Please see the following articles:

Sac Bee, Fri, 7/20: PG&E announces deals with smaller suppliers
Sac Bee, Fri, 7/20: Dan Walters: Six months later, utility debts are still 
the toughest nut to crack 
SD Union, Thurs, 7/19: California selling surplus power at fraction of cost 
it paid 
SD Union, Thurs, 7/19: PUC reveals plan to transfer much of watchdog role 
SD Union, Thurs, 7/19: Variety of plans to help Edison find friends, foes 
SD Union, Thurs, 7/19: Baja is hoping energy squeeze can spark boom 
SD Union, Thurs, 7/19: GOP pushes energy bill with billions in tax breaks, 
emphasis on coal, oil, nuclear power 
LA Times, Fri, 7/20: Edison May Avert Bankruptcy Filing
SF Chron, Fri, 7/20: Summer blackout seers missing the mark -- so far 
Blackout visions only bad dreams 
WHAT OUTAGES? State efforts paying off 

SF Chron, Fri, 7/20: State advisers forced to sell energy stocks 
CONFLICT: Holdings called unethical 
SF Chron, Fri, 7/20: Democrats defy Davis with bill on PUC 
Utilities panel would keep power over rates 
SF Chron, Fri, 7/20: Developments in California's energy crisis 
SF Chron, Fri, 7/20: Energy Secretary to speak at forum on California energy 
crisis 
SF Chron, Fri, 7/20: Energy secretary in S.F. to push Bush program 
Abraham says supply is the key, not conservation 
SF Chron, Fri, 7/20: More energy fallout 
SF Chron, Fri, 7/20: Wilson says Davis ignored warnings about energy 
Former governor defends himself 
Mercury News, Fri, 7/20: California buzzing with power - but for how long?
Individual.com (AP), Fri, 7/20: Western Utilities Appeal To Protect Their 
Customers California 
Bail-Out by FERC Threatens to Increase Bills for Millions of Customers 
NY Times, Fri, 7/20: Rate Proposal For Electricity In California 
LA Times, Fri, 7/20: Edison Bailout Bills Remain Stalled
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PG&E announces deals with smaller suppliers


(Published July 20, 2001) 
SAN FRANCISCO -- Two weeks after reaching a long-term agreement with a major 
electricity supplier, Pacific Gas and Electric Co. on Thursday announced 
similar pacts with 130 smaller alternative energy companies. 
The deals, which must be submitted to a federal bankruptcy judge for 
approval, are expected to provide about 1,600 megawatts at 5.37 cents per 
kilowatt hour -- a price set by the Public Utilities Commission for long-term 
agreements sealed by July 15. The total is about two-thirds of the 
electricity that the utility usually receives under contracts with 
alternative energy suppliers. 
The utility has promised to repay the 131 companies the $740 million it owes 
them when its plan goes into effect. 
It owes an additional $260 million to other small producers who have not 
settled. Some of those companies are trying to get out of PG&E contracts. 
--Claire Cooper 
County sues over bond sale
Monterey County officials sued the county's investment adviser for selling 
them $4.9 million in Pacific Gas and Electric Co. bonds as the utility was 
collapsing financially. 
PG&E defaulted on the bonds, which came due March 26, although it has paid 
the county $5,334 in interest, the county said in its lawsuit. 
The lawsuit, filed in San Francisco Superior Court, says Banc of America 
Securities sold the bonds to Monterey County on Dec. 11 even though the 
county "was seeking a conservative, low risk investment." 
At the time, the securities firm was aware that PG&E "was financially 
unstable and its securities subject to potential default," the lawsuit says. 
BofA Securities said the PG&E bonds were "similar in risk to investment in a 
certificate of deposit and less risky than an investment in treasury bonds," 
the suit says. 
BofA Securities couldn't be reached for comment. 
--Dale Kasler 






Dan Walters: Six months later, utility debts are still the toughest nut to 
crack 


