Please see the following articles:

Sac Bee, Thurs, 5/10:  "PUC sweats $4.8 billion rate raise"

Sac Bee, Thurs, 5/10:  "PG&E wants panel to get boot"

Sac Bee, Thurs, 5/10:  "Major job losses predicted; governor presses
generators"

Sac Bee, Thurs, 5/10:  "Bond-sale bill goes to Davis "

Sac Bee, Thurs, 5/10:  "State revenue outlook shrinks "

SD Union, Thurs, 5/10:  "No blackouts despite dip in supplies"

SD Union (AP), Wed, 5/9:  "Biggest users face huge rate hikes under PUC plan"

LA Times, Thurs, 5/10:  "Rate Hikes Up to 60" Proposed by PUC Chief"

LA Times, Thurs, 5/10:  "Bush Energy Stance Begins to Worry Some in GOP"

LA Times, Thurs, 5/10:  "In Office Buildings, the Lights Are On, But Nobody's
Home"

LA Times, Thurs, 5/10:  "Power Shifts to Congress"   (Commentary)

SF Chron, Thurs, 5/10:  "Proud state forced to knees in power hunt"

SF Chron, Thurs, 5/10:  "Power bills set to skyrocket for heavy users
Graduated rate increase would take effect in June "

SF Chron (AP), Thurs, 5/10:  "Developments in California's energy crisis "

SF Chron (AP), Thurs, 5/10:  "PG&E says fewer small power plants offline "

SF Chron (AP), Thurs, 5/10: "A look at two rate designs before power
regulators"

SF Chron, Thurs, 5/10:  "Lights stay on despite failure of big plant"

SF Chron, Thurs, 5/10:  "PG&E fights consumer committee
Obstruction feared in bankruptcy case "

SF Chron, Thurs, 5/10:  "Generators silent on Davis plan
He offers lower compensation to stave off Edison bankruptcy "

Mercury News, Thurs, 5/10:  "Rate plans shield most households"

Mercury News, Thurs, 5/10:  "Energy bond plan gets final legislative OK,
faces delay"

Mercury News, Thurs, 5/10:  "Fusion research gets a boost"

OC Register, Thurs, 5/10:  "Power is Money
PUC details plan to raise Edison rates up to 34%. Half of users to see no
hike"

OC Register, Thurs, 5/10:  "Economic crisis in forecast"

OC Register, Thurs, 5/10:  "GOP stalls sale of bonds with vote"

OC Register, Thurs, 5/10:  "Electricity notebook
Davis asks power suppliers to accept 30% less than owed"

OC Register, Thurs, 5/10:  "Regulators says more electricity rate hikes are
likely"

OC Register, Thurs, 5/10:  "Starting all over again
The Legislature's special session on the power crisis ends today -- with more
work to do at an added cost"

OC Register, Thurs, 5/10:  "Davis is set to sign a $13.4 billion bond-issue
measure
today to cover electricity costs"

OC Register, Thurs, 5/10: "Papering over state electricity problems"

Individual.com (AP), Thurs, 5/10:  "Task Force To Propose Legislation"

Individual.com (AP), Thurs, 5/10:  "Stage 2 Electrical Emergency Declaration;
SCE to Curtail 'Load' for Some Customers"

Individual.com (Bridgenews), Thurs, 5/10:  "[B] FULL/ Pacific Gas & Electric
restores all Qualifying
Facilities --Pacific Gas & Electric says 8 of 300 QFs still shut down"

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PUC sweats $4.8 billion rate raise
By Carrie Peyton
Bee Staff Writer
(Published May 10, 2001)
Big industries' electric bills would leap 50 percent or more and household
bills would rise an average of 11 percent to 17 percent under two proposals
outlined by state regulators Wednesday for revamping electric rates.
The twin proposals are efforts by Loretta Lynch, president of the state
Public Utilities Commission, and Christine Walwyn, a PUC administrative
judge, to decide how to divide the burden of a $4.8 billion rate hike.
"Both of them are just going to be very, very hard on business," said Bill
Booth, an attorney for the California Large Energy Consumers Association. He
said it appeared that some cement and steel makers could face 90 percent rate
hikes.
But small consumers were equally dismayed.
"This never should have happened in the first place," said Bob Finkelstein,
an attorney with The Utility Reform Network, placing the blame for soaring
rates on electric deregulation.
"In terms of allocating the fallout from the failed experiment, they seemed
to do a reasonable job. But it assumes that the fallout should be allocated
in the first place, and that just sticks in our craw," he said.
Several PUC commissioners have said they want to select a new rate design at
a special meeting Monday, so the higher electric bills can begin going out
June 1 to customers of Pacific Gas and Electric Co. and Southern California
Edison.
One version before the PUC would include Lynch's call to begin looking for
ways to charge federal installations power rates that are tied to wildly
gyrating wholesale costs.
Reportedly first floated as a joke, the idea quickly took hold within the
PUC. Lynch said she wants to set it up as "pilot program," perhaps beginning
in mid-summer, so the federal government can test its own theories about
unfettered market prices being good for consumers.
"I don't believe it's a dig at the FERC (Federal Energy Regulatory
Commission)," she said during a news conference.
But she repeated her attack on federal regulators, saying electric rates are
rising in California only because the FERC has refused to cap runaway
wholesale electric prices.
Commissioner Richard Bilas later called a special federal rate "silly" and
"kindergartenish," and said the proposal was clearly intended "just to get
back at the federal government."
Any of the five appointed commissioners can offer an alternate version of the
rate design, as Lynch did. The alternates will be considered alongside the
proposal by Walwyn, the judge who presided over lengthy hearings on how the
new rates should be crafted.
She recommended increases that would fall slightly more softly on residential
customers -- averaging 11 percent for Edison and 15 percent for PG&E -- and
more heavily on large industrial users, averaging 52 percent for Edison and
55 percent for PG&E.
But within those averages could be much higher individual increases, and
advocates for everyone from farmers to manufacturers waited anxiously
throughout the day for detailed tables that would list rates for dozens of
customer categories.
"I have got my expert economist standing by to look at the numbers when they
come out," said Ron Liebert, associate counsel for the California Farm Bureau
Federation.
The release of the rate proposal has been delayed repeatedly as the PUC tried
to cram work that usually takes months into just a few weeks, and many of its
details remained obscure late Wednesday, dismaying those who are still
arguing for changes.
"We have to file comments on this by Friday. What they're doing is, they're
shutting down the comment period," said Jack Stewart, president of the
California Manufacturers & Technology Association.
He said it appears that some rates could nearly double, and "that's just a
death knell for many California manufacturers."
Lynch provided only sketchy summaries of her ideas, saying she wanted to
raise residential rates 16 percent for Edison and 17 percent for PG&E on
average, raise industrial rates 50 percent to 52 percent and cap agricultural
rate increases on a sliding scale from 23 percent to 30 percent, partly at
Gov. Gray Davis' urging.
She said that about half of households statewide would see no increase under
a state law that protects those who use less than 130 percent of a "baseline"
amount. However, PG&E has calculated that far more households -- 69 percent
-- use more than the baseline at some point during the year.
PG&E's baseline varies by region and season but generally runs between 300
and 400 kilowatt-hours, or about 50 percent to 60 percent of average
electricity use per household. It was created to give people access to a
minimal amount of power at a lower rate.
The heaviest household users still would see no increase on their first few
hundred kilowatt-hours, but after that prices would rise sharply, in tiers,
so that some households could see their overall bills rise 34 percent or
more.
Lynch and Walwyn also have proposed "bill limiters" so that businesses with
unusual usage patterns won't get hammered by unintended rate spikes.
The increases will not affect customers of the Sacramento Municipal Utility
District, which recently approved its own hikes, averaging 22 percent, and
other ratepayer-owned utilities.

The Bee's Carrie Peyton can be reached at (916) 321-1086 or
cpeyton@sacbee.com.

PG&E wants panel to get boot
By Claire Cooper
Bee Legal Affairs Writer
(Published May 10, 2001)
SAN FRANCISCO -- Pacific Gas and Electric Co. on Wednesday asked a judge to
disband an unprecedented committee of ratepayers appointed last week to
represent consumers in the utility's bankruptcy case, saying that some in the
group were politically biased.
The utility filed a motion arguing that U.S. Bankruptcy trustee Linda Ekstrom
Stanley exceeded her legal authority by designating a consumers committee
armed with broad powers to investigate and negotiate alongside the utility
and its creditors.
The utility denounced the committee as a collection of "special interest"
groups with "well-known political and policy agendas" and a "history of
aggressive lobbying and litigation."
The PG&E motion, which was set for a hearing May 18 before Bankruptcy Judge
Dennis Montali, warned that turning the consumer committee loose could
"substantially retard the progress of this case and seriously prejudice its
outcome."
On Friday, PG&E singled out Consumers Union and The Utility Reform Network as
"well-organized lobbyists and political operatives."
Consumers Union regional chief Harry Snyder, a committee member, said he
would have no comment. TURN's representative to the committee, Nettie Hoge,
did not respond to a request for comment.
In appointing the ratepayers committee last week, Stanley, who is
administering the bankruptcy proceedings, said she was bringing it into the
case because the state, which ordinarily would represent the public, has
chosen to stay out.
Stanley chose the nine committee members to represent a mix of energy
consumers -- households, businesses, farms and government. In addition to
Consumers Union and TURN, the groups include the California Farm Bureau, the
California School Boards Association and the California Manufacturers &
Technology Association.
If Montali upholds Stanley's action, PG&E must pay for the committee's
lawyers, accountants and other consultants to analyze data and present
arguments in the bankruptcy proceedings from the consumer's perspective.
"They (will) have all of the information that's going on," said Judy Beckner
Sloan, a bankruptcy expert at Southwestern Law School, who speculated that
PG&E was balking at the committee's potential power and its costs to the
bankruptcy estate.
"The creditors and PG&E are opposed to their presence because to the extent
the judge heeds the consumers' concerns, he's going to be less aggressive
about raising rates," said Jesse Fried, a law professor at the University of
California, Berkeley.
While Fried said Stanley's decision was defensible because the judge "is
supposed to take into account the wider interests of society," Los Angeles
bankruptcy lawyer Richard Levin sided with PG&E. Only the state should have
been allowed to represent consumers, Levin said, and its decision not to do
so should be final.

The Bee's Claire Cooper can be reached at (415) 551-7701 or
ccooper@sacbee.com.

Major job losses predicted; governor presses generators
By Dale Kasler, Ed Fletcher and Emily Bazar
By Dale Kasler, Ed Fletcher and Emily Bazar
(Published May 10, 2001)
As a private consultant predicted the state will lose 135,000 jobs from a
summer of blackouts, Gov. Gray Davis on Wednesday pressed power generators to
forgo 30 percent of their California earnings to help pull the state out of
the energy crisis.
Summoning executives of the companies he has repeatedly accused of price
gouging, Davis said the generators probably would have to forgive a portion
of the debt they're owed by California's two destitute utilities to win the
Legislature's approval for his controversial plan to repay the debts and
rescue the utilities.
"I suggest that they should look to (accept) 70 percent of what they claim
they were owed," Davis said after a four-hour meeting in the Capitol. "I felt
the Legislature will insist on a reduction."
Although Davis said, "I believe they are willing to take some reduction," at
least one generator, Reliant Energy Inc., immediately dismissed the
governor's proposal.
The meeting capped a roller-coaster day in which anti-generator protesters
brought a pig to the Capitol and the state narrowly averted a third straight
day of rolling blackouts. But while enough megawatts were found to scrape by
for a day, the state is surely facing a summer of severe shortages.
A study, commissioned by some of the state's most influential business
lobbyists and partly funded by Intel Corp., predicted chronic blackouts will
mean significant economic harm to California.
The study by John Urbanchuck of New Jersey-based AUS Consultants said the
blackouts would erase 135,000 jobs and cause $26 billion in economic
devastation.
Several California economists said the prediction was overblown, but none
doubted the electricity crisis could significantly harm the state's business
climate.
"It really depends on how severe the blackouts are," said UCLA economist
Chris Thornberg. "If we have 30 straight days of blackouts in June ... you're
going to end up with a mess."
Everything else being equal, the loss of 135,000 jobs would raise
California's unemployment rate by 0.7 percent, to 5.4 percent, based on the
latest numbers from the Employment Development Department.
Ted Gibson, chief economist with the state Department of Finance, said AUS'
estimates seem high.
"It'd be hard for me to think those relatively limited, one-hour-at-a-time
(blackouts) would have such an impact," Gibson said.
As it is, the blackouts have struck some of California's most important
employers, such as Sun Microsystems Inc. and Advanced Micro Devices.
Tuesday's blackout hit Apple Computer Inc.'s lone U.S. factory, in Elk Grove.
Economic development agencies from other states have stepped up recruiting
efforts in California, hoping to capitalize on the state's misfortunes. A few
glass manufacturers have moved production, said Jack Stewart, president of
the California Manufacturers & Technology Association.
It could get worse. For example, a leading Silicon Valley electronics
manufacturer, Solectron Corp. of Milpitas, said it is seriously considering
pulling some of its operations out of California.
"The blackouts and the lack of reliable power are our biggest concerns," said
Solectron spokesman Bob Kula. "We have the ability to move (production)
quickly."
Solectron, whose factories were hit with blackouts in January and March,
employs 4,000 workers in Northern California.
A top state official said business leaders around the country look at the
electricity crisis as emblematic of a state that's becoming iffy as a place
to do business.
"The whole question of how did the state allow it to get this far -- I keep
hearing that from Wall Street, I keep hearing that from the business
community," said the official, who asked to remain anonymous. "The last year
has demonstrated that the risks of doing business in California are much
higher than anywhere else in the United States."
The state was spared a third day of blackouts Wednesday when cooler, windier
weather in the late afternoon produced a spurt of wind-generated electricity
and a much-needed drop in demand. Throw in an unexpected power purchase from
the Pacific Northwest, and the state's fragile power grid suddenly had 1,400
megawatts it wasn't expecting, more than enough to compensate for a breakdown
of a major Bay Area power plant in early afternoon.
Another boost: Pacific Gas and Electric Co. said all but a handful of its
alternative-energy suppliers have resumed production. These suppliers,
responsible for a fourth of the state's energy supply, have been closed for
weeks because of nonpayment by PG&E and Southern California Edison. The two
stricken utilities are paying them again.
But while blackouts were unlikely today, there were no guarantees.
"We're not swimming in megawatts," said spokeswoman Stephanie McCorkle of the
Independent System Operator, which runs the state's power grid.
Representatives from a dozen wholesale power generators -- 10 in person and
two by phone -- attended the Capitol summit.
Despite months of verbal potshots between Davis and the generators, the
meeting was described as cordial by John Stout, senior vice president of
Houston-based Reliant.
But Davis also said he told the executives that unless they accept a
reduction in payment for back debts, the Legislature is likely to reject his
plan to buy the utilities' transmission lines -- a key element of his plan to
pay back billions the utilities owe them.
If the plan goes through, the generators can get paid this year, Davis said.
If it's killed, they'll probably have to wait three or four years to get
their money in Bankruptcy Court.
So far only Edison has agreed to sell its lines to the state. Senate
President Pro Tem John Burton, D-San Francisco, said Wednesday that the
Edison deal will be rejected unless the generators forgive some debts.
"I'm going to insist that they take at least a 30 percent haircut on the
monies that they're owed," Burton said earlier.

