Adam Smith, Save Us! How to solve California's power crisis: market pricing.
Forbes, 07/09/01

INDIA: Enron India chief "optimistic" about Dabhol project.
Reuters English News Service, 07/09/01

INDIA: Enron chief to discuss Dabhol with Indian officials.
Reuters English News Service, 07/09/01

Trying to Run a Country Like a Corporation
The New York Times, 07/08/01

Privatise MSEB distn & generation: Godbole panel report-II
Press Trust of India Limited, 07/08/01

Tough-talking energy adviser could head state power authority
Associated Press Newswires, 07/08/01

NIGERIA: INTERVIEW-Nigeria power project's success fuels AES expansion.
Reuters English News Service, 07/07/01

FOCUS ON ENERGY / As the clock ticks, rifts remain in Calif. electricity 
refund talks
Houston Chronicle, 07/07/01

JUDGE URGES ON SETTLEMENTS FOR POWER OVERCHARGES
Portland Oregonian, 07/07/01

Sustainability isn't simple
The Seattle Times, 07/07/01

Campaign funds will pay for spots
The San Francisco Chronicle, 07/07/01



OutFront
Adam Smith, Save Us! How to solve California's power crisis: market pricing.
BY Lynn Cook

07/09/2001
Forbes
058
Copyright 2001 Forbes Inc.

Power Surge | Here's a novel scheme to balance supply and demand for 
electricity in California. Hint: It's called market pricing. 
Californians have a chance to keep the lights on this summer: Let commercial 
customers take the power they would ordinarily use but decide not to, and 
sell it back to the grid at a profit. Such "negawatt" auctions are already 
being tested in Atlanta.
Wal-Mart, say, could cool down its California stores by an extra three 
degrees during the nonpeak morning hours. In the afternoon, when temperatures 
and wholesale power prices soar, it could shut off air-conditioning and 
resell the power it would have consumed. Stores would be hot, but not 
unbearable. All Wal-Marts would get to remain open with cash registers 
operating instead of having to deal with scattershot closings and lost 
business because of blackouts. 
From steel fabrication plants to aluminum smelters that have already 
shuttered for the summer, heavy industry is itching to sell negawatts, says 
Marc Yacker, spokesman for the Electricity Consumers Resource Council 
representing industrial users. So why hasn't the Golden State seized a golden 
opportunity? Governor Gray Davis likes the idea, but not the 
proponents--Houston energy giants Enron and Reliant Energy--and any 
suggestion from Texas is, of course, anathema. Another little problem is that 
California's attorney general is on record favoring jail sentences for energy 
"profiteers." Let a big business like Wal-Mart make a spread on electricity? 
Horrors! 
Another hurdle: A multistate auction system of the sort that would rescue 
California would require overriding the federal Public Utility Holding 
Company Act, which prevents commercial and residential users from reselling 
juice to the grid. In Atlanta, where Georgia Power offers large industrial 
users a program called Daily Energy Credit, the utility was subject to 
approval only by a state commission, not the Feds, because it runs the 
negawatt program within its assigned borders and not across state lines. A 
bill pending in the U.S. House Energy & Air Quality subcommittee would have 
alleviated that. But in June the bill's sponsor, Representative Joe L. 
Barton, a Republican from Texas, yanked the relief package off the table, 
claiming House Minority leader Richard Gephardt, the Missouri Democrat, was 
planning to wreck the deal because it did not promote price caps. Gephardt 
denies the charge. 
A shame that it's so much harder to turn down the political heat than the 
central a/c.

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



INDIA: Enron India chief "optimistic" about Dabhol project.

07/09/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW DELHI, July 9 (Reuters) - The chief executive of Enron Corp's Indian arm 
said on Monday he was optimistic about working through the company's payment 
dispute with a local utility. 
"There are a variety of options facing us with the project. We are just 
trying to work through those," Wade Cline told reporters in the Indian 
capital after a meeting with the country's finance secretary.
"We are having good meetings with the ministry, so we are optimistic," Cline 
said. He added he had briefed the finance secretary ahead of Enron Corp 
Chairman Kenneth Lay's meeting with Finance Minister Yashwant Sinha. 
Lay is due to meet Sinha, the Indian power minister and senior officials in 
connection with the payment dispute between Enron's Dabhol Power Co and the 
Maharashtra State Electricity Board which has defaulted on payments of $48 
million to Dabhol. 
Enron's project is the largest direct foreign investment in India. Its first 
phase of 740 MW was completed in 1998, while a second phase adding another 
1,444 MW was almost complete when its contractor stopped work because of the 
dispute.

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



INDIA: Enron chief to discuss Dabhol with Indian officials.

