Please see the following articles:

Sac Bee, Tues, 5/8:  "Hot spell forces blackouts: More outages 
are probable today in a likely preview of a long, hot summer"

Sac Bee, Tues, 5/8:  "$13.4 billion bond bill clears split Assembly"

Sac Bee, Tues, 5/8:  "Dan Walters: Summer-like heat brings blackouts, 
partisan fingerpointing"

Sac Bee, Sun, 5/6:  "How Californians got burned"              (Jeff Skilling 
quoted)

SD Union, Tues, 5/8:  "Heat wave spawns statewide blackouts"

SD Union, Tues, 5/8:  "Bond clears Assembly with a partisan twist"   (Enron 
mentioned)

SD Union (AP), Tues, 5/8:  "Refinery merger could raise California gas prices"

SD Union (AP), Tues, 5/8:  "Enron could supply universities with 
state-subsidized power"

LA Times, Tues, 5/8:  "Edison's agony
For CEO, Life in 'Foxhole' Means Little Sleep, Peace"

LA Times, Tues, 5/8:  "Power Cut to Parts of State"

LA Times,Tues, 5/8:  "Landlords, Janitors Join in Plan to Save Energy"

LA Times, Tues, 5/8:  "Effort to Repay State for Power Is Delayed"

LA Times, Tues, 5/8:  "Blackouts Mean More Than Inconvenience for Disabled"

LA Times, Tues, 5/8:  "In 1st Hearing, PUC Urged to Lift Rate Hike"

LA Times, Tues, 5/8:  "An Oilman's Dream"       (Commentary)

LA Times, Tues, 5/8:  "Cheney's an Oaf on Conservation"   (Commentary)

SF Chron, Tues, 5/8:  "Secret power deals contain hidden costs 
THE CLAUSE: A link to natural gas prices "

SF Chron, Tues, 5/8:  "Bush won't budge on fuel prices 
Despite fears of a $3 gallon, he will oppose controls"

SF Chron, Tues, 5/8:  "Hot weather sparks new round of blackouts 
SUPPLIES LOW: Usage keeps climbing as temperatures surpass 90 degrees "

SF Chron (AP), Tues, 5/8:  "Developments in California's energy crisis" 

SF Chron (AP), Tues, 5/8:  "Blackouts hit California as spring heat wave sets 
in"

Mercury News, Tues, 5/8:  "Scorching heat sparks rolling blackouts"

Mercury News, Tues, 5/8:  "More than 100,000 customers hit by power blackouts"

Mercury News, Tues, 5/8:  "Carmaker Says Outages Could Damage Equipment,
Harm Efficiency"

Mercury News, Tues, 5/8:  "SF Airport plans to run extra generators"

Mercury News, Tues, 5/8:  "EXEMPT FROM BLACKOUTSThe state Public Utilities
Commission exempts the following energy users from rolling" 

OC Register, Tues, 5/8:  "Blackouts back, businesses cope"

OC Register, Tues, 5/8:  "Shortage somewhat a surprise"

OC Register (AP), Tues, 5/8:  "Energy notebook
Gas pipeline expansion OKd to benefit Southwest"

OC Register, Tues, 5/8:  "Energy borrowing OKd
Democrats in Assembly support the $13.4 billion bond over GOP opposition"

OC Register, Tues, 5/8:  "Jones has bright ideas on electricity"   
(Commentary)

Individual.com (Businesswire), Tues, 5/8:  "Power Scramble/ A Forbes.com 
Special Report"

Individual.com (Bridgenews), Tues, 5/8:  "[B] Calif. ISO says power 
blackouts this evening unlikely"

Individual.com (PRnewswire), Tues, 5/8:  "Stage 2 Electrical Emergency 
Declared;
SCE to Curtail 'Load' for Some Customers"

Individual.com (AP), Tues, 5/8:  "Rolling Blackouts Hit California"

Energy Insighty, Tues, 5/8:  "Hearts, minds, & pocketbooks"
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Hot spell forces blackouts: More outages are probable today in a likely 
preview of a long, hot summer.
By Carrie Peyton and Dale Kasler
Bee Staff Writers
(Published May 8, 2001) 
It's starting. 
A brief wave of forced blackouts swept across California on Monday, in a 
prelude to what could become the summer of our disconnect. 
Lights and air conditioners began flicking off just before 5 p.m., affecting 
more than 100,000 homes and businesses from San Juan Capistrano to the 
Central Valley for about an hour. 
Too many air conditioners straining against an early heat wave and too many 
power plants temporarily closed for repairs or upgrades combined to overload 
the state's electric grid, according to the California Independent System 
Operator. 
"The load ended up 2,500 megawatts higher than what I saw (forecast) when I 
walked in this morning," said Jim McIntosh, ISO director of operations. 
He said more blackouts are "probable" today, with more than one-fourth of the 
state's power plants off-line and temperatures expected to sizzle. 
In the Sacramento region, the outages disrupted stores and restaurants and 
darkened traffic lights in Elk Grove, triggering at least one accident. 
Hungry diners were turned away at Tecate Grill in Elk Grove, Target shoppers 
were shooed out after paying for purchases at battery-operated cash 
registers, and disappointed browsers clustered outside Borders Books. 
"They didn't believe they had to leave," said Borders manager Tammi Kole. 
Even grid operators were a little taken aback by the quick flurry of 
blackouts, ordered at 4:45 p.m., less than three hours after McIntosh said at 
a press conference that the state probably had escaped power disruptions for 
the day. 
"We thought things were under control," he said later, but an expected late 
afternoon decline in demand never materialized, and no more electricity could 
be lined up to bridge the gap. 
He told the state's utilities to cut off 300 megawatts of power, which 
affected about 103,000 homes and businesses, including 4,600 served by the 
Sacramento Municipal Utility District and 54,000 served by Pacific Gas and 
Electric Co. 
PG&E's outages were confined mostly to urban areas with computerized 
switching because the blackouts were ordered on such short notice. 
Southern California Edison wound up blacking out 36,000 customers in 40 
cities, and San Diego Gas & Electric cut power to about 8,600 customers in 
two counties. 
It was California's first glimpse of what a hot summer could do to its frayed 
electric grid, which already has seen January and March blackouts that were 
widely acknowledged to be triggered at least partly by financial chaos in 
electric markets. 
"This is going to be a long summer. We're at risk of blackouts now all the 
way through October," said Mike Zenker of Cambridge Energy Research 
Associates, a consulting firm. 
Industry officials and analysts predict there could be 20 to 36 days this 
summer of rolling blackouts, when electricity is deliberately cut off to keep 
the power grid from collapsing under the strain of overuse. 
Power use this summer will go well above Monday's peak of about 33,000 
megawatts, but late spring is expected to be touch-and-go because so many 
power plants are being retooled to get ready for the summer crunch. 
One unit at PG&E's Diablo Canyon nuclear plant is closed for refueling, part 
of San Onofre nuclear plant is still down for fire-related repairs, and 
numerous smaller plants are undergoing maintenance or air pollution upgrades. 
"May and June are promising to be the worst months of the year," said Gary 
Ackerman of the Western Power Trading Forum, an association of generators. 
"This is something we're going to have to get used to." 
The ISO and utilities around the state repeated their calls for consumers to 
raise thermostats, draw blinds, shut off unneeded appliances and do 
everything possible to put a damper on power usage from about noon through 
early evening. 
"We're going to need conservation," said the ISO's McIntosh "As we roll into 
summer, that's the only way we're going to avoid large-scale interruptions." 
The ISO has forecast potential blackouts for any day when demand soars above 
40,000 megawatts, which happened 34 times last summer. 
But as 2001 has shown five times already, blackouts can occur at far lower 
usage levels, and no one can really say for sure how bad it might get. 
In Sacramento, SMUD is trying to recruit more people for a wide range of 
conservation efforts, including a revised "Peak Corp" program, which will pay 
volunteers for each time it remotely shuts off their air conditioners. 
"I don't think it's ever been more important," said Mike Weedall, SMUD 
manager of energy services. 
"We've got a real challenge here in California, and energy efficiency, 
despite what the vice president says, is a very important option and a very 
viable option." 
Earlier Monday, unusually warm weather, refueling and repair closures at four 
Western nuclear plants, and a three-hour blip in power imports from Canada 
combined to bring the grid within five minutes of blackouts, said McIntosh. 
BC Hydro, a government-run Canadian utility, refused to deliver promised 
power for several hours unless it received more money up front from the 
state, according to the state Department of Water Resources. 
The state had to wire the money before shipments were resumed. BC Hydro 
officials declined to comment. 
In addition, temperatures were above normal for much of California. 
Sacramento topped out at 96 degrees downtown, compared with a normal high of 
79 degrees for May 7, according to the National Weather Service. 
High temperatures -- and the risk of rotating outages -- are forecast to 
continue today and decline slightly on Wednesday. 
If more blackouts are needed today, PG&E outages will resume with Block 14 
and then continue on, if needed, into Blocks 1 and 2. SMUD neighborhoods next 
in line for outages include parts of Galt, Elk Grove, Laguna West, Walnut 
Grove, Meadowview, Florin/Fruitridge, Pocket, Greenhaven and South Land Park. 
Monday's outage triggered a two-car crash about 5:30 p.m. at Bruceville Road 
and Kilconnell Drive, where traffic signals were not working, according to 
the California Highway Patrol. 
Robin Lake of Elk Grove was take by ambulance to the hospital with head and 
shoulder injuries. Two people in the other vehicle were not injured. 

The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com. 
Bee Staff Writer Ted Bell contributed to this report.


$13.4 billion bond bill clears split Assembly 
By Jim Sanders
Bee Capitol Bureau
(Published May 8, 2001) 
With billions in electricity bills clouding California's budget, state 
lawmakers passed legislation Monday to allow the sale of what is believed to 
be the largest revenue bond in U.S. history to help solve the current crisis. 
The planned sale of up to $13.4 billion in revenue bonds is designed to repay 
the general fund for power purchases made since January and give the state a 
multibillion-dollar pot to draw from to keep the lights on until more power 
plants are built. 
"We have to do it," Assemblyman Fred Keeley, D-Boulder Creek, told 
legislators who were deeply divided along party lines on the bond proposal. 
"We don't have to like it, but we have to do it." 
The Assembly voted 49-29 to authorize the bonds, with only one Republican, 
Anthony Pescetti of Rancho Cordova, supporting the measure. 
The bill failed to receive the two-thirds majority needed for an urgency 
measure, however, meaning that bonds can't be sold until 90 days after the 
end of the Legislature's current special session to address the energy 
crisis. 
The special session is expected to be discontinued this week after Senate 
action on the bill, SB 31x. That vote could come today or Wednesday. 
The measure is designed to keep the state's energy crisis from forcing deep 
cuts in public services next year, but it means that ratepayers would foot 
the bill far into the future for electricity consumed this year and next. 
The multibillion-dollar bonds would be repaid through rate increases recently 
proposed for customers of two debt-ridden private utilities -- Pacific Gas 
and Electric Co. and Southern California Edison. 
A heated, two-hour Assembly debate before the final vote Monday revealed a 
deep philosophical split over how best to shoulder the financial burden for 
an energy market that has spun wildly out of control. 
Republicans argue that using bonds to pay for electricity is like using a 
credit card that would result in massive, long-term interest expenses and 
keep rates high long after new plants have been built and the market 
stabilized. 
"For heaven's sake, when is this going to come to a stop?" asked Assemblyman 
Tim Leslie, R-Tahoe City. 
Republicans argued that California should bite the bullet now and allocate $5 
billion of the state's projected budget surplus to help foot the bill for 
about $6 billion in electricity purchased since January. 
Since that approach would call for all Californians to help rescue customers 
of private utilities, the Republican plan proposed to provide a $1.5 billion 
rebate that would offset any losses to residents served by public utilities. 
But Democrats ripped the plan as a boon to businesses -- which buy the vast 
majority of power in California. They also argued that raiding the general 
fund would jeopardize funding for vital public services ranging from 
education to health care. 
Gov. Gray Davis blasted Republicans for withholding their votes and forcing 
the 90-day wait before the bonds can be sold. 
"The Republican Party that brought us this disastrous energy deregulation 
scheme is now obstructing its solution," the Democratic governor said. 
"Their decision to play partisan politics with the energy crisis seriously 
complicates the budget process and could ultimately threaten our economy." 
Specifically, SB 31x calls for: 
Sale of up to $13.4 billion in revenue bonds. Davis has said about $12.5 
billion is needed to weather the crisis until adequate new power is added to 
the state's supply by Jan. 1, 2003. 
An expedited review of legal challenges to avoid lengthy, potentially 
devastating delays in implementing the state's plan. 
No bond proceeds to be used to reduce the debts of private utilities. 
No general fund money to be used after Nov. 15 for power purchases, with the 
possible exception of $500 million for short-term cash flow purchases. 
Since the bonds can't be sold for at least 90 days, Monday's legislative 
action apparently clouds the state's plan to arrange $4.13 billion in 
short-term financing to repay the general fund prior to the new year's 
budget, Keeley said. 
The state conceivably could craft a contingency budget, with one level of 
spending if the bonds are sold and another if they are not, Keeley said. 
Officials were assessing their options Monday, and some still held out hope 
that agreement could be reached between Republicans and Democrats on a bill 
that could allow the immediate marketing of bonds. 
Assembly Speaker Robert Hertzberg said he planned to meet with the Republican 
leadership. 
It's not unusual for the state to count on revenues not yet in hand, state 
budget officials said. That happens every year when the state anticipates 
getting some revenue from the federal government, for instance. 
So passing a budget before the bonds are sold won't necessarily throw the 
state budget out of kilter or require cuts. 
"There is a precedent for assuming you're going to be reimbursed," said Brad 
Williams, chief economist of the nonpartisan Legislative Analyst's Office. 
But "this would be on a grand scale," he said. 
The 90-day wait could get the state close to draining its bank accounts, 
which could require it to stop making some payments. 
But the state had a surplus of almost $8 billion going into the fiscal year 
starting July 1 -- an amount higher than expected in January because of 
healthy income tax returns in April. 
There are many variables in the electricity equation, making it uncertain 
whether the state could keep the cash flowing until the bonds are sold in 
August. Among them is the amount the state will get from electricity rates, a 
formula still being settled before the state Public Utilities Commission, and 
the future cost of power. 
Even though the budget could be unscathed by the 90-day wait, however, one 
casualty could be perceptions on Wall Street. 
Joe Fichera, Davis' financial adviser, said the state is probably paying a 
premium in bond interest rates because of the state's political turmoil. 
"Most investors tend to be very risk averse," he said. "They don't want to 
take any chance that they could lend money and have it suddenly not be there. 
"All it does is make Wall Street wonder what's going on over here." 

The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sacbee.com
. 
Bee Staff Writers Emily Bazar, John Hill, Dale Kasler and Kevin Yamamura 
contributed to this report.



Dan Walters: Summer-like heat brings blackouts, partisan fingerpointing


(Published May 8, 2001) 
Temperatures soared to near the century mark outside California's Capitol on 
Monday as a wave of summer-like heat swept over the state, and the spiking 
electricity load forced power grid operators to impose rolling blackouts on a 
number of communities. 
Just as the power demand reached its peak in the late afternoon, the state 
Assembly began debating a $13.4 billion bond issue aimed at financing 
electricity purchases during the critical summer season. And it soon became 
evident that the partisan atmosphere inside the building was becoming just as 
superheated as the air outside. 
Just one Republican voted for the measure that Gov. Gray Davis and other 
Democratic politicians said was critical to keeping California's lights 
burning and its air conditioners humming, thus blocking its immediate 
implementation. Democrats went to a fallback plan under which the bond issue 
would be approved on a simple majority vote, but it can't take effect for 90 
days, which may make its usefulness doubtful. 
"We have to do it," Assemblyman Fred Keeley of Boulder Creek, the leading 
Democratic power strategist, told the Assembly. "We don't have to like it, 
but we have to do it." 
"We owe our kids a top-notch education," Assemblywoman Lynne Leach, R-Walnut 
Creek, said during the lengthy debate, "not years of debt." 
The partisan clash reflected a sense in the Capitol that the energy crisis is 
growing steadily worse, that Monday's blackouts are just a taste of hours of 
power outages to follow this summer, that utility rates are spiking upwards 
as well, and that voters may look for scapegoats at the polls next year. 
Even before the Assembly vote, Davis issued his sharpest partisan rebuke 
since the crisis erupted, indicating that he, too, is repositioning himself 
in anticipation of a voter backlash. 
"The Republican Party that brought us this disastrous energy deregulation 
scheme is now obstructing its solution," Davis said in a statement several 
hours before the debate began. "Their decision to play partisan politics with 
this energy crisis seriously complicates the budget process and could 
ultimately threaten our economy." 
Davis and other Democrats had enlisted various interest groups -- including 
law enforcement officials -- to pressure Republicans on the bond issue, 
arguing that without the new loan, the state would have to eat the general 
fund advances and reduce spending on a variety of programs to make up the 
difference. Democrats echoed that line in the floor debate while Republicans 
depicted the bond bill as a long-term debt and a sharp increase in utility 
rates to repay it. 
The immediate politics of the situation notwithstanding, there's ample reason 
to be skeptical of the governor's scheme of borrowing heavily not only to 
repay the general fund but to finance power purchases this summer. When Davis 
proposed the first draft of the plan in January, direct state power purchases 
were to last only a few weeks and cost only a few hundred million dollars 
while long-term supply contracts were negotiated. Instead, the state has 
embarked on an open-ended program of buying power, spending up to $2 billion 
a month, while long-term contracts have proved elusive. 
The current version of the plan, moreover, is based on a series of 
assumptions that fly in the face of past and current experience, such as a 
sharp reduction in demand, an equally sharp increase in summer supply and, 
most of all, a steep drop in the prices being charged by generators. If those 
assumptions don't pan out, the state could be spending as much as $5 billion 
a month by midsummer, and even the proposed bond issue, the largest in the 
history of any state, would be consumed within a few weeks. 
Republicans said Monday that they wouldn't vote for a bond issue until they 
had received some reliable assurances that there was an end game. Their 
motives may have been partisan, but their wariness about where California is 
headed is well-founded. No one, including the governor, appears to know 
what's going to happen over the next few months and the governor's figurative 
plea to "trust me" is not reassuring. 

The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com
.


Special report
How Californians got burned
The state electricity system is in a shambles, and the worst may be ahead. 
How did things get to this point?


(Published May 6, 2001)

It isn't like California's political and business leaders got together and 
decided to wreck the state's electricity system. It just worked out that way. 
From the very start, a series of critical miscalculations and 
behind-the-scenes efforts of energy brokers, politicians and utilities 
dovetailed almost perfectly to create a new era in California. 
But a months-long review by The Bee of what led to the current fiasco reveals 
that state leaders ignored warnings -- in public testimony, insider memos and 
trade journals -- that their new system would be prone to manipulation and 
price gouging. 
State officials were so eager to move deregulation forward that they even 
kept some warnings from landing in the hands of federal authorities who 
rubber-stamped California's plans. 
Today, the results are well-known: California is drawing down its budget 
surplus at a rate of $50 million or more a day to pay for electricity, 
utilities are broke, rates are going up and summer blackouts are looming. 
But the juggernaut that led to deregulation began a decade ago with the best 
of intentions. 
Part of it stemmed from a warning by former Major League Baseball 
Commissioner Peter Ueberroth. Part of it came from the perilous state of 
California's economy at the time. 
And part of it began with O.J. Simpson. 
The first days
The deck was stacked against Robert Levin from the beginning. 
The expert on energy pricing flew to Los Angeles to warn that California's 
Public Utilities Commission was making a huge mistake. 
An executive with the New York Mercantile Exchange, Levin believed in the 
increased competition the plan was intended to provide, but he thought 
California was tilting toward a system that would actually produce less 
competition -- and higher costs. 

Special report
This special report on California's energy crisis was written by Bee staff 
writer Sam Stanton, with reporting from John Hill of The Bee's Capitol 
Bureau, staff writers Dale Kasler and Stuart Leavenworth and David Whitney of 
The Bee's Washington Bureau. 

Few were listening. 
"I'm not getting through," he told himself at the time. 
It was June 14, 1994, and even though the PUC convened a daylong hearing at 
the Los Angeles Civic Center, there were more important things going on in 
the world. 
Composer Henry Mancini died that day from cancer. President Clinton had just 
unveiled his welfare reform proposal. And Los Angeles police detectives were 
starting their probe of the mysterious slaying two days earlier of O.J. 
Simpson's ex-wife and a friend. 
"That was kind of the buzz," Levin said of Nicole Brown Simpson's and Ron 
Goldman's murders. "More than electricity deregulation." 
O.J. Simpson's influence ended there, but the incident was indicative of how 
little attention people were paying to the deregulation process at the time. 
Today, nearly seven years later, Levin's futile warning stands as one of many 
that were leveled -- and blithely ignored -- as a consortium of elected 
officials, utility executives and energy traders marched California into one 
of the greatest policy blunders of the past century. 
The perfect storm
Some now blame California's current predicament on a series of unavoidable 
acts of nature, the so-called "Perfect Storm" scenario: 
A hot summer last year in California that sent demand for power soaring. 
A cold snap last winter in the East that drove up prices for natural gas, 
widely used in plants that generate electricity. 
A 50 percent cut in the amount of power received from the Northwest because 
of drought, environmental concerns and increased demand there. 
"It's only because of those three acts of God that we got screwed up," said 
P. Gregory Conlon, a former PUC president. 
Power generators insist the price spikes that began in 2000 resulted from 
genuine supply and demand imbalances. 
But scores of market analysts, including officials at the Federal Energy 
Regulatory Commission, suggest that generators were able to ratchet up prices 
through various trading strategies, including the simplest: throttling back 
on production until prices increased. 
And ample evidence indicates that policy-makers should have known years ago 
that the system they set up was ripe for such manipulation. 
San Diego Gas & Electric figured it out early. 