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.
Bee Staff Writer Kevin Yamamura contributed to this report.

Bond-sale bill goes to Davis

(Published May 10, 2001)
The state Senate sent legislation to Gov. Gray Davis on Wednesday authorizing
the largest revenue bond sale in U.S. history over continued Republican
opposition.
The bill, SB 31x, would allow California to sell $13.4 billion in bonds,
starting in August, to repay the state for past and future power purchases.
Davis is expected to sign the bill today.
Because the bill failed to receive the two-thirds majority needed for an
urgency measure, however, the bonds can't be sold until 90 days after the end
of the Legislature's special session.
Lawmakers are expected to end the session Monday, and most of the 200 pending
energy bills already introduced will be reborn in a second energy session,
said Senate President Pro Tem John Burton, D-San Francisco.
SB 31x passed on a 23-12 vote, with most Democrats supporting the measure and
all Republicans opposing it. Sen. Joe Dunn, D-Garden Grove, was the only
Democrat to vote against it.
Republicans proposed that the state use the surplus to write off $6 billion
that California has spent on electricity since mid-January. But Democrats
said the state needs to replenish those funds to support other state programs
in education, transportation and health care.
Treasurer Phil Angelides had pursued a bridge loan of $4.13 billion to
bolster the state's budget and ensure that non-energy programs remain funded.
But when Assembly Republicans assailed the immediate bond sale, the
short-term loan was lost.
Zane Mann, editor of the California Municipal Bond Advisor, said the delay in
the bond sale "casts a cloud" over the project but won't kill it. It will
probably lead to a higher interest rate, which will add to the ratepayers'
costs, he said.
-- Kevin Yamamura and Dale Kasler

State revenue outlook shrinks
By John Hill
Bee Capitol Bureau
(Published May 10, 2001)
Legislative Analyst Elizabeth Hill dropped a budget bombshell Wednesday,
reporting to legislators that state revenues will be $3.4 billion lower than
Gov. Gray Davis predicted in his January budget proposal.
Instead of enjoying a $1.9 billion reserve, the Davis budget plan for the
fiscal year beginning July 1 would now leave the state $1.5 billion in the
hole, Hill wrote in a letter to legislators overseeing the budget.
Dwindling revenue from a faltering economy leaves Davis' plan in need of
major revisions. The new revenue estimates would require cuts in one-time
expenditures that Davis proposed for programs such as clean beaches and
fiscal relief for local governments. Cuts also may have to be made in new
spending contemplated for education, which got most of the new money in the
$104.7 billion January budget proposal.
"The number is so deep that it's going to be hard for us not to contemplate
cuts or make cuts," said Assemblyman Tony C?rdenas, D-Sylmar, vice chairman
of the Joint Legislative Budget Committee. "We don't know where those cuts
are going to come from."
Little will be immune, said Dan Howle, chief of staff for Sen. Steve Peace,
D-El Cajon, chairman of the Joint Legislative Budget Committee.
"It's going to include programs the governor is very supportive of and would
like to get done, but we're in a little bit of a cash crunch here, and you've
got to do what you've got to do," he said.
"If anything's got a protective fence around it, it's education. But I still
think it'll have to take a share of the cuts."
These grim budget figures don't take into account possible hits on the budget
caused by the state's breathtaking expenditures on electricity.
Those effects could be negligible if the state is able to sell bonds to pay
for power and replenish the treasury. But considering recent events in the
volatile energy crisis, no assumption is safe.
The budget crunch will likely highlight conflicting spending priorities and
could lead to more polarization between Democrats and Republicans who have
been squabbling over the energy crisis.
"A third of the Assembly has never done a budget," Howle said. "Another third
has never dealt with anything other than huge surpluses. Now you're saying
we've got to go in and cut. This could be a long, hot summer."
The new revenue projections are a dramatic illustration of the state's
faltering economy. Revenues for the fiscal year that starts July 1 are now
expected to be $4.8 billion less than anticipated in January, Hill wrote.
That includes a decrease of $3.9 billion in income tax, $500 million in sales
tax and $600 million in bank and corporation taxes, offset by some moderate
increases in insurance and estate taxes, said Brad Williams, chief economist
in the non-partisan Legislative Analyst's Office.
"It's deterioration in the stock market and implications for capital gains
and stock options," Williams said, "and also the weakening outlook for the
economy as a whole."
The $4.8 billion blow is softened somewhat by unexpectedly strong revenues
from last year's tax returns, which helped boost revenues $1.4 billion higher
than had been anticipated.
The net effect is $3.4 billion less for the fiscal year that begins July 1.
If the Democratic governor's budget were approved as is, the deficit would
reach almost $6 billion in the fiscal year that begins July 1, 2002, Hill
wrote.
The governor is expected to release his revised budget Monday. The state
Department of Finance said Wednesday that it wouldn't comment on the new
revenue estimates until then.
One obvious target for budget cutters is one-time expenditures in the January
proposal. This includes money for local governments, state building projects,
housing initiatives, replacing diesel engines that contribute to air
pollution, cleaning up beaches, law enforcement technology grants, flood
control, parks along rivers and more.
Even if the state axed $2.5 billion for one-time expenditures that Davis
proposed, it would still have to cut an additional $1.7 billion proposed for
ongoing programs.
Davis' budget -- which projected an $8 billion surplus -- includes at least
$1.9 billion more for education than required under formulas approved by
voters in Proposition 98. But considering Davis' commitment to education,
most believe it's unlikely the governor would balance the budget by
throttling back to the minimum funding level, which would require cuts to
existing education programs.
C?rdenas said education, health care and transportation should be protected
from cuts.
Assembly Republicans agree about education, but have different ideas about
the rest.
On Wednesday, the Republicans released their plan for the revised budget. It
includes protecting schools and law enforcement, creating a $4 billion
reserve for future electricity purchases, and striking a proposed 1/4-cent
sales tax increase.
The sales tax, which went into effect in the early 1990s, was removed this
year, but Davis has proposed restoring it in 2002.
"All this does is put a new burden on the backs of Californians" already
coping with higher energy costs, said Assemblyman George Runner, R-Lancaster,
a member of the Assembly Budget Committee.
Republicans say an electricity reserve could avoid the need to do another
bond sale for power purchases next year.
"This is the time to make sure we are putting money aside and that we're not
going to have to turn back to taxpayers or ratepayers and put an additional
burden on them," Runner said.

The Bee's John Hill can be reached at (916) 326-5543 or jhill@sacbee.com.

No blackouts despite dip in supplies

Stage 2 alert, power plant breakdown add to concerns
By Jeff McDonald
UNION-TRIBUNE STAFF WRITER
May 10, 2001
In the nip-and-tuck world of meeting California's energy needs, a small
victory was notched yesterday in Folsom, where managers of the state power
grid avoided blackout orders for the first time since the weekend.
But tensions nonetheless ran high among power industry officials, and
business leaders in San Diego County are growing increasingly alarmed at the
nagging energy crisis.
The number of available megawatts fluctuated throughout the day yesterday and
a major power plant broke down, but engineers at the Independent System
Operator maintained service across the state.
Persistent shortages combined with unusually high temperatures prompted power
alerts as early as 10:15 a.m., when grid officials warned that supplies had
dipped within 7 percent of reserves.
With more than 12,000 megawatts of power unavailable from idled plants,
system operators issued a Stage 2 warning about 11:45 a.m. and asked large
users to cut back consumption through the afternoon.
Two hours later, a boiler tube leak knocked out a 750-megawatt power plant in
the Bay Area. Repairs will probably take several days.
"It wrecked my day," said Jim McIntosh, the Independent System Operator
director of grid operations. "It just changed the whole perspective of what
was going on."
The loss of the 750 megawatts deepened concerns in Folsom, where ISO
engineers measured a peak afternoon demand that barely trailed supplies of
almost 34,000 megawatts.
As late as 3 p.m., grid officials expected to be forced into cutting service
to hundreds of thousands of homes and businesses. Cooling temperatures and
conservation efforts helped kill the last threat, McIntosh said.
More blackouts could be ordered today, however, and tomorrow may be just as
problematic.
"The next couple of days will certainly be impacted by the loss of that
unit," McIntosh said.
The latest breakdown added to some already high drama at utility companies,
where officials braced through the day for orders to cut power to hundreds of
thousands of customers.
Blackout orders never came. But executives at San Diego Gas and Electric Co.
spent the day on heightened alert, calling critical-need residents and
businesses and informing them of potential service interruptions.
"This has become relatively commonplace," SDG&E spokesman Douglas Kline said.
"We handle it as a matter in the course of business now, unfortunately. We've
been on high alert all day."
Service was cut to more than 23,000 customers in several San Diego-area
neighborhoods Monday and Tuesday afternoons. More than 500,000 homes and
businesses across the state also lost power.
In a power interruption unrelated to the power problems across the state, a
number of major businesses in downtown San Diego were cut off unexpectedly in
midafternoon.
Customers between F Street and Harbor Drive lost power about 3:15 p.m. when
something went wrong with an underground cable that serves, among others, the
Marriott Marina hotel, SDG&E said.
Service was restored within two hours, but not before convention meeting
rooms went dark and hotel restaurants closed.
The heat wave that has hung across California the past three days is expected
to begin cooling today and tomorrow, the National Weather Service said. That
should reduce demand for air conditioning, one of the biggest power draws in
the state.
However, the constant uncertainty in the electricity industry is taking its
toll on local businesses, which not only are seeing huge run-ups in utility
costs but are girding for potential losses that even a few minutes of
interruptions can cause.
"From a business standpoint, it's not 15 minutes of downtime for many of our
companies," said Julie Meier Wright, president of the San Diego Regional
Economic Development Corp. "For many of them, it means the loss of hours,
days, weeks and even longer of work."

Biggest users face huge rate hikes under PUC plan

By Karen Gaudette
ASSOCIATED PRESS
May 9, 2001
SAN FRANCISCO ) Customers of California's two largest utilities who use the
most electricity would pay much more to run canneries, tumble laundry and
conduct other tasks under a tiered rate plan implementing record hikes
approved in March.
The rate plan proposed Wednesday by Loretta Lynch, president of the state
Public Utilities Commission, suggests how the rate hikes should be allocated
among residential, industrial, commercial and agricultural customers.
Residential customers of Pacific Gas and Electric Co. and Southern California
Edison Co. who use the most electricity would face average rate hikes of 35
percent to 40 percent.
And industrial users, such as factories and food processors, could face hikes
of 50 percent or more as the state desperately tries to start recouping the
$5.2 billion it already has paid to buy power for customers of those
financially ailing utilities.
Still, under Lynch's plan, as many as half of the 9 million customers of PG&E
and SoCal Edison would not see their bills rise at all.
Lynch's plan is the culmination of weeks of discussion among customers, state
officials, consumer activists and the utilities about how best to allocate
the record rate hikes approved in late March by the PUC.
Those rate hikes will affect all classes of customers, from small families to
the huge Silicon Valley facilities powering the Internet, but not all will
face the same magnitude of rate increases.
And, even within those classes, customers will pay more depending on when
they use the electricity. Those who use power during times of highest demand
) generally, during daylight hours ) will pay the most.
Lynch said her plan "recognizes that energy is expensive at every hour of
every day by every customer," but penalizes those who do not cut back on
energy use or try to shift to different times of the day.
Under Lynch's proposal, agricultural customers could face rate hikes ranging
from 23-30 percent, with increases capped at 30 percent. Industrial users
face average increases of 50 percent or more, and commercial users average 34
percent to 45 percent hikes.
Her proposal, Lynch said, designs rates to encourage conservation and
provides $5 billion over the next year to help pay the state Department of
Water Resources for the billions it has spent providing electricity for
customers of PG&E and Edison.
Lynch left the door open for future rate hikes, noting that the state
provides its electricity-buying expenses to the commission only on a monthly
basis, while wholesale electricity prices continue to soar.
Lynch's proposal, and a largely similar proposal from PUC administrative law
judge Christine Walwyn, will be reviewed in public hearings throughout the
state the rest of this week.

Rate Hikes Up to 60% Proposed by PUC Chief
Power: Lynch says about half the residential customers of Edison, PG&E would
escape increases. Her plan draws fire from all sides.

By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers

?????SAN FRANCISCO--About 4 million California residential electricity
customers will face increases in their monthly bills of up to about 60% under
a proposal unveiled Wednesday by the state's chief utility regulator.
Interest groups on all sides promptly condemned the plan as too hard on
either consumers or businesses.
?????The proposal by California Public Utilities Commission President Loretta
Lynch would increase the bills of roughly half of Southern California
Edison's residential customers, who consume medium to heavy amounts, by $8 to
$93 a month. Pacific Gas & Electric Co. customers would be hit with hikes of
$6 to $87 a month.

