Tim -- This is the only article our "research department" could find.  Hope 
it's the one you were looking for.  kd
---------------------- Forwarded by Karen Denne/Corp/Enron on 03/21/2001 
08:55 AM ---------------------------
   
	
	
	From:  Ann M Schmidt                           03/20/2001 04:14 PM
	

To: Karen Denne/Corp/Enron@ENRON
cc:  

Subject: San Diego Union-Tribune


Karen,

I have combed carefully through past San Diego Union-Tribune articles for the 
article Tim Belden is looking for and below are the only two articles that I 
can find that remotely address Steve Peace and the stranded cost issue.  I 
have a feeling it may not be what they are exactly looking for but then again 
it may be.  I even had Miyung Buster and Lynette Barnes take a stab at 
finding it and they had no luck. Please let me know if this is it and if not 
I can combed through again.  Thanks, Ann   


NEWS
ELECTION '98 | PROPOSITION 9
Sparks fly over utilities measure | Consumer groups vs. broad coalition
Ed Mendel
STAFF WRITER

10/11/1998
The San Diego Union-Tribune
1 2
A-1
(Copyright 1998)

SACRAMENTO -- It looked like a triumph of legislative deal-making when, after 
a year and a half of talks, a sweeping plan to deregulate electricity in 
California came together in the final hours of the legislative session two 
years ago. 
The bill, brokered mainly by state Sen. Steve Peace, D-El Cajon, was not 
opposed by any special-interest group. The complicated measure sailed through 
both houses of the Legislature without a single "no" vote. But then consumer 
groups took a second look.
They reached two main conclusions: A promised 10 percent rate reduction is 
"phony," they say, and ratepayers should not have to pay for privately owned 
utilities' ill-advised investments in nuclear power plants. Now the consumer 
groups, backed by one of the biggest names in consumer protection, Ralph 
Nader, have placed an initiative on the Nov. 3 ballot, Proposition 9, that 
would make major changes in the deregulation plan passed two years ago. 
"Billions of dollars of ratepayer money has been committed not to a 
sustainable energy future but to the outright bailout of uneconomic nuclear 
and fossil-fuel plants owned by investors," said Nader. 
Proposition 9 prohibits ratepayers from being charged to pay off $6 billion 
in bonds issued last year to finance a 10 percent cut in electricity rates 
that took effect last January. 
Furthermore, the initiative promises a 20 percent rate reduction by 
prohibiting utilities from charging ratepayers for the "transition" costs as 
they move nuclear and other uneconomical power plants into a deregulated 
system. 
The ballot measure is alarming to opponents, a broad coalition that includes 
nearly all of the major business, labor, agriculture and local government 
groups, some environmental groups, the Republican and Democratic parties, and 
the leading gubernatorial candidates: Democrat Gray Davis and Republican Dan 
Lungren. 
Opponents say the initiative would be a severe setback for the deregulation 
process needed to bring more competitive electricity prices to California, 
where rates have been 50 percent higher than the national average. The 
opponents also contend that the initiative could force taxpayers to pay off 
the $6 billion bond, drive up the cost of borrowing for state and local 
government by damaging bond credit ratings, and ultimately result in higher 
rates for residences and businesses. 
"I think it's fair to say Proposition 9 is categorically the most 
disingenuous, misleading, anti-consumer proposition ever put on the ballot," 
said Peace. 
With heavy funding from utilities, opponents have launched an extensive 
television ad campaign to defeat Proposition 9. Backers of the measure say 
their campaign will probably be limited to grass-roots work. Some polls have 
shown Proposition 9 with a lead. But the statewide Field Poll, which has 
decades of experience polling on ballot measures, showed the initiative 
trailing by a ratio of nearly 2-to-1. 
Mark DiCamillo, Field research director, said that successful initiatives 
usually have a lead of about 2-to-1 in early polling. DiCamillo said the 
results of the poll are "very ominous" for Proposition 9. The stranded issue 
At the heart of the dispute is what has become known as the "stranded" costs 
of the three large privately owned California utilities: San Diego Gas & 
Electric, Southern California Edison, and Pacific Gas and Electric. The rates 
that the utilities could charge in the past were set by the California Public 
Utilities Commission. In exchange, the utilities had little or no 
competition, and they were required to serve all creditworthy customers in 
their service areas. 
The utilities invested in nuclear power plants and, at the direction of 