How it happened
Here's a look at key actions taken on the road to power deregulation in 
California: 
The PUC
The California Public Utilities Commission approved the state's deregulation 
plan on Dec. 20, 1995, by a 3-2 vote. Voting yes were Daniel W. Fessler, P. 
Gregory Conlon and Henry Duque. Voting no were Jessie Knight Jr. and Josiah 
Neeper. All five were appointees of Gov. Pete Wilson. 
WEPEX
Following the PUC vote, a revolving set of the dozen or so members of the 
Western Power Exchange Steering Committee met at airport hotels up and down 
the state to discuss the logistics of deregulation. Members included 
representatives of the major utilities, such as PG&E, San Diego Gas & 
Electric, Southern California Edison and SMUD. Also represented were power 
regulators, such as the PUC and the Energy Commission, and a number of energy 
providers, marketers and users, ranging from the Independent Energy Producers 
to the California Large Energy Consumers Association (CLECA). 
California Legislature
On Aug. 30, 1996, the state Assembly took the first vote on AB 1890, the 
deregulation bill. Approval was unanimous, 77-0. The state Senate voted 39-0 
the following day. The bill was signed by Wilson on Sept. 23. 
FERC
A key vote by the Federal Energy Regulatory Commission was interim approval 
for operation of California's bifurcated grid operation - the Power Exchange 
and the Independent System Operator - taken on Oct. 29, 1997. The three 
members at that time, who approved it unanimously, were Vicky A. Bailey, a 
Republican, and Democrats James J. Hoecker and William L. Massey. 
In their words
"Competition will work to drive costs down."
- John Bryson, head of Southern California Edison. From June 14, 1994, PUC 
hearing in Los Angeles. 
"A mandated pool structure would make it easier for big players to dominate 
and manipulate the generation market."
- PUC Commissioner Jessie Knight Jr., warning that his colleagues were 
creating an unworkable system, May 24, 1995. 
"We've pulled the plug on another outdated monopoly and replaced it with the 
promise of a new era of competition."
- Gov. Pete Wilson, signing the Legislature's deregulation bill in San Diego, 
Sept. 23, 1996. 
"California is, as usual, in the vanguard of change. I believe it will not be 
long before virtually all United States energy consumers will have this 
opportunity."
- PG&E CEO Robert Glynn Jr., speaking about the benefits of deregulation to 
the Commonwealth Club in San Francisco on Oct. 24, 1997. 
"All of us saw those numbers and realized that ? there was nothing to stop 
someone from bidding infinity."
- Independent System Operator CEO Jeffrey Tranen, recounting a sudden spike 
in one of ISO's side markets to $5,000 a megawatt hour, July 9, 1998. 
--Bee metro staff 

A consultant for the utility prepared a document describing how the new 
electricity market would hamstring the people in charge of making sure the 
state had enough electricity, and that the cumbersome system would drive up 
electricity costs. 
On June 28, 1996, the utility filed a 71-page statement with federal 
officials explaining its opposition to the market structure supported by the 
state's other large, publicly traded utilities, Southern California Edison 
and Pacific Gas and Electric Co. 
But the FERC, which had to approve any change in California's market, never 
considered the statement. SDG&E withdrew its comments under pressure from 
then-Gov. Pete Wilson's office and others. 
"Officially, (those comments) don't exist," said John Chandley, a 20-year 
veteran of the California Energy Commission. "You read those comments, and 
it's a roadmap of what happened." 
It was hardly the only map available. 
The California Municipal Utilities Association issued a similar warning in 
1996. The Public Utilities Commission cautioned legislators that a power 
shortage could drive prices up in the new market, although the PUC then 
turned around and predicted that would never happen. 
A 1998 utility industry journal outlined ways to manipulate or "game" the 
markets; and only three months after deregulation began, someone was able to 
drive up the cost of a megawatt of electricity from $1 to $5,000 in a matter 
of hours. 
The system was so flawed that a dentist on an airplane figured it out using a 
pen and a cocktail napkin. 
An unstoppable concept
Texas state Sen. David Sibley came to California in January 1998 to visit 
with energy officials in preparation for moving his state toward 
deregulation. 
Yet something about California's new market perplexed him, and on the flight 
home he started doodling. 
"We got a napkin, and it looked like you could game the power exchange," said 
Sibley. "We had our (PUC) guy and our staff and people just started talking 
about how you could figure out how to withhold just enough electricity. We 
were just kind of toying with it, kind of war games things on the airplane." 
"Now, I'm a dentist," Sibley said, "and if I could figure it out, it seemed 
like someone else could, too." 
Once California joined the rush to deregulate, however, it became 
unstoppable. 
The airlines had been deregulated, and airfares had gone down. The natural 
gas industry had been freed up, and rates had dropped. Telephone deregulation 
had spawned entire new industries. 
Electricity was the next obvious target, and California politicians were 
under pressure from the state's largest manufacturers to do something -- 
anything -- to give them a break. 
California was under siege in 1992. The recession and massive cutbacks in 
military spending in California had hobbled the state's economy. The state's 
power troubles were noted in the 1992 Ueberroth Report, a study on the 
state's economic competitiveness headed by millionaire Peter Ueberroth, the 
former baseball commissioner and Olympics czar. 
Energy costs were among the highest in the nation, and steel manufacturers 
and other heavy industrial companies were clamoring for cheaper power. 
Years of lobbying and millions of dollars in political contributions from 
energy firms had softened resistance. Among those pushing was Enron Corp., a 
Houston-based natural gas marketer nosing its way into the $200 
billion-a-year electricity business. 
In the mid-1990s, Enron was aggressively hopscotching from state to state, 
urging deregulation and offering money and promises. 
The company pushed for opening up markets in Iowa and Michigan, priming 
politicians there with contributions. In 1997, it doled out more than 
$858,000 in soft money and political-action contributions to members of 
Congress, becoming the largest contributor from the energy industry. That 
year it hired Ralph Reed, the former head of the Christian Coalition, to 
preach its agenda. 
At the time, Enron was a comparatively small ($8 billion a year in revenue) 
marketer of natural gas. But it was on its way toward becoming one of the 
world's most successful companies, a $100-billion-a-year giant that counts 
President Bush among its friends. 
Enron had qualms about the system California was leaning toward. In testimony 
before the PUC in June 1994, it warned that the highly centralized market 
structure could lead to higher prices. 
But ultimately the company joined the chorus urging California to plunge 
ahead. Enron executive Jeffrey Skilling told the PUC in 1994 that California 
could lower its $23 billion-a-year energy bills by as much as $9 billion -- 
enough money to triple the police forces of its largest cities. 
"Commissioners, the patient is on the ground bleeding," Skilling testified. 
"Delay kills." 
The color books
As California's recession deepened, Wilson's approval rating plummeted, and 
aides fretted about an economic snowball effect. 
Wilson settled on a rescue plan -- full deregulation -- and appointed members 
to the PUC who shared his free-market leanings. Three PUC staffers set things 
into motion in February 1993 with the release of a 200-page report declaring 
that change was needed. 
That report, nicknamed the "Yellow Book" for its cover, declared that the 
century-old system was "ill-suited to govern today's electric industry." 
Consumers would benefit from a change, the report concluded. Slightly more 
than a year later, the PUC commissioners formalized their staffers' 
conclusions in a report dubbed the "Blue Book." 
The Blue Book outlined a tentative plan for opening up the energy 
marketplace. Instead of guaranteeing the utilities a monopoly and capping 
their rates, California would become one of the first states to let customers 
choose their electricity provider while letting rates float. 
By January 2002, the PUC envisioned, every Californian would shop for 
electricity the way people shop for long distance telephone service. 
The book hit with the force of an earthquake, according to one consultant. 
Markets tanked as investors dumped energy stocks out of fear that competition 
meant the staid but stable utilities would be shredded by nimble new 
competitors. 
"The barbarians were at the gates," said Tom Willoughby, a retired PG&E 
lobbyist. 
Those barbarians wanted more. Enron and other out-of-state power companies, 
backed by consumer groups, told policy-makers that in order for everyone to 
have a fair chance at attracting customers, the three big utilities had to be 
defanged. 
Their proposed remedy: Make them sell off most of their power plants. 
Faced with this assault, the utilities set their own ground rules. They would 
break up their monopolies if the state let them charge customers for 
"stranded costs" -- debts from nuclear power projects and other costs they 
believed they'd eat in a competitive market. Wilson, who'd collected $120,000 
in campaign contributions from the utilities, agreed that the utilities 
should collect $16 billion in stranded costs from ratepayers. 
With that, the utilities became enthusiastic backers of deregulation. 
"Competition will work to drive costs down," John Bryson, Edison's chairman, 
told commissioners at their June 1994 hearing. 
Behind the scenes, Edison was working to make sure it was the right kind of 
competition. 
Edison and the San Diego utility settled on a system where utilities would 
buy their power from a centralized "pool" of electricity. They and others hit 
upon the idea of a high-powered field trip. 
In March 1994, the California Foundation for the Environment and the Economy, 
a utility-backed group, sent PUC members, lawmakers and utility executives to 
the United Kingdom to see a pool in action. 
During a weeklong, dawn-to-dusk blitz, the Californians toured power plants 
and utility offices and visited the crown jewel of the U.K. system: the 
National Grid, a kind of stock exchange through which every electron in 
England and Wales was bought and sold. 
The Californians came away impressed by the Grid and its disciplined trading 
system. 
"You just wring out the inefficiencies through the bidding," Conlon recalled. 
"It just kept driving the rates down." 
The compromise
Gov. Pete Wilson was puffed up with pride on Sept. 23, 1996. It was a sunny 
San Diego day, and Wilson was there to baptize one of his offspring: a bill 
to deregulate California's electricity markets. 
"What we are doing is more than signing a new law," Wilson said at the 
signing ceremony. "We are shifting the balance of power in California." 
That balance had begun to tip a year earlier, when Wilson and his top aides 
stepped in to speed things up. 
Edison and PG&E were squabbling over details of the new market, and 
deregulation seemed to be stalled. PG&E was objecting to the "pool" system, 
which it thought would stifle competition. Instead, PG&E favored a more 
free-market approach that would let the utilities buy power from whomever 
they wanted. 
Wilson's own attention was more focused on the possibility of running for 
president and the throat problems that temporarily stole his speaking voice 
-- and his ability to campaign. 
But his staff worked to hammer out an agreement with the utilities, the 
California Manufacturers Association, energy marketers and others. 
"CMA had access to the governor's office day-to-day," recalled Eric Woychik, 
who was acting as an adviser to consumer groups. "We made jokes about how 
they had their own office in the governor's office." 
In the end, Wilson and his aides made a Solomon-like decision. They cut the 
baby in half. Instead of a completely free-market system, they agreed to a 
centralized pool for buying and selling power but also allowed buyers and 
sellers to cut their own, independent power deals. 
The pool would be further split in two: Most of the state's electricity would 
be traded on something called the California Power Exchange. Another entity, 
called the Independent System Operator, would manage the state's transmission 
grid and buy last-minute power to balance supply and demand. 
Divvying up the pool was crucial to the deal, said George Dunn, then Wilson's 
chief of staff, because it lessened the utilities' clout by ending their 
stranglehold on the grid. 
Nowadays, Wilson concedes the setup "was not a perfect free-market 
institution," but at the time it seemed like the only workable compromise. In 
December 1995, the PUC approved deregulation by a 3-2 vote, putting most of 
the major elements into place. 
The state's big utilities would be directed to sell off many of their power 
plants. Individual customers, ranging from businesses to homeowners, could go 
outside the Power Exchange to buy their electricity. But the three big 
utilities had to rely on the exchange to purchase their electricity. 
Most of the commissioners, all Wilson appointees, were sure that having the 
utilities buy electricity on a daily basis would produce panic selling by the 
power generators. 
And prices would drop like stones in a lake. 
No dissent allowed
Not everyone was so sure. Officials with San Diego Gas & Electric believed 
that the rules governing the pool were cumbersome, prone to secrecy and 
inefficiency. 
Some analysts even suggested the power generators and energy marketing firms 
would be able to play one organization off the other -- holding back 
electricity from the Power Exchange, then selling to the ISO at the last 
minute, when prices peaked. 
But they were having trouble making themselves heard. 
For months following the PUC's December 1995 vote, a group consisting of 
utilities, government regulators, energy marketers and industrial and 
commercial users had participated in a series of talks aimed at ironing out 
the details of deregulation. 
These coffee-and-doughnut sessions of the Western Power Exchange Steering 
Committee were theoretically open to the public, but keeping track of them 
was complicated because they rotated among airport hotels from San Francisco 
to Riverside. 
At one of the first meetings, Woychik, who had been sent by consumer groups, 
says he was told by the chairman that he was not welcome: The other members 
had voted against seating him. Others involved confirmed the recollections of 
Woychik, who was already known as a critic of the proposed electricity 
market. 
The pressure was on to present a united front. But Woychik still struggled to 
air his concerns. 
In January 1996, he told a conference of federal regulators that some parts 
of the proposed electricity market "are invitations to classic gaming." 
He elaborated the next month, writing to the Western Power Exchange that, for 
savvy operators, gaming the market "should be like shooting fish in a barrel 
-- not great sport, but lucrative." 
Later, in a January 1998 trade journal article, Woychik described in detail 
four major "games" that could be played in the newly minted California 
electricity market. One involved generators saying their plants were down 
during times of peak demand to drive up prices -- a prophecy many believe 
came true last year. 
Deregulation had lots of cheerleaders. But Woychik was not the only one 
raising red flags. 
In a July 2, 1996, letter to the Legislature, even the PUC acknowledged that 
in times of shortage, market manipulation would be a danger. But the PUC 
predicted that such shortages wouldn't occur, and excess power would keep 
prices down. 
Chandley, meanwhile, had taken up the charge of criticizing the market rules 
at the Western Power Exchange meetings, speaking on behalf of the California 
Energy Commission. 
The Governor's Office was considering whether to let the Energy Commission 
file an official dissent with federal regulators, who had to OK the plan, 
when Chandley set off on a business trip to Massachusetts. Changing planes in 
Dallas, he stopped at a pay phone to check in with his office and got the 
word: Wilson's office had ruled there would be no dissent. 
Within a week, Chandley quit. 
Federal regulators later accepted the California plan. As William Massey, a 
member of the Federal Energy Regulatory Commission, recalls: "Essentially, we 
deferred to the market plan that was handed us." 
Death march
State lawmakers began taking up deregulation in summer 1996, and a bright, 
ambitious and abrasive Democratic senator from El Cajon named Steve Peace 
found himself at the forefront. Peace announced plans to scrap the PUC plan 
in favor of something better and cheaper. 
Then Wilson stepped in. 
In a letter, the governor made it clear that no tinkering would be tolerated, 
saying he would "oppose any legislation which seeks to alter the decision's 
basic framework or timeline." 
The lawmakers backed off. 
For months they labored over deregulation in a series of late-night 
negotiating sessions that became known as "the Steve Peace death march" -- 
focused almost exclusively on side issues of deregulation. 
Unions made sure that power plant employees got treated fairly. 
Environmentalists got millions in eco-subsidies. Utilities saw to it that 
billions in "stranded costs" would indeed be paid by ratepayers. Ordinary 
consumers got a 10 percent rate cut, and consumer groups largely kept quiet. 
Even Mother Nature nudged lawmakers forward. 
At 2:06 p.m. on a blazing summer day in August 1996, a power line in an 
Oregon forest began to sag until it touched a tree, shorting out the line. 
Over the next two hours, four other lines came into contact with trees. By 4 
p.m. the shorts along the intricate web of power transmission lines caused a 
blackout that affected 4 million people in nine U.S. states stretching from 
Canada to Mexico. 
Experts warned that the electricity system was too fragile, that there had to 
be some sort of backup -- like the ISO -- to protect the grid, some kind of 
independent organization standing ready to keep the lights on at all costs. 
The legislation passed unanimously, Wilson signed it and deregulation was set 
in motion. The utilities, directed by the PUC to start selling their power 
plants to establish a free market, went at it with gusto. 
PG&E sold its plants for $1.5 billion, far more than the book value of $981 
million. Southern California Edison got nearly $1.2 billion for plants valued 
at $677 million. 
Power generators ended up spending most of their capital buying those old 
plants instead of building new ones. Dunn, Wilson's former chief of staff, 
now sees that as an unanticipated flaw: "It was investment that didn't 
generate new electrons." 
Light-bulb cakes, free power
On March 31, 1998, more than seven years after the PUC started the process 
with publication of the "Yellow Book," California's deregulated energy market 
was open for business. 
Alhambra was home to the new Power Exchange, the state-mandated market where 
most electricity would be bought and sold. 
Up north, in Folsom, was its partner: the Independent System Operator, which 
was already buying extra power to make certain California had all the 
electricity it needed. 
On the first full day of deregulation, ISO officials celebrated with a 
light-bulb shaped cake. Brochures boasted of "Securing Reliability" and 
"Power to the people and by the people." 
The system worked beautifully. 
Competition among providers drove power prices so low that PG&E gave away 
electricity for free between 1 a.m. and 2 a.m. that day. The biggest problem 
seen on the horizon was for consumers who would have to pick among a dizzying 
array of cut-rate power providers. 
It would be three months before the party ended, when a worker inside the ISO 
offices in Folsom noticed something terribly wrong. 
The game
Tucked into a leafy office park in Folsom, the ISO consists of a labyrinth of 
hallways and meeting rooms. Ground zero is a 15,000-square-foot control room 
with a giant map board curving across one wall that charts the flow of 
electrons around the state. 
In the foreground, somber-looking people sit in front of computers, talking 
on telephones. Their job is to buy enough power to keep California's needs 
met. 
On July 9, 1998, the price for reserve power needed by the ISO was running at 
$1 a megawatt hour and was being tracked on computer screens in the market 
operations department of the agency. 
A staffer hurried up to ISO chief executive Jeffrey Tranen with a note. The 
$1 price tag, set by the power generators, had shot up to $2,500. Then, just 
as suddenly, it spiked again to $5,000, where it stayed for three hours. 
After that, it mysteriously dropped again, all the way back to $1. 
Four days later it happened again, but this time the price went to $9,999 and 
stayed there for four hours. Then it dropped to a penny. 
"All of us saw those numbers and realized ... there was nothing to stop 
someone from bidding infinity," said Tranen, now a software executive. 
Under the rules, the identities of power generators are kept secret. But 
Levin, the New York businessman who'd warned of higher prices back in 1994, 
said the price spikes were clear signs of someone probing for weak spots. 
"They were experimenting from Year One," he said. "Early on, people learned 
how to work the magic." 
The ISO saw the problem, too, and moved to cap prices. But it was clear that 
California markets were vulnerable to manipulation. The damage was done, and 
the gold rush was on. 
The Bee's Sam Stanton can be reached at (916) 321-1091 or sstanton@sacbee.com 




Heat wave spawns statewide blackouts 



Year's first scorcher drains system; plugs pulled on 225,000
By Karen Kucher 
UNION-TRIBUNE STAFF WRITER 
May 8, 2001 
Despite conservation and voluntary shutdowns, the first heat of the season 
meant blackouts for thousands across the state yesterday. 
Power grid managers said the hot spell pushed demand beyond available power 
supplies shortly before 5 p.m., requiring about 300 megawatts to be cut off 
for about an hour. 
The outages affected about 225,000 customers statewide, including about 8,600 
in San Diego and south Orange counties, and provided a glimpse of what the 
next few months could be like in California. Yesterday's blackouts were the 
first since March. 

