Please see the following articles:

Sac Bee, Fri, 6/8:  As prices fall, state seeks better deals

Sac Bee, Fri, 6/8: Energy rebate may reward ex-gluttons

Sac Bee, Fri, 6/8: PG&E may pay small creditors first, execs say

Sac Bee, Fri, 6/8: Energy Digest: Low-income discounts grow

SD Union, Fri, 6/8: PG&E president defends request for $17.5 million in
bonuses

SD Union, Fri, 6/8: PUC lowers electric bills by 5 percent for low-income
ratepayers

LA Times, Fri, 6/8: THE NATION Emergency-Power Price Cap Is Working, Data
Indicate Energy:
Much-criticized plan cut costs by 64% the first time it was used, source
shows.
Broader downturn also seen

LA Times, Fri, 6/8: THE ENERGY CRISIS Paying for Power a Struggle for Some
Utilities:
Consumers on tight budgets face crises. Requests for aid flood agencies, but
many of those
eligible for discount programs are not signing up

LA Times, Fri, 6/8: Los Angeles THE ENERGY CRISIS Universal May Get Break on
Electricity
Bills Legislature: Senate passes bill to allow the theme park and several
other businesses to
buy DWP's cheaper power

LA Times, Fri, 6/8: California L.A. Businesses to Get 'Real-Time' Electricity
Meters Energy:
Devices are part of larger plan to cut peak summer demand by at least 2,000
megawatts

LA Times, Fri, 6/8: California Sonoran Has Customers Lined Up for Gas
Pipeline

SF Chron, Fri, 6/8: A tax on greed              (Editorial)

SF Chron, Fri, 6/8: Crisis propels obscure federal regulators into limelight

SF Chron, Fri, 6/8: State 'turning a corner' / Davis expresses optimism about
crisis,
seeks blackout protection for refineries

SF Chron, Fri, 6/8: Legislators considered acquisition of PG&E @dk,1,18 Plan
also included
buying Edison firm @t

SF Chron, Fri, 6/8: More poor to pay less for their PG&E bills / PUC votes to
increase low-income discount

SF Chron, Fri, 6/8: Creditors hear PG&E's bonus defense / Executives say
retention is critical
to smoothing bankruptcy process

SF Chron, Fri, 6/8: Investigators request records from L.A. utility brokers

Mercury News, Fri, 6/8: Voltage-reduction project may stave off blackouts

Mercury News, Fri, 6/8: Lieberman hearings spotlight regulators' role, his
ambition

Contra Costa Times, Fri, 6/8: Davis touts conservation success

Contra Costa Times, Fri, 6/8: Martinez investigates power plant possibility

Contra Costa Times, Fri, 6/8: State reviewing 2 proposed Valero power plants

Contra Costa Times, Fri, 6/8: Energy prices drop in California

OC Register, Fri, 6/8: California's energy prices suddenly drop

OC Register, Fri, 6/8: Energy notebook
State on track to spend $20 billion buying electricity

OC Register, Fri, 6/8:  PUC raises rate discount for poor families

OC Register, Fri, 6/8: Taco Bell's taco bill includes energy fee

AP Newswires, Fri, 6/8:  Developments in California 's energy crisis

NY Times, Fri, 6/8: California Gets a Reprieve as Power Prices Fall

NY Times, Fri, 6/8: Senate Democrats to Press Inquiry Into High Energy Prices
 (Ken Lay mentioned)

WSJ, Fri, 6/8: Electricity Prices Fall in California, But Can It Last?

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As prices fall, state seeks better deals
By Dale Kasler and Emily Bazar
Bee Staff Writers
(Published June 8, 2001)

A dramatic decline in wholesale electricity prices left California officials
so confident Thursday that they threatened to back out of some long-term
power contracts unless suppliers agree to lower their prices.
But private experts cautioned that spot-market prices could rebound and said
the state would be taking a huge risk by wriggling out of any long-term
contracts.
The state, which got into the power-buying business in mid-January, has been
signing long-term contracts in order to stabilize prices and supply. On
Thursday state officials said they've essentially tamed the market by signing
38 long-term contracts and by threatening power generators with reprisals for
alleged price gouging.
"These contracts are taking a big chunk out of the market," said Ray Hart,
who oversees power buying for the Department of Water Resources.
By signing the contracts, the state doesn't have to buy as much last-minute
power at notoriously unpredictable prices. This summer the state will have to
make only about half its purchases on the spot market during peak-demand
times, when prices are highest.
While a drop in temperatures, conservation efforts and the return to service
of several major power plants have helped, state officials said the contracts
are driving down spot-market prices.
Spot prices are so low, Hart said the state would scrap 23 long-term
contracts -- deals that have been agreed to in principle but not finalized --
unless suppliers give in to the state's demands for lower prices.
"We will walk away," Hart said.
He said the state will honor the contracts that have been finalized.
Suppliers said they'd resist any attempt to reduce prices long term. "I don't
think that the spot prices we're seeing this week will have much impact on a
four- or five-year deal," said John Stout, senior vice president of Reliant
Energy Inc., a power generator that's in negotiations with the state water
department.
Analysts said the markets are still volatile enough that the state shouldn't
back out of any long-term contracts.
"It would be really foolish for them to bail on any of those contracts," said
Arthur O'Donnell, editor of California Energy Markets.
"It's not like we have a significant cushion (of power) to withstand an
extended heat wave," O'Donnell said. "We don't know what's going to happen."
While the state hasn't released the terms of specific contracts signed so
far, it said they carry an average price of $138 a megawatt-hour through
year's end and $70 over 10 years.
While that's barely half the spot market prices the state was paying for
power the first four months of the year, it's higher than current spot market
prices.
Spot prices Thursday ranged between $50 and $60 a megawatt-hour, the lowest
California has seen in about a year.
The irony is that wholesale prices are dropping just as most Californians are
starting to feel the impact of the energy crisis on their wallets. The
just-approved 37 percent rate hike will show up in bills mailed this month to
Pacific Gas and Electric Co. and Southern California Edison customers, while
Sacramento Muni-cipal Utility District customers were handed a 22 percent
increase last month.
Still, if wholesale prices stay low, it would be undeniably good news to
California. It could ease the strain on a state treasury that has committed
more than $8 billion to buy power on behalf of its troubled electric
utilities. It could also lower the chances of chronic rolling blackouts that
some experts have forecast, although Hart said the threat of blackouts is far
from over.
"If we have a period of five days of 105 degrees in the Valley and high
temperatures in Southern California, it's going to be very difficult to find
enough energy to meet the need," the water department official said.
Nancy McFadden, senior adviser to Gov. Gray Davis, said power generators may
be softening prices in response to recent allegations of price gouging and
market manipulation.
She called the scrutiny of generators a "factor that is difficult to quantify
but is nonetheless there."
Davis has threatened generators with plant seizures, windfall profits taxes
and other measures as a response to spot prices that got as high as $1,900 a
mega-watt-hour last month. Meanwhile, the new Democratic control over the
U.S. Senate could bring a push for price caps on wholesale power.
But Reliant's Stout, whose company was ripped by the governor for charging
$1,900 per megawatt-hour for power from one plant, said the political heat
has had no effect on prices.
"I don't think anybody like Enron or Reliant is too scared," added Patrick
O'Neill, who follows Western power markets for the Portland, Ore., consulting
firm Economic Insight Inc.
O'Neill and other analysts said much of the price drop is due to weather and
other factors beyond the state's control -- factors that could easily turn
against California.
It's too early to tell if the price drop is a lasting trend "or just a
short-term anomaly," Stout said.
O'Donnell noted that futures prices -- an indicator of where traders believe
the market is heading -- are still hovering near $200 a megawatt-hour for
August supplies.
"Let's wait four to six weeks and see where we stand," said Gary Ackerman of
the Western Power Trading Forum, an association of generators and traders.
The great unknown is the weather, which lately has helped California. Hot
weather in May caused prices to shoot up temporarily but melted the snow
earlier than usual in the Pacific Northwest, filling reservoirs and bringing
in surprisingly strong supplies of cheap hydroelectricity, O'Neill said.
Now the weather has cooled off, keeping demand down, O'Neill said.
Yet the early snowmelt, coupled with drought-like conditions, means there
will be less hydro power available later this summer and beyond, he said. And
if the summer turns hotter, prices are likely to move up.
The lack of hydro could raise the price of natural gas, another key source of
electricity generation in California, said analyst David Costello at the U.S.
Department of Energy.
Natural gas prices have come down in the past two months, but that could
change when gas-fired power generators crank up in earnest for the summer.
"When peak demand (for power) comes in, there's going to be a lot of pressure
on gas," Costello said. "The situation in California's so uncertain that no
one should say 'Don't worry about gas prices.' "
One reason California natural gas prices have dipped: A key company has
relaxed its stranglehold on the major pipeline into Southern California, said
Severin Borenstein of the University of California Energy Institute.
El Paso Natural Gas Co. sold almost 40 percent of the pipeline's capacity
last year to an affiliate, El Paso Merchant Energy, prompting state officials
to charge that El Paso could manipulate the market. The contract expired last
week, and the pipeline capacity is now owned by 30 companies.
El Paso, whose behavior is the subject of hearings by the Federal Energy
Regulatory Commission, has denied any wrongdoing.
The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.

Energy rebate may reward ex-gluttons
By Edie Lau
Bee Science Writer
(Published June 8, 2001)

When it comes to saving electricity, the hard truth is that the more
extravagant your past power use, and the more money you're willing to invest
in energy-efficiency, the more likely you can conserve a lot -- and perhaps
be rewarded with a rebate for your efforts.
California's "20/20 Program," which began this month, gives a 20 percent
discount to most power users who use at least 20 percent less electricity
this summer than last summer.
The offer applies to customers of the investor-owned utilities -- Pacific Gas
and Electric Co., Southern California Edison and San Diego Gas & Electric Co.
People served by the Sacramento Municipal Utility District and other public
utilities are not eligible. However, Roseville is funding its own program
modeled after the state's, with one key difference: Customers get a 10
percent discount for cutting their power use by 10 percent.
Roseville chose a more modest goal to enable more people to be successful,
said Bernie Fargen, city utility spokesman.
"We looked at the state's program," he said, "and it appeared to us that
customers were either going to have to make a major investment in some major
energy consumer in their home -- it could be replacing a refrigerator or
replacing their air conditioner -- or they were going to have to reduce
consumption through conservation ... at a level that would cause some major
comfort sacrifice."
Roger Salazar, a spokesman for Gov. Gray Davis, who established the 20/20
program by executive order, said the governor hopes all Californians will cut
back at least 10 percent. The rebate, he said, is meant for those who "go
above and beyond the call of duty."
More to the point, the issue is not moral, but practical. "The people who
have been conserving all along are the true heroes in this situation,"
Salazar said. "We're in a tough situation here; unfortunately, we have to go
where the megawatts are. It's a sad truth that most of the megawatts we can
save ... are going to come from those who've been energy guzzlers."
Chris and Shannon Devine of Chico are among those who historically have used
little electricity. They turn off all unnecessary lights in their two-bedroom
apartment, and set the thermostat at 82 in summer.
Now, Chris Devine said, it feels like they're being penalized. "To think
about conserving now, what are we going to do? Any hotter in the apartment,
and we can't sleep. Any less lights, and we'll be in the dark."
Still, he said he understands the state's needs. "We're not the people
they're after."
The state estimates that if one out of 10 Californians cut power use by 20
percent this summer, the savings in electricity costs will equal between $400
million and $1.3 billion.
The Hathaway family in Rocklin has its sights set on the rebate and has
invested heavily to save electricity.
The biggest expenses: erecting a large patio cover to shade the south and
west sides of the house ($5,000); installing a whole-house fan ($1,000); and
replacing incandescent light bulbs with compact fluorescents ($150).
The family also unscrewed a bunch of unnecessary light bulbs (there are three
bathrooms, each with a vanity mirror ringed by 10 bulbs); turns off porch
lights except when company's coming; closes the blinds during the day; uses
the clothes and dishwashers for full loads only; and has unplugged two of
three VCRs.
The savings have been huge. Robin Hathaway's records show they used 42
percent less electricity this April than last April; and 21.5 percent less in
May.
It's not just for the money that the family has altered its power
consumption. "We just want to feel like we're doing our part," Hathaway said.
"In the long run, who says this (energy shortage) is going to go away?"
The state rebate offer stands from June through September. Utility company
customers who save 20 percent or more will get an automatic 20 percent
discount on each month's bill. (San Diego customers, who saw the state's
first price spikes last summer, need save only 15 percent to get the rebate,
a nod to the conservation they achieved last year.)
In Roseville, those who wish to participate must sign up by June 30; bill
credits will be available after summer. Details are available by calling
774-5110.
In Sacramento, SMUD considered offering a similar rebate, but decided to
concentrate on programs that promote longer-term conservation measures, said
district spokeswoman Dace Udris.
The absence of a rebate has not discouraged many SMUD customers from avidly
playing the conservation game.
Bruce Cherubin brings his bills to the office every month, bragging about how
low they are. (Last month's was $24.) "We've all been doing that," said
Cherubin, who works for the state Department of Alcohol and Drug Programs.
When the temperature rose to 106 last week, it was 90 degrees inside
Cherubin's three-bedroom house in Valley Hi. He did not turn on the air
conditioner.
"If there are major outages, I want to be prepared to live without
electricity," he said. "I think we have all been pampered. We have gotten
used to the easy life."
A Web site created by Lawrence Berkeley National Laboratory,
http://savepower.lbl.gov, offers a prescription for cutting electricity use
by 20 percent.
The Bee's Edie Lau can be reached at (916) 321-1098 or elau@sacbee.com.

