Please see the following articles:

Sac Bee, Fri, 5/11:  "Davis signs bonds-sale bill, blasts GOP "

Sac Bee, Fri, 5/11:  "Senators push administration for more help on energy
crisis "

Sac Bee, Fri, 5/11:  "Energy Digest: Company will expand plant, sell power to
state "

Sac Bee, Fri, 5/11:  "Spreading the pain"   (Editorial)

SD Union, Thurs, 5/10:  "Oceanside seeks ally in building power plant"

SD Union (AP), Thurs, 5/10:  "Davis signs bill authorizing $13.4 in bonds
to repay treasury for power buying"

SD Union, Thurs, 5/10:  "GOP defeats first attempt to cap power prices"

SD Union (AP), Thurs, 5/10:  "Energy task force expected to recommend
tax breaks"

LA Times, Fri, 5/11:  "Power Rescue Plan Rests on Many 'Ifs' "

LA Times, Fri, 5/11:  "Bush, Rivals Don't Dare Ask Public to Make Sacrifices
in
Energy Crunch"

LA Times, Fri, 5/11:  "House Committe Rejects Electricity Price Controls"

LA Times, Fri, 5/11:  "Nonprofit Shrugs at Pleas to Conserve"

LA Times, Fri, 5/11:  "Restarting of Generators in O.C. Approved"

LA Times, Fri, 5/11:  "Discovery Has City Flying High"

LA Times, Fri, 5/11:  "Don't write off Davis energy plan"   (Commentary)

SF Chron, Fri, 5/11:  "High bills may not spur conservation
PG&E, critics agree increases are too small to change habits "

SF Chron, Fri, 5/11: "Power plant owners want end to PG&E contracts "

SF Chron (AP), Fri, 5/11:  "Developments in California's energy crisis"

SF Chron, Fri, 5/11:  "GOP members of House oppose price cap plan
Three from Southern California vote against Feinstein on electricity "

SF Chron, Fri, 5/11:  "PUC chief's proposal called petulant
Federal agencies would pay full tab for power "

SF Chron, Fri, 5/11:  "Sacramento decisions in state's power crisis "

Mercury News, Fri, 5/11:  "State leaders consider scheduled power blackouts"

Mercury News, Fri, 5/11:  "Davis plan to help utility faces fight in
Legislature"

Mercury News (AP), Fri, 5/11:  "Power plant owners want end to PG&E contracts"

Mercury News, Fri, 5/11:  "Businesses blast electricity rate-hike proposal"

Mercury News, Fri, 5/11:  "Households must share power costs"   (Editorial)

Mercury News, Fri, 5/11:  "Failure to conserve fueled energy woes"
(Commentary)

OC Register, Fri, 5/11:  "Generators win 10-year revival"

OC Register, Fri, 5/11:  "Energy notebook
Davis signs bill to sell $13.4 billion in bonds for power"

OC Register, Fri, 5/11:  "Not saving for a sultry day"

OC Register, Fri, 5/11:  "Despite opposition, AES has the power"

NY Times, Fri, 5/11:  "Many Utilities Call Conserving Good Business"

Individual.com(Businesswire), Fri, 5/11:  "PG&E Files Opposition to
Ratepayers'
Committee"

Individual.com (PRnewswire), Fri, 5/11:  "SCE to Curtail 'Load' for Some
Customers
Following Stage 2 Electrical Emergency Declaration"

Individual.com (AP), Fri, 5/11:  "For many Californians, fear of high
electricity bills is a bigger threat than blackouts"

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Davis signs bonds-sale bill, blasts GOP
By Emily Bazar
Bee Capitol Bureau
(Published May 11, 2001)
Accusing Republicans of "playing with fire" and jeopardizing the economy,
Gov. Gray Davis on Thursday signed a bill allowing the state to sell a
record-setting $13.4 billion revenue bond package to finance its past and
future electricity purchases.
The Democratic governor's harsh words capped a tense partisan standoff in the
Legislature that forced a delay in the bond sale until August.
Davis warned that the delay, which he blamed on GOP lawmakers, could hurt
Californians if state programs are cut to pay for electricity until the bonds
are sold.
"They should know that their constituents may well be hurt if, as a result of
their actions, cuts have to be made in law enforcement, transportation,
health care, education and programs for seniors," Davis said. "If I have to
go into every district occupied by a member who voted against (the bill) and
make a case about why this measure is necessary, that is what I will do."
Davis commended the only Republican to vote for the measure, Assemblyman
Anthony Pescetti of Rancho Cordova, calling his a "courageous vote in the
face of blind opposition."
Since mid-January, the state has committed $6.7 billion from its budget to
last-minute electricity purchases.
In order to pay that back, and to pay for power the state has lined up
through long-term contracts, Davis asked the Legislature to approve a bill
authorizing the sale of $13.4 billion in bonds. The bonds will be repaid with
higher customer rates over the next 15 years.
Assembly Republicans balked, saying the ratepayers would be saddled with debt
for too long. They proposed an $8 billion bond package instead, and suggested
using a one-time allocation from the state budget to make up the difference.
But Monday, Assembly Democrats pressed forward with the $13.4 billion figure.
Because they could not muster enough Republicans for a two-thirds vote, they
passed the measure, SB 31x, with a simple majority, requiring a 90-day wait
for the bill to become law.
Assembly Republican leader Dave Cox of Fair Oaks said Democrats could have
won Republican support if they had seriously considered the GOP proposal and
actually negotiated.
He accused Davis of engaging in "fear politics."
"We didn't hear from the governor. It kind of leaves you with the impression
that maybe there was never any intention of negotiating," Cox said. "It was
either their way or forget it."
The state's blueprint calls for the $13.4 billion to last until Jan. 1, 2003,
by which time wholesale electricity prices are expected to have fallen, new
power plants added and debt-ridden private utilities stabilized.
But the plan rests on numerous assumptions beyond the state's control,
including the price of electricity, extent of conservation, quantity of power
available from the Pacific Northwest and production by alternative energy
suppliers.
Under a worst-case scenario, critics say, the state could spend the bond
funds within several months and be left holding the bag for $50 million or
more per day in electricity bills.
Also Thursday, the Senate sent Davis emergency legislation that expedites
power plant construction in California, two weeks after a controversial labor
amendment hung up the bill, SB 28x.
Lawmakers removed the amendment after Davis enacted its provisions in an
executive order Tuesday. He is expected to sign the bill early next week.

The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com.
Jim Sanders and Kevin Yamamura of The Bee Capitol Bureau contributed to this
report.

Senators push administration for more help on energy crisis
By James Rosen
Bee Washington Bureau
(Published May 11, 2001)
WASHINGTON -- Western senators from both parties criticized Energy Secretary
Spencer Abraham on Thursday, telling him that President Bush must respond
with more urgency to rising gasoline prices and power shortages.
At a Senate Energy Committee hearing, Abraham also faced tough questions over
his department's proposed $19.2 billion budget and plans to slash funding for
the development of alternative energy and more energy-efficient vehicles.
"We have a pretty good plan for the long range, but we've got some problems
right now, and we're going to hear more and more about it -- whether it's
gasoline, whether it's electricity, whether it's the prices," said Sen. Craig
Thomas, a Wyoming Republican. "How are you going to react to this summer's
prices? And I'm not for price controls, but we need to have some reaction to
what's happening now."
Republican Sen. Gordon Smith of Oregon urged Abraham to push the Federal
Energy Regulatory Commission to control wholesale energy prices.
"We've never had a free market in energy, and people are truly going to want
to see this administration appearing more engaged than it appears to be,"
Smith said. "We have a crisis here, and I think it would behoove the
president -- it would behoove all of us -- to figure out a way to relieve
this in a very aggressive way."
Abraham told the senators that a comprehensive energy plan, which a task
force headed by Vice President Dick Cheney is expected to release next week,
will provide short-term and long-term solutions to the country's
energy-supply problems.
After the hearing, Abraham vehemently denied that either he or Bush has been
complacent about the crisis.
"I take a little bit of umbrage, whether it's from Republicans or Democrats,
at the suggestion ... that we're not moving with sufficient urgency," Abraham
said. "We've moved as fast as we can in the short period of time we've been
in office."
Abraham said the Bush administration has been especially responsive to the
problems in California.
"From the very first day that I was secretary, I was on the phone with
(California Gov.) Gray Davis, finding out what challenges he had and how we
could help," Abraham said. "Within three days of taking office, we supported
his call for emergency orders to provide natural gas and electricity to
California.
"We have subsequently responded favorably to virtually every request he has
made, from expediting permits that relate to new generation to helping with
respect to his desire to move forward with the acquisition of the
transmission system to last week's conservation measures. The only thing we
haven't done is agree to what we consider an unwise decision to impose price
caps. And that, I think, would only make the conditions more severe."
Sen. Dianne Feinstein, a California Democrat, said the federal government
should probe widespread signs that power suppliers have created artificial
shortages in the state.

The Bee's James Rosen can be reached at (202) 383-0014 or
jrosen@mcclatchydc.com.

Energy Digest: Company will expand plant, sell power to state

(Published May 11, 2001)
A Huntington Beach power plant will be required to sell its increased output
in California in exchange for speeded-up approval of an expansion project,
the state Energy Commission agreed Thursday in a 4-0 vote.
The decision comes after some commission lawyers and Gov. Gray Davis' office
initially had said they were concerned that such a requirement might violate
the U.S. Constitution.
But the plant's owner, AES Huntington Beach, eventually agreed to the
California-sales provision for the electricity it will produce by reviving
two mothballed steam turbines, commission Administrative Judge Garret Shean
said.
The commission granted the project licensing approval Thursday, and AES will
contract with the state for 450 megawatts, the expansion project's full
output, according to Davis' office. The expansion should be completed by late
summer.
--Carrie Peyton
Panel rejects price controls
WASHINGTON -- California Republicans led a successful effort Thursday to
defeat an amendment that would have imposed price controls on wholesale power
rates in an effort to lower the state's $1.5 billion monthly tab for
electricity purchases.
Thursday's vote was the first test in a drive by Western lawmakers to put the
brakes on skyrocketing power rates which, in California, have zoomed tenfold
over past year.
By a 20-12 vote, the House Energy and Commerce Committee's energy and air
quality subcommittee rejected a price controls amendment to an emergency
electricity package offered by Rep. Henry Waxman, D-Los Angeles.
"What the Republican-dominated committee has said is, 'California, drop
dead,' " Waxman said after the vote.
Patterned after legislation introduced in the Senate by Dianne Feinstein,
D-Calif., and Gordon Smith, R-Ore., the Waxman amendment would require
wholesale rates to be pegged at the price of production, plus a profit
margin.
--David Whitney
Small generators' claims aired
SAN FRANCISCO -- U.S. Bankruptcy Judge Dennis Montali on Thursday wrestled
with but did not come close to solving the problems of 300 small energy
generators, including many who claim they're on the verge of collapse because
Pacific Gas and Electric Co. has not paid them a total of about $1 billion.
They supply about 15 percent of PG&E's electricity, according to the
utility's figures. James Lopes, PG&E's bankruptcy lawyer, said all but eight
of the facilities now are operating.
But so far, more than two dozen producers of solar and wind power, biomass
and cogeneration have asked the judge to order PG&E to pay them or release
them from their contracts. Voiding the contracts would drive up the prices
they could charge but might keep them from going off line before summer, when
they're most needed.
Montali set a May 24 hearing to assess the immediate harm facing four
cogeneration companies whose combined motion for relief came up first in the
PG&E Chapter 11 bankruptcy proceedings.
He was unsympathetic during Thursday's hearing to arguments that PG&E, even
when it pays at the contracted rate, doesn't pay enough to keep the small
generators in business. But he gave no indication of his ultimate ruling.
--Claire Cooper

Spreading the pain

(Published May 11, 2001)

Monday the California Public Utilities Commission faces a $4.8 billion
question: How should regulators divvy up the electricity rate increase they
approved in March between residential customers and businesses?
All customer classes of the private utilities must bear some of the burden of
the higher costs for the electricity the state is now purchasing for Pacific
Gas and Electric and Southern California Edison (this rate increase does not
pertain to municipal power agencies such as SMUD).
The right way to do that is to spread the higher electricity costs between
residences and businesses in proportion to their use of power. This principle
will result in a higher average percentage increase for manufacturers and
commercial businesses because they now have lower per-kilowatt rates than
residences, but a rate structure that reflects their power usage.
But businesses shouldn't get saddled with some of the burden that belongs to
residential customers, as two of the plans before the PUC propose.
A new law prohibits the PUC from increasing the rates on residential
electricity consumption below 130 percent of "baseline." Depending on whether
one believes the PUC or PG&E, the law exempts anywhere from one-third to
one-half of residential customers from any rate hikes.
Had they not been exempted, however, their proportional share of the
necessary rate increase would have been $1.1 billion. The Legislature
exempted these customers as a way to protect lower-income consumers as well
as those who conserve. Lawmakers didn't say, however, who should pay for this
$1.1 billion in their place.
This thankless task now falls to the PUC. Two proposals -- one by PUC
President Loretta Lynch, another by an administrative law judge -- answer the
$1.1 billion question in the wrong way. Both proposals seek to shift most of
this $1.1 billion burden from the residential class onto manufacturers and
businesses.
That's both unfair and bad for the economy. This burden belongs solely to the
residential class. Because the PUC cannot impose it on usage below 130
percent of baseline, regulators must impose it on the other residential
customers who are using the most electricity.
Yes, this would increase their rates even more steeply than Lynch is already
proposing. But it sends the right signal to large users of electricity to
turn down the air conditioner and turn off unneeded appliances and lighting.
The alternative is to subsidize their excesses through higher bills on
businesses, as Lynch and the judge are proposing. Many manufacturers in
California will struggle to stay afloat as they cope with their own fair
share of the costs. Making them take part of the residential share of the
rate increase will deepen their distress and hurt the state's economy. It
does residential ratepayers no good to have protection for their electricity
bills if the protection costs them their jobs.

Oceanside seeks ally in building power plant

By Lola Sherman
UNION-TRIBUNE STAFF WRITER
May 10, 2001
OCEANSIDE -- The City Council wants to generate electricity any way it can,
including possibly building a power plant jointly with Camp Pendleton.
It also may partner with a nearby city or the county.
And it hopes at least to get some power from its green waste and its sewage
plant.
A council majority informally decided last night to pursue a joint project
with Camp Pendleton even after an energy consultant advised against trying to
work with the military.
Al Figueroa of San Diego, the consultant, said the Marines' needs always will
come before the city's.
"For a large system and long-term commitments, the Pentagon will be
involved," he said. "The U.S. government will not give an inch but will take
a mile. If you want full rein over your own destiny, look elsewhere."
Former Councilman Sam Williamson, the only person to speak from the audience
on the issue, said it isn't true that the military won't cooperate. He cited
its help in creating Oceanside Harbor and in moving the massive Sterling
Homes Marine housing project out of the city.
Williamson also suggested working with neighboring cities to find a site for
a plant. "We do not want to depend on these gas companies any more," he said.
Councilman Jack Feller agreed with Figueroa about avoiding the military. "I
just cannot get behind Camp Pendleton. I think we're spinning our wheels," he
said.
Councilwoman Esther Sanchez said Oceanside is uniquely situated next to the
base. "We would let our residents down if we did not at least take a look at
it," Sanchez said. "Some people might think it's pie in the sky, but it
actually might work."
Except for Feller, the council members agreed it's worth a try to approach
Camp Pendleton.
Deputy City Manager/Fire Chief Dale Geldert was given that task.
Councilwoman Betty Harding said the city isn't looking for its own power
plant simply to ease municipal electricity costs, which are running $800,000
a year over budget, but to do something to help reduce residents' soaring
power bills.
Councilwoman Carol McCauley said: "Maybe there's a silver lining behind this
cloud. Maybe we can become self-sufficient, whether at Camp Pendleton or with
other cities."
"Explore every avenue, every direction," McCauley urged Geldert.