(Published July 20, 2001) 
When Gov. Gray Davis and other state politicians finally became engaged in 
the energy crisis last January -- a half-year late -- the state's major 
investor-owned utilities had already amassed more than $13 billion in debt 
from runaway power costs and were out of credit. 
Davis and the Legislature launched a massive state power purchase program, a 
speed-up of new power plants, conservation subsidies and other actions, not 
all of which have been successful. But everyone involved knew that the 
utilities' debts, which had driven them to the brink of bankruptcy, would be 
the most complex and politically difficult aspect of the crisis. 
Six months later, that's still true. 
An administration team negotiated for weeks with Pacific Gas and Electric and 
Southern California Edison on schemes to retire their debts and bring them 
back to a creditworthy status. The talks with PG&E went nowhere, and three 
months ago, the huge San Francisco-based utility filed for bankruptcy 
protection. Davis, clearly concerned that Edison would follow, hammered out a 
deal with the smaller utility within hours. 
It was, by any standard, a sweet deal for Edison and its parent company, 
Edison International -- too sweet for just about everyone in the Legislature 
-- and immediately, efforts began to change it. 
Edison lobbyists worked the Legislature, and the utility cranked up a massive 
advertising and public relations campaign, to no apparent avail. And Davis, 
oddly, pulled back from the fray. The Democratic governor concentrated on 
another aspect of the crisis with greater political sex appeal: demanding 
that power generators, many of whom are PG&E and Edison creditors, be forced 
to repay many billions of dollars because, as he put it, they had gouged the 
state. Ultimately, Davis' campaign failed, although his strident advocacy 
did, apparently, arrest his decline in public opinion polls. Meanwhile, the 
Edison deal languished. With the Legislature now poised to leave Sacramento 
on a monthlong summer recess and a self-imposed deadline for enacting the 
Edison plan approaching, the Capitol is newly aflutter with efforts. 
"Complex" doesn't even begin to describe the situation. There are at least 
three alternative plans kicking around, none of which can be passed as 
written. Davis may be willing to accept almost anything that would save him 
from the embarrassment of another utility going to bankruptcy court on his 
watch, but currently backs a scheme ginned up by Assembly Democratic leaders. 
Edison, however, has split with Davis and now favors an alternative offered 
by Republicans and some moderate Democrats -- one that consumer advocates 
denounced as a corporate bailout. Meanwhile, liberal senators are pushing 
another version that Edison likes even less, but its critics among consumer 
activists like more. 
With both lawmakers and outside interest groups so widely scattered over 
what, if anything, should be done to rescue Edison, a consensus developed 
late Thursday to keep the vehicles alive with preliminary floor votes but 
continue private negotiations through the monthlong legislative recess. 
The many-sided stalemate stems from both the rival plans' provisions -- 
farmers, for example, fear environmentalists' gaining authority through the 
state over Edison-owned watershed in the Sierra -- and the convoluted 
dynamics of the Capitol. 
Legislative leadership is very weak in the era of term limits, especially in 
the Assembly, and lawmakers are leery about voting for any complex utility 
measure, particularly one that might raise rates. Some call it "1890 disease" 
for the number of the 1996 deregulation bill that backfired so badly. 
Then, too, some liberals and consumer activists appear to want all of the 
measures to fail, forcing Edison into bankruptcy court. Then, they believe, 
the newly created but still inactive state power authority could step in, 
using its $5 billion in untapped bonding authority, and pick up assets of the 
utilities on the cheap, thus creating a massive state utility system. 
Wheels within wheels, and none of them meshing. 

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








California selling surplus power at fraction of cost it paid  


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By Karen Gaudette ASSOCIATED PRESS  July 19, 2001  SAN FRANCISCO ) California 
has begun selling power for a fraction of its purchase price as cool weather 
creates an abundance of electricity, spending that has been criticized by 
some watching the state's power crisis closely.  Power the state bought at an 
average of $138 per megawatt is being sold for as little as $1, energy 
traders say, though the price is disputed by state officials.  The state 
acknowleges the power sales, but says the surplus represented only a blip in 
an otherwise typical scorching summer and that blackouts still could roll if 
temperatures increase again. 

