critics say the independent companies have bought up enough plants, and
held
them in few enough hands, to essentially hold California's electricity ransom
for the highest price. The generating companies have consistently rejected
such
accusations.

???Shares of Reliant rose $1.46, or 3.21 percent, to close at $47 in trading
on
the New York Stock Exchange yesterday.E-mail Christian Berthelsen at
cberthelsen@sfchronicle.com.

LOAD-DATE: April 17, 2001

??????????????????????????????23 of 66 DOCUMENTS

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

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

????????????????????April 17, 2001, Tuesday, Final Edition

SECTION: STYLE; Pg. C02; ART BUCHWALD

LENGTH: 433 words

HEADLINE: The Power of One

BYLINE: Art Buchwald

BODY:

??When someone steals $ 14 billion from me, I would like to know who it is.
That's the latest loss attached to the California electricity crisis.

???Everyone blames somebody else -- but I want names. There are, of course,
the
deregulators of California power whose system didn't work; the power suppliers
and brokers; the major companies, Southern California Edison and Pacific Gas
and
Electric Co.; and all the energy retailers throughout the state.

???There is a villain among them, a man so venal and unscrupulous he would
turn
out every light in California before admitting he was a scoundrel and an
embezzler.

???The worst part of it is that everyone in the power business is protecting
him because they fear if they point him out the system will go bankrupt and
the
investors will lose their money.

???For want of a better name I will call him Arthur Shock. At a future date
I'll give you his real name. Shock has made a fortune in the energy market and
has homes in Beverly Hills and Malibu and a 200-foot yacht. He has three
private
jet airplanes and hundreds of power generators in case there's a blackout.

???He supports the USC and UCLA basketball teams and the Stanford and
University of California at Berkeley football teams. He also supplies all the
spotlights for the premieres of motion pictures. He buys all his electricity
wholesale and sells it to the taxpayer at retail, for enormous profit.

???When asked whether he was gouging the customer, Shock said, "That's what
you
do with customers. If they don't pay, who will?"

???Shock was asked why he didn't go bankrupt like everybody else, and he
replied, "It wouldn't do any good. The state doesn't want us to go bankrupt
because it would give the utilities a bad name."

???The reason I want a real name to go with the greedy face is that I feel so
much better knowing who is screwing up with my $ 14 billion. I'm not saying
that
person should get the death penalty, but I'm also not saying he shouldn't. At
least let him confess to what he has done and become insolvent like everyone
else.

???To this day, everyone, including the governor, cannot explain how the
energy
giants got into such a mess. California blames it on the neighboring states
because they won't sell their electricity. The other states won't sell
California any power unless they get paid.

???It's obvious no one is going to solve the problem soon, but I have to know
who is responsible for the mess. What about Marc Rich or Pincus Green? It's no
fun if you don't have a name to go with a crisis -- no fun at all.

??(c)2001 Tribune Media Services

LOAD-DATE: April 17, 2001

??????????????????????????????31 of 66 DOCUMENTS

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

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

???????????????????????April 16, 2001, Monday, BC cycle

SECTION: State and Regional

LENGTH: 442 words

HEADLINE: Natural gas tax could worsen electricity shortage

DATELINE: LOS ANGELES

BODY:

??Plans to increase the capacity of the state's natural gas pipelines are
stumbling over a six-year-old tax that industry leaders and experts say could
worsen California's critical electricity shortage.

??The tax, established by the Public Utilities Commission, requires
electricity
generators to pay an extra fee if they use lines owned by companies other than
Southern California Gas Co., or if they switch from SoCal Gas to a competitor.

??At its birth, the tax was strongly supported by a broad base of activists
and
officials, who hoped the tariff would protect smaller customers of SoCal Gas.
Otherwise, they thought, SoCal Gas would pass on the costs of business lost to
competing pipelines.

??But now the tax is preventing the state from increasing line capacity and
from building desperately needed power plants, according to industry
officials.

??Two companies, Questar and Williams Co., are trying to increase the gas
pipeline capacity, a goal the state has called necessary to solving the power
crisis.

??Questar is working on an upgrade of an old pipe running 700 miles from New
Mexico to Long Beach. Williams hopes to extend its Kern River-Mojave pipeline
farther west, also to Long Beach.

??But both companies say they are having trouble signing up customers because
of the tax.

??Watson Cogeneration Co., for example, told the Los Angeles Times in Monday's
editions that it wants to use Questar's lines but won't act until the tariff
issue is resolved.

??Questar, Williams and other companies have been trying to sway the PUC
against the tax, and last year, the regulators acknowledged that the tariff
might be hindering new electricity generation projects. It also asked SoCal
Gas
to come up with a new pricing system.