Elisabeth Charion is among about 70 people testifying at a PUC hearing
Wednesday in Fullerton, most venting their anger at elected officials and
utility companies, whom they blame for the crisis.
IRFAN KHAN / Los Angeles Times

?????About half of the residential customers of the state's two biggest
public utilities would see no increase under the proposal if they continued
to consume energy at their current pace.
?????Lynch said she could not guarantee that more rate increases would not be
necessary. "Even these astronomical average rates may prove inadequate," she
said, noting that wholesale electricity prices are still high and
unpredictable.
?????The rate hike, Lynch said at a news conference, is necessary because
"federal regulators have failed to follow federal laws to ensure just and
reasonable prices."
?????The deepening energy crisis compelled Lynch to release her proposal
after public hearings on the rate increase already had begun. Lynch said that
she wished her proposal had been ready sooner, but that at least some of the
remaining public hearings will have the benefit of reviewing it.
?????PUC passage of the essential elements of Lynch's plan seems likely.
?????Along with two of her colleagues on the five-member commission, Lynch
was appointed by Gov. Gray Davis, and they often vote as a bloc. Lynch said,
however, that testimony later this week from utilities, the public and other
interested parties could prompt modifications.
?????Structuring the $5-billion rate increase is an important but politically
sensitive step in California's attempt to restore stability to the delivery
of power to 9 million customers of two financially troubled utilities while
protecting the state budget.
?????The PUC has tried to design rates that would encourage conservation
without damaging business. Competing interest groups, ranging from consumer
advocates to large manufacturers, have been jockeying for advantage for weeks.
?????The PUC approved a rate increase of 3 cents per kilowatt-hour March 27
to help pay the state's mounting power tab, which now exceeds $5 billion.
This week, the commission is conducting statewide hearings on how the pain
should be shared among millions of residents and businesses. On Monday the
panel is set to vote on Lynch's plan and a similar one by a PUC
administrative law judge.
?????Neither proposal appeared to please anyone.
?????"The PUC says everyone should share the pain, but we think the fair
share of the pain for residential consumers should be zero," said Mindy
Spatt, spokeswoman for the Utility Reform Network, a San Francisco consumer
group. "It should be paid by commercial and industrial customers who wanted
and still want deregulation."
?????Consumer activist Harvey Rosenfield said regulators should go after
power generators and their hefty profits rather than ratepayers.
?????"Rate increases are not the answer, and this is not going to be the end
of them," said Rosenfield, president of the Foundation for Taxpayer and
Consumer Rights in Santa Monica. "This is like organized crime: The more you
give them, the more they want."
?????Commercial and industrial customers would see increases of up to 50%,
and agricultural interests would face increases of 23% to 30% under Lynch's
proposal.
?????Business interests contend that the rate hikes hit them much harder than
residential users.
?????Calling the proposal "a death knell for the California economy," Jack M.
Stewart of the California Manufacturers and Technology Assn. estimated that
industrial customers would see their power rates increase an average of 53%.
And the pain of the rate hikes will be compounded by blackouts this summer,
which the group contends will cost California businesses $21.8 billion in
lost productivity.
?????"For most large manufacturers, energy is a large piece of their
operating costs," Stewart said. "If you add 53% to that, it's going to
severely hamper their ability to do business."
?????Unlike residential customers, the business customers are not grouped
into tiers based on their amount of usage. Lynch said there was insufficient
time to establish a tiering system for nonresidential customers by June 1,
when the rate hikes will start showing up on bills.
?????An earlier proposal by Lynch had attempted to narrow the gap between
residential rates and the lower rates paid by nonresidential customers. But
the commission president said that goal could not be immediately achieved
without seriously damaging the state's economy.
?????To protect the largest users from gigantic rate increases, Lynch's
proposal caps the maximum bill increase at 300% for most customers and 250%
for agricultural customers.
?????"While we understand bill limiters may have some troubling conservation
impacts, at some point, price signals are unbearable for customers. Bill
limiters will protect customers from unanticipated extraordinary bill
impacts," Lynch wrote.
?????In recent weeks, the commission has received about 20 plans for
structuring the rate increase, including one from Davis, who had proposed a
slightly smaller overall rate increase. Lynch said her plan incorporates a
number of features of the governor's plan, including a tiered structure that
would punish heavy users and reward those who conserve.
?????Under state legislation, there is no rate increase for consumption up to
130% of baseline, the amount deemed the minimum needed by a customer in a
given area and noted on ratepayer bills. Also exempted are low-income
customers who already receive discounted electricity rates.
?????Edison and PG&E said they could not assess how the PUC proposals would
affect their customers because the commission had not provided details to the
utilities as of late Wednesday.
?????But PG&E has disputed the commission's claim that half of customers
would not be affected by the increase, noting that only 32% of PG&E customers
never exceeded 130% of baseline usage in the last year.
?????Industrial and commercial customers complained that the plan should not
exempt such a large group of residential customers, in any event. A rate
increase for these users--based on the PUC's estimate that the group will
constitute about half of residential customers--could generate an extra $1
billion.
?????If the PUC insists on exempting so many, the $1-billion shortfall should
be covered solely by other residential users, businesses say.
?????Under Lynch's plan the burden of paying that amount would be split
equally among commercial, industrial and nonexempt residential customers.
?????If covering the shortfall were not shared by the three groups, Lynch
said, some residential customers would suffer a 100% increase in their bills.
?????The proposal calls for a pilot program, including one that would let
federal agencies based in California "experiment with their own market rate
policies."
?????Lynch challenged federal agencies to try to live with "real time," or
hourly, prices in the volatile wholesale marketplace--a slap at officials of
the Federal Energy Regulatory Commission who favor a free wholesale market
over price caps. Use of real-time pricing requires installing a special meter.
?????"'It would be great if the federal users respond to price signals enough
that prices come down," Lynch said, adding that she was skeptical that would
happen in today's dysfunctional market.
?????A FERC spokeswoman declined to comment on Lynch's proposal.
?????During the third day of PUC hearings, about 200 people gathered at
Fullerton College. Seventy people testified, most venting their anger at
elected officials and utility companies, whom they blame for the state's
flawed deregulation plan.
?????"I am opposed to any rate increase for residences and small business,"
testified Ruth Shapin, a Santa Ana attorney. "This crisis was created by
politicians. PG&E and SCE have transferred billions of dollars to their
parent companies. Let them bail themselves out, not the ratepayers."
?????Others said the baselines might be unfair because the commission had not
taken into consideration home size, the number of occupants and the location.
?????"It's going to be hard for many people to stay below the 130% baseline,"
said Sylvia Hartman of Lakewood. "Some customers could easily go 400% over
the baseline."
---
?????Reiterman reported from San Francisco, Rivera Brooks from Los Angeles.
Times staff writer Dan Weikel in Fullerton contributed to this story.

Copyright 2001 Los Angeles Times

Bush Energy Stance Begins to Worry Some in GOP

By GREG MILLER and RICHARD SIMON, Times Staff Writers

?????WASHINGTON--As power shortages and price spikes spread beyond
California, congressional Republicans are beginning to worry that the Bush
administration's reluctance to offer much immediate relief could hurt the
party in the 2002 elections.
?????A national energy plan to be unveiled by the White House next week will
focus on long-term strategies. But with California and other states bracing
for a summer of electricity turmoil and gasoline prices surging across the
country, some GOP lawmakers are pressing for short-term solutions.

U.S. Rep. Mary Bono, left, and Gov. Gray Davis discuss meeting with
executives of power-generating companies. Bono plans to seek $100 million to
help poor people pay energy bills.
AP

?????"The White House has been taking a look at the big picture," said a GOP
leadership aide in the House. "But they're going to be around in four years.
We might not have members around in two years if we don't show we care."
?????That sentiment is being voiced by a rising number of GOP lawmakers.
"We're in a crisis situation, which is only going to get worse if we don't
act very aggressively," Rep. Elton Gallegly (R-Simi Valley) said Wednesday.
Gallegly is one of four congressional Republicans from California to break
with the administration by supporting temporary price controls on wholesale
electricity.
?????The rising anxiety, which has begun spreading beyond the California
delegation, underscores how much has changed since the state declared its
first Stage 3 power emergency in December. At that time, Congress' response
was largely: That's Gov. Gray Davis' problem.
?????Not anymore.
?????Thirty-nine Stage 3 alerts later, a House committee today will take up a
GOP-drafted emergency bill that would, among other things, allow Davis to
temporarily waive certain emission standards for power plants during an
emergency and provide federal aid to relieve a notorious bottleneck in the
California power grid.
?????But some GOP lawmakers say the legislation doesn't go far enough, and
plan to offer amendments containing their own ideas. Rep. Mary Bono (R-Palm
Springs) plans to push for $100 million in energy assistance to low-income
households and for a directive to federal facilities in the West to cut
energy use by 20%.
?????"House leaders recognize that they could lose the House in California if
there's not an action plan that members can campaign on," said Scott Reed, a
GOP strategist.
?????As lawmakers search for ways to provide immediate relief, the White
House continues to cite California's troubles as evidence of the need to
upgrade an aging, overburdened electricity transmission system.
?????Responding to reports that the administration would propose legislation
to give the federal government eminent domain authority in siting power
lines, White House press secretary Ari Fleischer said Bush wants to ensure
that the distribution infrastructure can move electricity from regions with
surpluses to regions that need more power.
?????"That's one of the reasons that California is going through the
difficulties it's going through," Fleischer said. "There is energy available
in other parts of the country, but it can't be shipped to California as
easily as you would hope, because of infrastructure problems."
?????Fleischer took exception to a front-page story in The Times reporting
that Bush, in a speech delivered Tuesday, "offered no hint of what his
administration might do" to help California avert a possible economic
downturn caused by power blackouts.
?????Though the president did not specifically mention possible actions in
the speech, Fleischer said Bush last week "announced a series of steps,
including conservation," to help California get through an energy crisis this
summer.
?????He said that the Pentagon is reducing its energy needs within California
by 10% and that all other federal agencies, at Bush's direction, are
reviewing their energy consumption patterns.
?????Environmentalists already have begun blasting the administration's
energy plan--even before its details are made public--for what they
characterize as a failure to emphasize energy efficiency and investments in
renewable fuels.

?????Activists Say Crisis Isn't Real
?????At a Wednesday news briefing, a coalition of environmental advocates
disagreed with the administration's assertion that the country is
experiencing an energy "crisis," and accused it of crafting a plan designed
to boost the profits of key campaign contributors.
?????"We cannot drill our way out of this situation," said Dan Becker of the
Sierra Club. He and others argued that conserving fuel--with cars that use
less gasoline and appliances that use less electricity, for example--is the
best way to avoid energy shortages in the short term.
?????So far, it is not clear whether the energy crisis will work to either
party's advantage. Many on Capitol Hill are bracing for an election year that
could be brutal for incumbents of both parties if voters who endure high
energy bills this summer vent their frustration in the voting booth next year.
?????Some House Republicans acknowledged that they have been pushing the
White House to appear more engaged in finding near-term solutions.
?????When House Republicans met with Cheney last week, "they urged him and
all the administration to at least make it clear that a lot of effort is
going into finding a way to solve the problem," said Jim Specht, a spokesman
for Rep. Jerry Lewis (R-Redlands), leader of the California GOP delegation.
?????Though some Republicans have offered ideas to address the immediate
problem, it is not clear whether any will receive congressional approval.
?????Indeed, the emergency assistance bill being taken up today by the House
energy subcommittee faces trouble, although it was drafted by the panel's
chairman, Rep. Joe Barton (R-Texas).
?????Barton stripped out a number of provisions opposed by environmentalists.
But Democrats plan to seek a vote on capping wholesale electricity prices, a
proposal most Republicans oppose. Democrats also plan to introduce an
amendment to target natural gas prices.
?????House Minority Leader Richard Gephardt (D-Mo.) said the bill "fails
miserably" to address California's problems. "During the campaign, President
Bush promised a sensible energy policy," Gephardt said. "In recent weeks,
however, the president has responded to the gathering crisis by throwing up
his hands and saying there's nothing we can do, there's no way to give people
immediate relief from blackouts and sky-high increases of price of gasoline
at the pump."
?????Lawmakers of both parties acknowledge that they are hearing a rising
chorus of constituent complaints about the energy price spikes and supply
shortages.
?????Rep. Chris Cox (R-Newport Beach) was caught in a blackout during a tour
of a computer chip factory in his district. "They said it cost them $1
million if the power goes off even for five minutes," said Cox, who
nonetheless opposes price controls.
?????Cox said he is worried about how the California electricity crisis might
affect the national economy. He said that when he asks business owners about
expanding in California, "they just look at you like you're nuts. They don't
consider California an option because of this uncertainty."
?????"People come up to you and want you to help solve the problem," said
Rep. George Radanovich (R-Mariposa).
?????He has explained that there is little the federal government can do in
the short term.
?????"Californians want somebody to do something," said John J. Pitney Jr.,
associate professor of government at Claremont McKenna College. "When people
are in a mood like that, politicians get nervous thinking that they're the
ones who might get blamed."
?????Said Reed, the GOP strategist: "Every incumbent in California is
vulnerable in the next election, in both parties. This is an issue that is
not ideological. It's about action and solving a short-term problem.
"Politics have taken over this issue, like it or not," he said. "They may
have been raging in California for the last three or four months. It's now a
national political issue."
---
?????Times staff writers James Gerstenzang, Edwin Chen, Elizabeth Shogren and
Ricardo Alonso-Zaldivar contributed to this story.

Copyright 2001 Los Angeles Times

In Office Buildings, the Lights Are On, But Nobody's Home
Energy: Analysts say metering individual tenants could encourage
conservation.