Davis signs bill authorizing $13.4 in bonds to repay treasury for power
buying

By Don Thompson
ASSOCIATED PRESS
May 10, 2001
SACRAMENTO ) Gov. Gray Davis signed a law Thursday letting the state borrow
$13.4 billion to pay for electricity for three cash-starved utilities.
Davis couldn't guarantee the 15-year bond will be enough to cover the state's
electricity purchases. But he said the $13.4 billion price tag represents
"the best thinking of our financial analysts," and includes a reserve in case
electricity prices remain higher than expected.
The state spent $1,900 per megawatt hour Wednesday as state grid operators
narrowly avoided a third consecutive day of blackouts, Davis said,
reiterating his call for federal price caps. Cooler weather helped the state
avoid blackouts Thursday.
Wednesday's costs were a record or near-record since the state purchases
began in January, said Oscar Hidalgo, a spokesman for the power-buying
Department of Water Resources.
Davis said he hopes the state can stop buying power for Pacific Gas and
Electric, Southern California Edison and San Diego Gas and Electric by the
end of next year.
Davis accused Assembly Republicans of putting their political opposition
above the state's welfare by refusing to support the bond bill. That means
the bonds can't be issued for three months, which Davis said will drive up
the interest ratepayers will be charged for the bond.
"This measure is a lifeboat that allows us to stay afloat," he said.
In a statement, Assembly GOP Leader Dave Cox called the bond bill "a
dangerous gamble for California ) a gamble Republicans couldn't support
without a clear endgame ... The governor obviously believes that history will
judge that his was the right decision. He had better be right."
Also Thursday, a federal bankruptcy judge considered ordering PG&E to make
millions of dollars in back payments to small power plant owners that provide
nearly a third of California's electricity.
And California power regulators continued struggling over how to divide
record electric rate increases among the 9 million customers of the state's
two largest utilities, Edison and PG&E. The Public Utilities Commission is
rushing to adopt the higher rates Monday.

GOP defeats first attempt to cap power prices

By Toby Eckert
COPLEY NEWS SERVICE
May 10, 2001
WASHINGTON ) Republican lawmakers on Thursday slapped down an effort to
impose price controls on wholesale power sold in California and 10 other
Western states.
In the first test of congressional resolve on the issue, Republicans on the
House energy and air quality subcommittee, including three from California,
voted unanimously against the temporary price limits, while most Democrats on
the panel backed the move. The issue will now come before the full House
Energy and Commerce Committee.
The subcommittee vote dramatized the deep partisan divisions that have
developed, even within California's congressional delegation, over how the
federal government should respond to the crisis. While Democrats argue that
price controls would bring stability to the state's chaotic power market,
most Republicans ) including President Bush ) counter that they would
aggravate electricity shortages by discouraging needed power generation and
sales.
After two days of rolling blackouts in California, a preview of what could be
in store for the state all summer, the subcommittee vote was being watched
closely for any signs of wavering on the issue by Republicans worried about
the political fallout.
California Democrats vowed to continue pushing the measure and predicted
their Republican colleagues would pay a price for opposing it.
"Republican ratepayers are going to have to pay the same exorbitant prices as
Democratic ratepayers," said Rep. Jane Harman, D-Redondo Beach, a member of
the full committee. "As ... the blackouts increase over the next two months,
those folks who voted 'No' in this subcommittee are going to face very tough
questions. I wouldn't be surprised if they try a bit later to get on board."
But Rep. George Radonovich, R-Mariposa, said he was feeling little pressure
from his constituents to support price controls.
"All they care about is politics," he said of the Democrats who criticized
his vote against the controls. "What we're concerned about are some real
solutions to the problems, which they don't offer."
Republican Reps. Christopher Cox of Newport Beach and Mary Bono of Palm
Springs also voted against the measure.
Rep. Henry Waxman, D-Los Angeles, offered it as an amendment to a
Republican-crafted bill that contains several measures aimed at boosting
electricity production and encouraging energy conservation in the West. The
amendment would require federal regulators to impose either "just and
reasonable" rates for wholesale power that fluctuate with demand or rates
tied to the cost of producing the power, plus a "reasonable" profit.
Electricity generated at new power plants would be exempt from the limits to
encourage their construction.
Sen. Dianne Feinstein, D-Calif., is pushing a similar measure in the Senate,
so far without success.
Wholesale electricity prices in California have soared in the past year, a
side-effect of deregulation of the state's power market and increased prices
for natural gas, which fuels most of the power plants. Utilities have been
unable to pass on the full cost of the power to customers, threatening their
financial stability and driving one, Pacific Gas & Electric, into bankruptcy.
Waxman argued that price controls would discourage power sellers from
withholding power from the market to drive up prices.
"The only way that we'll get some relief in California is to put some limit
on the gouging that has taken place," he said. "...The rest of this bill does
not do much of anything for the state of California and the West during this
crisis."
But Republicans said price controls would have the exact opposite effect:
discouraging power providers from generating and selling electricity in the
region.
"It simply is a guarantee for more blackouts," said Rep. Billy Tauzin, R-La.,
the chairman of the full committee.
The amendment was defeated 20-12. Two Democrats ) Reps. Ralph Hall of Texas
and Christopher John of Louisiana ) voted against the measure.
The underlying bill passed on a party-line vote of 17-13.
It would allow the California governor to temporarily waive some
air-pollution limits to increase power production in the state when blackouts
are imminent; provide federal funding to fix a major power transmission
bottleneck in the Central Valley; require federal facilities in power-starved
states to cut their energy use by 20 percent; allow California, Nevada,
Oregon and Washington to adjust daylight savings time; and allow small,
independent power generators to escape exclusive contracts with utilities if,
in the future, they are not paid by the utilities.
While Democrats complained the bill would do little to provide immediate
relief to California and other Western states, subcommittee Chairman Joe
Barton, R-Tex., said, "it's the only game in town that will help."
"We can reduce the number of blackouts, we can minimize the time of the
blackouts if we pass this measure...," he said.

Energy task force expected to recommend tax breaks

By H. Josef Hebert
ASSOCIATED PRESS
May 10, 2001
WASHINGTON ) The Bush administration's energy task force will urge relaxing
clean air requirements to help refiners meet gasoline demand, and call for
tax breaks for some renewable energy such as wind and solar panels, according
to government sources.
The refinery proposal is aimed at addressing a petroleum industry complaint
that federal and local air quality rules often require production of slightly
different blends of gasoline, putting added strain on the supply and
distribution systems.
The so-called boutique blends of gasoline have been the subject of vigorous
complaints from refiners, who argue that they are not needed to meet federal
air quality goals, but prevent shifting of gasoline supplies where they are
most needed.
It was not clear Thursday whether the proposal would assume a waiver in some
cases of reformulated gasoline, which accounts for about a third of the
gasoline sold nationwide. This cleaner gasoline contains an oxygen additive
and is required in areas with serious pollution problems.
The energy task force is headed by Vice President Dick Cheney.
Separately, the House took its first action Thursday to try to ease
California's power problems this summer, but in a subcommittee vote rejected
Democratic demands for price controls on Western wholesale electricity.
The bill, approved by an Energy and Commerce subcommittee by a 17-13
party-line vote, "will not stop blackouts," said Rep. Joe Barton, R-Texas,
its chief sponsor, but give California some additional tools to boost
supplies this summer.
In a letter to Barton, California Gov. Gray Davis said the measure "will do
little to address our current situation." He urged approval of price caps on
soaring wholesale electricity prices. Caps were rejected by a 20-12 vote with
solid GOP opposition including the three California Republicans on the
subcommittee.
The Cheney task force, which will present its report to President Bush next
week, also will propose regulatory relief for construction of nuclear power
plants and tax incentives for development of technologies that make coal less
polluting.
Both nuclear and coal, which together account for nearly three-fourths of the
electricity produced, are essential to meet future energy needs, the task
force will declare. While urging expanded development of natural gas, the
report will warn against relying too heavily on a single energy source
including natural gas.
While the energy blueprint will focus heavily on long-range plans to boost
energy supplies, the administration in recent weeks has scurried to include
additional conservation and energy efficiency measures.
Fearing a backlash from environmentalists, Republicans and Democrats in
Congress have urged the administration to not ignore efficiency and renewable
energy sources.
"We need a balanced approach. We need renewables and conservation," said Sen.
Frank Murkowski, R-Alaska, chairman of the Energy and Natural Resources
Committee, who also is an advocate for the measures to expand supplies
including drilling in the Arctic National Wildlife Refuge.
The task force will urge Congress to approve drilling in the refuge.
The task force's efficiency and renewable proposals will focus heavily on
providing tax incentives including tax breaks for the development and
purchase of more fuel efficient "hybrid" gas-electric automobiles,
residential solar panels, wind generation, and development of hydrogen fuel
cells, according to sources who spoke on condition on anonymity.
In other energy-related developments Thursday:
)Senate Democrats complained that they have been "left in the dark" about the
administration's energy plans and should have been consulted by the Cheney
task force.
)Sen. Byron Dorgan, D-N.D., said he will soon introduce legislation to create
a special House-Senate committee to investigate soaring energy prices. He
said there are all the indications of price manipulation and a committee
"would keep the spotlight" on the electricity and gasoline markets.
)Sen. Dick Durbin, D-Ill., called for creation of a national consumer energy
commission that would give a voice to consumers in the debate over energy
shortages and rising prices.

NEWS ANALYSIS
Power Rescue Plan Rests on Many 'Ifs'

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

?????The success of Gov. Gray Davis' plan to end California's energy crisis
rides on assumptions that, if wrong, could lead to billions of dollars in
runaway costs for taxpayers.
?????Davis, who signed a historic $13.4-billion bond measure Thursday to
finance the plan, has refused to release key data and presented a single
model for how California will buy electricity--and pay for it--over the next
15 years.
?????If Davis and his cadre of financial advisors are right, the state will
emerge from the most ominous period of the crisis in less than two years,
flush with cash and the prospect of electricity rate cuts. By then, the hope
goes, the power suppliers Davis has vilified will be reined in.
?????If his predictions are off by modest margins, which even many state
officials and energy experts say is likely, the state may have to employ
tactical blackouts to control costs, siphon money that could be used for
other services, go deeper in debt or raise electricity rates above the record
increases of this year.
?????The governor's plan largely rests on these crucial assumptions: that
consumers will conserve a record amount of power at peak usage times, that
energy prices will drop precipitously, and that the state will lock in far
more contracts for long-term power. But those three assumptions could prove
faulty, according to government financial records and interviews with state
officials, Wall Street analysts and energy experts.
?????Davis is banking on that troika to quickly tame the wild prices of
last-minute power--which hit an apparent record of $2,000 for a megawatt-hour
Wednesday. Such purchases so far have put the state on the hook for $6
billion and pushed major utilities to the brink of ruin.
?????Davis' plan assumes that the state will reduce peak demand by 2,484
megawatts--enough to supply nearly 2 million homes--through three programs
run by the California Independent System Operator, which keeps power running
to homes and businesses across the state.
?????But Cal-ISO managers say they will be lucky to achieve a fraction of
that savings this summer.
?????They say that one of the programs listed in the governor's plan was
shelved because regulators had raised concerns about air pollution. Another,
aimed at businesses, is likely to yield only about half of the 600 megawatts
the governor has assumed will be saved when supplies are tight this summer,
said Cal-ISO Project Manager Bill Wagner.
?????"There's a lot of 'ifs' in there," he said of the conservation program,
which would pay businesses to cut back during critical hours. He said the
utilities are months behind in installing meters to measure the savings.
?????Officials at another state agency in charge of a similar conservation
program, the Public Utilities Commission, also said they are not sure about
hitting targets on which the bond plan is based.
?????PUC Senior Analyst Robert Strauss said he has no idea how many
businesses will agree to curtail electricity consumption in exchange for
cheaper power rates this summer. The program is only a month old, he said.
?????"We're in a new situation that we don't have good experience with,"
Strauss said. "Who's going to sign up for these programs? We don't really
know." Another program that Davis hopes will conserve 1,600 megawatts has
attracted interest from just two businesses since March.
?????"It's pretty ambitious to think we're going to get 1,600 megawatts by
June in that program," said Cal-ISO's Wagner.
?????Beyond Davis' assumptions about conservation, the success of his
hard-fought bond measure relies heavily on how much the state will pay for
electricity during the next two summers. If the price is higher than forecast
by Davis, the bond money could be consumed more quickly, potentially forcing
the state to borrow more, dip into tax funds or raise customer rates again.
?????To keep prices down, the Davis administration has struggled to lock up
in contracts most of the peak-hour power needed for the next two summers to
avoid premium, eleventh-hour prices.
?????In his effort to push his bond legislation through the Capitol, he has
suggested that about 50 such contracts will be signed to produce half of the
peak demand the state needs. And that, his advisors say, doesn't count other
contracts they think will materialize.
?????So far, the administration has fallen far short, achieving final
agreements on only 28 contracts as of Thursday.
?????If that gap persists, the state will probably be forced to buy
electricity on the expensive spot market, which could eat into the bond money.
?????"I think the operative word is uncertainty," said Paul Patterson, an
energy analyst with Credit Suisse First Boston. "There are too many pieces,
[and] all you need is for one or two of those not to work out substantially
and things change."
?????Patterson, who says he remains cautiously optimistic about the
governor's plan, was among a group of Wall Street analysts who were briefed
last week by Davis' top advisors.
?????Some wondered about who would provide the additional power that Davis
had incorporated into his plan. Others questioned whether investors would buy
the bonds with so many assumptions built into the measure.
?????During the briefing, the governor's advisors said one option being
considered is to refuse to pay the highest prices for power and "accept some
sort of rolling blackout scenario."
?????One of the governor's chief energy consultants, Joseph Fichera, told the
Wall Street analysts that if suppliers think they can profit by holding back
power until the threshold of blackouts, the state may simply say no, leaving
them with no sale.
?????Through calculations that include contracts and conservation, Davis'
advisors arrived at another assumption that has drawn skepticism. They insist
that the purchase of any power not under contract will average just $195 per
megawatt-hour this summer--helping slash overall power costs by hundreds of
millions.
?????Critics say the California market is simply too volatile to forecast.
Before Tuesday's blackouts, for example, prices on the last-minute market had
been below $800 for a megawatt-hour, a considerable amount. But not as much
as it was Wednesday when the state paid Houston-based Reliant Energy $2,000,
Davis said Thursday.
?????A report by Republican Assembly members concluded that if Davis'
assumption that non-contracted power will average $195 is off by just 10%,
electricity would cost an additional $250 million by September. Over two
years, those additional costs could soar to $1.1 billion, the GOP study found.
?????Democratic state Controller Kathleen Connell, whose staff has attempted
to analyze the governor's report, is warning that rising power costs could
tear through the bond funds and possibly expose the state's general fund.
?????Connell accused the governor of tailoring his assumptions and numbers to
neatly fit his goal of assuring the public--and Wall Street--that an end to
the crisis is near.
?????Fichera, who helped prepare the report, insists that the
administration's bond plan is conservative and presents the most reasonable
scenario of the converging forces of conservation and prices.
?????Even if things do not fall into place, Fichera said, there is an extra
$1 billion packaged into the measure, along with an expectation of billions
more in later years to cover any shortfalls.
?????"Any realistic scenario," Fichera said, "we believe we have the
resources to cover."
?????Fichera said he sees only a slim possibility that power costs in the
next two years could outpace the available bond money, forcing the state to
borrow more. He said such a loan could easily be paid back by the recent
utility rate increases, which would cover both dropping costs of power and
the bonds within the next three years.
?????Fichera declined to provide The Times with figures showing at what point
higher power costs could consume the cushion he said is built into the
governor's plan. Public officials and newspapers, including The Times, have
sued the administration for more details about the state's power costs.
?????But Davis and his consultants say key financial information must be kept
secret to prevent energy traders from gaining more leverage in the state's
power market.
?????But that confidence was tempered in a state document given to Wall
Street analysts that recently accompanied an unrelated bond issue.
?????The document acknowledged that the assumptions underlying Davis'
financial plan to restore stability to the California electricity market were
"subject to many uncertainties." "There can be no assurance," the document
concluded, "that there will not be future disruptions in energy supplies or
related developments which could adversely affect the state's economy."

