Please see the following articles:

Sac Bee, Tues, 4/10:  "State, Edison reach accord: California would pay $2.76
billion
 for the grid and let rates be used to defray debt"

Sac Bee, Tues, 4/10:  "Takeover of grid in doubt: PG&E's bankruptcy filing
complicates
 the state's plan to acquire power lines"

Sac Bee, Tues, 4/10:  "PG&E clashes with regulators in court session "

Sac Bee, Tues, 4/10:  "Judge blasts FERC, renounces power dispute "

Sac Bee, Tues, 4/10:  "Dan Walters: Lots of words, but is the crisis finally
coming to a climax?"

San Diego Union, Tues, 4/10: "Davis closes in on deal for Edison's lines"

San Diego Union, Tues, 4/10:  "White House urges energy spending cuts"

LA Times, Tues, 4/10:  "Davis Arranges to Buy Edison's Share of Grid"

LA Times, Tues, 4/10:  "PG&E Bankruptcy Case Opens in Tense, Packed Federal
Courtroom"

LA Times, Tues, 4/10:  "Oil Official Urges Eased Restrictions on Industry"

LA Times, Tues, 4/10:  "Give Power Buyers a Club in Cartel Wars"
(Commentary)

SF Chron, Tues, 4/10:  "State's Financial Exposure Is a Growing Worry
DAILY LOSSES: Experts say fiscal stability at risk "

SF Chron, Tues, 4/10:  "Davis Seals Power Deal With Edison to Buy Lines
10-YEAR PACT: $2.76 billion swap buys low-cost electricity "

SF Chron, Tues, 4/10:  "PG&E Stumps Math Whizzes
GO FIGURE: Who knows how much this will cost us? "

SF Chron, Tues, 4/10:  "PG&E Moves Quickly to Involve Federal Court in
State's Crisis
Strategy could allow judge to authorize "

SF Chron, Tues, 4/10:  "Going Dark Extra Day to Save Power
San Mateo County tries to cut costs "

Mercury News, Tues, 4/10:  "Davis forges deal to rescue Edison"

Mercury News, Tues, 4/10:  "Solar tech shines in market struggling with power
problems"

Mercury News, Tues, 4/10:  "Getting a line on electricity"
(Editorial)

Mercury News, Tues, 4/10:  "Price for gas surges again"

Mercury News, Tues, 4/10:  "Legislatures to plea for price cap"

Orange County, Tues, 4/10:  "Edison, state strike deal"

Orange County, Tues, 4/10:  "Davis' power plan is in doubt"

Orange County, Tues, 4/10:  "AES threatens to pull out of fast-track effort"

Orange County, Tues, 4/10:  "Electricity Notebook
PG&E may use reserved cash to purchase energy"

Orange County, Tues, 4/10:  "State's power fees hinge on good credit"

Individual.com (business wire), Tues, 4/10:  "AES NewEnergy Offers Program to
Help Commonwealth Edison Customers Reduce Electricity Costs and Increase
Reliability This Summer"

Individual.com (AP business wire), Tues, 4/10:  "Feds Embroiled in Power
Debate"

Individual.com (AP business wire), Tues, 4/10:  "Calif. Reaches Deal on Power
Lines"

Individual.com (AP business wire), Tues, 4/10: "California ISO Declares a
Statewide Stage Two Electrical Emergency; Conservation Needed as Demand
Surges and Supply Tightens"

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State, Edison reach accord: California would pay $2.76 billion for the grid
and let rates be used to defray debt.
By Emily Bazar
Bee Capitol Bureau
(Published April 10, 2001)
Just three days after Pacific Gas and Electric Co. filed for bankruptcy
protection and cut off negotiations with the state, Gov. Gray Davis on Monday
announced an agreement with Southern California Edison to buy the utility's
transmission lines in exchange for helping it pay off billions of dollars in
debt.

Key points of the accord between state and Edison
The agreement between the state and Southern California Edison must be
approved by the Legislature and Public Utilities Commission. Some points,
including details of the transmission grid sale, still must be negotiated.
Edison agreed to:
Sell its transmission system for $2.76 billion.
Use its generation assets to provide low-cost regulated power to the state
for 10 years.
Dismiss lawsuits for higher electricity rates.
Commit the entire output of a generating plant to providing power in
California at a fixed price for 10 years.
Grant perpetual conservation easements: 20,600 acres of precious lands
related to the Big Creek hydroelectric facility and 825 acres related to the
eastern Sierra.
Invest $3 billion over five years in capital improvements, to be covered by a
rate increase of undetermined size.
Edison's parent company will refund $400 million to its subsidiary.
The state agreed to:
Continue buying power through Dec. 31, 2002.
Allow Edison to issue $3.5 billion in bonds for all debt not covered by $1.5
billion net gain Edison realizes from transmission line sale. Bonds repaid by
a dedicated portion of the rate.
Allow Edison to continue receiving its current 11.6 percent rate of return
for 10 years.

The Democratic governor said the state would pay Edison $2.76 billion for its
transmission lines, and would dedicate a portion of consumers' electricity
rates to paying off the utility's debt, estimated at more than $5 billion.
Davis praised Edison for its persistence in negotiations, but upbraided PG&E
for filing Chapter 11. He added, however, that the state remains willing to
offer PG&E a comparable deal if it wishes to resume talks.
"It was hard, arduous work, but the result was positive for every consumer in
this state," Davis said at a news conference in Los Angeles. "It proves you
can solve problems of the state if you stay at the table, if you're
responsible and (if) you're resolute."
The deal came 47 days after Davis announced an "agreement in principle" with
Edison. Monday's announcement was received coolly by the governor's fellow
Democrats in the Legislature and criticized as a giveaway by consumer
advocates.
Harvey Rosenfield of the Foundation for Taxpayers and Consumer Rights branded
it a "massive ratepayer bailout" that protects only the utility's
shareholders and executives.
"I'd call this a desperate deal by a panic-stricken governor," Rosenfield
said. The deal is "designed to appease Wall Street and to redeem the governor
in the eyes of the energy and utility industry."
Rosenfield said he will fight the agreement, which must be approved by the
state Public Utilities Commission, the state Legislature and the federal
government before it becomes final. The process could take as long as two
years.
Rosenfield said he's prepared to put an initiative before voters in November
2002 that would undo the agreement if necessary.
The deal announced by the governor would require the state to pay $2.76
billion for Edison's transmission lines, or 2.3 times book value.
Edison is expected to profit by $1.5 billion from the purchase, and would use
that money to pay off some of its debt. Edison's parent company would refund
$400 million to its subsidiary, which would also go toward paying off the
utility's debt.
The utility would pay off the rest of its debt through corporate bonds, which
would be repaid by consumers through a portion of their electricity rates.
Before PG&E's bankruptcy-protection announcement Friday, Davis came out in
support of an average 26 percent rate increase.
In exchange, Edison has agreed to provide low-cost power to the state for 10
years from both regulated and nonregulated power plants, and to dismiss
lawsuits seeking higher electricity rates.
It also would grant perpetual conservation easements on more than 21,000
acres of forestland.
In addition, Edison has pledged to do work on its lower-voltage distribution
grid that would trigger a second, unspecified rate increase, to take effect
in 2003, said Stephen Frank, chief executive of Southern California Edison.
The utility would invest $3 billion in the poles and wires it still owns, and
would collect that money from consumers under a formula it will propose later
this summer, possibly in August. The formula would have to be approved by the
PUC, which is overseen by a Davis-appointed majority.
The legislative approval required for the entire agreement likely won't come
without a fight.
The bill that will contain the deal's provisions is expected to require only
a simple majority for passage, which means 41 votes in the Assembly and 21 in
the Senate. Though it could squeak through without Republican votes, it's not
clear whether all Democrats will support the plan.
Assembly Speaker Robert Hertzberg, D-Sherman Oaks, reserved judgment on the
plan until he can see details for himself.
"I am most anxious to review the protections the plan provides to California
residential and business consumers," he said.
Senate leader John Burton, D-San Francisco, was more blunt. Burton said he's
concerned about dedicating a portion of consumers' rates to pay off Edison's
debt.
"I have always had a concern about a dedicated rate component that would have
ratepayers picking up utilities' back debt that may have been built up
fraudulently through price gouging or mismanagement," he said. "There is a
question of whether ratepayers should have to gargle that."
Sen. Debra Bowen, D-Marina Del Rey, suggested that power generators must also
share the debt burden.
"It sounds like the plan puts ratepayers on the hook for 100 percent of the
rates charged by the power generators -- rates that even (the Federal Energy
Regulatory Commission) found to be unjust and unreasonable."
Frank, who heads Edison International's regulated utility, argued that the
utility is entitled to collect the funds, and estimated that Edison
ratepayers would be paying off $2 billion of the disputed "undercollection"
for the next 15 years.
"We do expect to recover all of our costs on this, but we also are
contributing a great deal to the overall deal," Frank added, including giving
up ownership of transmission lines.
Davis said that he expects to work out a deal with San Diego Gas & Electric
soon. The governor added that he still hopes to reach an agreement with PG&E.
But in a statement, PG&E officials said they aren't planning on returning to
the negotiating table unless they are directed by the judge handling their
bankruptcy protection case.
"Given our set of facts, we continue to believe that Chapter 11
reorganization is the most feasible means to reach a solution," the statement
said. "We will proceed at the direction of the bankruptcy court."

The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com.
Bee Staff Writers Carrie Peyton and Stuart Leavenworth contributed to this
report.
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Takeover of grid in doubt: PG&E's bankruptcy filing complicates the state's
plan to acquire power lines.
By Stuart Leavenworth
Bee Staff Writer
(Published April 10, 2001)
Can California be nourished by part of a hot dog?
A growing chorus of lawmakers, consumer activists and others say no.
On Monday, the governor reaffirmed his plans to take over Southern California
Edison's portion of the electrical transmission grid, an asset that Senate
leader John Burton once called a "hot dog" in a pitch to reporters.
But Pacific Gas and Electric Co.'s bankruptcy filing Friday throws into doubt
whether California can take over PG&E's power lines, and now even one-time
supporters are raising questions about the plan.
"There may be some value in having the state own the entire transmission
grid, but it's not clear to me what the benefit is to ratepayers if the state
is only acquiring a quarter of it," state Sen. Debra Bowen, chairwoman of the
Senate's energy committee, said soon after Gov. Gray Davis announced his
agreement with Edison.
For months, supporters of a grid takeover -- including Davis, Burton, State
Treasurer Phil Angelides and consumer activists -- have pressed PG&E, Edison
and San Diego Gas & Electric to give up their power lines in exchange for
state help in bailing the utilities out of debt.
Supporters say state ownership of power lines would give California more
clout in dealing with the Federal Energy Regulatory Commission and would
provide the state with an estimated $1.4 billion a year in fees collected
from grid users.
The transmission grid refers to the 32,000-mile network of power lines that
supply California's electricity. Its total value has been estimated between
$7.5 billion and $9 billion.
On Monday, Davis said that talks were continuing with SDG&E and that the
state may ask a federal bankruptcy court to relinquish PG&E's part of the
grid to the state. "One way or the other, we hope to be able to get all three
lines," Davis said.
Some legal experts, however, say Davis is taking a big gamble. In a
bankruptcy proceeding, any transfer of lines would have to be approved by a
judge and by PG&E's creditors, who, in this case, include some of the state's
biggest power generators.
"It would have to be done through a plan of reorganization that the creditors
would have to agree to," said David Wiggs, an energy consultant who has been
advising Assembly lawmakers. "Now you have a whole other group that has to
agree."
Gary Ackerman, head of the Western Power Trading Forum, said generators
aren't convinced Davis can take title to Edison's portion of the grid, much
less one from PG&E.
"Given this administration's sterling record for putting together deals, I am
not sure this one will work any more than the others," Ackerman said.
Another option is for the state to use its power of eminent domain to take
over the PG&E grid. But such a move could trigger years of lawsuits and
squabbles, analysts say.
"In the end, they may have to pay the debtors or the utilities a whole lot
more than book value," said Rich Ferguson, an adviser for the Sierra Club,
which once supported the idea of a grid takeover.
Now, Ferguson said, environmentalists are more worried about the utility
selling off its vast hydroelectric plants and land holdings in the Sierra.
"The state has to protect the hydroelectric assets," Ferguson said. "The idea
of giving commercial control over the water and power in that system is so
scary that people don't even want to think about it."
Steve Maviglio, a spokesman for the governor, said Davis shares such concerns
but is trying to salvage the best of a bad situation. "PG&E put themselves in
some very uncharted waters so we will have to see where this leads," he said.
Others fear the state could emerge from a summer of blackouts with higher
rates and only part of a hot dog. It's an unappetizing prospect, said Harvey
Rosenfield of the Foundation for Taxpayers and Consumers Rights.
"Buying two out of three transmission systems is like buying a car with three
out of four wheels," Rosenfield said. "There is no point in it."

The Bee's Stuart Leavenworth can be reached at (916) 321-1185 or
sleavenworth@sacbee.com.
Bee Staff Writers Emily Bazar and Carrie Peyton contributed to this report.
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PG&E clashes with regulators in court session
By Carrie Peyton
Bee Staff Writer
(Published April 10, 2001)
Electricity regulators and California's largest utility clashed in Bankruptcy
Court on Monday in what a state lawyer warned is the first move of a plan to
wrest control of electric rates from the state's hands.
And in continuing fallout from Pacific Gas and Electric Co.'s filing for
bankruptcy protection Friday, PG&E is notifying counties statewide that it
will pay them just under half of the property tax funds they were expecting
to receive today.
The flare-up in federal Bankruptcy Court in San Francisco on Monday morning
revolved around a technical issue -- how much time PG&E needs to give revised
accounting documents to regulators at the state Public Utilities Commission.
But by asking Judge Dennis Montali to order regulators to wait, PG&E is
dragging the judge into an area he doesn't belong, said Gary Cohen, the
lawyer for the PUC, which regulates electric rates.
"This is the first volley in PG&E's legal strategy, which is to try to get
the bankruptcy judge to subvert the PUC's regulatory authority," Cohen said
after the hearing.
"It isn't true; it isn't what happened today," said PG&E spokesman John
Nelson. He said PG&E really just needs more time -- for now.
Montali isn't expected to rule immediately on the accounting issue, which
could be just one avenue PG&E might use to make a legal case for higher
electric rates.
Power sellers have said they hope Montali will ultimately order or pressure
regulators to raise rates, and some bankruptcy experts say boosting rates, at
least temporarily, could be within the court's power.
It is "too early to speculate" on whether PG&E plans to ask the judge to
raise rates or to undo any PUC decisions, Nelson said.
The court also will be deeply involved in any ongoing payments by PG&E, which
has short-circuited revenue flowing to dozens of California counties.
The utility owed $79 million to California counties for its Jan. 1-June 30
property taxes, but it will pay only $37 million, covering the period from
April 6 onward, Nelson said.
That's because it needs court permission to pay any bills for the period just
prior to its bankruptcy filing. PG&E plans to ask the court to let it pay
counties the rest of the money.

The Bee's Carrie Peyton can be reached at (916) 321-1086 or
cpeyton@sacbee.com.
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Judge blasts FERC, renounces power dispute
By Denny Walsh
Bee Staff Writer
(Published April 10, 2001)
A Sacramento federal judge Monday bowed out of the bitter financial dispute
between energy generators and their California buyers but not before he
leveled a blast at the performance of federal regulators.