All day, the state's electricity grid had been stretched to the limit. Demand 
jumped as consumers around the state switched on air conditioning, as 
record-breaking temperatures were recorded in Northern California. The 
temperature reached 93 degrees in San Francisco. More hot weather is forecast 
for today. 
On a day when the peak demand was 33,300 megawatts, about 12,500 megawatts 
were unavailable because of scheduled maintenance work or breakdowns at 
generating plants. Repair work on a natural gas line in Ventura also put one 
power plant temporarily out of commission. 
Around 11 a.m., grid operators came within 500 megawatts of ordering rolling 
blackouts in the state, but pulled back when usage dropped, said Jim 
McIntosh, director of operations for the California Independent System 
Operator, which manages most of the state power grid. 
McIntosh said consumers and "interruptible" businesses allowed their power to 
be shut off for part of the day, an agreement they have made in exchange for 
cheaper power. 
But under the contracts signed with utility companies, those businesses can 
only be interrupted for up to six hours a day. So when those customers came 
back on line in the afternoon, demand soared and outstripped supplies. 
"When that load was restored, as far as I can tell, they were not able to 
recover additional load to cover it," said Michelle Mueller, a San Diego Gas 
& Electric spokeswoman. 
ISO spokeswoman Stephanie McCorkle said power demand was about 2,000 
megawatts higher than grid managers had forecast because of the record-high 
temperatures. 
"With the interruptibles, we can only call on them for a certain length of 
time," she said. "Those were being restored at the same time the temperatures 
continued to soar late in the day and people were coming home to warm houses 
and switching on the air conditioning. We had higher demand the same time we 
had less generation." 
At 4:36 p.m., the ISO ordered the megawatts to be dropped. SDG&E's portion 
was 25 megawatts. Pacific Gas and Electric shed 125 megawatts in Northern and 
Central California. Southern California Edison dropped 150 megawatts, while 
the Sacramento Municipal Utility District cut 18 megawatts. 
Within three minutes of the order, SDG&E cut power to parts of El Cajon, Mira 
Mesa, Torrey Pines and La Jolla. Blackouts also affected SDG&E customers in 
several south Orange County communities. 
Early in the day, SDG&E staff had gathered in the company's emergency 
operations center in Kearny Mesa and had called selected customers, such as 
those on life-support equipment and police and fire agencies, to warn of 
possible blackouts. 
"It is such a dynamic situation," said SDG&E spokeswoman Laura Farmer. "It 
didn't look as bad, and then as the afternoon progressed it started looking 
more and more bleak, and then the ISO decided that they needed to call a 
Stage 3." 
The blackouts apparently created few problems in the region. 
Power went out in the La Jolla Executive Tower, but the outage had little 
impact on Barry Demchak, who runs Torrey Pines Software Inc. 
He and his staff ran their computers on battery power and continued working, 
designing software. 
"The sun comes through the windows. We have no real power needs," he said. 
"If the power goes off here for six or eight hours, we could care less." 
El Cajon lost electricity at several intersections, but police received 
reports of outages lasting only 10 to 15 minutes. 
"Those blackouts did not last an hour," said El Cajon police Sgt. Chuck 
Merino. "They can say what they want. By the time we showed up, it's like 
everything's fine." 
However, a SDG&E spokeswoman said the outages could not have ended that 
quickly. She could not explain the discrepancy. 
In Ramona, a Sizzler restaurant was forced to close its doors during one of 
the busiest times of the day -- from 5 p.m. to 6 p.m. 
"We count on that hour," said manager Amy Krueger. "It impacts us quite a 
bit." 
She posted a sign on the steakhouse doors saying it would reopen when the 
power was restored. But several families arrived for dinner while the 
restaurant was closed. 
"We have a lot of regular customers that come on Monday nights and we had to 
turn them away," she said. 
Staff writers Kristen Green and Matthew T. Hall contributed to this report. 








Bond clears Assembly with a partisan twist 




By Ed Mendel 
UNION-TRIBUNE STAFF WRITER 
May 8, 2001 
SACRAMENTO -- The Assembly approved a $13.4 billion bond needed to repay the 
state general fund for power purchases yesterday, but Republicans who want to 
use the state surplus to aid ratepayers prevented the measure from taking 
effect until August. 
Democrats said they are working on a backup plan to borrow money before the 
new state fiscal year begins on July 1. But Republicans, whose approval also 
may be needed for the new plan, said the state budget and a solution to the 
electricity crisis should be linked. 
Gov. Gray Davis issued a statement sharply criticizing Republicans several 
hours before the vote, when it became clear that the minority party would 
continue to insist that the bond be lowered to $8 billion by using the state 
surplus to pay for some of the power. 
"The Republican Party that brought us this disastrous energy deregulation 
scheme is now obstructing its solution," Davis said. "Their decision to play 
partisan politics with the energy crisis seriously complicates the budget 
process and could ultimately threaten our economy." 
Democrats warned that failure to repay the general fund was a risky gamble 
that could endanger programs and prevent the investments in education and 
other public services needed to preserve a prosperous economy. 
Republicans complained that the state general fund has soared from $45 
billion to nearly $81 billion in the last six years and that Democrats want 
to burden future generations with more debt. 
"Let me tell you what our caucus philosophy is," said Tony Strickland, 
R-Thousand Oaks. "If you have money today, you don't borrow against your 
children and grandchildren's future." 
Democrats passed the measure on a near party-line majority vote, 49-29, after 
Republicans refused to provide the handful of votes needed for a 54-vote 
urgency bill that would take effect immediately when passed by the Senate and 
signed by the governor. 
The measure, which was passed in a special session on energy, could not take 
effect until 90 days after the special session is adjourned. Bills passed by 
a majority vote in a regular legislative session do not take effect until the 
following Jan. 1. 
The current special session could be adjourned this week if the bill is 
swiftly passed by the Senate and signed by Davis. Dozens of bills dealing 
with conservation and obtaining more power would be stranded, but they could 
be reintroduced if Davis called a new special session. 
All five Republicans representing parts of San Diego County voted against the 
bill: Patricia Bates, Laguna Niguel; Dennis Hollingsworth, Temecula; Jay La 
Suer, La Mesa; Mark Wyland, Escondido; and Charlene Zettel, San Diego. All 
three San Diego Democrats voted for the bill: Christine Kehoe, Juan Vargas 
and Howard Wayne. 
In January, legislation was enacted that authorizes the state to issue a bond 
to repay the state general fund for power purchases. The estimate then was 
that the bond would be $10 billion, the largest municipal bond in the history 
of the nation. 
Democrats said new legislation is needed because a state Public Utilities 
Commission action giving the state part of the revenue from monthly ratepayer 
bills was challenged by Pacific Gas and Electric and Southern California 
Edison. The utilities say they need a larger share of the ratepayer revenue. 
The state began buying power for utility customers in January after PG&E and 
Edison, whose rates were frozen under deregulation as wholesale power costs 
soared, ran up a debt of $13 billion and were unable to borrow. 
The state has spent about $6 billion so far, and some fear that spending 
could sharply increase this summer as the demand for power increases. The 
bond would repay the state general fund and also begin paying for some 
long-term contracts that will lower the cost of power in the months ahead. 
Assemblyman Fred Keeley, D-Boulder Creek, said the new legislation caps the 
size of the bond at $13.4 billion, reflecting the formula in the January bill 
that limited the size of the bond to four times the annual ratepayer revenue 
received by the state. 
Keeley said a new provision in the bill also would prevent the state general 
fund from paying for power after Nov. 15 this year, with the exception of a 
$500 million loan if needed. 
State Treasurer Phil Angelides had pushed for approval of the bond 
legislation as an urgency measure by today, when commitments from lenders for 
a $4.1 billion short-term "bridge" loan expire. Angelides said the bridge 
loan would help the state prepare a new budget and pave the way for the 
larger bond later. 
"There can't be a bridge loan under these circumstances," Keeley said after 
the vote yesterday. 
Some of the long-term power contracts obtained by the state have a provision 
allowing generators to cancel the contracts if the bond to repay the state is 
not issued by July 1. 
Keeley said Democratic legislative leaders are working on a plan to solve the 
contract problem and allow the state to borrow money before August. He 
refused to reveal details, but said that Republican votes may be needed for 
the new plan. 
Assembly GOP Leader Dave Cox of Fair Oaks said Democrats have not discussed 
the new plan with him. He said any plan should involve the state budget and a 
comprehensive solution that spells out a clear end to the electricity crisis. 
In other developments: 
?Enron Corp., which was ordered last month to honor its contracts to supply 
power to California's public universities, has won a key appellate ruling 
that could cost taxpayers millions. A federal appeals panel in San Francisco 
said Enron could buy power for the universities from the state's 
investor-owned utilities, rather than buying it on the expensive "spot" power 
market. Enron says it would save $12 million a month. But it means the state 
will have to spend more money. 
?California would impose a 100 percent "windfall profits tax" on high-priced 
electricity if a bill approved by the Senate yesterday becomes law. The bill, 
which now goes to the Assembly, would impose the tax on any power priced over 
$80 per megawatt-hour -- a fraction of what electricity has sometimes sold 
for in recent months.
The Associated Press contributed to this report. 




Refinery merger could raise California gas prices 




ASSOCIATED PRESS 
May 8, 2001 
SAN ANTONIO ) Valero Energy Corp. is buying rival Ultramar Diamond Shamrock 
Corp. for about $4 billion in cash and stock in a deal that will make Valero 
the second-largest U.S. refiner of petroleum products. 
The deal announced Monday was approved by both companies' boards over the 
weekend. It still must be approved by company shareholders and regulators. 
The new organization will have $32 billion in annual revenue, more than $10 
billion in assets, 23,000 employees in the United States and Canada and 13 
refineries. Valero will also be one of the nation's largest retailers with 
more than 5,000 retail outlets in the United States and Canada. 
Valero said acquiring Ultramar Diamond Shamrock will make it second only to 
Irving, Texas-based Exxon Mobil Corp. in refining capacity. 
"We're combining the two best independent refining and marketing companies to 
make the premier refiner and marketer in the U.S.," Bill Greehey, Valero's 
chairman of the board and CEO, said in a statement. 
Both companies are based in San Antonio, and between them own three 
California refineries that account for about 353,500 barrels per day of 
processing capacity, or nearly 19 percent of the state's total. 
Rob Schlichting, a spokesman with the California Energy Commission, said 
either Valero or Ultramar likely will be required to sell one of the two San 
Francisco Bay area refineries ) located in Martinez and Benicia ) to win 
regulatory approval. The third refinery is in Wilmington. 
The merger makes California's refining market more concentrated, said Mark 
Cooper, director of research with the Consumer Federation. 
"You've got people complaining about rising gasoline prices," Cooper said. 
"We think one of the reasons is not enough competition, and here you're 
losing more competition. We got into this mess because people wouldn't stop 
enough mergers." 
Valero spokeswoman Joanna Weidman said the merger would actually encourage 
competition. Cost-cutting measures should streamline operations and allow the 
companies to compete more effectively and benefit the consumer down the line, 
Weidman said. 
Valero will pay 1.228 shares of Valero common stock for about half of the 
outstanding shares of Ultramar Diamond Shamrock common stock, and $55 in cash 
per share for the remaining shares. 
That represents a 29 percent premium over Ultramar's closing price of $42.71 
a share on Friday. Valero finished last week at $45.47 a share. 
Valero will also assume $2 billion in Ultramar debt as part of the deal. 
Greehey said Valero's refining system will benefit from combining with the 
Ultramar refining, logistics and retail network. Seven Ultramar refineries, 
with a combined capacity of 850,000 barrels per day, will expand Valero's 
presence in Texas and California and give it a new presence in Colorado, 
Oklahoma and Quebec, Canada. 







Enron could supply universities with state-subsidized power 




By David Kravets
ASSOCIATED PRESS 
May 8, 2001 
SAN FRANCISCO ) Enron Corp., which was ordered last month to honor its 
contracts to supply power to California's public universities, has won a key 
appellate ruling that could cost taxpayers millions. 
A federal appeals panel said the Houston-based energy wholesaler could buy 
power for the universities from the state's investor-owned utilities, rather 
than buying it on the expensive "spot" power market. 
Enron says it would save the company $12 million a month. But it means the 
state will have to spend more money buying electricity to supply the 
universities. Since January, California has already spent $5 billion buying 
electricity for the customers of three ailing utilities that will eventually 
be repaid by customers and taxpayers. 
In its Thursday ruling that was made public Monday, the 9th U.S. Circuit 
Court of Appeals overturned a federal judge's April decision that ordered 
Enron to directly supply power to most of the state's universities as part of 
a long-term agreement with them that expires in March. 
Where Enron buys that power makes a huge financial difference to the state 
under California's power deregulation rules. 
The state said it could spend ) or Enron could save ) up to $12 million 
dollars a month. That's because buying last-minute power on the spot market, 
where Enron had been buying the schools' power, costs several times more than 
what the state can legally collect from ratepayers. 
Since January, the state has bought electricity for the customers of Pacific 
Gas and Electric Co., Southern California Edison Co. and San Diego Gas and 
Electric Co. in an attempt to keep them financially stable as power prices 
skyrocketed. 
The state has only been able to retrieve $1 billion from customers of the $5 
billion it has spent on electricity buys, said Nathan Barankin, a spokesman 
with the attorney general. 
The state said it would ask the court to reconsider its supply decision. The 
ruling, Barankin said, "allows Enron to perpetuate its scam on California's 
taxpayers." 
That's a position Enron vehemently denies. 
"We believe, under the way the contract is written, it gives us the right to 
supply the power or have somebody else source the power for us, such as the 
utilities," said Enron spokeswoman Peggy Mahoney. 
Enron convinced the appeals panel that it should not have to purchase power 
on the spot market to honor its contract, and instead can make good on its 
cheap power contract by buying it from the utilities. 
That means Enron will pay substantially less for the electricity through the 
utilities and will reimburse the universities for possible charges that 
exceed the contracted price with Enron. 
Electricity sold through the utilities is capped under California law and 
does not reflect the true cost of the power. Billions of dollars of 
undercollected costs is among the main reasons PG&E filed for federal 
bankruptcy protection early last month. 
The case is UC Regents v. Enron Energy Systems Inc., 01-1006. 






Last of three articles
EDISON'S AGONY
For CEO, Life in 'Foxhole' Means Little Sleep, Peace 
Utilities: Plans go awry, strategies collapse as John Bryson struggles to 
fend off bankruptcy. 

By NANCY CLEELAND, Times Staff Writer 

?????John E. Bryson, chief executive of Edison International, never imagined 
his charmed life would come to this: working 16-hour days. Laying off 
employees. Swallowing his pride and begging for regulatory relief.
?????It's early January and the heart of his company--the Southern California 
Edison electric utility--is going down like an old battered ship. No one will 
help him save it. Once-trusting consumers think Bryson is greedy. Legislators 
are confused. The governor seems distant. Some of his own people wonder 
whether Bryson is up to the task.




Edison International CEO John Bryson, left, discusses media coverage of the 
company with firm Vice President Tom Higgins.
BRIAN WALSKI / Los Angeles Times

?????Bankruptcy looms like a dark hole of shame. Bryson decides, with his 
board of directors, to do whatever he can to avoid it. He will try to salvage 
Edison through political compromise, to cajole and negotiate and plead. The 
decision means that in the coming months he will have to make awful 
concessions, allow himself to be humiliated and often hold his tongue. He 
will do this out of the conviction that it is the only way to save hundreds 
of Edison jobs, the retirement income of thousands of small investors and the 
very economy of California. 
?????He came to Edison almost incidentally 17 years ago, an outsider, the 
model of a new, environmentally sensitive energy executive. As 2001 dawns he 
is poised to go down in history as a bungler, the man who led a solid, 
century-old utility into ruin. Such a legacy is unthinkable, but as he runs 
from it, he embarks on a tortuous slide of disappointment.
?????Today, four months after the crisis hit public consciousness, there's 
still a chance that Bryson will work out a political solution. But it's a 
thin one, and it has come at a very high price.

?????January: Hope, Then Failure
?????Edison is several billion dollars in debt and losing millions more each 
day as electricity prices soar. Banks cut off credit. Blackouts are 
threatened across California. Bryson's mood is one of astonishment: How can 
government regulators let it go this far? Why won't someone step in? Then, in 
the waning days of the Clinton administration, he is called to a White House 
summit.
?????California Gov. Gray Davis, who refused to meet Bryson earlier to 
address the crisis, is there. So are the electricity wholesalers accused of 
price gouging. After weeks of blaming one another, all sides have finally 
come to Washington to look for solutions. Bryson is hopeful. Everyone, he 
says, takes the high road.
?????A vague plan is hatched: The state will jump in to buy wholesale 
electricity. Suppliers will sign cheaper long-term contracts. Edison and 
Pacific Gas & Electric, the troubled San Francisco utility, will pay off 
their debts through a state-backed bond issue, regain credit-worthiness and 
eventually return to normal business.
?????Back at Rosemead headquarters the next day, running on cold coffee, 
Bryson and a handful of Edison lawyers, engineers and money managers fill in 
the details. They go without sleep and call co-workers out of bed to ask them 
the rate at which transmission lines lose electrons.
?????By the afternoon of Jan. 12, three days after the summit, the plan is 
solid enough to talk about publicly.
?????"I'm very optimistic," Bryson declares, relieved that the crisis has 
been addressed at last. "We'll know whether or not this works in the next two 
to three weeks."
?????It won't.
?????A week later, President Bush, decidedly less fond of federal 
intervention, is inaugurated, and the goodwill generated in Washington 
evaporates. Energy prices climb even higher in California. Meanwhile, Davis 
plans an auction for long-term energy contracts that he swears will bring 
prices down. So much for a simple fix.

?????Insult to Injury
?????The following weeks bring showers of bad news. Edison defaults on loans, 
suspends dividends and forces some of its largest business customers to cut 
power. Several times, the utility comes within a hair of rolling outages.
?????Bryson laments the lack of progress. He can't understand why the tone in 
Sacramento has turned so hostile, why Edison is painted as a villain when 
faulty state regulations created this mess. This is a private company, he 
says, over and over. The state cannot force it to operate at a loss any more 
than it can force a service station to pump gas below cost.
?????"There's some quality to this whole thing that makes it sound like the 
utilities are supplicants, pleading for help," Bryson says, bewildered. "This 
is our right [to cover costs] and the business doesn't work without it. 
That's the most basic premise."
?????Often seething with anger, he tries to be discreet and diplomatic. The 
route to a deal is too delicate to risk offense. Yet his anger turns to 
outrage Jan. 19 when the state Public Utilities Commission issues an 
aggressive restraining order that compels Edison to continue delivering 
electricity to its customers no matter how much money it loses. There's no 
need for such an order, Bryson complains, and it's an insult to all Edison 
employees to suggest otherwise. 
?????He paces the plush beige carpet outside his office. Edison is entitled 
to cover reasonable costs, he says.
?????"These guys," he says of the PUC members, "are thumbing their noses at 
the law." When a reporter asks a question about PUC Chairwoman Loretta Lynch, 
Bryson nearly rants. 
?????"She's a very negative person," he says, then feels the crack in his 
veneer. With a laugh and wave of his hands, he wipes it away.
?????"Oh no," he says, "I'm not going to go there." He does it with an 
easygoing boyishness that still serves him well at 57, despite the hair 
that's nearly gone white. 
?????Sometimes in this crisis, Bryson appears haggard, unwell. But more 
often, and at the oddest times, he is buoyant, with a half smile that seems 
to be choking back a snort of laughter. It's a disarming affectation, and 
confusing. It makes him seem almost cavalier, almost masking the fact that he 
has turned his life over to solving this crisis.
?????Bryson, the son of an Oregon sawmill operator, graduated from Stanford 
University and went on to Yale Law School in the late 1960s. Bright and 
idealistic, he co-founded the nonprofit Natural Resources Defense Council, a 
still-thriving environmental protection law firm.
?????He was barely into his 30s when Gov. Jerry Brown appointed him to chair 
the California Water Resources Control Board. Three years later, in 1979, 
Brown made Bryson a member of the PUC. He later practiced law for a while, 
then--through friendships cultivated at the PUC--joined Southern California 
Edison as a vice president. Six years later, he took over the job of the man 
who recruited him, Chief Executive Howard Allen.
?????Life at a regulated utility can be very good, and Edison grew on him. He 
liked the easy pace, the terrific pay ($2.2 million last year). He liked the 
people around him. They were smart, steady, nice. Above all, he liked the 
utility's integrity, its image as a reliable corporate citizen.
?????Life at a deregulated utility would be very different.
?????Edison's rescue plan circulates in Sacramento. To Bryson's great 
annoyance, what he regards as a right to financial survival is being labeled 
a "bailout" by critics. The criticism fuels the idea that if Sacramento 
floats billions in bonds to help Edison pay its debt, the utility should give 
up something valuable. Perhaps its hydroelectric system. Or its transmission 
grid. In a world of populist political rhetoric, the trade-off is sold as "a 
dollar for a hot dog," in the words of Senate Leader John Burton (D-San 
Francisco).
?????To Bryson, these assets are chunks of Edison's soul, designed by Edison 
engineers, built by Edison linemen. They were marvels in their time, proof 
that man could harness nature on a massive scale. How could he give up Big 
Creek--Edison's legendary series of dams and powerhouses deep in the Sierra 
Nevada? That was the first place Bryson called top Edison management together 
when he was named chief executive in 1990 because he wanted to start his term 
with the stamp of history. 
?????Photos of the massive powerhouses hang on his office wall. Bryson walks 
past them, to a bookcase on the far side of his spacious office, and pulls 
out a photo book documenting Big Creek's construction.
?????"Take it," he tells a visitor. "Maybe it will help you understand."
?????Initially, Bryson and other executives say no deal on hydro or the grid. 
Then they waver: maybe, but only at a fair price. But already, Bryson is 
making the mental adjustment, accepting the loss, doing whatever he can to 
stay out of bankruptcy.
?????He is clinging to two hopes. The first is that a state audit will prove 
Edison did nothing wrong, but simply followed the misguided rules that 
abruptly pushed California into a deregulated energy market. The second is 
that Edison will prevail in its lawsuit against the PUC in which it seeks to 
increase electricity rates to cover its ballooning costs.
?????In the end, neither happens. The audit alleges no criminal wrongdoing, 
but is extremely complex and open to interpretation. It does not explicitly 
ask, or answer, whether Edison did anything wrong. The lawsuit fails to 
produce an immediate rate increase, and a trial is years away. Edison's 
stability continues to erode.
?????Bryson has to look hard for a few bright moments. On Jan. 23, he 
receives a letter from shareholder W.R. Cate, a retired telephone company 
manager in Henderson, N.C. He and his wife and children hold 1,500 shares; 
they've lost more than $10,000 in the last month. 
?????"We are behind you," Cate writes. "Bargain hard until you see some 
blood." 
?????Bryson writes back the same day: "Many thanks for your perceptive and 
insightful letter. . . . It was a ray of light and fun. We do intend to 
bargain hard until we see some blood."
?????His job becomes a blur of conference calls, predawn pages and 
last-minute shuttle flights. His world is this Rosemead office, where he 
often settles into a beige armchair and eats his lunch off a cafeteria tray; 
airports, where he boards the Southwest shuttle to or from Sacramento, and 
legislative hallways, where he trolls for allies.
?????The closest thing to a routine is the daily meeting with the inner 
circle. At least once a day, Bryson strides across the plush-carpeted hall to 
a conference room for an update on Edison's latest strategy. To each new idea 
from Sacramento, they respond earnestly, as if it were already law. The next 
day, when a new idea emerges, they do it again. There is something poignant, 
almost comical, watching the cluster of desperate veteran executives trying 
to outguess a new crop of state legislators. 
?????Bryson thinks about the hours he has spent with these men and a few 
women, the wartime atmosphere, and feels grateful.
?????"You're in a foxhole," he says in February. "The question is: Is the 
person beside you right there with you all the way? What I've seen is an 
amazing crew of people. They're creative, really dedicated, determined to 
work it through, and showing good judgment even when stressed. That's the 
little offset to all this."