Copyright 2001 Los Angeles Times

NEWS ANALYSIS
Bush, Rivals Don't Dare Ask Public to Make Sacrifices in Energy Crunch
By RONALD BROWNSTEIN, Times Political Writer

?????WASHINGTON--Amid their looming conflicts on energy policy, President
Bush and his critics appear to have reached agreement on an unlikely point:
Neither side is preparing to ask for significant sacrifices from the public
to respond to rising prices and squeezed supplies.
?????In the energy policy blueprint it will release next week, the
administration is expected to present enhanced production as the key to
easing the energy crunch. Democrats and environmentalists, in response, are
stressing measures to prod manufacturers to design more energy-efficient
products, from cars to air conditioners.
?????But neither side is yet suggesting that ordinary Americans--whose
average energy consumption has increased steadily over the last 15 years--may
have to scale back lifestyles that increasingly include mammoth sport-utility
vehicles, dawn-to-dark home computer use and new houses 50% larger than a
generation ago.
?????In fact, as the debate over Bush's plan approaches, both sides are
working overtime to insist that their solutions will allow Americans to use
virtually as much energy as they want--without sacrifice.
?????In a striking declaration earlier this week, White House spokesman Ari
Fleischer portrayed unconstrained energy use as virtually an American
birthright. "That's a big no," he answered when asked if Bush believes
Americans need to curtail their energy use. "The president believes that's an
American way of life and that it should be the goal of policymakers to
protect the American way of life."
?????More surprising, environmentalists mobilizing to fight Bush's plan are
sending a similar message. "We don't need to sacrifice a lifestyle in order
to save energy," says Dan Becker, director of the global warming and energy
program for the Sierra Club.
?????This improbable consensus reflects a deeper political calculation
shaping both sides' response to the energy challenge. After a decade in which
American life on almost every front--from energy to jobs to federal
revenues--has been defined by abundance, politicians have grown extremely
reluctant to confront voters with hard choices and unpleasant alternatives.
?????The big question is whether either side's preferred solutions can
resolve the long-term energy problem without forcing Americans to face at
least some of those hard choices.
?????Compared to most issues, public opinion about the energy debate is
unformed, analysts in both parties agree. That's largely because few
Americans have thought much about the problem since the last gas lines
disappeared 20 years ago. "People aren't settled on what are the causes of
the problem, let alone what are some of the solutions," says pollster Mark
Baldassare, a senior fellow at the Public Policy Institute of California.
?????As the struggle to shape public opinion begins, the central division is
likely to exist between Bush's emphasis on new production and the
Democratic/environmentalist push for greater reliance on renewable energy and
conservation. But that loud dispute threatens to obscure the remarkable
convergence on an equally important point: To the extent either side sees
conservation as part of the solution, they portray it primarily as something
done for consumers rather than by consumers.
?????White House aides say Bush isn't likely to completely ignore the value
of individual conservation; the Democratic energy alternative includes a
provision that could eventually compel the government to discourage the use
of vehicles with poor fuel efficiency. But overall both sides are promising
minimal disruption--a stark contrast to the admission by California officials
that higher prices are needed to deter electricity consumption.
?????Indeed, it's telling that, instead of discussing conservation, both Bush
and his critics are increasingly talking about energy efficiency. That
formulation implies engineering strategies rather than lifestyle changes to
reduce consumption. "With technology, there's no reason why . . . you've got
to live in the dark, turn out all the lights, don't enjoy the things that our
modern society brings you," Vice President Dick Cheney said this week.
?????Looming over these political and rhetorical calculations is the ghost of
President Carter, whose administration was plagued by repeated energy shocks
in the late 1970s. When Carter unveiled his comprehensive energy plan just
months after taking office in 1977, his message hit a strikingly different
note: The crisis, Carter said, "will demand that we make sacrifices and
changes in every life."
?????Behind those words, Carter offered an agenda bristling with thorny ideas
to discourage energy use: new taxes on gas-guzzling cars, automatic taxes on
gasoline triggered when consumption rose too fast, utility reforms that
increased costs for the heaviest users.
?????But Congress rejected almost all these ideas, focusing instead on tax
incentives to encourage more efficient energy use, and Carter's efforts to
encourage voluntary conservation (like turning down the heat in winter)
became a lasting symbol of weakness and ineffectuality.
?????Today strategists on both sides agree that the public is even less
inclined to sacrifice. And in that climate, neither Bush nor Democrats are
focusing on a paradox central to the energy riddle: While most products have
grown more energy efficient over the past generation, energy use per person
in America is still rising.
?????In the immediate aftermath of the 1970s oil shocks, per capita U.S.
energy use declined by roughly 8% from 1973 through 1985. But as the memory
of those disruptions faded, energy use per person increased almost 10% from
1985 through 1999, according to the federal Energy Information Administration.
?????On several fronts, it appears the demand for bigger energy-intensive
products is offsetting the efficiency gains of improved technology. Take
homes. In an April study, the National Assn. of Home Builders concluded that
because of such innovations as greater use of insulated windows and more
efficient furnaces, new homes today use energy twice as efficiently as they
did 30 years ago. But despite those improvements, the overall trend among new
homes is toward greater energy consumption.
?????In the first years after the 1970s oil shock, average fuel efficiency
for all passenger vehicles in America steadily increased, peaking at 25.9
miles per gallon in 1987. Since then average fuel efficiency has declined,
dropping to 24 mpg in 2000, the lowest it has been since 1980, according to
the Environmental Protection Agency.
?????Some analysts think both sides are selling the public short by exempting
them from sacrifice in the growing energy debate. "Americans have heard
messages about changing their ways and have been accepting when it comes to
conservation," says Baldassare.
?????But the dominant instinct is to target other causes--and solutions--for
the challenge, with Bush blaming environmental restrictions that have blocked
drilling or new power plant construction and Democrats pointing fingers at
oil companies, car manufacturers and the administration's links to both.
?????"Nobody wants to be in a position of telling the American public they
can't have what they want," acknowledges one top Bush political advisor.

Copyright 2001 Los Angeles Times

House Committee Rejects Electricity Price Controls
Strategy: In a blow to California's governor, Congress signals it won't rein
in soaring costs.

By GREG MILLER and RICHARD SIMON, Times Staff Writers

?????WASHINGTON--In the first test of congressional sentiment on California's
power problems, a House panel on Thursday rebuffed an effort by Democratic
lawmakers to legislate price caps on wholesale electricity.
?????The proposal, voted down 20 to 12 by the House energy and air quality
subcommittee, would have required the Federal Energy Regulatory Commission to
impose price controls keyed to the cost of generating power.
?????The Republican-controlled panel went on to approve a bill containing a
number of less aggressive energy crisis measures, such as allowing California
to relax environmental restrictions on power plants and extending daylight
saving time to reduce evening electricity consumption.
?????But the vote on price controls, which split largely along party lines,
was the most contentious issue addressed by the subcommittee. Although price
cap advocates are expected to press their campaign at least twice more in the
House, Thursday's vote was a significant setback. It signaled that Congress
is not inclined to rein in soaring energy prices, despite repeated pleas from
Gov. Gray Davis and other state officials to do so.
?????Rep. Henry A. Waxman (D-Los Angeles), who offered the price control
measure as an amendment to the energy bill, argued that it would protect
consumers from price gouging while preserving "reasonable" profit margins for
power suppliers.
?????Without price controls, he said, the bill "does not do for California
what we need, and it does a lot of things for our state we don't want."
?????But the other three Californians on the subcommittee--all
Republicans--disagreed, and voted against Waxman's amendment, saying they
believe price controls would exacerbate the problem by discouraging
investment in new sources of energy.
?????"I recognize there's tremendous political pressure on us, but do not
believe it's the right thing to do," said Rep. Mary Bono (R-Palm Springs).
?????She was joined in voting against the measure by Reps. Christopher Cox
(R-Newport Beach) and George P. Radanovich (R-Mariposa). The three California
Republicans ensured the amendment's defeat, because one Democrat who voted
against the measure, Rep. Ralph M. Hall of Texas, said he would have
supported it if all of the California members of the subcommittee had done so.
?????In Sacramento, Davis lashed out at Bono, Cox and Radanovich for opposing
price caps.
?????"I find it very surprising that people here in California experiencing
this crisis can go back to Washington and vote against the best interests of
constituents of this state," Davis said.
?????Waxman indicated he would attempt to revive the price cap amendment when
the bill is taken up by the full House Energy and Commerce Committee.
?????A final test could come later this month, when the full House is
expected to vote on the bill. Four California Republicans who are not on the
energy committee have already signaled they would support a price control
amendment.
?????Thursday's vote was the first congressional action directed at
California's energy crisis, and underscored the extent to which the center of
political debate on the issue is shifting from Sacramento to Washington.
?????Next week, the White House plans to unveil a comprehensive national
energy strategy. The plan is expected to emphasize long-term solutions,
ranging from new oil exploration in Alaska to construction of hundreds of new
power plants and refineries.
?????With California experiencing rolling blackouts and gasoline prices
surging nationwide, the White House has become increasingly sensitive to
criticism that its plan won't provide much immediate help.
?????At a news conference Thursday, White House spokesman Ari Fleischer
stressed that "the president's focus is going to be on doing everything he
can for all terms: short-term, medium-term and long-term."
?????House Republicans attending Thursday's subcommittee session were careful
to endorse the administration's position that the federal government's
ability to help California in the short term is limited.
?????"We can't make it rain. We can't make it snow. We can't make it cool in
Palm Springs," said Rep. Joe Barton (R-Texas), sponsor of the emergency bill
and chairman of the subcommittee.
?????Still, he said, Congress can provide some assistance. Barton's bill,
which was approved 17 to 13 by the subcommittee, contains more than a dozen
provisions designed to curb consumption and enhance power supplies.
?????Some of the key provisions would:
?????* Authorize California's governor to waive some emission requirements on
natural gas-fired power plants on "emergency" days of high demand. Democrats
said Davis hasn't sought such discretion, and the measure is unlikely to help
because environmental regulations have not hindered power generation.
?????* Allow energy users to resell some of the electricity they are entitled
to consume but don't. Republicans said this would create a financial
incentive to conserve, but Democrats said they fear it would undercut
existing state programs that reward conservation.
?????* Allow some power suppliers to suspend contracts with financially
strapped utilities. The measure is designed to enable companies that have cut
off supplies for lack of payment to cut new deals with other utilities or
users.
?????* Require federal facilities in states where electricity emergencies
have been declared to curb their consumption by at least 20% compared with a
year earlier.
?????* Permit California to extend daylight saving time beyond October.
---
?????Times staff writers Edwin Chen in Washington and Dan Morain in
Sacramento contributed to this story.

Copyright 2001 Los Angeles Times

Nonprofit Shrugs at Pleas to Conserve
Power: Ayn Rand Institute blasts calls to use less electricity. Utility and
government officials defend conservation.

By BOB POOL, Times Staff Writer

?????Their other electricity customers may be following the Southern
California Edison Co.'s plea to conserve electricity during the current
energy crisis.
?????But don't expect anyone to be going room-to-room flipping off lights and
turning down air conditioning in a fourth-floor suite at one Marina del Rey
office building.
?????That kind of conservation is "immoral" and "un-American," say those
working at the Ayn Rand Institute international headquarters on Admiralty Way.
?????The 15-year-old nonprofit group is run by devotees of novelist and
philosopher Ayn Rand, who died in 1982. It is a clearinghouse and educational
center for those who embrace Rand's theories of individualism and
laissez-faire capitalism.
?????Her philosophy, Rand wrote, "is the concept of man as a heroic being,
with his own happiness as the moral purpose of his life, with productive
achievement as his noblest activity."
?????Rand--whose first name rhymes with mine--is best known for the novels
"The Fountainhead" and "Atlas Shrugged," which together have sold 20 million
copies.
?????Institute leaders are blasting calls for electricity conservation and
the executive order issued last week by President Bush that directs operators
of federal buildings in California to reduce energy consumption.
?????"Expecting the American people to lower their standard of living is an
immoral idea," said Yaron Brook, the institute's executive director.
?????"Conservation is not a long- or short-term solution to the energy
crisis. Conservation is the un-American idea of resigning oneself to doing
with less--like a sick person who stops seeking a cure and resigns himself to
living with his illness." Instead, he said, market forces should prevail to
increase power supplies and reduce demand.
?????On Thursday, Brook's statements surprised officials pleading with
Californians to turn off lights and reduce air conditioning to help prevent
rolling blackouts.
?????" 'Un-American?' I've never heard that before," said Tom Boyd, an Edison
spokesman. "We and other utilities are urging our customers to conserve
electricity and use it wisely."
?????Lori O'Donley, a spokeswoman for the California Independent System
Operator, the agency that monitors power consumption and orders rolling
blackouts when supplies run low, said that "there are times we feel
conservation has made a difference" in calling or not calling for blackouts.
?????A White House spokeswoman said President Bush stands by his call for
conservation.
?????"The president believes the federal government should do its part. He
takes the energy crisis in California very seriously and believes it is right
and appropriate to explore how we can conserve energy," Claire Buchan said.
?????Brook disagrees.
?????The 40-year-old former Santa Clara University finance professor has
headed the institute since last August. It has 16 staffers and operates on a
$3-million annual budget financed by about 4,000 contributors--all firm
believers in Ayn Rand's philosophy.
?????Brook said he was a teenager living in Israel when he read "Atlas
Shrugged" and was immediately converted from the concept of socialism to
capitalism.
?????By coincidence, that novel features a countrywide blackout that is the
result of massive government economic regulation. Rand writes on page 1,075
of towns "reduced to the life of those ages in which artificial light was an
exorbitant luxury and a sunset put an end to human activity."
?????The towns were ruined by "rations, quotas, controls and
power-conservation rules."
?????Brook said the institute's Marina del Rey headquarters has thus far been
spared blackouts. But at his Tustin home, he and his wife and two children
turn off lights when they aren't needed.
?????"I do it because I don't want to pay higher electricity bills," he said
with a laugh. "I don't want to pay for something I don't use."