Political party
Here are the annual salaries of state officeholders before the California
Citizens Compensation Commission was formed in 1990 and at present.
Governor
1990: $85,000
Current: $175,000
% increase: 106%
Lt. Governor
1990: $72,500
Current: $131,250
% increase: 81%
Attorney General
1990: $77,500
Current: $148,750
% increase: 92%
Controller
1990: $72,500
Current: $140,000
% increase: 93%
Treasurer
1990: $72,500
Current: $140,000
% increase: 93%
Sec. of State
1990: $72,500
Current: $131,250
% increase: 81%
Supt. of Public Instruction
1990: $72,500
Current: $148,750
% increase: 105%
Insurance Commissioner
1990: $95,052
Current: $140,000
% increase: 47%
Bd. of Equalization
1990: $95,052
Current: $131,250
% increase: 38%
Legislator
1990: $40,816
Current: $99,000
% increase: 143%
Assembly Speaker
1990: $40,816
Current: $113,850
% increase: 179%
Senate President
1990: $40,816
Current: $113,850
% increase: 179%
Source: California Citizens Compensation Commission.
Percentages are rounded.

The blistering remarks came as Gov. Gray Davis' spokesman, Steve Maviglio,
said the federal government stance could add $5 million to $8 million more a
day to the state's power purchases for its two largest utilities this summer.
The cost will rise substantially during periods of high demand in summer
unless the state fights rulings last week by a federal appeals court and the
Federal Energy Regulatory Commission, Maviglio said, adding that no decisions
have been made on appeals.
U.S. District Judge Frank C. Damrell Jr. canceled Thursday's hearing on a
motion by the state's transmission grid operator to amend its lawsuit against
one of the nation's major energy suppliers.
Citing Friday's ruling by FERC that cash-strapped buyers of emergency power
must be able to pay for it, no matter how dire California's energy crisis
becomes, Damrell said in a short but stinging order that further action in
his court would be "futile."
The 9th U.S. Circuit Court of Appeals, hinting at jurisdictional problems,
stayed Damrell's injunction forcing Reliant Energy Services to sell emergency
power to the Independent System Operator. The ISO then sought to convert its
suit to breach-of-contract litigation in an attempt to overcome the appellate
court's concerns.
As he backed out of the brawl Monday, Damrell accused FERC of dragging its
feet and talking out of both sides of its mouth.
Meanwhile, the state Department of Water Resources, which has been acquiring
energy since Jan. 19 with the backing of legislative appropriations, is
"buying the power necessary to keep the lights on," said Ray Hart, the
department's deputy director.
And three top state lawmakers will travel to Boise, Idaho, today to attend a
FERC hearing on price volatility in the West. They will ask the commissioners
to impose a temporary price cap on wholesale electricity in Western states.
In a March 21 injunction, Damrell ordered Reliant to continue selling
emergency power to ISO, even though it would not be paid for purchases on
behalf of Pacific Gas and Electric Co., which has filed for bankruptcy
protection, and Southern California Edison Co., also heavily in debt.
Reliant said its agreement with the ISO requires buyers to be creditworthy
and sought to back away from the two investor-owned utilities. The ISO sued
to halt the retreat of the Houston-based firm along with other generators.
FERC issued an order Feb. 14 generally siding with generators on the
creditworthiness question.
FERC on Friday said the ISO "misinterpreted our order." It "required a
creditworthy counterparty, such as the California Department of Water
Resources." That did not please Damrell.
In his Monday order, the judge wrote that FERC said Feb. 14 it would address
the creditworthiness question as it applies to emergency purchases in the
future. "The FERC explicitly acknowledged this fact five days ago in a brief"
submitted to the 9th Circuit challenging the March 21 injunction, he said.
The judge said it was FERC's own words in the Feb. 14 order that he relied on
in issuing an injunction pending the agency's decision on creditworthiness.

The Bee's Denny Walsh can be reached at (916) 321-1189 or dwalsh@sacbee.com.
Bee Staff Writer Carrie Peyton and the Associated Press contributed to this
report.

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Dan Walters: Lots of words, but is the crisis finally coming to a climax?

(Published April 10, 2001)
Last Thursday, Gov. Gray Davis abandoned his oft-voiced, albeit unrealistic,
"hope and expectation" that consumers' electric utility rates would not rise
sharply to cope with soaring wholesale power costs, backing a hefty boost in
rates he said would provide utilities with enough revenue to avoid
bankruptcy.
A day later, the state's largest utility, Pacific Gas and Electric Co.,
thumbed its nose at Davis by filing for Chapter 11 bankruptcy protection,
with PG&E executives blaming Davis and other state politicians for prolonging
a financial drain on the company.
Davis immediately denounced PG&E's action, saying the venerable company "has
dishonored itself," and declared that his negotiations with the smaller but
similarly distressed Southern California Edison on a state buyout of the
intercity transmission system would continue.
Over the weekend, as Davis and his aides conducted nearly round-the-clock
talks with Edison executives, he and PG&E traded sharp barbs over who was to
blame for bankruptcy.
"PG&E management is suffering from two afflictions: denial and greed," the
governor declared in a statement Saturday, followed by an equally testy
response from PG&E. The utility said that "instead of focusing all his
attention on solving the state's yearlong and ever-worsening energy crisis,
the governor has launched a campaign-style attack on our company."
On Monday, Davis and Edison Chairman John Bryson -- a former colleague from
the Jerry Brown administration two decades ago -- announced agreement on a
deal for the state to acquire Edison's share of the power transmission grid
for $2.76 billion and obtain low-cost power from the utility for the next 10
years. Net proceeds of the sale, about $1.5 billion, would be used to reduce
Edison's $5 billion debt, with the rest being covered by bonds, to be repaid
from a share of the utility rate hike Davis now supports.
Davis continued his sniping at PG&E, albeit indirectly. "This is a clear
example of the good that can come when parties are responsible, resolute and
remain at the bargaining table," Davis said -- adding that PG&E could have a
similar deal if it wants. But PG&E, whose debt is half-again as large as
SCE's, has declared it doesn't want to sell its share of the grid.
That's five days of fairly intense activity. And the flurry may indicate that
the state's lengthy crisis involving electric supplies that fall short of
demand, escalating wholesale and retail power prices and the shaky financial
health of the state's utilities may be coming to a climactic point. But are
matters really improving, as Davis insists, or are there more curves and
bumps ahead? And will the road lead to some sort of crash-and-burn
conclusion?
The harsh truth is that no one knows for certain, and that includes Davis.
Not only is this energy crisis an unprecedented event, but it's one that has
been stubbornly resistant to the sort of give-and-take,
something-for-everyone approach that politicians instinctively favor. It's
part politics, part economics, part technology and part psychology -- a
volatile mixture whose exact composition changes constantly. And no one knows
what role the bankruptcy judge will play in setting rates or compelling PG&E
to reopen negotiations on the sale of its share of the grid.
Even the steps that Davis hails as positive, such as state acquisition of the
power grid, could turn negative. Is the state capable of owning and
operating, even indirectly, such a thing? Will the much-needed expansion of
the system now become another bit of political pork? And what happens if, as
Davis now wants, the state moves even more deeply into the power business by
building and operating generating plants? Will rates be manipulated for
political purposes? It's well known that Davis' pollsters have been testing
voters' tolerance of rate boosts.
This is a wild ride, and no one -- absolutely no one -- knows where it will
end.

The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com
.
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Davis closes in on deal for Edison's lines

But several hurdles still stand in the way
By Ed Mendel
UNION-TRIBUNE STAFF WRITER
April 10, 2001
SACRAMENTO -- Gov. Gray Davis, scrambling to save his utility rescue plan,
announced a $2.76 billion agreement yesterday for the state to purchase
Southern California Edison's transmission system.
The long-delayed acquisition is what Davis wants in exchange for helping
Edison pay off its huge debt. But the deal is far from done.
Assembly Republicans are threatening to block the purchase in the
Legislature, approval by federal regulators is uncertain, and disputes could
arise as details of the agreement are worked out.

White House urges energy spending cuts
Continuing coverage: California's Power Crisis
?

Negotiators worked through the weekend to swiftly complete a memorandum of
understanding after Pacific Gas and Electric surprised Davis by filing for
bankruptcy Friday, a day after the governor made a statewide televised
address to report progress on the rescue plan.
Davis praised Edison for being concerned about "the fate of the consumers
they serve" and criticized PG&E for acting "arrogantly and selfishly." He
said the Edison offer is available to PG&E if it returns to the bargaining
table.
But PG&E, without elaborating, issued a statement saying that it must deal
with a different "set of facts" than Edison and continues "to believe that a
Chapter 11 reorganization is the most feasible means to reach a solution."
A U.S. bankruptcy judge in San Francisco, Dennis Montali, began work on the
PG&E bankruptcy yesterday. He ruled that PG&E's assets can continue to be
used to back the purchase of natural gas.
Edison Chairman John Bryson, joining Davis at a news conference in Los
Angeles, said his utility believes that a negotiated resolution of the issues
is "far preferable" to bankruptcy.
"It serves the state," Bryson said. "It serves our customers. It serves our
employees and our companies to achieve a practical resolution."
Davis said the administration would resume negotiating for the purchase of
the transmission system of San Diego Gas & Electric. He said he is optimistic
because SDG&E has agreed "in principle" to sell its transmission system.
SDG&E said in a statement that it was "very encouraged" by the Edison
agreement and looked forward to continuing negotiations with the Davis
administration.
Under the governor's rescue plan, the transmission system is the main thing
that the utilities give the state in exchange for aid in paying off the
massive debts that drove PG&E and Edison to the brink of bankruptcy.
The rates they charge customers were frozen under deregulation as the price
of wholesale power soared, producing a combined debt of $13 billion. The
state was forced to begin buying power for utility customers in mid-January
when generators refused to extend further credit to the utilities. It has
spent more than $4 billion so far.
The governor's plan would give the utilities part of the revenue from the
monthly bill paid by their customers -- a "dedicated rate component" -- that
could be used to finance bonds that would pay off the utility debt.
Davis has said that state ownership of the transmission system would allow
improvements of bottlenecks that led to blackouts last year.
The governor said yesterday that if there are purchase agreements with two of
the utilities, the bankruptcy judge might be persuaded to allow the sale of
PG&E's transmission system or to permit private mediation.
"One way or the other we hope to get all three lines," Davis said.
But there is a fallback position. If the transmission purchase does not occur
within two years, the state could make up the shortfall by buying Edison's
hydroelectric power plants and obtaining low-cost power.
The governor has previously said there is a question about whether the state
purchase of utility transmission systems would be approved by the Federal
Energy Regulatory Commission.
Republicans, who must provide at least five votes for the purchase of a
transmission system to pass the Assembly, oppose the plan and have suggested
that the utility parent firms pay off the debt.
"I think the governor will be hard-pressed to find the votes he needs in the
Assembly to complete the Southern California Edison bailout," said Assembly
GOP Leader Dave Cox of Fair Oaks.
Senate President Pro Tempore John Burton, D-San Francisco, said he is
concerned that a "dedicated rate component" may cause ratepayers to pay off
utility debt that resulted from price gouging, stock buybacks, executive
bonuses and transfers to the parent companies.
"There is a question of whether ratepayers should have to gargle that," said
Burton, who promised in-depth legislative hearings on the Edison agreement.
Edison officials say they have a debt of $5.5 billion from the
"undercollection" on power costs, some of which is owed to the generating
branch of Edison.
The state purchase price of $2.76 billion is 2.3 times the book value of the
transmission system. Edison said it will pay off its debt with money from the
transmission sale and a $2 billion bond backed by its share of the
ratepayer's monthly bill.
The state expects to recover the purchase cost from the current transmission
fees on monthly ratepayer bills. Edison would continue to operate the system
under a contract with the state.
The deal announced by Davis yesterday added some of the details to an
agreement "in principle" to buy the Edison transmission system announced Feb.
23. Davis said then he hoped to finish the agreement in a week.
One of the things that caused PG&E to file for bankruptcy, its executives
said Friday, is that the Davis administration did not negotiate with them for
more than three weeks while trying to wrap up the Edison deal.
The complex Edison agreement requires the utility to provide low-cost power
to the state from its remaining regulated generators for 10 years and to drop
a lawsuit seeking a rate hike to pay off its debt.
Edison also agreed to give the state low-cost power from its new unregulated
Sunrise power plant for 10 years. If the plant is not operating by Aug. 15,
Edison will pay a $2 million penalty.
The Edison parent firm will give the utility $400 million, returning a tax
refund that the utility transferred to the parent firm.
Edison agreed to spend $3 billion over five years to improve its distribution
system, the local lines and equipment retained after sale of the
long-distance transmission system. A rate increase to pay for the work may be
proposed in 2003.
The goal of the governor's plan is to get the utilities back into the
power-buying business by the end of next year, freeing the state from the
burden it assumed nearly three months ago.
The state general fund, which has been paying for the power, is expected to
be repaid by a bond of perhaps $12 billion or more that would be paid off by
ratepayers over a dozen years.
But as the state spends $1.5 billion a month to buy power, with the fear that
spending will accelerate this summer, some are concerned that the PG&E
bankruptcy may delay or halt the bond, causing funding cuts in other
programs.
The chairman of the Federal Energy Regulatory Commission, Curt Hebert Jr.,
said again yesterday that the Bush administration does not want to impose
federal caps on wholesale power, something sought by Davis since last fall.
Assembly Speaker Robert Hertzberg, D-Van Nuys, plans to lead a legislative
delegation to a FERC hearing in Boise, Idaho, today to make another plea for
caps on wholesale power prices.
Davis said that California, which has not built a major new power plant in a
dozen years, will continue to have power shortages until about a dozen new
plants are operating.
"We will have capacity exceeding demand by some time in mid to late 2003,"
said Davis. "But to help us get there without blackouts, we are going to need
a lot of conservation on the part of consumers and business."
Staff writer Dean Calbreath, Copley News Service reporter Matt Krasnowski and
wire services contributed to this report.
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White House urges energy spending cuts

By Toby Eckert
COPLEY NEWS SERVICE
April 10, 2001
WASHINGTON -- Despite dire warnings of a new energy crisis, the Bush
administration yesterday proposed slashing federal spending on conservation
programs and renewable energy.
Energy Secretary Spencer Abraham defended the proposal, saying the targeted
programs were not producing enough benefits and that the administration
wanted to bolster more successful initiatives, like home weatherization.
Energy conservation groups said the cuts would gut programs that are saving
billions of dollars a year in energy costs and would worsen the very power
shortages Abraham and President Bush have been warning the country about. The
administration also reportedly is weighing whether to delay or roll back new
energy-efficiency standards for air conditioners and other appliances.
Experts have said conservation efforts are a key to lessening the blackouts
that are expected to hit California this summer, and state officials have
urged residents to cut power use.
The detailed budget blueprint for fiscal year 2002 that Bush submitted to
Congress would cut federal energy efficiency and renewable energy programs by
more than $200 million from current levels. Some of the programs affected
include solar and wind-power development and efforts to cut energy
consumption at commercial and government buildings.
"We decided that it made little sense to continue forward with programs that
had not helped us avert the energy crisis we confronted," Abraham said in
unveiling the Energy Department budget. "Instead of spending a huge amount of
additional taxpayer money in areas we did not see as being highly productive
at this point, we thought it made sense to step back."
Critics said Abraham was understating the benefits of the programs to further
the Bush administration's strategy of expanding development and use of fossil
fuels such as oil, gas and coal. They also suggested the programs were being
sacrificed to make way for Bush's proposed $1.6 trillion tax cut.
"It is bald-faced hypocrisy to argue that we are worried about an energy
crisis and to cut the programs that have had the single biggest effect on
reducing energy consumption," said Hal Harvey, president of The Energy
Foundation, a San Francisco-based group that promotes alternative energy
sources and conservation.
The Alliance to Save Energy estimated that the targeted programs cut energy
costs by more than $25 billion a year.
Abraham said the administration was "absolutely committed" to conservation
and efficiency measures and that they would "play a key role" as a White
House task force devises a national energy policy.
He characterized the proposed cuts as "a transitional step that gives us the
opportunity to come back in future budgets with a new set of priorities that
will help us to overcome the energy crisis we face."
The administration has proposed boosting alternative energy programs by $1.2
billion beginning in 2004 -- but only if Congress approves oil and natural
gas drilling in Alaska's Arctic National Wildlife Refuge. There is strong
opposition to that in Congress.
Abraham touted the administration's proposal to increase funding for a grant
program to make homes more energy efficient. The program would grow by $120
million next year and by $1.4 billion over 10 years under Bush's plan.
The administration also has proposed extending tax credits for wind and solar
power projects, increasing research into energy derived from organic biomass
material by $30 million and spending $150 million on a new clean-coal
technology program.
Just as Bush has in the past, Abraham cautioned that there are no quick fixes
to the nation's energy woes. He also defended the administration's response
to the crisis in California, saying the problem had festered under the
Clinton administration.
"In the one month in which a Bush-appointed chairman was in charge of (the
Federal Energy Regulatory Commission), they began making refunds," Abraham
said, referring to FERC's threat to order power providers to repay California
utilities for alleged overcharges.
California officials say FERC consistently has underestimated the amount that
should be refunded and that it has taken far too long to act.
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Davis Arranges to Buy Edison's Share of Grid

Power: State would pay $2.76 billion and let the company recover from some of
its debt.