PG&E may pay small creditors first, execs say
Generators and banks may have to wait until lesser claims clear
By Claire Cooper
Bee Legal Affairs Writer
(Published June 8, 2001)

SAN FRANCISCO -- The top executives of Pacific Gas and Electric Co. on
Thursday told some of the utility's smallest creditors -- a woman who sells
rubber gaskets, a man who can't cash a rubber check -- that they may be paid
first in PG&E's bankruptcy reorganization plan.
The largest of PG&E's 30,000 creditors -- power generators and banks -- may
have to stand in line behind what PG&E bankruptcy lawyer James Lopes referred
to as "an administrative convenience class," often made up of small
businesses whose claims clutter the books.
"It's certainly something that will be considered," Lopes said in answer to a
question from creditor Howard T. Ash, a market consultant, who suggested
paying people with claims of less than $10,000 ahead of "those who put you in
the problem."
The executives were unable to say how many creditors fall in that category.
The exchange was the most productive of the debtor-creditor meeting, one
required under the bankruptcy law. A scattering of protesters gathered
outside the Hastings College of Law auditorium where the meeting was held.
Inside, the harshest criticism came from consumer activist Medea Benjamin,
who scolded the executives for "doubling your salaries when your company is
bankrupt."
The utility has requested court permission to pay $17.5 million in bonuses to
keep managers from quitting.
"Which of you is going to jump ship if you don't get those raises?" Benjamin
demanded.
No one volunteered. But Gordon Smith, the utility's president and chief
executive officer, said a steady management team is essential while "PG&E is
doing its darnedest to provide electricity day in and day out."
He noted that the official creditors committee supports the bonuses.
The San Francisco-based utility sought bankruptcy court protection April 6
after running up more than $8 billion in debt for electricity purchases after
wholesale rates spiked while customer rates remained frozen.
After the meeting, however, U.S. trustee Linda Ekstrom Stanley, the
bankruptcy court's administrator, said she'll formally oppose the bonus
request next week.
On other issues the executives acknowledged they've hired a law firm to look
into matters concerning their supplier generators but refused, on Lopes'
advice, to say whether the firm is investigating possible wholesale energy
overcharges. Lopes also cut short discussion of a law that bars PG&E from
selling off its own remaining power plants before 2006.
Kent Harvey, PG&E's senior vice president and chief financial officer, denied
that the utility's crisis was caused by shifting billions of dollars to its
parent corporation.
But several creditors were focused on smaller sums.
The issue for Aline I. Varanese of Bay Rubber Co. in Oakland was a $600
discrepancy between her records and the amount PG&E claims it owes her for
gaskets.
For Jim Gormly, it was a check PG&E sent him before filing for bankruptcy
protection. He hasn't been able to cash it. Lopes told him the check is "dead
and void," and he's now a creditor, like 30,000 others.

Energy Digest: Low-income discounts grow

(Published June 8, 2001)
With utility bills rising, state regulators Thursday expanded the discounts
available to low-income Californians.
The Public Utilities Commission deepened the discounts and eased the
eligibility requirements for its CARE program, or California Alternate Rates
for Energy. The decision applies to customers of Pacific Gas and Electric
Co., Southern California Edison, San Diego Gas & Electric and Southern
California Gas Co.
The discount will increase to 20 percent from 15 percent. Californians making
175 percent of the federal poverty level will now be eligible; the old figure
was 150 percent.
The decision will shift about $47 million in costs to other ratepayers, said
a spokeswoman for the commission.
-- Dale Kasler
Matsui energy bill
WASHINGTON -- Tax legislation designed to promote energy production and
conservation was introduced in the House Thursday by Rep. Robert Matsui,
D-Sacramento.
The Matsui bill is identical to legislation that's been pending in the Senate
since March sponsored by New Mexico Sen. Jeff Bingaman, the new Democratic
chairman of the Senate Energy and Natural Resources Committee.
Called the Energy Security and Tax Incentive Policy Act, it includes tax
incentives and credits for a wide range of developments in energy
conservation and production.
The House and Senate bills would provide tax credits or deductions for home
and commercial building energy efficiency additions.
-- David Whitney

PG&E president defends request for $17.5 million in bonuses

By Karen Gaudette
ASSOCIATED PRESS
June 7, 2001
SAN FRANCISCO ) The head of California's largest utility defended a recent
request for $17.5 million in employee bonuses, saying the money is necessary
to keep valuable employees from jumping ship at the bankrupt company.
"The restoration of the company's financial health requires that we have a
rank-and-file team," said Gordon Smith, president of Pacific Gas and Electric
Co. "Retention is a key factor."
Several hundred of the more than 50,000 cities, businesses and individuals to
whom PG&E owes money had the chance Thursday to ask about the utility's
financial health and its plans for paying its creditors. PG&E executives told
the room of more than 300 people it would file its plan for paying back
creditors as soon as possible.

Steve Johnson, an attorney with the U.S. Trustee's office that is overseeing
the bankruptcy proceedings, grilled a handful of PG&E executives and
attorneys about the utility's financial activities during the past few years.
The $17.5 million bonus program, which must be approved by a bankruptcy
judge, is designed to encourage about 226 top managers to remain with the
company through the next two years
The planned payments are modest compared with the billions of dollars PG&E
owes to tens of thousands of creditors in the biggest utility bankruptcy in
U.S. history.
PG&E's petition for the bonuses has drawn fire from consumer critics, who for
months have argued the utility's management could have avoided the financial
crisis if it had reacted more swiftly to rapidly changing conditions in the
power market.
This isn't the first time PG&E's employee compensation has rankled the
utility's critics.
The night before filing for bankruptcy on April 6, the utility transferred
$50 million in bonuses and raises to 6,000 workers. At the time, management
said it wanted to ensure its employees received adequate paychecks before the
company plunged into the uncertainty of bankruptcy court.

PUC lowers electric bills by 5 percent for low-income ratepayers

By Karen Gaudette
ASSOCIATED PRESS
June 7, 2001
SAN FRANCISCO ) Low-income ratepayers of California's public utilities will
save 5 percent more on their electric bills, state power regulators ordered
Thursday.
The Public Utilities Commission voted unanimously to expand the low-income
discount from 15 percent to 20 percent. Commissioner Carl Wood said the
savings would help ease the financial worries of the state's poorest
ratepayers.
"It is critical that we act to provide relief to these most vulnerable
customers," Wood said.
The PUC delayed action on a proposal to order the state's two largest
utilities to pay 15 percent of the more than $1 billion they owe small power
plants throughout the state for past electricity deliveries.
Money previously allocated by the Legislature to help low-income users would
cover the cost of expanding the discount through the year, said Paul Clanon,
executive director of the PUC's energy division.
To get the discount, low-income ratepayers usually have to apply by mail to
the California Alternate Rates on Energy program. Many of those eligible
haven't signed up, and Wood and PUC President Loretta Lynch are looking at
creating an automatic enrollment system.
The PUC also approved a request from San Diego Gas & Electric Co. and San
Diego County businesses to be paid by the utilities for using diesel
generators during power emergencies, thus lowering the state's electricity
demand.
The PUC lowered the payment from a proposed 35 cents per kilowatt hour saved
to 20 cents per kilowatt hour. Those customers already avoid paying for
electricity by running generators during those times, the PUC said.
San Diego County representatives countered that it costs thousands to rent,
buy and fuel generators, and say they are being good citizens by finding
alternative solutions.

National Desk
THE NATION Emergency-Power Price Cap Is Working, Data Indicate Energy:
Much-criticized plan cut costs by 64% the first time it was used, source
shows. Broader downturn also seen.
RICARDO ALONSO-ZALDIVAR
?
06/08/2001
Los Angeles Times
Home Edition
Page A-22
Copyright 2001 / The Times Mirror Company
WASHINGTON -- A widely criticized federal order to limit California power
prices significantly reduced rates for last-minute electricity purchases
during two power emergencies last week, new data show.
Also Thursday, more evidence emerged of a broad downward trend in California
energy prices--well beyond what can be attributed to the consequences of
government intervention.
The unexpectedly positive data on the initial effect of the Federal Energy
Regulatory Commission's price limits immediately touched off a stormy debate.
The agency's besieged chairman claimed vindication. But critics said
electrical generators were already finding loopholes in the price limits and
argued that the order needs more toughening to be truly effective.
The FERC order--which went into effect May 29--resulted in a 64% cut in the
wholesale price of power immediately after an emergency was declared the next
day, according to data posted on the California Independent System Operator's
Internet site.
Prices dropped from $300 per megawatt-hour just before noon to $108.47 the
following hour after Cal-ISO, the state's power grid operator, declared an
official emergency that triggered the federal price limits.
A similar scenario unfolded during another declared emergency on May 31.
Prices dropped from $187 per megawatt-hour before the emergency declaration
to $66.51 immediately after.
During the May 31 emergency, power plant owners in California began selling
more electricity to out-of-state buyers. That electricity can later be sold
back to the state by out-of-state marketers, who are not as tightly
controlled by FERC's order. Market watchers call that "megawatt laundering."
"We saw an increase in exports pretty quickly as a result of that" FERC
order, said Ray Hart, deputy director of the state Department of Water
Resources, in an interview. "So that clearly shows they're looking for ways
around it. As soon as they export it, they bring it right back through a
marketer, and then the marketer has a price that's not challengeable under
the FERC order."
FERC Chairman Curt Hebert disputed that, saying the agency can order
marketers to justify their prices.
Meanwhile, the continued across-the-board drop in California power prices is
beginning to attract at least as much attention as the controversy over
FERC's actions.
According to analysts at Platts Electric Utility Week, which monitors the
industry, forward-looking prices for August delivery of electricity in
Southern California have fallen 69% since April. Prices for August
electricity stood at $220 per megawatt-hour on Wednesday, down from $700 in
April.
The figures are significant because they apply to purchases made under
long-term fixed contracts, not just the emergency purchases made by Cal-ISO
and subject to the FERC order.
Market watchers at Natural Gas Week reported that gas prices at a key
pipeline junction on the California -Arizona border had dropped
precipitously. Prices fell from $8.16 per million British thermal units on
Wednesday to $5.93 at the close of business Thursday--a 27% plunge in one
day.
High natural gas rates have been widely blamed for aggravating California 's
power crisis, since gas is the fuel most commonly used by electricity
generators.
At FERC, a small federal agency that functions like a national utility
commission, Hebert said the lower prices during last week's power emergencies
show that the commission's efforts are finally paying off.
"Thus far, what we are seeing is that the price mitigation order is bringing
real-time prices down, which is exactly what I said it would do," Hebert said
in an interview.
But Cal-ISO officials said it was too soon to break out the champagne.
Indeed, the state is threatening to sue Hebert's agency for not doing enough
to restore "just and reasonable" prices in California .
"It is too early to make any conclusions at this point," said Stephanie
McCorkle, a Cal-ISO spokeswoman. "We just feel we need more days of
emergencies to see how it is really working."
And there were signs that generators were looking for ways to sidestep the
FERC order.
The federal order relies on a complex formula to limit the price power plant
owners can charge whenever the state's electricity reserves are depleted. The
maximum price allowed in any given hour can vary according to factors
included in a formula. The FERC order requires California generators to offer
all their available power for sale when Cal-ISO declares an emergency.
But by contracting to sell electricity a day or more in advance, generators
can essentially tell Cal-ISO they have no power available to sell in an
emergency. Such a maneuver becomes all the more attractive if prices being
paid in surrounding states are higher than the controlled price offered in
California during an emergency.
Mike Wilczek, a senior market reporter for Platts, said that on Wednesday of
last week, when the first emergency was declared under the FERC order,
generators were unsure how to respond. But by the second emergency on
Thursday, a strategy seemed to be emerging.
"People were selling ahead to try to get away from the order," Wilczek said.
"They wanted to avoid being 'mitigated.' In the northern part of California ,
we saw some hours in which the ISO couldn't get any offers, even when they
[generators] were being forced to sell into the ISO."
Hart said his market watchers observed the same ploy. The Department of Water
Resources is purchasing power for the state's financially hobbled utilities.
Rep. Doug Ose (R-Sacramento) said FERC needs to toughen the order by
extending it to all hours--not just periods covered by power emergencies--and
to every Western state. Ose said his proposal is picking up support among
Republicans who oppose Democratic demands for FERC to impose fixed price caps
on wholesale electricity in the West.
"The evidence is that the FERC order is working," Ose said. "If it works,
then let's use it. They need to take their order and extend it. Let's take it
to all the Western states. Twenty-four/seven coverage needs to be in there
also."
Paul Joskow, a Massachusetts Institute of Technology economist who supports
temporary price caps, said strengthening the FERC order may prove to be a
workable compromise to rein in costs for the rest of the summer. "It's
getting late in the game, and expanding the number of hours of mitigating,
making sure there aren't loopholes, would be a very productive thing to do,"
he said.
FERC Chairman Hebert said the commission plans to review the order, but he
would not commit in advance to suggested changes. "My position as chairman is
not to follow House or Senate members, or anybody else, but to do what is in
the best interest of America," he said.
Meanwhile, power generators complained the FERC order is forcing them to sell
at rates below their costs. "We had no power plants that were producing power
at a cost of $108 on Wednesday," said John Stout, a vice president of
Reliant. "Some were in the mid-$100s, others were above $200."
Reliant is urging FERC to adopt a new formula to more fully account for
higher natural gas prices in Southern California .
*
Times staff writer Nancy Vogel in Sacramento contributed to this story.