Copyright 2001 Los Angeles Times

Restarting of Generators in O.C. Approved

By JENIFER WARREN, Times Staff Writer

?????SACRAMENTO--Granting the governor's wish that power plants receive
speedy approval, the California Energy Commission cleared the way Thursday
for the restarting of two idled generators that will double the output of a
plant in Huntington Beach.
?????The commission's action allows AES Corp. to run the two controversial
units for at least 10 years, provided that a midterm review finds that
operators are taking steps to limit any harm the plant may cause to seawater
quality and marine life.
?????The commission also required the company to sell all the power generated
by the units, enough to supply about 337,500 homes, within California--a
restriction unprecedented in the state.
?????Some attorneys questioned whether the panel had the legal authority to
impose such a restriction. But Commissioner Robert Laurie said that although
the limit "may not be good long-term policy," the state's power emergency
warrants it now.
?????The commission's unanimous vote capped weeks of arduous negotiations
involving AES, the state and Huntington Beach officials, who called the
10-year permit "a major disappointment." AES officials pushed for the 10
years on grounds that a shorter time frame would make the economics of the
project iffy.
?????City officials preferred a five-year permit, saying the company's track
record--it once paid a $17-million fine for allowing too much pollution to
spew from its Long Beach plant--raises doubts about its future performance.
The commission's staff also favored five years, with the possibility of a
five-year extension.
?????"They have not exactly been great corporate citizens," Matt Lamb,
project manager for Huntington Beach, said of AES. "This is a grossly
inefficient plant that has been mothballed, and they're basically
kick-starting it. We don't think it deserves 10 years."
?????But Gov. Gray Davis--who has publicly pushed the commission to approve
plants quickly--hailed the decision. "That's good news. That's supply we're
counting on," he said.
?????The two Huntington Beach units are 40 years old and have been idle since
1995. But the energy crisis has made the old valuable once again, and AES
plans to invest $150 million to re-power the generators--once scheduled for
demolition.
?????The units represent almost 10% of the 5,000 megawatts Davis has said he
will bring into service this summer to avert an electricity shortage.
?????Recent estimates, however, suggest that the governor's pledge was overly
optimistic.
?????And although Davis and the Energy Commission are expecting the
Huntington Beach generators to begin operating in August, AES Southland
President Mark Woodruff said Thursday that it is unclear whether that goal
can be met.
?????The AES project is among a few receiving fast-track approval under the
governor's executive order earlier this year requiring expedited review of
such plants.
?????In normal times, a 450-megawatt project such as the one approved
Thursday might have taken a year's worth of study, public hearings and other
scrutiny, said Claudia Chandler, a commission spokeswoman. The expedited
review shrinks that to just 60 days.
?????That clearly rankles some Huntington Beach residents, who, in testimony
before the commission, wondered whether emissions, ocean pollution and other
threats had been thoroughly studied.
?????"I think it's almost outrageous what's being foisted on the public,"
said Rich Lloyd, who lives about a quarter of a mile from the plant. "What
relief are you going to give to all these people, all these schoolchildren,
who have to breathe these emissions for 10 years?"
?????Huntington Beach Councilwoman Shirley Dettloff said she too was troubled
by the fast-track licensing process: "We're taking a risk as a city," she
said. "If a price has to be paid, our citizens will be paying that price."
?????Critics are alarmed by a UC Irvine study concluding that the
plant--which now uses and discharges about 300 million gallons of seawater
each day as coolant--may combine with ocean currents to attract sewage
released miles offshore.
?????Many residents suspect that the plant contributed to pollution that
caused repeated beach closures in 1999.
?????Acknowledging the concerns, the commission required AES to spend $1
million to study whether water quality is at risk.
?????The company also must spend $2.5 million to monitor fish deaths caused
by its seawater intake system. If too many white croaker, queenfish and other
species become trapped and die, AES may be required to modernize its
equipment, commission officials said.
?????Other complaints have focused on the noise, smoke and smells produced by
the plant.
?????Jane Riley, who lives nearby, plans her outings with son Daniel, 6,
around the thick clouds of yellow-brown smoke that are a part of everyday
life.
?????"I try to avoid it. I take a look at which direction it's going," Riley
said. With two more units fired up, a bad situation will only get worse, she
fears.
?????In other action Thursday, the commission approved a 95-megawatt "peaker"
plant in the Central Valley city of Hanford.
?????Peaker plants can produce large amounts of power in short bursts, and
the governor is counting on such facilities to make up about 40% of
California's electricity deficit this summer.
---
?????Times staff writers Seema Mehta and Dan Morain contributed to this story.

Copyright 2001 Los Angeles Times

Discovery Has City Flying High
Energy: Claim of huge natural gas deposit leads Delano to dream of wealth
that may result. But some are skeptical.

By GEOFFREY MOHAN, Times Staff Writer

?????DELANO, Calif.--At the signal from oil wildcatter F. Lynn Blystone,
roughnecks opened the valve of a greasy well rig, and with an earsplitting
screech, a fat jet of natural gas blasted plumes of dust from the fields
outside this San Joaquin Valley town.
?????City officials covered their ears and dropped their jaws.
?????"That's the sound of money, loud and powerful," said Delano City Manager
Adela Gonzalez.
?????Indeed, the estimated 3 trillion cubic feet of coveted and pricey
natural gas that Blystone, president and chief executive of Tri-Valley Corp.
in Bakersfield, claims to have tapped could be the biggest natural gas
discovery in California since the 1930s, and might rank among the top in the
lower 48 states.
?????And although the full extent of the find remains unproven--and industry
veterans urge caution--Blystone's well has set off a frenzy in this
impoverished agricultural town more famous for Cesar Chavez and the pickers
who touched off a national grape boycott.
?????Delano is seeing dollar signs in the dust. It's talking power plants,
pipelines, big industry, and independence from the grip of the statewide
energy crisis.
?????Energy consultants are lining up at City Hall, where visitors are urged
to use the stairs instead of the elevators to save electricity. Ordinary
residents are scurrying to learn if they own mineral rights, mostly finding
that their dreams of overnight riches are about as real as the fictional
Clampett family on TV's "The Beverly Hillbillies."
?????"Everybody is doing their research, to see if they have mineral rights,"
said Delano Mayor Art Armendares. "We're getting control of our own destiny.
We can provide citizens with uninterrupted electricity and gas. Then we can
put up our shingle and attract industry."
?????Beyond grapes, almonds and other crops, industry is sparse in Delano,
which recently attracted a Sears distribution center for the West Coast.
Seasonal unemployment reaches upward of 30%, Armendares said.
?????Even if Delano is poised to reap rewards, the state in general won't see
much effect. That's because even the optimistic estimates of daily production
wouldn't meet more than 1% of the state's whopping 7.5 billion cubic-foot
demand, according to the state Department of Conservation.
?????That hasn't stopped Delano residents from dreaming. Among those who
might hit it big are City Manager Gonzalez's secretary, Phyllis Kraft, who
hails from one of the area's old farming families.
?????"People aren't exactly treating me differently, but they are saying,
'You're not going to forget me when you get rich and famous, are you?' " said
Kraft, who remains cautiously optimistic about the claim. "It would be
wonderful if it's true, but let's just wait and see."
?????For years, children here have learned that, while the soil rendered
their food, its hidden riches could one day change their destiny. Few sold
their mineral rights, even when they let go of their land.
?????As a result, the original landowners are most likely to get any
royalties from leasing those rights--generally 12.5% to 25% of gross
production, Blystone said.
?????Revenue from the field could be $7 billion or more over a predicted
lifetime of 85 years, he said.
?????Among the biggest winners so far appears to be the U.S. government,
which operates an antenna field for the Voice of America on about 800 acres
of the 6,600 that Tri-Valley believes harbor natural gas.
?????But Emeterio "Butch" Navalta, who owns the plot where Tri-Valley
drilled, ignored the screech of the gas well Tuesday and sullenly hoed weeds
from his 20-acre plot. He bought the land for $60,000 last year but didn't
get the mineral rights. Although he gets $12,000 a year leasing drilling
space to Tri-Valley, he is bitter.
?????"I didn't even think about it," Navalta said. "I'm trying to find
someone who knows what to do."
?????Ruth Hiett, 85-year-old matriarch of a farming family with several
hundred acres in the claim area, said she'll hold tight to her rights.
Surrounded by almond trees and fallow fields, she lives in an aging clapboard
house that is part of the family's original 1906 homestead.
?????"I don't know if it'll make me rich, but it might somebody," Hiett said.
"Anybody who knows anything at all likes to think some day we'll hit it. But
some company still has to come and explore and do whatever they have to do.
Who knows? No telling."

?????'It's Just a Story as Far as I'm Concerned'
?????Thus far, no one knows, or no one is telling. But the prospect of 3
trillion cubic feet of unassociated, or "dry," gas--meaning it is not mingled
with oil--in an area that has not shown such deposits before raises ample
skepticism.
?????"It's just a story as far as I'm concerned," said Lawrence Chroman Jr.,
a third-generation farmer who kept the mineral rights to the land he sold
Navalta last year. "Whenever the price of gas or oil goes up, they have money
to go out and do exploration. It goes through cycles. I'm not willing to go
any further until I see whether this thing develops or not."
?????Experts and regulators likewise cautioned that one gushing well does not
prove a major find.
?????"All we can say is we are rooting for him," said Don Drysdale, spokesman
for the state Conservation Department. "It would help us all out. But the
statements they are making are based on one well. We don't know enough yet."
?????Industry experts note that with natural gas going for $12 per thousand
cubic feet, plenty of wildcat drillers have been scouring overlooked or
unlikely places in search of El Dorado. Many find little more than, well,
Delano.
?????Tri-Valley, a public company whose stock trades at about $1.80, has been
through bankruptcy protection before, fighting off a hostile takeover by a
creditor. And it has made one similar claim near Fresno, which proved dry.
When it announced the Delano find April 11, its stock leaped 75%, and has
since hovered just under $2.
?????The company will need about $100 million to drill about 40 wells that it
says could yield a total of 80 million cubic feet per day for about 85 years.
That is well over the about 50 million cubic feet a day coming from the
state's most productive field, Rio Vista, according to the Conservation
Department, but still not enough to ease the state's crisis.
?????But because of the huge amount consumed daily in California, even if
optimistic estimates in Delano pan out, the production there won't help ease
the state's crisis.
?????"We're not going to be able to materially affect the power needs of
California," Blystone cautioned.
?????Bolstering Blystone's claim is the East Lost Hills find reported in
February by Berkley Petroleum 25 miles west. That discovery has shown early
promise of being at least as big as the Delano find.
?????The two potential deposits were made public within six weeks of each
other, and nothing has been the same since in the area.
?????"There's almost been the equivalent of a Gold Rush to lease land all
around the Berkley field," Kramer said.
?????Drysdale said, however, that his department believes the two finds are
separate deposits.
?????Tri-Valley has mapped out 6,600 acres, and so far a substantial wedge
lies within Delano boundaries, where the city owns mineral rights.
?????Virtually everything is speculative about the claim, particularly
royalties. But city officials think they could make $3 million a year--in a
town with an operating budget of $6 million, dismally paved roads and
overcrowded schools.
?????Not only are they considering forming a municipal power authority, but
they say they will waive about $1,000 in fees to landowners willing to annex
to the city, which could bring tax benefits on land where the wells might be
erected.
?????"I'm going to make a one-time offer to all these farmers that the city
will pick up the cost of annexation," said Matthew Alexander, community
development director for Delano. "I see this as a window of opportunity."
?????Alexander and others have been to Sacramento to study the pros and cons
of forming a municipal utility, and are convinced that building a power
plant, and using gas royalties to power it, is the answer.
?????"You're looking at a totally different town," Blystone said.
?????Small players like Navalta, however, suspect that Delano will be the
same town as ever for them.
?????"It's supposed to be good for the city," he said. "They're going to get
a lot of revenue. I just wish I could get something."

Copyright 2001 Los Angeles Times

California; Opinion Desk
Commentary Don't Write Off Davis Energy Plan
ALAN BLINDER
Alan Blinder, a professor of economics at Princeton University, was vice
chairman of the Federal Reserve from 1994-96. He is the senior advisor to
Saber Partners, which is advising Gov. Gray Davis on energy policy

05/11/2001
Los Angeles Times
Home Edition
B-17
Copyright 2001 / The Times Mirror Company

Might Californians finally be seeing a dim light at the end of the energy
tunnel? This spring and summer will be difficult times unless everything
breaks just right. But Gov. Gray Davis' recently announced energy plan offers
at least short-run management of the crisis--and a hope for a long-run
solution. And that's about all anyone should ask the government to do.
Ignoring the history and some mind-numbingly complex details, the electricity
problem comes down to this: Demand now outstrips supply by a wide margin even
on a normal day, and by much more on days of peak demand. With the utilities
no longer credit-worthy, the state must fill the gap by buying on the
wholesale market. These days, that means buying high and selling low.
Any comprehensive attack on this problem must have three components:
mechanisms for reducing demand, mechanisms for increasing supply and a pile
of money to cover the bills while the medicine works. The governor's plan,
while not perfect, has the three elements. It also avoids the wackier
suggestions from both the right and the left.
Let's work backward through the three components. First, the state needs
money to keep the lights on. One naive remedy would be to raise taxes to pay
all the bills. No danger that any politician will ever latch onto that one.
But a related bad idea--raising retail electricity rates to cover all the
costs--does have a following. Why is that a bad idea? Because the utilities
are saddled with debt from the past. And things almost certainly will be
brighter (pun intended) in the future.
Like a family, when a government is faced with a huge, one-time expense--say,
to build a highway--it generally borrows most of the money. That's sound
financial practice because it spreads what otherwise would be a ruinously
high cost over time. Davis wants to spread the cost of the current crisis by
issuing bonds worth about $12 billion to $13 billion, secured by future
payments for electricity. I do not know whether this is exactly the right
number. But the principle is clear, and it's too bad the Legislature delayed
the bond issue.
Next comes supply. Wishful thinkers on the right have a simple solution: Just
let retail prices rise, and more supply will come. The trouble is that it
won't, at least not in the short run. Over years, greater supply is the only
lasting solution. But to expect much supply response in the short run is
dreaming.
The left has its own favorite silly idea: The state should seize control of
power plants and take over the business of supplying electricity. Seize? How
much good would that do to California's business climate? And does anyone
really believe that the state can, over the long run, generate and supply
electricity better than private business? There are, in fact, traces of
public ownership in the Davis plan: The state is buying transmission lines,
and a new public authority would build power plants if private industry fails
to do so. But the governor sees public ownership as a last, not a first,
resort.
Finally, we come to the demand side, where true believers offer the same
remedy: Just let the retail price rise enough to cut demand back to the
available supply. Sound harsh? It is. Higher electricity prices must be part
of the solution, at least in the short run. But relying exclusively on higher
rates would be foolhardy and perhaps even ruinous to California's economy,
because titanic price hikes would be needed to cut demand by enough in short
order. So we would wind up inflicting pain on consumers without calling forth
greater generating or transmission capacity.
The governor at first resisted the conclusion that consumer prices had to
rise. But he has now embraced it. His package includes not just price hikes
for big energy users, but also financial incentives for those who reduce
consumption. More can be done in this regard, but he is at least on the right
track.
Will these conservation measures get California through the next few months?
I wouldn't bet on it. But unless the federal government truly caps wholesale
electricity prices temporarily, demand management is about the only short-run
game in town.
Pray for a cool summer and for a lot more rain behind the dams in the Pacific
Northwest.