07/09/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW DELHI, July 9 (Reuters) - Enron Corp Chairman Kenneth Lay is due to meet 
the Indian power minister and senior power ministry officials on Monday to 
discuss a dispute between the U.S. firm's Indian unit and a local utility, 
officials said. 
The firm's Dabhol Power Co and the Maharashtra State Electricity Board (MSEB) 
are locked in a payments dispute which provoked Enron to serve a preliminary 
termination notice to the utility, which in turn stopped buying power from 
Dabhol.
"He is scheduled to meet Power Minister Suresh Prabhu at 5:25 p.m. (1155 
GMT)," a federal power ministry official told Reuters. 
Lay was expected to discuss the future of the troubled Dabhol project, said 
the official who did not want to be identified. 
He said Lay would also meet senior officials in the federal power ministry 
before visiting Prabhu. 
MSEB, the sole buyer of Dabhol power, has defaulted on payments of $48 
million to Dabhol. 
Enron's project is the largest direct foreign investment in India. Its first 
phase of 740 MW was completed in 1998, while a second phase adding another 
1,444 MW was almost complete when its contractor stopped work because of the 
dispute.

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



Week in Review Desk; Section 4
The Nation: Look Sharp
Trying to Run a Country Like a Corporation
By DAVID E. SANGER

07/08/2001
The New York Times
Page 1, Column 5
c. 2001 New York Times Company

WASHINGTON -- WHEN President Bush was sworn in nearly six months ago, 
Washington was awash with loose talk of a ''C.E.O. presidency.'' The first 
president with an M.B.A. to his name, from Harvard Business School no less, 
would be the chairman of the board of the world's biggest conglomerate, his 
aides boasted, a leader who delegated to his cabinet of experienced C.E.O.'s. 
They said his administration would apply business discipline to a bloated 
government. And cabinet sessions do look a lot like the Business Roundtable, 
the organization of chief executives that, a few weeks ago, held part of its 
annual meeting in the East Room. Next to the president sits Dick Cheney, late 
of Halliburton, and Treasury Secretary Paul H. O'Neill, fresh from Alcoa. 
Donald H. Rumsfeld is also at the table, in his second run as defense 
secretary, after running G. D. Searle & Company.
Lower level officials, too, look and sound like business folk. ''We 
effectively are the C.E.O.'s of wholly owned subsidiaries of the Department 
of Defense,'' said Thomas E. White, who left Enron -- the Texas energy 
company that wields great influence here -- to become secretary of the army 
last month. 
But cracks are already beginning to mar the smooth veneer of Bush & Co.'s 
boardroom table. Part of the problem is Mr. Bush himself: He cast himself 
first as a Reagan-style figure -- though less detached -- who would define 
the missions his team would carry out. But on a host of issues, from energy, 
to stem cell research, to ending bombing exercises on the island of Vieques 
in Puerto Rico, Mr. Bush has second-guessed his C.E.O.'s and swept decisions 
back into the White House. 
At Bush & Co., the strategic plans are beginning to collide, and polls 
suggest that shareholders are increasingly unconvinced by aspects of the 
business plan. 
One cause of the president's troubles may be that his C.E.O. approach to 
running the government conspicuously lacks what Washington demands: the 
flexibility required to appeal to a variety of constituencies and to horse 
trade (something Mr. Bush did quite well in Texas). 
While Mr. Bush scored a quick, major victory with the tax cut, for example, 
his energy initiatives and his ''faith-based'' plan for federal aid to 
religious groups that perform social services have run into the kind of 
political cross-currents that are rarely seen in corporate America. 
IN both cases, the White House has shown little willingness to compromise and 
little ability to persuade voters to share its views. 
''They run the meetings on time but he doesn't have much emotional range in 
connecting these themes to the public,'' said Rahm Emanuel, a highly partisan 
aide to President Clinton, who never ran meetings on time but knew how to 
stir a crowd. 
Mr. Bush's style has also vexed America's allies. They made it clear during 
his trip to Europe that they are tired of being treated like foreign 
subsidiaries of America, Inc. So Mr. Bush listened, and said he was humbled. 
But as soon as he got home, he boasted to The Wall Street Journal that 15 
leaders of the European Union ''told me how wrong I was'' on global warming, 
but that he stood his ground because his position was ''right for America.'' 
Others say the problem is not Mr. Bush, it's the slowness of his C.E.O.'s to 
readjust to a world where they do not have the last word. It's a huge change, 
notes Peter G. Peterson, who moved from a chief executive's post to become 
commerce secretary in the Nixon administration, and who is now chairman of 
the Blackstone Group, the New York investment bank. 
In the private sector, he notes, Mr. Bush's successful former executives had 
''the undiffused power to implement their individual corporate visions.'' 
Not in Washington. ''When you are a C.E.O., you observe, listen, and 
decide,'' Mr. Peterson said. ''When you are a cabinet secretary, you observe, 
listen, testify, subject everyone to interagency review, get resistance from 