?????Feb. 7: The Longest Day
?????Bryson wakes up in Sacramento, exhausted with a cold. Negotiations with 
the state are going nowhere. Legislative hearings start in two days. Edison 
wants its side heard, so Bryson has come to the Capitol to talk to reporters 
and seek help from the governor. 
?????He stands at a podium next to Bob Foster, Edison's governmental affairs 
chief, a career employee. Their messages are clear: Bankruptcy is bad. We 
didn't cause this crisis. We have a legal and moral right to cover the costs 
of wholesale electricity. We will only sell our transmission lines if it's a 
fair deal.
?????He is scanning the state's newspapers later when he freezes at an 
editorial in The Times contending that Edison International "milked" its 
utility of essential cash. Not now, he moans. The editorial gives credence to 
an allegation that the parent corporation stole money from its starving 
utility to pay off shareholders.
?????In fact, Bryson insists, the transfer of funds, detailed in the state 
audit, was legal and proper and approved by the PUC. He must clear this up 
before the legislative hearings. He gets on the phone to The Times--where he 
was once a member of the newspaper's corporate board--and begs for an 
audience with the editorial board. He flies south and walks into the building 
that day, carrying a binder full of memos, charts and old audits going back 
five years. He is cordial but insistent. "Milked" is inappropriate, he says. 
It's a word that implies unethical.
?????He is pale from his cold and a little too desperate. He stays more than 
an hour, too long for the editorial writers, who are facing deadlines. 
Please, Bryson insists. Let me read from this 1999 audit that found SCE "more 
than compliant." Just this one page.
?????But his pleas produce no Times editorials reflecting his comments.
?????Two days later, a clear-headed Bryson addresses the Legislature with an 
evocative speech about trust. He laments the rift between utilities and 
regulators, the mutual distrust that has developed.
?????"We find ourselves today treated as an adversary and as an enemy," he 
says. But his defense is forgotten, wiped out by a question from a San Diego 
legislator: Did Southern California Edison overpay millions of dollars in 
taxes to the parent company, Edison International? The implication is that 
Edison International found another way to drain the utility--and, thus, 
ratepayers--of cash.
?????Bryson insists it's not that devious. The PUC required the utility and 
its parent company to figure their taxes separately. SCE paid those taxes to 
the parent. But losses from other subsidiaries lowered Edison International's 
taxes and allowed it to keep some of the SCE money.
?????Did SCE overpay Edison International in taxes? the legislator asks again.
?????It's complicated, Bryson says. But, yes, we did.
?????In mid-February, a federal judge rejects Edison's request to force the 
PUC to immediately increase rates to cover costs. Edison's last ace blows 
away.

?????Feb. 23: The End of the Beginning
?????Stage 3 alerts--the last step before rolling blackouts--have become 
routine. Businesses are screaming about reliability. The state is bleeding 
money trying to continue purchasing power. Davis, his political future at 
stake, is engaged. A framework is announced: Edison agrees to sell its 
transmission grid for less than half of what it wanted. In exchange, a 
portion of rates revenue will be set aside to cover past debt.
?????Bryson has to explain his decision to disheartened employees, many of 
whom helped build the grid and take so much pride in it. He's not even sure 
the agreement will work. "Was it Churchill," he wonders to a reporter, "who 
said something like, 'This is not the end. This is even not the beginning of 
the end. But it may be the end of the beginning'? That may be where we are 
now."
?????He worries about losing employees, about being able to attract good ones 
in the future. He worries about Edison becoming a takeover target. His 
escapes are few.
?????A day after the framework is signed, he sits in an Oxnard high school 
gymnasium, watching his 17-year-old daughter compete in the last game of her 
high school basketball career. Bryson is lost in the energy of the gymnasium, 
grateful for the anonymity of the bleachers. 
?????He and his wife, Louise Henry Bryson, a former documentary filmmaker and 
now television executive, live in San Marino. He dotes on his four daughters. 
The youngest, a still-innocent 12, knows something's wrong at Daddy's work 
but has no idea how bad it is.
?????Small breaks are the way to get through this, he tells himself. He works 
out--aerobics, Pilates, yoga--in a Pasadena gym where no one knows him. His 
chief financial officer, Ted Craver, runs the L.A. Marathon. Counsel Bryant 
Danner takes comfort in drives to Mammoth. Foster and John R. Fielder, a vice 
president for regulatory affairs, take their wives to Hawaii for a week. 
Their timing is horrible.

?????April 6: A Tightening of the Noose
?????While Foster and Fielder are gone, PG&E decides to solve its financial 
crisis by filing for bankruptcy protection. Creditors will now be less timid 
about pulling Edison into court. Bryson figures he has a few days, at most, 
to close a deal with the state, or Edison will go down too.
?????That night, he and Davis meet for more than four hours, refining the 
framework. The Edison team spends all weekend, yet again, filling in the 
details. Monday morning, after five hours of discussion, Edison's directors 
approve a 33-page agreement covering the bond issue, dedicated rate component 
and sale of Edison's transmission lines to the state.
?????It's far from over. The state Legislature must sign off on certain 
parts. Consumers must approve bonds to cover the debt, which will be paid off 
through a small share of rates over some 15 years.
?????And then there are the intangibles: Will people still buy Edison stock? 
Will institutions still lend it money? It will be years before it is clear 
whether Edison's decision to fight bankruptcy is the right one. Bryson's 
humiliation rose last week when Forbes magazine dinged him as No. 7 on its 
list of the nation's "worst-valued" CEOs. But he feels at peace, that he has 
done everything he could do--except, perhaps, talk a little louder, a little 
earlier in the crisis. 
?????"It's probably fair to say that, going all the way back to last summer, 
we could have rung the bell louder," he says, a sadness momentarily replacing 
the boyish chuckle. "We kept thinking we would be be persuasive, and it kept 
not happening. We tried hard, but we didn't succeed."

Copyright 2001 Los Angeles Times 






Power Cut to Parts of State 
Electricity: First blackouts since March may be the beginning of warm-weather 
outages, industry officials warn. 

By MITCHELL LANDSBERG and KAREN ROBINSON-JACOBS, Times Staff Writers 

?????The dreaded summer of 2001 cast its shadow over California on Monday as 
an early spate of hot weather forced an hour of scattered, statewide 
electrical blackouts--a precursor of what could be a difficult season ahead.
?????With more warm weather expected today and tomorrow, state power 
officials warned that more blackouts might be necessary before an expected 
cooling trend later in the week. And they acknowledged that this could be the 
start of a long, dark summer.
?????"I hate to be the bearer of bad news," said Ed Riley, a spokesman for 
the agency that operates the statewide electrical grid, "but yeah, this is 
the start."
?????The blackouts, the first since March, were triggered at 4:45 p.m. after 
a day in which the California Independent System Operator struggled to patch 
together enough electricity to keep the grid running without outages. That 
worked for most of the day, but finally a combination of warm weather and 
power plant outages proved to be too much for the grid jockeys, and they were 
forced to order the hourlong blackouts, which affected about 100,000 
residential, industrial and commercial customers.
?????The customers hit by the outage were those served by the state's three 
largest private utilities--Pacific Gas & Electric, Southern California Edison 
and San Diego Gas & Electric--plus a number of people served by municipal 
utilities in Pasadena and Vernon.
?????As has been the case throughout the power crisis, which began last 
summer, customers of the municipally owned Los Angeles Department of Water 
and Power were spared. The DWP operates independently of the statewide grid.
?????State officials have been warning for months that this summer would 
probably bring frequent blackouts. Demand for electricity in California has 
far outstripped the supply, and the state's ability to import power from 
elsewhere in the West has been limited by a drought in the Pacific Northwest, 
which relies heavily on hydroelectricity, and by prices that have soared 
beyond the reach of the private utilities.
?????The heat that triggered Monday's blackouts was far from the hottest that 
can be expected this summer. Temperatures ranged from the 70s along the 
Southern California coast to 80 degrees in downtown Los Angeles, 95 degrees 
in Northridge and Sacramento, and a statewide high of 104 degrees in Palm 
Springs.
?????However, there also were more power plants out of service than officials 
hope will be the case this summer. In all, about 12,500 megawatts of power 
were unavailable, mostly because of planned outages for maintenance. That 
amounts to about one-quarter of the state's peak summer demand for power.
?????California uses more electricity in the summer because air conditioners 
require vast amounts of power. Power officials said the latest blackouts were 
an ominous sign.
?????"This is probably typical of what we'll see this summer, but I would say 
this was a less than full experience," said Dick Rosenblum, Edison senior 
vice president for distribution and transmission.
?????"Here we go," said Michael Zenker, California director of Cambridge 
Energy Research Associates, a Massachusetts energy consulting firm. "This is 
a bad omen for how bad the situation is."
?????Rosenblum said about 34,000 Edison customers lost power during the 
blackouts. They were scattered across Edison's 50,000-square-mile territory, 
and included such communities as Irvine, Barstow, Santa Monica, Long Beach 
and Inglewood, he said.
?????The blackouts also affected about 54,000 PG&E customers scattered 
through Northern and Central California, and about 8,600 customers of SDG&E 
in parts of San Diego and Orange counties.
?????As is typical in such blackouts, the utilities received only a few 
minutes' warning from Cal-ISO before they had to pull the plug.
?????No serious incidents were reported. "People are starting to get the hang 
of this," observed Tustin Police Lt. Mike Shanahan, who said he was 
pleasantly surprised at the ease with which drivers in his Orange County 
community began treating blacked-out signals as four-way stops.
?????The blackouts came slightly more than two hours after Cal-ISO officials 
expressed cautious optimism that they might squeak through the day. Worries 
in the morning had eased when the state received 1,000 megawatts from a 
Canadian supplier, and when "interruptible" customers--those who agree to 
occasionally shut off power in exchange for lower rates--came through when 
asked.
?????Riley guessed that the late-afternoon shortage occurred when the 
interruptible customers turned their power back on. In the past, he said, 
such customers--usually large businesses and institutions--typically quit 
work for the day rather than wait around to turn the power back on.
?????"For some reason today, some of that load came back," Riley said.
?????He said it was difficult to immediately determine the extent to which 
Californians were conserving electricity, and whether poor conservation 
efforts could be blamed for the blackouts.
?????Gov. Gray Davis has been exhorting Californians to conserve energy as 
part of a multi-pronged--and hotly contested--state strategy to cope with 
power shortages and exorbitant prices.
?????On Monday, speaking at a news conference in Los Angeles, Davis thanked 
President Bush "for what he has done to date"--a rare bouquet--but was 
clearly critical of recent comments made by Vice President Dick Cheney that 
energy prices should not be capped or regulated under any circumstances, even 
if the problem threatens the nation's economy.
?????"By far the most important thing that the federal government could do 
for us is to moderate prices, which are staggering," Davis said. He said it 
would be a "grave mistake" for the Bush administration to "rigidly adhere to 
ideology even if it meant hardship for California."
?????Also Monday, Davis said he anticipates that a deal to purchase the 
transmission system of San Diego Gas & Electric "will be resolved before the 
week is out." He has offered more than $7 billion to buy the transmission 
systems of SDG&E, Edison and PG&E. So far, only Edison has accepted the deal. 
PG&E's ability to sell its grid has been complicated, if not thwarted, by the 
company's decision to file for protection in federal Bankruptcy Court.
?????Davis has faced difficulty at every turn attempting to rescue the 
state's electrical system while staying afloat in a political tar pit.
?????The latest setback took shape over the past few days as chief executives 
of several independent power companies turned down the governor's invitation 
to a meeting in his office on Wednesday. Davis had sent out the invitations 
to a dozen chief executives last week. Most responded by offering to send 
lower-ranking officers.
?????Davis has relentlessly attacked independent generators, refusing to let 
up even as he invited them.
?????"I'm going ask these generators, who have made more money than God 
sucking money out of California and taking it back to Texas and other 
Southwest states, to reduce the cost of power for this summer, and to reduce 
the claims they have on us for money the utilities owe," he said.
?????In declining the invitation, Stephen Bergstrom, president and chief 
operating officer of Dynegy Inc. of Houston, wrote: "We are greatly disturbed 
by the increasingly virulent rhetoric that is coming from Sacramento."
?????Also Monday:
?????* Democratic lawmakers announced in Sacramento that they are suing the 
Federal Energy Regulatory Commission to compel the agency to cap wholesale 
electricity prices. The agency recently ordered a limited cap, but the 
legislators said it was not enough.
?????* The state Senate voted to impose a special tax on the "windfall" 
profits of energy producers whose earnings have soared astronomically during 
the last year. The resulting revenue would be returned to income taxpayers in 
the form of a credit.
?????* Frustrated by a Republican roadblock, Democratic legislators pushed 
forward with a parliamentary maneuver to reimburse the state budget for 
billions in electricity purchases--a last-gasp move that will effectively 
delay repayment until August.
--- 
?????Times staff writers Miguel Bustillo, Carl Ingram, Dan Moran and Julie 
Tamaki in Sacramento, Robin Fields, Geoff Mohan, Nancy Rivera Brooks in Los 
Angeles, John Glionna in San Francisco, Tony Perry in San Diego, Scott Gold 
in San Bernardino and Deanne Brandon in Orange County contributed to this 
story.

Copyright 2001 Los Angeles Times 






Landlords, Janitors Join in Plan to Save Energy 
Labor: Campaign will include cleaning crews turning out lights in offices on 
their rounds. 

By KAREN ROBINSON-JACOBS , Times Staff Writer 

?????Showing how crisis can unite former adversaries, landlords and janitors 
announced a plan Monday to cut electricity use in major office buildings by 
10% statewide--in part by having cleaning crews turn off lights in offices as 
they make their rounds.
?????Calling it the "largest commercial partnership ever for conservation," 
Gov. Gray Davis hailed the Lights Out plan as part of an overall statewide 
effort to reduce the threat of blackouts this summer.
?????"This is a tremendous partnership between labor and business," said 
Davis, speaking at a news conference in the shadow of the towering Wells 
Fargo Center in downtown Los Angeles, one of the many buildings participating 
in the program. "I challenge all commercial building owners up and down this 
state to do their part."
?????As part of the campaign, cleaning crews will be encouraged to turn off 
lights in unoccupied areas and after cleaning an area. They will also switch 
off other machinery, including computers, and will clean floors in teams, 
rather than be spread out over several floors at the same times, to reduce 
energy consumption.
?????In addition, building owners will be encouraged to seek state-financed 
incentives to offset the cost of installing energy-efficient lighting and 
so-called smart technology, such as motion sensors that shut off the lights 
when a room is not in use.
?????Though tenants will pay most of the cost as energy prices soar, 
landlords have a financial stake in the matter too, said Geoff Ely, president 
of the Building Owners and Managers Assn.
?????As energy use in a building decreases, so do the overall operational 
expenses of the building, making it more attractive to future tenants, he 
said.
?????"In this climate, that could be a significant benefit to the owner," Ely 
said.
?????Ely said the estimate of 10% savings is based on the experience of 
building owners who have implemented similar programs.
?????But if the potential savings are so great, why haven't all building 
owners and tenants begun turning off the lights? According to Ely, many 
owners and tenants simply aren't aware of the savings to be gained. He said 
the new cooperative approach between the landlords and Service Employees 
International Union is part of a broader effort to get more segments of the 
business community involved in conservation. 
?????"We need to work with anyone and everyone who has a role in these 
buildings," Ely said. "The janitors indicated that they wanted to 
participate. This extends beyond management-labor issues and goes to the 
basic issue of the business climate in California."
?????The announcement comes one year after more than 8,000 janitors in Los 
Angeles County let office-building trash pile up during a three-week strike. 
But Mike Garcia, president of SEIU Local 1877, said he and the 25,000 union 
members who clean the major office properties throughout the state were proud 
to be part of the landmark program.
?????"The energy crisis threatens all of us, especially the low-wage 
workers," such as janitors, said Garcia, facing a sea of union members 
sporting green "Lights Out" T-shirts.
?????Noting that a year ago the union was just concluding its work stoppage, 
he said, "Today we stand in solidarity and full cooperation on our five-point 
plan."
?????The program calls for janitors and landlords throughout the state to 
work together to:
?????* Encourage energy-efficient cleaning practices, including switching 
more workers to a Sunday-to-Thursday workweek and establishing janitorial 
"lighting patrols" to shut off unneeded lights.
?????* Implement building-wide conservation programs, seeking input from 
janitors, engineers and other building staffers.
?????* Conduct conservation training seminars for janitors and engineers.
?????* Develop and implement a "comprehensive capital program," offering 
rebates and other state-funded incentives for retrofitting buildings with 
energy-efficient equipment. 
?????* Use newsletters, e-mail and lobby signs to spread the word about the 
program to the 2 million office-building workers.
?????Ely said owners of about 250 million square feet of office space in the 
major markets statewide--including Arden Realty Inc., TrizecHahn Corp., 
Equity Office Properties Trust and MaguirePartners-- have committed to the 
program. In many cases, work to upgrade energy efficiency has begun.
?????He said that represents a "very good chunk" of the estimated 600 million 
square feet of space targeted in the program.
?????Rob Maguire, managing partner of MaguirePartners, which owns the Wells 
Fargo Center, said the bottom-line issue is how the energy crisis will affect 
the state's ability to attract and retain business--a key concern of 
landlords statewide.
?????"At the moment, there is a concern that the state is not competitive," 
Maguire said.

Copyright 2001 Los Angeles Times 






Effort to Repay State for Power Is Delayed 
Crisis: Democrats, GOP fail to agree on a $13-billion emergency bond, putting 
California at risk of running out of funds this fall. 

By MIGUEL BUSTILLO and JULIE TAMAKI, Times Staff Writers 

?????SACRAMENTO--California will not be able to reimburse state coffers the 
billions spent buying electricity during the energy crisis until August at 
the earliest, which will leave the state perilously close to running out of 
money this fall.
?????Democrats and Republicans failed to come to terms Monday on emergency 
legislation that would authorize up to $13.4 billion in bonds to repay the 
state budget, leading Democrats to push forward with a last-gasp strategy.
?????The Legislature's ruling party outflanked the minority GOP by 
introducing an identical, nonemergency measure that required only majority 
approval, not two-thirds passage. It was approved by the Assembly Monday 
evening on a 49-29 vote, and is expected to receive final Senate approval 
Thursday. 
?????Though it guarantees California taxpayers will eventually be repaid in 
full for electricity purchases made to supply private utilities, the 
Democrats' action carries a series of negative consequences for the state as 
it seeks to escape the energy crisis.
?????The nonemergency bill will take a minimum of 90 days to become law after 
the special session ends, effectively leaving the general fund with a massive 
hole as lawmakers prepare the state budget over the next two months.
?????"We can't sell the bonds as quickly, and will probably need a 
contingency budget," said Assemblyman Speaker Pro Tem Fred Keeley (D-Boulder 
Creek).
?????Keeley said lawmakers will probably have to prepare a spending plan with 
different levels of funding--one from July, the time the next fiscal year 
begins, to whenever the bonds are eventually sold. Lawmakers may also have to 
consider a worst-case scenario: the possibility that the bonds will not sell.
?????"If [investors] don't buy the bonds," Keeley said, "the situation we're 
in is very, very dire because the general fund would be repaid very, very 
slowly."
?????State Treasurer Phil Angelides had hoped to borrow $4.13 billion to 
partially repay the budget until bonds could be issued, but lawmakers said 
the new legislation will make that impossible. Angelides' tentative deal to 
borrow the money from several Wall Street firms expires today. The deal 
required authorization on the bonds, because bond proceeds were to be used to 
repay the loan.
?????"The Assembly Republicans' refusal to support emergency legislation puts 
the state's fiscal integrity at great and continuing risk, and does serious 
harm to essential services from education to public safety to health care," 
Angelides said in a statement.
?????The delay also means that Gov. Gray Davis will fail to keep his promise 
to repay the budget and take the state out of the energy buying business by 
the end of June. That is crucial, because many of the contracts to purchase 
electricity that the Davis administration signed contain language that may 
make them void if financing is not secured by July 1. If the contracts 
evaporate, the state will be forced to buy even more power on the expensive 
spot market to avoid blackouts.
?????Davis plans to replenish state coffers and stop using taxpayer money on 
power purchases by floating a record bond issue, which would be repaid by 
utility ratepayers out of their monthly bills. But the bonds cannot be issued 
until the bill in question takes effect.
?????In a statement, Davis also accused Republicans of "obstructing the 
solution" to the state's electricity problems, saying "their decision to play 
partisan politics with the energy crisis seriously complicates the budget 
process and could ultimately threaten our economy."
?????So far this year, California has spent more than $5 billion from the 
budget buying power for the private utilities that were too financially 
strapped to continue doing so.
?????Most critically, the measure will leave a dangerously narrow window of 
time for the bond to be issued so the budget could be reimbursed before state 
coffers begin to run dry in early fall. The $12.5-billion bond is expected to 
be the largest in American history, and experts say it will require a 
significant sales effort. The Democrats' bill authorizes a slightly larger 
amount in case the bond issue needs to grow.
?????Assembly Speaker Bob Hertzberg (D--Sherman Oaks) said he will continue 
working with Republicans in hopes of passing legislation to authorize the 
bonds sooner.
?????"I'm still holding out an olive branch to Republicans," Hertzberg said.
?????Lastly, the bill's final passage will kill, temporarily at least, 
hundreds of energy-related bills now winding their way through the 
Legislature. That is because, for the bill to become law as quickly as 
possible, Democrats would have to adjourn the current special legislative 
session on the energy crisis.
?????Democrats are vowing to quickly approve a host of important bills this 
week before the session is closed down. And Davis is expected to immediately 
call another special session, said spokesman Steve Maviglio, so most of the 
remaining bills could be reintroduced.
?????Nonetheless, the process would slow down passage of numerous 
measures--especially for Republicans, who may have a harder time getting 
their bills through both houses a second time. Republicans hold only 30 of 
the Assembly's 80 seats, and 14 of the Senate's 40 seats, making them a 
distinct minority.
?????Without question, the Democrats' move represents a ratcheting up of 
partisan politics on the energy crisis.
?????Republicans held up the initial legislation in hopes of forcing Davis 
and his Democratic colleagues to alter their financial plan to get the state 
out of the crisis--even if it meant scaling back the next state budget.
?????Davis has proposed borrowing the $12.5 billion to repay the budget and 
cover future power purchases over the next two years, which would allow his 
next state budget to move forward unimpeded by the crisis.
?????GOP lawmakers, who are convinced that the size of the bond will need to 
be increased to finance Davis' plan, countered last week with a proposal to 
essentially gobble up most of the state's projected surplus by writing off $5 
billion in electricity purchases and borrowing less in bonds for future power 
buys.
?????But Democrats balked at the Republican proposal, saying California had 
far too many needs in education, law enforcement, transportation and health 
care to permanently spend $5 billion on electricity. Furthermore, they said, 
using taxpayer money instead of electric rates to cover power purchases would 
favor big business.
?????"Today, we take a bitter pill to fix a problem we all know needs to be 
fixed," Assemblyman Dennis Cardoza (D-Merced) said. 
--- 
?????Times staff writers Carl Ingram and Dan Morain contributed to this story.