By JERRY HIRSCH, Times Staff Writer

?????Despite power outages and soaring energy prices, workers stream out of
California's downtown and suburban offices each evening leaving lights
blazing and computers humming. And there has been scant incentive to
conserve, since commercial building leases typically include the cost of
energy.
?????Energy experts and other analysts say metering of individual office
tenants would encourage conservation by pushing companies to shut off lights,
computer monitors, desk fans and other electrical devices at night, but state
regulations and utility policies are in the way.
?????That conflict between policy and conservation efforts has drawn the
attention of state Sen. Debra Bowen (D-Marina del Rey), who chairs the Senate
Energy, Utilities and Communications Committee. On Tuesday, Bowen asked
California Public Utilities Chairwoman Loretta Lynch to review what Bowen
called "archaic" regulations governing how electricity meters are used in
office buildings. Bowen said she also plans to take up the issue in her
committee.
?????At issue is Rule 18, a regulation established by the commission two
decades ago that prohibits landlords from using submeters to assess energy
charges to tenants.
?????"It is quite old and dates back to a different era of electricity
distribution in California," said Bowen, who was urged to take action by the
Building Owners and Managers Assn. "I asked Loretta Lynch to open a
proceeding to revise or eliminate that ban."
?????Lynch did not return calls for comment on the state's metering policies,
but PUC regulatory analyst William Gaffney said more metering "would be a
boon to energy conservation" because "you could see what you are using."
?????"Direct metering would ultimately foster greater energy savings . . .
more permanent savings, because it would encourage capital investments in
more efficient equipment, windows, etc., etc.," said Evan Mills, a scientist
in the energy analysis department of the Lawrence Berkeley National
Laboratory in Berkeley.
?????Usually, the only tenants in office buildings with utility meters are
retail and restaurant businesses, according to commercial real estate
experts. Most tenants in California office towers sign what are called "gross
leases" that include power. When electricity usage or rates go up
unexpectedly, landlords can charge monthly or annual "escalation fees" to
cover the extra cost. The fees typically are apportioned by the percentage of
the building a tenant occupies.
?????This method of billing is counterproductive to energy savings, said
Willet Kempton, senior policy scientist at the University of Delaware's
Center for Energy and Environmental Policy. Energy hogs are subsidized by
other tenants. Conversely, savings through conservation are only fractionally
shared.
?????Two key obstacles block metering of individual tenants in a building.
?????One is economics--high-rise buildings get a far better rate with one
utility meter than if each floor is metered.
?????"We can sell a lot of energy on just one bill," said Randy Howard,
manager of commercial services at the Los Angeles Department of Water and
Power. "If we had 200 meters there and had to do the billing and meter
reading for each of them, each tenant would pay a higher rate."
?????Moreover, utilities aren't anxious to send meter readers to every floor
of a building, going through private offices to find the meters. One
alternative--locating all the meters in a central area where the main
electrical line enters the building--would require massive rewiring of
existing office towers that could cost several hundred thousand dollars or
more, depending on the size of the building, said Ali Sherafat, senior vice
president of the Los Angeles office of Syska & Hennessy, a consulting
engineering firm.
?????A 1995 ruling by the PUC required that individual tenants in office
buildings be placed on meters operated by a public utility (as opposed to
landlord-managed submeters), but relatively few have been installed because
of exemptions.
?????For example, Southern California Edison Co. officials typically meet
with developers at the start of a building project to determine how many
meters it might require, said Matt Deatherage, a planning support manager for
the utility. But because developers build office space so that its
configuration can change easily as tenants shift, the estimate is often
wrong. A building designed with three meters for three tenants might find
itself with six tenants or more by the time it opens.
?????"We don't require them to go back and rewire the building if it turns
out to be wrong, that would be too expensive," Deatherage said.
?????The second obstacle is Rule 18, the 1981 ban on submetering originally
intended to protect utility monopolies and to prevent landlords from getting
electricity at a discount price and selling it at a markup to tenants.
?????"When you resell electricity like that, you function as a utility and
that's not allowed," said Deatherage.
?????Nonetheless, Bowen believes that deregulation may have superseded those
issues and that current policy should emphasize conservation.
?????Although the leasing model used in California is common, it's not
universal, said Peter L. DiCapua, energy chairman of the Building Owners and
Managers Assn. International.
?????Many New York tenants have individual meters. Others are on landlord
submeters, a system that allows them to tap into the lower, high-volume rates
paid by the building's operator but still pay for actual, rather than
estimated, energy use.
?????Landlords would welcome a changed regulation to allow submetering for
several reasons. There are the conservation benefits, said Dan Emmett, chief
executive of Douglas Emmett & Co., one of the largest building owners and
managers in Los Angeles County. It also would reduce some of the inevitable
arguments with tenants who claim they pay more than their fair share for
services at a building.
?????"I think submetering could be practical," Emmett said. "It is not that
complicated and is fairly inexpensive."
?????Sherafat said it would cost about $2,000 per tenant for the submeter and
the necessary software. Submeters could be installed at the electrical panel
level without expensive rewiring for utility meters, he said. Better yet, the
software allows data to be collected at a central point, eliminating the need
for meter readers. Such a system also could allow big buildings to use one
master meter to get the best rate .
?????Though submetering would foster conservation, it still is not a panacea,
said Kempton of the University of Delaware. When it comes to energy
conservation, changing the behavior of businesses and workers is notoriously
tricky.
?????"Attorneys literally can't be bothered with the nuances of energy," said
DiCapua, an executive at Atco Properties & Management in New York. "They are
focused on things other than if the air conditioning was left on all night.
?????That is typical of professional services firms, because energy is just a
small fraction of their expenses, Kempton said.
?????And individual metering sounds great in theory, Kempton added, but it is
useless if the bill goes to a home office elsewhere or if the on-site manager
of the firm never sees it.
?????In any push to change the rules, however, people should remember that
the current system was developed for sound reasons, often based on reducing
the expense of constructing buildings and finding tenants the lowest prices
for energy, Howard said.
?????"Right now we are in a conservation mode, so everybody is talking about
this," he said. "But that hasn't always been the case, so a single meter for
a big building made sense."

Copyright 2001 Los Angeles Times

Thursday, May 10, 2001
Power Shifts to Congress

?????Wholesale electricity prices soared with the temperature this week,
jumping to eight times the peak of only three weeks ago. No one knows how
high the price may go when high summer hits. Which makes it all the more
intriguing that one of the big power-generating companies is now calling for
temporary price caps, which the Bush administration stubbornly opposes.
?????Authority over wholesale power prices rests with the Federal Energy
Regulatory Commission, which is charged by Congress with maintaining "just
and reasonable" rates. But FERC refuses to impose what California desperately
needs, a broad temporary price cap that allows companies to recover their
costs plus a reasonable profit. The state's last hope for rate caps now rests
with Congress.
?????Sens. Dianne Feinstein (D-Calif.) and Gordon Smith (R-Ore.) are
sponsoring legislation that would require FERC to establish temporary maximum
rates. Rep. Henry Waxman (D-L.A.) is scheduled to propose amendments to a
House bill today to do the same. The support of three Republican House
members from California, who are on the energy and air quality subcommittee,
is crucial. They are Christopher Cox of Newport Beach, Mary Bono of Palm
Springs and George Radanovich of Mariposa. The Waxman measure serves the best
interests of California. Concern about losing seats in Congress may also help
the GOP members make the right choice.
?????It was Feinstein who got a letter from Keith E. Bailey, chairman of
Williams Cos., an energy producer, in support of temporary price controls.
Perhaps some generators are tired of being labeled gougers, pirates and
bloodsuckers, and they will settle for a reasonable profit through the rest
of this crisis. But price caps would have to apply to all the producers.
Congress must act, starting today with the subcommittee vote on the Waxman
measure. Copyright 2001 Los Angeles Times

Proud state forced to knees in power hunt
Robert Salladay, Chronicle Sacramento Bureau
Thursday, May 10, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/10/MN40227.DTL
California has turned into the trailer park next door, the cash-only,
deadbeat neighbor forced to beg for enough power to keep the swamp cooler
running.
Yesterday in Folsom, home of the state's energy managers, was another study
in high-tech, air-conditioned humiliation -- punctuated by a frantic scraping
and bowing for energy across the West.
Poor people with "secured" credit cards can relate to the scene at the
California Independent System Operator. This week began with Canada's BC
Hydro threatening to shut off power again until the state actually wired cash
to its bank account.
"We got the money," an ISO engineer stood up and told another employee at the
agency's semi-secret Folsom headquarters yesterday. "Yeah, we're good for
another $14 million. Burn it up, huh, Lloyd?"
Lloyd started burning it up, thanks to an OK from the Department of Water
Resources and to several million California taxpayers' footing the bill.
California narrowly missed a third day in a row of blackouts yesterday. The
situation was tight when a power plant in Pittsburg shut down because its
boiler was leaking, but cooler weather and increased supply from other
generators helped keep the lights on.
All week at the ISO, engineers have been fretting about facilities and
finances.
BC Hydro shut off 2,000 megawatts of power to the state Monday while it
waited for a check from the water agency. The state has a line of credit with
BC Hydro, but California is buying so much at such high prices that it was
reaching the limit.
The company already is owed about $307 million from the state's insolvent
utilities, so it is impatient.
"They wanted to make sure we were good for it before we could continue," said
Oscar Hidalgo, a spokesman for the water agency, which is paying the bills.
The power cutoff sent the ISO into a panic, since BC Hydro was providing
enough to power an estimated 2 million homes. Two hours later, the state
marched down to the bank and wired the money. Power was restored, and an
agreement was reached yesterday for daily payments.
The engineers in shirtsleeves at the ISO aren't used to this kind of
treatment. Since the energy crisis drained the bank accounts of the
utilities, it's been months of constant struggle to get power generators to
fork over electrons.
"We have to go into higher begging mode for generators out of state," said
Jim McIntosh, director of grid operations for the ISO. "It scares the hell
out of these guys. They've never been put in that position. . . . From the
electricity standpoint, we're operating like the Third World."
The ISO has no control over energy prices or even how the bills are paid. The
bills are the job of the water agency, which has been spending about $50
million a day since mid-January.
Not only have a near-record number of power plants been shut down for repairs
this month, the hot weather is breaking records and causing energy use to
spike. The state would probably be near blackouts even without the shaky
financial situation.
But the final insult is that some of the bills are getting paid late, in part
because power generators are charging unprecedented rates on the daily energy
market.
That causes the people who work at power companies to get snippy sometimes
and threaten to withhold power. That also leads to the same things that poor
people face every day: higher prices, bad service and frustration.
"We pay more for gasoline. We pay more for natural gas. We pay more for
electricity than anywhere else in the country," said Larry Bellnap, shift
manager at the ISO, a two-decade veteran in the power business. "I can't
think of a reason except we're California, and they are taking advantage of
us."
Here's a conversation recorded a few months ago between an ISO engineer and a
generating plant in El Segundo. At the time, the ISO needed the plant to go
on line immediately to avoid blackouts.
"You need to get somebody that has the authority to tell me how I'm going to
get paid," the plant manager demands on the phone.
"I have the authority to order these plants on," the ISO manager says, and
then gets this back a few minutes later:
"I still need clarification on how you're going to pay me if I get these
things on."
"OK. I can't give you that right now. That will have to wait until tomorrow.
"
"No, I need that now," the plant manager says.
"That's unacceptable."
The conversation is contained in court records compiled when several out-of-
state generators threatened to cut off power, despite their contracts, and
the ISO sued. The state lost its case essentially, but federal regulators
backed them up last week in a ruling.
McIntosh said he'd never in his 31 years working in the power industry had to
get a lawyer on the phone to force a power generator to start up a plant to
provide more power. But now they have two available if needed to remind
generators of their commitment.
GALLING POSITION
The problem is especially irritating because power generators are charging
the highest prices ever seen for power.
McIntosh and others said the situation was much smoother now that California
was the major creditor and was pumping billions of dollars into buying power.
Most of the generators are confident enough they will get paid.
Hidalgo said the BC Hydro situation this week was isolated so far, but he
offered one solution for the future:
"Maybe they shouldn't charge so much."
E-mail Robert Salladay at rsalladay@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Power bills set to skyrocket for heavy users
Graduated rate increase would take effect in June
David Lazarus, Chronicle Staff Writer
Thursday, May 10, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/10/MN176943.DTL