California ; Metro Desk
THE ENERGY CRISIS Paying for Power a Struggle for Some Utilities: Consumers
on tight budgets face crises. Requests for aid flood agencies, but many of
those eligible for discount programs are not signing up.
TIM REITERMAN
?
06/08/2001
Los Angeles Times
Home Edition
Page B-1
Copyright 2001 / The Times Mirror Company
In San Francisco, a retired music teacher with polio came within 48 hours of
losing gas to heat his apartment and electricity to charge the motorized
scooter that takes him to the doctor and to church.
In Santa Cruz County, a former insurance company administrator dropped
insurance for her mobile home because she could find no other way to pay her
mounting utility bills.
In Los Angeles, a former foster care provider whose gas bills are running
about $100 a month can't make ends meet on her $289 Social Security check.
Up and down the state, problems encountered by utility ratepayers on fixed
incomes and tight budgets are bad and getting worse, according to the state's
anti-poverty agency.
Tens of thousands of Californians are flocking to special programs that offer
discounts on energy bills, cash assistance and home weatherproofing that
reduces utility costs.
Social service agencies say they are swamped with applications for assistance
from low- and moderate-income people, even before the largest electricity
rate increase in state history starts showing up on bills this month. The
clients, they say, range from single-parent and working-class families to
seniors who have sold their estate jewelry and even condominiums because
utility bills pushed them beyond the limits of fixed incomes.
Several agencies contacted by The Times say they already have provided more
assistance this year than during all of last year. Some have been forced to
hire extra staff to handle the crush. Others temporarily ran out of funds.
Many people are turned away because there is not enough money to go around or
they do not qualify under the income guidelines or other criteria for
assistance.
"We have to make tough choices about serving eligible seniors or disabled or
people with children," said Sigmund Vays, president of Community Enhancement
Services, which serves Hollywood and the San Fernando Valley. The agency is
able to assist about one of five applicants.
The state Public Utilities Commission approved a rate increase of 3 cents per
kilowatt hour on March 27. Officials say that translates to an increase of $4
to $85 a month for residential customers. Natural gas rates have soared
throughout the state as well.
Rising energy costs hit people living at the margins particularly hard
because utilities eat up such a high proportion of their income. Some are
saddled with bills of $1,000 or more; others are doing without medicine and
scrimping on food to keep their power on.
"We got numerous e-mails from seniors, the disabled and others on fixed
income because their utility bills have increased two, three or four times,"
said Toni Curtis, chief deputy of the state Department of Community Services
and Development. "They can't pay them."
Elizabeth Berryhill, 81, longtime artistic director of a Bay Area theater
group, was getting by on frugality, Social Security and a little money from
renting space in her house in San Anselmo.
Then her utility bill tripled last winter to about $300. A community
organization now provides up to $230 a month in assistance.
With the new electricity rate increases, Berryhill said, "I am hugely
concerned. . . . I don't know how long the program will go on, or how long
they will be able to help me."
'More Lip Service Than a Real Safety Net'
State regulators recently directed utilities to redouble efforts to enroll
low-income customers in programs infused with tens of millions from state
coffers.
While encouraged by the increased funding, consumer advocates and community
service agencies are worried that the programs will not reach the millions
who qualify, let alone those who might need help even though they don't
qualify.
"The promises of protection become more lip service than a real safety net,"
said Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa
Monica.
California officials estimate that one-fifth of the state's households, or
2.7 million customers, are eligible for two major utility-run programs.
But only 60% of them are participating in the California Alternate Rates for
Energy program, which provides low-income customers a discount that the PUC
increased from 15% to 20% Thursday and exempts them from this year's rate
hikes.
Only a small portion of those in the program are also enrolled in the
Low-Income Energy Efficiency program, which provides home energy improvements
such as insulation and new appliances.
Utilities administer the programs and receive $200 million to fund them
through small surcharges on customer bills. Recent legislation provides an
additional $120 million.
The federal Low-Income Home Energy Assistance Program, created during the
energy crisis two decades ago, pays customers' bills when they face cutoff of
their utilities for nonpayment. Even with another $120 million from
California , state officials say, the program has enough money for less than
10% of the 2.1 million households that could qualify.
"Everyone realizes there is not enough to go around," said Alex Sotomayor,
director of the Maravilla Foundation in East Los Angeles, which has
distributed 40% more money this year than last.
San Diego Gas & Electric refused to release figures on service disconnections
this year. Pacific Gas & Electric Co. sent about 1 million 48-hour notices
from February through April, and disconnected about 53,000 customers. From
January through April, Southern California Edison cut off about 133,000
customers. The numbers are roughly the same as a year ago.
The 22,000 shut-offs at Southern California Gas Co. in the first four months
of 2001 represent a 40% increase from last year, but are below its three-year
average for the period.
More Outreach, Funding Cutting Disconnections
Utilities say their efforts have helped prevent shut-offs from rising higher.
Southern California Gas, for example, notes that it offered nearly 1 million
extensions to customers through April, up 82%.
Social service agencies say increased outreach and funding this year also are
helping hold down disconnections for now, but with rate boosts, they are
concerned about this summer and beyond. "Our concern at this point is how we
will help prevent disconnections on an enormous scale and the loss that will
ensue in the coming winter," wrote Dennis Osmer of the Community Action Board
in Santa Cruz County in a May 21 report for the state Senate Office of
Research.
To the north, retired organist, singer and teacher John von Spreckelsen, 65,
lives in a spartan apartment near San Francisco City College. He survived
polio and a heart attack. He manages to get across town to Grace Cathedral
for Sunday services and occasionally to the symphony by using his electric
scooter, public transportation and transit for the disabled.
The energy crisis, however, threw him. His electricity and gas bill from PG&E
went from about $40 to $140 and ate a huge chunk of his $712-a-month
disability payment. When he couldn't pay his bills, von Spreckelsen said, he
was notified his power would be shut off in two days.
"I travel with an electric scooter, and I have to keep it plugged in every
night," he said. "Because I'm sedentary, I keep my thermostat at 75. They ask
us to turn it down to 68, but I freeze to death."
A community service agency enrolled von Spreckelsen in the utility discount
program and paid $840 of his bills. "It was astronomical," he said. "It means
I even have change for the next bill."
Melissa Porter, a 32-year-old mother of two, says she faces the cutoff of
utilities to her rented house in El Cajon unless she pays a $600 bill by June
19. That, she said, will not be easy.
Her husband died of a heart attack on March 20. She is in a leg cast with an
injury, and can work only one of her two jobs for a private firm that assists
the elderly.
"I am cutting everything back," Porter said. "I had to let my car payments
and insurance go. I managed to pay rent for May just last week and to buy
food for my kids. It [isn't] much food either. . . . We're eating lots of
macaroni and cheese." Porter said she has been trying for two weeks to get
help with her utility bill, without success.
A number of customers reached by The Times through service providers did not
want their relatives and neighbors to know about their plight, so they asked
that their names not be used.
One Los Angeles woman is a former foster care provider and part-time student
who receives $289 in Social Security and cannot afford her $100 monthly gas
bills. "I can never catch up," she said. "I now owe $372." Her children pay
the mortgage on the Koreatown home she has owned since 1965 and help her with
food.
A former insurance administrator lives on a fixed income of $711 a month, but
$495 of that goes to pay her utilities and mobile home space in Soquel, south
of Santa Cruz.
"I had to drop my homeowners insurance because I could not pay for it and the
utility bill," she said. Like a number of her neighbors, she said, she also
has cut back on food.
Thanks to government programs, she gets discounted electricity and received a
free high-efficiency refrigerator.
"Lots of people are too proud to admit they need help," she said. "That's the
way I was too."
Marin County is synonymous with the good life, but the energy-price explosion
is damaging those least able to roll with it.
"It's terrible," said Layne Schneider of Community Action Marin, which has
helped five times more people with their utility bills this year than last
and ran out of money a week ago.
After 35 years as a travel agent, Christina Thomas of Sausalito did not
expect to find herself so frail at 63. She has osteoporosis and emphysema.
She needs to be on oxygen 24 hours a day. Thomas tried to conserve but fell
behind on her utility bills.
"I seldom put the TV on," she said, "but I can't cut down on my oxygen."
She received $300 in one-time assistance, but a 15-day shut-off notice
arrived recently, saying she owed $900.
Thomas plans to make the minimum payment of $134. "That would keep me going
until the next bill," she said. "I worked all my life and paid my taxes, and
it has come to this."
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Aid to Low-Income Customers Through programs, California provides discounted
electricity rates, assistance with bills and weatherization services to
low-income customers of investor-owned utilities:
CALIFORNIA ALTERNATE RATES FOR ENERGY (CARE)
Funding: Surcharge on utility bills, augmented by state money.
Benefit: Discounts on gas and electricity bills, which the state Public
Utilities Commission increased from 15% to 20% Thursday.
Eligibility: Households with incomes below 175% of poverty level, or about
$30,000 for a family of four.
LOW-INCOME ENERGY
EFFICIENCY (LIEE)
Funding: Surcharge on utility bills, augmented by state funds.
Benefit: Weatherization services to low-income households.
Eligibility: Households with incomes below 175% of poverty level, or 200% of
poverty level for elderly and disabled.
LOW-INCOME HOME ENERGY
ASSISTANCE PROGRAM (LIHEAP)
Funding: $62.7 million in federal funds, plus $120 million in state funds
this year.
Benefit: Payment assistance, with a sliding scale by income levels.
Eligibility: For federal funds, households with incomes below 60% of state
median income. For state funds, households with incomes below 250% of poverty
level.
UTILITY PROGRAMS
Pacific Gas & Electric Co.:
Relief for Energy Assistance through Community Help (REACH) is administered
through the Salvation Army and provides help with bills. Last year, the
average was $180 for about 18,000 households.
Southern California Edison:
The Energy Assistance Fund, administered by the United Way, provided one-time
payments averaging $86 to 5,185 households last year.
Southern California Gas:
The Gas Assistance Fund provides a one-time credit of up to $150 on the bills
of qualified low-income customers.
San Diego Gas & Electric:
The Neighbor to Neighbor program provides half the monthly bill, up to $200,
during winter months.
Sources: State Senate Office of Research, Department of Community Services
and Development, Public Utilities Commission.

California ; Metro Desk
Los Angeles THE ENERGY CRISIS Universal May Get Break on Electricity Bills
Legislature: Senate passes bill to allow the theme park and several other
businesses to buy DWP's cheaper power.
CARL INGRAM
?
06/08/2001
Los Angeles Times
Home Edition
Page B-3
Copyright 2001 / The Times Mirror Company
SACRAMENTO -- Over protests of special-interest favoritism, the state Senate
passed legislation Thursday to give Universal City a break on its electricity
bills during the California energy crisis.
Bipartisan approval of the measure contrasted starkly with the defeat last
month of a similar bill that would have cut the power costs of public
agencies in Los Angeles County.
"The public got shafted while the private interests got taken care of,"
complained Los Angeles County Supervisor Zev Yaroslavsky, who fought for the
bill that would have benefited the local government entities.
The bill, SB 1172, introduced by state Sen. Sheila Kuehl (D-Santa Monica) on
behalf of Universal Studios and its theme park, would allow Universal and
several other businesses to switch from Southern California Edison to the Los
Angeles Department of Water and Power, whose electricity is cheaper.
The bill cleared the Senate on a 29-4 vote despite the objections of Sen.
Debra Bowen (D-Marina del Rey). Its future in the Assembly is uncertain.
Kuehl said saving money for Universal, an influential enterprise that makes
political contributions, was not the foremost issue. She said Universal was
more concerned about safety during a blackout because visitors might get
stranded on rides.
Chances of avoiding a blackout with the DWP seem better than with Edison, she
said, adding, however, that there is no "guarantee the DWP won't have
blackouts."
Bowen warned the Senate against approving a bill that she said would feed a
perception that special interests can get what they want in Sacramento "if
they just have enough political clout."
She said that if Universal's power bills were to go down, bills for other
electricity customers throughout California would go up.
"How do we expect other businesses and other residents of California to
conserve and sacrifice, if not everyone has to do it?" Bowen asked.
Universal and about a dozen other businesses straddle the service boundary
between Southern California Edison Co. and the Los Angeles Department of
Water and Power. Those customers are hooked up to both utilities and pay two
electricity bills.
The legislation would enable Universal and the other customers, including
Cedars-Sinai Medical Center, to buy all their power from the DWP, a municipal
utility whose prices are much lower.
However, Bowen, one of the Legislature's energy experts, noted that the
electricity sold to Universal at low cost would no longer be available to the
state Department of Water Resources, which is buying power on behalf of
bankrupt Pacific Gas & Electric Co. and financially crippled Edison.
"So the bill provides a benefit to these businesses at the expense of
everyone else," Bowen charged.
"How do we tell a child-care center down the street that they are going to be
subject to blackout risks, but these businesses are not because they happen
to have this power?" Bowen asked.
Kuehl responded that it was "speculative" for Bowen to predict shifts in
power costs.
She noted that Universal, a Target department store, the hospital and others
would have to pay Edison an "exit" fee. The bill would enable each customer
to consume a maximum of 50 megawatts, a relatively small amount of power.
"I resent the implication that I, of all people, am carrying a bill for rich
businesses," Kuehl told a reporter later. "I'm always at least No. 1 or No. 2
on the hit list of the California Chamber of Commerce for not generally
voting with the rich and powerful."
Bowen, who said that "everyone needs to pitch in" to resolve the power
crunch, spearheaded the vote to defeat the public agencies' low-cost power
bill in May. The bill failed in her Energy Committee by one vote.
That bill, AB 15x by Assemblyman Roderick Wright (D-Los Angeles), would have
allowed five entities in Los Angeles County to purchase the lower-cost power
from the DWP instead of Edison.
Bowen argued against the bill, saying it would drive up electricity costs for
other consumers throughout California .
Yaroslavsky noted Thursday that the five public agencies face substantially
higher power bills that would be reduced, freeing funds for other services,
if they could switch to DWP electricity .
The beneficiaries would have been Los Angeles County, the Los Angeles Unified
School District, a community college district, the county Board of Education
and the Metropolitan Transportation Authority.
Yaroslavsky said he and others came up with the idea of government agencies
switching to the cheaper city power and rejected efforts of Universal and
others to be included in Wright's bill.
"We end up doing the right thing and get screwed, and they [Universal and
Target] get a piece of legislation out of the Senate," he said.

Business; Financial Desk
California L.A. Businesses to Get 'Real-Time' Electricity Meters Energy:
Devices are part of larger plan to cut peak summer demand by at least 2,000
megawatts.
NANCY RIVERA BROOKS
?
06/08/2001
Los Angeles Times
Home Edition
Page C-2
Copyright 2001 / The Times Mirror Company
Los Angeles businesses will get first crack at a new program designed to
slice peak power usage through sophisticated electricity meters that allow
utilities to calculate bills based on when power is used.
Gov. Gray Davis officially launched a program Thursday to install "real-time"
electricity meters in Los Angeles in order to reduce peak electricity use by
as much as 240 megawatts this summer.
The Los Angeles Department of Water and Power expects to install more than
3,400 real-time electricity meters at commercial and industrial customers
with peak electricity demand of 200 kilowatts or greater. Such customers
include large retail stores, manufacturing operations and office buildings.
Real-time meters measure not only how much electricity is used but also when
it is used. Because wholesale electricity costs more when demand is high,
such metering encourages businesses to reschedule shifts, conserve or shift
energy use to take advantage of lower prices during times of low electricity
demand.
"Real-time metering is another innovative way California is cutting demand
for electricity as we continue to bolster supply" by licensing new power
plants, Davis said. "As other municipal and investor-owned utilities install
these sophisticated electricity meters, this program alone is estimated to
cut our state's peak energy use by another 500 megawatts this summer."
Under the state plan, customers with real-time meters will be able to shave
15% off their electricity bills by measurably reducing peak energy use, he
said.
"The hope is if people could see the real-time price of energy, they would
use less of it," said Eric Tharp, DWP vice president of public affairs.
Although DWP territory is not part of the power-short electricity grid
operated by the California Independent System Operator, the blackout-plagued
territories of Southern California Edison, Pacific Gas & Electric and San
Diego Gas & Electric will still benefit, Tharp said. DWP has committed to
sell power to the state equal to the amount saved under the program at
cost-based prices, which are still being negotiated, Tharp said.
The DWP meters, and others that will follow across the state, are being
funded through AB 29X, legislation Davis signed in April that sets aside $35
million for the purchase and installation of such meters. The DWP portion is
about $5 million, Tharp said.
The meters are part of a larger energy conservation plan to cut peak summer
demand by at least 2,000 megawatts, or enough to power about 1.5 million
homes.
How fast DWP and other utilities can get these programs operating depends
largely on the supply of the equipment, which can be difficult to get, Tharp
said.