Copyright 2001 Los Angeles Times 





Blackouts Mean More Than Inconvenience for Disabled 
Energy: They say life-saving equipment could fail. Advocates will urge state 
officials and utilities to provide a stronger safety net. 

By JOHN M. GLIONNA, Times Staff Writer 

?????SAN FRANCISCO--As she monitored the news of possibly more rolling 
blackouts Monday, Lori Gray braced for another tense day in the projected 
summer-long fallout from the state's worsening energy crisis.
?????For the 39-year-old Berkeley woman--who is blind and suffers from 
epilepsy, asthma and chronic pain from aching joints that restrict 
movement--losing electricity is more than just an inconvenience.
?????It could kill her, she says.
?????Gray relies on electricity to run several life-saving machines that do 
everything from dispensing her asthma medication and opening her door by 
remote control to relaying her emergency telephone numbers in a computerized 
voice.
?????Today, disability activists are calling on state officials and 
California's utilities to do more to assist residents like Gray--disabled 
people who are perilously vulnerable to any loss of electrical power.
?????In letters to Gov. Gray Davis, the California Public Utilities 
Commission and Judge Dennis Montali, who is presiding over Pacific Gas & 
Electric's recent bankruptcy filing, an Oakland-based disability watchdog is 
calling for a comprehensive statewide system to ensure that disabled people 
do not fall through the energy crisis safety net.
?????Lawyers from Disability Rights Advocates want a state-mandated emergency 
plan that responds to the "disproportionate and life-threatening impact of 
the energy crisis on people with disabilities."
?????Activists are calling for a statewide early-warning system; the creation 
of charging stations on exempt circuits for recharging equipment during 
blackouts; funds to buy backup batteries and generators and a toll-free 
emergency hotline for the disabled.
?????They also seek a state investigation into remedies for the long-term 
impacts--including rate increases.
?????Gray says the prospect of losing power and relying on unreliable 
generators pervades even her dreams.
?????"I spend my days worrying," she says. "I worry over when the next 
blackout will come. I worry about my friends who are in similar, if not 
worse, predicaments than me--who rely on their respirators. Let me tell you, 
this is no way to live."
?????At least two utilities said Monday they already employ an early-warning 
system for many customers on life support, but were open to other suggestions 
on how to improve services for the disabled. They added that the burden also 
rests with state officials.
?????Activists, who called the letters a first attempt to open discussions of 
the issues, say they have not ruled out a class-action lawsuit on behalf of 
what they say are 3 million people with disabilities in California.
?????"The response should not be an ad hoc process--one utility doing this 
and another that," said Shawna Parks, an attorney for the Oakland nonprofit. 
"We want an organized system that addresses some very serious needs. And as 
for any lawsuit if this doesn't happen, we're not closing any doors."
?????Disability Rights Advocates recently won major concessions in settling a 
lawsuit it filed against health care giant Kaiser Permanente for failing to 
address the needs of its wheelchair patients.
?????PUC Commissioner Carl Wood said Monday he would be open to any 
suggestions to assist the sick, elderly and disabled in the event of 
continued blackouts. "The energy crisis has put a huge burden on the most 
vulnerable people in our society--people just trying to survive," he said.
?????But funding new programs presents problems.
?????"One utility faces bankruptcy and others could be close, so some might 
question the wisdom of giving them new mandates when there may be no money to 
fund them," Wood said. "The goals are reasonable. The question is where the 
money comes from."
?????Dan Quigley, director of emergency communications for PG&E, said the 
company contacts about 22,000 life-support customers before anticipated 
blackouts. Another 48,000 are part of a medical baseline program in which 
they receive reduced electrical rates.
?????"We didn't design the system to shut people off and cause them 
inconvenience," he said. "We're eager to work with the PUC and disabled 
advocates to figure out a system that reduces the disruption."
?????Quigley added, however, that some of the activists' suggestions--such as 
community battery charging stations--would be better served by state 
emergency response groups.
?????Anita Gore, a spokesperson for the state's massive health and human 
services agency, said the suggestions will be considered. "This is all 
relatively new," she said of the blackouts, "so we're gearing up to address 
concerns of the disabled and everyone else."
?????Ed Van Herik, a spokesman for San Diego Gas & Electric, said the company 
notifies 3,500 life-support customers of impending blackouts and "calls those 
customers back later to make sure the power has come back on."
?????He echoed concerns about the suggestion of an emergency hotline. "Some 
of those calls might be better handled by 911," he said.
?????Disability Rights Advocates has recently heard from dozens of disabled 
residents from across the state, including a woman who uses a respirator to 
breathe at night--who says she must stay awake during blackouts because she 
cannot afford a generator.
?????A deaf man who uses visual alarms for the phone, doorbell, smoke 
detector and baby monitor has lost them during blackouts and fears going 
without power at night--saying his family will have difficulty communicating 
because they use sign language.
?????Another disabled woman who uses a wheelchair told advocates she was 
stranded in her apartment during a blackout because the elevator did not work 
and she could not use the stairs.
?????Parks said activists want the utilities to expand services for the 
disabled.
?????"There are situations faced by the disabled that aren't defined as 
critical by the utilities," she said. "There are many more definitions of 
being disabled than to be on a respirator or life support."
?????Lori Gray knows how the system can fail the disabled.
?????She was expelled from PG&E's medical baseline program last summer after 
failing to respond to a company letter requiring her to recertify.
?????"They sent a printed letter, but I'm blind and can't see," she said. 
"But they bounced me anyway."
?????Now Gray must acquire new letters from her doctors to get readmitted 
into the program. And when she asked utility officials to attach a staple to 
the return address of future letters so she could distinguish them as 
important mail, they refused--until she complained to PUC officials.
?????Gray says she would do anything to be included in the early warning 
programs because notification could be a lifesaver.
?????"It would relieve the stress of worrying when the next blackout is 
coming," she said. "I think the disabled deserve that much."

Copyright 2001 Los Angeles Times 





In 1st Hearing, PUC Urged to Lift Rate Hike 
Energy: Speakers call on the agency to rescind the increase approved last 
month. Officials caution that they are focusing on "who pays and how much." 

By NANCY RIVERA BROOKS, Times Staff Writer 

?????The lights were out to save energy in a Santa Monica hearing room, but 
the heat was on as consumers and business representatives urged the 
California Public Utilities Commission on Monday to spread the pain of rate 
increases fairly--but differed substantially on how that could be 
accomplished.
?????Many of the more than 30 speakers who appeared at the PUC's first public 
hearing on how to design new electricity rates spent their time trying to 
persuade the commission to undo the increase of 3 cents a kilowatt-hour, 
which was approved March 27 and is expected to begin appearing on bills in 
June.
?????Although Commissioner Henry Duque and Administrative Law Judge Victor 
Ryerson listened politely and court reporters took down every word, those 
fervent pleas were largely wasted.
?????Ryerson admonished the audience of about 75 people that the hearing 
would not determine whether rate increases are necessary to pay for soaring 
electricity costs. That already has been decided by the PUC, he said.
?????Rather, the series of hearings this week throughout the state, each 
attended by one of the five PUC commissioners, will focus on "who pays and 
how much," Ryerson said.
?????That wasn't what consumer advocate Douglas Heller wanted to hear.
?????"The PUC is asking the wrong questions," said Heller of the Foundation 
for Taxpayer and Consumer Rights in Santa Monica. "The question that the PUC 
should be asking is: How do we get our state back?"
?????"Small consumers never asked for deregulation and never benefited from 
it," Heller said. "The innocent victims of this public policy nightmare 
should not bear the burden of the energy industry's greed and the governor's 
failure to confront it."
?????About 20 different rate plans have been submitted to the PUC, which is 
expected to adopt a rate design at its meeting next Monday. PUC officials 
said that rates will rise by an average of 30% but that some customers will 
see no increases while some will see much larger increases.
?????The commission is under tremendous pressure to devise a new rate 
structure that encourages conservation but doesn't damage businesses--and to 
do it in six weeks rather than the usual six months or longer.
?????Some who testified Monday in Santa Monica feared that the new rates will 
cause families to subsidize single users and will penalize those that are 
already conserving electricity.
?????David Marshall, chief financial officer of El Monte-based Gregg 
Industries, asked that the PUC retain lower rates for the hours when 
electricity use is lower.
?????Gregg, which employs 400 people to make heavy iron parts for industry, 
has shifted all its production to between midnight and noon, he said. That is 
the only way Gregg can continue to compete, Marshall said.
?????His company does business in the United States, Mexico, Europe and Asia, 
"and in every one of those markets we have direct competitors anxious to take 
business away from us," Marshall said. "California is not an island."
?????Encino resident Donald Tollefson argued that consumers should be spared 
the brunt of the rate increases because they will be forced to pay twice: for 
their own higher electricity rates and in the form of price increases as 
businesses pass along their higher energy costs.
?????"Whatever you do," he said, "you should be fair and compassionate."
?????About 200 people attended a similar hearing in a dimly lit high school 
auditorium in Rosemead.
?????Bob Wellemin, an air-conditioner mechanic from Temple City, said the 
commission should take the blame for not pushing to build more power plants.
?????"How on Earth have you been representing the consumers?" he said, 
evoking applause. "And what I don't understand is that we have three or four 
meetings like this ahead. And we got a May 14 deadline to make a decision. I 
don't want to sound skeptical. But how can I not be skeptical when you've got 
one representative here and a week to decide."
?????Wellemin also criticized the commission's proposed rate increases, 
saying that it would hurt people who already conserve energy. As a resident 
with low-energy appliances and no central air-conditioning, he said he would 
be penalized because it would be difficult to reduce his power from one month 
to the next.
?????Others warned the commission to take a methodical approach in deciding 
the rate plan.
?????"If I have to act businesslike, I would expect state representatives to 
act the same," said Don Osborn, a small business owner from the San Gabriel 
Valley. "I haven't seen that."
--- 
?????Times staff writer Joe Mozingo contributed to this story.

Copyright 2001 Los Angeles Times 






Tuesday, May 8, 2001 
An Oilman's Dream 

?????A hot week is forecast for California. It began Monday with Stage 1, 2 
and 3 power alerts, topped by statewide rolling blackouts. Say hello to 
summer, which California will have to get through with little help from the 
White House. 
?????Both President Bush and Vice President Cheney are Texas oil patch 
veterans, which may explain, if not excuse, their backward-thinking energy 
policy ideas. 
?????Last week, Cheney gave a speech in which he said the nation must develop 
new supplies of oil and natural gas, use more coal and rely more on nuclear 
power. That's a policy for the 1950s or 1960s, when oil was king, but not for 
this century and certainly not for California. 
?????Cheney gave some lip service to conservation but not, heaven forbid, 
anything that would "affect lifestyles." The nation simply cannot "conserve 
or ration our way out" of energy shortages, he said in an obvious dig at 
California energy policies from the Jerry Brown days. 
?????Cheney's dig finally stirred the White House to some lukewarm concern. 
President Bush, after expressing little sympathy or empathy for California 
the past 100 days, came out with a plan to cut power use by 10% in federal 
offices in California during Stage 2 and 3 emergencies. Gee, thanks. 
?????In an interview with The Times at the end of last week, Cheney repeated 
this administration's reliance on fossil fuels. And he slammed California 
again by saying his energy plan sees the state as an example of things not to 
do. He's wrong on that count too. California in fact has done much to praise. 
?????The state has the lowest per capita electric power use in the nation. 
Today, nearly a third of all our power comes from renewable and alternative 
sources. Even so, some of these sources, particularly solar, have barely been 
tapped. 
?????We do need to develop more oil and natural gas from our own federal 
lands. But we are not so desperate that we need to spoil the pristine 
wilderness of the Arctic National Wildlife Refuge in Alaska or California's 
Los Padres National Forest, home of the condor. In fact, modest improvements 
in the fuel efficiency of autos and sport utility vehicles could save far 
more oil, and sooner, than getting it from the refuge. 
?????But nuclear and coal are no answer, even if Cheney's Wyoming is the 
leading coal-producing state. One tactic of this administration is to mock 
California for creating its own shortage by adopting extreme environmental 
protection laws while its citizens soak in hot tubs. But consider that the 
state was a leader in turning to clean-burning and then-plentiful natural gas 
instead of fuel oil. And the utilities stopped building nuclear plants 
because of economics and safety, not because of environmental protectionism. 
?????The nation does need a new energy policy, and the administration is 
expected to announce its official strategy within two weeks. To base it on 
domestic fossil fuel production would be folly. Cheney is right that we can't 
conserve our way out of the energy crisis. Yet we can't begin to drill our 
way out, either. Copyright 2001 Los Angeles Times 







Tuesday, May 8, 2001 
Cheney's an Oaf on Conservation 
By ROBERT SCHEER


?????Why beat around the Bush? Surrogate President Dick Cheney is behaving 
like an oil-guzzling, intellectually irresponsible, anti-environmental oaf. 
?????How else to define one who summarily dismisses the promising advances 
made in energy conservation while urging the more rapid depletion of fossil 
fuel resources and construction of nuclear power plants? 
?????Cheney is a mouthpiece for energy companies like Halliburton, his former 
employer, which paid him $36 million in his last year of brief service as its 
CEO in a field he previously knew nothing about. But the company, which 
prospers when new power plants are built, got its money's worth when 
President Bush added "energy policy czar" to Cheney's extensive White House 
portfolio, leaving the president ample time to greet Little League teams. 
?????Ever grateful to the oil bigwigs who made him financially whole while 
lavishly supporting the GOP ticket, Cheney barely took up his new civic 
responsibility before launching a war on energy conservation. In his words, 
the commitment to conservation, endorsed by a long line of presidents of both 
parties, was valuable primarily as therapy for tree-huggers: "Conservation 
may be a sign of personal virtue, but it is not a sufficient basis for a 
sound, comprehensive energy policy." 
?????Nonsense. Conservation works, and according to the latest government 
studies--pointedly ignored by Cheney--it could be a major factor in staving 
off any future energy crisis. 
?????As the New York Times reported in its lead story Sunday, "Scientists at 
the country's national laboratories have projected enormous energy savings if 
the government takes aggressive steps to encourage energy conservation in 
homes, factories, offices, appliances, cars and power plants." ?????The 
three-year studies by the five national science laboratories undermine 
Cheney's shrill insistence that the country must pop for a huge new polluting 
power plant every week for the next two decades, lest our homes and factories 
go dark. The studies concluded that a government-led conservation program 
could cut growth in energy consumption almost in half, using proven 
technology already tested and in place. 
?????Such technology is already saving energy and money at Cheney's official 
residence at the Naval Observatory and at President Bush's new ranch in 
Crawford, Texas. Inexplicably, what's good for them isn't good enough for the 
rest of the country. 
?????To ignore scientific breakthroughs on energy conservation is to lie to 
the American people about the dimensions of the problem. This is not 
leadership; this is fear-mongering that withholds from the American public 
sound scientific information in order to justify eviscerating conservation 
policy. 
?????Indeed, the administration's 2002 budget kills much of President 
Clinton's program to improve energy efficiency in building construction, 
heating and appliances, savings that would have obviated the need for an 
estimated 170 new power plants. 
?????Cheney chose to attack conservation at the very time when California 
embarked on a major plan to end its electricity shortage through lowering 
consumer demand--a shortage that Cheney irresponsibly blames on 
environmentalists who were insisting on pollution controls. 
?????California's crisis is being created by the price-gouging of mostly 
out-of-state energy suppliers that are taking advantage of a deregulation 
plan hatched by former Republican Gov. Pete Wilson in cahoots with the 
privately owned utilities. The utilities wanted to sell off what they 
incorrectly figured to be the less-profitable energy production business, 
including ever-troubled nuclear plants of the sort Cheney now embraces. In 
return, they agreed to temporary caps on consumer prices. 
?????The problem is that the feds control wholesale prices, which they didn't 
cap. Last week, when the Federal Energy Regulatory Commission finally 
recognized that it needed to exercise its legal authority to cap wholesale 
prices, Cheney blasted it: "If I had been at FERC, I never would have voted 
for short-term price caps." 
?????California consumers should remember Cheney's refusal to rein in the 
price-gougers come the next election. 
?????Finally, whatever happened to the monarchs of Saudi Arabia and Kuwait 
saved by former President Bush and then-Defense Secretary Cheney during the 
Gulf War? 
?????The monarchs sit atop the world's largest oil reserve. Wouldn't you 
think that since they owe their continued existence to the Bush clan, they 
might return the favor with lower oil prices? Instead, U.S. consumers are 
being punished at the gas pumps with some of the highest prices in recent 
memory. 
?????The dirty secret is that the Texas oilmen in the White House like the 
price of foreign crude to be very high. That justifies increased U.S. 
production, even in pristine lands, and boosts energy profits, which 
doubtless will fatten the coffers of Republican candidates in the next 
election. 
?????You can't say we weren't warned. Put two Texas oil guys in the White 
House, and they are going to seize any opportunity to grease the palms of 
their big oil backers while raping the environment. 
?????Still, it is surprising that they are being so obscenely blatant about 
it. 
- - -

Robert Scheer Is a Syndicated Columnist

Copyright 2001 Los Angeles Times 





Secret power deals contain hidden costs 
THE CLAUSE: A link to natural gas prices 
David Lazarus, Chronicle Staff Writer
Tuesday, May 8, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/05/08/MN38174.DTL 
While Gov. Gray Davis insists that California's top-secret contracts to buy 
electricity will lead to more stable prices in years ahead, the deals 
actually may expose consumers to even higher energy bills, The Chronicle has 
learned. 
At least a portion of the contracts contain what is known in industry jargon 
as a "gas escalator" clause, which allows power companies to increase prices 
as their natural gas costs go up, according to sources familiar with the 
agreements. 
Analysts predict that natural gas prices could climb in years ahead as dozens 
of new gas-fired power plants in the Western region compete for tight 
supplies. 
This makes it possible, analysts said, that the $13 billion in bonds 
California intends to offer to pay for its power purchases will not be enough 
to cover the full cost of the contracts, some of which last as long as 10 
years. 
The state now spends more than $50 million a day to purchase electricity on 
behalf of cash-strapped utilities. Davis has argued that long-term power 
contracts will ease California's financial burden. 
"The governor has suggested that he has all these contracts lined up at a 
certain price," said Jeff Dietert, an energy-industry analyst with Simmons & 
Co. in Houston. "He's been deceptive to a certain extent on that point." 
However, S. David Freeman, Davis' top energy adviser and the negotiator for 
most of the state's power accords, said yesterday that escalator clauses are 
"the rare exception for the bulk of the contracts." 
"The overwhelming majority do not have any escalators in them," he said. "The 
price is firm." 
Freeman acknowledged, though, that a number of contracts "were finished after 
I left, so I don't know about them." 
He stopped negotiating California's power contracts in early March and 
returned to his job as general manager of the Los Angeles Department of Water 
and Power. Freeman returned to Sacramento as the state's newly appointed 
energy czar in mid-April. 
California consumers so far have had to take the governor's word that the 
long-term contracts will work to their benefit. Details of the more than 40 
accords have remained shrouded in secrecy as Davis argues that revealing the 
contents would jeopardize future negotiations. 
The Chronicle and other media outlets are suing the governor for access to 
the contracts, which involve about $40 billion in public funds. 
A state judge ruled last week in San Diego that Davis has until May 14 to 
file papers defending his decision to keep the contracts secret. The next 
hearing in the case is scheduled for June 1. 
Roger Myers, a partner with the San Francisco law firm of Steinhart & 
Falconer, which represents The Chronicle and the Associated Press in the 
lawsuit against the governor, said news of the gas escalator clauses could 
have bearing on the case. 
"The fact that this information has not been made previously available 
illustrates the importance of unsealing the contracts so the public can see 
what's in them," he said. 
Little is known about the contracts except that they are at an average price 
of $69 per megawatt hour for about 9,000 megawatts -- almost a fourth of 
California's current electricity needs. 
However, analysts said power companies routinely demand that fuel- adjustment 
clauses be included in long-term contracts as a way to minimize their risk. 
"No one's going to sign a contract that doesn't contain a fuel-cost 
adjustment," said William Hyler, an analyst at CIBC World Markets in New 
York. 
To be sure, there is a chance that California's electricity costs could 
decline under some contracts if the price of natural gas, which fuels most 
modern power plants, comes down from currently sky-high levels in years 
ahead. 
Most industry analysts foresee gas prices decreasing over the next few years 
as suppliers boost production. Longer term, however, prices could once again 
soar as new gas-fired power plants push demand higher. 
Gas prices are now more than 50 percent below their winter peak of $10 per 
million British thermal units but are expected to climb again this summer. 
About 30,000 megawatts of new power plants in the Western region are 
scheduled to come online this year, and dozens of other plants are expected 
to begin operating over the next five years. 
Tight supply makes it difficult, to say the least, to predict where prices 
might be over the duration of California's long-term contracts, which vary in 
length from three to 10 years. 
"You can't accurately predict the price of fuel, especially over that period 
of time," said Duane Grubert, an analyst at brokerage Sanford C. Bernstein in 
New York. 
He and other analysts said volatile fuel prices only increase the likelihood 
of power bills going up for California consumers, despite locking in supplies 
of power through long-term accords. 
E-mail David Lazarus at dlazarus@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 1 