As state regulators outlined plans to raise residential electricity bills by
as much as 40 percent, the head of the Public Utilities Commission warned
yesterday that power rates could soar even higher.
The PUC, which adopted an increase in March, is scheduled to approve details
of the new rates in San Francisco on Monday. Consumers will see the higher
rates in their June utility bills.
State regulators say nearly half of all consumers will see no change in their
power bills. The remainder will experience rate increases ranging from 3
percent to more than 50 percent, depending on the type of customer and the
amount of power used.
The increases would be added to an average 10 percent increase adopted in
January.
PUC President Loretta Lynch suggested that rates could rise yet again if
wholesale electricity prices continue to surge this summer.
"If the sellers decide to turn up the heat and raise prices, we'll have to
look again at the numbers," she said.
INCREASE WILL CONTRIBUTE LITTLE
The proposed rate increase would bring in about $5 billion annually -- a
fraction of the estimated $65 billion California will spend this year
purchasing power on behalf of the state's cash-strapped utilities.
Lynch said she expects the remainder to be made up by issuing bonds. The
state Senate yesterday approved $13.4 billion in bonds to help cover
California's power costs.
However, those bonds would not be released until August, by which time
California's energy tab would be billions of dollars higher.
"There's huge cause for concern that this latest rate increase is a down
payment rather than anything close to a final installment," said Bob
Finkelstein, staff attorney for The Utility Reform Network in San Francisco.
The PUC's Lynch stressed that while California's new rate structure would
place a greater burden on the state's heaviest power users, the increases are
intended to spread the pain among all consumers.
"Energy is expensive for every hour of every day for every customer," she
said.
LINING UP TO GET PAID
That includes the state Department of Water Resources, which is spending
about $70 million a day to keep California's lights on.
While the PUC is moving to have more money collected from consumers to pay
California's power bills, it has yet to address the thorny question of how
the proceeds will be distributed among the various parties lined up for
compensation.
The Water Resources Department wants all rate-related revenues to first
replenish state coffers, while Pacific Gas and Electric Co. and Southern
California Edison Co. insist that they be paid as well for their own
expenses.
The utilities' costs include payments to small power generators that can no
longer afford natural gas to run their plants. The recent closure of hundreds
of such facilities is a key reason California is experiencing blackouts this
week.
Although PG&E said yesterday that most of the smaller generators with which
it does business are now back online, it is not yet clear whether the utility
will be able to keep paying for their power.
"It appears that everything (from the rate increase) is going to DWR (the
Water Resources Department)," said John Nelson, a PG&E spokesman.
Lynch said the PUC will take up the matter of apportioning funds at an
unspecified future date.
CONSERVATIVE USE PAYS
For the moment, state regulators have their hands full digesting two
competing -- and highly complex -- proposals for how rates should be
increased next week.
One proposal was submitted by an administrative law judge working with the
PUC and the other by Lynch. Commissioners will choose between them on Monday.
The two proposals are largely identical. Under both, residential customers
who can keep electricity usage within 130 percent of predetermined limits
would experience no rate increase.
The "baseline usage" figure -- included near the bottom of PG&E bills --
represents the minimal amount of power consumers require. It includes a
number of variables, such as climate, time of year and type of fuel used.
The PUC said about half of all utility customers statewide historically stay
within 130 percent of baseline limits.
Heavy residential users whose electricity usage tops 400 percent of baseline
figures would see power bills rise by as much as 40 percent. Heavy commercial
and industrial users would see bills rise by more than 50 percent.
The average increase for all PG&E residential customers would be about 16
percent, the PUC said, although this number is skewed by the addition of all
those customers whose bills would remain unchanged.
Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights in
Santa Monica, questioned whether these rate increases will be sufficient to
motivate greater conservation among consumers and thus ease California's
energy woes.
He called instead for the state's political leaders to seize generating
plants from out-of-state power companies and impose a special tax on the
companies' "windfall" profits.
"Unless our elected officials take action, this is just the beginning of our
rate increases," Rosenfield warned.
FEDERAL BUILDINGS IN SIGHTS
One of the main differences between the two rate-increase proposals is
Lynch's inclusion of a "real-time pricing program" for federal agencies.
If enacted, she said, federal buildings in California would be fully exposed
to the volatile wholesale power market and would pay whatever California pays
to keep the lights on throughout the day.
Lynch denied that this is an effort on the part of California officials to
drive home to federal authorities the impact of sky-high wholesale
electricity prices.
"It's just an experiment," she said.
While California officials have called on federal regulators and the Bush
administration to assist the state by capping wholesale power prices,
Washington has provided only limited relief to date.
The Utility Reform Network's Finkelstein complained that the proposed rate
increases place a severe burden on residential customers when commercial and
industrial users account for the greater percentage of power consumption.
"It was the commercial and industrial customers who were clamoring for
deregulation," he said. "You didn't hear any calls for deregulation from
residential customers."
Lynch said she was aware that residential users are being asked to carry a
high proportion of the load but said efforts to force industrial users to pay
higher rates ran into political opposition.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Developments in California's energy crisis
The Associated Press
Thursday, May 10, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/10/state0
948EDT0159.DTL&type=news
, , -- (05-10) 06:48 PDT Developments in California's energy crisis:
THURSDAY:
-- Grid operators say cooler temperatures will help them meet California's
electricity demands. Officials at the Independent System Operator say
supplies are tight, but they don't expect blackouts.
-- The PUC holds a public hearing on the proposed rate structure in
Sacramento.
-- Gov. Gray Davis is scheduled to sign a bill authorizing $13.4 billion in
revenue bonds to pay for power for customers of the state's three largest
utilities. The bonds will repay the state general fund for $6.7 billion
authorized for power buys since January and will finance future electricity
purchases.
WEDNESDAY:
-- After a difficult afternoon, grid operators are able to avoid blackouts
after temperatures drop slightly.
-- The Public Utilities Commission releases recommendations for rate
increases, sparing about 9 million customers of Pacific Gas and Electric Co.
and Southern California Edison, but socking residential customers who don't
cut back with a 40 percent hike. PUC president Loretta Lynch says the plan is
designed to encourage conservation and provides $5 billion more to help pay
the state for the $6.7 billion it has spent so far providing electricity for
the customers of PG&E and Edison.
-- The state Senate approves a bill authorizing $13.4 billion in bonds for
power buys, sending the bill to the governor.
-- The governor meets with the CEOs of several major energy suppliers to
discuss the money they're owed by the state's two largest utilities, the
state's creditworthiness and how wholesalers can help the state during the
energy crisis. Davis says he won't be discussing any of the investigations
into price manipulation in the wholesale market.
-- A consortium of business interests releases a study saying continued
blackouts this summer could cost the state $21.8 billion in losses from
sales, wages and production.
-- PG&E says only eight of the 300 small power plants in its territory are
still shut down for payment reasons. All eight are natural gas-fired plants
that deliver a combined 109 megawatts of electricity, enough to power about
80,000 homes. Owners of these plants say they haven't been fully paid for
millions of dollars in past power deliveries and that they would operate at a
loss if they resume full operations.
-- PG&E asks U.S. Bankruptcy Judge Dennis Montali to void the appointment of
a committee representing ratepayers. The utility says that such a committee
isn't allowed under bankruptcy law and that the state attorney general can
represent ratepayers in the bankruptcy process.
Montali also says PG&E can use hundreds of millions of dollars in payments
from customers to buy gas, which the utility in turn sells to homes and
businesses. That came as other creditors wait to recoup billions of dollars
from the bankrupt utility. Montali rules that creditors lining up to collect
from PG&E cannot use any money they secure to sue the utility's largest
creditor, The Bank of New York.
-- A major electricity generator starts an ad campaign that offers to sell
power to the state for 2 cents per kilowatt hour -- as long as the state
provides the natural gas to produce the power. Reliant Energy says the ads
are necessary because their offer is being ignored by power buyers. Another
energy producer, Mirant, has also kicked off a media campaign.
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 rate increases of as much as 46
percent on average to help finance the state's multibillion-dollar power
buys. The PUC is still determining how those increases will be spread among
utility customers.
,2001 Associated Press ?

PG&E says fewer small power plants offline
KAREN GAUDETTE, Associated Press Writer
Thursday, May 10, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/10/state0
343EDT0125.DTL&type=news
(05-10) 00:43 PDT SAN FRANCISCO (AP) -- Only eight of the 300 small power
plants in Pacific Gas and Electric Co.'s territory remain shut down for
payment reasons, the struggling utility says. That means more vital megawatts
have come back online that could help prevent rolling blackouts.
But operators of those so-called qualifying facilities say that's because
they're required to run their plants during periods of high demand to get
paid, not because of a change of heart over millions of dollars owed to them
for past electricity deliveries.
``What I believe will start happening is you will see QFs operate for a
minimal amount of time during peak times in order to get their capacity
payments,'' said Jan Smutney-Jones, executive director of the Independent
Energy Producers. ``They won't be fully available to California.''
All eight of the plants in PG&E's territory are natural gas-fired plants that
deliver a combined 109 megawatts of electricity, enough to power about 80,000
homes.
Lorie O'Donley, a spokeswoman with the Independent System Operator, which
manages California's electric grid, said that more of so-called qualifying
facilities had indeed come back online throughout the state.
``Right now we have 1,400 megawatts offline statewide,'' O'Donley said,
though she didn't yet know how many QFs were offline in PG&E's territory and
in other territories.
QFs harness solar, biomass, geothermal or wind power, as well as natural gas,
to generate environmentally friendly electricity, and provide electricity to
the state's investor-owned utilities under contract.
QFs contribute about 6,000 megawatts to the state's power grid, O'Donley
said. A few weeks ago, around 3,000 megawatts were offline. Many plants were
shut down in protest for not getting paid millions of dollars for past
electricity deliveries. That lack of power contributed to rolling blackouts
which swept the state.
The past debt, as well as a new pricing system ordered by the Public
Utilities Commission, would force QFs to operate at a loss if they start
producing power at full capacity, said Smutney-Jones.
The new PUC price structure ties how much they can charge for their
electricity to the price of natural gas coming in at the Oregon border, where
natural gas is cheaper. However, many plants can only ship and buy their gas
at the Topock border in the south, where prices are much higher.
``I don't think we're anywhere near out of the woods with respect to the QF
issue,'' Smutney-Jones said.
PG&E and Southern California Edison Co. have paid for QF electricity
delivered since April under order by the PUC. However, PG&E had made partial
payments on deliveries since last year, while SoCal Edison had paid nothing.
San Diego Gas and Electric Co. says it never fell behind on its payments.
www.pge.com
,2001 Associated Press ?

A look at two rate designs before power regulators
The Associated Press
Thursday, May 10, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/10/state0
338EDT0123.DTL&type=news
, , -- (05-10) 00:38 PDT
Key components of rate design proposals introduced Wednesday by Loretta
Lynch, state Public Utilities Commission president, and Christine Walwyn, a
PUC Administrative Law Judge. Both proposals suggest how to implement record
rate increases passed by the PUC on March 27. Both rate plans use baseline --
an average amount of power used based on a customer's climate, geography and
the time of year -- to help determine how much to charge customers.
President Loretta Lynch's proposal:
--Divides residential groups into five tiers
Tiers 1 and 2 include low-income customers exempt from rate hikes and power
use up to 130 percent of baseline.
Tier 3 covers power use from 130 percent to 200 percent of baseline. Rate
increase percentage was not released Wednesday.
Tier 4 covers power use from 200 percent to 300 percent of baseline. Rate
increase percentage was not released Wednesday.
Tier 5 covers power use beyond 300 percent of baseline. Lynch said power used
within these limits would receive an average 48 percent rate increase. Paul
Clanon, head of the PUC's energy division, says that number is closer to
35-40 percent on average.
--Commericial customers of PG&E would receive an average 37.5 percent
increase on all electricity used.
--Industrial customers of PG&E would receive an average 52 percent increase
on all electricity used, depending what time of day they used it.
--Agricultural customers of PG&E would receive an average 21 to 30 percent
rate increase on all electricity used, depending what time of day they used
it. Rates are capped at 30 percent.
--Would adopt a pilot program to introduce real-time pricing to federal
electric customers. Real-time pricing charges customers the full cost of
electricity. Therefore, proponents say, customers should shift their electric
use away from times of high demand and higher prices, thus lowering demand
and eventually lowering wholesale prices.
Administrative Law Judge Christine Walwyn's proposal:
--Divides residential groups into four tiers
Tier 1 includes low-income customers exempt from rate hikes and power use up
to 130 percent of baseline.
Tier 2 covers power use between 130 percent to 200 percent of baseline. Power
used within these limits would receive an average 3 percent increase.
Tier 3 covers power use betwen 200 percent to 300 percent of baseline. Power
used within these limits would receive an average 10 percent increase.
Tier 4 covers power use over 300 percent of baseline. This use would receive
an average 34 percent increase.
--Exact information on other classes was not provided.
Source: Public Utilities Commission, Energy Division
,2001 Associated Press ?

Lights stay on despite failure of big plant
John Wildermuth, Joe Garofoli, Chronicle Staff Writers
Thursday, May 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/10/M
N173855.DTL&type=news
With temperatures still high and generating plants running full out, state
power officials managed by the smallest of margins to prevent a third
straight day of rolling blackouts yesterday.
"It's been a roller-coaster of an afternoon," said a weary Stephanie
McCorkle, spokeswoman for the California Independent System Operator.
Demand was running slightly ahead of estimates early in the day, but the
situation improved when the ISO asked its interruptible power users to cut
their loads shortly after noon, McCorkle said.
Those users, who agree to temporarily limit their power use when asked in
return for lower rates, gave the system an additional 800 megawatts to work
with.
Temperatures again soared inland, but by 2 p.m. a slight break in the weather
raised hopes that the emergency could be easing.
Then, a 750-megawatt plant in Pittsburg broke down.
"That wrecked my day," said Jim McIntosh, the ISO's operations director.
While the ISO managed to beg, borrow and buy enough extra power to replace
the Pittsburg plant for the afternoon, the generator's loss is another
headache for a system already stretched to the maximum.
The Pittsburg plant will be shut down for a minimum of 60 hours while crews
repair a boiler tube leak, said a spokesman for Mirant Corp., the plant's
owner.
"I stress 'minimum' here, because that's usually the least amount of time it
takes to fix one of these things," said Chuck Griffin, a company spokesman.
The Pittsburg plant is the largest gas-fired generator in the state's power
grid, McIntosh said.
California already has plants that normally produce 12,000 megawatts of power
out for maintenance and repair.
"We knew May was going to be a tough month," McIntosh said.
E-mail the writers at jgarofoli@sfchronicle.com and
jwildermuth@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 12

PG&E fights consumer committee
Obstruction feared in bankruptcy case
Bob Egelko, Chronicle Staff Writer
Thursday, May 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/10/M
N150518.DTL&type=news
Pacific Gas and Electric Co. asked a judge yesterday to dissolve a committee
appointed to represent consumers in the utility's bankruptcy case, calling
its members "special interest groups" who could obstruct the proceedings.
The nine-member committee, with representatives from businesses, government
agencies and consumer organizations, was named last week by the Justice
Department's bankruptcy trustee for Northern California and Nevada. Trustee
Linda Ekstrom Stanley said her action was needed to give the public a voice
because the state had declined to take part in the case.
The appointment was significant because the committee can participate fully
in the high-stakes case, conduct investigations, comment on PG&E's plan to
settle its debts and propose an alternative plan. No past utility bankruptcy
case has included a consumer committee.
In papers filed late yesterday, PG&E said the committee was unauthorized by
bankruptcy law and was potentially harmful.
The law allows only unsecured creditors and equity security holders to be
appointed to official committees, and consumers do not fit those categories,
PG&E attorneys argued.
A committee of the largest unsecured creditors, including banks and power
generators, was appointed earlier. That committee has also opposed the
appointment of the consumers' committee but has not filed legal objections.
Even if individual customers qualified for appointment, "none of the special
interest groups can claim a mandate to represent the interests of PG&E
ratepayers generally," the utility said.
PG&E said the two consumer organizations on the committee, The Utility Reform
Network and Consumers Union, have "well-known political and policy agendas
that have nothing to do with the reorganization principles of the Bankruptcy
Code" and "a demonstrated history of aggressive lobbying and litigation."
Noting that the consumers' committee would be funded by PG&E, the utility
said the consumer groups' "proclivities could substantially retard the
progress of this case and seriously prejudice its outcome."
U.S. Bankruptcy Judge Dennis Montali has scheduled a May 18 hearing on PG&E's
challenge. Stanley said she had met last week with PG&E representatives and
lawyers, concluding "after significant research" that her action was both
legal and necessary.
"The public's interest is not being protected in the bankruptcy case," she
said, noting that the state government was keeping out of the proceedings in
order to avoid exposure to PG&E lawsuits.
"The ratepayers are claimants here," Stanley said. "They have a right to
expect performance from this utility. They have a right to be heard here."
Committee member Nettie Hoge, executive director of The Utility Reform
Network, said she was confident in Stanley's judgment. "You've got a monopoly
utility and customers who are forced to pay rates for an essential service,"
Hoge said. "You've got to have customers involved in the discussions.
"The trustee has done an admirable job, choosing a committee that is very
diverse, folks who have a stake in every aspect of the economy."
E-mail Bob Egelko at begelko@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 10