Business; Financial Desk
California Sonoran Has Customers Lined Up for Gas Pipeline
?
06/08/2001
Los Angeles Times
Home Edition
Page C-2
Copyright 2001 / The Times Mirror Company
A venture between Kinder Morgan Energy Partners and Calpine Corp. has
attracted more than enough customers to build a $1.7-billion natural-gas
pipeline for energy-starved California by the summer of 2003.
Sonoran Pipeline, the joint venture, expects to sell capacity on the
1,030-mile project within 60 days and gain federal approval by year's end,
Sonoran Vice President Scott Parker said in a statement.
California , which is in the midst of an electricity shortage, depends on
natural gas to fuel many of its power plants. The Sonoran line would carry
enough gas to generate 9,000 megawatts of power, Calpine spokeswoman
Katherine Potter said. A megawatt can light 750 California homes.
The project would deliver 750 million cubic feet of natural gas a day from
gas fields in northern New Mexico to the California -Arizona border. A second
segment would connect with other pipelines to deliver as much as 1 billion
cubic feet a day to the San Francisco area.
Sonoran Pipeline received binding agreements and nonbinding interest for more
than 1 billion cubic feet a day for the first run of pipe, and interest in
1.5 billion cubic feet a day for the second phase, the company said.
Calpine, a San Jose-based power plant developer, has committed to ship 400
million cubic feet a day on the Sonoran line for 20 years.
In New York Stock Exchange trading, Calpine shares rose $1.54 to close at
$45.30, erasing this year's decline, and Houston-based Kinder Morgan's shares
fell 95 cents to close at $70.05.

EDITORIALS
A tax on greed
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.24
(Copyright 2001)
IT'S TIME to get tough in solving the state's energy crisis. Billions of
dollars are flowing from state coffers to electric generators, whose profits
have jumped five-fold in the past year. It's greed, gouging or windfall
profits -- the winnings collected from a broken market.
One sensible rescue plan -- a cap on the wholesale price of electricity --
was ruled out by President Bush on his trip to California last week although
a similar proposal remains alive in the Senate. But next week, the state
Assembly will take up another answer: a tax on the inordinate profits earned
by a handful of energy generators.
The measure would set a base of $60 per megawatt (the amount of electricity
used by 1,000 homes) and impose increasing levels of taxes of 50 to 90
percent for prices above the starting point. The proposal, by Assemblywoman
Ellen Corbett, a San Leandro Democrat, gives California a powerful weapon in
restraining a runaway market.
Consider the damage done. The state has spent $8 billion to buy power on
behalf of financially-weakened utilities. This money is expected to be paid
back in higher power bills for residents and businesses, but it also means a
huge diversion of funds from parks, schools, or health care. The revenue
flowing to Sacramento from the state's economy is essentially going down an
energy rathole.
The $60 per megawatt figure is nearly double the average charged for
electricity in January 2000, a time when major electricity generators were
already earning healthy profits. The average price on January of this year
was $278. Since then, the gyrating spot market for power has touched $1,900
and higher on high-demand days when vital electricity was in short supply.
Imposing taxes on a lopsided, cartel-dominated market could pay back the
state for the enormous expenses of the energy crisis. It could act as a
brake, inducing the mulish generators to lower prices that are busting the
budgets of residents and businesses.
The Corbett bill would return the tax money to state coffers. A second
similar bill, by state Sen. Nell Soto, D-Pomona, would return the money to
taxpayers via tax credits. In a session with The Chronicle editorial board
yesterday, Gov. Gray Davis repeated his willingness to sign such a tax on
excessive generator profits.
A special tax aimed at the flagrant misconduct of a single industry is not
always the best public policy. But with billions in state money at stake, and
few effective controls over energy prices, a windfall profits levy makes
sense at this time.

NEWS
Crisis propels obscure federal regulators into limelight
Zachary Coile
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.12
(Copyright 2001)
For most of its 24-year history, the Federal Energy Regulatory Commission was
an agency so low-profile that only those in the power business paid it much
attention.
That is, until the lights went out in California .
Once viewed as mundane, the commission's written orders and biweekly meetings
now are front-page news. Its acronym, FERC, has become part of the lexicon --
at least among California residents anxious about rising energy bills and
blackouts.
The five members of the commission and the agency's 1,200 staff members,
tucked in a sleek 11-story office tower hidden behind the train tracks at
Union Station, now find their every move second- guessed by politicians,
economists and the media.
"At some level, I think they probably are enjoying it," says Larry Foster,
who edits Inside FERC, a weekly newsletter about the agency read by energy
executives, lobbyists and state regulators.
"I say that because these are people who have worked long and hard for many
years on important issues with absolutely no recognition at all. Now there is
public awareness that what they do is important.
Foster added: "Having said that, do they enjoy being vilified daily by (Gov.)
Gray Davis? No, probably not."
The regulatory commission's defenders say it hasn't ignored California 's
power woes. But critics argue that the commission has exacerbated the crisis
by refusing to order wholesale price limits on electricity and by not
investigating alleged market abuses. Sen. Dianne Feinstein, D-Calif., is
asking for hearings into whether energy executives exerted influence over key
decisions by the commission.
"Energy companies have learned how to game the system. It really has been to
their benefit and to the detriment of California consumers," said Adam
Goldberg, energy policy analyst for Consumers Union. "FERC has let that
happen and has done nothing to rectify the situation or to punish the
wrongdoers."
The commission, whose members are nominated by the president, oversees the
guts of America's energy system: interstate oil and gas pipelines, electric
transmission lines and hydropower dams. The agency's most critical task is to
ensure "just and reasonable" energy prices -- a responsibility critics say it
has abdicated during California 's energy crunch.
Because it regulates only wholesale prices for transmitting and trading
electricity and natural gas, the commission usually draws less attention than
state regulators, who set the energy prices consumers pay. Even in
Washington, the agency is far less visible than its regulatory siblings, such
as the Federal Communications Commission and the Federal Trade Commission.
An independent agency under the Department of Energy, the Federal Energy
Regulatory Commission was established in 1977 to replace the Federal Power
Commission, which had regulated the energy industry since 1920. In the
aftermath of an oil embargo and rising energy prices, President Jimmy Carter
and Congress renamed the agency and change its mission. The new goal was to
ease regulation and help energy companies increase production and lower
prices.
The Federal Power Commission had long set rates for the price of transmitting
gas across state lines, and a 1954 Supreme Court decision gave the agency the
power to set wholesale prices for natural gas. But by the 1970s, the agency's
formula for setting rates -- production cost plus an allowed rate of return
-- discouraged production.
Charles Curtis, the agency's first chairman and later a deputy energy
secretary, said the regulatory commission's marching orders from Congress
were to foster competition as the best way to lower prices. Through two
decades, it has remained the regulators' guiding principle, he said.
The goal was to "let competition be the great regulator so you don't have to
rely on five people sitting around a table to determine what the price is,"
said Martin L. Allday, regulatory commission chairman under former President
George Bush, and now an oil and gas attorney. "I think it's worked
marvelously."
In 1985, the agency began an attempt to force companies that owned pipelines
and produced gas to separate those functions to prevent them from charging
rival producers more money to ship gas. In 1996, the commission ordered
utilities to open their transmission lines to competing power companies.
Reglatory commission supporters say the moves have saved consumers hundreds
of billions of dollars in lower energy costs. But dissenters, including some
former FERC officials, argue that the agency has failed to adequately police
the increasingly deregulated energy market.
The agency has 14 administrative law judges, who can hold hearings similar to
trials and recommend remedies to the commission. The regulatory commission
has ordered about $125 million in refunds for alleged overcharging by energy
firms, but the California Independent System Operator, which manages the
state's electrical grid, says California has been overcharged by more than $6
billion.

NEWS
State 'turning a corner' / Davis expresses optimism about crisis, seeks
blackout protection for refineries
David Lazarus
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.1
(Copyright 2001)
After months of lamenting California 's weak position in tackling the state's
energy woes, a reinvigorated Gov. Gray Davis declared yesterday that "we've
basically won the war."
With electricity prices at their lowest level in more than a year and natural
gas prices down from record highs, Davis said in a meeting with The
Chronicle's editorial board that California is "definitely turning a corner."
But Davis cautioned that the state still faces a difficult summer of possible
rolling blackouts, and said consumers and businesses must do their utmost to
conserve power or be at the mercy of out-of-state generators.
The governor moved to protect one industry that has loudly complained about
the prospect of blackouts, asking Loretta Lynch, president of the state
Public Utilities Commission, to exempt oil refineries from rolling outages.
Davis made the request after being told last week by Chevron Corp. that it
would cut production at its two California refineries to match the amount of
electricity they can generate on their own during blackouts.
Another refinery owner, Valero Energy Corp., has no backup power at its
Benicia refinery and has warned that any blackout could shut it down for
several days at least -- driving up gasoline prices throughout the state.
Industry analysts have estimated that nearly one-third of California 's
petroleum output is endangered by power failures. The threat of less gasoline
in a state that already suffers the nation's highest pump prices was
sufficient to get the governor's quick attention.
In a letter to the PUC president, he asked that refineries be considered
"essential-use customers" and thus exempt from rolling blackouts.
The PUC's Lynch said last night that the commission "will take a very hard
look at what the governor would like." She noted, however, that about 10,000
applications for blackout exemptions have been submitted so far and that they
are being addressed one at a time.
Chevron and Valero officials said they were pleased with the governor's
request. "He agrees we do serve a central role in California that needs to be
protected," Valero spokesman Scott Folwarkow said.
Folwarkow said he and Rich Marcogliese, general manager of Valero's Benicia
refinery, had met briefly with Davis on Monday to make their case.
'MOST CHALLENGING ISSUE'
In his meeting at The Chronicle, Davis emphasized that he inherited a flawed
deregulation blueprint when he took office and has been forced to come up
with solutions to the problem.
"This is the most challenging issue any governor has faced in 50 years," he
said. "I think we're making progress."
The governor credited himself with streamlining construction of new power
plants and promoting conservation.
At the same time, he said he has "shamed" power companies that have reaped
huge profits at the expense of California utilities and consumers -- and now
the state itself, which is more than $8 billion in the hole from electricity
purchases.
"These people are not good citizens," Davis said of the generators. "They
want to drive us into a grave."
Nevertheless, he said California has stood its ground and is now "on the
verge of breaking the back of the spot market," where electricity has been
sold at prices as high as $1,900 per megawatt hour.
CITES LONG-TERM CONTRACTS
The governor said 38 long-term power contracts signed by the state Department
of Water Resources were largely responsible for the recent plunge in
wholesale electricity prices.
By reducing the state's demand in the spot market, he argued, power companies
were forced to compete for buyers, which helped push electricity prices
lower.
"That's maybe one factor," responded Paul Patterson, an energy- industry
analyst at Credit Suisse First Boston in New York. "But there's more going on
than that."
He said the tumble in electricity prices -- to as low as $50 per megawatt
hour this week from more than $500 -- is mainly attributable to more power
plants returning to service, increased output from dams and mild weather,
which reduces the need for air conditioning.
The drop in electricity demand caused a commensurate decline in natural gas
prices. Natural gas is the fuel that runs most power plants in the West.
PREMATURE VICTORY DECLARATION
Patterson said Davis may be premature in announcing that California 's war
with high power costs is all but over.
"The battle may have turned, but it's way too early to declare victory over
high prices," he said.
Or over the power companies. Davis said he will be briefed by Attorney
General Bill Lockyer on Monday about the state's investigation into illegal
price manipulation by generators.
"At some point soon, he will file a number of lawsuits," the governor said,
adding that the suits would be both civil and criminal. He did not elaborate.
Sandra Michioku, a spokeswoman for Lockyer, said the attorney general is only
now receiving material subpoenaed from generators, but intends to file civil
and criminal lawsuits "if there is evidence of wrongdoing."
MUNICIPAL UTILITIES WARNED
Davis also reiterated his threat to seize excess power from California
municipal utility districts, which he said have gouged ratepayers even more
severely than Texas energy titans such as Enron Corp. and Dynegy Inc.
To prove his point, he revealed that municipal utilities charged the state an
average of $360 per megawatt hour during peak usage, whereas out-of-state
generators were charging $310.
But Jerry Jordan, executive director of the California Municipal Utilities
Association in Sacramento, said Davis apparently does not realize that most
municipal utilities are merely reselling unused power that they themselves
had to purchase on the spot market.
"If we have to pay $450 on the market, we can't sell it to him for $300,"
Jordan said.
PRICE CAPS UNLIKELY
The governor acknowledged that federal authorities remain philosophically
opposed to imposing limits on wholesale power rates.
But he said he is optimistic that Pat Wood, a former Texas regulator widely
expected to become the next chairman of the Federal Energy Regulatory
Commission, will support refunds for unduly high prices.
Davis also said many of California 's energy troubles will be remedied by
creation of a state public power authority that would build plants as needed
or take control of utilities' transmission lines.
"If I have a legacy on electricity , it will be to leave the state
energy-independent," he said.