By DAN MORAIN and ROBIN FIELDS, Times Staff Writers

?????SACRAMENTO--Gov. Gray Davis announced a deal Monday to buy Southern
California Edison's transmission lines for $2.76 billion, and to allow Edison
to recoup part of its multibillion-dollar debt from consumers.
?????With Edison International Chairman John Bryson at his side, Davis
announced what he called a historic agreement with the near-bankrupt utility,
and vowed to press ahead with negotiations to buy San Diego Gas & Electric's
share of the transmission system.
?????Coming on the first business day after Pacific Gas & Electric filed for
bankruptcy, the deal's significance was clouded by the difficulty of
extending its provision to the state's largest utility, whose finances will
now be untangled in court. Without acquiring PG&E's share of the transmission
grid, experts said the purchase would be of little practical value to the
state. Still, the deal represented a victory for Davis and Edison in their
efforts to avoid another bankruptcy, and the troubled utility's stock jumped
as much as 40% on the news.
?????Davis renewed his attack on PG&E as the bankruptcy proceeding officially
opened, saying it acted "arrogantly and selfishly" by filing for bankruptcy.
?????He went out of his way to praise Edison: "We have come to terms with a
utility that was on the verge of bankruptcy, because they are people of
goodwill and are concerned about the fate of the consumers they serve, and
they stayed at the bargaining table."
?????Calling the deal preferable to bankruptcy, Bryson said: "It serves the
state, it serves our consumers, it serves our employees and our companies to
achieve a practical resolution."
?????The deal is far from done. The Legislature and the California Public
Utilities Commission must approve major parts of it. Senate President Pro Tem
John Burton (D-San Francisco) said he intends to hold "complete hearings, and
then some."
?????"We have to take a very thorough, careful, detailed look at it," Burton
said Monday.
?????Assembly Speaker Bob Hertzberg (D-Sherman Oaks) said in a statement that
he had not seen any details, "including the costs to the state." Lawmakers
will begin work promptly on legislation to implement the deal, he said.
?????Consumer advocates were not enamored of the deal.
?????"It's hard to imagine that PG&E would walk away from a deal like this
because it seems to give Edison everything they want," said attorney Mike
Florio of the Utility Reform Network, a consumer group in San Francisco.
?????In what probably will be the most controversial element, Davis agreed to
allow Edison to recover at least part of its debt--$3.5 billion--from
consumers. The company would use part of ratepayers' money to back the sale
of bonds to investors, taking the proceeds to refinance its debt.
?????To sell bonds, the utility must be able to assure investors that it has
a dedicated source of revenue from ratepayers' bills earmarked to repay the
principal and interest on the bonds.
?????Davis was not specific about whether the so-called dedicated rate
component would require a rate hike beyond what amounts to the 37% increase
the governor is advocating, or the roughly 40% boost that the PUC approved
last month.
?????However, the Legislature would have to approve the provision, and Burton
said it could result in a rate hike. Burton added that he opposes a dedicated
rate component, noting that Edison's debt might have occurred because of
illegal actions by independent generators that have been charging record
wholesale prices for electricity.
?????"This deal by our panic-stricken governor is going to raise rates
enormously," said Santa Monica consumer advocate Harvey Rosenfield, who is
expected to promote an initiative to block the agreement. "He acted to
protect his political career at the public's expense. It is a desperate
attempt by the governor to redeem his credibility with Wall Street."
?????Davis, clearly stung by PG&E's decision to file for bankruptcy, told his
negotiators to jump-start talks with Edison and to work through the weekend
to resolve differences.
?????Davis and Bryson met for 4
 hours Friday, and teams of lawyers worked
through the weekend until 5 a.m. Monday to craft the deal, Davis said.
Edison's board of directors ground through the fine print for 5
 hours Monday
before giving its stamp of approval.
?????Also as part of the deal, Edison's parent company agreed to pay back
approximately $420 million to the utility. Also, Edison will withdraw all
pending lawsuits seeking to recoup losses by the imposition of higher rates.
?????Bryson appeared hollow-eyed with fatigue as Monday's deal was announced,
reflecting strain of negotiations.
?????In the centerpiece of the deal, Davis agreed to buy Edison's
transmission lines for $2.76 billion. Edison would use proceeds from the sale
to refinance its debt, which it estimates to be $5.5 billion.
?????Additionally, the state would receive conservation easements to roughly
20,000 acres of Edison land in the Sierra, assuring that the wilderness areas
would not be developed.
?????Edison also agreed to sell power at cost from its plants in California
for 10 years, including electricity from a plant called Sunrise being built
in Kern County.
?????The governor's announcement raised many questions--not the least of
which is the wisdom of owning only a part of the 32,000-mile transmission
system. Davis himself said Feb. 23 that it makes little sense for the state
to buy only Edison's share of the grid.
?????With PG&E in bankruptcy court, chances are slim that the state will be
able to take over its share of the transmission grid. Without the entire
grid, the public benefits are questionable.
?????"It's like buying a car with three wheels," Rosenfield said.
?????Davis said his negotiators will turn their attention to striking a deal
with San Diego Gas & Electric. San Diego's situation is far different from
Edison's or PG&E's. The utility's debt is about $680 million--far less than
the combined debt of more than $13 billion claimed by PG&E and Edison.
?????"We have been negotiating on good faith with the governor for several
weeks now, and we will continue that process," said Art Larson, spokesman for
Sempra Energy, parent of San Diego Gas & Electric.
?????Davis said that after he has deals with Edison and San Diego, he hopes
to ask the Bankruptcy Court to allow the state to buy PG&E's portion of the
grid. He also held out hope that PG&E might agree to negotiate with the
state--even though PG&E executives say that one of the reasons they filed for
bankruptcy was that the state had gone three weeks without meeting with them.
?????"Even though PG&E acted arrogantly and selfishly--they walked away from
the bargaining table--if they come back, we are certainly willing to submit
this offer to them as well," Davis said.
?????PG&E spokesman John Nelson replied: "We are proceeding under the
direction of a federal bankruptcy judge."
?????Davis says that after the state owns the transmission lines, itwill
improve the long-neglected system to make the distribution of power more
efficient. The cost of overhauling the system has been placed at $1 billion.
?????The state also may be able to exercise some control over prices for
electricity charged by generators--though the Federal Energy Regulatory
Commission, which must approve the sale, likely would oppose such state
action.
?????Investors cheered Edison's deal with the state on grounds that it would
pull the utility further from the precipice of bankruptcy--whether filed
voluntarily or by creditors unwilling to trust a bureaucratic solution.
?????"This absolutely helps Southern California Edison prevent an involuntary
bankruptcy," said Paul Fremont, an analyst with Jefferies & Co. in New York.
"Depending on the details, it makes them viable."
?????Edison's stock, which gained 67 cents to $8.92 a share in regular
trading Monday, soared another 40% after hours to a high of $12.50 a share
after the deal was announced. PG&E's stock, meanwhile, fell 30 cents to $6.90
a share.
?????Most analysts deemed the purchase of Edison's transmission system more
valuable for the state strategically than practically; without PG&E's
holdings, the state cannot achieve the control over delivery it had sought,
they agreed.
?????But the deal means Davis and California lawmakers will retain a role in
resolving the power crisis, rather than being preempted by court proceedings.
?????"If both of them had said it's futile, we can't deal with the state;
we'd rather go to court, it would speak loudly," said Douglas Christopher, an
analyst at Crowell, Weedon & Co. "The governor had to come back, and with the
kind of details that were missing from his speech."
?????Edison's agreement to the deal does not necessarily mean it will avoid
bankruptcy. Gary Ackerman, who represents power producers and marketers as
the executive director of the Western Power Trading Forum, said creditors
still could force Edison into bankruptcy.
?????"Creditors will be motivated to push Edison into bankruptcy sooner,"
Ackerman predicted. "We don't see this as being 100 cents on the dollar,
because the amount of money for the transmission system is not enough to pay
for Edison's debt."
---
?????Morain reported from Sacramento and Fields from Los Angeles. Times staff
writers Miguel Bustillo, Nancy Vogel and Julie Tamaki in Sacramento and Nancy
Cleeland in Los Angeles contributed to this story.
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--------------------------------------------

PG&E Bankruptcy Case Opens in Tense, Packed Federal Courtroom

Hearing: Reorganization gets underway as routine motions are made, and judge
approves utility to pay many of its bills.

By MAURA DOLAN, Times Staff Writer

?????SAN FRANCISCO--In the opening of the largest utility bankruptcy case in
U.S. history, dozens of high-priced lawyers squeezed into a packed courtroom
Monday to have a say in how Pacific Gas & Electric Co. will be allowed to
spend its cash.
?????Attorneys for gas suppliers told U.S. Bankruptcy Judge Dennis Montali
that they are worried that PG&E might not pay their gas bills, which run into
the tens of millions of dollars. Montali, who had read all the legal
documents before the hearing, pointedly advised lawyers for PG&E to spiff up
their legal briefs and get their court citations right.
?????As Montali addressed a PG&E lawyer, a consumer activist marched
uninvited to the court podium to read the judge a letter. Montali told her to
sit down.
?????Although the motions before the court were relatively routine--Montali
approved temporary orders that allow PG&E to pay many of its bills--the
atmosphere was tense as the high-stakes bankruptcy reorganization got
underway.
?????PG&E asked the bankruptcy judge for an injunction against accounting
changes ordered March 27 by the Public Utilities Commission. The utility said
the changes prevented a customer rate freeze from being lifted. The skirmish,
scheduled to be heard on April 18, represents the utility's first attempt to
get higher electricity rates through the bankruptcy proceeding, attorneys
said.
?????In the coming months, the huge, complicated case will bring hundreds of
seasoned lawyers together as they try to restructure the finances of a
company that is more than $9 billion in debt.
?????Consumers are watching closely to see whether Montali allows PG&E to
raise electricity rates, which state regulators have already increased by as
much as 46% for some customers. The state has predicted more blackouts, and
gas charges have spiraled upward for months.
?????Monday's hearing was held in the federal Bankruptcy Court, blocks from
the federal courthouse, on a top floor of a high-rise in the city's busy
financial district.
?????Lawyers for a variety of creditors were led into the courtroom first and
filled the front rows. Activists filled the rear and seats in the jury box.
?????Even without the seating plan, it was easy to tell who was who. The
activists, many of them women, were distinctly less formal than the lawyers
and appeared less impressed by the proceedings. Some of them glared at the
lawyers.
?????The hearing began when Montali heard from an East Coast attorney, who
spoke by telephone to the courtroom representing Bank of New York for PG&E
bondholders, who are owed more than $2.2 billion.
?????The proceeding on the emergency motions was intended to allow PG&E to
pay its suppliers and other creditors without interruption. The judge will
make a final decision on the motions May 9, a day after the first major court
session of PG&E's creditors.
?????Early in a bankruptcy proceeding, it is rare for a judge not to allow
the debtor to spend cash that is pledged to others as collateral. It is
usually the only way for the company to continue operating. But as the case
wears on, the standards for allowing expenditures become increasingly
stringent, lawyers said.
?????PG&E attorney James L. Lopes, speaking in court, sought to reassure the
public and creditors of the utility's good faith.
?????He said PG&E believes the state PUC erred in calculating how much the
utility must pay the state for the electricity it is buying for customers.
?????Lopes added that PG&E continues to make payments because "it's very
important to the state and their ongoing procurement of power." However, he
said the utility reserves the right to challenge the formula for the payments
at a later date.
?????The attorney also stressed that gas suppliers will be paid because the
utility can pass on to consumers higher gas prices. Only electrical prices
are capped. He said the utility is confident of a steady supply of gas for
the next several months.
?????"There isn't going to be a default," he insisted.
?????Montali said that PG&E's "sanguine" reassurances may not be enough to
comfort creditors and told the utility lawyer that he expected PG&E to
provide many more specific numbers about its financial affairs. However, he
approved a temporary order allowing the utility to pay its gas suppliers.
?????Adam A. Lewis, a lawyer for a gas supplier, underscored the concern of
creditors when he talked about the enormous sums involved.
?????Lewis, who represents El Paso Merchant Energy, said its bill to PG&E
just for March and part of April was $50 million. The monthly payment before
that was $60 million, he said.
?????Considering the staggering amounts, "it doesn't take very long for
something to go drastically wrong," Lewis said.
?????Montali, addressing these concerns, made it clear that he cannot
single-handedly solve the energy crisis. "I have no control" over the future
price of gas, he said.
?????Elsewhere on Monday, PG&E announced it would pay only half the nearly
$80 million in utility property taxes due today to 49 California counties. A
PG&E spokesman said bankruptcy laws allow the utility to pay only for the
period following its bankruptcy filing and that the utility will ask the
court in a few days for permission to pay the rest of its bill.
?????One of the nation's major debt-rating agencies, Standard & Poor's Corp.,
lowered its rating Monday on PG&E's unsecured debt--money owed that is not
secured by any collateral--to "default" status. Another major debt-rating
company, Moody's Investors Service, took no immediate action as a result of
the bankruptcy filing.
?????Monday's court hearing attracted many lawyers curious about Montali's
debut as the ringmaster of the gigantic case and to see who was representing
other parties in the case.
?????"People were really there to do the talking in the hallways," one lawyer
said later.
?????Montali, a former bankruptcy lawyer appointed to the bench in 1993, was
extremely active during the hearing, peppering lawyers with comments and
questions.
?????When he complained of ambiguities in PG&E's legal documents, he prefaced
his remarks by saying he did not mean to criticize. He said he understood the
time pressures the lawyers were under.
?????Asking for clarification of some numbers, Montali told PG&E's Lopes:
"That is something to put on your short to-do list." Montali added to that
list as the hearing wore on for more than an hour.
?????The judge also expressed weariness with PG&E's recitation of the history
of the crisis in legal document after legal document. Could the lawyers
indicate that background in italics or something "so the poor judge doesn't
have to read it 175 times?" Montali asked.
?????"Your Honor," Lopes replied, "I am getting tired of reading it as well."
?????At one point, a cell phone rang in the courtroom. Montali sternly
announced that it would be removed if it rang again.
?????Lopes quickly bent down and began to rummage in his briefcase. "You
scared me," he said, confessing he could not remember whether he had turned
off his phone.
?????He had. "It's off," he said, relieved.
?????Without missing a beat, Montali told his clerk: "Get me Jim Lopes on the
phone."
?????For many of the spectators, being in the courtroom was like being in a
foreign country. The judge and lawyers spoke in bankruptcy jargon that
consumer activists later complained they could not understand.
?????When Montali noted that he might move the case to a larger courtroom to
accommodate the crowds, Lopes said the numbers would fall off once people see
"how boring these hearings are."
?????Just as Montali and Lopes began to discuss future hearing dates,
consumer activist Medea Benjamin jumped from her seat and strode over to the
podium to address the judge.
?????"You interrupted me," Montali admonished her. "Now go back and sit down,
and I'll let you make a statement in a minute."
?????When he allowed her to speak later, she asked whether there was some way
consumers could be briefed about what was happening at the hearing because it
was "a little bit above our heads."
?????"Yes," Montali said. "Hire a bankruptcy lawyer."
?????Benjamin, of the Coalition for Public Power Now, then read her letter.
She begged Montali not to raise utility rates and urged him to force PG&E's
parent company to assume the financial burden.
?????"We have great faith in you," she concluded. "Please don't let us down."
---
?????Times staff writers James Peltz and Tim Reiterman contributed to this
story.