Congress, and then, more often than not, someone else decides.'' 
That should have come as no surprise to Mr. Cheney, Mr. Rumsfeld or Mr. 
O'Neill, who all had previous experience in government. ''And yet,'' said 
Thomas Mann of the Brookings Institution, ''they seem like somewhere along 
the line they forgot what they learned, and they've made some severe errors 
in judgment.'' 
TAKE Mr. Cheney -- former Congressman, former White House chief of staff, 
former defense secretary. To put together the administration's energy report, 
he drew on the best minds he knew from his life at Halliburton. Yet his 
reliance on one slice of his constituency -- his fellow energy executives -- 
only fed the perception that the Bush team is far too close to energy 
interests. 
Now, in a classic Washington battle, the General Accounting Office is 
demanding to know who Mr. Cheney met with as his task force developed its 
policy in secret sessions, and he has refused to reveal the list, fueling 
suspicions about who has his ear. 
''It was less than politically adept,'' one of Mr. Cheney's close friends 
conceded last week. ''But Dick had strong views, and they were reinforced by 
others he knew who had similarly strong views.'' 
Now Mr. Bush is trying to undo the damage, showing up in places like Sequoia 
National Forest, restoring $300 million in Federal money for energy 
conservation that Mr. Cheney cut out of the budget, and calling for Americans 
to use energy efficient devices that Mr. Cheney ignored. 
Similarly, Mr. Rumsfeld is backtracking from his go-it-alone approach. For 
months he left the Joint Chiefs in the dark about his missile defense plans, 
and conducted his top-to-bottom review in secret, with a few trusted aides. 
''It was very corporate,'' said one senior military official, ''but we had no 
idea what he was doing, and he had no idea why we do things the way we do.'' 
He has begun to change, but some of the Joint Chiefs remain wary of him. 
Then there is Mr. O'Neill, a longtime friend of Mr. Cheney and the chairman 
of the Federal Reserve, Alan Greenspan. But it's unclear who is setting 
financial strategy -- Mr. O'Neill or the White House chief economic adviser, 
Larry Lindsey -- and that has many of America's economic partners unsettled. 
''Who makes dollar policy?'' a top aide to Japan's new prime minister asked a 
reporter last week. So far, it's hard to say. 
Mr. O'Neill has also shown a penchant for speaking more frankly than the 
White House would wish. For example, when asked if it was smart to keep 
pressing for the elimination of the corporate tax at a time the 
administration is under fire for being too cozy with corporate America, the 
former Alcoa chief dismissed the whole issue. 
The corporate tax, he said, ''causes people to say we're getting those rotten 
bastards who are corporations, and we are taking money away from them.'' But 
''at the end of the day individuals pay all the taxes,'' he said, so by 
cutting taxes for Exxon, I.B.M. and Alcoa, he's really helping consumers. 
It is not an argument the White House wants to hear right now, and it seems 
to be looking for another way of doing business. The president is in the 
midst of what business schools might call a ''strategic refocusing.'' 
Issues that one might have expected to be decided by the C.E.O.'s have been 
recalled to the White House. It was Karl Rove, Mr. Bush's political guru, who 
told the Pentagon that its days of bombing Vieques were coming to an end -- 
even though the military has no alternative site to train its fliers. The 
issue was just too important to Latino voters, or so Mr. Rove thought. 
Similarly, the coming decision on federal funding for stem-cell research was 
sucked back into the White House as soon as it became clear that it involved 
not only science, but Catholics, anti-abortion groups and other key 
constituencies. 
Mr. Bush is likely to get into the middle of more decisions. With the surplus 
shrinking and government revenues declining, Mr. Rumsfeld is trying to figure 
out how to pay for missile defense and new conventional weapons, while Mr. 
Cheney wants funding for his energy agenda. 
AS Mr. Peterson says, ''when the aggregate of these individual visions don't 
add up, something, and in particular somebody, has to give.'' 
It's possible that these are the usual contortions any new team finds itself 
in as it struggles to its feet. But it's also possible that Mr. Bush, eager 
to apply the lessons of private enterprise to Washington, overestimated how 
transferable those lessons are. 
''The problem isn't the model,'' insists Jeffrey E. Garten, the dean of the 
Yale School of Management and author of the recent book, ''The Mind of the 
C.E.O.'' (Perseus, 2001.) ''The problem is the Bush variant of the model. 
''A good C.E.O. has to be able to execute the policy once it's set,'' he 
said. Mr. Bush, like many politicians, is already ''compromising and 
backpedaling. The C.E.O.'s aren't accustomed to dealing with that. And so 
they get antsy.''


Photo: President Bush and Vice President Cheney display their concern for 
punctuality in a photo released by the White House to commemorate the 
administration's first 100 days. (Reuters) 

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



Privatise MSEB distn & generation: Godbole panel report-II

07/08/2001
Press Trust of India Limited
(c) 2001 PTI Ltd.