However, the surplus power selloff could encourage criticism that the state 
bought too much power at too high a price in its haste to fend off rolling 
blackouts and power prices 10 times higher than the year before.  "If the 
price is $138 on average for a month and you have to turn around and sell a 
chunk of it for a dollar, you're not going to look real good to a number of 
people," said Gary Ackerman, executive director of the Western Power Trading 
Forum in San Jose.  "I just don't think many people in California truly 
understood what their state did when they stepped into this business."  
Unlike natural gas, extra electricity cannot be stored away for a later day. 
Since Californians haven't been running their air conditioners as often as 
expected over the past week, the state hasn't needed the entire 38,000 
megawatts it had figured it would need.  The state Department of Water 
Resources, in charge of buying power for three financially ailing utilities, 
has spent the past few months arming the state with long-term energy 
contracts while weaning itself away from buying the highest-priced power on 
the last-minute electricity market.  Those contracts, along with last month's 
20 percent boost in energy conservation and the temperate weather, mean 
there's suddenly more power than Californians can use.  Energy traders say 
the state has tried to sell as much as 6,000 megawatts at one time, Ackerman 
said.  That's around 16 percent of the 38,000 megawatts the state estimated 
it would use around this time of year, Ackerman said. A megawatt is enough 
electricity to power roughly 750 homes.  "We know from traders who have 
bought that it's gone as low as a dollar and last week we know it was as low 
as $5," Ackerman said. "When a seller shows up with an enormous amount of 
power for sale and the market knows it, it has a depressing effect on 
prices."  California Energy Markets, a trade weekly, said the state sold 
power last Thursday at $25 per megawatt ) a price that Steve Maviglio, a 
spokesman for Gov. Gray Davis, said was "much closer to reality."  The state 
"never sold anything more than 1,000 megawatts on any single day," Maviglio 
said. "(Ackerman) has no evidence" of California selling power for $1, 
Maviglio said. "California Energy Markets is much closer to reality."  Oscar 
Hidalgo, a DWR spokesman, acknowledged the state has been trying to sell as 
much as 20 percent of its daily megawatts, though he would not say at what 
price. That could put the state at a disadvantage in the market if 
competitors knew how much it was paying, Hidalgo said.  "This is unusual, but 
it was anticipated, it is typical in the power buying operation," Hidalgo 
said.  "It's better than doing nothing with surplus power," Hidalgo said. 
"Scheduling energy is a balancing act because you can't store the item."  
Hidalgo said the state is sending some of the extra electricity up to the 
Bonneville Power Administration to repay it for power it had loaned 
California earlier this year.  "This is not a bad position for us to be in 
every once in a while," Hidalgo said. "If someone were to make these 
long-term contracts go away, we would fall off a cliff and be back where we 
were in January." 