Generators silent on Davis plan
He offers lower compensation to stave off Edison bankruptcy
Lynda Gledhill, Chronicle Sacramento Bureau
Thursday, May 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/10/M
N128963.DTL&type=news
Sacramento -- Gov. Gray Davis, who has portrayed power generators as greedy
villains in the state's power crisis, met face-to-face with industry
officials yesterday, calling on them to forgive some of the debt racked up by
an insolvent utility.
In a three-hour meeting described as "businesslike," Davis said generators
will have to accept 70 cents on the dollar of past debt as part of a solution
designed to prevent Southern California Edison Co. from going bankrupt.
At least one of the companies flatly rejected the idea after the meeting,
putting the deal in jeopardy.
If the two sides are not able to reach an agreement, Southern California
Edison would probably follow Pacific Gas & Electric Co. into bankruptcy
court, where creditors face a lengthy and uncertain resolution to recovering
debts.
Davis has run into legislative opposition to the original terms of the
agreement he brokered with Southern California Edison, which includes the
state's purchase of the utility's transmission lines as a way to help it
regain financial stability.
But the governor said he now believes that the deal can win passage in the
Legislature if the generators "take a haircut."
"I indicated that passage of the (agreement) that we signed with Edison would
only work if they agreed to reduce the amount of money they claim the
utilities owe them," he said.
Edison owes generators, including municipal utilities, between $1.1 billion
and $1.2 billion, Davis said. He said he agreed that talks would also take
place with municipal utilities about taking less money on the dollar.
Most of the generators refused to comment on the proposal, but a
representative of Reliant Energy dismissed the suggestion.
"That's simply an unreasonable number to start with," said John Stout, senior
vice president of Reliant, who said that 67 cents on every dollar the company
receives goes to pay the fuel bill, which doesn't include personnel and
maintenance of facilities.
"It doesn't get any supply built," Stout said of the idea. "I would much
rather get that 100 cents on the dollar" to invest in new generation.
The generators, who have reaped huge profits in the past year, said the main
thrust of the meeting was on short-term issues, such as lining up more power
for the summer.
Davis asked which companies were not yet selling to the state and said he
would work to get the Department of Water Resources to sign agreements with
them.
He also asked the generators to support the Edison deal, reportedly asking
them to try to win GOP support for it.
Davis agreed to a proposal from the companies to form permanent working
groups to deal with the crisis.
A handful of protesters led by former Senate candidate Medea Benjamin
condemned Davis for meeting with the companies. Dressed as pigs, with the
names of the companies on their masks, the five protesters brought a small
live pig into the Capitol, where it proceeded to defecate outside the
governor's office before the group was escorted out of the building.
Lawmakers have insisted that the generators must take a cut in the money they
are owed as part of any deal ending the energy crisis.
Senate President Pro Tem John Burton, D-San Francisco, said earlier in the
day that at least a 30 percent "haircut" would be necessary before he would
allow any deal to be approved.
"What we have here is a problem caused by the unfettered greed of generators
that has brought capitalism to a new low," Burton said.
He said if the generators don't agree to some kind of cut, they will find
themselves in bankruptcy court.
Earlier in the day, the Senate approved a bill that allows the state
treasurer to issue $13.4 billion in bonds. The money, which will eventually
be repaid by ratepayers, will be used to replace the funds that have drained
out of the state's general fund since January to buy electricity and pay for
future power purchases.
The state has spent about $6 billion so far -- money, Democrats argue, that
has to be replaced in order to fund other state services.
"Where do those revenues go?" asked Sen. Sheila Kuehl, D-Santa Monica, during
the floor debate. "They create child care slots, pay in-home support services
and provide medical benefits for the poor."
But Republicans said the state's budget should take some of the hit, instead
of pushing it all off on ratepayers.
Sen. Tom McClintock, R-Northridge, said the average ratepayer will see a $2,
000 increase on their utilities bills over the next 15 years to pay for the
bond.
The final vote was 23 to 15. Because not enough Republicans supported the
measure in either the Assembly or Senate to make the bill an urgency measure,
the law will not take effect until 90 days after the end of the special
session. Davis will sign the bill today.
Chronicle staff writer Greg Lucas contributed to this report.
E-mail Lynda Gledhill at lgledhill@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 10

Rate plans shield most households
Posted at 11:05 p.m. PDT Wednesday, May 9, 2001
MICHAEL
BAZELEY
Mercury News

State regulators on Wednesday painted the clearest picture yet of who will
bear the brunt of the biggest electrical rate hike in 20 years: Commercial,
industrial and agricultural users will be socked with power bills that could
soar by 50 percent or more.
But most residential customers will be shielded from huge rate increases,
regulators said. In two proposals unveiled Wednesday by the California Public
Utilities Commission and to be voted on Monday, only the heaviest residential
users get hit with big hikes, potentially doubling their rates in an effort
to push them toward conservation.
``The moderate users will be largely protected,'' said PUC chairwoman Loretta
Lynch.
The PUC has been grappling with designing a rate plan for customers since
March, when it announced an across-the-board rate hike of 3 cents per
kilowatt-hour. The PUC announced the increase -- designed to help the state
climb out of its ongoing power crisis -- before deciding how the rate
structure would work and considered at least 20 plans.
Details of the proposals were criticized Wednesday by energy experts who said
residential customers are not being charged enough to encourage conservation,
and by business representatives who said business and commercial users are
being unfairly targeted.
``This is not a real rate increase for the residential class and we need
one,'' said Severin Borenstein, director of the University of California
Energy Institute. ``This is ridiculous. This is not a way to respond. This
will send no price signal to people at all.''
Both proposals create a five-tier billing system for residential customers,
with heavy users -- nearly 10 percent of all households -- seeing their rates
possibly double. Energy misers and moderate users -- the other 7.3 million
households -- would either see no change at all in their bills or only modest
increases of up to about $12 month.
The consumer group the Utility Reform Network said it was generally satisfied
with the rate plans and how they spread the increase across all customer
groups.
``Yes, they've done a reasonable job of allocating the pain equitably,'' said
Bob Finkelstein, a staff attorney with the organization. ``But we shouldn't
be in this position in the first place. I think it's a shame we're even going
to see a rate increase.''
Covering state's costs
Lynch said this rate increase, along with a statewide bond recently approved
by lawmakers, should cover the state's costs in purchasing power.
But she left the door open for further rate increases, especially if energy
suppliers raise the price of electricity.
``If the sellers decide to turn up the heat and raise rates,'' she said,
``we'll have to look at those numbers again.''
Lynch and an administrative law judge both submitted similar plans. Because
Lynch is the commission president, her proposal would appear to be the most
likely to gain the support of fellow commissioners.
Industrial users appear to take the biggest hit under Lynch's plan. Those
equipped with special meters could see their rates double or more for power
they consume during peak demand periods. Small commercial users would pay
about 45 percent more for their ``on-peak'' electricity, Lynch said.
Lynch said she intentionally ``weighted'' the on-peak rates higher as a way
to encourage conservation.
``By promoting energy conservation during summer peak hours,'' she said in
her proposal, ``we attempt to limit blackouts and service interruptions in
order to preserve public health and safety.''
But industry representatives cried foul.
``These costs make it impossible to operate at a profit,'' said Jack Stewart,
president of the California Manufacturers and Technology Association. ``You
can't add these kinds of prices to the product and try to sell it. This looks
like the beginning of the ringing of the death knell for the economy.''
Agriculture caps
For agricultural users, the proposals are a mixed bag. Agricultural groups
were hoping the PUC would endorse a recommendation by Gov. Gray Davis to cap
their rate increases at 5 to 15 percent. Agriculture groups did get caps, but
they are higher than the governor's, ranging from 23 to 30 percent in both
plans.
Even before the rate increase, farmers and other agricultural businesses were
bracing for a rough summer. Because of a statewide water shortage, farmers
will need to rely more on groundwater pumps, significantly driving up their
energy use.
``We are definitely going to be impacted significantly,'' said Michael
Boccadoro, executive director of the Agricultural Energy Consumers
Association.
Federal buildings
Lynch also slung an arrow at the federal government, proposing that federal
buildings in California be forced to pay market rates for electricity. Her
proposal that federal buildings be given real-time meters could drive up
federal government energy rates by 10 times or more.
Lynch is angry with the federal government's hands-off attitude toward the
state's power crisis and its insistence that Californians pay market rates
for electricity.
Lynch's idea -- which she said would be studied in the coming weeks -- was
derided by several critics.
``This is something you do in kindergarten,'' said fellow Commissioner
Richard Bilas. ``All it's going to do is make matters worse'' with the
federal government.
The PUC considered rate proposals from utility companies, consumer groups and
the governor. Gov. Davis' proposal was perhaps the most closely watched
because three of the PUC commissioners are Davis appointees.
Davis proposed a slightly smaller across-the-board rate increase, an idea
that was rejected by both Lynch and the judge. But Lynch, a Davis appointee,
stressed that the two plans embrace other aspects of the governor's proposal,
such as the caps on agricultural rates.

Contact Michael Bazeley at mbazeley@sjmercury.com or (415) 434-1018.

Energy bond plan gets final legislative OK, faces delay
Posted at 8:28 p.m. PDT Wednesday, May 9, 2001
BY DION NISSENBAUM

Mercury News Sacramento Bureau

SACRAMENTO -- Amid rising partisan attacks, state Democrats gave final
approval Wednesday to a record $13.4 billion energy crisis bond plan to
replenish the drained California budget and buy critical power for the
state's impoverished utilities.
Democrats blasted Republicans for their steadfast refusal to support the plan
-- opposition that will force the state to continue to use its already
strained budget to buy power through the summer.
``I think the Republicans are playing a perilous game with dire
consequences,'' said Assemblywoman Carole Migden, D-San Francisco, after the
Senate approved the bill on a 22-15 vote. Gov. Gray Davis plans to sign the
bill today.
Without two-thirds support in both houses, the bonds cannot be sold
immediately, and the state will lose the chance to line up about $4 billion
in short-term loans.
Because Democrats could pass the bond plan by only majority votes, the
Legislature will have to shut down its special energy crisis session Monday.
Without the two-thirds support, the bond measure cannot become law until 90
days after the session comes to a close.
Closing the session would force state lawmakers to reintroduce hundreds of
other energy crisis bills when Davis, as expected, launches a second energy
crisis special session.
Zane Mann, publisher of the monthly California Bond Advisor newsletter,
blasted Republicans for not throwing their support behind the bonds.
``I can't understand why the Republicans did what they did,'' Mann said. ``I
find it totally obstructionist. They're willing to sell out the state in
order to blame Davis.''
During Wednesday's floor debate, Sen. Tom McClintock, R-Thousand Oaks, said
bonds would saddle each Californian with an extra $2,000 on their energy
bills.
``This expense was incurred because of some very bad decisions by elected
officials of California,'' he said.
The state has just about used up its $6.6 billion budget surplus buying power
for the state's cash-strapped utilities and will have to tap unused cash from
state programs to continue to buy power this summer.
There is still concern that the state will be unable to find buyers for the
largest bond measure in U.S. history.
Mann, as well as the bank behind the bonds, J.P. Morgan, insist there's a
market for them. Mann said the state's two largest mutual funds are waiting
to buy the bonds -- if they have a high interest rate.
If not, he said, ``they'll go out the window.''

Mercury News Staff Writer Jennifer Bjorhus contributed to this report.