High bills may not spur conservation
PG&E, critics agree increases are too small to change habits
David Lazarus, Chronicle Staff Writer
Friday, May 11, 2001
,2001 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/11/MN218961.DTL
Looming increases in California power bills may help replenish state coffers
but will do little to promote conservation or reduce blackouts this summer,
consumer activists, environmentalists and PG&E said yesterday.
In a rare convergence of views, Pacific Gas and Electric Co. agreed with the
utility's sharpest critics that the pending rate increases would be
insufficient to discourage electricity use.
While the heaviest residential power customers will see their June bills soar
by as much as 40 percent, most increases will range between 7 and 15 percent.
"Based on our studies, residential customers will not respond to changes in
price signals of less than 20 percent," said Michael Shames, executive
director of the Utility Consumers' Action Network in San Diego.
"Forty percent is probably enough to send a signal," he added. "A 15 percent
increase is much less likely to have an impact."
If so, this would undermine what state regulators say is a primary goal of
the rate increases, scheduled to be adopted Monday. Higher power bills, they
say, will result in cutbacks in power usage.
"By promoting energy conservation during summer peak hours," said Loretta
Lynch, president of the Public Utilities Commission, "we attempt to limit
blackouts and service interruptions in order to preserve public health and
safety."
Gov. Gray Davis, who supports the plan to hand out rebates to those who can
reduce power use by at least 20 percent, also said higher rates would lead to
conservation.
"He thinks that if there's a financial incentive to conserve, then clearly
consumers will do it," said Steve Maviglio, a spokesman for the governor.
'NOT GOING TO BE ENOUGH'
The question now is whether the rate increases planned for customers of PG&E
and Southern California Edison will do the trick.
"They're not going to be enough," said Harry Snyder, senior advocate at
Consumers Union in San Francisco. "This amount is not going to get us the
levels of conservation we need."
Helen Burke, who oversees energy matters at the San Francisco Bay chapter of
the Sierra Club, agreed that a long, hot summer of blackouts remained likely.
"And if we get more blackouts, I'm sure the rates will have to be ratcheted
up again," she said.
A PUC overview of how much typical PG&E bills will rise in June supports the
idea that the impact for most consumers will be minimal.
For example, a PG&E customer whose electricity usage is within 200 percent of
predetermined limits will see monthly bills rise 7 percent, from $95 to $101.
A heavier user -- within 300 percent of "baseline" limits -- will see monthly
bills climb 15 percent, from $163 to $187.
The baseline usage figure -- included near the bottom of PG&E bills --
represents the minimal amount of power consumers require. It includes several
variables, such as climate and time of year.
Only the heaviest users -- surpassing 400 percent of baseline -- would
experience rate increases of as much as 40 percent.
State regulators say almost half of all residential utility customers stay
within 130 percent of baseline usage and thus would see no change in their
power bills.
In other words, the majority of residential customers eligible for higher
rates would see bills go up by no more than 15 percent.
John Nelson, a PG&E spokesman, acknowledged that this amount was unlikely to
promote widespread cuts in electricity usage.
"Increases on the order of 7 to 15 percent probably won't accomplish much
conservation," he said.
"The only way you're going to see significant conservation this summer is a
combination of higher prices, giving people conservation tips, and raising
awareness among consumers that we're in a crisis," Nelson said.
Shames of the Utility Consumers' Action Network said state officials were
being less than honest when they insisted that the rate increases were meant
first and foremost as a conservation tool.
"It's to recoup costs being incurred on the wholesale power market," Shames
said. "That's it."
California has spent more than $6 billion since January purchasing
electricity on behalf of cash-strapped utilities.
INCREASES TO GENERATE $5 BILLION
The pending rate increases will raise about $5 billion in additional
revenues, which will be merged with proceeds from a $13.4 billion bond
offering approved yesterday.
Yet even these sums represent only a fraction of the estimated $65 billion
California will spend on electricity this year.
"What we should be doing is raising rates a lot more," said Severin
Borenstein, director of the University of California Energy Institute in
Berkeley.
He advocated increasing power bills this summer by as much as 75 percent over
levels paid a year ago.
"That would get you conserving," Borenstein said.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Power plant owners want end to PG&E contracts
KAREN GAUDETTE, Associated Press Writer
Friday, May 11, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/11/state2
143EDT0313.DTL&type=news
(05-11) 00:40 PDT SAN FRANCISCO (AP) --
The owners of at least 19 small power plants scattered throughout California
are now asking a bankruptcy judge -- along with state and federal power
regulators and lawmakers -- to set them free from their contracts with
bankrupt Pacific Gas and Electric.
Attorneys for the so-called qualifying facilities said a new pricing system
recently ordered by the Public Utilities Commission lowers how much the QFs
can charge for their electricity. That means many actually lose money when
they run their plants because of soaring natural gas prices.
Those losses, as well as millions of dollars owed to all the state's roughly
700 QFs for past deliveries, have forced many of those plants offline, QF
owners have said.
But for years QFs -- which harness solar, wind, biomass or geothermal power
or use natural gas to generate electricity, steam and other energy -- have
benefitted from the contracts, which allowed them to charge higher prices for
their electricity.
The qualifying facilities say that U.S. Bankruptcy Court Judge Dennis Montali
should set them free from their contracts, allowing them to sell their
electricity on the wholesale market instead.
Critics fear that would allow the QFs to gouge California by matching high
power prices that have already forced the state to spend $5.2 billion to keep
the lights on.
But representatives for four QFs from the Bakersfield area at a bankruptcy
hearing Thursday pointed to this week's rolling blackouts as evidence the
state needs every megawatt it can get. And until they get paid a "reasonable
rate," they can't afford to make electricity in California, they said.
"If we're paid a rate that doesn't cover our costs we will financially fail,"
said Bruce Leaverton, a lawyer representing the QFs.
Montali said he didn't think setting a new pricing system was within his job
description as a bankruptcy judge.
"Even though your side doesn't like the result, a lot of time and effort has
gone into this decision," Montali said. He gave both sides until May 24 to
debate before he makes his decision.
PG&E said Wednesday that only eight of the 300 QFs within its territory
remain offline for nonpayment reasons. Others are down for maintenance. The
Independent System Operator, which manages the state's power grid, said only
1400 megawatts of QF power remain offline statewide. That's an improvement
over the 3,000 megawatts down last month.
The state receives about 6,000 megawatts of electricity from QF, according to
ISO figures. That's enough to power about 4.5 million homes.
QF operators say the plants may be online, but they're only generating the
bare minimum of electricity to get paid.
On the Net:
www.canb.uscourts.gov
www.pge.com
,2001 Associated Press ?

Developments in California's energy crisis
The Associated Press
Friday, May 11, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/11/state1
013EDT0147.DTL&type=news
(05-11) 07:13 PDT (AP) --
Developments in California's energy crisis:
FRIDAY:
* Consumer activists, farmers, corporations and others meet at the Public
Utilities Commission in San Francisco to argue about how the PUC wants to
spread around recent rate hikes.
* State Treasurer Phil Angelides holds briefing about the plan to issue bonds
to repay the state for power buys.
* Residents of Mesa Verde and Blythe say they will protest the groundbreaking
ceremony for the Blythe Energy Project, a 520 megawatt natural gas power
plant in Southern California.
* The state remains free of power alerts in the early morning as energy
reserves stay above 7 percent.
THURSDAY:
* Grid operators say cooler temperatures are helping them meet California's
electricity demands. Officials at the Independent System Operator declare a
Stage 2 emergency, meaning the state is within 5 percent of running out of
power, but say they don't expect blackouts.
* The state Assembly and Senate give final approval to a bill expediting
power plant siting. The bill now goes to the governor for his signature.
* The PUC holds a public hearing on the proposed rate structure. Two
proposals are on the table for consideration Monday: Each would make
businesses and farms pay the most, while shielding most residential
customers.
* Gov. Gray Davis signs 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.
* State officials reveal they spent a record or near-record $1,900 per
megawatt hour Wednesday to avoid a third consecutive day of rolling
blackouts. The $319,200 the state paid Reliant Energy for 168 megawatt hours
at that price was enough to power 168,000 homes for an hour,
* Owners of small power plants ask U.S. Bankruptcy Judge Dennis Montali to
order PG&E to release them from contracts to provide it electricity. Montali
decides to wait until May 24 to make a decision.
* The California Energy Commission licenses two power plants that should be
able to deliver 545 megawatts by late summer: a 450-megawatt power plant
retooling project in Huntington Beach and a 95-megawatt summer reliability
project in Hanford.
* A U.S. House subcommittee votes to allow California to extend Daylight
Savings Time to reduce consumption, among other provisions. But it rejects
Democratic demands for price controls on wholesale electricity-prices on a
party-line vote.
* Inspectors from the PUC and Independent System Operator, which runs the
state's power grid, make their first check of a reported power plant outage
under a policy announced Wednesday by Davis to verify generators aren't
artificially withholding electricity to drive up power prices. They find that
a 750 megawatt Bay Area plant operated by Mirant Corp. is legitimately down
for repairs, but is expected to return to service Sunday.
* Edison International stock closes at $8.91, down 3 cents. PG&E Corp. gained
a dime to close at $9.10.
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 ?

GOP members of House oppose price cap plan
Three from Southern California vote against Feinstein on electricity
Carolyn Lochhead, Chronicle Washington Bureau
Friday, May 11, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/11/M
N235199.DTL&type=news
Washington -- Three California House Republicans voted against Sen. Dianne
Feinstein's proposal to cap electricity prices yesterday, as California
Democrats warned the trio would pay at the polls.
In a test committee vote, Republicans George Radanovich of Fresno, Chris Cox
of Newport Beach and Mary Bono of Palm Springs all voted against the
Feinstein proposal, saying it would make blackouts worse.
California Democrats had offered it as an amendment to a House bill aimed at
ameliorating California's electricity crisis. The amendment failed 20 to 12
on a mostly party-line vote.
Given that there is little the federal government can do immediately to
increase power supplies to California, price controls have become the pivot
point of the debate in Washington over how to help the state.
PRICE-GOUGING ALLEGATIONS
Democrats, led by Feinstein, insist that federal regulators by law must
intervene when prices become "unjust and unreasonable." Not doing so, they
contend, puts California consumers at the mercy of price gouging by
wholesalers.
Republicans argue price caps would make the situation worse by discouraging
energy generators from providing power to the state.
The Democrats held an impromptu press conference in the hallway afterward,
accusing the Republicans of abandoning their state in its darkest hour.
"This Republican-dominated committee said that California should drop dead, "
said Rep. Henry Waxman, D-Los Angeles.
"I don't know about their districts, but I'll tell you one thing, my
constituents know that they're being screwed, and they're being screwed by
the out-of-state generators, and it's up to us to stand up for our
constituents," said Rep. Anna Eshoo, D-Atherton. "I don't know what those
Republican members are going to say when they go home."
ANGRY GOVERNOR
Gov. Gray Davis blasted the Republicans from Sacramento.
"I find it very surprising that people here in California experiencing this
energy crisis can go back to Washington and vote against the best interests
of the constituents of the state," Davis said at a press conference.
The Republicans argued the Democratic plan would have hurt California.
"The fact of the matter is, if you put price caps on, you create a better
investment climate in Uganda than California," Radanovich said, "and I won't
vote for anything that'll keep us from solving our supply problem."
Cox contended that price controls would do nothing to prevent blackouts
because they would not increase supply or reduce demand.
"In many ways this is for Californians simply changing the subject from our
immediate problems of May, June and July," Cox said. "No one is contending
that price controls will help us meet the blackout challenges."
He also argued that because Feinstein's plan would exempt about half of
California's power suppliers from the caps, it would open the door to
"further chaos."
EXEMPTIONS
Feinstein's bill, co-sponsored by Sen. Gordon Smith, R-Ore., would impose
temporary price controls on wholesale Western electricity sales. But it
exempts municipal utilities such as the Los Angeles Department of Water and
Power and big federal power marketers such as the Bonneville Power
Administration in Oregon.
Like private generators, these providers have profited handsomely from
soaring electricity prices.
Radanovich said the Democratic effort to force price caps was a way to shift
the blame for the state's electricity fiasco from "a bumbling governor"
(Davis) to President Bush.
The overall bill was approved 17-13 by an Energy and Commerce subcommittee
chaired by Rep. Joe Barton, R-Tex., who said it "will not stop blackouts,"
but could help increase power supplies this summer.
Chronicle staff writer Linda Gledhill contributed to this report. / E-mail
Carolyn Lochhead at clochhead@sfchronicle.com
,2001 San Francisco Chronicle ? Page?A - 19

PUC chief's proposal called petulant
Federal agencies would pay full tab for power
Zachary Coile, Chronicle Political Writer
Friday, May 11, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/11/M
N230049.DTL&type=news
The state's top energy regulator says her proposal to force federal agencies
in California to pay "real time" prices for electricity could result in major
energy savings.
But critics say the proposal by Public Utilities Commission President Loretta
Lynch is nothing more than a schoolyard slap at the federal government for
refusing to rein in skyrocketing wholesale energy prices.
"It's just saying, 'You weren't nice to us, so we're not going to be nice to
you,' " said Commissioner Richard Bilas, a Republican, who opposes the
measure.
Lynch, a Democrat and appointee of Gov. Gray Davis, introduced the proposal
this week as part of package of rate increases to be voted on Monday, which
could jack up monthly electricity bills on heavy residential energy users by
40 percent and heavy commercial and industrial users by 50 percent or more.
Under her proposal, federal buildings, offices and military bases -- which
account for 1.5 percent of the state's energy load -- would pay rates based
on the fluctuating price of power on the wholesale market, probably leading
to huge increases at peak times.
Lynch said Wednesday the plan would force federal agencies to conserve
energy. She said the measure was not meant to punish the federal government
for not intervening in California's energy crisis.
"It's just an experiment," she said.
"I'm sure what Loretta is saying is, 'Put up or shut up,' " fellow
Commissioner Jeff Brown, a Democrat, who backs the idea said yesterday. "It
really puts the monkey on their back."
Brown said federal officials had urged state regulators to raise rates,
especially during peak times, to help cut demand. Lynch's plan would put that
theory to the test on federal buildings, he said.
Federal officials say they are conserving energy. And earlier this month
President Bush ordered all federal agencies to cut their electricity use by
10 percent.
In California, federal agencies have slashed energy consumption by 25 percent
since 1992, when Congress passed a law requiring conservation. Federal
buildings in San Francisco, Oakland and elsewhere are already dimming lights
and setting thermostats at 78 degrees during power emergencies.
Mary Filippini, western region spokeswoman for the General Services
Administration, which manages federal offices, warned that any jump in energy
costs would have to be passed on to taxpayers.
Filippini also cautioned that Lynch's proposal could threaten a deal to sell
California 12 megawatts of electricity a day from the Bonneville Power
Administration in Washington for $55 a megawatt. The deal went into effect
March 1.
"We would have to rethink our contract with them if we had some issues with
our (energy) pricing," Filippini said.
Even some advocates of real-time pricing say Lynch's plan to single out
federal agencies is misguided.
"It sends the signal that real-time pricing is something to be scared of
rather than something to really pursue as a tool to help us get through the
summer," said Jim Bushnell, director of research for the University of
California Energy Institute.
E-mail Zachary Coile at zcoile@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 19