Mumbai, Jul 8 (PTI) Even as India's western state of Maharashtra grapples 
over its energy crisis with US energy major Enron, Godbole Review Committee 
has recommended outright "privatisation" of the loss-making Maharashtra 
electricity board's (MSEB) distribution network and generation unit in the 
second part of its report to be submitted on July 11. 
"The report outlines path breaking reforms, which not only suggests 
restructuring of MSEB, but also makes its clear that its once-a-very-good 
board will be destroyed, if it continues as a government body", official 
sources told PTI here Sunday.
The report would be submitted to the state Chief Minister Vilasrao Deshmukh 
on Tuesday morning, sources said. 
"The committee has recommended that MSEB's government ownership should be 
dissolved, however, the control of transmission network should rest with it". 
"MSEB's current assets are close to worth Rs 120 billion and once cabinet 
approves the proposal following submission of the report, process like 
inviting tenders from private parties may be taken up", officials said. 
According to the report, the interested companies would have to infuse 
capital investment in the distribution and generation networks with an 
increased rate of return at about 4.8 per cent, sources explained. 
The 200-plus pages report draws a detailed road map for the need to privatise 
MSEB, a different model from what was implemented in other states, sources 
added. 
(THROUGH ASIA PULSE) 08-07 2001

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


Tough-talking energy adviser could head state power authority
By DANNY POLLOCK
Associated Press Writer

07/08/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

LOS ANGELES (AP) - With his trademark Stetson hat, cowboy boots and raspy 
Tennessee drawl, S. David Freeman has seized center stage in California's 
power crisis. 
Credited rightly or wrongly for keeping the lights on in Los Angeles as head 
of the Department of Water and Power, the swashbuckling chief energy adviser 
to Gov. Gray Davis is seen by many as the state's energy savior.
Others, however, call him a wily salesman and master of public relations 
whose dealings with energy providers are overly confrontational. 
"Maybe I'm a little of both," the 75-year-old Freeman said. "I know how to 
sell a vision." 
Indeed, Freeman's record is a conflicted one. He headed the nation's largest 
municipal utility when it was one of the few power providers in California to 
avoid the pain of deregulation. He kept the lights on and rates low for the 
city's 3.8 million residents while pulling the DWP from the brink of 
bankruptcy. 
He also was one of the first public officials to talk tough about power 
generators when energy prices soared, routinely accusing them of committing 
"highway robbery" and "ripping off" consumers. 
Yet Freeman himself has been accused of selling surplus power at premium 
rates as head of the DWP. 
His critics also note that Freeman was an early architect of deregulation who 
helped devise the key mechanisms of the state's energy market, and that he 
may not deserve the credit he claims for keeping the DWP in control of its 
own generating plants. 
Freeman makes no apologies for his record or his aggressive rhetoric. 
"It distinguishes me from all the mealy-mouthed wusses who talk in language 
people don't understand," he said. "It's a tough business we're in. We're not 
playing pattycake." 
Freeman made believers of many state officials while negotiating $43 billion 
in long-term energy contracts for the state. 
"We needed a pirate to negotiate with the pirates," said state Sen. Debra 
Bowen, D-Redondo Beach, who chairs the Senate Energy Committee. "We didn't 
want to send Snow White." 
Freeman is in line to head the newly created state power authority, a key 
element in his vision for ending the power crisis. The agency can issue up to 
$5 billion in revenue bonds to build and buy power plants. 
Freeman's faith in public power goes back to his days growing up in the 
shadow of the Tennessee Valley Authority, the grandaddy of all public power 
projects. 
"The TVA and religion were the two biggest things in life," recalled Freeman, 
who went to work for the TVA soon after college. 
In the mid-1960s, he caught the attention of the White House with a major 
study on energy conservation. President Lyndon Johnson made him the nation's 
first coordinator of energy policy, a role he maintained under presidents 
Nixon and Carter. 
Since then, Freeman has headed four public power agencies, including the TVA. 
"David Freeman has an almost religious belief in public power," said Jan 
Smutny-Jones, executive director of the Independent Energy Producers 
Association, which represents major providers such as Enron, Reliant and 
Dynegy. "He really believes that can save the day. But he's flat wrong for 
California ... The generation industry, with government stability, will bring 
new investment." 
In the mid-1990s, while Freeman was heading the Sacramento Municipal Utility 
District, state officials considering deregulation recruited him to oversee 
development of the Power Exchange and California Independent System Operator. 
The agencies were to be the cornerstones of deregulation, handling the 
auctioning of power and managing much of the state's transmission grid. 
"I thought deregulation might work," Freeman said about the project. "I 
wouldn't have done it if I'd have known what would happen." 
That turnaround is one of many Freeman has made to dodge the political 
fallout of deregulation, according to Brian D'Arcy, business manager of Local 
18 of the International Brotherhood of Electrical Workers, which represents 
6,000 municipal utility workers in Los Angeles and other cities. 
"He's reinventing history and people aren't calling him on it because they're 
trying to latch on to his star," said D'Arcy, who worked with Freeman after 
he took over the DWP in 1997. 
Freeman has been labeled a visionary for bucking deregulation and hanging on 
to power plants that have since provided a lucrative energy surplus for Los 
Angeles. 
D'Arcy said Freeman actually favored selling outdated DWP plants because 
plenty of cheap power was then available on the spot market. D'Arcy said he 
fought a sell-off to save jobs for union members. 
"He and I fought over (selling) generation, and that stalled it," D'Arcy 
said. 
Freeman, however, said he intentionally held on to those plants, a move that 
allowed the DWP to sell excess power and make more than $200 million. 
He said the agency charged reasonable rates for power under state guidelines, 
but critics said Freeman's opportunism undercuts his verbal assaults on 
private generators. 
"It's the pot calling the kettle black," Smutny-Jones said. "I don't think 
it's proper for him to be characterizing everyone else in a negative light." 
John Stout, a senior vice president with Reliant Energy, declined to comment 
specifically about Freeman. However, he said energy providers are being 
unfairly targeted by accusations of price gouging. 
"It's counterproductive,' he said. "It makes it difficult to sit down face to 
face to solve problems when someone has their finger in your face."