Bush won't budge on fuel prices 
Despite fears of a $3 gallon, he will oppose controls 
Verne Kopytoff, Benjamin Pimentel, George Raine, Chronicle Staff Writers
Tuesday, May 8, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/05/08/MN188349.DTL 

As oil companies quietly warned service station owners that fuel may rise to 
$3 a gallon this summer, the Bush administration said yesterday that it will 
do nothing to curb soaring gasoline prices. 
The statement from the White House followed a report yesterday that gas 
prices are at record high levels in the Bay Area. 
"If any politician has a magic wand that they can wave over gas prices to 
lower them, the president . . . would like to listen to them," said Ari 
Fleischer, the White House spokesman. 
Bush is opposed to price controls and did not support cutting the 18.4- 
cents-a-gallon federal gas tax during the presidential campaign. 
The California State Automobile Association said a gallon of regular self- 
serve unleaded now averages $2.10 in San Francisco and $2.03 in San Jose. The 
state average is also at a record high of $1.95, the association reported. 
"It's outrageous," said Dave Miller, a contractor from San Rafael, while 
filling up an Oldsmobile sports utility vehicle yesterday at a Shell station 
in San Francisco. "I see three bucks coming." 
Fear that gas will reach $3 a gallon spread last week when service station 
owners were advised by some oil companies to have the number "3" on hand to 
place on their signs should the price climb to $3 a gallon. One of the 
operators was Bob Oyster of Redwood City, who operates 27 Shell and Chevron 
stations in the Bay Area. 
"They said, 'Make sure you are prepared,' " Oyster said. "There has been a 
lot of talk over the weeks by oil people that the price is going up, but 
there's a larger issue, and $3 may be a bargain." 
Oyster blames oil industry consolidation and dwindling competition for the 
higher prices. He said there are half as many oil companies and dealers as 10 
years ago. 
"If the consolidation and lack of competition continues, we're going to be 
talking about $6 per gallon, not $3," Oyster said. 
Taking into account inflation, gas prices are now the highest they have been 
since 1981. That was when President Ronald Reagan ended price controls on the 
oil industry and gas prices spiked to $1.38 a gallon -- $2.30 a gallon when 
adjusted to today's dollars. 
1918 RECORD 
Gas prices need to jump above $2.75 cents a gallon to beat the record 
adjusted for inflation. That record was set in 1918. 
Phil Verleger Jr., an oil industry analyst in Newport Beach, said the chance 
of gas reaching $3 a gallon this summer is probably slightly more than 1 in 
3. He said it depends on several factors, including whether the state's 
electricity crisis causes blackouts at oil refineries. 
"Those idiots at the California Public Utilities Commission seem to not care 
for the fact that refineries do not operate the same way printing plants do," 
Verleger said. "You can't just turn them off and on with a switch." 
California's gas supply is especially vulnerable to price fluctuations 
because of the state's requirement for cleaner burning fuel. There are just 
enough refineries to keep the state supplied, and if one malfunctions, prices 
soar. 
Olivia Malabuyo, a director of a nonprofit in San Francisco and part-time 
actress, said high gas prices are painful. She earns a modest salary and 
drives nearly 400 miles a week, much of it by commuting from Oakland. 
"It's going to make my pay check a lot smaller," Malabuyo said while filing 
up her Toyota Corolla with medium-grade gas for $2.26 a gallon. "It's hard to 
refuse to pay if you have to get to work." 
ENERGY POLICY FORTHCOMING
The White House is expected to release an energy policy this month that 
includes long-term solutions to supply shortages as opposed to short-term 
strategies such as price controls. One controversial solution already 
proposed is to drill for oil in the Arctic National Wildlife Refuge. 
Fleischer said Bush "has never sought a quick fix because quick fixes don't 
work. He will resist the siren song of moving from one short-term solution to 
another." 
Sen. Dianne Feinstein of California has asked Bush in letters and telephone 
calls to temporarily waive a requirement for oxygenates in the state's gas. 
The oxygenates reduce pollution but also lead to higher fuel costs. 
"Unfortunately, the administration has refused to act on this requirement," 
said Howard Gantman, a spokesman for Feinstein. 
SIGNS OF SETTLING DOWN
However, there are signs that gas prices are stabilizing for now, according 
to Bronwyn Hogan, a spokeswoman for the California State Automobile 
Association. She said prices are no longer increasing by a penny each day, 
and may in fact be declining slightly in some locations. 
According to the Energy Information Administration, the national mean gas 
price in May is expected to be $1.60 a gallon, about 5 percent above the 
record set last year. That could very well be the highest it gets for now, 
the agency said. 
Past price spikes have prompted concern that oil companies are engaging in 
monopolistic behavior. However, the Federal Trade Commission concluded 
yesterday that there is no evidence major oil refiners violated antitrust 
laws in marketing West Coast gasoline during past price spikes. 
The investigation, which began three years ago, "found no evidence of 
collusion between oil companies" nor any agreement on pricing "at any level 
of supply." 
But even some workers at gas stations believe the prices they currently 
charge are outrageous. Jeff Triplitt, a manager at a Shell station in San 
Francisco, said he does not get a discount for gas where he works and in fact 
fills up his Chevrolet suburban at another station where it is cheaper. 
"It's just ridiculous," Triplitt said. "If they bring down the price by 10 
cents, that will make a big difference." 

Chronicle news services contributed to this report. / E-mail Verne Kopytoff 
at vkopytoff@sfchronicle.com, George Raine at graine@sfchronicle.com and 
Benjamin Pimentel at bpimentel@sfchronicle.com. 
Price at the pump
How the average price for a gallon of gas (self-serve regular) stacks up:
   San Francisco
   $2.10
   San Jose
   $2.03
   Oakland
   $1.99
   California
   $1.95
   U.S.
   $1.76
   Source: CSAA, Lundberg Survey


,2001 San Francisco Chronicle ? Page?A - 1 



Hot weather sparks new round of blackouts 
SUPPLIES LOW: Usage keeps climbing as temperatures surpass 90 degrees 
John Wildermuth, Michael Pena, Chronicle Staff Writers
Tuesday, May 8, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/05/08/MN5423.DTL 

California's long, dark summer began yesterday as the energy crunch forced 
power officials to black out more than 200,000 homes and businesses around 
the state. 
Soaring temperatures -- and a supply situation so precarious that even a 
highway project that shut down a gas line in Ventura County was cause for 
concern -- forced the state to turn out the lights. 
The decision to call for the first blackouts since March 20 came at 4:45 p. 
m. and capped a day when the state's utilities thought they had dodged the 
blackout bullet. 
"The temperatures ended up well above what was forecast and really took off 
at the end of the day," said Stephanie McCorkle, a spokeswoman for the 
California Independent System Operator. "And demand went right up with it." 
The ISO ordered the state's three private utilities to cut a total of 300 
megawatts. In Northern and Central California, 54,000 customers of Pacific 
Gas and Electric Co. lost power for about an hour. 
SCATTERED POWER LOSSES
The blackouts were scattered throughout the Bay Area. Among the areas blacked 
out were South San Francisco's industrial area east of Highway 101 as well as 
homes across town near Interstate 280. In Mountain View, an undetermined 
number of homes and businesses across Highway 101 from Moffett Field lost 
power, while parts of San Leandro also went dark. 
Police reported no blackout-related problems. 
"This wasn't too big an outage," said Ron Low, a PG&E spokesman. "March 20, 
the last time we had blackouts, there were 438,000 of our customers 
affected." 
Power officials called the Stage 3 alert and blackouts when electricity 
reserves dropped below 1.5 percent. 
While power officials originally predicted no power blackouts for the rest of 
the week, they were backing away from that forecast by yesterday evening. 
A Stage 2 alert is likely today, meaning power reserves are expected to drop 
below 5 percent, and a new round of blackouts is a real possibility. 
"We're stressing that it's a very dynamic situation," McCorkle said. "A lot 
depends on the temperature, and we've heard it's going to be even hotter 
(today). We're really preaching conservation." 
SHADES OF SUMMER
Yesterday probably was just a sample of what the summer will be like. The 
power demands that hot weather brings -- and the resulting energy shortfall 
-- are likely to continue for the next four months. 
"It's the first day of what will be many this summer," said Jim McIntosh, 
director of operations for the ISO. 
The unexpected loss of some electricity from Canada, along with the planned 
shutdowns of some nuclear plants, nearly brought blackouts earlier in the 
day. But planned emergency measures to limit power usage, along with some 
conservation efforts, kept the lights on -- at least for a few more hours. 
"At 11 a.m., we were within five minutes of going to blackouts," McIntosh 
said. 
The bulk of the conservation came from customers with interruptible service 
agreements, who have agreed to accept short-term power cuts in exchange for 
lower rates. But about 150 megawatts came from customers who decided on their 
own to chop back their energy usage. Each megawatt is enough to supply power 
to 1,000 homes. 
"The 150 megawatts doesn't sound like much, but it made a difference today, " 
McIntosh said. "And during the summer, it would make a difference every day." 
RISING TEMPERATURES
It was a record 93 degrees in San Francisco yesterday, and temperatures also 
reached new heights in Oakland, Santa Rosa and Hollister. As the mercury 
soared in the Bay Area and Central Valley, people were thinking about the 
energy crunch. 
Lenshina Pendar, a pre-med student at the University of California at San 
Francisco, said her family in Hercules had started using the air conditioner 
again -- sparingly. 
"Definitely, we turn it on, but not so high," Pendar said. "We leave it on 
maybe for 30 minutes." 
At the Pleasant Hill BART station, people said they were taking advantage of 
the heat. 
"I hung my clothes on the line today," said Lisa Kelley of Walnut Creek. 
She also has a backyard swimming pool. "It's almost swimmable," Kelley said. 
"It's 73 degrees without heating or anything." 
PRECARIOUS SITUATION
Yesterday's events showed the delicate balance of the state's energy 
situation. 
California's generation capacity already has been cut because the nuclear 
power plants that supply power to the state are either shut down or working 
at limited capacity. While the San Onofre plant near San Clemente has been 
offline since a fire in February, the Diablo Canyon plant near San Luis 
Obispo and plants in Arizona and Washington are down because of long-planned 
maintenance and refueling. 
Meanwhile, a not-so-wet winter has cut the amount of hydroelectric power 
produced by dams throughout the West, leaving California's power grid 
vulnerable to almost any disruption. 
Yesterday, for example, an expected 1,000 megawatts didn't materialize when a 
Canadian supplier stayed off the energy market for three hours in the 
morning, forcing the ISO to scramble for replacement power. 
Even some roadwork in Ventura County that shut down the gas line to a local 
power plant was cited as a potential threat to the state's energy supply. 
California's power grid is working on such a tight margin that the unexpected 
loss of a power plant can quickly plunge part of the state into darkness, 
McIntosh warned. 
"It doesn't have to be a huge plant," he said. "Certainly today it didn't 
have to be." 
PG&E customers who are vulnerable to rolling blackouts are grouped into 14 
blocks; when blackouts hit, customers in those blocks lose power for one to 
two hours. Yesterday's blackouts started in Block 14; the next group hit will 
be the remaining customers in Block 14 and then those in Block 1. 
Each block contains about 225,000 customers. PG&E customers can determine 
their block by looking at the bottom left-hand corner of their monthly bill. 
-- The blackout: About 225,000 customers statewide, including 54,000 PG&E 
customers in Block 14, lost power from 4:45 to 5:41 p.m. 
-- Why it happened: High temperatures brought on unusually high demand for 
electricity, and supplies were tight because several plants were shut down 
for maintenance. 
-- Today's outlook: Power grid managers expect to have sufficient power to 
meet demand but warn another blackout is possible. 
-- Power Block Outages: The last rolling power outages occurred in the 
following blocks: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 
Next outage block: 14 then 1 
Chronicle staff writers Charles Burress and Marshall Wilson contributed to 
this report. / E-mail John Wildermuth at jwildermuth@sfchronicle.com and 
Michael Pena at mpena@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 1 



Developments in California's energy crisis 
The Associated Press
Tuesday, May 8, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/08/state1
011EDT0137.DTL&type=news 
, , -- (05-08) 07:11 PDT Developments in California's energy crisis: 
TUESDAY:
-- The state remains free of power alerts in the early morning, although grid 
operators warn that high temperatures could force blackouts again. 
-- A coalition of churches announce an initiative to encourage power 
conservation among member religions. 
-- The state Senate could decide to vote on a $13.4 billion bond to pay for 
the state's power buys. 
-- Gov. Gray Davis meets with representatives of energy wholesalers. 
-- The Public Utilities Commission continues its round of hearings on the 
rate increases affecting customers of the three investor-owned utilities. 
They meet at 2 p.m. in Fresno and 7 p.m. in Visalia. 
-- Pacific Gas and Electric Co. is expected to file more papers with the 
bankruptcy court. 
MONDAY:
--Power grid operators order rolling blackouts due to warmer than average 
temperatures and scarce supplies of power. The California Independent System 
Operator was able to stave off an earlier threat of blackouts by asking large 
commercial users to cut back on their electricity use. ISO officials say 
several key power plants that normally provide enough power for about 9.4 
million homes are off-line today for pre-summer maintenance. 
--Davis is recruiting janitors in his energy saving campaign. Davis says 
janitors are part of a plan calling for cooperation from landlords, employers 
and workers to conserve power to protect the state from blackouts this 
summer. 
--The governor says he's ``very, very close'' to a deal with San Diego Gas & 
Electric to purchase the utility's transmission lines. Davis says he hopes to 
have it completed by the end of the week. ``These negotiations do not move in 
a straight line,'' he says. ``You make progress, then you get detoured, you 
get back on track, then you get detoured, but I believe we are very, very 
close to resolving that issue.'' 
--About 200 people show up at a Public Utilities Commission hearing in Santa 
Monica to ask state regulators for a break from the largest electricity rate 
increase in state history. The PUC in March approved rate increase of up to 
40 percent for customers of PG&E and Southern California Edison. The 
commission has scheduled 11 public hearings on the issue around the state, 
and could implement the hikes as early as next month. 
--Democratic lawmakers will have a tough time winning their lawsuit alleging 
that federal energy regulators aren't controlling soaring electricity prices, 
legal experts say. Assembly Speaker Robert Hertzberg and Senate President Pro 
Tem John Burton say they'll sue the Federal Energy Regulatory Commission in 
federal court next week alleging the commission is violating federal law by 
not requiring that electricity costs be ``just and reasonable.'' 
--The state Senate passed a bill to create a windfall profits tax on 
electricity prices that $80 per megawatt hour. The bill passes 25-12. The 
Assembly Revenue and Tax Committee sends the Appropriations Committee a 
similar bill that would tax prices above $60 per megawatt hour. 
--The state Assembly approves a bill to authorize $13.4 billion in bonds for 
power buys. Republican members balked at financing that much money, 
suggesting the state instead spend some of its surplus buying electricity for 
customers of three cash-strapped utilities. 
--State power buyers say they'll draw another $500 million from the general 
fund to buy power to customers of three utilities. That brings the state's 
power-buying tab to $6.7 billion since mid-January. 
--The Federal Energy Regulatory Commission approves a pipeline expansion that 
is expected to provide an additional 230 million cubic feet of natural gas to 
Southwest markets, including California. The El Paso Natural Gas Co. plans to 
convert 785 miles of an existing pipeline that now carries crude oil so that 
it will carry natural gas to the high-demand California market. 
--The state initiated a new Web site, www.flexyourpower.ca.gov/rebates, to 
help consumers, businesses, farmers, cities and counties make use of rebates 
and other conservation programs. The site allows consumers to search for 
energy efficiency programs offered by any public agency and their local 
utility district. The same information is available toll-free by calling 
1-800-555-7794 during business hours. 
WHAT'S NEXT:
-- The governor meets Wednesday with the CEOs of several major energy 
suppliers to discuss the money they're owed by the state's two largest 
utilities, the state's creditworthiness and how wholesalers can help the 
state during the energy crisis. Davis says he won't be discussing any of the 
investigations into price manipulation in the wholesale market. 
-- Davis' representatives continue negotiating with Sempra, the parent 
company of San Diego Gas and Electric Co., to buy the utility's transmission 
lines. 
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight 
supply worsened by scarce hydroelectric power in the Northwest and 
maintenance at aging California power plants are all factors in California's 
electricity crisis. 
Edison and PG&E say they've lost nearly $14 billion since June to high 
wholesale prices the state's electricity deregulation law bars them from 
passing on to consumers. PG&E, saying it hasn't received the help it needs 
from regulators or state lawmakers, filed for federal bankruptcy protection 
April 6. 
Electricity and natural gas suppliers, scared off by the two companies' poor 
credit ratings, are refusing to sell to them, leading the state in January to 
start buying power for the utilities' nearly 9 million residential and 
business customers. The state is also buying power for a third investor-owned 
utility, San Diego Gas & Electric, which is in better financial shape than 
much larger Edison and PG&E but also struggling with high wholesale power 
costs. 
The Public Utilities Commission has raised rates as much as 46 percent to 
help finance the state's multibillion-dollar power buys. 
,2001 Associated Press ? 



Blackouts hit California as spring heat wave sets in 
JENNIFER COLEMAN, Associated Press Writer
Tuesday, May 8, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/08/state0
301EDT0100.DTL&type=news 
(05-08) 07:01 PDT SACRAMENTO (AP) -- Blackouts rolled through California as 
temperatures soared to record levels in a preview of what power grid 
operators warn is in store when summer heat triggers increased demand for air 
conditioning. 
Outages hit portions of selected cities Monday afternoon as California 
slipped off the tightrope of electrical supply and demand for the fifth time 
this year. 
Grid managers said more blackouts were possible Tuesday, although the state 
was under no power alerts in the early morning. 
Rush-hour traffic jammed in communities where signal lights went dark, and 
police officers were dispatched to control intersections. No major incidents 
were reported by the time the blackouts ended, however. 
The early onset of high heat came as imported power was scarce and several 
key plants, including nuclear generating stations, were down for pre-summer 
maintenance. 
The Independent System Operator managed to stave off a late-morning threat of 
blackouts Monday by asking for cutbacks by ``interruptible'' customers who 
get cheaper electricity rates in exchange for scaling back power use during 
emergencies. 
``We were able to take off the interruptible, but only for so long,'' ISO 
spokeswoman Lorie O'Donley said. ``Then they started coming back on and the 
temperatures were still high.'' 
The mercury climbed to a record 93 degrees in San Francisco, while in the 
south temperatures ranged from 80 in downtown Los Angeles to the 90s in the 
valleys and over 100 in the deserts. 
``We expected demand to peak between 3 and 4 p.m. and it didn't,'' O'Donley 
said. ``It just continued to climb.'' 
Grid managers ordered utilities to cut 300 megawatts between 5 p.m. and 6 
p.m. 
Pacific Gas and Electric Co. cut off about 54,000 customers in Northern and 
Central California. 
About 36,000 commercial, industrial and residential customers of Southern 
California Edison were affected in portions of 40 communities. 
San Diego Gas & Electric cut power to about 8,600 customers in Orange County, 
El Cajon and the Torrey Pines and Mira Mesa areas of San Diego. 
The Sacramento Municipal Utility District cut 18 megawatts, affecting about 
4,600 customers in southern Sacramento County. 
Tight electricity supplies and high demand led to two days of rolling 
blackouts Jan. 17 and 18 in Northern California. The ISO ordered statewide 
blackouts March 19 and 20 due to scarce power supplies. 