PUC reveals plan to transfer much of watchdog role  


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By Craig D. Rose  UNION-TRIBUNE STAFF WRITER  July 19, 2001  The California 
Public Utilities Commission laid out a framework yesterday for transferring 
much of its watchdog role in ensuring fair electricity rates to the state 
Department of Water Resources.  The controversial proposal is in response to 
legislation earlier this year that puts the water department in charge of 
state power purchases. Utilities commission action is needed to ensure that 
the water department has enough revenue to make the purchases and to clarify 
areas of responsibility, including oversight of power rates.  Under the draft 
agreement made public yesterday, the commission would guarantee that 
consumers pay enough to cover interest payments on a planned $13.4 billion 
bond sale later this year. The guarantee is considered an essential element 
for completing the bond sale.  The bonds' proceeds are needed to repay some 
$8 billion the water department already has spent to purchase electricity and 
to cover future payments.  California began buying electricity through the 
water department earlier this year after the state's utilities were unable to 
make purchases because of credit problems brought on by the state's failed 
deregulation plan.  No mention was made in the draft agreement of the 
possibility of further rate increases to cover electricity purchases. Some 
observers have speculated that the current rate structure, even after two 
rounds of rate increases, may not cover all costs.  On the other hand, the 
draft agreement states that the water department itself will determine if the 
prices it pays for electricity meet the legal test of being just and 
reasonable, a determination heretofore made by the utilities commission.  
Under the utilities commission's procedure, the public is invited to comment 
on the draft. An administrative law judge for the commission will consider 
the draft before issuing a proposed decision. A full commission vote is 
expected Aug. 23, a deadline that would have to be met if the bond offering 
is to proceed as planned later this year.  Harvey Rosenfield, president of 
the Foundation for Taxpayer and Consumer Rights, said the utilities 
commission's draft agreement would allow a "secretive agency of dubious 
competence controlled by the governor and completely unaccountable to the 
public" to unilaterally order rate increases.  "It was deregulation which got 
us into the mess we are in today," Rosenfield said. "Now Wall Street is 
demanding that the (utilities commission) be forced to surrender its 
authority and legal responsibility."  He urged the commission to reject the 
draft proposal.  Carl Wood, one of five members of the Public Utilities 
Commission, said the draft agreement was driven largely by legislation 
empowering the water department as an electricity purchaser. With a state 
department buying power, Wood said, oversight shifts to the governor and the 
Legislature.  Commissioner Richard Bilas said he saw the agreement as 
empowering the water department as "prosecutor, judge and jury" in matters of 
electricity purchasing.  "The argument is that it's better off this way than 
the way we were," Bilas said. "And that's true in the short run. But what 
about in the long term?" 




Variety of plans to help Edison find friends, foes  


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Agreement in Legislature doesn't seem likely soon By Ed Mendel  UNION-TRIBUNE 
STAFF WRITER  July 19, 2001  SACRAMENTO -- Plans to aid Southern California 
Edison met mixed fates in legislative committees yesterday amid opposition 
from business, consumers and Edison itself, which said one of the plans would 
not restore its ability to borrow money.  The Senate energy committee 
rejected a plan that is tough on Edison, but the committee plans to consider 
it again today.  In the Assembly, a committee approved two plans. One has the 
support of Democratic leaders, is viewed more favorably by Gov. Gray Davis 
and has not drawn opposition from Edison. The other, crafted by the committee 
chairman, Rod Wright, D-Los Angeles, and Republicans, is supported by 
businesses and Edison.  Senate President Pro Tempore John Burton, D-San 
Francisco, told an Edison official during a committee hearing that financial 
experts have told him repeatedly that bankruptcy is the logical course for 
Edison.  "They keep saying they don't understand why a business in your 
situation does not avail themselves of that," Burton said.  The Senate leader 
told the Edison official not to expect the usual legislative compromises that 
would give the utility most of what it is seeking in a rescue plan.  "I want 
to disabuse you of the fact that somehow you are going to get some great big 
deal at the end of the rainbow," Burton said. "Because you are not going 
to."  The Senate and Assembly Democratic leadership plans require businesses 
to pay off most or all of Edison's debt, while also preventing businesses 
from shopping around for cheaper power. Business groups oppose the plans 
because of those provisions.  Davis is pushing for a legislative plan that 
would keep Edison from joining Pacific Gas and Electric in bankruptcy. He 
wants an Edison rescue plan that could become a model for getting PG&E out of 
bankruptcy.  Once their financial health is restored, the utilities could 
resume buying power for their customers, allowing the state to get out of the 
power-buying business it entered in January, when the utilities were crippled 
by a failed deregulation plan and no longer able to borrow money.  But the 
lengthy and sometimes emotional debates in legislative committees yesterday 
made it clear that reaching an agreement on an Edison rescue plan in the next 
few days will not be easy.  A plan that Davis negotiated with Edison in early 
April found little support in the Legislature and is not being considered. 
Opponents said the plan was too generous to Edison.  But the alternative 
rescue plans prepared in the Legislature also are called too generous to 
Edison by a consumer group, the Foundation for Consumer and Taxpayer Rights, 
which is threatening to put an initiative on the ballot to repeal any Edison 
"bailout."  Edison, on the other hand, fears that it will be saddled with too 
much debt and placed under a regulatory system that does not assure lenders 
that the utility will be able to pay costs for operating and buying equipment 
and power.  "We don't believe this bill in its present form would restore us 
to creditworthiness," Bob Foster, an Edison vice president, told a committee 
hearing the Senate plan.  The plan by Wright and Republicans was supported by 
business groups and Edison but opposed by consumers. All ratepayers would pay 
off the Edison debt and businesses would be allowed to shop for cheaper power 
as state long-term contracts expire.  "What will come out of the mix is hard 
to tell," said Steve Maviglio, Davis' press secretary. "Everyone is working 
feverishly to get something passed in the next few days." 