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Oil Official Urges Eased Restrictions on Industry

Environment: Geologist advocates resuming offshore drilling and providing tax
breaks in response to energy crisis.

By KENNETH REICH, Times Staff Writer

?????A call for relaxation of environmental laws, an end to moratoriums on
offshore oil drilling and more favorable tax treatment for oil and gas
drillers was made Monday by an industry geologist at a meeting of scientists
and petroleum engineers in Universal City.
?????G. Warfield Hobbs, a divisional president of the 30,000-member American
Assn. of Petroleum Geologists, said it is high time the public and Congress
recognize facts in the energy crisis.
?????"You can talk until you're blue in the face," Hobbs said. "They don't
want to hear it. . . . How do we get the public's attention?"
?????Citing statistics provided by the U.S. Energy Information Agency, Hobbs
told a joint luncheon of his group and the Geological Society of America that
energy demand in the United States has grown by 20% since 1979, but domestic
supply has increased by only 4.3%.
?????In the next 20 years, the agency's projections show, overall energy
consumption will increase by 32%, petroleum demand by 62%, natural gas demand
by 45%, coal demand by 22% and electricity demand by 45%, Hobbs said.
?????"Despite a 37% increase in energy efficiency, crude oil imports will
increase 40% by 2020 to a total 64% of domestic supply," he said, even if
curbs on domestic reduction are eased.

?????Suggestions for Increasing Production
?????Accordingly, Hobbs urged:
?????* Clearing the way for drilling off the East and West coasts and in the
Gulf of Mexico, which he said could add 46 billion barrels of oil to the
nation's officially projected 110 billion in onshore reserves and 268
trillion cubic feet of gas to the projected onshore 1,074 trillion.
?????* Amending the Federal Antiquities Act to "prevent its misuse in
restricting access to public lands." The act protects some fossils and
authorizes the president to set aside land for national monuments without
going to Congress.
?????* Reforming the Clean Water Act and the Endangered Species Act,
especially sections pertaining to wetlands. This would not lessen protections
for "caribou and grizzly bears," he said, but would "stop searches for the
black-tailed ferret two counties from where it is known to exist," and "stop
protecting each separate subspecies of salamander."
?????* Restricting the federal Environmental Protection Agency's ability to
regulate drilling muds as hazardous wastes. These have been implemented as
additional protections from drilling excesses.
?????* Reducing taxes for the oil and gas industries by such changes as
restoring the write-off of intangible drilling costs for passive investors,
eliminating the "onerous alternative minimum tax" and raising depletion
allowance provisions to previously high levels.
?????* Opening portions of the Arctic National Wildlife Refuge to oil
drilling as President Bush has urged. Hobbs argued that most of the land to
actually be used for drilling is swampland, not caribou grazing territory.
?????"We must assure the public that we have the energy resources to meet the
demand and that these resources can indeed be developed in a responsible
manner in environmentally sensitive areas of the Rocky Mountains, the north
slope of Alaska, the eastern Gulf of Mexico and the Pacific and Atlantic
outer continental shelf," Hobbs said.
?????A resident of Connecticut, he said, "I frankly don't want oil washing up
on my family's beach, but I'm prepared to take that risk to help resolve the
nation's energy problems."

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Tuesday, April 10, 2001
Give Power Buyers a Club in Cartel Wars
By MICHAEL SHAMES, PETER NAVARRO

?????Last week, Gov. Gray Davis proclaimed that conservation and new energy
supplies will allow California to make it through this summer without
additional rate increases. On Monday, he announced a "sweetheart deal" to
save one of the state's largest utilities even as the other slunk behind the
protection of a bankruptcy court.
?????In fact, none of these actions will change this basic reality: An
unscrupulous "seller's cartel" now manipulating California's electricity
market is likely to make this summer unbearable. This cartel consists of the
major companies controlling most of the uncommitted electric generation and
natural gas transmission contracts in the Western United States.
?????To fight this cartel, we propose a plan with a stiffer backbone--a
hard-nosed "buyers' cartel" and, if necessary, the forced purchase of
in-state generating plants. Failing such actions, Californians face a
blackout-riddled summer with a potential electricity bill of nearly $50
billion.
?????The governor's plan to beat the sellers' cartel is built on too many
"ifs": If the West escapes a hot summer, if the increasingly unreliable power
plants suffer no outages, if 20% conservation gains materialize, if there's
enough natural gas to fuel new plants, if the cartel doesn't withhold supply.
?????Failing any one of these "ifs," and with forecasts warning of Stage 3
alerts that could stretch a full six months, the sellers' cartel would gorge
as it never has before. Wholesale prices could double or triple from already
exorbitant rates of 25 and 50 cents per kilowatt-hour to a dollar or more.
This power costs no more than 15 cents to produce.
?????Unfortunately, Davis' strategy to negotiate long-term power contracts
does little to reduce California's short-run vulnerability. Most contracts
don't even begin until 2002. President Bush and federal regulators could end
this crisis tomorrow by imposing hard price caps and ordering the cartel to
supply power to the market. They have steadfastly refused. The results are
staggering.
?????The sellers' cartel first took utility shareholders on a $13-billion
ride to insolvency. After bleeding them dry, it was the taxpayers' turn.
Indeed, after state government took over purchasing power in January,
California's healthy budget surplus dropped by more than $5 billion. This led
the Public Utilities Commission to approve the largest rate hike in
California history.
?????However, if the governor's "Hail Mary" strategy fails, we project
additional rate hikes of 100% or more. To avert this disaster, we propose
that California join with the other "victim states" of Oregon and Washington
to form a "buyers' cartel"--in essence, a buyers'-side monopsony to fight the
sellers' price-fixing oligopoly.
?????In particular, we propose offering a "fair price" to the sellers'
cartel, but not a penny more. This fair price would be cost-based--not market
driven--and calculated daily on natural gas prices and other factors. It
would include a generous profit margin to ensure sufficient incentives for
investment in the Western market and result in an average price of 15 to 20
cents.
?????As an ancillary weapon, California must force the sale of all in-state
plants owned by any member of the sellers' cartel refusing to provide ample
power at the fair price. Under a declared state of emergency, the state has
the authority to purchase the plants at reasonable prices, and they can be
run by qualified utility operators.
?????Forming a buyers' cartel will almost certainly spark retaliatory
blackouts as the sellers test the political will of our legislators and
governor. To prepare, we must end highly disruptive random rolling blackouts.
Instead, divide the states into identifiable blackout zones and, with
sufficient notice, flip switches off as need be. The benefits to businesses
and residents of knowing when the power will be turned off are considerable.
Increased crime risks can be offset by targeted police deployment.
?????The state should also buy literally truckloads of new, efficient air
conditioners. Utility employees, youth groups and other volunteers must move
systematically through the hot valley spots throughout the California
offering to replace old air conditioners--our Achilles' heel during the
summer time peak. ?????On the energy supply front, the state should continue
its effort to build emergency power plant capacity far from population
centers but near the transmission grid--no-frill plants built quickly. There
will be no better weapon against the cartel than standing reserves.
?????We do not understate the challenge of staring down a group of
well-financed energy companies. There are no other reasonable options, and
the stakes are too important to succumb to the generators' "rolling
blackmail."
- - -

Michael Shames Is the Executive Director of the Utility Consumers' Action
Network. Peter Navarro Is a Business Professor at Uc Irvine. This Article Is
Based on a More Comprehensive Ucan Report Available at Www.ucan.org
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State's Financial Exposure Is a Growing Worry
DAILY LOSSES: Experts say fiscal stability at risk
Christian Berthelsen, Lynda Gledhill, Chronicle Staff Writers
Tuesday, April 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/10/M
N161819.DTL

California's financial exposure to the energy crisis continues to grow,
causing government and finance experts to question how long the state can
keep pace.
A spokesman for Gov. Gray Davis said yesterday that California's bill for
energy purchases will increase by upward of $8 million a day after a ruling
last week by the Federal Energy Regulatory Commission. The unexpected rise
could push the state's daily electricity tab to as high as $58 million.
Coupled with a negative credit report issued late last week, the federal
ruling spells trouble for the state as it continues to stand in for the
bankrupt utility Pacific Gas and Electric Co. and buy high-priced,
open-market electricity, according to state officials and financial experts.
"The state is taking a loss right now in spending this money," said Sandy
Harrison, a spokesman for the state's Department of Finance. "It's a
significant loss. The state is paying much more than it's receiving in
return."
Since the state government stepped in as the power buyer of record in January
to help California's ailing utilities, the financial community has become
increasingly concerned. Moody's Investors Service put the state on negative
credit watch Friday, which could lead to a possible credit-rating downgrade.
In a letter, Moody's said that the deepening financial crisis, compounded by
PG&E's bankruptcy filing, "has increased the risks to the state's otherwise
strong fiscal and economic condition" and that steps so far have been
inadequate -- including the state's attempts to buy low-cost power on long-
term contracts, leaving it reliant on sky-high spot market prices.
"The spot market price has remained very high and is likely to continue to be
so for the remainder of this year, increasing the risk that the state's
financial exposure will persist beyond the period previously expected," the
letter said.
1 STATE REQUIRED TO Pay
The Energy Regulatory Commission's order -- released late Friday afternoon -
- could make matters worse. It requires the state to pay for all the
electricity it has been buying on the expensive spot market.
The California Independent System Operator, a nonprofit organization that
oversees the state's power system, has been balking at paying for some of
those purchases and has been passing the bill along to utilities.
On Friday, the commission ruled that because the utilities are broke, the
state must pay for the electricity itself. The state estimates that cost at
$8 million daily.
"It's amazing how quickly FERC can act when it will cost Californian
ratepayers more, but how slow they are to bring relief," said Davis spokesman
Steve Maviglio.
On a daily basis, PG&E is paying California the retail rate for power it
sells to its customers, and it has passed on some $110 million to the state
so far, the utility said yesterday.
But that is, obviously, much less than what the state is paying to buy the
power. Through the California Department of Water Resources, the state has
spent more than $4 billion on electricity since January.
Moody's downgrade came as the state continues to pursue a bond measure of as
much as $14 billion to repay the general fund for money it has already spent
buying electricity and to cover the cost of those payments into the future.
But at current rates, state officials acknowledge, even that much money would
not last long -- perhaps not even the year.
The state treasurer, Phil Angelides, doesn't favor securing more debt if it
will not fix the core problem of spiraling prices.
"It is very possible that continued borrowing for DWR purchases might only
delay by a matter of months the reality of runaway energy prices which
generators have imposed on California," Angelides said in a letter to Davis
last week.
LOOK FOR LONG-TERM SOLUTION
Matt Freedman, of The Utility Reform Network, a consumer advocacy group, said
the state should not be looking for a quick exit but should build on its
beginnings as an electricity buyer to slowly create a state power authority.
The sale of bonds would spread out payment of the huge costs of short-term
purchases on the wholesale market through the rest of the year. Meanwhile,
the state can help finance construction of new power plants with commitments
to sell electricity to the state at reasonable rates. Prices should drop as
long- term contracts negotiated by the state start to kick in and new power
plants come online.
"This is a positive vision," Freedman said. "This is the opposite of looking
at it as a morass." But as the ratings agencies see it, California's
financial situation has given them little to be positive about.
STATE ON NEGATIVE WATCH
Standard & Poors, another credit rating agency, placed the state on negative
watch in January shortly after it entered the agreement with PG&E to become
power procurer of record. Their reasoning at the time indicated a belief --
which the agency still appears to hold, since the negative watch has not been
removed -- that California has no exit strategy from a deepening quagmire.
"First of all, it seemed like an open-ended commitment, and we didn't know
when it would end or what the cost would be ultimately," said David
Hitchcock, the agency's chief California analyst. "Secondly, we didn't know
what the effect on the state economy would be with the blackouts. The
reasoning still holds now more than ever."
The ruling by the Federal Energy Regulatory Commission will just make matters
worse, Maviglio said.
The cost of buying electricity will rise substantially during periods of high
demand in summer unless the state fights rulings last week by a federal
appeals court and the Federal Energy Regulatory Commission, Maviglio said. No
decisions have been made on appeals.
.
DAILY GRIND
The state's tab to keep the lights is heading above $50 million per day. By
comparison, here's how much the state spends per day in other areas: .
Grants for high-tech crime task forces and a crackdown on identity theft:
30,000 .
Funding for a new, aggressive anti-smoking campaign targeting teenagers and
college-aged young people:
$55,000 .
An incentive program to attract and retain qualified algebra teachers and
prepare students for the new algebra requirement:
$82,000 .
Commitment to the war on methamphetamine:
$110,000 .
Coastal access and restoration:
$137,000 .
Program to Support and encourage development of Zero Emission Vehicles:
$137,000 .
Health coverage for 290,000 working parents through the Healthy Families
program:
$208,000 .
Local law enforcement equipment grants:
$205,000 . Source: State Budget
Chronicle staff writer Bernadette Tansey contributed to this report. / E-mail
Christian Berthelsen at cberthelsen@sfchronicle.com Lynda Gledhill at
lgledhill@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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Davis Seals Power Deal With Edison to Buy Lines
10-YEAR PACT: $2.76 billion swap buys low-cost electricity
David Lazarus, Chronicle Staff Writer
Tuesday, April 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/10/M
N162790.DTL