Scorching heat sparks rolling blackouts 
Posted at 10:45 p.m. PDT Monday, May 7, 2001 
BY STEVE JOHNSON 

Mercury News 


Record temperatures coupled with a spate of out-of-commission power plants 
were all it took to nudge California's electrical system into overload 
Monday, triggering rolling blackouts in a grim prelude to what could become a 
daily reality in coming months. 
With more hot weather forecast, conditions are expected to remain perilous 
today and perhaps Wednesday. But a cooling trend due Thursday should ease the 
threat of more outages, said Jim McIntosh, director of operations for the 
California Independent System Operator, which manages the flow of electricity 
for most of the state. 
State officials have warned that blackouts could become routine this summer, 
particularly if Californians don't get into the habit of using less power. 
``To the extent that you can live without it,'' he said, ``it will make a big 
difference.'' 
Officials ordered power to be shut off at 4:45 p.m. and restored service at 
5:41 p.m., the fifth time state officials have ordered rolling blackouts this 
year. The last was March 20. 
Movie screens, popcorn-makers and video games went quiet for about 20 minutes 
at the Century Capitol multiplex in South San Jose. ``I was just getting into 
it when a screen went blank,'' complained Luis Ortiz. ``Blam. No warning or 
nothing. People just walked out of the theaters wondering what was going 
on.'' 
The most immediate cause of the blackouts was the heat. 
In San Francisco, the 93-degree high recorded Monday exceeded the previous 
record of 91 degrees set on that date in 1987. Downtown Oakland's high of 89 
degrees beat out the 1987 record by one degree. The 91-degree high recorded 
in Salinas outdid the previous high of 89 there in 1967. And in South 
Monterey, 89 degrees exceeded the old record of 84, set back in 1959. 
The hot weather prompted many people to switch on their air conditioners, 
putting a heavy drain on the already severely crimped supply of power. Hot 
weather across the West also limited the amount of power the state normally 
imports from the Southwest by at least 500 megawatts -- or enough for about 
375,000 homes, according to the ISO's McIntosh. 
Nuclear plants off line 
But an even bigger problem was the loss of four nuclear power plants. Two of 
them were in California: Diablo Canyon near San Luis Obispo, which is being 
refueled, and San Onofre in Southern California, which is undergoing repairs 
after a recent fire. 
In addition, the Palo Verde Nuclear Generation Station near Phoenix and the 
Columbia Generating Station in southeast Washington state were undergoing 
routine repairs. 
All four plants are expected to be off line for several more weeks. 
Some California plants that run on natural gas had to shut down because of 
repair work on a natural gas pipeline near Ventura. 
Pacific Gas & Electric Co. spokeswoman Jennifer Ramp said the utility was 
ordered to cut 120 megawatts in its service area, which meant the blackout 
affected about 54,000 homes and businesses from Bakersfield to the Oregon 
border. PG&E has 4.6 million electricity customers. 
In the Bay Area, PG&E customers from San Francisco to San Jose lost power, 
but PG&E and police departments reported no major problems as a result of the 
blackouts. 
``It was very quick. We got the order to restore and everything was back 
up,'' Ramp said. 
At Sumitomo Tire in South San Francisco, Robert Tan was working in his 
sixth-floor office when the air conditioning slowly hummed to a halt. The 
company faced a previous round of rolling blackouts just a month ago, so Tan 
knew exactly how to cope. 
``No one's here, so we just unbuttoned our shirts,'' said Tan, who handles 
shipment orders. ``It's an inconvenience, but we all have to play a role'' in 
conserving energy, he said. 
San Francisco suffered ``little bitty interruptions all over the city,'' but 
reported no problems, said Jim Aldrich, the city's emergency services 
coordinator. 
The rolling blackouts hit parts of Fremont's Irvington district, but city 
officials said emergency crews were able to handle their traffic-snarling 
effect. Police monitored major intersections and planted temporary stop signs 
at others. 
``The blackouts are mainly a traffic issue and an inconvenience to 
businesses,'' said Vic Valdes, division chief with the Fremont Fire 
Department. ``We have an emergency contingency plan under which we've 
prioritized the major traffic intersections that we feel must be staffed 
during a blackout.'' 
Linda Clerkson, a spokeswoman for Palo Alto's city-owned utility, said it 
avoided blackouts by calling on major power users, including Hewlett-Packard, 
Agilent and Roche, to conserve. The regional water treatment plant kicked on 
a generator to help the city's power grid. 
``This was totally not the big test,'' Clerkson said. 
About 34,000 homes and businesses were blacked out in the territory served by 
Southern California Edison, which has 4.2 million electricity customers, and 
the prospect for trouble today ``looks a lot like'' Monday, said spokeswoman 
Karen Shepard-Grimes. 
Conservation helped 
Although the ISO's original warning on Monday morning led utilities to 
believe they might have to cut power to more than one outage block, Ramp said 
that ultimately only about a third of Block 14 was affected. PG&E has 14 
blocks that are subject to rolling blackouts. The remainder of block 14 will 
be included in the next rolling blackouts, followed by customers in block 1. 
Altogether, about 12,500 megawatts of power that is normally available to the 
state was offline Monday. McIntosh of the ISO said state officials hope to 
reduce that figure to about 2,500 megawatts by summer. But if they can't do 
that, he said, the state's ability to avoid future blackouts will largely 
hinge on how much people can conserve. 
Businesses and other large customers helped Monday by agreeing to go on 
backup generators in exchange for lower utility rates. That saved about 850 
megawatts, McIntosh said. He estimated that an additional 150 megawatts was 
saved by other customers who heard about the electricity emergency and 
voluntarily cut back on their electricity use. 
Even so, Californians have done much better than that in the recent past, 
accounting for savings of up to 2,000 megawatts, according to state 
estimates. So while McIntosh thanked consumers Monday, he warned that they'll 
have to do even better this summer. 
``As we roll into the summer and the supply situation remains as it is, 
that's the only way,'' he said. 


Mercury News reporters Brandon Bailey, Michael Bazeley, Chuck Carroll, Gil 
Jose Duran, Putsata Reang and Roxane Stites contributed to this report. 
Contact Steve Johnson at sjohnson@sjmercury.com or (408) 920-5043. 








More than 100,000 customers hit by power blackouts 
Posted at 9:47 p.m. PDT Monday, May 7, 2001 
BY JENNIFER COLEMAN 

Associated Press Writer 



SACRAMENTO, Calif. (AP) -- Record temperatures in California led the state's 
power grid managers to order rolling blackouts Monday for the first time 
since March, cutting service to slightly more than 100,000 customers. 
The California Independent System Operator said high temperatures in 
California and the West and tight electricity supplies resulted in the 
blackouts between 5 p.m. and 6 p.m. 
``We expected demand to peak between 3 and 4 p.m. and it didn't,'' said ISO 
spokeswoman Lorie O'Donley. ``It just continued to climb.'' 
Grid managers asked utilities to cut 300 megawatts. One megawatt is enough to 
power about 750 homes. 
The blackouts quickly snarled rush-hour traffic in portions of the state. In 
Santa Monica, police dispatched officers to check on the parts of the city 
without power. 
``It has a significant impact on us. We have to have police units out to 
control intersections,'' Lt. Ray Cooper said. 
In San Dimas, traffic jammed intersections without lights, but there was no 
immediate word of accidents, said Nicole Panzone, a law enforcement 
technician with the Los Angeles County Sheriff's Department. 
Pacific Gas and Electric Co. spokesman Ron Low said the utility cut 125 
megawatts in Northern and Central California, affecting about 54,000 
customers. 
San Diego Gas & Electric cut power to about 8,600 customers in Orange County, 
El Cajon and the Torrey Pines and Mira Mesa areas of San Diego. 
The Sacramento Municipal Utility District cut 18 megawatts, affecting about 
4,600 customers in southern Sacramento County, while the outages affected 
approximately 36,000 commercial, industrial and residential customers of 
Southern California Edison. 
Small portions of 40 communities serviced by Edison were hit by the 
blackouts, including Chino Hills, Calimesa, Tulare, Long Beach, Beverly 
Hills, Oxnard, Barstow, Fullerton, Blythe, Santa Monica and Montclair, the 
company said. 
Before the blackouts, the ISO had urged conservation because warm weather 
across the West was pushing up demand for electricity. 
San Francisco reached 93 degrees, 2 degrees higher than the previous record 
set in 1987. Temperatures warmed to summerlike highs in Southern California, 
too, with readings ranging from 80 in downtown Los Angeles to over 100 in the 
deserts. 
In addition, several key power plants were closed for pre-summer maintenance, 
officials said. Those plants normally would provide enough power for about 
9.4 million homes. 
Among the plants down for repairs are four nuclear power plants. 
The ISO declared a Stage 2 alert Monday morning as electricity reserves 
dwindled to close to 5 percent. A Stage 3 alert, when reserves near 1.5 
percent, can prompt blackouts. 
California was hit with rolling blackouts Jan. 17 and 18 and March 19 and 20.









CARMAKER SAYS OUTAGES COULD DAMAGE EQUIPMENT, HARM EFFICIENCY 
Published Tuesday, May 8, 2001, in the San Jose Mercury News 
BY MATT NAUMAN 

Mercury News 


To avoid having to shut down completely during rolling blackouts this summer, 
Fremont's NUMMI auto plant has agreed to cut power usage by 15 percent when 
blackouts loom. 
Plant officials say shutting down operations during a blackout could cause 
damage to equipment, as well as idle 4,800 workers. 
Until recently, NUMMI was immune from California's rolling blackouts because 
it is what's known as a transmission-level customer. 
``We take out electricity raw and transform it on site,'' said Jean-Yves 
Jault, spokesman for New United Motor Manufacturing Inc. 
But, under new rules enacted by the state's Public Utilities Commission, the 
status of NUMMI and other large industrial users with their own substations 
has changed. 
``We took away that blanket exemption,'' said PUC Commissioner Carl Wood, who 
noted that now only ``essential-use customers'' like fire stations are exempt 
from blackouts. 
Instead, the carmaker now falls under the PUC's OBMC, or Optional Binding 
Mandatory Curtailment program, which will require it to curtail power usage 
when rolling blackouts are under way near the plant's Interstate 880 
location. 
To cut its power usage by up to 15 percent, Jault said, the plant will shut 
down some equipment that is not essential to production and switch to on-site 
power generators. The plant will be told by Pacific Gas & Electric Co. when 
blackouts are likely, which will trigger the power cutbacks. 
The Toyota-General Motors joint venture began an energy conservation program 
last year that included installing more efficient motors in some equipment, 
reducing lighting where it was safe to do so and turning off ventilation in 
storage areas. The result has been a 5 to 10 percent reduction in power 
usage. And, since NUMMI will get a credit for those moves, it will only need 
to cut back another 10 percent when blackouts loom, Jault said. 
Efficiency concerns 
NUMMI has submitted its plans to PG&E, Jault said. Wood of the PUC said 
technical details of the power curtailment will be worked out between 
utilities and their customers. 
Blackouts could wreak havoc at NUMMI. Cars and trucks could be lost, and 
equipment could be damaged or destroyed, Jault said. The plant relies on 
just-in-time delivery of many of its parts so a breakdown in efficiency has 
large-scale ramifications. 
Stiff penalties 
``The program is not an easy thing to achieve,'' Jault said of the plan to 
reduce power usage. And penalties for failure to meet the curtailment goals 
are stiff, he said. The first failure comes with a monetary fine, and the 
second one gets a company kicked out of the program. 
Last year, NUMMI's 4,800 workers produced 344,000 Toyota Corolla and 
Chevrolet Prizm sedans and Toyota Tacoma pickups. It is the only auto plant 
on the West Coast, and the only source for Toyota's small pickups. 
``I think they're fairly confident they can reduce power and maintain 
production levels,'' said Barbara McDaniel, spokeswoman for Kentucky-based 
Toyota Motor Manufacturing North America, the parent company of Toyota's 
10-plant manufacturing operation in the United States and Canada that 
produces more than 1 million vehicles annually. 


Contact Matt Nauman at mnauman@sjmercury.com or (408) 920-5701. Fax (408) 
271-3786. 








S.F. Airport plans to run extra generators 
Published Tuesday, May 8, 2001, in the San Jose Mercury News 
BY AARON DAVIS 

Mercury News 


Worried about rolling blackouts this summer, San Francisco International 
Airport agreed to spend $5 million for backup generators it has now 
discovered it doesn't need because its radar systems and other airport 
facilities are exempt from blackouts. 
At first officials planned to let the generators sit idle, saying it would be 
too costly to fire them up to help ease the state's power shortage. 
But Monday, as California experienced its first rolling blackout in more than 
a month, officials changed direction and promised to turn the generators on 
whenever statewide power supplies are dangerously low. 
The 10 portable, 1-megawatt generators produce enough electricity for about 
10,000 homes. The airport has leased them for a year and expects delivery 
soon. 
Ron Wilson, an airport spokesman, said the generators were never intended to 
be more than an ``insurance policy'' to keep baggage conveyors and ticket 
machines humming this summer. Officials remain concerned that a blackout 
could hit, despite the airport's exemption. 
``No one has written a letter to San Francisco Airport to guarantee that we 
won't see blackouts,'' Wilson said. ``We're getting different stories from 
different people.'' 
The state Public Utilities Commission exempts communication, navigation and 
traffic control at airports from blackouts because it considers such services 
essential. 
The airport uses about 46 megawatts of power. When it tried conservation 
measures like cutting down on air conditioning in terminals, customers 
complained and some computer equipment was damaged, officials said. 
Worries about summer blackouts started last month when airport officials 
learned the PUC was trying to slim down the list of who is exempt from 
rolling blackouts by setting clearer guidelines for who constitutes an 
``essential'' customer. 
Airport officials ``heard from somebody who heard from somebody else'' they 
might get cut from the list. But despite bad information on the 
heard-it-through-the-grapevine conduit, the new PUC guidelines actually made 
San Francisco International -- and Oakland and San Jose airports -- ``more 
exempt'' than ever before, power officials said. 
``Under the law, the airport used to be exempt simply because it is a large 
transmission customer,'' said Jennifer Ramp, a PG&E spokeswoman. ``But now, 
the entire airport is an exempt customer because it is clearly essential for 
safety reasons.'' 
For many, it came as no surprise that turning off the lights at the nation's 
fifth-busiest airport was a safety risk, Ramp said, ``but we had to 
reevaluate each customer's exempt status.'' By the time they did, the airport 
had leased the generators. 
During a blackout, existing emergency generators protect air traffic control 
towers and runway lights at all three major Bay Area airports. 
It would be the loss of baggage conveyer belts, which move nearly a 
half-million pieces of luggage each day, electronic ticket counters and other 
airport equipment that would grind air travel to a halt if San Francisco 
Airport gets caught up in rolling blackouts, Wilson said. 
The airport will use jet fuel to power the generators during Stage 3 power 
alerts so that it won't have to conserve its power use, Wilson said. 
Talks are stalled on plans for a separate 51-megawatt power plant on airport 
property. 


Contact Aaron Davis at acdavis@sjmercury.com or (650) 688-7590. 









EXEMPT FROM BLACKOUTSThe state Public Utilities Commission exempts the 
following energy users from rolling 
Published Tuesday, May 8, 2001, in the San Jose Mercury News 
?Navigation, communication and traffic control for ships and aircraft 
?Prisons 
?Police and fire services 
?Hospitals 
?Military defense 
?Telephone and other communications systems essential to health, welfare and 
security 
?Electric utilities and supporting fuel systems critical to the power system 
?Radio and television stations participating in emergency broadcast services 
?Water and sewage treatment facilities may request restoration of service if 
needed. 
Mercury News reporting












Blackouts back, businesses cope 
In what is likely a preview of things to come, 100,000 in state lose power. 
May 8, 2001 
By KATE BERRY
and TIFFANY MONTGOMERY
The Orange County Register 






Kevin and Dana Kim of Fullerton, with their 6-year-old daughter, Nina, lounge 
outside a Tustin IKEA, which briefly closed Monday due to a blackout. Nearly 
10,000 Orange County customers lost power for about an hour.
Photo: Mark Avery / The Register
?
?

Orange County shopkeepers shuttered doors and hotel managers passed out 
flashlights Monday as soaring temperatures and idle power plants led to 
blackouts across the state, previewing the outages expected to cripple 
California this summer. 
A total of 9,550 customers in Dana Point, Fullerton, Irvine, La Habra, Laguna 
Hills, Laguna Niguel, Mission Viejo, Newport Beach, Tustin and San Juan 
Capistrano, part of 100,000 statewide, lost electricity for about an hour 
beginning at 4:45 p.m. More blackouts could hit today because of warm 
weather, said Jim McIntosh of the California Independent System Operator. 
Nearly half of the state's power capacity was unavailable because plants were 
either closed for planned outages or emergency repairs. 
At the Irvine Marriott, guests meeting in ballrooms continued working after 
employees provided flashlights and light sticks, General Manager Ned Snavely 
said. 
Shopkeepers at Tustin Market Place found different ways of dealing with the 
blackout. While the House of Lamps shut its doors, Jackie Lombardi, a sales 
associate at Kingsbury Road, stuck it out. 
"Cash and calculators work," Lombardi said. 
Paul LaPlante, a senior vice president at Ingram Micro in Santa Ana, worried 
that rolling blackouts would cripple California this summer. 
"We have a long, hot summer ahead of us," he said.












Shortage somewhat a surprise 
State regulators thought they could avert Monday's blackouts, but then demand 
'continued to climb.' 
May 8, 2001 
By KATE BERRY,
JEFF COLLINS and
TIFFANY MONTGOMERY 
The Orange County Register 
At 11 a.m., California was five minutes away from running out of juice. 
Then, businesses cut power and purchases from Canada boosted supplies, 
averting a rolling blackout. 
But five hours later, after state regulators thought the worst was behind 
them, the grid began to heat up again. 
By 4:45 p.m., about 100,000 Californians from Sacramento to San Diego were 
hit by the first blackouts since March, caused by summerlike temperatures and 
generating plants going off-line. 
"We expected demand to peak between 3 and 4 p.m., and it didn't," said Lorie 
O'Donly, spokeswoman for the Independent System Operator, which manages the 
state's electrical grid. "It just continued to climb." 
The Sacramento Municipal Utility District cut power to about 4,600 customers, 
while San Diego Gas & Electric severed electricity to 8,600 customers, 
including 4,950 in Dana Point, San Juan Capistrano, Laguna Niguel, Laguna 
Hills and Mission Viejo. Southern California Edison cut power to 4,600 
customers in Fullerton, Irvine, La Habra, Tustin and Newport Beach. 
Scott Lowe, a guard at the west end of Big Canyon, a gated community north of 
Newport Beach's Fashion Island, watched as a driver crashed through a traffic 
gate, apparently thinking it would open automatically. 
Lowe then opened all the gates with a wrench. 
At Il Fornaio Cuccina in Irvine, employees tallied bills using calculators 
and hand- delivered orders. 
"If it was like an hour and a half later (during the peak dining period), it 
would have been a disaster," said manager Ottavio Oro. 
Police delivered barricades and stop signs to about five or six key 
intersections around Tustin Market Place, where an outage occurred, Lt. Mike 
Shanahan said. Market Place security directed traffic within the shopping 
area. 
Motorists reverted to treating all darkened intersections like four-way 
stops. 
"I think people had just become accustomed to (blackouts) and are getting 
better at it," Shanahan said. 
The afternoon power crunch hit primarily because the grid operator had 
already called on large businesses to cut power early in the day. Because 
those businesses have to curtail power for only six hours, many began turning 
on air conditioning and lighting systems from 4 to 5 p.m. 
Higher temperatures statewide also drove up demand. 
San Francisco reached a record 93 degrees. Chatsworth, in the San Fernando 
Valley, hit a record-tying 96. 
The possibility of rolling blackouts will persist this week until 
temperatures cool Thursday or Friday, said Jim McIntosh, the ISO's operations 
director. 
"We're going to need more conservation efforts,'' he said. 
Nearly half of the state's power capacity remained off- line Monday - 
including four nuclear power plants in the West. Roughly 15,500 megawatts of 
electricity - enough to light up to 15.5 million homes - were unavailable 
because plants were either closed for emergency repairs, planned outages or 
because of nonpayments from the state's largest utilities. 
Register staff writers Laura Corbin, Eric Johnson, Morgan Sales, Ann Pepper 
and Tanya Rose and The Associated Press contributed to this report.