regulators, also made long-term contracts at relatively high rates to ensure 
a stable supply of electricity from sources that minimized pollution. 
But in a deregulated market, the utilities cannot sell power from nuclear 
plants and their long-term contracts at competitive prices. Thus, the 
utilities' cost of paying off the debt on their nuclear power plants and 
other long-term contracts is said to be "stranded." 
The nonpartisan Legislative Analyst's Office said the nuclear-related 
stranded costs for the three utilities is about $10 billion. Estimates of 
their total stranded costs are as high as $28 billion. 
Peace and the backers of the deregulation legislation argue that it would be 
unfair and illegal to force the utilities to pay their stranded costs, 
because the state changed the rules of the game and the marketplace. A 
federal court ruled against a New Hampshire restructuring plan last year that 
would not have allowed a utility to recover its stranded costs. The utility's 
lawsuit argued that the plan violated the "contracts" and "takings" clauses 
of the U.S. Constitution. 
The California plan allows the utilities to pay off their stranded costs in 
two ways. The utilities received $6 billion from a bond issue that will be 
paid off by ratepayers over 10 years, and the utilities can add a Competition 
Transition Charge to ratepayer bills until March 31, 2002. Meanwhile, rates 
are capped, and the amount of the competition surcharge that could be added 
to ratepayer bills shrank or disappeared last summer as energy costs soared. 
There is no guarantee that all of the stranded costs will be paid off under 
the plan. Pacific Gas & Electric, a Northern California utility with 
hydroelectric power sources, is said to have plenty of room under the rate 
cap and may recover all of its stranded costs. But some think that San Diego 
Gas & Electric and Southern California Edison could fall short of full 
recovery. In the view of the backers of Proposition 9, the deregulation 
legislation is far too generous to utilities. The consumer advocates say that 
the shareholders of the investor-owned utilities should share risk as well as 
profits, particularly from the nuclear power plants. Harry Snyder of 
Consumers Union said that other states, such as Pennsylvania and Illinois, 
are not asking their ratepayers to pay all of the stranded costs of 
utilities. 
Proposition 9 would prohibit ratepayers from paying most of the transition 
costs and all of the bond payments, resulting in a rate reduction of at least 
20 percent. A disputed preliminary staff report from the state Energy 
Commission estimated that the reduction could be 32 percent. The bond deal 
Most of the controversy has centered on the $6 billion bond issue. 
After the amount was determined by the Public Utilities Commission, the bond 
was issued by private trusts created through the state Infrastructure Bank. 
The bond refinances some long-term utility debt at a lower interest rate. 
Peace said ratepayers save $1.2 billion on the amount that would be paid on 
the debt if there had been no refinancing. 
Furthermore, said Peace, the bonds allowed the deregulation legislation to 
include a 10 percent rate reduction that took effect last January. He said 
the lower rates not only benefit customers, but also thwart unscrupulous 
competitors. 
"I didn't want a bunch of fly-by-night operators coming in here with all of 
the rip-offs that we saw during the deregulation of telephones," said Peace. 
But the consumer advocates say that the bond payments will offset most of the 
rate reduction, making the alleged short-term savings from the deregulation 
little more than a shell game. 
"What they did was deny the 10 percent rate reduction," said Lenny Goldberg, 
a lobbyist for The Utility Reform Network, or TURN. "We ended up with a rate 
reduction of 2 to 3 percent by financing the entire thing and making us pay 
for 10 years." 
Opponents have been running television ads contending that passage of 
Proposition 9 could result in the state -- meaning taxpayers -- paying off 
the $6 billion bond, rather than the utilities and their shareholders as 
intended by the authors of the initiative. 
But many think that the courts, citing long-standing laws covering contracts, 
would be virtually certain to overturn the provision in Proposition 9 that 
prohibits ratepayers from paying off the bond. 
Under the existing deregulation, the bonds are in essence being financed by 
ratepayers. 
After talking to experts, the Legislative Analyst's Office concluded that the 
probability of taxpayers becoming responsible for the bond is "very low." The 
possibility is not even mentioned in the analyst's discussion of Proposition 
9 in the ballot pamphlet. 
One of the co-authors of the initiative, Mike Florio of TURN, conceded at a 