Sacramento decisions in state's power crisis
Source: Chronicle Sacramento Bureau
Friday, May 11, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/11/M
N116335.DTL&type=news
In other developments in California's energy crisis yesterday:
BONDS APPROVED
Gov. Gray Davis signed a bill that will allow the state to issue up to $13. 4
billion in bonds to repay the general fund for past energy purchases and pay
for future purchases.
Davis blasted Republicans, who prevented the bill from passing with a two-
thirds majority, which delayed the bond issuance for 90 days and scuttled
Democrats' plans to get short-term loans to quickly replenish what the state
has already spent out of the general fund on electricity purchases.
MEGAWATT PRICE SETTLED
State officials confirmed they had spent $1,900 per megawatt hour for a time
Wednesday as part of the state's effort to avert rolling blackouts. Oscar
Hidalgo, a spokesman for the Department of Water Resources, said the state
had purchased 168 megawatts from Reliant Energy at that price over a
three-hour period on the volatile spot market.
Hidalgo said it was the highest price per megawatt hour that officials could
recall paying. The Davis administration has refused to release detailed
accountings of energy purchases, but documents obtained by The Chronicle this
year indicated the price per megawatt hour averaged roughly $300 in February
and March.
The state began purchasing power Jan. 17 because the state's investor-owned
utilities could no longer afford to. California has spent about $6 billion so
far.
BILL FOR FASTER RESULTS
The Legislature sent Davis a bill intended to allow the state Energy
Commission and the Air Resources Board to get new power plants operational
faster.
The bill shortens the time cities and counties have to review power plant
projects to 45 days for the initial review and 100 days for the final review.
It also contains $3 million for cities and counties to defray the cost of
speeding up reviews of applications for new power plants.
Davis is expected to sign the bill, which won unanimous approval yesterday in
the Senate.
,2001 San Francisco Chronicle ? Page?A - 19

State leaders consider scheduled power blackouts
Posted at 10:09 p.m. PDT Thursday, May 10, 2001
JOHN WOOLFOLK
State leaders are considering darkening sections of California on a rotating
schedule as one way to take the frustrating surprise out of the rolling
blackouts expected to be frequent this summer.
The proposal to turn off power to large sections of the state on a regular
basis rather than wait until the last minute to call a rolling blackout drew
considerable interest among lawmakers. They met to consider the issue
Thursday, just days after outages swept the state with only minutes of
warning.
``We're talking about blackouts of such magnitude we just have to find a way
to get people better notified,'' said state Sen. Debra Bowen, D-Redondo
Beach. ``People want to know whether it's in our best interest to simply plan
for outages, rather than subject ourselves to an out-of-control market. We
may be better off doing that.''
But while scheduling power outages would make blackouts more predictable, it
may also make them more frequent than necessary. Customers might find
themselves in the dark even if plenty of power is available.
But the advantage of planned outages is that by lowering power demand, the
state could curb the runaway power prices draining its budget and ``break the
back'' of the energy ``cartel,'' Bowen said.
Currently, the state pays whatever is necessary to keep the lights on.
Wednesday, state officials said they paid $1,900 a megawatt-hour to avoid
blackouts, the most they ever have spent.
Residents and businesses complain that rolling blackouts would be more
bearable with more warning.
``The overwhelming response from our constituents is, `We want
notification,'?'' said Assemblywoman Jackie Goldberg, D-Los Angeles.
Businesses pay price
Carl Guardino, president of the Silicon Valley Manufacturing Group and a
board member of the California Independent System Operator, which runs most
of the power grid, said rolling blackouts have come with just two minutes'
warning. He's trying to get a notification plan in place for the summer that
would allow at least half an hour of notice.
``A two-minute warning may be appropriate for a football game, but it's
inadequate to protect California's citizens and economy,'' Guardino said.
With at least half an hour, businesses could fire up standby generators or
turn off computers, assembly lines and other equipment that could be damaged
by sudden blackouts, Guardino said. That could lessen the enormous costs of
the blackouts to businesses.
The manufacturing group estimated that the first wave of rolling blackouts,
which hit the Bay Area during a heat wave June 14, cost Silicon Valley
companies $100 million.
A month's worth of blackout days this summer -- a likely possibility -- could
cost California $16 billion and 15,000 jobs, Guardino said, citing a Bay Area
Economic Forum analysis.
Rolling blackouts, in which utilities cut power from one group of customers
to the next for an hour or so, are ordered when power demand threatens to
overwhelm available supplies and crash the whole system. It could take days
to restore power after a systemwide failure.
Summer is critical because air conditioning is California's biggest power
use. Grid managers expect the state to be short some 3,700 megawatts,
particularly in May and June, enough for more than 3 million homes. New power
plants may lessen the shortage in late summer, but hydroelectric power could
be more limited then.
Desert residents object
With rolling blackouts a virtual certainty, some lawmakers suggested planning
the entire summer's outages months in advance.
``I'm interested in calendar blackouts,'' said Assemblyman Mike Briggs,
R-Fresno. ``I'm talking about calendaring months in advance, `These are your
potential blackout days.'?''
Under the current system, about half of all customers are exempt from rolling
blackouts because they are essential services like police or hospitals or
share a circuit with them. The rest are divided among outage groups or blocks
spread throughout each utility's service area, a move intended to prevent
blackouts from affecting any region disproportionately.
Officials from desert districts oppose planning to turn off power in their
areas. But they suggested reconfiguring circuits so cool coastal areas could
go dark while hot regions are spared.
``If you want to black out other parts of the state, that's OK by me,'' said
Sen. Jim Battin, R-Palm Desert, adding that his desert constituents have paid
taxes to help coastal residents through earthquakes and mudslides. ``Now it's
our turn.''
The current system for dealing with power shortages was established under the
state's 1996 deregulation plan, with three stages of emergencies declared as
demand approaches the limits of supply.
During Stage 2 emergencies, utilities cut off businesses that have agreed to
lose power in exchange for lower rates. Stage 3 emergencies indicate rolling
blackouts are possible.
But state officials never expected to put such measures in place regularly,
and the system's flaws have become evident over the past year.
Grid officials avoid making outage predictions because they fight for every
last watt, said Terry Winter, the system operator president.
The system operator faces shortages each morning of anywhere from 7,000 to
16,000 megawatts, differences usually made up throughout the day by
conditions that change by the minute, Winter said.
Planning outages around the state could work, Winter said. But he cautioned
that transmission constraints, sudden plant outages and weather could still
mean unexpected outages.
Lawmakers said even a vague prediction, like a weather forecast, would be
better than nothing.
``People listen to the weather forecasters on a regular basis, even when
they're wrong,'' Goldberg said.
Winter responded: ``I can be wrong on a regular basis.''

Staff writer Mark Gladstone contributed to this report.

Davis plan to help utility faces fight in Legislature
Posted at 9:42 p.m. PDT Thursday, May 10, 2001
BY DION NISSENBAUM

Mercury News Sacramento Bureau

SACRAMENTO -- With a plan to issue $13.4 billion in bonds to buy power behind
them, state lawmakers are confronting their next major energy crisis
challenge: the governor's controversial plan to bail out nearly bankrupt
Southern California Edison.
But that proposal, which has received a cool reception in the Legislature,
appears all but dead. And various factions are now lining up behind their own
alternatives.
``It has a snowball's chance'' in hell, Assemblywoman Sarah Reyes, D-Fresno,
said of the governor's deal.
Moderate Democrats want to give Edison $1.5 billion less for its transmission
lines than Davis offered, while liberals are calling for the outright
takeover of the company.
And some lawmakers are growing concerned that the divisions will force Edison
to follow the lead of its northern cousin, Pacific Gas & Electric Co., and
declare bankruptcy.
Despite the hurdles, Davis remains optimistic. On Thursday, the governor said
he still thinks a modified version of his plan will ultimately win support
from lawmakers.
``It's one legislator at a time, but I believe we are making progress,'' said
Davis, who met with legislative leaders Thursday afternoon to discuss his
proposal and the alternatives.
Davis trumpeted his deal with Edison last month just days after PG&E stunned
the governor and state by filing for bankruptcy protection. The two utilities
amassed enormous debts buying expensive electricity, but could not pass those
costs on to their customers because the state has capped rates.
Too little, too much
The Edison agreement has been met with a barrage of criticism from all sides.
Some lawmakers think the state has offered too much -- $2.76 billion -- to
buy Edison's share of the transmission system used to shuttle electricity
around California. Others complain that the deal doesn't force Edison to
``share the pain'' and return some of its profits from generating power.
Some question the agreement to protect 20,000 acres of Edison-owned
wilderness and think it goes too far in allowing continued logging. Others
think it doesn't go far enough.
``I don't know of anybody who has said, `Yeah, this is a good deal,'?'' said
Assemblyman Joe Nation, D-San Rafael.
Nation sits on what Assembly Democrats have dubbed their Plan B task force,
which is looking at ways to rework the Edison deal or craft a different
proposal.
Nation and Assemblyman John Dutra, D-Fremont, are shopping around a
slimmed-down version of the Edison deal that would give the state a three- to
five-year option to buy the transmission lines for $1.2 billion -- $1.5
billion less than the current offer.
The lawmakers also want to compel power companies to write off some of their
profits and require Edison to use $400 million from its parent company to
help pay off the utility's debt.
Other lawmakers are floating the idea of buying the entire utility instead of
just its transmission lines. Under that proposal, if Edison goes bankrupt,
the state would buy its stock and take control of the utility's dams and
nuclear plants, as well as its debts.
That alternative, however, has garnered little support from moderates.
``This idea that we step in and purchase the entire utility is an East German
model,'' Nation said.
Edison executives have cautioned lawmakers not to tinker too much with the
deal. The company has launched a $3 million media campaign to curry public
favor.
Brian Bennett, Edison's vice president for external affairs, said the company
is open to some changes -- as long as nothing throws the tenuous agreement
out of whack.
Risk of bankruptcy
``Ideally, we would hope that after all the teeth gnashing that's going on,
they'll see how difficult it is to reach an agreement and that, in the end,
they'll adopt it in large part the way it is now,'' Bennett said.
At this point, none of the options appear to have enough momentum. And this
stalemate, some worry, could force Edison -- like PG&E before it -- to throw
up its hands and declare bankruptcy.
``It's really bite-the-bullet time,'' said one senior Edison executive.
``Come up with a plan or we go bankrupt, and they deal with the fallout.''

Mercury News Staff Writer Mark Gladstone contributed to this report.

Power plant owners want end to PG&E contracts
Posted at 6:38 a.m. PDT Friday, May 11, 2001
BY KAREN GAUDETTE

Associated Press Writer

SAN FRANCISCO (AP) -- The owners of at least 19 small power plants scattered
throughout California are now asking a bankruptcy judge -- along with state
and federal power regulators and lawmakers -- to set them free from their
contracts with bankrupt Pacific Gas and Electric.
Attorneys for the so-called qualifying facilities said a new pricing system
recently ordered by the Public Utilities Commission lowers how much the QFs
can charge for their electricity. That means many actually lose money when
they run their plants because of soaring natural gas prices.
Those losses, as well as millions of dollars owed to all the state's roughly
700 QFs for past deliveries, have forced many of those plants offline, QF
owners have said.
But for years QFs -- which harness solar, wind, biomass or geothermal power
or use natural gas to generate electricity, steam and other energy -- have
benefitted from the contracts, which allowed them to charge higher prices for
their electricity.
The qualifying facilities say that U.S. Bankruptcy Court Judge Dennis Montali
should set them free from their contracts, allowing them to sell their
electricity on the wholesale market instead.
Critics fear that would allow the QFs to gouge California by matching high
power prices that have already forced the state to spend $5.2 billion to keep
the lights on.
But representatives for four QFs from the Bakersfield area at a bankruptcy
hearing Thursday pointed to this week's rolling blackouts as evidence the
state needs every megawatt it can get. And until they get paid a ``reasonable
rate,'' they can't afford to make electricity in California, they said.
``If we're paid a rate that doesn't cover our costs we will financially
fail,'' said Bruce Leaverton, a lawyer representing the QFs.
Montali said he didn't think setting a new pricing system was within his job
description as a bankruptcy judge.
``Even though your side doesn't like the result, a lot of time and effort has
gone into this decision,'' Montali said. He gave both sides until May 24 to
debate before he makes his decision.
PG&E said Wednesday that only eight of the 300 QFs within its territory
remain offline for nonpayment reasons. Others are down for maintenance. The
Independent System Operator, which manages the state's power grid, said only
1400 megawatts of QF power remain offline statewide. That's an improvement
over the 3,000 megawatts down last month.
The state receives about 6,000 megawatts of electricity from QF, according to
ISO figures. That's enough to power about 4.5 million homes.
QF operators say the plants may be online, but they're only generating the
bare minimum of electricity to get paid.