Gov. Gray Davis and Southern California Edison reached final agreement
yesterday on a $2.8 billion bailout deal that includes the state taking
possession of the utility's 12,000 miles of power lines.
As part of the accord, Edison will provide low-cost power to the state for 10
years and drop a lawsuit asking for full recovery of past electricity costs.
For California, restoring Edison to financial health represents an important
step toward stabilizing the state's dysfunctional energy market.
But with Pacific Gas and Electric Co. pursuing bankruptcy protection, the
state's two largest utilities are now traveling completely different roads,
and it remains to be seen what effect this will have on consumers.
Announcement of the Edison deal came just hours after PG&E's first bankruptcy
hearing was held in a San Francisco courtroom. PG&E filed for Chapter 11
protection Friday after deciding its own bailout talks with the governor were
going nowhere.
"This is a historic moment," Davis said at a Los Angeles news conference
yesterday. "This is a good deal for consumers of the state."
PG&E PROBLEMS
However, critics said it is unclear how much things have improved without
PG&E's participation in a statewide accord.
"It's like buying a car with only three wheels," said Doug Heller, a
spokesman for the Foundation for Taxpayer and Consumer Rights in Santa
Monica. "It doesn't get you anywhere."
Davis again chided PG&E for having paid out $50 million in bonuses and raises
to employees before filing for bankruptcy, as reported by The Chronicle on
Saturday. He called the action "arrogant and selfish."
"But if they come back to the bargaining table, we'll offer them the same
agreement," Davis said.
PG&E said in a statement last night that a deal with the state is positive
for Edison, "given its set of facts."
"Given our set of facts, we continue to believe that a Chapter 11
reorganization is the most feasible means to reach a solution," it said.
The governor and Edison reached a tentative pact on the bailout deal in late
February. Subsequent weeks were spent settling on the fine print.
Parallel talks with PG&E produced no results -- a point that Davis repeatedly
implied yesterday was the fault of the Northern California utility rather
than his own negotiators.
"If you walk away from the table, nothing gets done," the governor said. "If
you stay at the table, good things do and will get done."
The agreement still requires approval from the state Public Utilities
Commission and the Legislature.
Among the terms of the Edison deal:
-- The utility will receive $2.8 billion from the state in return for its
transmission network. This is more than twice the network's book value.
-- Edison will provide low-cost power to California for the next 10 years.
The rates have yet to be determined.
-- The utility will drop a federal lawsuit that attempted to force state
regulators to allow recovery of about $5 billion in power debts.
EDISON UPGRADES
Moreover, Edison will invest $3 billion into upgrading distribution lines
that connect with the newly purchased transmission network. The company will
retain possession of the distribution lines, which run from transmission hubs
to customers' homes.
The utility also committed to new environmental-protection measures affecting
more than 21,000 acres of land near its dams.
"A negotiated, practical, comprehensive resolution is far preferable to
bankruptcy," said John Bryson, chairman of Edison International, parent of
the Southern California utility.
"We have achieved a practical approach that is preferable to years of
litigation," agreed Steve Frank, Edison's chief executive.
Edison will issue at least $2 billion in bonds to help pay off its debts.
Bondholders will be paid off by a surcharge tacked onto the bills of Edison
customers. PG&E customers will be unaffected.
LEGISLATIVE SCRUTINY
"We need to find out how much of this back debt is really the responsibility
of the ratepayers," said Senate President Pro Tem John Burton, D-San
Francisco.
"The devil is in the details," he said. "We're going to have very, very
thorough hearings on it and find out how much it costs the ratepayers."
Assemblyman Fred Keeley, D-Boulder Creek, hailed the fact that Edison has
committed itself to provide power to the state at bargain-basement rates.
"Not having the whole transmission system is not as good as having the entire
system," he noted. "But it is an asset of substantial value that would be in
the hands of ratepayers, and that's positive."
However, Heller at the Foundation for Taxpayer and Consumer Rights said any
lawmaker who supports the Edison deal "is a turncoat." If it is granted
legislative approval, he threatened to undo the accord with a future ballot
initiative.
"Gray Davis gave away the store," he said. "This is a complete and
unadulterated bailout of Edison."
"It's way too rich," said Nettie Hoge, executive director of The Utility
Reform Network in San Francisco. "It makes PG&E look like a fool for going to
bankruptcy court when you can get everything you want from the governor."
Davis said his negotiators would have preferred working at a more leisurely
pace but scrambled to get the deal done as quickly as possible once PG&E
filed its bankruptcy papers.
"This transaction kept people up until 5 this morning," he said.
The agreement was approved by Edison's board yesterday afternoon.
SAN DIEGO NEGOTIATIONS
Davis said he hopes to begin negotiating with San Diego Gas & Electric for
its power lines today, and is "very optimistic" that a second accord will be
negotiated in short order.
He still has his eye on PG&E's transmission system, although it will be up to
Bankruptcy Judge Dennis Montali to decide whether any of the utility's assets
will be placed up for sale.
"One way or another, we hope to get all three lines," the governor said. .

EDISON STRIKES A DEAL
What's at stake for the major players in the energy cruch:
-- -- Edison: Southern California Edison receives $2.8 billion for its power
lines and has customers pay for at least $2 billion in bonds. This will
restore the utility to creditworthiness and allow it to borrow money to pay
off outstanding debts.
-- The governor: Gov. Gray Davis can claim progress in solving California's
energy woes after PG&E filed for bankruptcy last week. It is unclear,
however, how purchasing Edison's power lines will improve things if PG&E
refuses to sell its lines as well.
-- PG&E: The utility is largely unaffected by Edison's deal with the state.
However, PG&E still may be forced to part with its power network if the
bankruptcy court decides to place the company's assets up for sale.
-- Consumers: California consumers will benefit from Edison's commitment to
provide low-cost electricity to the state for 10 years. However, Edison
customers face higher electricity bills to help pay for the deal. Chronicle
Graphic
Chronicle staff writer Greg Lucas contributed to this story. / E-mail David
Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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PG&E Stumps Math Whizzes
GO FIGURE: Who knows how much this will cost us?
Steve Rubenstein, Chronicle Staff Writer
Tuesday, April 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/10/M
N159853.DTL

Mathematics, the PG&E kind, came to a San Jose classroom yesterday, and
utility bills turned out to be even more complicated than Euclidean geometry.
"This," said a kid, "is tough stuff."
Two dozen of the brightest math whizzes in California struggled for an hour
to figure out exactly what the giant utility is up to with its all-new rate
plan, its all-new bankruptcy and its four-page utility bills full of such
stuff as CTCs, TTAs and PPPs.
When the third-period honors math class at Joaquin Miller Middle School was
over, two plus two seemed to equal whatever PG&E says it does.
In recent days, Pacific Gas and Electric Co. announced that rates were going
up and that baseline amounts -- the cheapest electricity offered -- were
going down. It also announced it was bankrupt, but not too bankrupt to pay
$50 million worth of bonuses to 6,000 employees.
Students were invited to bring their family's utility bills to class and
attempt to calculate, using PG&E's formula charts, how much the bills would
increase.
A lot of pencil points broke in the process. Oreo, a black-and-white rabbit
who is the class mascot, took one look at the charts, thumped his foot and
scampered for cover beneath a desk.
"I really did not understand it," Heather Chou, 12, said after punching her
calculator buttons.
"It would be easier if your mom or dad was from PG&E," said Harry Jiang, 11.
"I found the rate tier and multiplied my total by the rate per kilowatt
hour," Brian Huh, 11, said. "This was complicating."
A typical bill charges up to four different prices for the same electricity,
depending on whether -- and by how much -- it exceeds the so-called baseline
amount.
Those prices are changing. The number of rate tiers is changing. And the
baseline amounts are changing. Go figure.
Deciphering a typical bill involves dozens of calculations. And that is not
counting the myriad mysterious charges such as Public Purpose Programs (PPP),
Competition Transition Charge (CTC) and Trust Transfer Amount (TTA), along
with transmission and distribution fees, that cling to every bill the way
Oreo's fur clings to a student's fleece pullover.
The only easy things to calculate, the students of Room 34 said, were the
bonuses paid out by the company the day before it filed for bankruptcy.
You divide $50 million worth of bonuses by 6,000 PG&E managers, 11-year-old
Diane Ngo said. What you get is $8,333, the amount of bonus that each manager
gets.
"I don't think PG&E is really bankrupt," she added. "I think they're just
scared about the economy and are trying to worry the government and the
public. "
"I think that PG&E is actually not bankrupt because they're making more money
now," said Jonathan Ou, 11. "I also think that PG&E is messing up the
government."
"They just want to keep a whole ton of money," Heather Chou said, "so they
can get rich."
If figuring the bonuses was easy, the hard part was figuring out how a
bankrupt company can afford to pay them.
Not even Miller students, who scored higher than all other middle school
students in the Bay Area in last year's Stanford 9 math test, could make
sense of that.
When third period ended, only Oreo had failed to find the problem exhausting.
Teacher Lise Stull called the calculation challenging, even though her
students routinely spend their days tinkering with quadratic equations,
polyhedrons, plane geometry and the scourge known as fractions. And an
assistant principal said the problem looked like a handful. He declined to
pick up a pencil.
"If the average person tried it," Stull said. "it would be extremely
difficult."
E-mail Steve Rubenstein at srubenstein@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1
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PG&E Moves Quickly to Involve Federal Court in State's Crisis
Strategy could allow judge to authorize
David Lazarus, Chronicle Staff Writer
Tuesday, April 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/10/M
N199730.DTL
San Francisco -- Pacific Gas and Electric Co. wasted no time at its first
bankruptcy hearing yesterday in attempting to force the federal court to
intervene in a state regulatory matter.
The move, which provoked a clash with state lawyers, indicated that part of
the San Francisco utility's legal strategy over months of bankruptcy
proceedings will be to establish the federal court's authority over state
issues.
PG&E wants the bankruptcy court to have such authority so it can order an
increase in consumers' rates and permit the utility to recoup about $9
billion in debt, lawyers said.
"This was a way to test the judge's attitude," said Gary Cohen, general
counsel for the California Public Utilities Commission.
If so, Bankruptcy Judge Dennis Montali offered no hint of how he feels about
his potential role in sending consumers' bills through the roof.
He instructed the two sides to work out a compromise themselves. If they
could not, Montali said, he would take up the matter this afternoon.
PG&E filed for bankruptcy protection on Friday after deciding that months of
bailout talks with Gov. Gray Davis were on the verge of collapse.
The first hearing in what promises to be a long, complex and frequently
tedious process clearly illustrated that California's energy mess has entered
a new phase.
SPARRING OVER SMALL POINTS
Legal jargon has replaced protesters' chants as the lingua franca of debate,
and the players now uniformly wear blue or gray suits, and eagerly spar over
the most microscopic of points.
The change in tone was made evident when consumer activist Medea Benjamin,
who was thrown out of recent PUC meetings for leading boisterous protests,
approached the podium yesterday and said she wanted to address the bankruptcy
court.
Montali, who was in the middle of scheduling future actions with PG&E's
attorneys, looked amazed that Benjamin had spoken out of turn.
"I'd like to read an open letter to you," she said.
"You've interrupted me," the judge replied with an icy glare. "Now go back
and sit down."
Benjamin promptly retreated to her seat.
TECHNICAL TERMS
Much of the bankruptcy hearing was peppered with technical terms like "cross
collateralization" and "postpetition liens," and most nonlawyers in the
courtroom gazed on with blank expressions.
"A number of people, after seeing how boring this is, may not want to come
back," PG&E lawyer James Lopes joked at one point.
The only fireworks came when a PG&E lawyer, Jerome Falk, requested that
Montali issue a temporary restraining order to block a recent PUC decision
concerning the utility's accounting methods.
The accounting change, which the PUC voted on in March, effectively reduced
the amount of debt PG&E can claim to have accrued as a result of runaway
wholesale power costs -- a total the utility says is about $9 billion.
Cohen and another PUC lawyer, Alan Kornberg, immediately jumped up and
insisted that there was no need for the bankruptcy judge to intervene in the
matter.
PUC MAY EXTEND DEADLINE
They said the PUC was prepared to extend its deadline for PG&E to file
related paperwork, thus making federal intervention unnecessary.
Outside the courtroom afterward, Cohen made clear that the PUC will act to
block any attempt by PG&E to give Montali jurisdiction over state regulatory
affairs, especially rate setting.
"The bankruptcy in no way affects the PUC's regulatory authority over PG&E, "
he said. "It is our understanding that there is no precedent for a bankruptcy
judge to raise rates."
Legal experts are divided on this point. Some say federal law supersedes
state law, but others say a bankruptcy judge has no power to force a state
agency to raise electricity prices.
However, many experts believe that if Montali decides consumers' rates must
be increased to pay off PG&E's debts, the PUC may willingly decide to go
along.
E-mail David Lazarus at dlazarus@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 9
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Going Dark Extra Day to Save Power
San Mateo County tries to cut costs
Mark Simon
Tuesday, April 10, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/10/M
NS23191.DTL
San Mateo County will shut down one of its buildings an extra day every week
next month as an energy-saving measure that officials hope will prove
contagious.
The building, a five-story, 116,000-square-foot facility in the county's
four-building government complex in Redwood City, will be closed every Friday
starting May 4.
The 400 employees in the building will go to a four-day, 10-hour-a-day
workweek.
Hours of business at the building will be extended from the current 8 a.m. to
5 p.m. schedule to a 7 a.m. to 7 p.m. schedule.
The four-day week will be in place for at least a year, after which its
effectiveness and its effect on public services will be assessed, said
Supervisor Mike Nevin, who proposed the once-a-week shutdown.
Closing the building for an extra day per week should reduce the building's
energy usage by 17.5 percent, said Nevin.
The county should save at least $80,000 in electricity and energy costs the
first year.
Nevin hinted broadly that the state's Department of Real Estate ought to take
the hint and look for ways it can shut down portions of its vast statewide
complex of office buildings.
The county building houses planning, parks and recreation and personnel
departments -- all of them nonemergency entities, Nevin said.
The public most frequently uses the Planning Department, and the principal
customers are contractors asking for approval of building plans.
They're likely to benefit from the expanded-hours schedule, which allows them
to go to county offices early or late in the day, Nevin said.
Meanwhile, county employees appear enthusiastic about eliminating one day
from their commute schedule, he said.
"They cross two bridges today and they come from 100 miles away," Nevin said.
"You're taking the employees off the freeway one day a week, reducing the
pollution and making their quality of life better."
ON THE CIRCUIT: The 2001-02 lineup for the 12th season of the Peninsula
Lecture Series in San Mateo contains the usual list of people it would be fun
to hear. But the list also carries with it a subtle ethical question.
The eight speakers include "60 Minutes" mainstay Mike Wallace, former
Secretary of State Madeleine Albright, former Interior Secretary Bruce
Babbitt,
TV documentarian Ken Burns, comedy king Carl Reiner, columnist and TV
commentator Mark Shields, Fox News talk-show host Bill O'Reilly, and NPR
legal affairs correspondent Nina Totenberg.
The series begins Sept. 5 with Totenberg. Tickets for the entire series are
$330 for reserved seating, $230 for open seating. For information, call (650)
348-0820.
Last year's series was a sell-out and there's no reason to think that won't
happen again, and soon.
The subtle ethical question arises in the fact that four of participants are
journalists. There long has been criticism when journalists accept speaking
fees to appear before organizations they cover.
But aside from the lapse in objectivity that might arise from speaking to a
group, there remains the larger question whether journalists should be paid
for pontificating, when it's their job to listen to the pontificators.
LOVE ON THE COASTSIDE: They're not exactly San Mateo County's official
sweethearts, but Controller Tom Huening and former business leader Denise de
Ville have had one of the longer engagements.
They are engaged no more.
On March 31, they tied the knot at a private ceremony at the Ritz-Carlton
Hotel in Half Moon Bay, the first wedding at the hotel.
They also honeymooned overnight at the hotel, making them among the first
guests there.
The day they spent there included a visit to what Huening called "the Roman
baths" and some time in the chairs overlooking the ocean.
Then it was back to work on Monday for both of them -- Huening to his job as
county controller and de Ville to the consulting business she began a year
ago after leaving her post as chief executive officer of a Peninsula business
lobbying organization.
Asked if it wasn't a short honeymoon, Huening said, "We're going to defer and
take a number of honeymoons over the next 40 years."
Huening and de Ville became engaged in 1998, making theirs a betrothal that
lasted more than two years.
"The controller is a very careful person," Huening said.
Actually, de Ville has a teenage son who was preparing for college and she
wanted to focus on that before getting married, Huening said.
It was noted that if they had waited a day, they could have been married on
April Fool's Day.
"We thought it would be pushing our luck," said Huening.
Simon can be seen 7:30 p.m. Fridays on The Chronicle's "Peninsula This Week"
on cable Channel 26, and at other times on local access channels. You can
reach him at (650) 299-8071, by fax at (650) 299-9208, or e-mail at
msimon@sfchronicle.com. Write him c/
,2001 San Francisco Chronicle ? Page?A - 15
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Davis forges deal to rescue Edison
Posted at 10:45 p.m. PDT Monday, April 9, 2001
BY JOHN WOOLFOLK,
CHRIS DEVALL AND CHRIS O'BRIEN