AP Photo LA101 

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


NIGERIA: INTERVIEW-Nigeria power project's success fuels AES expansion.
By Ebenezer Ademola

07/07/2001
Reuters English News Service
(C) Reuters Limited 2001.

LAGOS, July 7 (Reuters) - If successful, Nigeria's most ambitious independent 
power project will be a beacon for other foreign ventures in the country, the 
head of the project said at the weekend. 
Dennis Skipper, project manager for AES Barge Nigeria Ltd, the Nigerian 
subsidiary of the U.S. energy group AES Corp. , told Reuters in an interview 
that many prospective investors based in the U.S. and Europe are watching 
AES' attempt to generate 270 MW of electricity for Nigeria's power-starved 
commercial capital Lagos.
"There is a great deal of interest in the United States to invest in Nigeria 
and the success of this project is going to lead to an economic boom," 
Skipper said. 
"Each year people invest in doing things in Nigeria, the risk factor goes 
down - it has a snowball effect and attracts more investors," he said. 
But just in case the political situation in Nigeria, which ended 15 years of 
military rule in 1999, does turn for the worse, Skipper said AES has taken 
out a $200 million political risk insurance policy from the U.S.-based 
Overseas Private Investment Corporation (OPIC). 
"If somebody seizes power and seizes my (power-generating) barges, I can be 
paid," he said. 
But after overcoming six months of repeated delays, Skipper said early 
indications suggest the project will be a success and the company is has 
large expansion plans. 
READY TO SEND FIRST ELECTRIC BILL 
Last month the generating barges - positioned next to the country's biggest 
power plant at Egbin near Lagos - began injecting 60 MW into the national 
grid. 
Two additional barges are scheduled to be activated July 15, bringing the 
project up to 120 MW. Skipper said the project should be operating at its 
full capacity of 270 MW in September. 
Nigerians have been anxiously watching the barge project in the hope that it 
they will no longer have to rely solely on the erratic supplies of 
electricity from the the State-run National Electric Power Authority (NEPA). 
Africas' most populous country with more than 110 million people, needs about 
3,400 MW daily but NEPA's decaying facilities generate only 1,500 MW. 
Nigerians joke NEPA stands for "Never Expect Power Always". 
At the end of July, AES will send its first monthly bill to NEPA. 
"We've given away about $600,000 worth of electricity already," Skipper said. 
He said $270 million has been invested in the project so far and AES is 
negotiting with NEPA to expand the project by 60 MW to increase the capacity 
to 330 MW. 
TWO NEW PROJECTS IN WORKS 
Skipper said the company is in advanced negotiations with NEPA on two new 
projects The largest is a 800 MW extension to the Ughelli power plant in 
Nigeria's oil-rich Delta state. 
"We have actually built the engineering model that will be taken," he said. 
"We have a financial proposal that in principle have been agreed to, all we 
need to do is finalise the PPA (power purchase agreement)." 
The second project is a 548 MW land-based power plant at Agbara, Ogun State, 
an industrial centre near lagos. 
When the Nigeria government privatises NEPA next year, Skipper said AES would 
like to buy the Egbin power plant. 
"AES is coming here to stay, we are not just here to make few thousand or few 
million dollars and go home," Skipper said. "We came here to do business in 
Nigeria, to be a Nigerian company." 
To demonstrate AES's commitment to Nigeria, Skipper said the company is 
creating a $500,000 education fund, which will provide scholarships and 
promote education in the country. 
AES bought majority interest in the barge power project from he original 
contractor Enron Corp. in December. Nigerian energy firm YF Power Nigeria 
owns the remaining shares in the business.

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


NEWS
FOCUS ON ENERGY / As the clock ticks, rifts remain in Calif. electricity 
refund talks
DAVID IVANOVICH, LAURA GOLDBERG
Staff

07/07/2001
Houston Chronicle
3 STAR
1
(Copyright 2001)