??But the issue has since been reassigned to a new administrative law judge
who
says she has no timetable in mind for resolving the issue.

??Meanwhile, SoCal Gas is defending the tariff. Otherwise, the company argues,
power plants would shop around for the best deal, only to turn to SoCal Gas
during emergencies. That, in turn, could interrupt service to paying
customers.

??Pipeline companies reply that they're open to some kind of tariff, but
nothing as large as the current one. They point out that there has not been a
single company willing to pay the price of switching gas lines because the
tariff is so huge.

??SoCal Gas has introduced two new rate structures, but the matter is still
open for debate.

??Administrative law judge Carol Brown told the Times that the issue is a
"daunting project" for her that will not receive priority unless regulators
tell
her to put it high on her list of cases.

LOAD-DATE: April 17, 2001

??????????????????????????????35 of 66 DOCUMENTS

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

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

???????????????????????April 16, 2001, Monday, BC cycle

SECTION: State and Regional

LENGTH: 681 words

HEADLINE: Davis may have trouble selling power plan, senators say

BYLINE: By DON THOMPSON, Associated Press Writer

DATELINE: SACRAMENTO

BODY:

??Gov. Gray Davis may have trouble persuading lawmakers to approve his plan to
purchase Southern California Edison's transmission lines to help shoulder the
utility's debt, legislators said Monday.

??The governor will spend the week lobbying for support for his plan to buy
the
power lines for $2.76 billion. But legislators of both parties are challenging
the agreement he reached with Edison a week ago.

??All three of the state's investor-owned utilities have been facing financial
problems for months because of high wholesale rates they have been unable to
pass on to consumers under the state's 1996 deregulation law.

??Davis spokesman Steve Maviglio said negotiators hope to reach agreement to
buy San Diego Gas and Electric's transmission lines within a week.

??But lawmakers asked if it does the state any good to buy Edison's portion of
the transmission system now that Pacific Gas and Electric has opted to declare
bankruptcy rather than accept Davis' offer for PG&E's share of the power grid.

??"Normally if you buy a third of a bridge you get very wet," said Sen. Debra
Bowen, D-Marina del Rey, who chairs the Senate Energy, Utilities and
Communications Committee. "We feel ratepayers are already getting soaked."

??However, Davis hopes to convince U.S. Bankruptcy Judge Dennis Montali to let
the state buy PG&E's portion of the transmission lines as well once the state
has purchased the lines owned by Edison and SDG&E, Maviglio said. Owning the
lion's share of the power grid would give the state bargaining power with
federal regulators and let the state build more transmission capacity, he
said.

??Senate President Pro Tem John Burton, D-San Francisco, said he has "serious
questions" about the agreement, including how much Edison is truly in debt.

??Senators remain concerned whether ratepayers would get their money's worth
from a deal that requires the utility to provide low-cost power to customers
for
10 years, Burton said after meeting with Davis.

??Burton said it is up to Davis to convince his fellow Democrats to support a
plan that Burton and Maviglio said has little chance of gaining Republican
support. Burton said he won't pressure his members to support the agreement.

??Davis wants the package passed "yesterday," said Maviglio. Burton, however,
said he will hold as many hearings as necessary for members to feel
comfortable
supporting the measure. Burton said there appears to be no need to rush,
because
the agreement does nothing to help the state weather this summer's expected
power shortages.

??The governor plans to meet with Senate Republicans and Assembly Democrats
Tuesday and Senate Democrats Wednesday.

??Davis praised the state's electricity consumers Monday for cutting their
power use by 9.2 percent in March compared to a year ago, which he said shows
his goal of reducing power consumption by at least 10 percent this summer is
within reach.

??The California Energy Commission said businesses and residents reduced their
electricity demand by 2,967 megawatts last month, up from the 8 percent
savings
of 2,578 megawatts in February, and the 2,091 megawatts or 6.2 percent
reduction
in January. One megawatt continuously powers about 1,000 homes.

??"We're hoping that this energy conservation ethic will hold for the summer,
because energy efficiency is going to be very important to avoid rolling
blackouts," said commission spokeswoman Claudia Chandler.

??Also Monday, the Federal Energy Regulatory Commission ordered energy
wholesalers to justify $587,000 in possibly excessive charges for electricity
sold to California's utilities in March.

??The order is the third time the FERC has ordered power wholesalers to
justify
more than $124 million in charges for January and February.

??A Senate committee rejected a bill Monday that supporters said would have
helped avert rolling blackouts this summer by exempting backup generators from
pollution controls during energy shortage alerts. Environmental groups and
pollution control officers said the bill would have increased air pollution
and
health risks.

LOAD-DATE: April 17, 2001