legislative hearing that the provision barring ratepayers from paying off the 
bond is likely to be overturned in court. If ratepayers are charged for the 
bond payments, the initiative has a fallback provision that is intended to 
require utilities to reduce their rates to offset the bond payments made by 
ratepayers. 
Consumer groups drop support 
California and other states began to move toward deregulation after a 1992 
federal law removed restrictions on the ownership of power-generating 
facilities and made it easier for independent power generators to use 
existing transmission lines. 
Consumer groups and some legislators said that a California Public Utilities 
Commission decision on deregulation guaranteed full recovery of stranded 
costs and was skewed toward businesses and big customers at the expense of 
residential users. 
At first, consumer groups welcomed the legislation put together by Peace and 
others as an improvement over the PUC's plan. 
A four-page letter from TURN and the San Diego-based Utility Consumers' 
Action Network expressed some reservations about the plan, but concluded with 
these words: 
"However, we will not oppose a bill which, under difficult circumstances, has 
successfully incorporated a number of the concerns of residential and 
small-business customers." 
But after more study, Proposition 9 was written by a group of consumer 
advocates, including Florio of TURN, Snyder of Consumers Union, and Harvey 
Rosenfield, whose Proposition 103 cut insurance rates a decade ago. Backers 
of the deregulation legislation accuse the consumer groups of "betrayal" and 
breaking a deal, while the consumer advocates denounce the legislation as a 
"fraud" and a "rip-off." 
Peace and Snyder, who once had a good working relationship, are now 
exchanging bitter barbs. 
Snyder said of Peace: "He is doing the bidding of the utilities, not the 
public, and he is really a disgrace to democracy." 
Peace said he has never been so disgusted with political opponents: "It isn't 
so much the issue, as it is their total disrespect for truth and for the 
process itself." 
The consumer groups used a contribution of about $800,000 from the Public 
Media Center, a nonprofit organization in San Francisco, to gather the voter 
signatures needed to place the initiative on the ballot. Opponents of the 
initiative have suggested that the Public Media Center laundered 
contributions from out-of-state energy companies and may have exceeded the 
political contribution limit for nonprofit organizations. Herb Chao Gunther, 
Public Media Center president, said the organization has received no 
contributions from out-of-state energy companies. He said the organization, 
which grossed $32 million during the last two years, is well within the 
contribution limits for nonprofit organizations based on revenue. 
"It's the classic defensive posture of trying to make us the issue," Gunther 
said of the allegations from Proposition 9 opponents. 
Proposition 9 
What it does: Changes a state law deregulating the electric industry. 
Electric utilities would be barred from charging customers to recover the 
cost of nuclear power plants. Customers could not be charged to repay $6 
billion worth of bonds issued last year to finance a rate reduction. Requires 
a 20 percent reduction in electricity rates, rather than the 10 percent 
reduction currently required by deregulation. Arguments for: 
{} Privately owned utilities pushed through a deregulation law that allows 
them to raise electric rates to pay off their money-losing investments in 
nuclear power plants. The bonds used to cover the cost of a phony 10 percent 
rate cut would be paid off by private utilities, not consumers or taxpayers. 
Consumers would get an honest 20 percent rate cut not covered by back-door 
payments to private utilities. A study suggests that rates eventually could 
be cut by a third. Supporters: 
{} Consumers Union, Ralph Nader, Harvey Rosenfield, The Utility Reform 
Network and League of Women Voters. 
Arguments against: 
{} Taxpayers would be liable for the $6 billion bond repayment, potentially 
causing a major cut in funding for schools and other services or a tax 
increase. Changing the source of repayment for the $6 billion bond would 
jeopardize state and local bond ratings. The plug would be pulled on a 
deregulation plan that eventually will produce permanent electricity rate 
reductions through a competitive market system. The poorly written measure 
would trigger a major court battle. Opponents: 
{} California Chamber of Commerce, California School Employees Association, 
California Organization of Police and Sheriffs, Environmental Defense Fund, 
Planning and Conservation League, California Taxpayers Association, 
Democratic and Republican parties.