WASHINGTON - California Gov. Gray Davis vowed Friday not to back down on his 
demands electric power companies cough up $8.9 billion for overcharging the 
state for electricity in the midst of a power crisis. 
Negotiators from California and a group of power producers - including 
representatives from Houston-based Reliant Energy, Enron Corp., Duke Energy 
North America, Dynegy and El Paso Corp. - agreed to work through the weekend 
in the hopes of resolving their refund disputes.
But with a Monday deadline fast approaching and the rhetoric still 
confrontational, the two sides still sounded far from a negotiated 
settlement. 
The Federal Energy Regulatory Commission last month ordered the parties try 
to reach an agreement. Otherwise, administrative law Judge Curtis L. Wagner 
Jr., who is overseeing the negotiations, will craft his own compromise. 
Wagner had threatened to issue his preliminary terms on Friday, only to back 
off that warning to give the parties more time to haggle. 
"We have several settlement offers pending," Reuters quoted Wagner as saying 
Friday. Wagner added: "They could meet a consensus in a day or two if they 
really wanted to." 
Tamara Young-Allen, a spokeswoman for the commission, said Wagner is "very 
optimistic. The talks are moving along." 
But Wagner's optimism is not echoed by other parties at the bargaining table. 
"Litigation is basically where we're headed," one industry source said early 
Friday. 
Davis claims the power companies overcharged the state to the tune of $8.9 
billion between May 2000 through May 2001. 
"Will I take less than $8.9 billion? No," the California governor told 
reporters Friday. 
Davis, however, has instructed his negotiators to make clear he is open to 
several forms of repayments, including renegotiating some existing contracts 
or contracting for future power at below-market rates. 
California has been struggling to sign long-term power supply contracts, in 
an effort to get away from its reliance on the volatile spot market, which 
left the state's power companies vulnerable to the huge price spikes last 
winter. 
As of June 12, the state had signed deals totaling $42.8 billion with 18 
different suppliers. As a result, California purchased only 1.9 million 
megawatt hours of power on the spot market, down from 4 million megawatt 
hours in May, Davis said. 
Earlier this week, Davis' chief negotiator in the talks, California 
Independent System Operator Chairman Michael Kahn, proposed allowing those 
companies that have signed long-term deals to renegotiate those contracts for 
lower rates. These discounts could be used to cover the refunds demanded by 
the state, an industry source said. 
But Davis said Friday he wants a substantial portion of the $8.9 billion in 
the form of refunds. 
The industry source complained that Davis has not been willing to go far 
enough to reach a settlement. 
Davis said Friday the state would not be willing to offer to drop ongoing 
investigations that could result in civil or even criminal penalties as part 
of those negotiations. 
Companies from Houston, Oklahoma and North Carolina took advantage of 
California, Davis said, "trying to suck us dry." 
The power companies, meanwhile, are firing their own salvos. 
In a report filed with the U.S. Securities and Exchange Commission Friday 
titled "Myths Debunked: The Real Story of Wholesale Power Costs in 
California," Reliant assailed the "disingenuous attempts . . . to paint the 
picture that independent generators have been principal beneficiaries of the 
increase in wholesale power costs in California." 
Joe Bob Perkins, president of Reliant Energy's Wholesale Group, argued in an 
interview that the higher wholesale prices in California were not caused by 
generators trying to push up their operating margins. 
Instead, Perkins argued, those prices were the result of a number of factors, 
including high natural gas prices and a greater reliance on gas-fired power 
generators because hydroelectric power was short. 
Reliant's operating margin for its California operations between October 2000 
through May 2001 - the peak of the power crisis - were $41.34 a megawatt 
hour, the company revealed Friday. 
This margin - which represents the profit for their generating operations per 
megawatt hour - compares with $27.64 per megawatt hour in all of 2000, $11.21 
in 1999 and $37.52 in 1998, the company said in its filing. 
Between 1998 and 2001, the company's fuel costs rose seven-fold while its 
sales quadrupled, said Reliant, parent company of Houston utilities Reliant 
HL&P and Reliant Entex. 
Reliant officials examined which companies collected the $27 billion paid for 
wholesale power in California last year. 
More than half the increase in cost, Reliant officials noted, went to 
California's investor-owned utilities, San Diego Gas and Electric, Southern 
California Edison and Pacific Gas & Electric, as well as the publicly-owned 
Los Angeles Department of Water and Power. 
"The real money stayed in California itself," Reliant said in its filing. 
Gary Ackerman, executive director of the Western Power Trading Forum, a trade 
association of wholesale power buyers and sellers in the Western states, 
argued that "if the state of California insists on its fictitious number of 
$8.9 billion, that won't help the negotiations any," he said. 
If the parties fail to reach an agreement, Wagner will have one week to 
devise his own settlement plan and present that recommendation to the full 
Energy Regulatory Commission. 
He said the talks would likely continue up to the midnight Monday deadline. 
"Three minutes before closing time is when the most serious negotiations take 
place," he said.