Baja is hoping energy squeeze can spark boom  


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New electricity, gas plants seen spurring a fresh wave of growth By Diane 
Lindquist  UNION-TRIBUNE STAFF WRITER  July 19, 2001  Energy shortages in 
California and Mexico are firing hopes for a new wave of industrial 
development in Baja California, where a maquiladora slowdown has cut 
thousands of jobs.  The power squeeze has triggered a rush to build 
electricity and natural gas projects in Baja California.  Once those plants 
are up and running, energy experts and Tijuana boosters say, the state will 
be able to make an unusual pitch to global manufacturers: Come to Baja 
California, where power is plentiful, reliable and relatively cheap.  "It's a 
new frontier for Baja California," said Institute of the Americas president 
Paul Boeker, a frontier that "opens up investment opportunities that aren't 
possible at the moment."  To seize the possibilities, Tijuana's Economic 
Development Corp. is pushing the Baja California government to fund a study 
to identify the United States' biggest electricity and natural gas users.  
"When we saw the price of energy going up so high in California, we thought 
we might be able to use this as a marketing tool," said David Mayagoitia, a 
director of the development group.  The hope is that an influx of big-energy 
users, such as high-tech firms that operate clean rooms, will offset serious 
problems in the region's sputtering maquiladora industry.  Since October, 
Baja California has lost 11,700 maquiladora jobs, 4 percent of the sector's 
total. In Tijuana alone, 7,600 positions have disappeared.  "I've never seen 
so many large and small and medium companies narrow their operations in such 
a short amount of time," said Deloitte & Touche accountant Mauricio Munroy.  
Maquiladora insiders like Munroy blame the U.S. economic downturn, rising 
costs, a strong peso and a new Mexican regulatory regime for reining in the 
operations.  Mayagoitia calls it a crisis.  "Our labor costs are going up. 
We're not as competitive as other places in the world. We have to look for 
other angles."  Over the past three decades, the arrival of foreign-owned 
maquiladoras has pushed Baja California's population to 2.5 million and 
transformed the state into one of the world's manufacturing hot spots. The 
region now ranks as a top producer of televisions and other consumer 
electronic products, and many other goods.  There are 1,287 factories in the 
state, employing 278,900 workers.  New operators continue to come. Since 
October, when employment began dropping, 33 companies have established 
factories in the state. Other companies, including Korean electronics giant 
Samsung, the state's largest operator, are expanding.  But in the past nine 
months, the sector's growth has dropped below its routine double-digit rate.  
Some companies, such as Sanyo and Day Runner, have shut factories. Others are 
threatening to. And so many have trimmed operations that Munroy said, "I 
don't think we can feel comfortable the industry's going to recover."  But 
now, California's energy crisis and cross-border power demands could alter 
that picture. A natural gas pipeline and three power plants in the works will 
boost the state's electricity output by 2,200 megawatts. As much as 1,500 
megawatts could flow to California consumers.  Additional plants are 
anticipated. Mexican Energy Secretary Ernesto Martens has said there's no 
limit to the number that could be built in Baja California. And California 
and Mexican officials are considering recruiting energy companies to start 
projects in Baja California.  Meanwhile, numerous companies -- El Paso and 
Phillips, Sempra, Chevron and Chiyoda among them -- have expressed interest 
in building liquid natural gas facilities near Rosarito and Ensenada. The 
operations would convert into vapor form liquified natural gas imported from 
other regions for use in Mexico and the United States.  Such projects could 
give Baja California billions of dollars in investment, thousands of 
construction and operating jobs, and a reputation as an energy-abundant place 
to do business.  "Large energy consumers could come down here, set up 
operations and get a big break on their utilities," Mayagoitia said.  
Previously, such operators have shunned Baja California.  "They've always 
said electricity down here is not constant. There are too many fluctuations 
on the line," Mayagoitia said.  While a bigger supply would overcome that 
obstacle, other challenges must be met before the region can use energy as a 
marketing tool.  At a San Diego Dialogue forum on energy last week, Boeker 
listed the key elements needed to attract the next wave of industrial 
development to Baja California. As he sees it, they need at least one liquid 
natural gas import facility, to allow power generators to export to 
California and sell directly to companies in Baja California, and to upgrade 
the cross-border gas and electricity transmission infrastructure.  Mexico 
also needs to make sure its business laws and regulations, which in the past 
have restricted the energy sector, allow corporations to get the supplies and 
prices they need to be competitive, Mayagoitia said.  "We think if the 
numbers make sense, and they have confidence that Mexico can deliver what 
they need, then we'll have the market niche."