Mercury News

On the heels of Pacific Gas & Electric Co.'s bankruptcy filing, Gov. Gray
Davis announced Monday that the state has reached a $2.76 billion deal to
prop up the state's other major utility by buying Southern California
Edison's transmission wires.
The deal, which still needs legislative and regulatory approval, would avert
another embarrassing utility bankruptcy and would give the state its first
piece of hardware in its bid to assume more control over the chaotic
electrical system.
The announcement came just three days after PG&E, blaming a broken political
process, filed for bankruptcy, adding a new dimension to the deregulation
debacle. Davis and PG&E executives have traded bitter accusations ever since.
On Monday, Davis said PG&E ``has acted arrogantly and selfishly,'' but heaped
praise on Edison. ``This is a clear example of the good that can come when
parties are responsible, resolute and remain at the bargaining table,'' he
said.
But the complex deal drew fire from consumer advocates and lawmakers, who
labeled it a costly bailout and questioned whether it would solve the state's
energy problems.
PG&E, reluctant to part with its own high-voltage wires, vowed Monday to
press on in bankruptcy court, complicating the state's plans to buy the whole
grid.
Some experts, however, said the Edison deal could strengthen the state's hand
in any effort to acquire PG&E's wires through court proceedings.
``PG&E no longer has the ability to say yes or no to a deal,'' said David
Huard, an energy regulatory expert at the Manatt, Phelps & Phillips law firm
in Los Angeles. ``It's now up to a bankruptcy court. The state now has the
ability to work with a judge who has no preconceived notions of what the
company should look like when it comes out of bankruptcy.''
The Edison deal largely mirrored a conceptual agreement Davis announced Feb.
23. Neither he nor Edison officials explained what took so long to complete
the deal to buy Edison's transmission wires for a price that is 2.3 times
their assessed value.
Other details
Also under the proposal:
?Edison will sell the nuclear and hydroelectric power it generates to the
state at rates based on production costs for 10 years. The utility's parent
company will also provide all 500 megawatts from its new Sunrise power plant
to the state at similar rates for 10 years.
?Edison's parent will give the utility $400 million from a tax refund.
?Edison will grant the state conservation easements on more than 21,000 acres
of watershed surrounding its dams.
?And Edison will drop lawsuits seeking to lift state control over its rates.
Both Davis and Edison officials acknowledged PG&E's filing Friday for Chapter
11 bankruptcy protection added urgency to firm up the deal.
``These were tough negotiations, but they've produced a good, balanced
deal,'' Davis said, calling it ``a major step in the right direction.''
Edison International CEO John E. Bryson said the deal was a better
alternative than years of litigation in bankruptcy court.
``This negotiated resolution with the governor is far preferable for our
company and our employees and for our customers than is going into
bankruptcy,'' he said.
Edison serves 4.3 million customers.
The Davis administration began negotiating to buy transmission wires from
PG&E, Edison and San Diego Gas & Electric in January in a bid to keep them
out of bankruptcy and stabilize the state's electricity market.
Edison and PG&E have teetered on bankruptcy since last fall because they have
paid some $13 billion more for wholesale power than they are allowed to
charge customers under their state-frozen rates. San Diego Gas & Electric is
similarly troubled.
Together, the utilities serve some 10 million customers.
But PG&E had been reluctant to sell the transmission wires, and talks with
the state had been deadlocked for weeks. PG&E has declined to explain its
opposition.
On Friday, a day after Davis delivered a historic televised announcement in
which he assured the public a resolution was soon at hand, PG&E rebuffed the
governor by taking its case to bankruptcy court.
``Given our set of facts, we continue to believe that a Chapter 11
reorganization is the most feasible means to reach a solution,'' PG&E said
Monday in a prepared statement. ``We will proceed at the direction of the
bankruptcy court.''
Consumer groups criticized the proposed Edison deal as a bailout.
Nettie Hoge, executive director of The Utility Reform Network, said the state
is getting too little for its money. She had hoped the agreement would
include tighter restrictions on sales of Edison assets and on the amount of
profits the utility could earn.
``It's way, way too rich,'' Hoge said. ``We can't afford it. It's like a fun
house mirror. You stare at it long enough and the distortion becomes
apparent.''
Even some of Davis' allies in the Democrat-controlled Legislature agreed.
Senator critical
In a prepared statement, Sen. Debra Bowen, D-Redondo Beach, said she was
disturbed that the deal might mean that generators could be paid for
overcharging the utilities. ``It sounds like the plan puts ratepayers on the
hook for 100 percent of the rates charged by the power generators -- rates
that even FERC found to be unjust and unreasonable,'' she said.
And Bowen, like other lawmakers, questioned whether a deal based on buying
transmission wires still make sense. ``There may be some value in having the
state own the entire transmission grid, but it's not clear to me what the
benefit is to ratepayers if the state is only acquiring a quarter of it,''
Bowen said.
One Democratic legislator said some lawmakers believe the governor, after
being publicly humiliated by PG&E, may have been so eager to come to an
agreement with Edison that he was too generous. For that reason, lawmakers
will probably hold detailed hearings on the different provisions to ensure
they protect the interests of California consumers and the state.
But Assembly Speaker Pro Tem Fred Keeley, D-Santa Cruz, said the agreement
``was very consistent'' with the briefing the governor's staff gave to
Assembly Democrats recently.
Rated positive
``I think it's a positive turn of events,'' he said. ``It raises the
likelihood that the state will submit a plan to the bankruptcy court that
would mirror, in principle, the agreement reached with Edison.''
Power generators, owed billions by the utilities for electricity, said they
needed more time to assess the deal.
Edison says it owes $5.5 billion for power. The deal would bring Edison $3.5
billion from selling the wires and issuing bonds that would be repaid by
ratepayers. The utility would have come up with the rest from its own
profits.
Jan Smutny-Jones, executive director of the Independent Energy Producers
Association, said that with PG&E in bankruptcy and Edison agreeing to the
deal, ``it's not clear how it all fits together.''

Mercury News staff writers Brandon Bailey and Hallye Jordan contributed to
this report.

Contact John Woolfolk at jwoolfolk@sjmercury.com or (408) 278-3410.
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Solar tech shines in market struggling with power problems
California's power crisis couldn't have come at a better time for solar
energy.
The cost of producing solar power has been plummeting. The market for
photovoltaics, or solar cells, is growing like gangbusters -- 44 percent last
year alone. And promising new technologies under development for decades are
just now coming online.
Solar panels are showing up in unexpected places. The canopies over new BP
gas stations consist of semitransparent solar modules. Cars in four
Sacramento parking lots are shaded by photovoltaic-studded structures.
Hundreds of buildings in California alone are shingled with solar roof tiles.
Soon, scientists say, solar cells will be an integral and virtually unnoticed
part of many buildings: Think windows that generate juice while providing a
view.
These are not wild dreams. The technology is out there now.
And with it, researchers say, there is now a realistic possibility that solar
energy could supply a substantial part of the nation's energy needs.
``I think people are going to be surprised by photovoltaics,'' said Ken
Zweibel, a program manager at the National Renewable Energy Laboratory in
Boulder, Colo. ``The 20 years of waiting for it to happen has caused people
to take a jaundiced view. But it's the most real of the alternative
technologies, in my opinion.''
At the same time, there is grave concern that the federal government will
sharply reduce its support for solar -- funding that has played a key role in
developing these technologies and making them increasingly more efficient and
competitive. President Bush's budget proposal, released Monday, calls for a
54 percent cut in solar research and development.
Solar is still a tiny part of the current energy market. Solar modules sold
worldwide last year have the capacity to put out only 252 megawatts of
electricity -- enough for up to 252,000 homes. That's a drop in the bucket of
world energy consumption.
But even before the current energy crisis, sales of solar modules had started
to soar as demand grew overseas, said Bob Johnson, an analyst with Strategies
Unlimited, a market research firm in Mountain View.
Sales grew 38 percent in 1997, 18 percent in 1998, 30 percent in 1999 and 44
percent last year: ``That was a barnburner,'' Johnson said. They're expected
to increase 30 percent to 40 percent this year.
With the energy crisis, and the resulting sharp increase in the price of
electricity, solar is suddenly more attractive, and companies that produce
the cells can't keep up.
Of the 55 companies now making solar cells, the biggest producers are BP
Solar, which is starting to manufacture an innovative photovoltaic film at a
plant in Fairfield, and Kyocera Solar of Japan.
``Supposedly we have an order for everything we can make here through the end
of the year,'' said Douglas Skinner, manager of BP Solar's Fairfield plant,
which is scheduled to start production in May.
When the plant is in full swing, he said, it will produce 120,000 solar
panels a year, each 2 by 5 feet, that generate 10 megawatts of power --
enough for up to 10,000 homes. There are plans to double that rate, Skinner
said: ``Given the way demand is going up, I think everyone would like it to
be sooner rather than later, let's put it that way.''
Cheap, simple

The type of photovoltaic cell made there is known as ``thin film,'' a cheap
and simple alternative to the silicon cells that dominate the market. Some
experts think this is the technology of the future.
Traditional cells are based on wafers of pure, crystalline silicon -- the
same stuff that underlies most integrated circuits. They convert 12 percent
to 14 percent of incoming sunlight into electricity. But the wafers are
expensive.
In contrast, thin films are based on cheap materials, such as ordinary window
glass. Layers of semiconducting material are deposited on the glass, along
with compounds that block or conduct electricity. Then lasers cut the film
into individual cells and carve conductive channels to carry the flow of
electrons through the film and into a circuit.
The active layer in the film BP makes is cadmium telluride -- chosen because
its electrons are readily knocked out of place by the exact wavelengths of
sunlight that are most intense at the Earth's surface. Once bumped out of
position, they're free to flow as current.
Because the films are just 1/2,500th of an inch thick -- more than 100 times
thinner than conventional silicon cells -- the cost of materials is low. And
the cells are connected within the film, eliminating the need to wire them
together.
So while these cells are less efficient at harvesting sunlight -- they grab 5
percent to 11 percent of it, depending on their composition -- they generate
electricity at about the same cost as conventional silicon cells, Zweibel
said. The goal is to cut that cost an additional 80 percent.
Part of the building

Dave Carlson, chief scientist for BP Solar in Linthicum, Md., said he thinks
the biggest application for thin films will be in windows for buildings,
based on pieces of glass up to 9 by 12 feet in size.
Almost all large office windows now have reflective coatings that make them
look somewhat gray, he said. Photovoltaic windows look about the same.
``The photovoltaics can just piggyback along,'' he said. ``The glass and the
frame are free. They're already part of the structure. If you do it all
right, the costs should be significantly lower'' than installing the two
separately.
The company is now putting photovoltaic windows in a building at the
University of Wisconsin-Green Bay, Carlson said.
Two firms, Atlantis Energy Systems in Sacramento and United Solar Systems
Corp. of Troy, Mich., are making solar shingles. With 300 to 400 of these
shingles on the south-facing side of its roof, the typical home can generate
about 80 percent of its electrical needs, said Todor Galitev, chief of design
and engineering for Atlantis.
``You can tell that they're different, but it is a very attractive roof and
very pleasant,'' reflecting the color of the sky above, he said.
Galitev added that solar roofing can often be financed as part of a mortgage.
A typical home system costs $32,000. With subsidies -- the city of San Jose,
for instance, offers buyers $4 per installed watt -- the cost drops to
$18,000. When spread over a 30-year mortgage, the cost of generating
electricity with the system is about 12 cents per kilowatt hour, comparable
to today's utility rates.
Gathering sunbeams

Yet another approach is to concentrate sunlight into a powerful beam and
focus it on solar cells, which can then harvest the light with greater
efficiency. The technology was invented at Stanford University in the 1980s
and, after years of development, is just now being deployed commercially, in
a small solar power station in the remote mining town of Broken Hill,
Australia.
``It's taken much longer to work the bugs out than anybody thought,'' said
the inventor, Richard Swanson, now president of SunPower Corp. in Sunnyvale,
which makes optical products.
He said his concentrator arrays have a couple of advantages: They use
relatively cheap mirrors to focus sunlight from a wide area onto a small
group of solar cells. This cuts costs.
And the solar cells, based on silicon wafers, could easily be manufactured by
fabrication plants that are no longer adequate for making the latest
generation of chips.
But concentrators do have drawbacks: They are suitable only for large
installations, not for back yards and rooftops. And because the mirrored
dishes move to track the sun, they require more care than conventional solar
panels, which are motionless and virtually maintenance-free.
``In practice, there are engineering issues that crop up in terms of being
able to focus the sunlight on the cell, and doing it reliably. To my personal
satisfaction, those problems have not been solved,'' said Terry Peterson,
manager of solar power and green power marketing at the Electric Power
Research Institute in Palo Alto, which funded much of the early research on
concentrators. He added that he thinks the problems will be worked out.
A second concentrator array, using a different approach that focuses light
with lenses, was dedicated last week at Glendale Airport in Arizona. Built by
Amonix Inc. of Torrance in partnership with Arizona Public Service, the
state's largest utility, it will feed 100 kilowatts of power into the grid.
Funds for more research

Much of current photovoltaic research is focused on making current
technologies more efficient and less costly.
But the field needs a steady infusion of cash if it's to become a significant
part of the energy mix, researchers say. And on some fronts, prospects are
not good.
The Bush budget proposal puts half of current federal funding for solar in
jeopardy. Utilities nationwide have reduced their research funding by 60
percent. And investors, burned in the dot-com meltdown, are not necessarily
eager to get involved.
``The question is how do we make the next jump from here to
commercialization?'' asked Vijay Kapur, president of International Solar
Electric Technology in Inglewood, which has developed a potentially cheaper
way to make thin films.
``Let's face the facts,'' he said. ``Until recently, when the dot-com guys
got busted, every investor was just totally mesmerized by the dot-com money.
Energy has not been looked at as a very attractive sector for investment.
``That situation is changing with the California energy crisis now. People
are coming to talk to us. Unfortunately, I have not succeeded yet in getting
money on the table, but we are trying.''