Mug: California Gov. Gray Davis: "Will I take less than $8.9 billion? No'' 
(p. 16) 

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


BUSINESS
JUDGE URGES ON SETTLEMENTS FOR POWER OVERCHARGES
TOM DETZEL - The Oregonian

07/07/2001
Portland Oregonian
SUNRISE
B01
(Copyright (c) The Oregonian 2001)

Summary: About $15 billion in refund claims for electricity overcharges is at 
issue at a settlement conference ordered by FERC 
Optimistic that he can meet a looming deadline, a judge on Friday pushed to 
keep a surge of momentum going in talks to settle as much as $15 billion in 
refund claims for electricity overcharges across the West.
"We are making progress. We're swapping offers back and forth," said 
administrative Judge Curtis L. Wagner, who earlier had threatened to issue 
his own preliminary refund plan to give the negotiations a jolt. 
Wagner said he dropped the threat after it served its purpose and to avoid 
jeopardizing a deal before Monday, when the clock runs out on the 15-day 
settlement conference ordered by the Federal Energy Regulatory Commission. 
Oregon and Washington are among the parties at the meeting, which is aimed at 
discharging financial and legal claims spawned by California's power 
deregulation fiasco and the staggering wholesale electricity prices it 
exported. 
Huge sums are at stake. 
California officials have demanded $8.9 billion in refunds for the year ended 
in May, and some have put overcharges elsewhere across the 10 other states 
connected to the Western power grid at as much as $6 billion. 
Power suppliers such as Reliant Energy, Mirant, Dynegy, Enron and Duke Energy 
dismiss charges of price gouging and counter that they haven't been paid for 
billions of dollars worth of electricity sales into California. 
Caught in a complicated middle ground are such Northwest utilities as 
Portland General Electric, PacifiCorp, Puget Sound Energy, Avista Utilities, 
Idaho Power, plus the Bonneville Power Administration and many consumer-owned 
utilities. 
In some cases, those utilities acted on both sides of the high- flying 
wholesale power markets of the past year, benefiting from the extreme prices 
when they sold electricity and paying a hefty premium when they were buyers. 
How they might fare in a settlement is far from clear, and results might vary 
greatly from utility to utility, said Bob Jenks, executive director of the 
Oregon Citizens' Utility Board, a ratepayer advocacy group. 
"For consumers in Oregon, it goes both directions," Jenks said. "If refunds 
are ordered, some customers may see benefits from that, and a credit on their 
bill. Other customers may see a charge on their bill." 
He said PGE, for instance, made enough money off power sales last year to 
withdraw a proposed 17 percent rate increase. Meanwhile, PacifiCorp was 
forced to buy heavily into the wholesale market after its Hunter power plant 
in Utah suffered a five-month generator failure. The utility wants a 15 
percent rate hike starting Aug. 1. 
Participants in the talks are under order to keep details confidential, but 
Wagner on Friday shed light on a few areas: 
* He said separate settlement offers were being prepared for his review by 
Pacific Northwest parties and by utilities from outside California, but he 
declined to clarify which utilities or states were behind each offer. 
"There are so many parties in it, it's hard to keep them all in my head," the 
judge said, explaining that some parties were represented in both offers. 
* He described as "encouraging" statements by California Gov. Gray Davis that 
the state might reduce its demand for refunds if power suppliers agreed to 
renegotiate $43 billion in long-term power sales contracts with power 
providers in the state. 
Davis seemed to suggest for the first time Wednesday that renegotiating terms 
of those contracts could be a way to deal with California's refund claim. 
"We've offered various ways in which people could get us $8.9 billion," Davis 
told the San Jose Mercury News in California on Wednesday. "You can 
renegotiate our existing contracts and save us money. However you want to do 
it, it's just got to net out close to $8.9 billion." 
On Friday, however, Davis' chief representative at the conference stressed 
that the state wasn't budging from its refund demand going into the talks. 
"We came here saying we wanted $8.9 billion and we would justify the numbers, 
and we want $8.9 billion," said Michael Kahn, chairman of agency that runs 
California's power grid. "We have justified the numbers at every turn." 
Kahn seemed to echo Wagner's optimism about the discussions, saying the judge 
was doing "everything in his power" to reach a deal. 
The settlement talks began June 25 at the insistence of FERC, which days 
before ordered a broad expansion of market-based price controls across the 10 
Western states that took collateral damage in the California-induced crisis. 
Wagner said he had no plans to extend Monday's deadline. If no settlement is 
reached, he is instructed to recommend one to FERC. That's one reason why he 
considered putting out his own preliminary refund plan. 
"It was just to put folks on notice that if they didn't settle, that this 
might occur," Wagner said. 
You can reach Tom Detzel at 503-294-7604 or by e-mail at 
tom.detzel@newhouse.com.

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


Opinion
Sustainability isn't simple

07/07/2001
The Seattle Times
Fourth
B5
(Copyright 2001)

TWENTY-SEVEN wind turbines set to produce "green" electricity for 4,300 homes 
have been stopped dead by a law to protect endangered species. 
Who said sustainability was simple?
The species being so expensively saved is the Washington ground squirrel, 
Spermophilus washingtoni. Gray with white spots, it is 5 to 7 inches long, 
with a short, black-tipped tail and hints of red about the nose. It burrows 
among the sagebrush along the Washington-Oregon border east of the bend in 
the Columbia River. 
Hardly a Goliath, the squirrel is asleep seven months of the year. In Oregon, 
it lives only in three counties, and the state has listed it as endangered. 
The machines it stops are 21st-century versions of the old Dutch windmill. 
Made of steel alloys and guided by computers, they sip no oil or natural gas 
and emit no carbon dioxide or sulfur dioxide. 
Their fuel is free, though the power they generate is not because the 
machines themselves are so expensive. They generate power at about $50 per 
megawatt-hour--double the price of the late 1990s, but a nice price today. 
The Stateline Wind Farm was to have created electricity for 70,000 homes. The 
squirrel reduces that to 65,700. Presumably, the difference is to be made up 
from Dynegy, Enron, B.C. Hydro or one of the other scalpers who now sell 
power. 
Do not curse the squirrel. Just be thankful it is not yet listed in 
Washington.