Businesses blast electricity rate-hike proposal
Posted at 9:59 p.m. PDT Thursday, May 10, 2001
BY SAM DIAZ

Mercury News

Silicon Valley businesses are crying foul at the latest rate hike proposal by
the California Public Utilities Commission, arguing they are being unfairly
singled out and that the ripple effect will cause long-lasting damage to the
state's economic health.
State regulators on Wednesday put forward a plan that would hit commercial,
industrial and agricultural users with potential power bill increases of 50
percent or more while leaving moderate residential users mostly shielded.
The commission is expected to vote on the proposal Monday.
The idea that businesses would carry the expense of the energy crisis on
their shoulders has left some fuming and others screaming for a real-time
pricing plan that would reward those who conserve during high-demand hours
and penalize those who don't -- both on the residential and business levels.
``We have been in front of the PUC with court pleadings, we've filed briefs,
we've met with everyone we can meet with inside the governor's office,'' said
Earl Bouse, a vice president with Hansen Permanente Cement, which operates a
plant off Interstate 280 in Cupertino.
``With this sort of rate shift, industry simply cannot operate in California.
I'm hoping and praying that this is all just an administrative error of
stupidity.''
The idea that businesses would flee the Golden State as fast as they flocked
to it during the dot-com boom is very real under the PUC's proposal, said
Carl Guardino, president and CEO of the Silicon Valley Manufacturing Group.
``The PUC may think that by shielding residential customers from paying our
proportionate share that they are doing everyone a favor yet it's pretty hard
to pay your bills when a disproportionate plan forces your employer out of
business or out of California,'' Guardino said.
In recent months, states such as Michigan, Tennessee and West Virginia have
been courting California businesses, assuring them that the availability of
power is not a problem in their states.
And while a move may be enticing for some businesses, others have too much
invested in their Silicon Valley presence to simply up and leave.
Real-time pricing
Cisco Systems, San Jose's largest employer, won't be packing up anytime soon,
said company spokesman Steve Langdon. ``San Jose is our home, and we fully
intend to stay here,'' he said.
But that doesn't mean the company isn't frustrated with the thought of being
hit with exorbitant energy bills, especially when it has gone out of its way
to conserve.
Cisco has installed special lighting, retrofitted windows and put usage
regulators on equipment motors to help reduce energy, Langdon said.
But it seems that it's still not enough as the state gears up for a hot
summer and a demand for energy that is expected to exceed the supply.
There's been a call to develop a real-time pricing plan that would arm
residents and businesses with the data -- and financial incentives -- to cut
usage during the peak afternoon hours.
Frank Wolak, a Stanford University economics professor and chairman of the
Market Surveillance Committee for the agency that operates California's
electricity transmission system, said energy pricing needs to be done in real
time.
``If you increase the rate I pay for power in every hour, when am I going to
reduce my consumption?'' he asked. Power users will reduce during the hours
that save them the most money, he said.
But that involves putting users on real-time energy monitoring plans.
Currently, most residents and businesses are charged a monthly rate for their
total usage, regardless of whether that usage was at 4 p.m. or 4 a.m.
Adjusting rates
By adjusting the rates for the time of day -- and monitoring usage by the
hour -- customers could save money by conserving when energy costs are high
and using energy when costs are low. The financial incentive would also
reduce the demand during those peak hours.
According to PG&E, only about 3,200 businesses in its operating region have
real-time meters -- without real time pricing. The meters allow customers to
monitor when their heaviest usage is and adjust it accordingly. But without
the financial savings, there's little incentive to do anything more with the
data except to analyze it.
Hansen Permanente Cement is one of those businesses with a real-time meter.
``We recommended charging us more on the peak side and in the off-peak
leaving the rate where it was to begin in with,'' Hansen's Bouse said. But
the request fell on deaf ears, he said.
``The opinion was that no one was listening,'' he said. ``There might as well
have been no pleadings.''

Contact Sam Diaz at sdiaz@sjmercury.com or (408) 920-5021.

Households must share power costs
Published Friday, May 11, 2001, in the San Jose Mercury News
FEAR of raising rates for household use of electricity has hindered the
resolution of California's energy crisis since it exploded in December.
A rate increase that could have saved the utilities from financial
catastrophe, had it been approved in January, eventually was enacted March
27. In the meantime, the state had to jump into the business of buying power
when Pacific Gas & Electric and Southern California Edison ran out of money.
Now, the California Public Utilities Commission looks set to stumble again
for fear of consumer wrath. A proposal from Loretta Lynch, PUC president, on
which electricity users will carry the burden of the March rate increase,
goes too light on residents.
Low-income residents should be protected, and they will be. But raising bills
for the rest of us an average of only $6 for using twice the baseline amount
isn't sending residents the necessary conservation message. (Baselines
establish minimal levels -- about two-thirds of average usage.) Many
households can afford an increase of more than $6 a month.
Since residents aren't paying, businesses will have to. The average
residential rate, including those who would get no increase at all, is 17
percent. The average industrial increase is 52 percent.
The full PUC should adjust the proportions, not to let business off the hook,
but to dial its share back as the residential share gets dialed up.
``Let business pay'' goes only so far in protecting residential customers.
Residents are, after all, employees too. If the companies they work for are
burdened too heavily, jobs start evaporating in the summer heat.
Lynch's proposal does point in some positive directions. It sets prices in
five tiers, meaning the price per kilowatt steps up as usage increases for
residents.
For large customers, the proposal makes some progress toward real-time
pricing -- that is, charging more for power at times of peak demand to
reflect the greater cost of buying it then.
But the state should have initiated a more aggressive conservation, metering
and real-time pricing program months ago. And it should be hastening to get
residents involved in it too.

Failure to conserve fueled energy woes
Published Friday, May 11, 2001, in the San Jose Mercury News
BY PAUL KRUGMAN
GASOLINE prices are rising again, and the administration is rushing to turn
this into another argument for its drill-and-burn energy strategy. But a look
at the causes of the current gasoline shortage actually suggests a quite
different moral: namely, that conservation ought to be a major element in our
energy strategy, and that lack of conservation is a large part of what we've
been doing wrong.
First things first: This year's gasoline price spike has nothing to do with a
shortage of crude oil. Even if we had already punched the Alaskan tundra and
the ocean floor off Florida full of holes, we'd still be in the same fix. The
binding constraint right now is the nation's limited capacity to refine crude
oil into gasoline.
Why is refining capacity inadequate? No new refineries have been built in
this country for 20 years, a point emphasized with obvious relish by Dick
Cheney. His implicit subtext, of course, is that it's the fault of
environmentalist types who stood in the oil industry's way. That must be the
story, right?
Wrong. It's true that environmental rules have somewhat crimped the
production of our existing refineries. The problem is not so much the
strictness of the regulations as their lack of consistency: Each region has
its own rules -- like the insistence of Midwestern states that gasoline
include corn-derived ethanol -- fragmenting the nation's production. But the
reason the oil industry didn't build any new refineries for two decades was
that they weren't needed. In fact, right up until last year oil refining was
a persistently depressed business, plagued by overcapacity.
Here's what happened: In the wake of the energy crisis in the 1970s, ordinary
people in the United States began conserving energy -- not as a ``sign of
personal virtue,'' as Cheney sneeringly puts it, but because they wanted to
save money. Cars, in particular, became much more fuel-efficient. Meanwhile,
the oil industry was subject to ``refinery creep,'' the tendency of refining
capacity to grow through incremental improvements even when no new refineries
are built. The result was excess capacity and squeezed margins, right up to
the late 1990s.
What finally brought us up against capacity constraints was a surge in demand
that was partly due to the economic boom of the later Clinton years, but
mainly due to the renewed enthusiasm of Americans for huge, gas-guzzling
vehicles -- an enthusiasm, er, fueled by cheap gas. In 1998 gasoline was
cheaper compared with overall consumer prices than ever before in U.S.
history -- 60 percent cheaper than it was in 1981. The nation rushed out to
buy ever-bigger SUVs -- and then suddenly discovered that we had run out of
refining capacity. Refiners weren't frustrated by rules that prevented them
from building new facilities; they were simply caught by surprise.
You have to bear this history in mind when parsing Cheney's recent speeches.
To listen to him, you would imagine that we live in a country in which
powerful political forces oppose energy production and preach a return to the
Dark Ages. ``To speak exclusively of conservation,'' Cheney declared in one
speech, ``is to duck the tough issues .?.?. it is not a sufficient basis --
all by itself -- for a sound, comprehensive energy policy.'' In another
speech he ridiculed unspecified types for ``saying to the American people
that you have to live in the dark, turn out all of the lights.'' The story
according to Cheney, in other words, is that we have an energy shortage
because extreme conservationists prevented us from developing the supply
capacity that serious people knew we needed.
Need I point out that this, like so much of what one hears from this
administration, is a cynical misrepresentation? I defy Cheney to come up with
examples of influential people who ``speak exclusively of conservation,'' let
alone anyone who says to the American people that they have to live in the
dark. In fact, hardly any important politicians have spoken about
conservation at all -- never mind exclusively -- this past decade.
We will need to build more refineries -- and more power plants, and
pipelines, and so on. But it is ludicrous to suggest that our current energy
woes are the result of too much emphasis on conservation. It would be closer
to the truth to say that we are in trouble now because our politicians
haven't dared even use the word.

Economist Paul Krugman writes for the New York Times.

Generators win 10-year revival
To Huntington Beach officials' dismay, AES nets a long-term permit to fire up
old but refurbished units.
May 11, 2001
By KATE BERRY
The Orange County Register

AES Corp.'s power plant in Huntington Beach will welcome two refurbished
generators back online in July, according to plans.
Photo: Leonard Ortiz / The Register
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California's electricity needs trumped local environmental concerns Thursday
as AES Corp. received a 10-year permit to fire up two old generators at its
Huntington Beach power plant - angering city officials who wanted to restrict
the permit to five years.
The California Energy Commission allowed AES to restart the 40-year-old
generators on the condition that the company sell all power from the units to
the state.
"We're certainly disappointed in having a 10-year permit, not five years,''
said Huntington Mayor Pam Julien-Houchen.
Huntington Beach is the first full-time power plant approved under a
fast-track permitting process ordered by Gov. Gray Davis in January. In
addition, seven "peaker'' plants, which operate only during hours of peak
demand, have been approved since January.
The approval ends a contentious five-month process that pitted Huntington
Beach officials against the company.
The city, concerned about air and water pollution, wants AES to replace the
plant with a modern, cleaner one. To gain approval to restart the mothballed
generators, AES agreed to pay $2.5 million for studies of the plant's effect
on ocean bacteria that may have contributed to beach closures.
In order to get the units running by mid-July, AES plans to begin nearly
round-the-clock construction "in a matter of days,'' said Aaron Thomas, a
company spokesman.

Energy notebook
Davis signs bill to sell $13.4 billion in bonds for power
May 11, 2001
From Register news services
SACRAMENTO Gov. Gray Davis signed a bill allowing the state to issue $13.4
billion in bonds to buy electricity, the largest municipal bond offering in
U.S. history.
The bonds will be issued as early as August and will help repay the general
fund. California has spent more than $6 billion buying power for PG&E Corp.'s
Pacific Gas & Electric and Edison International's Southern California Edison,
the state's two largest utilities. California is spending more than $50
million a day buying power, the state Department of Finance said.
"This is part of the solution, but it's not going to end all the problems.
It's not going to stop until we start using less power or generating more
power," said Clark Stamper, head of Stamper Capital & Investments in Santa
Cruz, which manages about $430 million of municipal bonds.
Blackouts averted -- at $1,900 per megawatt-hour
SACRAMENTO The state spent as much as $1,900 a megawatt-hour to buy power
Wednesday as state grid operators narrowly avoided a third consecutive day of
blackouts, Gov. Gray Davis said, reiterating his call for federal price caps.
The $1,900 is a record or near record since the state purchases began in
January, said Oscar Hidalgo, a spokesman for the power-buying Department of
Water Resources. The $319,200 the department paid Reliant Energy for 168
megawatt hours at that price was enough to power 126,000 homes for an hour,
Hidalgo said.
Reliant spokesmen did not return telephone messages from the Associated Press
Thursday.
Task force wants more funds to promote efficiency
WASHINGTON A White House task force will recommend more funding for programs
that promote energy efficiency, reversing some cuts made by President George
W. Bush, a senior administration official said.
The task force on energy policy, led by Vice President Dick Cheney, wants to
review current funding for conservation and renewable sources of power and
propose "appropriate" increases for those considered valuable by private
companies, including Alcoa Inc., Bethlehem Steel Corp. and Weyerhaeuser Co.
The recommendation follows lobbying by oil, aluminum, mining, paper, metal
and steel companies last month against administration efforts to cut federal
financing of energy-related research.

Not saving for a sultry day
Some officials say conservation efforts so far aren't enough. Consumers say
they're trying.
May 11, 2001
By CHRIS KNAP, TOM BERG, JIM RADCLIFFE and HANH KIM QUACH
The Orange County Register

IRMA FLORES of Santa Ana has Greg Soloman and Francisco Gomez of the
Appliance Recycling Center of America remove her old fridge. She is using an
Edison rebate toward an energy-efficient one.
Photo: Paul E. Rodriguez / The Register
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?

If Californians had conserved just 500 more megawatts - 1.5 percent -- the
rolling blackouts this week could have been prevented.
The state Energy Commission and the governor have been congratulating
consumers for slashing their energy use by 9 percent.
But some experts question those numbers.
And, even the forecaster who compiled those figures called them "squishy."
Operators of the state's power grid complain each time that supplies get
short that Californians aren't trying hard enough to save - although they
acknowledge they have no scientific way of measuring conservation.
"Tuesday we forecast a peak demand of 35,500 megawatts. The actual peak was
35,755. You tell me: How much conservation was there?'' asked Lisa Szot,
senior engineer at the California Independent System Operator.
Interviews and records show that Californians are taking baby steps, changing
light bulbs and shutting off appliances. But for most, conservation is not a
priority. Until power bills rise dramatically and blackouts hit their homes,
it probably won't be, experts say.
One thing is clear: Californians are not now conserving enough to keep the
lights on during hot days. And experts think it will get worse as the weather
gets hotter.
"Californians can conserve their way out of this crisis,'' said Severin
Borenstein, an energy economist at the University of California Energy
Institute in Berkeley.
"But I'm pretty skeptical of that 9 percent savings figure, given what we're
seeing on the demand side so far."
Demand for power on the hottest day last month was down 5 percent from 2000
-- 1,580 megawatts.
Factor in the higher usage expected because of warmer weather and economic
percent growth, and you have the 9 percent savings calculated by the Energy
Commission and touted by Gov. Gray Davis.
Richard Rohrer, an energy forecaster for the commission, said his numbers
include an adjustment for weather. That has the effect of making demand look
lower than what the ISO is measuring.
"The data are squishy, but the numbers are telling a story. Peak demands are
lower. Monthly energy use is lower,'' Rohrer said.
Crisis a concern, but 'You've Got to Live'
From the sidewalk of a Lake Forest street, the buzz of Liz Dye's
air-conditioning unit broke the silence.
It was Tuesday at 3 p.m., and rolling blackouts were just about to begin.
Dye, 40, says she waits until 1 a.m. to run her dishwasher and has taught her
children to flip off lights when no one's in the room. But the Dye family
needed a little cool-down Tuesday.
"I'll keep it on for two hours and then turn it off,'' she said.
In Mission Viejo, Norma Roman was at the laundromat washing a California
king-size comforter that won't fit into her home machine.
Roman, 33, says she dresses lightly so she can keep off the air conditioning
in her home, using ceiling fans instead. But Tuesday she was taking advantage
of a break in her schedule to wash the comforter, even as Southern California
Edison cut power to nearby neighborhoods.
"You take it into consideration, but you've got to live,'' Roman said.
That's pretty much the way most folks sized it up.
"Energy efficiency? No factor," said Jeff Ganoe, 38, of Garden Grove, on how
he chose the dryer he bought at Home Depot this week after his old machine
conked out. Color and style were more important factors.
What would it take to make him conserve?
"More blackouts," he said. "My electricity bill's only $10. But blackouts are
a big pain. I might change."
If the energy crisis is a war, then it seems we haven't seen enough
casualties yet to pitch in and do our part.
The most popular energy-saving item these days is a $15 curlicue of glass
called the compact fluorescent light bulb. They screw into a typical
incandescent socket, last 13 times longer and use one-quarter the energy.
At this stage of California's energy crisis, they constitute the front line:
a small investment, eventual savings, and a tinge of pride about doing the
right thing.
"It's definitely saving me money," said John Irwin, 61, of Garden Grove. "And
I may not have to look at blackouts."
That remains to be seen.
On the hottest days between June and September, demand for electricity on the
California grid is forecast to be 47,500 megawatts, or about one-third more
than what led to this week's rolling blackouts. This week, big generating
stations that could have provided more than 12,000 megawatts of power weren't
running, primarily because they were down for maintenance.
Plus some alternative-energy generators, which make 700 megawatts of power
from the wind and the sun, were refusing to generate power because the
utilities owe them millions of dollars.
Counting on a change in behavior
In total the ISO has generating capacity of about 44,000 megawatts and on
most days imports another 4,000 megawatts of power. That's just barely enough
to cover the forecasted energy needs-if nothing goes wrong.
Davis and the Legislature have enacted new conservation programs.
But independent experts don't think these efforts will save enough power -
and they say the increases most consumers will see on their June power bills
won't be enough to spark a change in behavior.
Borenstein, the Berkeley economist, said he was in the state Capitol on
Tuesday, just before the blackouts.
"It was a typical summer day, and the temperature inside was 72 or 74
degrees, men were wearing suits and ties, and nobody was sweating,'' said
Borenstein.
"If you turned all the air conditioning to 80 degrees, that alone could go
most of the way to avoiding blackouts,'' he said.
"That's not pleasant, I know. But we are going to need aggressive action.''