3 PICS | 1 CHART; Caption: 1. No charge: Proposition 9 would prohibit 
utilities from charging ratepayers for much of the cost of uneconomical 
nuclear plants,including San Onofre. (A-19) 2. Proposition 9 (A-19) 3. Steve 
Peace: "I think it's fair to say Proposition 9 is categorically the most 
disingenuous, misleading, anti-consumer proposition ever put on the ballot." 
(A-19) 4. Ralph Nader: "Billions of dollars of ratepayer money has been 
committed . . . to the outright bailout of uneconomic nuclear and fossil-fuel 
plants." (A-19); Credit: 1. FILE PHOTO 2. UNION-TRIBUNE 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



BUSINESS
Only a few unplug | Despite deregulation, 99% of consumers stay with same 
power firms
Craig D. Rose
STAFF WRITER

10/13/1998
The San Diego Union-Tribune
1 2 3 6 7 8
C-1
(Copyright 1998)

State Sen. Steve Peace can take credit for co-authoring California's 
electricity deregulation bill -- legislation that appeared to revolutionize 
the power market and provide an array of choices to consumers. But when it 
comes to his own home, Peace hasn't revolutionized anything: His household is 
still drawing current from SDG&E. 
"Here is where my wife's skepticism is," said the Democrat from El Cajon. 
"And she makes the decisions."
The Peace family belongs to a very big club. 
About 99 percent of the state's consumers continue to receive electricity 
from their local utility, despite the nominally competitive market now in 
place. In fact, a full six months after deregulation of the state's $23 
billion power industry, the outcome remains short of electrifying. In August, 
about 17,000 of the 10 million utility customers switched to a new power 
provider. But during the same period, 3,300 switched back to their local 
utility. 
Overall, about 9 percent of the load in competitive markets has switched to 
new providers, with utility companies retaining the 91 percent of the market 
they've traditionally held. 
If consumers are underwhelmed, would-be competitors also express surprise at 
the lack of competition in the newly opened market. 
"Of the 300 that signed up (to be new power providers), only five or six are 
legitimate power providers," said Frederick Bloom, chief executive officer of 
Commonwealth Energy, which claims 39,000 customers. Under California's 
deregulation plan, SDG&E and other local utilities have retained their 
monopolies over regional power grids. But there is supposed to be competition 
in the power-generation business. 
Companies registered with the California Public Utilities Commission win the 
right to sign up customers and supply power to a state pool in amounts 
equivalent to the usage of their customers. And hundreds of companies signed 
up to compete. 
But the new power companies say that technical hassles and the burden of 
paying utilities about $28 billion for their unprofitable nuclear plants and 
other investments -- so-called stranded costs shouldered by all ratepayers -- 
is limiting their ability to truly compete. 
Many find they're unable to offer much if anything beyond the 10 percent rate 
reduction mandated to all ratepayers under the state's deregulation law. 
The payback of stranded costs, meanwhile, has provoked Proposition 9, a voter 
initiative that would rewrite terms of the open power market and cancel the 
payoff to utilities, while promising deeper rate cuts to small power users. 
If smaller users have found little to excite them in the new market, some 
larger commercial power users have found savings in the deregulated market. 
Collectively, these larger users have switched about 20 percent of their load 
to new providers. 
A small number of residential consumers also are unplugging from local 
utilities for green power, electricity said to be generated by means other 
than burning a fossil fuel. 
Peace says all this is what he expected. 
"This is probably the single most complex transition of any single market," 
Peace said. "I'm stunned by how smoothly it has gone." 
But Harvey Rosenfield, a consumer activist leading the effort to pass 
Proposition 9, says consumer indifference proves that California's 
deregulation is a "total fraud." 
"It's a devastating indictment of the way deregulation was crafted by the 
Legislature to destroy competition for residential ratepayers," Rosenfield 
said. 
Either way, deregulation has opened the door to small savings for at least a 
few local power users. 
The San Diego Association of Governments, which purchased about $40 million 
in power annually from SDG&E, hopes to cut about $1 million from its yearly 
power bill by purchasing its energy from Commonwealth Energy Corp. in Tustin. 
The savings were hard to find. 
The association had to twice bid out its power needs before finding a vendor 
that could provide savings worth the effort to switch. Even with a vendor in 
hand, the changeover has been prickly. 
"It's a very detailed process for switching each account," said Steven Sachs, 
senior planner with SANDAG. What had been expected to be a 60-day process is 
now nearing completion after more than three months, he said. "We hope the 