GOP pushes energy bill with billions in tax breaks, emphasis on coal, oil, 
nuclear power  


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By H. Josef Hebert ASSOCIATED PRESS  July 19, 2001  WASHINGTON ) House 
Republican leaders hope to pass a broad energy package in the coming weeks 
that offers billions of dollars in tax breaks and favors for the coal, oil 
and nuclear industries as well as conservation incentives.  Much of the 
legislation, which emerged in bits and pieces this week from four House 
committees, mirrors ) and in some cases goes beyond ) the energy blueprint 
outlined by President Bush two months ago.  House GOP leaders have promised 
to enact energy legislation before Congress leaves for its summer recess in 
August.  The energy package includes drilling in an Arctic wildlife refuge, a 
top priority of the White House; incentives for technology to allow continued 
use of coal for power production; and tax breaks for high-mileage hybrid 
gas-electric automobiles.  But in some cases, the House committees have 
cleared measures not even sought by the administration.  Within one of the 
energy bills is a provision giving some of the largest, most profitable oil 
companies a waiver on having to pay the government royalties on oil and gas 
taken from new lease areas in the Gulf of Mexico. During the presidential 
campaign, Bush opposed such a royalty waiver, which critics claim amounts to 
a $7.3 billion windfall to the oil companies.  The House tax-writing 
committee, meanwhile, produced $33.5 billion worth of energy-related tax 
breaks ) a much broader sweep of tax incentives than Bush has sought ) even 
though some Democrats wondered whether there will be money available.  About 
half the tax breaks would go to oil, gas and coal industries and an 
additional $9 billion was earmarked to promote conservation and energy 
efficiency  Rep. Bill Thomas, R-Calif., chairman of the Ways and Means 
Committee, said the aim was to produced "a balanced package of tax measures" 
that helps conservation and development of energy supplies.  But the breath 
of the tax incentives went far beyond those proposed by the White House 
energy task force headed by Vice President Dick Cheney.  In addition to tax 
breaks for clean coal initiatives, refineries, pipelines and nuclear power 
plants, the committee also approved tax credits on a wide range of 
conservation programs, from helping to sell hybrid-fueled cars to making it 
cheaper to insulate homes, buy residential solar panels, reduce energy use in 
commercial buildings and develop and sell more efficient appliances.  Still, 
"overall the (legislative) package is disappointing," said David Nemtzow, 
president of the Alliance to Save Energy, a private energy conservation 
advocacy group.  While Nemtzow praised the tax writers for some of their 
provisions, he said big-ticket energy saving items ) such as a major increase 
in automobile fuel economy and tougher appliance standards ) were largely 
rejected in other energy legislation advanced to the House floor this week.  
The disagreements over energy efficiency, a fight Democrats pledged to 
continue when the legislation is considered by the full House, was apparent 
during the Energy and Commerce Committee's crafting of its energy bill.  A 
proposal to boost the federal corporate average fuel economy standard, or 
CAFE, from the current 27.5 mpg to 37.5 mpg was soundly defeated, 43-11. 
Another fuel economy increase and an attempt to force the Bush administration 
to accept a more stringent federal air conditioner standard also fell by 
similar margins.  Rep. Billy Tauzin, R-La., the committee chairman, dismissed 
the criticism. He called the legislation that emerged from committee by a 
50-5 vote a "landmark conservation bill" that for the first time in years has 
Congress taking steps to increase motor vehicle fuel economy.  The bill 
requires that CAFE standards for light trucks be adjusted to reduce gasoline 
consumption by new sport utility vehicles and minivans by 5 billion gallons 
over six years. Critics called that far too little, noting that the gasoline 
savings over six years would amount to about what all cars and trucks consume 
in two weeks.  The Bush administration's biggest victory came in the 
Resources Committee, where Democrats failed 19-29 to strip the legislation of 
a provision that would allow oil drilling in the Arctic National Wildlife 
Refuge in northeastern Alaska.  Opponents vowed to kill the provision on the 
House floor, where Democrats will be joined by many moderate Republicans in 
opposing it. Senate Democrats also have said no Arctic refuge drilling 
measure would pass.  Nevertheless, Rep. James Hansen, R-Utah, sponsor of the 
legislation, said he was optimistic. "It's a selling job," he said, noting 
that with the various energy bills before the full House, "we're now down to 
serious business." 