Despite opposition, AES has the power
Many in Huntington Beach want the aging plant to run for five years, not 10.
May 11, 2001
By KATE BERRY, JIMMY CHAI and CURT SEEDEN
The Orange County Register
California's dire need for electricity took precedence Thursday over the
desires of Huntington Beach residents and city officials, who had struggled
to limit two 40-year-old generators at the AES Corp. power plant to a
five-year license.
Though residents and city officials recognize that California is mired in an
energy crisis, many expressed dismay that AES received a 10-year operating
permit for generators, which will undergo a $130 million refurbishment. The
California Energy Commission granted the permit on the condition that all the
power from the units be sold to the state.
"What they expressed to us is that they needed 10 years to make the plant
financially viable,'' said Garret Shean, a commission hearing officer.
Matthew Lamb, the city's real estate service manager, who has been on the
front lines of negotiations between the city, AES and the commission, said
any chance for a new plant at the site will now be shelved for 10 years.
"We can't argue that California needs the power,'' he said. "But this
community wants to have a modern plant. California doesn't want 1960s
technology that needs to be jump-started.''
Though residents complain about air and water pollution, many expected the
permit to be approved.
"If we really need the power, I don't object,'' said Don Stack, who lives
near the plant at Newland Street and Pacific Coast Highway.
Aaron Thomas, a spokesman for Arlington, Va.-based AES, said the two units
are expected to be online in July, producing 450 megawatts - enough to light
from 337,500 to 450,000 homes.
"This facility will be cleaner than any of the new facilities coming online
over the next couple of years.''
City officials said they were led to believe that the units would receive a
five-year permit and then be subject to a completely new certification
process. Instead, the commission granted a full 10-year permit, with an
interim review after five years. That review would ensure the plant is in
compliance with the permit, which requires environmental studies and steps to
mitigate ocean bacteria levels if studies link the plant to bacteria that
have caused beach closures.
City officials have asked the company to build a low-profile, modern plant,
similar to an AES plant under construction in Redondo Beach. A new plant
would replace all five units on the 53-acre site in Huntington Beach
overlooking the Pacific.
Malcolm Weiss, a lawyer for the city, said officials are considering whether
to appeal the permit. The city also could file an appeal with the South Coast
Air Quality Management District, which is expected to issue an air-quality
permit and emissions credits to the plant within days so that construction
can begin, Weiss said.
The Huntington Beach plant's five units include one peaker unit, which
operates only during Stage 3 power shortages. It will be required by the
commission to install air pollution controls by December 2002. The plant's
Units 1 and 2 currently are offline while catalytic converters that reduce
pollutants are installed. Those units are expected to be on line by July.

National Desk; Section A
Many Utilities Call Conserving Good Business
By TIMOTHY EGAN
?
05/11/2001
The New York Times
Page 1, Column 6
c. 2001 New York Times Company
SEATTLE, May 10 -- More than 20 years ago, as power companies were building
nuclear plants across the country to meet the need for new electricity,
Seattle City Light invested instead in measures to promote energy efficiency.
In the years since, some of those plants have ended up in default, while
Seattle has saved enough energy to power the entire city for 18 months.
Hundreds of miles to the south, the city-run utilities in Los Angeles and
Sacramento, have generally managed to avoid the rolling blackouts of recent
months by opting out of the state's deregulation experiment and promoting
conservation with near-religious fervor.
''Over the last ten years, we have conserved enough energy to save us the
equivalent of having to build one huge new power plant,'' said Mike Weedall,
a manager at the Sacramento Municipal Utility District. ''Instead, we like to
say we built the conservation power plant.''
When Vice President Dick Cheney said last week that conservation could not be
a centerpiece of energy policy, he left some utilities -- those that have
spent 20 years trying to prove just the opposite -- feeling as though their
efforts had been undermined. In his speech, he said, ''Conservation may be a
sign of personal virtue, but it is not a sufficient basis for a sound,
comprehensive energy policy.'' The nation, he said, should build a new power
plant every week for the next 20 years.
In recent days, Bush Administration officials have emphasized that their
energy policy will include some financial incentives for alternative power
and energy efficiency. But they said that the nation still needs to build
thousands of new power plants, no matter how well energy is used.
Bob Royer, a spokesman for the municipally run Seattle City Light utility,
agreed that the country needs to build more power capacity. But he said that
conservation efforts worked because they proved more popular with his
utility's customers.
''These guys in the Bush administration are doing this manly stuff, putting
their horns on to make it sound like conservation is for sissies,'' Mr. Royer
said. ''But we know from experience that conservation equals generation. They
are the same.''
Other utilities, even some that embrace conservation, agree with the Bush
administration that the nation cannot conserve its way to energy
independence.
''Cheney is saying that conservation won't solve the energy crisis, and we
agree with that,'' said Gary Swofford, a vice president for Puget Sound
Energy, a private utility that serves nearly a million customers in western
Washington. The company has just won approval from regulators to start a
program that lets people play less when they use electricity during
low-demand times .
Officials at most utilities say that some new power is needed to meet growth.
But many say that up to half of it can come from conservation or reliance on
renewable resources like wind, solar or small hydroelectric plants. This does
not have to involve personal sacrifice, as the Bush administration has
implied, these power providers say.
In California, where the state is offering cash incentives for people to use
more energy-efficient appliances and lights, S. David Freeman, the man named
by Gov. Gray Davis to oversee the state's response to its power crisis, said
that conservation remained a way not only to get through the difficult summer
ahead but also to meet long-term energy needs.
''I've got a message for the vice president: conservation is not a dirty word
in California,'' Mr. Freeman said on Friday in addressing a gathering of
state business leaders.
And in the Northwest, conservation is not just a civic virtue, it's written
in the main law governing how the region uses its power.
Twenty years ago, Congress ordered the Bonneville Power Administration, which
markets the hydroelectric energy from this region's extensive network of
dams, to make conservation the priority to meet future power needs.
Instead of building new dams or nuclear plants, the region promoted energy
efficiency, in everything from residential building codes to industrial
plants. In normal weather years, the Northwest usually has a large surplus of
electricity.
''This has nothing to do with austerity or being a greenie,'' said Tom
Eckman, the conservation manager of the Northwest Power Planning Council,
which was created by Congress to guide major power decisions in this region.
''It's common sense. If you can get something for 10 cents, why pay a dollar
for it?''
Officials at even some big private utilities say that choosing conservation
over big new power plants has paid off for them. The Potomac Electric Power
Company, which serves nearly 600,000 customers in Maryland and the District
of Columbia, has invested $360 million on conservation in the last 10 years,
eliminating the need for at least two medium-sized power plants, company
officials said.
''With conservation, we were able to avoid building those big power plants,
and it was ultimately cheaper,'' said Bob Dobkin, a spokesman for the
company.
Mr. Cheney said that the Bush administration would oppose any measure based
on a premise that people should do more with less. His remark was echoed this
week by Ari Fleischer, the White House spokesman.
Asked on Monday if Mr. Bush believed that Americans should change their
lifestyles in the face of a power crisis, Mr. Fleischer dismissed the idea of
people using less energy as one solution.
''That's a big no,'' said Mr. Fleischer. ''The president believes that it's
an American way of life, and it should the goal of policy makers to protect
the American way of life. The American way of life is a blessed one. And we
have a bounty of resources in this country.''
But a number of utilities say that giving people financial incentives to use
less energy has been tremendously popular, prompting people to change some
small habits of their lives.
''Our phones are just ringing off the hook,'' said Mr. Weedall of Sacramento,
referring to consumer response to the utility's 20 different conservation
programs. ''Mr. Cheney seems to be saying that you shouldn't have to do
without all the electronic toys you want. We agree. But you can do it
efficiently. You don't always have to build the new power plant.''
No matter what comes from the president's initiative, the utilities say
creative conservation is here to stay -- because the public wants it. In
Spokane, Wash., a large private power provider, Avista Utilities, has just
won approval from state regulators for a plan in which they would pay
consumers for using less electricity. The average homeowner could get as much
as $10 a month by simply changing habits, utility officials said.
Avista has aggressively promoted conservation, dispensing coupons for
discounts on energy-efficient lightbulbs, and offering financial incentives
for businesses and schools to change their appliances and lighting.
The Los Angeles city utility, which serves 3.8 million people in Los Angeles,
has been offering customers cash rebates of as much as $10,000 a home to
convert to solar energy.
''We took our cue from the Water Department, which added a million new
customers but its overall water use has stayed the same,'' said Angelina
Galiteva, an executive director with the Los Angeles utility. ''Why not try
to do the same thing with power?''

Photo: Avista Utilities in Spokane, Wash., has several plans for promoting
conservation, including discount coupons for low-energy-use lights.
(Avista)(pg. A30)

PG&E Files Opposition to Ratepayers' Committee

SAN FRANCISCO--(BUSINESS WIRE)--May 9, 2001 via NewsEdge Corporation  -
Pacific Gas and
Electric Company today filed a motion with the U.S. Bankruptcy Court
asking the court to vacate the United States Trustee's (UST)
appointment of the Ratepayers' Committee. The filing indicates that
the creation of a Ratepayers' Committee exceeded the authority of the
UST because it was inconsistent with express provisions of the federal
Bankruptcy Code.

Pacific Gas and Electric Company appreciates that its Chapter 11
filing and Plan of Reorganization may create concerns for the
company's customers. Under the Bankruptcy Code, there are legitimate
ways by which the ratepayers can be represented and heard in the
process, for example, through the California Attorney General's
Office. In addition, the bankruptcy code provides flexibility and
discretion to the court to allow parties to intervene in the case when
they have standing to do so.

The utility does not object to ratepayers having a voice in the
process, when issues arise where the court determines they have
standing, but does object to procedures that are outside of the
existing Bankruptcy Code.

In its filing, Pacific Gas and Electric Company says the
"organizations and individuals appointed to the Ratepayers' Committee
-- and the ratepayers whose interests they supposedly represent -- are
neither creditors nor equity security holders and therefore not
eligible for appointment to a committee by the UST under Section
1102(a)(1). Thus, the UST's appointment of the Ratepayers' Committee
was not authorized by the Bankruptcy Code and constitutes an abuse of
discretion by the UST."

CONTACT: Pacific Gas and Electric Company |News Department, 415/973-5930

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

ROSEMEAD, Calif., May 10 /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 1 p.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, at 1:48 p.m. SCE activated 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 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.

MAKE YOUR OPINION COUNT -  Click Here

http://tbutton.prnewswire.com/prn/11690X65758427

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)

For many Californians, fear of high electricity bills is a bigger threat than
blackouts

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By SETH HETTENA=

Associated Press Writer=

SAN DIEGO (AP) _ Ray Marquez wonders whether he'll have to cut
back on food or gas in order to pay his electricity bill.

The 34-year-old Orange County maintenance man usually pays dlrs
80 a month for power during summer months. Now, he's trying to
figure out how to pay an electricity bill that could push dlrs 130
come June 1.

``Since I got married and had children, you know, I've been
dealing with balancing bills,'' he said Wednesday. ``But if I now
have to pay more for electricity, I'm not going to have money for
gas or food for the kids.''

As Californians coped with rolling blackouts that darkened
thousands of businesses and homes Monday and Tuesday, many
struggled with an even bigger worry: how to pay for soaring energy
costs.

In March, the state Public Utilities Commission approved the
biggest rate increase in California history, up to 46 percent for
customers of Southern California Edison and Pacific Gas & Electric.
Those rate hikes start hitting customers in next month's bill.

Gailen Kyle, who raises alfalfa on 1,600 acres (640 hectares) in
the Mojave Desert, says a 40 percent increase would put his farm
out of business.

``It would end us,'' the third-generation farmer said.
``Everybody here that farms alfalfa would be out of business.''

Kyle, 46, said he has to pump water nearly around the clock from
wells drilled 310 feet (93 meters) below his farm near Lancaster. A
small increase in the price of energy a few months ago added dlrs
80,000 to the dlrs 400,000 annual bill he was already paying.

To save money, Kyle agreed to become an ``interruptible''
customer, meaning he voluntarily allows his power to be shut off
during statewide electricity shortages in exchange for reduced
rates. So far this year, his power has been cut 26 times.

Even before the state utilities commission raised rates,
residents were paying 26 percent more for electricity than the
nationwide average, according to federal statistics. Only customers
in New England, New York, Alaska and Hawaii pay more.

One of the problems is that the wholesale cost of electricity
has risen sharply over the past year but under California's 1996
deregulation law the state's largest utilities, PG&E and SoCal
Edison, have been prevented from passing their costs to customers.
In April, PG&E declared bankruptcy.

The West isn't just facing spiraling costs and a shortage of
supplies, however. Its transmission system is fragmented and
overworked and would take years to improve, power officials told
the region's governors Wednesday.

``There is no immediate solution,'' said Idaho Gov. Dirk
Kempthorne, one of four governors participating in a six-hour,
round-table meeting with industry representatives.

The Western Governors Association was told there is no
established method for paying for transmission upgrades, and market
and regulatory barriers stand in the way. It's not even clear where
new power lines are most needed.

The group, which included the governors of Utah, Idaho, Montana
and Wyoming, has given energy experts until July 15 to recommend
ways to eliminate bottlenecks.

Meanwhile Californians, who've already weathered six days of
rolling blackouts this year, fear they'll soon be paying more for
less service.

The Independent System Operator, which runs the state's power
grid, has forecast more than 30 days of blackouts this summer due
to severe shortages of electric supply.

Dee Ann Hendirx, 53, of San Francisco, has stocked up on candles
and battery-operated clocks.

``I hate to say this but it's getting to be a way of life in
California,'' she said.