Fusion research gets a boost
Published Thursday, May 10, 2001, in the San Jose Mercury News
BY JIM PUZZANGHERA

Mercury News Washington Bureau

WASHINGTON -- With California and the nation facing energy troubles, Rep. Zoe
Lofgren introduced bipartisan legislation Wednesday to accelerate research
into fusion power, a potential long-term solution that promises cheap,
environmentally friendly power if major scientific hurdles can be overcome.
Fusion is the way the sun and stars produce their energy. Unlike nuclear
power, which is a product of fission, or the splitting of atoms, fusion
produces energy by fusing atoms together -- with no high-level radioactive
waste. If it works, 50 cups of seawater could produce as much energy as two
tons of coal, advocates said.
Fusion energy has been proven possible in laboratories, but a power plant
using the technology is still decades away, experts said. The Department of
Energy is spending $248 million on fusion research this year, with the
Lawrence Livermore National Laboratory one of several facilities around the
country receiving funding.
Fusion research funds, however, have decreased about 40 percent in the past
decade, and Lofgren wants to reverse that. Her legislation, the Fusion Energy
Sciences Act of 2001, seeks an increase of $72 million over the next two
years. It would also require the energy secretary to submit a plan by July
2004 for the next major step in fusion energy, a burning-plasma experiment.
``It is time for this country to move beyond caveman technology to the
technology of the future -- fusion technology,'' said Lofgren, D-San Jose, as
she announced the legislation in front of the Capitol Hill Power Plant, which
burns coal, oil and natural gas to power congressional offices. She was
joined by Reps. Mike Honda, D-San Jose, Randy Cunningham, R-Escondido, and
Rush Holt, D-N.J., a physicist. The bill also is co-sponsored by Reps. Ellen
Tauscher, D-Walnut Creek, and Barbara Lee, D-Oakland.
Fusion requires intense heat and pressure. Under the proper conditions, like
those inside the sun, the nuclei of two hydrogen atoms can be forced together
so tightly that they fuse, forming a helium nucleus and releasing large
amounts of energy that could be harnessed for electricity.
The major source of fusion fuel is deuterium (heavy water), which is readily
extracted from water. The other fuel source, tritium, is widely available
from seawater and land deposits.
Fusion is not to be confused with so-called ``cold fusion,'' a disputed
theory that few scientists believe is achievable. In 1989 two Utah scientists
reported cold-fusion success in the laboratory by immersing metal electrodes
in a jar of heavy water. Their results were later discredited, but some
scientists continue to experiment with cold fusion.
Although research on ``hot'' fusion has been moving forward, it still has
many scientific hurdles to overcome, said Robert Park, a physics professor at
the University of Maryland.
``We're still a long way away. Thirty years ago they used to say it would be
30 years, and they're still saying the same thing,'' he said. ``We can fuse
atoms every day, but the trick is when you produce more energy than it takes
to get there.''
The head of one of the leading fusion research facilities in the country
agreed that it will probably be the middle of this century before a
functioning fusion power plant is operating, but he said the scientific
advances ``have really been fantastic.''
Robert Goldston, director of the Plasma Physics Laboratory at Princeton
University, said that as a graduate student there in 1974 he and other
researchers were thrilled to produce one-tenth of a watt of electricity for
one-hundredth of a second using fusion. In 1997, they produced 10 million
watts of electricity for about a second -- a degree of advance that outstrips
the phenomenal increases in computing power.
``The trick now is to make fusion as practical as computers are,'' he said.
``It's a grand scientific challenge.''

Power is money
PUC details plan to raise Edison rates up to 34%. Half of users to see no
hike.
May 10, 2001
By KATE BERRY
The Orange County Register

JOHN MEE of Fullerton is focused at a PUC hearing Wednesday at Fullerton
College.
Photo: Daniel A. Anderson / The Register
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Customers of Southern California Edison would see their electricity bills
jump as much as 34 percent under rate proposals unveiled Wednesday by the
state's top energy regulator.
The Public Utilities Commission designed two rate plans to encourage energy
conservation and repay the state of California for wholesale power purchases.
Though many customers would pay higher rates, half of all residential
customers, or 4 million households, would not be subject to any rate increase
at all. In January, the Legislature blocked rate hikes for customers who use
relatively little electricity or have low incomes.
Loretta Lynch, president of the PUC, blamed "unbounded and exorbitant
wholesale electricity prices" for the proposed increases, which she disclosed
at a news conference in San Francisco. "We all have to share the pain of
that," she said.
If either of the proposed plans is approved Monday by the commission, the
higher rates will appear on electricity bills beginning June 1.
The rate increase won't apply to customers of San Diego Gas & Electric or
Anaheim Public Utilities.
The burden of higher rates would fall primarily on the 2 million households
that consume the most electricity.
A household that pays $114 a month would, on average, pay $12 more. Bigger
users with monthly bills of $213 would pay an additional $73 - a 34 percent
increase.
The hikes would come on top of a 9 percent increase approved by the PUC in
January.

Economic crisis in forecast
May 10, 2001
By ANNE C. MULKERN
The Orange County Register
Rolling blackouts this summer could cost California $26.4 billion in lost
production and income, a business report released Wednesday forecasts.
"This isn't an energy crisis, it's an economic crisis,'' said Nancy
Heffernan, spokeswoman for the group of retailers, manufacturers and other
business groups that funded the $25,000 study.
The report came as Orange County and California escaped a third consecutive
day of rolling blackouts. Energy demand fell when the weather cooled.
The report was released to coincide with a state Public Utilities Commission
announcement on higher electricity rates. The highest rate hikes - up to 50
percent - will hit industrial customers.
Although economists previously have said the energy crisis is unlikely to
cause a recession, the report said blackouts could cut state productivity
growth from current projections of 2.3 percent to less than 1 percent.
If the energy crunch is more severe, economic growth could stop, the report
said.
The study, by New Jersey-based research AUS Consultants, is based on
interviews with 34 businesses in 25 different industries.
It assumes 110 hours of blackouts will darken businesses and homes this
summer and that the average customer will experience about 20 hours of
blackouts.
Based on the state's so-far limited experience with rolling blackouts, that
prediction may be overly severe.
The report assumes statewide blackouts, but not every customer is blacked out
during any given outage. On March 19, for example, when the most severe
blackouts so far hit the state, only 14 percent of Orange County was affected.

GOP stalls sale of bonds with vote
The $13.4 billion measure is approved, but it lacks two-thirds support for
immediate implementation.
May 10, 2001
By JOHN HOWARD
The Orange County Register
For Gov. Gray Davis, the bond sale and the new state budget for the 2001-02
fiscal year beginning July 1 were linked.
The governor had hoped to win Republican support for the bonds, and thus a
two-thirds majority in both houses, which would have allowed the legislation
to take effect immediately and the bonds to be marketed as early as this
month.
But Republican opposition meant the legislation was approved by only a simple
majority, forcing a 90-day wait.
"We think we're probably biting off more financing than we can chew," said
Jaime Fis Fis, spokesman for Assembly Republican Leader Dave Cox.
That means the bond-sale proceeds won't be contained in the state's spending
plan until weeks after the new fiscal year begins, and if the market sours
for such a large bond issue the state could be affected.
"This greatly complicates the budget process," Davis said.
Earlier in the day, the Legislature's financial expert said a slowing economy
was causing a drop in incoming revenue that could force some $3.4 billion in
cuts from the plan Davis proposed in January.
The administration is going to announce its own view of the budget on Monday,
but Davis signaled that the worsening economy would affect his spending plan.
"I suspect it will have an impact," he said.
The sole Democratic dissenter in Wednesday's 23-15 Senate vote was Sen. Joe
Dunn, D-Santa Ana.
He did not address the bond bill on the Senate floor, but earlier said he
opposed the bond plan because it was not tied to aggressive action targeting
profiteering power generators.

Electricity notebook
Davis asks power suppliers to accept 30% less than owed
May 10, 2001
From Register news services
SACRAMENTO Gov. Gray Davis asked generators to accept 30 percent less than
they are owed for electricity sold to the state, saying the discount is the
price of keeping Edison International solvent.
Davis said power suppliers must accept less than they are owed in order to
win legislative approval for a financial-rescue package designed to keep
Edison, owner of the state's No. 2 utility, Southern California Edison, out
of bankruptcy. PG&E Corp.'s Pacific Gas & Electric declared bankruptcy April
6.
"I suggested that 70 percent now was better than anything they could get in
bankruptcy three to four years down the line," the governor said during a
press conference in Sacramento.
Davis made his pitch during a meeting with executives from 12 of the largest
U.S. energy producers.
Air pollution rules to be modified for power plants
DIAMOND BAR Southern California air regulators are close to slashing their
market-based system for controlling power plant pollution, which for years
has allowed plant operators to avoid installing emission controls.
The move is designed to allow large power plants to operate at full capacity
without facing stiff fines as they try to meet the demand for electricity.
The change was prompted by an executive order from Gov. Gray Davis requiring
air districts to let large generators run at the greatest capacity.
Rules expected to be considered Friday by the South Coast Air Quality
Management District Governing Board would curtail a program known as RECLAIM,
which has allowed power plants to buy and sell unused emission "credits"
controlled by other polluters.
Edison, PG&E allege El Paso withheld natural gas supply
SAN FRANCISCO California's two largest utilities have filed testimony with
federal regulators alleging El Paso Corp. withheld natural gas from the
state, leading to an overcharge of some $3.7 billion in energy costs over the
past year and worsening the state's power crisis.
"We believe El Paso has withheld significant amounts of natural gas from
California and manipulated gas prices to the tune of $3.7 billion. ... PG&E
also supports these findings," said Kevin Lipson, lead attorney for Edison
International unit Southern California Edison, the state's No. 2
investor-owned utility.
A spokesman for PG&E Corp. unit Pacific Gas & Electric, the state's No. 1
utility, confirmed Wednesday that it made a filing late Tuesday with federal
energy regulators alleging that El Paso Corp. "clearly possessed the ability
and incentive to raise (gas) prices."
Natural-gas prices in California, the highest in the U.S. over the past year,
have been a key reason for the surge in power prices in the state because
gas-fired turbines are the single biggest source of electricity in
California, providing more than a third of the power used by the state's 34
million residents.

Regulator says more electricity rate hikes are likely
PUC member tells a Fullerton audience that more increases may be necessary.
May 10, 2001
By KATE BERRY
The Orange County Register

FULLERTON COLLEGE economics professor Arienne Turner brought students to
Wednesday's PUC hearing on power-rate increases.
Photo: Daniel A. Anderson / The Register
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A California energy official said consumers can expect more electricity rate
increases beyond the proposals unveiled Wednesday.
Carl Wood, one of five commissioners on the state's Public Utilities
Commission, said at a public hearing at Fullerton College on Wednesday that
raising electricity rates was a "hateful choice," but one the commission may
have to revisit.
"This may not be the end of the rate increases," Wood told about 250 people
at the hearing, one of nine held by the PUC throughout California this week.
The hearings were scheduled to allow consumers a voice on how the rate
increase should be divvied up among different classes of customers.
PUC President Loretta Lynch unveiled two rate proposals Wednesday. Under
those plans, rate increases of as much as 34 percent would show up on the
bills of customers of Southern California Edison and Pacific Gas & Electric
starting in June. The increases would be retroactive to March 27.
Consumers expressed anger and frustration at the hearing in Fullerton before
Wood and Administrative Law Judge Michael Galvin.
"Consumers did not create this mess, and we should not have to pay for it,"
said Ruth Shapin, a Santa Ana lawyer.
Darrell Nolta, a systems engineer in Westminster, held up copies of the 1996
law that deregulated the electricity industry, which promised consumers a 20
percent reduction in retail electricity rates by 2002.
"I want a refund of my money," Nolta said, referring to the roughly $19
billion in so-called "stranded costs" that the state's three largest
utilities have collected in the past four years and transferred, in part, to
their parent corporations. "I want to be able to sue the state of California
and the PUC for this."
The money transfers and salaries paid to executives at Edison and PG&E were
the subject of most of the consumer vitriol.
The PUC is investigating the utilities' connections with their parent
companies. The utilities say their actions have been legal.
Tom Martin, a representative of the Small Manufacturers Association of
California, said the rate increases will cripple the state's economy.
"Some people believe businesses can just raise prices to make up the
difference," he said. "But they cannot."
Under the proposals released Wednesday, nearly half of all consumers would
pay no rate increase. The 2 million heaviest residential users would pay 10
percent to 34 percent more, or an extra $12 to $73 a month. The 2 million
households that are medium users would pay just $2 more a month, a 3 percent
increase.
Small and medium-sized businesses, which pay lower rates than consumers, can
expect a 35 percent increase, while farmers will pay 23 percent more.
Industrial users face a 50 percent rate hike.
The rates would be partly used to pay back up to $13.4 billion in bonds the
state Senate approved Wednesday to recover state expenditures on power since
January and future purchases. In just four months, the state has spent about
$6 billion buying power for Edison, PG&E and San Diego Gas & Electric Co.
customers. Lynch, the PUC president, said the rate proposals would raise $5
billion statewide this year.
Under deregulation, consumers' rates were frozen at artificially high levels
to allow the utilities to collect "stranded costs," mostly investments in
nuclear power plants and contracts with small energy producers. The utilities
thought those investments would be unprofitable in a deregulated environment.
Starting a year ago, when wholesale electricity prices rose above the level
of frozen retail rates, the utilities were stuck with losses on their power
purchases. The losses amounted to more than $14billion for Edison and PG&E
through January.
"Most of the money in this crisis went to the power cartel," said Wood,
referring to private power generators that purchased power plants from Edison
and PG&E under deregulation. "In the long run, we have to move back to a
regulated system because this is an essential commodity."
PG&E declared bankruptcy April 6, saying it could no longer shoulder its
debt.

Starting all over again
The Legislature's special sesion on the power crisis ends today -- with more
work to do at an added cost.
May 10, 2001
By HANH KIM QUACH
The Orange County Register
SACRAMENTO The state will have to restart a $3.2 million legislative process
after lawmakers today adjourn the special session devoted to fixing the
energy market.
The energy crisis is by no means solved, but because of the rules of the
Legislature, the special session must be gav eled to a close to ensure that
the $13.4 billion revenue bond bill passed by the Senate on Wednesday can be
enacted 91 days after Gov. Gray Davis signs it.
But by abruptly ending the session, about 200 energy-related bills that
lawmakers have been hashing out will die, said Jon Waldie, chief consultant
for the Assembly Rules Committee.
Lawmakers would have to reintroduce them in a new special session with a new
bill number, he said. The non-partisan Legislative Analyst's Office estimates
that it costs an average of $15,900 for each bill that moves through the
legislative process. That accounts for printing and staff hours.
Democrats are trying to make sure bills don't have to go through the trouble
of being rescheduled for hearings and re-debated in committees, both
time-consuming efforts, said an aide for Assembly Speaker Bob Hertzberg.
But restarting the process has Republicans worried.
"It's going to delay the process,'' said Assemblyman Tony Strickland,
R-Ventura. "How can the process be delayed when people are going through
rolling blackouts?"
It's also more work for staff members who have spent countless hours drafting
ideas into legalese.
Bion Gregory, lead attorney for the Legislative Counsel's Office, said the
attorneys need to recreate bills each time they're amended to show how the
proposal would change from existing law.
"It's not a matter of taking language and reproducing it,'' he said.
The special session mechanism allows lawmakers to pass and enact bills more
quickly than in the regular session. In special session, bills that pass with
a simple majority vote take effect 90 days after the session adjourns, rather
than the following Jan. 1, as with regular-session bills.
Bills passed with a two-thirds majority in special session can be enacted
immediately after the governor signs them. In regular session, such bills
don't become effective until 90 days after signed.
Having a second session on the same topic didn't concern Ron Roach of the
California Taxpayers Association as much. He said the second session might
even be more efficient because lawmakers will be more aware of each other's
bills and not introduce similar ones. In fact, the second time around might
streamline the process, he said.
In addition, some of bills that have been largely passed over as legislative
leaders search for more immediate fixes to the energy problem are probably
not going to make it far anyway.
"If they didn't get a hearing (and voted on by now) they never will - what's
the point?'' Roach said.