Edison May Avert Bankruptcy Filing
Energy: Thanks to a rate increase and natural gas price drop, the utility's 
improved cash flow may cover its electricity costs.
By JERRY HIRSCH
Times Staff Writer

July 20 2001

For the first time in months, Southern California Edison is collecting more 
money than it is spending on electricity, a shift that could enable the 
utility to avoid bankruptcy without a state intervention as dramatic as the 
proposed $2.8-billion purchase of the company's transmission lines.

The turnabout has come during the last several weeks as natural gas prices--a 
major component in the cost of electricity--have plummeted and as Edison has 
collected more money from customers through a record increase in rates 
approved by state regulators.

The utility this month expects to collect more than it will spend on 
electricity--the first time that has happened since the state's power crunch 
started in May 2000. If the trend holds, Edison would be able to cover 
several hundred million dollars in losses that piled up after Feb. 1 from its 
purchases of electricity, said executives at the Rosemead-based company.

Edison's relief comes against a backdrop in which the California power crisis 
appears to be easing, as consumers conserve energy, new power plants come 
online and wholesale prices moderate from the high levels of last winter.

The executives said that barring an unusually severe heat wave, which would 
prompt customers to crank up energy-guzzling air conditioners, or another 
spike in natural gas prices, Edison by early next year also could make 
payments on a proposed bond offering to pay down its $3.5 billion in debt 
from energy purchases before Feb. 1.

Creditors of the utility and consultants working with the governor's office 
agree that such a scenario could mean that Edison would be able to stay out 
of U.S. Bankruptcy Court without the state buying the company's transmission 
lines, which is a key element in Gov. Gray Davis' now-stalled proposal to 
rescue the utility.

Jim Scilacci, the utility's chief financial officer, has hinted at improving 
company finances during conference calls with creditors holding $931 million 
in defaulted bonds and notes in recent weeks. Investors have responded 
positively, boosting the company's depressed stock price about 45% in the 
last six weeks to a Thursday close of $14.70 on the New York Stock Exchange.

Although Edison's cash flow may be enough to cover its electricity costs, its 
huge debts keep it far from solvency. Moreover, the company still faces two 
wild cards in its fight to avoid bankruptcy: California's own claims on that 
cash and the utility's uncertain prospects of gaining state approval to use 
the money to repay its debts.