Energy notebook 
Gas pipeline expansion OKd to benefit Southwest. 
May 8, 2001 
By The Associated Press 
WASHINGTON - The Federal Energy Regulatory Commission on Monday approved a 
pipeline expansion that is expected to provide an additional 230 million 
cubic feet of natural gas to Southwest markets, including California. 
The El Paso Natural Gas Co. plans to convert 785 miles of an existing 
pipeline that now carries crude oil so that it will carry natural gas to the 
high-demand California market. 
FERC Chairman Curt Hebert said the swift action on the case by the agency, 
which acted after only two months, "demonstrates our commitment to get needed 
energy supplies to serve the ever-increasing demand in the West." 
The $154 million project involves a pipeline that runs from McCamey, Texas, 
to Ehrenberg, Ariz., near the California state line. El Paso is buying the 
line from All American Pipeline and converting it from crude oil to natural 
gas. 
The line would serve as a loop to El Paso's existing system that serves the 
Southwest market, including California, the FERC said. 
The expansion, which the company has indicated would be completed by August, 
would add 230 million cubic feet of natural gas capacity to the El Paso 
mainline, according to FERC and the company. 
Natural gas shortages have been cited by industry as a reason for unusually 
high natural gas prices in California. Last week, spot prices of gas at 
California's trading hub ranged from about $12 to more than $14 per thousand 
cubic feet, compared with just under $5 per cubic foot elsewhere. 
Tough road ahead seen for lawsuit over energy pricing 
SACRAMENTO - Legislative leaders will have a tough time winning their lawsuit 
alleging that federal energy regulators aren't controlling soaring 
electricity prices, legal experts said Monday. 
Assembly Speaker Robert Hertzberg and Senate President Pro Tem John Burton 
plan to sue in federal court early next week alleging the Federal Energy 
Regulatory Commission is violating federal law by not requiring that 
electricity costs be "just and reasonable." 
Current prices are "unconscionable," said Hertzberg, D-Van Nuys, while 
announcing the suit Monday. "It's just absolutely destabilizing California." 
The suit will ask that prices be capped and overcharges be reimbursed, said 
Burton, D-San Francisco. FERC officials could not be reached for comment 
Saturday or Monday. 
Their attorney, Joseph Cotchett, acknowledged it "is a very difficult case" 
and said he plans to include other electricity consumers and possibly 
California cities to overcome objections that the Legislature doesn't have 
grounds to sue. 
Cotchett said a recent federal appellate ruling that the city of San Diego 
can join in a lawsuit against FERC means that "any consumer that purchases 
power in California" may sue. 
"We're talking lives of people here. This is the lives of senior citizens and 
everyone else who uses power," Cotchett said. At the least, the suit will 
"let them know California means business." 
FERC has said it is already acting to rein in high power prices but 
California can't afford to wait, Cotchett said. "This state can't put up with 
the carnage." 
That's a tough argument to win, said Stephen Angle, FERC attorney for 14 
years who now represents power generators on non-California issues. 
Procedures to appeal FERC rulings in the courts exist, but asking a federal 
judge to overrule an independent regulatory body in a pending case isn't one 
of them, Angle said. 
"It's not something courts like to do. It's a very high standard and there 
are very few cases where it's happened," Angle said. "It's a very high hurdle 
to get over." 
100% windfall tax urged for high-priced electricity 
SACRAMENTO - California would impose a 100 percent "windfall profits tax" on 
high-priced electricity under a bill approved by the Senate on Monday. 
That would in effect impose a state cap on power prices in the absence of the 
hard federal cap state officials have sought for months from the Federal 
Energy Regulatory Commission. 
"Obviously the best way to enact a rate cap is for FERC to do its job. They 
have refused to listen to our pleas," said Sen. Jack Scott, D-Altadena. 
"We're faced, as the state of California, with solving the problem 
ourselves." 
The bill, which now goes to the Assembly, would impose the 100 percent tax on 
any power priced over a baseline price of $80 a megawatt hour, a fraction of 
what electricity has sometimes sold for in recent months. 
The measure gives the California Public Utilities Commission 60 days to 
revise the $80 price threshold. Companies could exceed the baseline price if 
they can prove they must to recoup their costs and a "reasonable" profit. It 
does not affect existing power contracts. 
"We ought to be laying out a welcome mat for these power generators. What 
we're laying down is a spike pad," objected Sen. Ray Haynes, R-Riverside. 
"It sends a message that California is not a good place to do business," said 
Brian O'Neel, a spokesman for generator Mirant. 
Gov. Gray Davis has said he is amenable to signing a windfall profits bill. 
Janitors told to clean up their energy-savings act 
LOS ANGELES - Gov. Gray Davis on Monday enlisted janitors in an energy-saving 
campaign in which they will turn out lights and urge energy conservation in 
buildings they clean. 
"Everyone must do their part so that we can get through this summer without 
major disruptions," the governor told a Los Angeles news conference. 
The janitors are part of a plan calling for cooperation from landlords, 
employers and workers to conserve power to protect the state from blackouts 
this summer. 
"I would now challenge all commercial building owners up and down this state 
to do their part and help us through this energy crisis," Davis said. 
With current participants, the plan could achieve a 10 percent power savings 
in 2,500 buildings encompassing 300 million square feet of commercial space, 
Davis said. 
"My friends, we are in a war with energy companies, mostly from Texas and the 
Southwest, who are charging us outrageous prices for the cost of 
electricity," Davis told about 50 janitors from Service Employees 
International Union. 
"Our best short-term remedy ... against price gouging and summer blackouts is 
conservation," he said. 
Janitors will be asked to help by cleaning one floor of a building at a time, 
turning off lights when they're done and leaving notes for workers who have 
left computers and other equipment on. 
Yolanda Umana, a janitor who works in downtown Los Angeles at night, said she 
agreed that cleaning crews should participate in conservation efforts. 
"We're part of the building, just as the tenants are, and I think we can 
share in the responsibility," she said through a translator. 
In other news Monday: 
The governor said he's "very, very close" to a deal with San Diego Gas & 
Electric to purchase the utility's transmission lines. Davis said he hopes to 
have it finalized by the end of the week. "These negotiations do not move in 
a straight line," he said. "You make progress, then you get detoured, you get 
back on track, then you get detoured, but I believe we are very, very close 
to resolving that issue." 
About 200 people showed up at a Public Utilities Commission hearing in Santa 
Monica to ask state regulators for a break from the largest electricity rate 
increase in state history. The PUC in March approved rate increase of up to 
36 percent for customers of Pacific Gas & Electric Co. and Southern 
California Edison. The commission has scheduled 11 public hearings on the 
issue around the state and could implement the hikes as early as next month. 
The state initiated a new Web site, www.flexyourpower.ca.gov/rebates, to help 
consumers, businesses, farmers, cities and counties make use of rebates and 
other conservation programs. The site allows consumers to search for 
energy-efficiency programs offered by any public agency and their local 
utility district. The same information is available by calling (800) 555-7794 
during business hours. 
The Associated Press








Energy borrowing OKd 
Democrats in Assembly support the $13.4 billion bond over GOP opposition. 
May 8, 2001 
By JOHN HOWARD
and HANH KIM QUACH
The Orange County Register 
SACRAMENTO - Democrats in a sharply divided Assembly on Monday pushed through 
a record $13.4 billion in borrowing to cover California's emergency 
electricity purchases - despite Republican fears that the scheme would do 
little to provide new energy and could jeopardize the state's financial 
standing. 
As blackouts rolled across the state, giving a heightened sense of urgency to 
deliberations, the Assembly voted 49-29 along partisan lines for what amounts 
to the largest state borrowing package in California history. 
The bill, SB31x by Senate leader John Burton, D-San Francisco, was sent to 
the Senate, where it could be taken up as soon as today. 
Under the plan, the bonds would be sold to investors who would be repaid 
through money collected from 10 million California utility ratepayers on 
their monthly bills over 15 years. 
Proceeds from the bond sale would enable the state's main treasury, the 
General Fund, to be kept whole for more spending on programs "such as 
education or transportation or environmental protection or child care," said 
Assemblyman Fred Keeley, D-Boulder Creek. 
But Republicans said the bond debt was at least $5 billion too high, could 
stress the state's long-term creditworthiness and did nothing to produce more 
energy. They refused to support it. 
"Passing this $13.4 billion bond issue does not increase generation, it does 
not increase conservation. We still do not have a game plan about how we're 
going to spend $13.4 billion," said Assembly Republican Leader Dave Cox of 
Fair Oaks. The next-largest bond sale was $9.2 billion in education bonds 
approved by voters in November 1998. 
Although not detailed, the Democrats' plan would use some of the proceeds to 
pay for the $6.7 billion already spent or allocated for emergency energy 
purchases and another portion to pay for future energy locked up under 
long-term contracts. 
Democrats control both houses of the Legislature but lack two-thirds 
majorities - the margin needed, with the governor's signature, to authorize 
bonds to go to market immediately. The Republican opposition meant Democrats 
could win approval of the bonds but delayed the bill's effective date until 
August. 
The potential delay raised new problems. The state Department of Water 
Resources, which purchases electricity on behalf of the weakened utilities, 
said the bonds have to be issued by July 1. If not, some of the companies 
that agreed to sell power to the state at relatively low rates could legally 
back out of their contracts. It was not clear whether any of the cheaper 
energy would be lost to the state by missing the July 1 deadline. 
Keeley said the Assembly speaker's office was trying to determine whether the 
bonds could be marketed earlier. 
The governor was angered at Republican opposition. 
"The Republican Party that brought us this disastrous energy deregulation 
scheme is now obstructing its solution," Gov. Gray Davis said. Democrats also 
said failure to approve the bonds could force the 2001-02 state budget, which 
is supposed to be signed into law by July 1, to be delayed or rewritten. 
But Cox said the state should "write off" $5 billion in losses and float a 
bond issue of no greater than $8 billion. 
"We've got some cash in our pocket; let's use it to pay down that $13 
billion," he added.












Tuesday, May 8, 2001 



Jones has bright ideas on electricity 
In a Democrat-dominated state, Republican Secretary of State Bill Jones' plan 
to pull California out of its ongoing electricity crisis is unlikely to get 
serious consideration. That's especially true given that Mr. Jones is a 
likely contender for Gov. Gray Davis' office. 
Still, Mr. Jones has detailed the most reasonable plan so far for dealing 
with the current mess in a way that moves in the right direction - toward 
freer markets rather than government controls. His analysis is the first one 
in a while that doesn't use demagogy to shift blame from California 
politicians to Evil Out of State Power Generators.
In a May 2 letter to Vice President Dick Cheney, Mr. Jones captured the 
nature and the seriousness of the problem: "California is on the brink of 
fiscal insolvency. Our state budget has moved rapidly from an $8 billion 
surplus to a potential deficit situation and our credit rating has been 
downgraded two levels, which puts us 49th out of the 50 states. This is a 
failure of leadership - and the cost is staggering."
He argues, correctly, that although Gov. Davis did not cause the problem, his 
approach is only exacerbating it by attempting to "socialize" the electricity 
market, and by keeping secret spending and deal-making decisions that will 
affect Californians for years.
Specifically, Mr. Jones wants to keep California out of the power business. 
Instead of creating a state-run system, he said the government should restore 
the utilities to fiscal health by calling on creditors to "accept a reduction 
in accounts receivable in exchange for immediate payment of past-due debts." 
He would also let the state provide low-interest loans to help utilities pay 
their debts, using company assets as collateral rather than having the state 
take over costly-to-maintain power lines.
He would impose a temporary rate cap until additional power sources come on 
the market, with the ultimate goal of removing the cap and allowing the 
marketplace to kick in. He calls for tax incentives so that utilities offer 
pricing meters that charge more for peak electricity usage and less for 
non-peak hour use. Furthermore, the Jones plan encourages a variety of tax 
and regulatory changes to encourage the creation of new generating capacity 
as well as conservation efforts.
Some of his regulatory proposals sound reasonable, but offer only added 
layers of bureaucracy. He calls for more federal involvement than we would 
like to see. And some of the proposals need to be detailed to determine their 
usefulness. And, of course, it will be interesting to see what energy and 
policy experts say about the plan on closer analysis.
Still, despite the obvious political motives involved here, the Jones 
proposals put some of the best market-based proposals on the table at a time 
when government solutions seem to be the only ones seriously addressed in the 
Legislature and governor's office.
Perhaps the crisis is serious enough that legislators will be willing to 
consider any good ideas - no matter where they come from. 




Power Scramble/ A Forbes.com Special Report



NEW YORK--(BUSINESS WIRE)--May 7, 2001 via NewsEdge Corporation  -
Rolling blackouts ...
bankrupt utilities ... soaring gas prices. Will the lights go out in
your city this summer? Is California a harbinger of doom?


What would a new energy crisis mean for you and your business? Or
is all the talk of crisis phony? Check out the Forbes.com package,
Power Scramble, to find out.


This special report prepared by Forbes.com staff, continuing
through the summer, takes a hard look at power generation and
consumption in the U.S., and how utility deregulation impacts
consumers and businesses.


For the in-depth report and ongoing coverage, please go to:
www.forbes.com/power


Here are some highlights:


--  19 states plus the District of Columbia had a power deficit


during the first 11 months of 2000, and had to import power


from another state.


--  On the other hand, the U.S. and the world have tremendous


energy reserves and the U.S. is more energy-efficient than


ever.


--  New York needs to come up with about 4,000 to 5,000 megawatts


of additional capacity this year -- and New York City needs


most of it.


--  Texas is unique in that is does not export power.


--  West Virginia has the highest surplus of power generated and


not used within the state.


For more information please contact:
Debbie Weathers, Forbes.com, 212.366.8848 or
Lisa Brown, Forbes.com, 212.366.8932



CONTACT: Forbes.com, New York | Debbie Weathers, 212/366-8848  | Lisa Brown, 
212/366-8932





[B] Calif. ISO says power blackouts this evening unlikely



By Christine Cordner

San Francisco, May 7 (BridgeNews) - California is not expected to see power
outages this evening since the state is receiving 1,600 megawatts of imported
power from a Canadian province, said Jim McIntosh, California Independent
System Operator Director of Operations, Monday. He said that the state was
prepared to initiate rolling blackouts earlier in the day before the Canadian
supplier came though.



*                     *              *



"If imports remain where they are, we don't anticipate any supply
problems....We can handle it,"  McIntosh said during a conference call.


McIntosh said that Tuesday's supply situation looks similar to Monday.


The ISO issued a Stage 2 emergency this morning when power supplies dipped
below 5%. McIntosh said that the ISO was very close to initiating a Stage 3
emergency, which allows it to ask utilities to cut off customers' power.


California has already seen the consequences of Stage 3--rolling blackouts
Jan. 17 and 18 and then again March 19 and 20.


Monday's problems stemmed from high temperatures increasing demand in the
state as well as increased demand in Southwest states that import power. In
addition, several key power plants were closed for pre-summer maintenance. End





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



ROSEMEAD, Calif., May 7 /PRNewswire/  via NewsEdge Corporation  -
The California Independent System
Operator (Cal-ISO) declared a Stage 2 Emergency this morning, due to low power
reserves and increased demand for power because of rising temperatures.  The
agency called upon Southern California Edison and other investor-owned
utilities to begin voluntary "load" curtailment programs for certain customers
within their service areas.


Cal-ISO said the Stage 2 Emergency would be in effect from 10 a.m. to
midnight.  Cal-ISO and SCE are making urgent appeals for all customers to
immediately reduce their electricity consumption so that reserve levels do not
deteriorate further.


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


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


SCE customers are asked to reduce power consumption by turning off any
unneeded electrical appliances and lights, especially during the state's daily
peak consumption period -- 1 p.m. to 5 p.m.


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


LARGE ENERGY USERS


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


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


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


AIR CONDITIONERS


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


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


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


conditioner is running;


-- avoid cooling unoccupied rooms;


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


APPLIANCES AND TOOLS


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


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


equipment;


REFRIGERATORS AND FREEZERS


-- avoid unnecessarily opening refrigerators;


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


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


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


clean (refrigerators represent approximately 25% of the electric bill


for a typical residence);


ADDITIONAL TIPS


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


and;


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


electricity in most homes;


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


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


fluorescent bulbs;


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


adjustment for smaller loads;


-- be sure your home has adequate insulation.


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


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


SOURCE  Southern California Edison



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







Rolling Blackouts Hit California



By JENNIFER COLEMAN
Associated Press Writer




SACRAMENTO, Calif. (AP) _ As temperatures soared to record
levels in parts of California, blackouts cut electricity to more
than 100,000 customers in what power grid operators warned was a
preview of summer.


Hour-long outages, ordered by power grid managers, hit portions
of selected cities Monday for the first time since March as
California slipped off the tightrope of electrical supply and
demand for the fifth time this year.


Signal lights went dark, rush-hour traffic jammed and police
officers were dispatched to control intersections. No major
incidents were reported.


The state remained in a Stage 2 power alert _ one step below the
threshold for blackouts _ until midnight Monday. Grid managers,
however, warned that conditions remained ``subject to change'' with
little notice. More heat was expected as high pressure dominated
the West.


Before the blackouts, the Independent System Operator urged
conservation because warm weather across the West was pushing up
demand for electricity. Imported power was scarce and several key
plants, including nuclear generating stations, were down for
pre-summer maintenance.


The ISO managed to stave off a late-morning threat of blackouts
by asking for cutbacks from ``interruptible'' customers who get
cheaper electricity rates in exchange for scaling back power use
during emergencies.


``We were able to take off the interruptible, but only for so
long,'' ISO spokeswoman Lorie O'Donley said. ``Then they started
coming back on and the temperatures were still high.''


The mercury climbed to a record 93 degrees in San Francisco,
while in the south, temperatures topped 100 in the deserts and a
record was set in Lancaster at 96 degrees.


``We expected demand to peak between 3 and 4 p.m. and it
didn't,'' O'Donley said. ``It just continued to climb.''


Grid managers ordered utilities to cut 300 megawatts between 5
p.m. and 6 p.m. One megawatt is enough to power about 750 homes.


Utility giant Pacific Gas and Electric Co. cut off about 54,000
customers in Northern and Central California. An additional 36,000
commercial, industrial and residential customers of Southern
California Edison were affected in portions of 40 communities.


San Diego Gas &amp; Electric cut power to about 8,600 customers in
Orange County, El Cajon and areas of San Diego. The Sacramento
Municipal Utility District cut 18 megawatts, affecting about 4,600
customers in southern Sacramento County.


Tight electricity supplies and high demand led to two days of
rolling blackouts Jan. 17 and 18 in Northern California. The ISO
ordered statewide blackouts March 19 and 20 because of scarce power
supplies.


The utilities blame the crisis on 1996 deregulation legislation
designed to open up California's electricity market to competition.
Among other things, the law temporarily capped the rate the state's
largest utilities could charge customers even while they were
forced to pay soaring prices for wholesale electricity.


In April, PG&amp;E filed for bankruptcy. SoCal Edison is teetering
on the edge of insolvency.







Updated 5/8/01



By Dave Todd
dtodd@ftenergy.com
As political battle lines tighten in anticipation of the Bush 
administration's announcement this month of a national energy strategy to 
buttress the country's economic development, some of America's largest 
industry associations are expressing deep concern about the possibility of 
being caught on the wrong side of public opinion across the country.

That fear sparked a move by the U.S. Chamber of Commerce and like-minded 
economic development groups, manufacturing councils and energy utilities and 
producers to establish the Alliance for Energy and Economic Growth (AEEG). 
The alliance's aim: persuade a host of other institutions, corporate America 
at large and, ultimately, the public that its collective future lies in the 
balance because the "energy crisis" is no mirage. 

In an interview with Energy Insight, a key player in putting together the 
AEEG, U.S. Chamber of Commerce Executive Vice President Bruce Josten, 
explained its purpose and immediate objectives. Josten, the chamber's senior 
government and political affairs officer as well as second highest-ranking 
official, maintained that the business community has done a weak job, by and 
large, of explaining energy-related concerns. And, more worrisome still, it 
has failed to see beyond specific sector concerns to consider "over the 
horizon" energy issues threatening to adversely affect industry and the 
nation's economy as a whole.


"Freelance lobbying" and "cannibalistic tendencies" of different segments of 
the energy industry have been a significant part of the problem, Josten 
contends. The fact that "we haven't built a refinery in this country in 25 
years, or the fact that today we have half the number of refineries we had 25 
years ago only addresses one side or a sliver of this issue."

So how can the alliance make a difference? It's all about education, said 
Josten, as he began rattling off statistics.

Educating consumers.
"You sit here, if you're me, and you wonder: Do the American people know that 
since the Arab oil embargo (of the early 1970s) energy use per dollar of GDP 
has dropped by about 40%? Do they know that a single car today produces less 
air pollution than a fleet of 20 fuel-efficient cars did 30 years ago? Do 
they know that the amount of energy they are using in their homes for heat, 
light and appliances has decreased by a little bit more than 25%? Do they 
know that air conditioners today are using 50% less energy to produce the 
same amount of cooling as air conditioners (a generation go)? Do they know 
that the average refrigerator today costs 40 bucks versus about $110 or $120 
on an annual basis to run then?"

The Arlington, Va.-based Electronics Industry Alliance, a national trade body 
that represents the full spectrum of U.S. manufacturers in the more than $500 
billion electronics industry, is a key player in the AEEG. The group 
represents companies ranging from makers of complex tiny electronic 
components for the defense industry to consumer products such as appliances. 
Headed by former seven-term Oklahoma U.S. congressman and once House 
Intelligence Committee Chairman Dave McCurdy, the Electronics Industry 
Alliance is a key backer of Vice President Dick Cheney's approach of framing 
national energy policy in a national security context.

But the necessity of linking energy security to economic growth in the 
public's mind, as the AEEG intends, will be rooted in down-to-earth concepts, 
said Josten. "We think we have a unique role in defining the problems and 
educating the American people to the gigantic strides that have been made (in 
terms of energy efficiency) and to get them to understand just what's in 
their homes today versus what was in their homes even a decade ago."

In terms of the bigger picture: "You just cannot continue to have the kind of 
GDP growth that we have enjoyed as a country without energy to fuel it. You 
can't have the ability to pay for the kinds of environmental performance 
(improvements) that we want and seek, nor can you have the kind of 
technological innovation that we want and seek unless of course you have a 
growing and prosperous economy with the ability to pay for those items," he 
said. Josten added that his political take on the situation is that the 
environmental community is gearing up to "pummel" the Bush administration for 
opening up natural resources in the U.S.

For all the "gyrations in the stock market" in recent months and anxiety 
about an economic downturn as consumer confidence indices have dropped, "New 
jobs were still growing, and up until a month ago were still outpacing job 
losses," he observed. However, continued erosion in consumer confidence 
creates the risk of "creating a recession."

Some critics "are going to accuse (AEEG) of basically being a front or a 
shill for the (Bush) administration in one way or another," he acknowledged. 
"On the other side of that, this issue is so big that the need to build and 
develop a national consensus, for the need to have a sound and sustainable 
national energy policy, is going to require a cacophony of different voices, 
comprised of consumers and producers."

Josten said his role is to try to help get industry across the nation to 
start singing from, as he calls it, "the same hymn sheet." His choice of the 
word "cacophony" can only be interpreted as an invitation to bring on the 
dissonant voices.