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


NEWS
Campaign funds will pay for spots
Robert Salladay
Chronicle Sacramento Bureau

07/07/2001
The San Francisco Chronicle
FINAL
A.6
(Copyright 2001)

Gov. Gray Davis will begin a series of radio ads next week defending his 
handling of the energy crisis -- further proof that political campaigning has 
become a permanent sport. 
Davis political adviser Garry South said the ads are designed to fill an 
"information void" among Californians about what the state has accomplished. 
But they are playing statewide just as millions of dollars of TV ads financed 
by Republicans and power companies are attacking Davis.
"The campaign season has started early," said Rob Stutzman, a consultant with 
the state GOP, which has not been involved with the anti-Davis TV spots 
running since June 19. 
Davis' 60-second radio spot takes the form of an "energy update," where the 
governor informs listeners that "we" have licensed 16 new power plants, 
including three Davis opened this month, and that "conservation is the best 
way to fight back against high energy prices." 
Davis' ads convey the same information as a series of state- financed "Flex 
Your Power" ads run by the Department of Consumer Affairs, only those ads 
don't mention Davis. Davis' campaign fund, worth well above $25 million, is 
paying for the $150,000-per-week radio spots to avoid accusations he is using 
state money to finance his political ambitions. 
South dismissed the notion that the radio ads came in response to the TV ads 
that make Davis a target, saying the governor's poll numbers are actually 
going up. He said people laughed at the ads attacking the governor as 
ridiculous, particularly one showing Davis in Red Square. 
"One of the reasons we chose this ('energy update') tack," South said, "is 
that people simply are not in the mood to have some full- out firefight and 
some partisan battle about this problem. They are in a just-the-facts-ma'am 
mood." 
Stutzman said he didn't disagree with South about the ill-timed and partisan 
nature of the TV ads, which are financed out of Washington, D.C., but he said 
the governor is also launching a political firefight of his own. 
"These ads, even though the the first iteration of them sound like public 
service ads, very much are political ads," Stutzman said. "The reason they 
may be poor political ads is they use the governor's voice, and I don't think 
he has any credibility on this issue." 
Davis already has updated his 2002 campaign Web site, www.gray- davis.com, 
which includes an odd-looking caricature of the governor and a photo of Davis 
standing with actor Martin Sheen, who plays a president on the TV show "The 
West Wing." The Sheen photo dominates the home page. 
"What we're trying to do with the Web site is have a little fun with it," 
said South, who declined to say whether Davis would run against President 
Bush in 2004. 
Last month, a conservative group with links to Republicans and energy 
companies began running a series of ads blaming Davis for the energy crisis 
and saying the state was suffering from "Grayouts." 
Time magazine reported last month that hundreds of corporations had 
contributed to the ads attacking Davis, who has accused Texas firms such as 
Reliant Energy of "unconscionable price-gouging." 
Reliant, which donated $10,000 to Davis before the energy crisis, has 
contributed to the anti-Davis advertising effort, according to Time, and the 
American Taxpayers Alliance hopes to raise as much as $25 million to keep the 
ads running in California through July. 
Scott Reed, a former campaign manager for Bob Dole's failed 1996 presidential 
bid, formed the American Taxpayers Alliance in Washington to raise money for 
the 30-second ads. He has refused to name his donors, and did not return a 
call for comment yesterday. 
Even though the 2002 elections are more than a year away, Republicans are 
worried they are losing ground in Congress on Bush's energy policy, and 
Davis' popularity has slipped somewhat in the polls. 
But the ads mounted by both sides also are designed to change public policy. 
Davis recently hired former Clinton-Gore campaign and White House strategists 
Chris Lehane and Mark Fabiani, and Davis' public presence and political pull 
dramatically increased. 
Another conservative group, the 21st Century Energy Project, will begin 
running TV ads next week in Washington to promote expansion of the energy 
supply, more drilling and nuclear energy. 
The $500,000, two-week advertising purchase is being coordinated by Ed 
Gillespie, a former campaign strategist for Bush and a consultant for 
Houston's Enron Corp., the world's largest energy trader. 
Gillespie said yesterday his group wants to promote a "conservative, 
market-oriented message" about energy, to counteract environmental groups 
such as the Sierra Club. He said environmentalists aren't addressing the gap 
between supply and demand, except through strict conservation. 
"We're trying to shape the debate, because it's been pretty one- sided so 
far," Gillespie said.

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