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Getting a line on electricity
Published Tuesday, April 10, 2001, in the San Jose Mercury News
THE state has a deal, but what does it mean? With an agreement between
Southern California Edison and Gov. Gray Davis, one piece of the electrical
solution Davis wants to construct has been put in place.
Had the agreement to buy Edison's transmission lines for $2.76 billion been
announced last week, it would have been a clear indicator of progress, at
least as the governor defines it. Now, its effect is muddied by the
bankruptcy filing on Friday of Pacific Gas & Electric.
Davis has been pursuing a utility rescue plan that centers on buying the
long-distance transmission lines from Edison, PG&E and San Diego Gas &
Electric. The utilities are to take the proceeds from the sale and pay the
bills they ran up as they were forced to buy electricity at rates well above
the price at which they were allowed to resell it.
But Pacific Gas & Electric Co. crossed the wires Friday when it filed for
bankruptcy and broke off negotiations with the state, saying they were
``going nowhere.''
With the Edison deal, the state has an agreement to buy some of the
high-voltage wires that carry electricity around the state. But much of the
logic of the purchase, beyond assisting the utilities, was to bring the
transmission system under one ownership, for efficiencies of financing and
operation. PG&E's bankruptcy and its longstanding resistance to the sale make
acquisition of the whole system a big question mark.
Monday's announcement is merely a first step. Both the Public Utilities
Commission and the Legislature must act if the deal is to go forward.
The Legislature in particular needs to examine it. Is the $2.76 billion for
the transmission system fair? Is the ``low-cost'' power that Edison is
promising to provide for 10 years as good as it looks?
No easy paths lead out of the thicket that the state finds itself in. A huge
challenge remains in finding enough electricity to get through the summer
without rolling blackouts.
Without knowing what else is going to happen, it is impossible now to judge
the importance of the deal to buy Edison's lines. Let's hope that two weeks
from now we can look back and call it a first step in an encouraging
direction.

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Price for gas surges again
Published Tuesday, April 10, 2001, in the San Jose Mercury News
BY GARY RICHARDS

Mercury News

If you thought record-setting gas prices last fall were a shock, brace
yourself again.
Prices reached as high as $2.09 a gallon at some stations in Silicon Valley
on Monday, rising 12 to 15 cents within the past week with the promise of
going even higher.
``Wow!'' exclaimed motorist Cathy Martin of San Jose, who last visited the
pump a week ago and paid more than $2 a gallon at a Shell station near Great
America. ``It's crazy, and I've got to get gas again this afternoon.''
Many discount stations are now topping $1.83 for a gallon of self-serve
unleaded in the South Bay, and at $1.99 along the Peninsula. More expensive
brands are just that, such as the Texaco station off Saratoga Avenue in
Saratoga, where prices climbed 20 cents in little more than a week to $2.09 a
gallon for the cheapest blend on Monday.
The San Jose average is $1.92, while San Francisco is at $1.97, according to
figures released Monday by the California State Automobile Association.
That's 5 to 8 cents higher than a year ago, when prices began their march to
a record $1.98 average in the Bay Area by Labor Day.
Tight supplies, rising crude costs and the expectation that demand will
increase with the approach of summer are factors behind the latest price
surge, energy experts say. Those same factors caused the Department of
Transportation last week to issue a warning that prices in the nation's
largest urban areas may spike to California levels this summer.
``This is not a good time,'' said Jerry Cummings, president of Coast Oil,
adding that production had slowed for planned and unplanned maintenance at
Arco, Chevron, Valero and Texaco refineries from Washington state to Los
Angeles. ``There are a lot of them having problems.''
Inventory down
It's showing up on inventory counts. Stocks of reformulated gas were down
more than 19 percent at California refineries as of March 30, a decline of
nearly 100,000 barrels from a year ago, according to the California Energy
Commission.
This comes at a time state motorists are burning up more gas than ever. They
consumed nearly 15 billion gallons in 2000, about 1 billion more than in 1999
and almost twice the annual increase since 1995.
Refinery supplies nationwide have fallen in eight of the past nine weeks, the
American Petroleum Institute said, leaving them 5 percent below levels a year
ago. That's when pump prices reached higher than $2 a gallon in the Midwest.
``We are definitely going to see prices above $2 again, and soon,'' Pat
Pitoon, owner of a Citgo service station in Chicago, told Bloomberg News
Service.
Refineries nationwide are shifting production to reformulated gas required by
various states, contributing to a 7-cent-a-gallon price increase nationwide
to $1.54 a gallon.
Here's more bad news if you're waiting to fill up the sport utility vehicle:
Crude oil that will arrive in the United States next month rose as much as 61
cents to $27.67 a barrel -- 10 percent higher than this time last year.
While they're unsure of the timing, some experts expect crude prices to fall
to $21, which could mean to an easing for local motorists. And a cooling
economy might bring prices down as well.
But a number of California refineries use natural gas in the production of
automobile fuel, and the fear of rolling blackouts next month and higher
energy bills may keep prices high.
Renewed anxiety
``There's speculation that prices are going to go higher,'' said Brownwyn
Hogan, who tracks fuel prices for the California auto club. ``And just
talking about higher prices can sometimes keep prices high.''
Bay Area motorists -- perhaps numbed by paying the nation's highest prices
for five years -- have been silent. There's been no Internet talk of
boycotts, as in past years.
But some are starting to pay attention. Nearly two dozen cars were lined up
Sunday at an Arco station in Campbell to buy gas for $1.73 a gallon, spilling
onto busy Campbell Avenue, where a few blocks away the price was $1.99 at a
Shell station.
By Monday, the price had risen 2 more cents at the Arco station. This time,
there was no line, and Millie Williams of Campbell zipped in for a fill.
``This seems like a bargain compared to every place else,'' she said.

Mercury News wire services contributed to this report. Contact Gary Richards
at mrroadshow@sjmercury.com or (408) 920-5335.

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Lawmakers to make plea for price cap
Published Tuesday, April 10, 2001, in the San Jose Mercury News
BY HALLYE JORDAN

Mercury News Sacramento Bureau

As federal energy regulators and Western power officials gather today in
Idaho to discuss the region's critical energy shortage, three top California
legislators plan to deliver an urgent plea for a two-year cap on wholesale
electricity prices.
Assembly Speaker pro Tem Fred Keeley, D-Santa Cruz, Speaker Robert Hertzberg,
D-Van Nuys, and Rules Committee Chairman Dennis Cardoza, D-Turlock, will
board a $20,000 charter jet before dawn today for the flight to Boise.
Though the Bush administration has rejected price caps before, Keeley said
the lawmakers are holding out hope for reconsideration because circumstances
have changed.
Since January, when the Federal Energy Regulatory Commission last turned down
the caps, energy prices have continued to soar.
In Boise on Monday, FERC Chairman Curt H,bert Jr. reiterated that he
generally opposes price caps because there is no assurance they will be
temporary. He also said they can lead power brokers to sell at the cap price,
rather than lower, or drive them to other markets.
But H,bert did stop short of flatly ruling out caps.
``I'm willing to consider anything filed before me, as I must,'' he said. ``I
don't rule anything out. It's a very difficult time.''
H,bert, who has served on the federal commission since 1997 and been chairman
since January, said he'll have a question for the California lawmakers: ``I'd
like to ask them, other than a price cap, what do you want FERC to do?''
Keeley said the group has two goals during the meeting. ``One is to make sure
FERC understands that we are doing quite a bit to resolve this issue
ourselves,'' he said. ``But we also want to emphasize to them that this is a
problem that is larger than California, and it exceeds state government's
ability to resolve it on our own.''

Mercury News staff writer Eric Nalder contributed to this report.
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Edison, state strike deal
If OKd, the company would sell power lines and drop a suit against
California.
April 10, 2001
By KATE BERRY
The Orange County Register
Southern California Edison reached a deal Monday with Gov. Gray Davis to sell
its transmission lines to the state for $2.76 billion, allowing the utility
to avert bankruptcy through a consumer-financed bailout.
The deal would allow the state to take possession of Edison's 12,000-mile
network of power lines at a price more than twice its book value. Edison
would use that money and issue $2 billion in bonds to pay off about $5.4
billion in debt, which it accumulated by purchasing power at high prices that
couldn't be passed on to consumers under a rate freeze.
Both Edison- and state-issued bonds will be paid off by ratepayers via their
electricity bills.
The Legislature and state regulators must approve the agreement, reached
three days after California's largest utility, Pacific Gas & Electric,
rejected the governor's efforts to negotiate a rescue and filed for
bankruptcy. "If you walk away from the table, nothing gets done," Davis said
at a press conference in Los Angeles. "If you stay at the table, good things
do and will get done."
The deal calls for Edison to drop a federal lawsuit against the state and
requires the utility to provide power to California for 10 years from its own
generation and one new power plant in exchange for a guaranteed return on
equity of 11.6 percent.
Edison also agreed to invest $3 billion over five years in improvements to
the transmission lines. And its corporate parent would contribute $420
million to reduce the utility's debt.
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Davis' power plan is in doubt
Legislators say buying transmission lines doesn't do enough to ease the
crisis.
April 10, 2001
By JOHN HOWARD and KATE BERRY
The Orange County Register
SACRAMENTO Gov. Gray Davis' $2.76 billion agreement to acquire Southern
California Edison's transmission lines faces hard times in the Legislature,
where some lawmakers fear that it bails out the debt-riddled utility but does
little to ease California's energy crisis.
The governor's proposal entails the purchase of Edison's transmission network
and gives the state control over 20,000 acres of Edison-owned land. It
requires the utility to provide the state with a decade's worth of low-cost
power, obliges Edison's corporate parent to refund $420 million it took from
the utility, and whittles down the company's debt over time with money set
aside from increased consumer rates.
It also includes Edison's commitment to invest $3 billion in capital
improvements over five years, financed with money from rates, and continues
for 10 years a guaranteed return on equity of 11.6 percent for the utility.
It does not call for new power-plant construction.
"It's too rich, there's too much money, too many dollars," said Nettie Hoge,
a consumer activist with The Utility Reform Network. "It's like a fun-house
mirror. You look closer, and it's a total distortion."
The plan must be approved by the Public Utilities Commission and the
Legislature.
"My guess is there isn't a single vote in my caucus for the purchase of the
grid," said Assemblyman Dave Cox, R-Fair Oaks, the Assembly's GOP leader.
"And I'd be surprised if the governor can find the people on the Democratic
side of the aisle to vote for this. We certainly agree the utilities should
be made creditworthy, but we don't think they should be bailed out."
Sen. John Burton, D-San Francisco, the leader of the Senate, said using
higher rates to help cover Edison's $5.4 billion power-buying debt would
prove a major sticking point, because the debt "may have been built up
fraudulently through price-gouging (by generators) or mismanagement.
"There is a question of whether ratepayers should have to gargle that,"
Burton said.
PUC President Loretta Lynch said she was encouraged by the deal, and
suggested that it stood a good chance of winning PUC approval. She said the
plan allowed "utilities to recover their reasonable costs and to earn
reasonable profits."
Davis said the agreement with Edison paves the way for a similar arrangement
with San Diego Gas & Electric Co. Negotiations with SDG&E will begin in
earnest today and could be wrapped up soon, he said.
Pacific Gas & Electric Co., which has $8.9 billion in power-buying debts,
spurned negotiations with Davis and sought protection Friday under federal
bankruptcy laws. Unlike Edison, PG&E has been reluctant to relinquish its
transmission lines. "All along, we've always felt that they never really
wanted to sell them," Sen. Debra Bowen, the chairwoman of the Senate energy
committee.
Davis has opposed bankruptcy for the utilities, saying it gives the courts
excessive control over electricity distribution and hamstrings the state's
ability to resolve the crisis.
One key lawmaker said PG&E's bankruptcy makes the Legislature's decision more
difficult.
"In light of PG&E's bankruptcy, there is a very large question of whether
purchasing less than a third of the state's transmission lines makes any
sense, other than to provide an infusion of cash to the utility," said Sen.
Joe Dunn, D-Santa Ana, who heads a committee examining electricity market
practices.
State officials have said a purchase of the transmission lines would only
make sense if all three investor-owned utilities were to sell. Otherwise, the
state wouldn't enjoy the bargaining leverage with generating companies that
would come from owning a majority of the grid.
"We need to review the nitty-gritty details, and it (passage) is
questionable," Dunn said. "We need to know why this is beneficial to the
people of the state of California, and I'm not sure that case has been made
yet."
Michael Shames, of the San Diego-based United Consumer Action Network, said
purchasing just part of the grid could prove to be of only marginal value.
"The benefits that accrue for owning the grid do not become available if you
only own a third or two-thirds of the grid. All three legs of the stool have
to be there," he said.

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AES threatens to pull out of fast-track effort
The power company tells a state panel it wants a longer expansion license.
April 10, 2001
By KATE BERRY
The Orange County Register
HUNTINGTON BEACH AES Corp. threatened Monday to pull out of a fast-track
process to bring much-needed electricity into California by July, telling a
state energy panel that it wants a license for the expansion of its
Huntington Beach power plant to extend beyond five years.
Huntington Beach officials objected to any extension of the license beyond
the five years recommended by a committee of the California Energy
Commission, saying the city has made several concessions to accommodate a
fast-track permit for the project, including delaying environmental studies
on air and water effects.
The CEC on Monday held its final public hearing before it votes April 18 on
AES' plan to restart two 40-year-old gas-fired generators at the plant. The
hearing was at City Hall. A CEC committee has recommended that AES'
application be approved, with conditions.
The two units could contribute 450 megawatts of energy to the state - or
roughly 10 percent of the 5,000 megawatts Gov. Gray Davis is trying to bring
online by this summer to help avoid rolling blackouts.
The commission is considering whether to limit the use of the refired units
to five years, require any power produced by the two units be sold to the
state, and require AES to pay $1.5 million to fund environmental studies of
air and water quality.
Ed Blackford, president of AES Huntington Beach, said the city was asking for
too many concessions.
"If some of these conditions become overbearing on the project, let's revert
back to a 12-month permit process," he said.
Permits for such projects normally take a year to get, but the CEC cut the
process to two months for AES because of the power shortage.
Bill Workman, an assistant city administrator, conceded that AES might win
its battle against the city because it is currently in negotiations with the
state's Department of Water Resources to sell power from the plant to the
state. He said those negotiations are being used as leverage to get the
license extended.
"This facility is aged and obsolete and were it not for the energy situation
we're facing, we would be looking at a totally different project for the
city," Workman said.
"We cut a lot of things out that would have normally been in a 12-month
permit process.''
City officials estimated that AES would recoup its $150 million investment in
the expansion in 12 to 18 months.
The city made several last-minute recommendations to the commission,
including asking that AES hire a noise technician to be on call after 8 p.m.
so residents can contact someone if construction noise rises above 5 decibels
-- the limit recommended by the CEC committee for nighttime work. Because
construction on the plant's two units would be allowed for 20 hours a day
under the committee's recommendation, the city also requested that residents
receive off-site lodging, paid for by AES, if they are disturbed repeatedly
at night by construction noise.
The city also asked that construction workers be required to park six miles
away from the plant and take a shuttle to the site, rather than use beach
parking, which would affect tourists and recreation in the area.