Davis is set to sign a $13.4 billion bond-issue measure today to cover
electricity costs
May 10, 2001
By JOHN HOWARD
The Orange County Register
SACRAMENTO Gov. Gray Davis is prepared to sign off on the biggest state loan
in history today - a $13.4 billion bond sale to buy emergency electricity for
California's beleaguered utilities and replenish a state treasury sapped by
the energy crisis.
The average residential utility ratepayer would pay $2.50 to $3 per month for
up to 15 years to retire the debt. Some critics placed the figure at $10.55
per month for ratepayers of all sizes.
The Democrat-ruled state Senate, like the Assembly earlier in the week,
approved the bond-sale legislation along partisan lines Wednesday.
The bill authorizes the state to borrow up to $13.4 billion by selling
revenue bonds beginning in August. The money will be used to pay back the
state for more than $6 billion worth of electricity it has bought since
January on behalf of the utilities and to finance the purchase of new power
in long-term contracts.
Davis said he plans to use about $12.5 billion of the bond and keep the rest
in an emergency reserve.
Democratic supporters said the borrowing protected the state budget as
California faces an economic downturn and dwindling revenue, and protected
potentially threatened programs. Republican critics said the bonds would
burden ratepayers for years.
"If we don't pass this bill today, we're going to have to wipe out programs,"
said Sen. Tom Torlakson, D-Antioch, although he did not say which programs
could be affected.
But Republicans in both houses said the bonds were too high, and urged the
governor and legislative leaders to strike a compromise.

Thursday, May 10, 2001

Papering over state electricity problems
Crisis management and recovery plans are the way to solve a crisis, not
piecemeal programs and gimmicks. But even as new blackouts roll across the
state, piecemeal is about all we're getting in the way of solutions from Gov.
Gray Davis and the California Legislature.
The latest one came Monday when the Assembly voted for a $13.4 billion
revenue bond to pay for this year's high electricity bills. (Revenue bonds
are paid by a service's users, in this case ratepayers.) The Senate is
expected to pass the bill, Senate Bill 31X, today or Thursday.
Because the two-thirds threshold was not met in the Assembly, the bonds could
not be issued immediately, but instead will be issued in 90 days, in August.
In the 49-29 vote, only Republican Assemblyman Anthony Pescetti of Rancho
Cordova sided with the Democratic majority.
The bonds will repay the state general fund for electricity purchases which,
so far in the crisis, amount to at least $5 billion and will rise much higher
later this year. Bonds will be repaid over 15 years.
In a conference call Gov. Davis held with us and several other newspapers
Monday, he explained that he hoped for bipartisan support for the bonds
because the delay "would greatly complicate the budget process and could
damage the economy. It's my hope that both parties can be part of the
solution, not part of the problem. People elected us to be problem solvers."
The Republicans' beliefs were summarized by Assemblyman Tony Strickland of
Thousand Oaks. "Let me tell you what our caucus' philosophy is," he told the
San Diego Union-Tribune. "If you have money today, you don't borrow against
your children and grandchildren's future." The Republicans favor using the
state budget surplus to pay for the state electricity purchases.
Indeed, the bond sale will create more problems than it solves. "It's not
needed," Adrian Moore, director of economic studies at the Reason Public
Policy Institute, told us. "It helps cover up the costs of what Davis's
overall policies are bringing about. It just stretches it out so it's not
paid this budget cycle. Plus it adds interest [costs]."
What's really needed, Mr. Moore said, is to "get back to a market-based
solution." Retail prices to ratepayers, now capped, should be further freed.
Higher retail prices then would bring about more conservation and power plant
investment and, as less electricity is used, wholesale and retail prices
would moderate.
And, the governor and Legislature should stop attacking power producers with
threats of seizures and taxes, especially given the intermittant price caps
instituted by federal energy regulators. Leaders should instead encourage
producers to build here.
The longer California's leaders paper over the dimensions of the crisis, the
longer it will persist and the more expensive it will become.

Task Force To Propose Legislation

By SCOTT LINDLAW
Associated Press Writer
WASHINGTON (AP) via NewsEdge Corporation  -
President Bush's energy task force plans to
propose legislation allowing the seizure of private property to
accelerate the construction of electrical power lines, three
administration officials said Tuesday.

The recommendation is contained in the final draft of a broad
energy blueprint to be unveiled by President Bush next week, the
officials said. The ``eminent domain'' authority allows the
government to appropriate private property for public use; the
property owners are usually compensated.

The Federal Energy Regulatory Commission already has eminent
domain authority over the siting of natural gas pipelines, but has
no such power over long-distance electricity transmission lines.
The lack of authority often requires electrical companies to get
approval from several states and numerous local jurisdictions.

Federal authority to locate transmission lines would quicken the
approval process, supporters of the provision contend. The shortage
of transmission lines has been cited by officials as one reason for
bottlenecks in the electric grids and a shortage of power in areas
of high demand.

New lines also are needed to connect new power plants to the
grid.

Vice President Dick Cheney said on CNN Tuesday that the energy
task force he heads will include a recommendation on eminent domain
for power lines.

``The issue is whether or not we should have the same authority
on electrical transmission lines'' as the government has on gas
lines, Cheney said. ``That's never been granted previously.''

He did not say what the recommendation would be.

But the administration officials, speaking on condition of
anonymity, said the report would ask Energy Secretary Spencer
Abraham to draw up legislation allowing utilities to obtain rights
of way for transmission lines, presumably through FERC.

The energy strategy report is going to the printers in stages
this week. Officials said there was no talk of taking out the
eminent domain provision, though they could not rule out that
remote possibility.

Utilities, not the government, would own the property, one
official said.

Earlier this year, a draft of a Republican energy bill in the
Senate had included giving FERC eminent domain authority for power
lines. But that provision later was deleted when it was introduced
by Sen. Frank Murkowski, R-Alaska.

The electric utility industry for some time has been lobbying
for a federal role in siting electric power lines, which now must
go through a maze of overlapping local jurisdictions and state
agencies for approval.

``If FERC has the eminent siting authority, that will help
facilitate siting of electric power transmission lines,'' said Jim
Owen, a spokesman for the Edison Electric Institute, which
represents investor-owned utilities.

It especially would help in getting interstate transmission
rights of way approved, he said.

``But it's still not a silver bullet because ... it can still be
a cumbersome process,'' said Owen. Some natural gas pipeline cases
before FERC have taken years to resolve, he said.

Critics have questioned whether Cheney's task force will
emphasize power production and transmission over conservation.

Cheney said the report would use tax breaks to encourage
conservation.

``Most of the financial incentives that we recommend in the
report go for conservation or renewables, for increased
efficiencies,'' Cheney said.

The task force will likely recommend tax incentives for purchase
of ``hybrid,'' ultra-efficient automobiles that run on gasoline and
electricity, one administration official said. A similar provision
was included in the budget Bush sent to Congress earlier this year.

The report will also call for a new tax credit for builders of
certain new power plants.

Cheney outlined the energy plan at the weekly Senate GOP
conference Tuesday.

According to one Republican who was present, the vice president
said that while he supported energy price controls when President
Nixon used them three decades ago, he wouldn't advocate them now.

Caps that are too high cause voters to blame politicians rather
than the utilities, Cheney said, according to the Republican.
Excessively low caps undermine the incentives for developing new
power sources, Cheney said.

After Cheney spoke, Sen. Gordon Smith, R-Ore., rebutted, saying
he came from a state where energy prices have risen enormously in
the past year, and he favors price caps.

Stage 2 Electrical Emergency Declaration; SCE to Curtail 'Load' for Some
Customers

ROSEMEAD, Calif., May 9 /PRNewswire/  via NewsEdge Corporation  -
The California Independent System
Operator (Cal-ISO) again declared a Stage 2 Emergency this afternoon, due to
low power reserves and increased demand for power because of high
temperatures.  The agency called upon Southern California Edison and other
investor-owned utilities to begin voluntary "load" curtailment programs for
certain customers within their service areas.

Cal-ISO said the Stage 2 Emergency would be in effect from 11:45 a.m.
through midnight.  Cal-ISO and SCE are making urgent appeals for all customers
to immediately reduce their electricity consumption so that reserve levels do
not deteriorate further.

To achieve this load reduction during Stage 2, SCE is required to activate
its voluntary load curtailment program, under which large industrial,
commercial, and agricultural customers have agreed to temporarily curtail
electricity usage during an electrical emergency in exchange for reduced
rates.

Should the situation worsen for any reason, and power reserves drop below
1.5%, Cal-ISO could declare a Stage 3 Emergency, the most critical status.
Cal-ISO could direct utilities to "drop load," necessitating involuntary
rolling blackouts for groups of customers across their service areas until
sufficient reserve levels are achieved.

SCE customers are asked to reduce power consumption by turning off any
unneeded electrical appliances and lights, especially during the state's daily
peak consumption period -- noon to 6 p.m.

Following are some effective ways customers can reduce their power use and
not be greatly inconvenienced:

LARGE ENERGY USERS

-- turn off all auxiliary or redundant machinery where possible;

-- consider shifting or staggering operations outside the hours of highest

electrical demand, typically noon to 6 p.m.;

AIR CONDITIONERS

-- set thermostats no lower than 78 degrees (F);

-- use electric fans instead of air conditioning if practical;

-- avoid using evaporative coolers or humidifiers at the same time an air

conditioner is running;

-- avoid cooling unoccupied rooms;

-- open windows during evening hours to take advantage of cool breezes;

APPLIANCES AND TOOLS

-- delay until evening hours the optional use of appliances (dishwashers,

clothes washers and dryers), chargers, power tools, and electrical

equipment;

REFRIGERATORS AND FREEZERS

-- avoid unnecessarily opening refrigerators;

-- keep your refrigerator or freezer set at the proper temperature;

-- be sure to use the "power-saver" switch if your refrigerator has one;

-- keep the condenser coils behind or beneath your refrigerator/freezer

clean (refrigerators represent approximately 25% of the electric bill

for a typical residence);

ADDITIONAL TIPS

-- run swimming pool equipment during early morning and evening hours;

-- limit the reopening of a refrigerator, which is a major user of

electricity in most homes;

-- use drapes and blinds to keep out direct sunlight;

-- replace incandescent light bulbs with ENERGY Star(R) qualified compact

fluorescent bulbs;

-- always wash a full load of clothes or use the variable water level

adjustment for smaller loads; and

-- be sure your home has adequate insulation.

For more information about electricity conservation and SCE's energy
efficiency programs, go to www.sce.com.

An Edison International (NYSE: EIX) company, Southern California Edison is
one of the nation's largest electric utilities, serving a population of more
than 11 million via 4.3 million customer accounts in a 50,000-square-mile
service area within central, coastal and Southern California.

SOURCE  Southern California Edison

CONTACT:  Corporate Communications of Southern California Edison,
626-302-2255
Web site:  http://www.edisonnews.com
Web site:  http://www.sce.com
(EIX)

B] FULL/ Pacific Gas & Electric restores all Qualifying Facilities --Pacific
Gas & Electric
says 8 of 300 QFs still shut down

May 10, 2001

New York, May 9 (BridgeNews) - Pacific Gas & Electric Co. restored nearly all
of the Qualifying Facilities that had been shut down earlier in the year due
to financial reasons. The company now has only eight of the more than 300
Qualifying Facilities under contract to it still shut down for
payment-related reasons.
--Adrian Viegas, BridgeNews

*                 *                    *

The following is the text of today's announcement, with emphasis added by
BridgeNews. BridgeStation users will find links to company data at the end:
Most of PG&E's Qualifying Facilities are Back On Line; Only 3% Still Shut
Down for Payment-Related Reasons
SAN FRANCISCO----May 9, 2001--PACIFIC GAS AND ELECTRIC COMPANY ANNOUNCED
TODAY THAT NEARLY ALL OF THE QUALIFYING FACILITIES (QFS) THAT HAD SHUT DOWN
EARLIER THIS YEAR FOR FINANCIAL REASONS HAVE RETURNED TO SERVICE, AND ARE
AGAIN GENERATING POWER FOR PG&E'S ELECTRIC CUSTOMERS.
ONLY EIGHT OF THE MORE THAN 300 QFS UNDER CONTRACT TO PG&E ARE STILL SHUT
DOWN FOR PAYMENT-RELATED REASONS. THESE EIGHT REMAINING GENERATORS TYPICALLY
DELIVER ABOUT 109 MW OF POWER, OUT OF THE ROUGHLY 2,500 MW TOTAL TYPICALLY
DELIVERED BY ALL PG&E-CONTRACTED QF GENERATORS COMBINED. ALL EIGHT FACILITIES
ARE GAS-FIRED GENERATORS.
"We remain optimistic that these last few generators will come back on line
in the next few days, and we are working with them to help make that happen,"
said Gordon R. Smith, president and CEO of Pacific Gas and Electric Company.
"Ironically, our Chapter 11 filing has provided additional financial
certainty to many QFs, since we are now able to pay them in full for power
they are delivering, and since rates currently cover their costs. We will
continue to work with the QF producers to assure that all of the power they
are supposed to deliver will be available for our customers."
The QFs under contract to Pacific Gas and Electric Company have been paid in
full since early April, and received partial payments for prior deliveries.
In addition to the facilities shut down for nonpayment, another 13 facilities
that would ordinarily be delivering an average of 82 mw are out for scheduled
maintenance or unplanned outages. This amount is fairly typical and not
unusual for this time of year.
For energy saving tips, please visit our website at www.pge.com/123 or
contact the Smarter Energy Line at 1-800-933-9555.
CONTACT: Pacific Gas and Electric Company

News Department, 415/973-5930

End