NEWS
Legislators considered acquisition of PG&E @dk,1,18 Plan also included buying
Edison firm @t
Christian Berthelsen
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.14
(Copyright 2001)
State lawmakers quietly circulated a proposal last month that California 's
government buy Pacific Gas and Electric Co. and Southern California Edison
for more than $3 billion.
Backers of the plan sought support from large trade and consumer groups and
were said to have approached representatives of PG&E's creditors in
bankruptcy court. It was part of a strategy laying out possible state
government solutions should PG&E be joined in bankruptcy by Southern
California Edison, which is teetering on the brink.
The idea was held up by state Assembly leadership while last- ditch efforts
are made to keep Edison from entering bankruptcy as well, according to
senators, Assembly members and members of the legislative staff.
The prospect of Edison's bankruptcy was given more credence by Raymond James
analyst Frederick Schultz, who said in a research report this week that it
becomes "more likely" every day a solution is not reached.
A three-page term sheet obtained by The Chronicle, prepared May 14 by the
office of Assemblyman Fred Keeley, D-Boulder Creek, laid out a scenario in
which the state would participate in a leveraged buyout of the utilities,
assuming their debt, taking over their assets and financing the entire plan
-- at an estimated cost of up to $3.5 billion -- with bonds to be paid off
from power sales to users.
COSTS OF ACQUISITION
According to the memorandum, the acquisition costs would be relatively low
because the "effective net equity of PG&E Company is close to, or less than,
zero" and the equity of Edison was perhaps $1 billion to $2 billion.
Keeley, through his chief consultant, Guy Phillips, declined to comment on
the proposal. A number of legislators and interest groups said both men were
advocating the proposal before it was supplanted by a newer version of the
Edison bailout plan.
State Sen. John Burton, D-San Francisco, said the proposal was going around
last month, although discussion of it has been superseded by a new plan to
rescue Edison before it files for bankruptcy. Still, he said, he'd be willing
to consider it.
"If it penciled out, I'd be for it," Burton said. "It doesn't offend me."
In a sense, the idea is just one amid a sea of others that have surfaced in
recent months as lawmakers have struggled to find a way to fix the state's
energy mess. It apparently grows out of the increasing belief that publicly
controlled power service is one of the few ways to prevent California energy
consumers from being gouged, given the example of government-run municipal
power authorities that have largely been exempt from the state's heartaches.
The proposal also comes in reaction to the deal proposed by Gov. Gray Davis
to buy Edison's transmission lines for $2.7 billion as a means of infusing
the company with cash and restoring it to operation. For that kind of money,
the thinking goes, why not get the entire companies, rather than limited
assets?
PLENTY OF HURDLES
Still, such a deal would face significant hurdles, including questions about
the legality of state acquisition of stock, and probable opposition from both
utilities. There was concern that having the state step forward as a white
knight for PG&E would encourage Edison's creditors of pushing that company
over the edge into bankruptcy in the hopes of getting the same deal. And some
consumer advocates say the deal would not solve the central problem plaguing
California 's electricity market -- the high wholesale electricity prices
being charged by generating and power marketing companies.
"PG&E and Edison have demonstrated they are unfit to serve Californians,"
said Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer
Rights. "But we are being taken to the cleaners by Enron, Reliant and Duke."
The proposal, which was subtitled "State Ownership of the Natural Monopoly
Utility Companies," said the utilities' creditors would be asked to take a 10
percent "haircut," or reduction, in the amount of money they are owed on the
utilities' debts. The utilities would be placed under the fold of California
's newly created Public Power Authority and be run under contract by an
operations and maintenance services company.
INCREASED LEVERAGE
The memorandum said the state would then have increased leverage to negotiate
with power providers for lower-cost long-term contracts.
The idea was handed out to the offices of at least three key state senators,
including those of Burton, Debra Bowen, D-Marina Del Rey, and Byron Sher,
D-Redwood City. And a source familiar with the proposal said legislative
staff communicated with representatives for PG&E's creditors.

NEWS
More poor to pay less for their PG&E bills / PUC votes to increase low-income
discount
Bernadette Tansey
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.12
(Copyright 2001)
Low-income households will get a bigger break on their utility bills -- and
more consumers will be eligible for the reductions -- under new rules passed
yesterday by state regulators.
In a unanimous vote, the state Public Utilities Commission increased the
discount from 15 to 20 percent for qualified customers of Pacific Gas and
Electric Co. and three utilities serving Southern California .
The commission took action at the urging of community groups that said
elderly and poor families were spending as much as half their monthly incomes
on gas and electricity .
"The existing 15 percent rate doesn't provide sufficient relief to low-income
consumers," said Commissioner Carl Wood, who drafted the PUC proposal.
The new regulations, which take effect immediately, also lower the bar to
qualify for the lower charges under the California Alternative Rates for
Energy (CARE) program. A family of four can now sign up if its income is
$31,100 or less -- 175 percent of the federal poverty line.
In PG&E's territory, the former cutoff for a family of four was $25,800.
The additional customers who now qualify for discounted rates can also take
advantage of a state energy efficiency program that offers help with home
weatherization and other measures to cut down utility charges.
The expanded discount program could cost as much as $60 million in lost
revenue to utilities. But Wood said other customers are unlikely to have to
make up the loss this year, because the Legislature recently approved $100
million to support the program.
PG&E spokeswoman Staci Homrig said 433,646 households are now enrolled in the
program -- between 52 and 58 percent of those eligible.
People interested in enrolling can call PG&E at (800) 743-5000.

NEWS
Creditors hear PG&E's bonus defense / Executives say retention is critical to
smoothing bankruptcy process
David Lazarus
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.14
(Copyright 2001)
Senior executives of Pacific Gas and Electric Co., in their first public
faceoff with creditors, yesterday defended $17.5 million in proposed bonuses
for managers of the bankrupt utility.
Consumer advocate Medea Benjamin, dressed in an oversized suit coat and
sporting a red tie, told the PG&E officials that she was a creditor and was
concerned about reports that the utility's leaders are prepared to depart if
they do not receive the extra financial incentives.
"Which of you is going to jump ship if you don't get these raises?" she
asked.
"Retention is a key factor," replied Gordon Smith, chief executive of the
utility. "Many of our employees have jumped ship already."
He said the current bankruptcy proceedings represent the worst chapter in
PG&E's almost 100 years of history. "This requires we have a management team
working through this process," Smith argued.
RULING IN 10 DAYS
Federal Bankruptcy Judge Dennis Montali, who now oversees all compensation
matters at the utility, is scheduled to rule on the bonuses June 18.
A committee of 11 top creditors already has given its approval to the
"management retention program," accepting the utility's argument that the
bankruptcy proceedings will go more smoothly with experienced executives at
the helm.
The proposal would double the pay of some senior managers, including PG&E
Chairman Robert Glynn, and provide bonuses of between 25 percent and 75
percent of annual salaries to hundreds of others.
Yesterday's court-mandated meeting between PG&E and its thousands of
creditors was held in an auditorium at the University of California 's
Hastings College of the Law in downtown San Francisco.
Several hundred people showed up for the event -- mostly lawyers, but also
dozens of creditors and a handful of protesters.
Most of the discussion dealt with arcane financial matters, but there were
some new developments. PG&E:
-- Reiterated its intent to pay back creditors in full, but for the first
time said the creditors also would receive interest on the amounts owed them.
The utility did not specify how much interest it will pay or where the money
will come from.
-- Suggested for the first time that smaller creditors, with claims of
$20,000 or less, probably will be broken off into a separate group and
compensated more quickly than larger creditors.
-- Revealed that the utility's total assets have a book value, as opposed to
market value, of $32 billion, while its liabilities total about $14 billion.
Of the latter amount, nearly 90 percent is owed to financial institutions and
power companies.
The creditors meeting was organized by the U.S. Trustees Office, which is
helping coordinate the bankruptcy proceedings. Steve Johnson, an attorney
with the trustees office, spent almost two hours grilling a half-dozen PG&E
executives about the utility's financial condition.
LINED UP FOR A GRILLING
The executives, sitting side by side at a single table, appeared decidedly
uncomfortable at the outset of yesterday's meeting but grew in confidence as
the questions increasingly focused on relatively mundane business dealings.
They repeated the utility's argument that bankruptcy court was the best venue
in which to deal with debts accrued as a result of California 's bungled
experiment with electricity deregulation.
They also insisted that PG&E is entitled to recover about $9 billion in
outstanding costs from ratepayers. State regulators have yet to rule on that
thorny matter.
The executives refused to answer questions about the financial status of the
utility's parent company, PG&E Corp., which has kept itself apart from the
bankruptcy proceedings. They also declined to say whether the utility
believes that power companies illegally manipulated electricity prices.
"We have made many allegations that power generators are overcharging," said
Chris Warner, PG&E's chief counsel for regulatory affairs. "The prices are
not competitive."
Energy consultant Howard Ash asked the executives about the likelihood of
breaking smaller creditors into a separate group for speedy reimbursement.
Jim Lopes, the San Francisco attorney spearheading PG&E's bankruptcy efforts,
replied that this sort of thing is common in bankruptcy cases.
"I wouldn't be at all surprised if there is an administrative class (for
smaller creditors) in any plan that is proposed," he said.
PG&E gave no indication of when it will file its Chapter 11 reorganization
plan with the bankruptcy court.
Creditors have until Sept. 5 to file claims for outstanding payments against
the utility.

NEWS
Investigators request records from L.A. utility brokers
Christian Berthelsen
?
06/08/2001
The San Francisco Chronicle
FINAL
Page A.14
(Copyright 2001)
A state Senate committee investigating alleged price manipulation of the
state's wholesale energy market has requested documents from the Los Angeles
Department of Water and Power and the state agency buying electricity on
behalf of the utilities.
The requests come as a controversy has erupted over the prices which
municipally owned utilities have charged for selling their surplus power into
the state's markets.
In a meeting yesterday with Chronicle reporters and editors, Gov. Gray Davis
said local government utilities were charging the state an average of $360
per megawatt hour during peak usage, compared with $310 for out-of-state
generators.
Davis has threatened to seize the municipal utilities' surplus electricity .
"We're going to get that power one way or another," Davis said in an
interview with The Chronicle last week.
Until this spring, the Los Angeles power department was headed by S. David
Freeman, whom Davis retained in April to advise him on energy policy. Freeman
previously denied allegations that Los Angeles was taking advantage of the
situation.
A source familiar with the investigation said the decision to ask for the Los
Angeles records was unrelated to the current controversy.
Most of the state's municipal utilities have little or no excess power to
sell. The three main public utilities that do are Los Angeles, Redding and
Glendale/Burbank. Davis has been trying to get Los Angeles to agree to a
long-term contract for its power, with no success so far.
According to the letters, investigators are seeking access to a wide range of
information, including prices charged by Los Angeles for power sold out of
state and possibly sold back into the state, operations costs, maintenance
records and bidding policies.
The letter to the state Department of Water Resources asks for the contracts
that agency has entered to buy power from generating companies. Those
contracts have been a closely guarded secret since the state began
negotiating them earlier this year.
The letters asking for the documents were sent to the two agencies Wednesday.
The committee threatened to issue subpoenas for them if they declined to
provide them freely.

Voltage-reduction project may stave off blackouts
Posted at 10:09 p.m. PDT Thursday, June 7, 2001
BY PAUL ROGERS

Mercury News

In a move that could significantly reduce the risk of blackouts in California
this summer, a group of scientists working with the state's three major
utilities has begun testing a plan to conserve large amounts of electricity
by slightly reducing the voltage on the power grid.
The theory, known as ``conservation voltage regulation,'' is familiar to all
motorists: Lift your foot from the accelerator and your car saves fuel.
If successful -- an early small-scale trial was encouraging -- the idea could
save California's treasury millions and make the difference between keeping
the lights on or off on some hot days. Yet state regulators must overcome
fears about potential damage to appliances, and the loss of some profit to
utilities, which would sell less electricity.
``It's a big deal. I think it's very promising,'' said Arthur Rosenfeld, a
board member of the California Energy Commission and a physicist at Lawrence
Berkeley National Laboratory in Berkeley.
Thursday, Rosenfeld held a conference call to plan tests with representatives
of Pacific Gas & Electric, Southern California Edision, San Diego Gas &
Electric, the governor's office and the Public Utilities Commission.
Utility representatives agreed to spend the next two weeks testing their
substations to measure the feasibility of the idea, he said.
Under the plan, California's major utilities would reduce the voltage
delivered to homes and businesses from the present level of 120 volts, to
perhaps 118 volts or 116 volts.
Such a slight drop would cause almost no noticeable change on appliances and
computers, but could dim some lights, supporters of the idea say. Meanwhile,
it also could save between 400 to 1,000 megawatts of electricity. Put in
perspective, that is enough energy for 300,000 to 750,000 homes, or the
equivalent of instantly creating one or two new power plants.
``We believe that even if customers have to suffer through some low voltages,
it might be better than having the power out,'' with stuck elevators and
darkened traffic lights, said Ron Ferree, director of grid operations for
Southern California Edison.
Last Friday, Edison tested the idea by turning down the voltage 4 percent, to
about 117 volts, at a substation in Riverside County, for 15 minutes. It
received no consumer complaints and reduced power demand about 2 percent, he
said.
Edison can make the change by radio control. PG&E, which did not return calls
Thursday, would have to manually adjust hundreds of substations.
Some experts are wary about potential pitfalls.
Home appliances, computers and other equipment are normally rated to run best
at about 115 volts. If voltage is dropped too low, say below 110 volts, it
can damage appliances by overheating motors.
``If you permanently lower the voltage, you are subjecting your motors and
compressors and appliances to greater stress and strain,'' said Ken Giles, a
press officer for the U.S. Consumer Products Safety Commission. ``That will
raise temperatures and can burn out motors.''
The key question: Can utilities turn down the voltage just a bit to prevent
blackouts, while not going too far?
``So long as you don't bring anybody's voltage down enough to damage their
equipment, it will work,'' said Julian Ajello, supervisor for gas and
electric safety at the Public Utilities Commission.
``You should aim not to go below 114 volts, with 110 as rock bottom,'' he
said.
In 1978, during a previous energy crisis, Ajello helped write the rule that
set the operating range for California's grid at between 114 and 120 volts.
Back then, the state saved energy by reducing the top range, which was 126
volts.
The change reduced energy consumption in California 3 to 5 percent, a savings
of about 4 million barrels of oil a year, according to trade journals of the
time.
The latest plan grew out of experiments at PG&E's San Ramon testing center.
PG&E scientists were working in April with Bill Wattenburg, a nuclear
physicist and former professor of electrical engineering at UC-Berkeley.
Wattenburg, who also hosts a show on KGO radio, was testing an electric
switch that could shut off partial power to homes and businesses during Stage
3 alerts.
During the tests, the researchers began turning down the voltage to
appliances, televisions, computers, pool pumps, microwave ovens and other
equipment.
``We took them down from 120 volts,'' Wattenburg said, ``all the way to 90
volts before things shut down harmlessly. I was flabbergasted.''
Wattenburg said he realized that small changes in voltage, perhaps down to
117 or 115 volts, could result in big power savings statewide.
``Here's a way to give the governor the equivalent of a new power plant or
two,'' he said. ``That way he could play poker better with these power
suppliers.''
Wattenburg noted that engineers design appliances to run on a range of
voltages so they can handle fluctuations in power from urban to rural areas,
or in other countries, or in homes with spotty wiring. A generation ago, most
U.S. power was delivered to homes at 110 or 115 volts, he said.
Experts from around the country had varying degrees of support for the idea.
``You can do it. It's possible, but there is a difficult balancing act,''
said Ken Hall, manager of distribution issues at the Edision Electric
Institute in Washington, D.C.
Electricity is moved throughout the state on a 32,000-mile network of
transmission lines carrying current at up to 500,000 volts. It is ``stepped
down'' in a series of substations and transformers for use in homes. In
outlying areas, voltage can wane, so city residents might receive 120 volts
while a rural area could get 115. Some fear that if the city level were cut
too low, the corresponding drop might cause rural ``brownouts.''
``It is a good idea, certainly worth considering,'' said T.C. Cheng,
professor of electrical engineering at the University of Southern California.
``But we have to raise it up to 120 afterward, because of the reliability of
the system. But on a short-term basis, it's better than a blackout.''