headache was mostly at the front end," Sachs said. "The real issue is that 
all local governments have to be in the energy market so it's a great chance 
for these people to learn about what is going on." Macy's department stores 
in San Diego have also unplugged from SDG&E and contracted for power from New 
Energy Ventures. 
The department store chain made the switch to save money, said Russ Brown, 
energy manager for Macy's Western division, but he declined to discuss the 
amount of savings the stores hope to achieve. 
"Nobody does this to lose money," Brown said. 
New Energy Ventures, which is supplying power to Macy's, meanwhile, touts 
itself as the biggest winner in the new market. The Los Angeles-based company 
says it's won about 40 percent of the power load now being supplied by 
companies other than the major utilities. 
The company says the key to its success has been shared-savings contracts 
with customers, in which the power company and its customers share the 
savings that are achieved through the relationship, said Michael Peevey, the 
company's chief executive officer. Smaller users 
Peevey noted that such savings are unavailable to residential and small 
commercial customers. The automatic 10 percent rate cut plus the stranded 
cost payments make it difficult for new companies to compete against the 
utilities for smaller power users. 
"We look forward to the time (in 2002) when the utilities industry's stranded 
costs are paid by customers so that we can begin to provide truly significant 
reductions in energy costs for customers," said Peevey. Arthur O'Donnell, 
editor of California Energy Markets, a weekly newsletter based in San 
Francisco, agreed that the rate cut and the burden of stranded costs has 
eliminated the potential for lower prices for most Californians. Attempting 
to compete on price under the current market structure can be fatal, 
O'Donnell added, who noted that at least three companies competing for 
residential customers have already defaulted, unable to deliver the power 
they promised consumers and forced to turn their accounts back to utilities. 
"That's the first solid evidence of people getting washed out of the market," 
said O'Donnell. 
Peace says small customers will have more significant choices in power 
company offerings within a few years. 
"It was always our preference in the Legislature that the transition to 
competition in the residential arena not be pushed fast because residential 
customers are vulnerable to scams," said Peace. Moving slowly will allow 
residential power users to become more sophisticated about their choice. In 
the meantime, he said, small customers have benefited from the 10 percent 
rate cut, plus from the boost to the state economy from the savings that 
larger companies are achieving in their power bills. 
Green power niche 
That said, green power has found a niche in the new market, although these 
offerings require customers to pay up to 25 percent above the cost of 
conventional power. O'Donnell calls green power the most robust sector of the 
new market. 
Among the leaders in the niche is Green Mountain Energy Resources of Vermont. 
The company declines to disclose the number of customers it has signed up 
beyond saying it's greater than 10,000 and should exceed 50,000 by year-end. 
Douglas Hyde, president of Green Mountain, believes that more than 20 percent 
of California's 11 millions power users are potential green power customers. 
"The lack of active price competition is not what we expected, but on the 
other hand we're convinced the value of the (green power) we bring to the 
market will excite people," said Hyde. "We sell cleaner resources to 
customers who care about the market." 
That customer base may extend beyond what many expected. Edison Source, for 
example, a unit of Edison International, has won a contract to supply power 
from renewable sources to several of Toyota Motor Sales USA's offices in 
California. Other commercial users have also gone green, said O'Donnell. But 
any revolution in the California market is unlikely for several years, he 
said. 
"What has happened is kind of what was expected," O'Donnell said. 
"Deregulation was not meant for residential customers." 
Trickle but no bolt 
A few thousand of SDG&E's 1.2 million customers each month request to leave 
the utility for a new power supplier. More than 97 percent have stayed put. A 
smaller number each month are filing requests to return to SDG&E. 1997 
Leaving SDG&E Returning to SDG&E 
Nov. 224 0 
Dec. 612 0 
1998 
Jan. 268 0 
Feb. 828 0 
March 1,892 12 
April 6,878 81 
May 1,562 104 
June 1,840 143 
July 5,074 375 
Aug. 5,897 242 
Sept. 4,225 2,214* 
*2,012 returned to SDG&E because one company defaulted.


1 ILLUSTRATION | 1 CHART; Caption: Trickle but no bolt | A few thousand of 
SDG&E's 1.2 million customers each month request to leave the utility for a 
new power supplier. More than 97 percent have stayed put. A smaller number 
each month are filing requests to return to SDG&E. (C-7); Credit: 1. KRIS J. 
LINDBLAD / Union-Tribune 2. UNION-TRIBUNE | SOURCE: SDG&E 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.