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Electricity notebook
PG&E may use reserved cash to purchase energy
April 10, 2001
SAN FRANCISCO PG&E Corp.'s Pacific Gas & Electric persuaded a bankruptcy
judge to let it temporarily spend cash pledged as collateral to bondholders
and gas suppliers so the utility can buy energy and keep operating.
In a separate filing, Pacific Gas asked U.S. Bankruptcy Judge Dennis Montali
to shift some control of the utility away from California's Public Utilities
Commission. The company requested that Montali block a March 27 PUC order
that requires the company to file certain accounting documents Wednesday.
Alan Kornberg, an attorney for the PUC, said it seemed as though Pacific Gas
was asking Montali to excuse the company from complying with the agency's
orders. "It's the PUC's position that all orders must be complied with,"
Kornberg said.
The utility's legal move comes as it begins jockeying for position in the
United States' largest utility-bankruptcy case.
Pacific Gas, California's largest public utility, sought bankruptcy
protection Friday, saying it couldn't agree with California lawmakers on a
plan to help it repay $9 billion in debt.
Montali's interim order, issued Monday, allows the utility to continue to buy
natural gas on the same terms it had before the bankruptcy filing. Pacific
Gas in January gave 16 natural-gas suppliers liens on some of its assets to
get better credit terms.
Utility timed bankruptcy to gain ground, sources say
SAN FRANCISCO Pacific Gas & Electric Co. insiders say the utility's
bankruptcy filing was timed to put maximum blame on Gov. Gray Davis and avoid
being disadvantaged by the governor's apparently successful negotiations with
Southern California Edison.
PG&E Corp. Chairman Robert Glynn decided days before Davis' televised address
on the energy crisis Thursday evening to file for bankruptcy immediately
thereafter, the San Francisco Chronicle reported Sunday, citing unidentified
sources inside the utility.
Davis was not made aware of the company's plans - which included giving
last-minute raises and bonuses to 6,000 top PG&E executives and workers -
until after it filed for protection Friday morning.
After months of contemplating bankruptcy, sources told the Chronicle that
this was the most-advantageous time for the utility to move forward with its
plan.
Any further delay, and it might have been pressured to forgo $9 billion it
hopes to recoup from California ratepayers.
"We had this thing ready to go long before that," PG&E spokesman Greg Pruett
said of the bankruptcy filing and its timing to Davis' speech.
Glynn told a different story Friday, blaming the filing on the inability of
Davis and other state lawmakers to reach a political solution.
"We listened carefully to the (governor's) statement and the commentary that
followed, and this decision is the result," Glynn said.
Drought-induced power shortage looms ahead
PORTLAND The Northwest drought is so dire that the aluminum industry should
virtually shut itself down for two years to save power, the acting director
of the Bonneville Power Administration recommended Monday.
Steven Wright said the second-worst Northwest drought in 72 years means the
region faces a tripling to a quadrupling of wholesale electricity prices
beginning Oct. 1 unless radical cuts in power consumption are made.
"An increase of this magnitude would have widespread economic consequences,"
Wright said. "With such an increase, we'd surely see more businesses close
and more job losses."
At a news conference, Wright also asked public utilities in the region to
voluntarily cut back their power purchases from Bonneville by 5 percent to 10
percent. He asked private utilities to do the same.
Bonneville, based in Portland, is a federal agency that markets almost half
the electricity in the Northwest.
It produces about 8,000 megawatts of power, much of it from 29 hydroelectric
dams along the Columbia and Snake rivers.
Wright also recommended that aluminum companies accept "limited compensation"
from Bonneville to cover some of their costs and pay laid-off workers to
cushion the economic impact. Otherwise, the industry faces a huge rate hike,
he said.
"I wouldn't say they're happy about it," Wright said, but "it is our
expectation that the companies would not be able to operate given a potential
tripling of our rates anyway."
Bloomberg News and the Associated Press contributed to this report.

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State's power fees hinge on good credit
April 10, 2001
By DON THOMPSON
The Associated Press
SACRAMENTO Two federal rulings could add $5 million to $8 million more a day
to the state's power purchases for its two largest utilities this summer, a
spokesman for Gov. Gray Davis said Monday.
The state Department of Water Resources has been spending $45 million to $50
million daily to buy power for customers of Southern California Edison and
bankrupt Pacific Gas & Electric.
The cost will rise substantially during periods of high demand in summer
unless the state fights rulings last week by a federal appeals court and the
Federal Energy Regulatory Commission, Davis spokesman Steve Maviglio said,
adding that no decisions have been made on appeals.
Both ruled that the overseer of the state's power grid, the California
Independent System Operator, must have credit-worthy buyers for the
last-minute power it acquires to fill gaps in the supply and avoid blackouts.
Cash-strapped Edison and PG&E are the major recipients of that emergency
power, but haven't been paying suppliers for it.

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AES NewEnergy Offers Program to Help Commonwealth Edison Customers Reduce
Electricity Costs and Increase Reliability This Summer

CHICAGO--(BUSINESS WIRE)--April 9, 2001 via NewsEdge Corporation  -
In an effort to help
reduce the risk of California-style electricity shortages this summer
in the Chicago area, AES NewEnergy, the nation's leading competitive
retail electricity provider, will be offering Commonwealth Edison
(ComEd) business customers a way to make money this summer by
voluntarily reducing unneeded power usage at peak times. AES NewEnergy
is expanding on an existing curtailment program the electric marketer
worked out with ComEd last summer as a way of dampening down the
extremely volatile peak summer power prices and avoiding
California-style rolling brownouts and blackouts.

In a pioneering effort to maintain reliable electricity services
in the recently deregulated Illinois market, AES NewEnergy will
actually pay its customers to participate in this program, which is
designed to stabilize the power grid and increase service reliability
during times of peak use. The program will lessen the risk of
hardships such as were seen in California. "This is a first in the
power industry," said Phil O'Connor, Vice President of AES NewEnergy.
"AES NewEnergy is providing our customers from coast to coast with the
flexibility to reduce their power demands on hot days and get paid for
it."

Under its Incremental Incentive Curtailment Program, AES NewEnergy
customers can earn curtailment credits via voluntary usage reductions
during the course of this summer. Credits earned by businesses under
AES NewEnergy's program will be in addition to those earned through
ComEd's curtailment programs. This means increased savings for
businesses and enhanced stability for the power grid at large.

AES NewEnergy has developed its curtailment service in conjunction
with ComEd. When a member of AES NewEnergy's curtailment pool agrees
to participate in any curtailment period called by ComEd, both
programs will automatically assess credits to the customer over the
period. AES NewEnergy may also call for a curtailment period
independently from ComEd, providing yet another opportunity for AES
NewEnergy customers to participate and earn credit. Any AES NewEnergy
customer with a minimum peak demand of 300 kilowatts and ability to
curtail at least 100 kilowatts of demand is eligible to apply for the
program. Members of AES NewEnergy's curtailment pool will be contacted
prior to declared curtailment periods, and can participate in any
given period at their discretion.

If a business cannot participate when called, there is no penalty.
Credits will be applied on a kilowatt-hour per hour reduction basis,
and could mean significant credits above and beyond those available
through the ComEd program. The savings will be made available many
times over the summer.

Advantages of this program extend beyond monetary value to its
participants. AES NewEnergy wishes to provide proactive management and
power grid stabilization as an additional service. Uncertain summer
temperatures directly affect the volume of energy required, and
curtailment programs buffer the impact of increased demand on the
grid. Responsible use of curtailment programs and effective
participation from businesses will alleviate such strain and provide a
stable power supply throughout the summer.

AES NewEnergy is America's leading retail electricity provider,
serving commercial and industrial customers in competitive markets
throughout the country. The company offers businesses energy-related
products and services. AES NewEnergy is a subsidiary of The AES
Corporation (NYSE: AES), a leading global power company comprised of
competitive generation, distribution and retail businesses around the
world. More information on AES NewEnergy's products and services can
be found at www.newenergy.com.

CONTACT: AES NewEnergy |Richard Spilky, 312/704-9200 | rspilky@newenergy.com
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Feds Embroiled in Power Debate

By H.JOSEF HEBERT
Associated Press Writer
WASHINGTON (AP) via NewsEdge Corporation  -
California's electricity debacle has embroiled
an obscure federal agency in accusations that it is failing to
confront powerful energy companies over allegations of price
gouging.

Free-market advocates argue that more aggressive intervention by
the agency could make the West's electricity problems worse. But
critics say the agency is too timid, raising concerns about its
role as the watchdog over a $250 billion electricity industry.

Scarcely known by the general public, the Federal Energy
Regulatory Commission _ its five members selected by the president
_ can wield immense power as federal overseer of wholesale
electricity markets and interstate natural gas transport.

Its daily activities and public pronouncements rarely have
attracted much attention outside the industry _ until now.

Suddenly FERC, as it is commonly known among energy insiders,
has become a boogeyman of deregulation-run-amok in the eyes of its
sharpest critics _ among them members of Congress, state regulators
and Western utilities saddled with billions of dollars in debt from
power purchases at astronomical prices.

``It's high time FERC was called to account for its
public-be-damned attitude,'' Rep. John Dingell of Michigan, the
ranking Democrat on the House Commerce Committee, fumed recently.

Aware of the discontent, especially in the West, the commission
was taking the unusual step of holding a hearing Tuesday in Boise,
Idaho, to listen to officials from 11 Western states on how it
might help them cope with the wildly gyrating wholesale power
markets expected this summer.

Curtis Hebert, FERC's Republican chairman and a staunch
free-market advocate, rejects claims the commission isn't doing its
job but acknowledges that complexities brought on by open
competition have put strains on the agency.

He cites a string of FERC actions:

_Its move in mid-December to order changes in the way California
contracts for power and put wholesale electricity suppliers on
notice that unusually high prices would have to be explained.

_Its pursuit last month of two companies accused of withholding
power to inflate prices, a case critics have applauded but note it
stems from actions nearly a year ago.

_Its investigation of thousands of January-February power
transactions in California involving $124 million in alleged
overcharges.

FERC-ordered refunds, Hebert told a recent congressional
hearing, ``demonstrate the commission's commitment to appropriate
and reasonable prices'' in California and elsewhere in the West.

Hebert, however, insists that a government-imposed dampening of
prices wanted by many of the agency's critics will only keep people
from investing in more power plants and make consumers less likely
to conserve.

``Price caps are unworkable, unreliable and not a solution,''
says the former state utility regulator from Mississippi.

On that, as well as the adequacy of FERC's push for refunds,
Hebert's sharpest critic may be on the commission itself, which
currently has two vacancies.

By its inaction, argues William Massey, a Democratic member of
the commission, the FERC has condoned ``unlawful'' pricing
practices despite its mandate to ensure ``just and reasonable''
prices for consumers.

The commission has an obligation ``to aggressively intervene''
when a market has become broken, says Massey. He has called for
price caps and a broadening of FERC's investigation into refunds,
saying thousands of questionable sales have been ignored. Each time
he's been outvoted 2-1.

It is Hebert's free-market approach, and not Massey's call for
more action, that mirrors the views of the White House, where
President Bush also has opposed price controls on the California
electricity market. While some Democrats in Congress have
introduced legislation ordering FERC to take more aggressive
action, the agency's policies have the support of most Republican
lawmakers.

Beyond the issue of price caps, there have been questions about
FERC's ability to adequately monitor and police the increasingly
complex and rapidly moving wholesale electricity market. Its staff
is now 15 percent smaller than it was four years ago.

Last October, an internal FERC report raised concerns about the
agency adapting to the rapidly changing electricity industry it is
supposed to regulate. The report said the agency needs more
staffers with market-oriented skills and noted the potential
conflict in the agency's dual mandates: to further a
pro-competition agenda and also regulate that competition.

``Right now my view is the FERC is overwhelmed by the task
before it,'' says William Nugent, Maine's state public utility
commissioner, expressing his frustration at what he views as FERC's
slow response to alleged market abuses. A year-old price spiking
case in New England involving tens of millions of dollars has yet
to be fully investigated, he said.

``There's a sense of this being a trial by fire,'' says FERC's
Massey. ``There's no question about that.''
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Calif. Reaches Deal on Power Lines

By LESLIE GORNSTEIN
Associated Press Writer
LOS ANGELES (AP) via NewsEdge Corporation  -
In a bid to pull the state's second biggest
utility back from the brink of bankruptcy, Gov. Gray Davis
announced a deal on Monday for the state to buy power lines from
Southern California Edison for $2.76 billion.

The deal is a key part of the governor's plan to keep the
cash-strapped utility solvent. It would give Edison money to
reorganize its debts and pay power generators, many of which have
not been paid for power since last November.

``These were tough negotiations but they've produced a good,
balanced deal,'' Davis said.

The deal requires Edison to provide low-cost power to the state
for 10 years and to dismiss a lawsuit seeking hikes in consumer
rates, Davis said.

Davis had originally proposed buying parts of the state's
transmission grid owned by all three of the state's investor-owned
utilities. That plan was dealt a serious blow Friday when Pacific
Gas & Electric, the state's largest utility, pulled out of
negotiations and filed for bankruptcy protection.

Consumer advocate Harvey Rosenfield said the PG&E filing put
immense pressure on Davis to cut a deal with Edison to keep the
state's second-largest utility out of bankruptcy.

``He's trying to redeem himself with Wall Street,'' Rosenfield
said.

Edison and PG&E say they have lost more than $13 billion since
June because of skyrocketing wholesale power prices. They cannot
pass on their costs to customers under the state's 1996
deregulation law.

Edison also was expected to file an update Monday on its
financial condition with the Securities and Exchange Commission.
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California ISO Declares a Statewide Stage Two Electrical Emergency;
Conservation Needed as Demand Surges and Supply Tightens

FOLSOM, Calif.--(BUSINESS WIRE) via NewsEdge Corporation  -
At 7:50 a.m. today, Monday, April
9, 2001, the California Independent System Operator (California ISO)
called a Stage Two Emergency as operating reserves dipped below five
percent. This emergency status is partly attributable to higher
electrical loads due to cold temperatures and meager winds, which has
reduced available wind power generation from 1,000 megawatts to an
estimated 250 megawatts. Additional conditions that are producing
tight operating reserves include:

--  A total of 12,421 megawatts worth of generation unavailable

today with power plants off-line because of preventative

repairs and plant malfunctions

--  An additional 3,000 megawatts of generation from the state's

qualifying facilities (QFs) remain unavailable due to

continuing financial concerns

--  Path 15 transmission congestion because of especially high

demand and low supply in Northern California

--  Low imported power due to higher loads in the Northwest -- a

region also suffering from a cold snap

With operating reserves hovering at critical levels, the
California ISO requests that customers voluntarily reduce their use of
electricity to prevent more severe curtailment measures. Peak demand
on the transmission system is expected to reach 28,462 megawatts
around 6:00 p.m. today. Today's Stage Two declaration, expected to be
in effect until midnight, enables the California ISO to access
emergency resources to help maintain operating reserves.

If an operating reserve shortfall of less than one-and-a-half
percent is unavoidable, Stage Three is initiated. Involuntary
curtailments of service to customers including "rotating blackouts"
are possible during this emergency declaration. The California ISO's
Electrical Emergency Plan (EEP) is part of the state's enhanced
reliability standards enacted by landmark legislation Assembly Bill
1890 that led to the restructuring of California's electricity
industry.

The California ISO is charged with managing the flow of
electricity along the long-distance, high-voltage power lines that
make up the bulk of California's transmission system. The
not-for-profit public-benefit corporation assumed the responsibility
in March, 1998, when California opened its energy markets to
competition and the state's investor-owned utilities turned their
private transmission power lines over to the California ISO to manage.
The mission of the California ISO is to safeguard the reliable
delivery of electricity, facilitate markets and ensure equal access to
a 25,526 circuit mile "electron highway."

Continuously updated information about the California ISO control
area's electricity supply and the current demand on the power grid is
available on the web at www.caiso.com.

Other helpful contacts:

Pacific Gas and Electric 415/973-5930

Southern California Edison 626/302-2255

San Diego Gas and Electric 877/866-2066

CONTACT: California ISO |              Stephanie McCorkle, (888) 516-NEWS
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