Contact Paul Rogers at progers@sjmercury.com or (408) 920-5045.

Lieberman hearings spotlight regulators' role, his ambition
Posted at 9:30 p.m. PDT Thursday, June 7, 2001
BY JIM PUZZANGHERA

Mercury News Washington Bureau

WASHINGTON -- As the new chair of a key investigatory committee, Sen. Joseph
Lieberman will launch hearings into California's electricity crisis next week
that will increase pressure on regulators to curb power prices while laying
the groundwork for his own possible presidential run.
Lieberman, the Connecticut Democrat who was former Vice President Al Gore's
running mate last year, officially announced the hearings Thursday while
expressing his belief that the Federal Energy Regulatory Commission needs to
set limits on wholesale electricity prices across the West.
Lieberman will bring members of the commission before his Senate Government
Affairs Committee on June 20. He'll try to determine if they are carrying out
their responsibilities under federal law to ``ensure just and reasonable
prices to consumers,'' he said.
``I suppose my mind is always capable of being changed,'' Lieberman said in
his first meeting with reporters since Democrats took control of the Senate
this week. ``From all that I can see -- and I've been out to California five
or six weeks ago and met with people there, I've been studying it closely --
I think that FERC has authority to act and should have acted already to give
more protection to the electricity customers of California.''
Political analysts said that trip to California in April and his growing
attention to the state's electricity problems indicate Lieberman is preparing
to run for the Democratic presidential nomination in 2004. His eagerness to
help a state that would be crucial to such a run could assist California in
getting the federal price caps state officials crave.
Lieberman has been coy about his future plans. But he's widely viewed as
among the party's front-runners, including Gore, Senate Majority Leader Tom
Daschle, House Minority Leader Richard Gephardt of Missouri and Massachusetts
Sen. John Kerry.
Courting California
If he wants to be president, Lieberman must seriously court California, said
Howard Reiter, a political-science professor at the University of
Connecticut.
``It's possible if another state were having this energy crunch he'd be
involved, but the fact that it's California makes it especially attractive,''
Reiter said.
Lieberman's press officer, Leslie Phillips, said politics were not fueling
his involvement in California's problems.
``He has a longstanding interest in energy problems as they relate to
gasoline and heating oil in Connecticut and the Northeast,'' she said. ``And
as chairman of the committee, he's got oversight over this agency that
statutorily has to set fair rates and apparently hasn't.''
Lieberman's chairmanship gives him broad power to subpoena witnesses and
records while overseeing the actions of nearly every government agency. His
focus on FERC will ratchet up the pressure on that agency to set price limits
on wholesale electricity, which it has refused to do.
The hearings also serve to highlight the difference between Democrats and
Republicans on energy at a time when national polls have shown President Bush
is vulnerable on the issue.
Legislation by Sen. Dianne Feinstein, D-Calif., to force the commission to
set price limits had been wallowing in the Republican-controlled Senate, but
Democratic leaders say they will move the bill forward if FERC doesn't act
soon.
While Lieberman said his hearings would look into how federal regulators
handled California's problems this year and before, he was specifically
critical of the response from the Bush administration since taking office in
January. Bush has been adamantly opposed to any price limits, saying they
would only discourage suppliers from selling to the state and scare investors
away from financing new power plants in California.
Lieberman said Bush and federal regulators had been too inflexible.
``It does seem to me that the Federal Energy Regulatory Commission and the
Bush administration have been following a theoretical model, an ideological
model, that is hostile to entering the marketplace with price controls,''
Lieberman said. ``And, normally, I agree with that model, but sometimes
ideology has to yield to reality, and the reality is there is no real market
competition here.''
Lieberman will hold a hearing Wednesday on the effects of deregulation in the
electricity and natural-gas industries, particularly in California and the
West, and the way the federal government has responded. His hearing on FERC's
specific role, on June 20, most likely will include all five commission
members, and possibly California Gov. Gray Davis.
Putting pressure on FERC would score political points for Lieberman in
California, particularly among Democratic officials like Davis and Feinstein,
Sherry Bebitch Jeffe, a political analyst at the Claremont Graduate School.
Davis is also a potential presidential candidate, but if he doesn't run his
backing would be important to Lieberman.
``Getting California behind you is enormously helpful'' to a Democratic
presidential bid, she said. ``Where is the biggest political ATM in the
nation?''
Weighing in
Lieberman has not always embraced issues friendly to California. His
continuing crusade against violence in entertainment has angered many in
Hollywood. But Lieberman softened his tone on that during his run with Gore
last year.
Lieberman was quick this year to weigh in on the state's electricity crisis.
He asked the U.S. General Accounting Office in April to investigate whether
FERC was carrying out its duties in California. And he traveled to California
that month to speak out about the Bush administration's handling of the
electricity crisis.
On that trip, Lieberman also met with many top Democrats in the state and key
fundraisers in Silicon Valley, San Francisco and Los Angeles, fueling
speculation that he will run.
``If he's not running for president, he's giving the best imitation I've ever
seen of someone who is,'' Reiter said.
Lieberman was one of the first senators to sign onto Feinstein's bill. But
his possible presidential ambitions led the other major co-sponsor of the
legislation, Sen. Gordon Smith, R-Ore., to threaten to skip the news
conference if Lieberman attended. Lieberman stayed away.
``I believe he's running for president,'' Smith told the Hartford Courant the
day of the news conference. ``If we inject presidential politics into this,
we could defeat the passage of needed legislation.''
Bruce Cain, a political-science professor at the University of
California-Berkeley, said Lieberman would get positive exposure in California
from the hearings.
``California emerged in the '90s as an absolutely essential win for any
Democratic presidential candidate,'' Cain said. ``The high salience of the
issue just creates an important political opportunity'' for Lieberman.

Contact Jim Puzzanghera at jpuzzanghera@krwashington.com or (202) 383-6043.

Published Friday, June 8, 2001
Davis touts conservation success
POWER CRISIS
He and businesses say it gives the state leverage in electricity market
By Rick Jurgens
TIMES STAFF WRITER
SAN FRANCISCO -- Gov. Gray Davis and a group of heavyweight corporate
executives gathered Thursday to tout their success using energy conservation
to gain leverage in the wrestling match that is California's wholesale
electricity market.
"We have the power to use less (electricity) from out-of-state generators
than they want us to," said Davis, who was flanked by about three dozen
business leaders on the 51st floor of the Bank of America tower. That, he
added, is "our best short-term weapon against price gouging and blackouts. We
have to keep the pressure on."
The business executives didn't join Davis in criticizing power producers but
pledged to cut energy use. President Liam McGee said the Bank of America
California would cut electricity use by 35 million kilowatt hours during the
rest of 2001, in part by turning off the outdoor signs at the bank's 1,000
branches.
A pledge to reduce electricity use by 20 percent, turn up thermostats to 78
degrees and reduce lighting by 25 percent was signed by 128 executives.
Thursday's event continued a series of upbeat announcements by state
officials designed to show they have gained the upper hand over power
suppliers. Still, even Thursday's pep rally set as its goal reduction, not
avoidance, of summer blackouts.
Earlier in the day, the state's top power buyer cited this week's lower
spot-market prices for electricity as evidence of progress in bringing down
wholesale electricity costs.
Prices sagged after two nuclear power plants came back on line, cool weather
reduced demand for air conditioning and long-term contracts took effect, Ray
Hart, deputy director of the Water Resources Department, said in a conference
call.
Spot market electricity traded at $41.43 per megawatt-hour in Northern
California on Thursday, down from $563.69 on May 7, according to Bloomberg
News Service.
But low spot-market prices won't necessarily lower the state's energy bill,
because the state also is buying power through long-term contracts.
Also, the long-term deals the state now is heralding could lose their luster
if power prices fall and California finds itself locked into buying expensive
energy. The average cost of power contracted so far will be $138 per
megawatt-hour for the last seven months of 2001, $84 through 2005 and $60
from 2006 to 2010, according to the state.
Hart said that by mixing long-term deals and spot-market buys, the state is
"hedging" against future price moves. Some of the deals also allow the state
to benefit from natural gas cost declines, he said.
Already, power buys have consumed most of the state's budget surplus. The
state stepped in to buy wholesale electricity in January after soaring
wholesale prices drove Pacific Gas & Electric Co. into bankruptcy and
Southern California Edison to the brink. The state's expenditures as
wholesale buyer could reach an estimated $15 billion. Higher than normal
temperatures boosted spending above projections in May, but spending is down
this month, Hart said.
The statewide total power tab is now on track to reach $55 billion this year,
up from $27 billion in 2000 and $7 billion in 1999, Davis said Thursday.
Efforts to restore the utilities to financial health have foundered, with
PG&E reorganizing under the watchful eye of a bankruptcy judge and an Edison
bailout stuck in the Legislature. Davis said Thursday he hopes the
Legislature would pass the Edison bailout by Aug. 15.
Although state officials are relying on a 43 percent retail power rate hike
to further curb consumption, that rate hike wasn't mentioned during
Thursday's public presentation. Businesses have complained that that increase
fell too heavily on them.
Bruce Kern, executive director of the Economic Development Alliance for
Business, was on stage with the governor but said afterward that, while
cutting energy use, businesses would continue to pressure the Public
Utilities Commission, which sets rates, to implement a more "equitable
distribution of costs."
Rick Jurgens covers energy and the economy. Reach him at 925-943-8088 or
rjurgens@cctimes.com.

Published Friday, June 8, 2001
Martinez investigates power plant possibility
POWER CRISIS
BY YVONNE CONDES
TIMES STAFF WRITER
MARTINEZ -- The city is investigating whether to put a power plant on
property it owns near the Martinez water treatment plant.
The City Council directed staff members Wednesday to solicit proposals from
companies possibly interested in building a "peaker" plant at the site on
Pacheco Boulevard near Howe Street.
Evergreen Power is one of two companies interested in building it, said City
Councilman Rob Schroder.
Representatives from Evergreen spoke to the council briefly Wednesday and
proposed that it sign a 90-day exclusive agreement with the power company to
determine whether the site is appropriate.
The council instead opted to seek proposals from other companies as well.
City Manager June Catalano will present a request for proposals to the
council by July 25.
"Peaker" plants produce power during times of peak power demand. They
generally are constructed in a small area with minimal environmental impact,
and can be connected to existing transmission and natural gas systems,
according to the California Energy Commission Web site.
The water treatment plant area would work, Schroder said.
However, it is very early in the process and the city must consider the
environmental impact a plant would have on and area that has the Equilon,
formerly Shell, oil refinery, he said.
It must also consider what the public will have to say.
Council members Mark Ross and Barbara Woodburn said they owe it to the city
and the state to find out what the city can do to help solve the state's
energy crisis.
"It's our duty to look at options to keep the lights on," Ross said.
The Contra Costa County Board of Supervisors vowed last month that it would
oppose any local power plant proposals because the county already has done
its share to help ease the crisis.
Three approved power plant projects in the county will take care of about 19
percent of California's projected energy shortfall, Supervisor Gail Uilkema
said in an interview Thursday.
A peaker plant is worth investigating and the decision of whether to allow a
plant should be left up to the city and the state, she said.
Council members and city staff members said they did not know how residents
would react to the idea of a power plant.
"I think you'll find that in the middle of August, when it's 105 degrees with
rolling blackouts and stoplights going out and cars crashing and air
conditioners dying," Schroder said, "people might think this is a good idea."

Published Friday, June 8, 2001
State reviewing 2 proposed Valero power plants
POWER CRISIS
The energy company has asked for permission to build 51-megawatt generators
at its Benicia refinery
TIMES STAFF
BENICIA -- State energy regulators have begun a four-month review of Valero
oil refinery's plan to build two power plants to generate enough electricity
to supply 100,000 homes.
The California Energy Commission accepted the application Tuesday and agreed
to review it under procedures that call for a four-month, expedited review on
projects that can start running by Dec. 31, 2002.
Valero Energy Co. asked for permits to build two, 51-megawatt generators that
will burn light refinery gases and natural gas to make electricity. The total
cost is about $100 million.
Valero has given corporate approval to build one of the generators to meet
electricity needs at the refinery, said company spokesman Bill Tanner. The
refinery is vulnerable to blackouts because it relies on Pacific Gas &
Electric for power.
Plans for an adjacent second generator depend on finding a financial partner
to join Valero, Tanner said.
Public meetings on the project will be held in Benicia at times to be
announced later.
Information on the Valero power generator applications is available on the
Energy Commission's Web site: www.energy.ca.gov/sitingcases/valero.

Published Friday, June 8, 2001
Energy prices drop in California
POWER CRISIS
Federal, state officials disagree over whether FERC order triggered
precipitous decreases
By Ricardo Alonso-Zaldivar
LOS ANGELES TIMES
WASHINGTON -- A widely criticized federal order to limit California power
prices significantly reduced rates for last-minute electricity purchases
during two power emergencies last week, new data shows.
Evidence also emerged Thursday of a broad downward trend in California energy
prices -- well beyond what can be attributed to the consequences of
government intervention.
The unexpectedly positive data on the initial impact of the Federal Energy
Regulatory Commission's price limits immediately touched off a stormy debate.
The agency's embattled chairman claimed vindication. But critics said
electricity generators were already finding loopholes in the price limits.
The FERC order -- which went into effect May 29 -- resulted in a 64 percent
cut in the wholesale price of power immediately after an emergency was
declared the next day, according to data posted on the California Independent
System Operator's Web site.
Prices dropped from $300 per megawatt-hour just before noon to $108.47 the
following hour after Cal-ISO, the state's power-grid operator, declared an
official emergency that triggered the federal price limits.
A similar scenario unfolded during another declared emergency on May 31.
Prices dropped from $187 per megawatt-hour before the emergency declaration
to $66.51 immediately after.
Still, the continued, across-the-board drop in California power prices is
beginning to attract at least as much attention as the controversy over
FERC's actions.
According to analysts at Platts Electric Utility Week, which monitors the
industry, forward-looking prices for August delivery of electricity in
Southern California have fallen 69 percent since April. Prices for August
electricity stood at $220 per megawatt-hour on Wednesday, down from $700 in
April.
The figures are significant because they apply to purchases made under
long-term, fixed contracts, not just the emergency purchases made by Cal-ISO
and subject to the FERC order.
Market watchers at Natural Gas Week reported that gas prices at a key
pipeline junction on the California-Arizona border had dropped precipitously.
Prices fell from $8.16 per million British thermal units on Wednesday to
$5.93 at the close of business Thursday -- a 30 percent plunge in one day.
High natural-gas rates have been widely blamed for aggravating California's
power crisis, since gas is the fuel most commonly used by generators.
At FERC, Chairman Curt Hebert said the lower prices during last week's power
emergencies show that the commission's efforts are finally paying off.
"Thus far, what we are seeing is that the price-mitigation order is bringing
real-time prices down, which is exactly what I said it would do," Hebert said
in an interview.
But Cal-ISO officials said it was too soon to break out the champagne.
Indeed, the state is threatening to sue Hebert's agency for not doing enough
to restore "just and reasonable" prices in California.
"It is too early to make any conclusions at this point," said Stephanie
McCorkle, a Cal-ISO spokeswoman. "We just feel we need more days of
emergencies to see how it is really working."
The FERC order requires California generators to offer all their available
power for sale when Cal-ISO declares an emergency.
But by contracting to sell electricity a day or more in advance, generators
can essentially tell Cal-ISO they have no power available to sell in an
emergency. Such a maneuver becomes all the more attractive if prices being
paid in surrounding states are higher than the controlled price offered in
California during an emergency.
"We saw an increase in exports pretty quickly as a result of that (FERC
order)," said Ray Hart, deputy director of the state Department of Water
Resources. "So that clearly shows they're looking for ways around it. As soon
as they export it, they bring it right back through a marketer, and then the
marketer has a price that's not challengeable under the FERC order."
Hebert disputed that, saying FERC can order marketers to justify their
prices.

California's energy prices suddenly drop
Davis' administration credits long-term contracts.
June 8, 2001
By JOHN HOWARD and KATE BERRY
The Orange County Register
SACRAMENTO Prices for California's emergency electricity have suddenly and
dramatically fallen to a fifth of what they were just weeks ago - finally
offering the reeling state a glimpse at a path out of a crisis that is
sapping its treasury and threatens to make rolling blackouts a way of life.
Although the Gov. Gray Davis administration's gleeful financial report
Thursday marks the most upbeat energy news the state has had in months,
experts cautioned that factors out of the state's control could quickly pitch
California back into panic mode.
Several factors are at work in the dive in power costs:
Davis administration officials mainly attribute it to the impact of the
long-term energy contracts negotiated by the state finally kicking in. As
more power is locked up in contracts, there is more competition among
companies to sell the remainder, further lowering prices, said Ray Hart of
the state Department of Water Resources, the state's energy-buying arm.
Davis aide Nancy McFadden, said power companies also are fearful of charging
excessively because of state, federal and local investigations into their
market conduct.
An early onset of "June gloom" has kept temperatures relatively low in the
past few weeks, thus reducing demand.
More hydroelectric power than expected has been available out of Pacific
Northwest.
The past week has seen a sharp drop in the number of electricity plants that
have been shut down for repairs.
Typically, power plants representing 8,000 to 12,000 megawatts have been
idled at a given time. On Thursday, however, just 4,600 megawatts was
offline.
But experts cautioned the favorable prices and low demand could disappear
quickly in the summer heat as air conditioners crank up, or if power plants
don't come into operation as expected.
Also, they said, the administration's supply outlook relies heavily on
conservation that may not materialize in a torrid summer.
"I just can't imagine when California starts heating up in July and August,
that those prices are going to stay anywhere where they are now," said Mike
Hansen of the Bonneville Power Administration, the Oregon-based agency that
produces power from 29 dams.
But the Davis administration on Thursday focused on the contracts. Through
the end of May, the state had 38 signed contracts with power producers and
merchants, up from 24 in April.
"We are enjoying lower prices because we have almost half of the 'peak' power
in contracts," Hart said.
When the state is forced to buy off-contract on the so-called spot market,
peak power - that electricity purchased at the last minute to avoid outages -
is the costliest you can buy.
On May 9, it reached $1,990 per megawatt-hour, and last week one company said
it charged $3,880 per megawatt-hour over the winter. Both sales were for
relatively small amounts of energy.
More typically during the crisis, power prices have generally ranged to $500
per megawatt-hour. But during the past two weeks, they dipped to below $100.
Under the contracts, the average cost of the power was $284 through the first
quarter, dropping to $138 by midyear. It will rise slightly to $142 by year's
end. Over the next five years, the average contract power cost is $84, and
$72 over the next 10 years, according to Davis' figures.
Overall, the administration says it has nearly three-fourths of the emergency
power it needs locked up in contracts, and it is working on the remainder.

Energy notebook
State on track to spend $20 billion buying electricity
June 8, 2001
Sacramento California has spent more than $7.2 billion buying electricity for
its cash-strapped utilities since January, and will need at least another
$500 million this month, the state Department of Finance said.
Gov. Gray Davis notified legislators that the state will need $500 million
more beginning in 10 days to buy electricity on behalf of its three
investor-owned utilities, according to a letter from the Department of
Finance.
At current rates, the state is on track to spend more than $20 billion buying
electricity this year, a record amount for power purchases and a total that
exceeds the record $13.4 billion in bonds the state Legislature authorized
for electricity purchases in 2001. The bonds are scheduled to be sold in
August.
Utility president defends bonus requests for execs
San Francisco The president of California's biggest utility defended a
request for $17.5 million in employee bonuses Thursday, saying the money will
keep top executives from leaving the bankrupt company.
"The restoration of the company's financial health requires that we have a
rank-and-file team," said Gordon Smith, president of Pacific Gas and Electric
Co. "Retention is a key factor."
Some big companies vow 20% power cuts
San Francisco Bank of America Corp., Dreyer's Grand Ice Cream Inc., Levi
Strauss & Co. and 134 other companies promised to cut their electricity use
in California 20 percent through October to help prevent statewide blackouts.
The companies said they will use less power by reducing lighting in offices
and other facilities, turning off office equipment not in use, and setting
thermostats at 78 degrees or higher.
Regulators to consider rescue plan for Edison
Rosemead California power regulators may consider parts of Davis' rescue plan
for Southern California Edison next week, including how to devise a rate plan
for its power plants, utility executives said.
The California Public Utilities Commission put four items regarding the plan
on its agenda for a June 14 meeting, said Ted Crave, CFO of Edison
International, the utility's parent.
In other news:
Davis approved the construction of two power plants that will provide enough
electricity to light 180,000 homes by September: a gas-fired plant in San
Bernardino County that will eventually produce 180 megawatts, and a smaller
plant that will produce 49.5 megawatts at times of peak demand in Escondido.
The California Public Utilities Commission on Thursday approved a San Diego
Gas & Electric plan to have businesses power up generators this summer to
avoid rolling blackouts.
State legislators delayed until June 13 a meeting on whether to force
utilities to pay some alternative-energy generators 15 percent of back debts.
Bloomberg News and The Associated Press contributed to this report.

PUC raises rate discount for poor families
But many low-income customers aren't taking advantage of the program.
June 8, 2001
By BARBARA KINGSLEY
The Orange County Register
The California Public Utilities Commission voted Thursday to knock an
additional 5 percent off the electric bills of poor families. But many
eligible families aren't taking advantage of the discounts.
The unanimous PUC vote gives the poor a discount of 20 percent on their
monthly bill, up from 15 percent. The PUC previously exempted low-income
utility customers from rate hikes approved last month.
Commissioner Carl Wood said the savings will help ease the financial worries
of the state's poorest ratepayers.
"It is critical that we act to provide relief to these most vulnerable
customers," Wood said.
Yet only about 588,000 Southern California Edison customers have applied for
the California Alternate Rates on Energy Program, known as CARE. About 1
million are eligible, including about 300,000 in Orange County.
"That is a significant number," said Edison spokesman Steven Conroy.
Edison serves 4.3 million customers in Central and Southern California.
About 225,000 San Diego Gas & Electric Co. customers are eligible for the
program, and 147,000 have signed on. SDG&E serves southern Orange County.
Anaheim Public Utilities is not covered by the program.
The PUC also increased income limits for eligible families. Under the new
CARE guidelines, a family of four with a household income of $31,100, or a
single person making $22,000 or less, would qualify. The Legislature
allocated $100 million to fund the expansion of the program.
Edison launched a direct-mail campaign to publicize the CARE program, using
census data to pinpoint neighborhoods where families are likely to qualify.
A door-to-door campaign by the Orange County Community Development Council
quickly signed up 1,800 for the electric-rate reduction program.
"Notification of our residents requires a house visit or a phone call," said
Allen Baldwin of the Orange County Housing Corporation, adding that some of
his clients, many of whom work in service jobs, cannot read.
"It's a matter of getting over the communications wall," said Sister Marie
Gaillac, director of the Justice Center for the Sisters of St. Joseph. "The
language is so complex. The issues are so complex. The poor can't get through
it. It's hard for everybody."
Edison customers can call (800) 655-4555 for more information. SDG&E
customers can call (800) 411-7343.

Taco Bell's taco bill includes energy fee
To cover rising costs, chain charges an extra 15 cents per customer.
June 8, 2001
By ANNE C. MULKERN
and ANDREW BLUTH
In the latest sign the state's electricity crisis is eating into the economy,
some Taco Bell restaurants this week added a 15-cent energy surcharge to all
purchases.
Irvine-based Taco Bell, part of the nation's second-largest fast-food chain,
Tricon Global Restaurants in Louisville, Ky., said escalating electricity
costs forced the move.
The company would not say how many of its 360 Southern California restaurants
are charging the fee.
The surcharge comes as many restaurants, hotels and other businesses grapple
with surging electricity and natural-gas prices. Numerous restaurants have
raised prices to pass along those costs, said John Dunlap, president of the
California Restaurant Association, a trade association of 15,000 restaurants.
Many hotels now charge energy surcharges of $2 to $3 per night, but few
restaurants have adopted that strategy.
Taco Bell likely chose the surcharge over raising prices because consumers
understand energy costs are rising, restaurant analyst Bob Sandelman of Villa
Park said.
The surcharge also implies that the fee will be temporary, he said.
But at least one consumer found the surcharge sneaky. Sherri Horner of Aliso
Viejo encountered it Thursday after buying a chalupa, cinnamon twist and
beverage from a Tustin Taco Bell.
"If the energy costs go up and they have to raise the price of food, that's
fine," Horner said. "If they call it a surcharge, it makes it sound like a
government fee.''
Several Orange County- based fast-food chains, including In-N-Out, El Pollo
Loco and Carl's Jr. parent CKE Restaurants, said they have no plans to raise
prices but are carefully monitoring energy costs.
Taco Bell's move may spark a similar response from other chains, said
In-N-Out's vice president of operations, Carl Van Fleet.
"Any time one of the bigger chains makes any kind of strategic move on
pricing, the rest of the industry always sits up and takes notice,'' he said.
"I think you'll see other people considering (a surcharge).''
San Diego-based Jack In The Box raised prices 1.8 percent this year to help
offset energy costs and is planning another hike but not a surcharge.
Taco Bell's parent company, which also owns Pizza Hut and Kentucky Fried
Chicken, said last month in an earnings report that energy costs rose
significantly in the first three months of the year.
The higher energy costs come as Taco Bell struggles to improve its bottom
line. Tricon has tried mightily in the past year to boost Taco Bell's sales,
which have been shrinking at sites open at least a year.
Most restaurants operate with narrow profit margins and can't readily absorb
increased costs, said Dennis Lombardi, executive vice president of Technomic
Inc., a Chicago food-service consulting firm.
A restaurant's energy costs typically equal 3 percent to 5 percent of its
sales dollars, he said.
Many restaurants have seen their energy costs double in the past year, said
Dunlap of the restaurant association. In addition, higher gas prices have
driven up food costs because food must be delivered.
Taco Bell restaurants with the surcharge post a telephone number consumers
can call for information, (800) Taco Bell. A worker answering that line
Thursday incorrectly said the state is mandating the surcharge.
Taco Bell spokeswoman Laurie Gannon said that the employee was misinformed.

Developments in California 's energy crisis
?
06/08/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.
Developments in California 's energy crisis:
FRIDAY:
- No power alerts Friday as reserves stay above 7 percent.
THURSDAY:
- California 's power buyers have locked in enough power in long-term
contracts to help bring wholesale electricity prices down to near-normal
levels, state officials say. Helping cut prices are better-than-expected
conservation efforts by Californians, more power plants returning to service
and more scrutiny of electricity generators by several investigators.
- Two more power plants have been approved by state regulators. They will
eventually add much-needed power to California 's grid. The plants include a
49.5 megawatt peaker plant and a 180 megawatt power plant in San Bernardino
County.
- The state Senate approves a bill that requires the state Public Utilities
Commission, when establishing blackout priorities, to consider the effect of
blackouts on the health and safety of people who live in areas with extremely
high temperatures. The author, Sen. Jim Battin, R-Palm Desert, says during
the rolling blackouts that hit the state last month, customers in the desert
lost electricity when temperatures were hitting 110.
- The Senate also approves a bill that would let about 15 businesses,
including Universal Studios, that now get power from both the Los Angeles
Department of Water and Power and Southern California Edison or another
supplier to get all their electricity from the LA department. LADWP operates
its own transmission grid and isn't subject to rolling blackouts ordered by
the ISO.
- State power regulators increase the electric bill discount for low-income
customers from 15 percent to 20 percent. Commissioner Carl Wood says the
Public Utilities Commission must protect the state's most vulnerable
ratepayers. The PUC says it will use money previously allocated for
low-income programs by the Legislature.
- The PUC also approves a request from San Diego Gas & Electric Co. and San
Diego County businesses for big customers to get paid by SDG&E to lower the
state's power demand by using diesel generators during power emergencies. San
Diego businesses will receive 20 cents for each kilowatt hour they save.
- Gov. Gray Davis announces a plan to install more than 3,400 real-time
electricity meters in businesses in the Los Angeles area. The meters bill
customers at higher rates during peak times, encouraging conservation.
- No power alerts Thursday as reserves stay above 7 percent.
- Shares of PG&E Corp. close at $11.95, up 88 cents. Shares of Edison close
at $11.01, up $1.03. Shares of Sempra Energy, the parent company of San Diego
Gas and Electric Co, closed $26.58, down 13 cents.
WHAT'S NEXT:
- Davis' representatives continue negotiating with Sempra, the parent company
of San Diego Gas and Electric Co., to buy the utility's transmission lines.
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight
supply worsened by scarce hydroelectric power in the Northwest and
maintenance at aging California power plants are all factors in California 's
electricity crisis.
Edison and PG&E say they've lost nearly $14 billion since June to high
wholesale prices the state's electricity deregulation law bars them from
passing on to consumers. PG&E, saying it hasn't received the help it needs
from regulators or state lawmakers, filed for federal bankruptcy protection
April 6.
Electricity and natural gas suppliers, scared off by the two companies' poor
credit ratings, are refusing to sell to them, leading the state in January to
start buying power for the utilities' nearly 9 million residential and
business customers. The state is also buying power for a third investor-owned
utility, San Diego Gas & Electric, which is in better financial shape than
much larger Edison and PG&E but also struggling with high wholesale power
costs.
The Public Utilities Commission has approved average rate increases of 37
percent for the heaviest residential customers and 38 percent for commercial
customers, and hikes of up to 49 percent for industrial customers and 15
percent or 20 percent for agricultural customers to help finance the state's
multibillion-dollar power buys.

National Desk; Section A
California Gets a Reprieve as Power Prices Fall
By RICHARD A. OPPEL Jr.
?
06/08/2001
The New York Times
Page 16, Column 1
c. 2001 New York Times Company
After months of baleful forecasts about California 's worsening energy
situation, the outlook has changed markedly, at least for the moment.
Electricity prices in California have fallen sharply in the past two weeks,
giving the state its first breathing room since a year ago.
The reason for the sudden turnaround is not entirely clear, though cooler
weather, the return to service of power plants that had been taken down for
maintenance, lower natural gas prices and conservation by consumers are all
playing a role.
Industry and public officials were quick to caution yesterday that the state
still faced summer blackouts and that many factors could send prices
spiraling higher again. But, for now, practically everyone involved is taking
some kind of credit.
Aides to Gov. Gray Davis, who only a month ago warned of widespread power
disruptions in early June, praised Californians' conservation as well as the
long-term contracts the state signed with power generators to stabilize
prices. The companies that generate electricity say that while the relief may
be temporary, it demonstrates that they are not manipulating prices and that
the market is capable of fixing itself. Some consumer advocates, meanwhile,
contend that with the Federal Energy Regulatory Commission under pressure to
investigate the price spikes that occurred in December and earlier this year,
the companies are lying low.
Whatever the correct combination of factors, daily spot prices for
electricity have dropped to less than $70 a megawatt-hour from more than $400
in late May, according to Platts Power Markets, an industry publication.
Contracts for electricity to be produced in August, the month of the highest
demand, have fallen to about $200 a megawatt-hour from as high as $700 in
April.
Some California energy officials said that the speeded-up efforts to bring
new power plants on line and significant savings from conservation were
helping by increasing supply and cutting demand.
But no one is willing to bet how long the trend will continue. ''We've been
able to push back on prices, and the prices have taken quite a tumble,'' said
Ray Hart, deputy director of the California Department of Water Resources,
which has been negotiating long-term power purchases for the state. But when
hotter weather arrives, he said, ''we fully expect prices are going to be
much higher.''
Joe Bob Perkins, president of Reliant Energy's wholesale group, one of the
largest owners of generation plants in California , warned that the state
should not take ''false comfort'' in the falling prices.
''We haven't done anything to fix the long-term supply and demand problems
yet, and I am still very concerned about this summer,'' Mr. Perkins said.
''We do not want to confuse price stability with having averted, or even
mitigated, the amount of blackouts we may see this summer.''
Still, state officials say the lower prices appear to have given new leverage
in their dealings with electricity generators. Mr. Hart said that while the
state would honor contracts it had already signed to buy long-term power from
generators, negotiators were now demanding better terms for new or incomplete
deals. The state has purchased almost half of the power it expects to need
during peak periods this summer, and Mr. Hart credited that with reducing the
demand for power in the marketplace and playing a role in the price decline.
Some causes of the falling prices are clear. Two weeks ago, power plants that
generate 10,600 megawatts of electricity or enough to light eight million
homes were off-line for maintenance, according to the California Independent
System Operator, the independent agency that runs the state's electricity
grid. By yesterday, the number of megawatts off-line had dropped to 4,800, as
generators completed maintenance and brought plants back into service in
preparation for the summer.
According to the California Energy Commission, the state will also have 5,000
megawatts from new power plants that will be in operation by this fall,
including 2,200 megawatts up and running by next month.
West Coast consumers are also using less power. In California , total
electricity use fell 2 percent in May compared with the same period last year
and it fell 11 percent after factoring in changes in the weather and economic
growth, according to the state energy commission. Demand may fall further
once California consumers start receiving bills containing electricity rate
increases of 30 percent to 50 percent that go into effect this month,
analysts said.
Reduction in demand from the Pacific Northwest, which competes with
California for wholesale power, also appears to be playing a role. The
Bonneville Power Administration, a large wholesale power generator in the
Northwest, said it had already signed agreements to reduce demand from
customers by 1,200 megawatts, or about 11 percent. Officials at the federal
agency say they hope to be able to reduce demand by another 1,200 megawatts
by the end of the month.
Mike Hansen, a spokesman for the administration, said that a rate increase
planned for Oct. 1 that could have been as high as 250 percent now may be no
more than 75 percent.
Prices for natural gas which powers about half of the state's generation
plants during peak times have also fallen sharply in the past week. In
Southern California , the average price during last week's ''bidweek''
process, which determines the price for much of the gas sold in the following
month, was $11.70 per million British Thermal Units, according to Natural Gas
Intelligence, an industry publication. But spot prices for gas sold on a
daily basis have since drifted to below $7, compared with a high of almost
$60 in December and current average prices of less than $4 across most of the
nation.
Because of this month's savings, the average homeowner's gas bills from
Pacific Gas & Electric, the giant California utility that is in bankruptcy
because of the power crisis, are expected to drop 38 percent this month.
Some analysts and industry officials, including Mr. Perkins of Reliant
Energy, said that the moderate price caps instituted earlier this year by
federal regulators may be partly responsible for keeping prices in check. But
Mr. Hart said the price caps were having no effect, and he reiterated
longstanding complaints of California officials that federal regulators are
not doing enough for the state.

National Desk; Section A
Senate Democrats to Press Inquiry Into High Energy Prices
?
06/08/2001
The New York Times
Page 23, Column 1
c. 2001 New York Times Company
WASHINGTON, June 7 -- With Democrats now in control of the Senate, its main
investigating committee will focus on high energy prices. That will include
conducting an inquiry into whether the federal agency that regulates
electricity markets has been properly enforcing the law.
The new chairman of the panel, the Governmental Affairs Committee, is Senator
Joseph I. Lieberman of Connecticut, who said today that it would take on
tough issues in a bipartisan manner.
''I will refuse to allow oversight to become overkill,'' Mr. Lieberman said
at a news conference.
The committee's focus on energy is part of a larger strategy by Democrats to
try to highlight their differences with the Bush administration.
The committee's first hearing will explore the effects of deregulation on
natural gas and electricity prices. Among those testifying will be economists
who recently advocated temporary curbs on prices in volatile wholesale
electricity markets like that in California .
Mr. Lieberman supports price caps as a temporary solution in such markets.
The Bush administration opposes them on the grounds that they distort the
market by inhibiting investment in new plants.
Mr. Lieberman also said he planned to examine ''whether the Federal Energy
Regulatory Commission was adequately carrying out its duties to ensure 'just
and reasonable' electricity prices to consumers.''
The commission, an independent agency that oversees a $250 billion industry,
is charged with enforcing a 1935 law that calls for fair electricity prices.
But as the energy markets have moved toward deregulation, the commission has
tended to defer more to market forces, leading critics to question its
enforcement of that law.
Until this year, the commission had brought only one case asking for refunds
in the electricity markets, collecting $598. More recently it sought $125
million in refunds from electricity generators for what it said were
overcharges of California utilities. Mr. Lieberman said he would look at the
commission's record under Democratic and Republican administrations.
He said he would also look at ''serious allegations'' raised by Senator
Dianne Feinstein, Democrat of California , concerning the commission's
relationship with the industry it regulates. Ms. Feinstein's concerns include
a discussion earlier this year between the commission's chairman, Curt Hebert
Jr., and Kenneth Lay, the chairman of the Enron Corporation, the nation's
biggest electricity trader. They said they discussed commission-related
issues and Mr. Hebert's continued tenure as its chairman, though they had
different interpretations on the talks.
Mr. Lieberman said the committee would use its subpoena power if it was
needed to hear testimony from industry officials.

Economy

Electricity Prices Fall in California, But Can It Last?
By Rebecca Smith and John R. Emshwiller
Staff Reporters of The Wall Street Journal
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06/08/2001
The Wall Street Journal

A2
(Copyright (c) 2001, Dow Jones & Company, Inc.)
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California officials say the state is enjoying at least a brief respite from
sky-high wholesale electricity prices. But some of the relief is the result
of a combination of factors that may prove temporary.
The price of power solicited by the state's grid operator, needed to keep the
system in balance, dipped to $85 a megawatt hour shortly after noon yesterday
before rising past $200 a few hours later. On many occasions in the past
week, power has been available for less than $100 a megawatt hour, about half
the price of a week or two ago. In recent weeks, power prices have often been
several hundred dollars a megawatt hour.
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But market data are thin nowadays. In January, the state's energy auction,
organized as part of California's utility-deregulation effort, went bust and
the state government began buying large amounts of electricity directly from
suppliers. The state has been steadily clamping down on the release of
trading information.
State officials attribute generally lower prices to several factors. They
include relatively mild weather in recent days, conservation efforts in the
state, the return of some major power plants to full operation and continued
progress in locking in long-term supplies at below-spot-market prices. Prices
for natural gas, a major power-plant fuel, also have fallen recently in parts
of California.
But it is doubtful that the price dip represents a sea change in the overall
market, say some power traders. Surplus power has been available to
California from the Pacific Northwest for the past two weeks as a result of
snow-melt runoff in the Snake River hydroelectric system. That runoff,
however, appears to be finished for the year.
It is anyone's guess how much water will be available to generate power
through the Columbia River basin that lies below the Snake system. Experts
aren't optimistic, as rainfall is at a 56-year low for the region.
Ray Hart, deputy director of California's Department of Water Resources, said
yesterday that recently signed power contracts reduced the average cost of
power under contract through 2005 to $84 a megawatt hour from the $86 a
megawatt hour that was cited in April. "We've been sharpening our pencils all
along through this," Mr. Hart said.
However, the $84 figure is still higher than the $79-a-megawatt-hour average
that was cited in March when Gov. Gray Davis announced the initial batch of
long-term agreements with generators. Deals negotiated since then had
evidently been for somewhat higher average prices, though it appears that the
average has begun turning down recently.
For a 10-year period ending in 2010, the average price of power under state
contract appears relatively unchanged, falling to $60 a megawatt hour in May
from $61 in April. Total generating capacity under contract increased to
10,950 megawatts from 9,725 megawatts, about one-quarter of the state's
capacity.
It is still impossible to independently verify the average prices, because
the state refuses to release the 38 final contracts it says it has signed
that obligate state residents to pay tens of billions of dollars for power in
coming years. (Several newspapers, including The Wall Street Journal, have
filed suit in San Diego state court to compel public release of the
contracts.)
The state remains vulnerable to any new surges in spot-market prices. The
state's current analysis shows the spot market supplying nearly a quarter of
the power that the state will need to buy this summer. If conservation
efforts don't do as well as forecast by the state, as much as nearly half the
state's purchasing needs might have to be met through the short-term market.
The state legislature has authorized the water agency to spend as much as
$8.2 billion on purchases, with the money being borrowed from the state's
general fund. Those borrowings are supposed to be repaid by a record
municipal-bond issuance of as much as $13.4 billion later this year. To help
foot that bill, California electricity users were hit this month with the
largest rate increase in state history.
The governor's office also said that energy-conservation efforts have
contributed to the recent fall in prices. It said demand was down 11% in May
from May 2000. "It's been fairly remarkable how people have responded" to the
governor's call to conserve, said the water agency's Mr. Hart.
However, that 11% figure is based on certain adjustments made by state
officials to take into account year-to-year differences in weather and
economic activity. Actual year-to-year demand fell only 4.8%, according
statistics supplied by the California Energy Commission. Some
private-industry analyses indicate that lower demand might have more to do
with milder weather than with active conservation.
"It's way premature to declare victory," said Joe Bob Perkins, head of
wholesale-power sales for Reliant Energy Inc., a big Houston-based power
marketer that owns plants in California. "Contracts provide price stability,
but they don't prevent blackouts. There's still a big supply-and-demand
imbalance."
Projections by the state grid operator indicate that California is likely to
be thousands of megawatts short of the energy it will need this summer to
maintain uninterrupted service.
Some new generating plants have been slower to come into operation than
expected. Richard Sklar, an adviser to the governor, said on Sunday that he
had hoped 2,200 megawatts of new plants would be online by the end of June.
It now appears only 1,500 megawatts will be completed by then.