The Department of Water Resources is buying electricity for 27 million 
Californians served by Edison and the state's two other regulated utilities. 
The agency could disclose as soon as today how big a slice it will take from 
Edison's rate collections to repay a proposed $13.4-billion bond offering to 
cover the state's purchases.

The water agency began buying electricity from private generators in January, 
after Edison and Pacific Gas & Electric Co., the Northern California utility, 
became mired in debt. PG&E went on to file for bankruptcy protection in April.

"What this means for Edison all depends on how much money it can keep," said 
Paul Patterson, an analyst with investment bank ABN Amro in New York.

The water department's requirements could eat up much of the margin that has 
provided Edison with its small cushion this month. However, Joseph Fichera, 
chief executive of Saber Partners, which is advising the governor, said the 
latest numbers indicate that there is enough money in current rates to 
implement the governor's plan to pay for the utility's debt as well as the 
state's current and future power purchases.

Even if the water department allocation still left room for Edison to pay off 
its debts, such a course of action would require approval by the state 
Legislature and the Public Utilities Commission. Although energy trends 
appear to allow the utility to regain its financial footing, analysts 
cautioned that the utility still could find itself in Bankruptcy Court if the 
state doesn't provide a method for Edison to pay its debts.

"While we might be able to cover our costs going forward, it is equally 
important that we have a way to pay off that $3.5-billion debt," said Brian 
Bennett, an Edison vice president. "But without knowing what [the water 
department's] revenue needs are, we won't know what is left over in rates to 
cover our costs."

Bennett blamed the utility's so-called under-collection--debts that piled up 
as frozen consumer rates could not cover soaring wholesale electricity 
costs--on what he called "flawed regulatory policies."

Based on recent energy prices, Bennett said, "We are just only beginning to 
repay the under-collection."

The recently enacted rate increases, which kicked in last month, have pushed 
what Edison can charge customers for the electricity component of their bills 
from about 7 cents a kilowatt-hour to 10.27 cents.

At the same time, declining natural gas prices have sliced in half what the 
utility must pay to a group of small and alternative-energy companies that 
generate about 27% of its electricity needs. Edison, for example, paid this 
group 18.6 cents a kilowatt-hour in February. That dropped to 13.6 cents by 
May and now stands at about 7.5 cents. Each penny decline in the cost of 
electricity from this group of generators represents more than $200 million 
in savings for Edison on an annual basis.

Bennett cautioned that if the water department requires additional funds or 
if Edison's energy costs were to turn upward again, "then rates once again 
may not be adequate to cover our generation costs. It is therefore imperative 
that this uncertainty in the rate structure be cured now so we establish 
predictable, stable rates for our customers."

Three plans to aid Edison to varying degrees are working their way through 
the Legislature, though late Thursday it appeared none would be approved 
before lawmakers adjourn for a summer recess. Several legislators have said 
they are content to let Edison join PG&E in bankruptcy.

Any plan that would allow Edison to use a portion of the rates it is 
collecting to pay off a bond offering would meet the objection of some 
consumer groups, which label the concept a corporate bailout.

"Just as the utilities gambled on deregulation and were winners at first, 
Edison now has to be responsible for its losses," said Harvey Rosenfield, 
president of the Foundation for Taxpayer and Consumer Rights in Santa Monica. 
He said Bankruptcy Court is the most appropriate place for Edison to resolve 
its financial problems.

Several creditors of the utility, however, said that as long as Edison can 
tread water or even work down its debts, there is little incentive to put the 
company into bankruptcy, which would only add another legal layer and more 
expenses to an exceptionally complicated situation.

Creditors could move against the company if they believed its finances were 
declining and thus shrinking the amount of cash and assets that could be 
distributed in a bankruptcy proceeding. They also could put Edison into 
involuntary bankruptcy if some creditors exacted payment from the company 
ahead of others that are owed money. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 








Summer blackout seers missing the mark -- so far 
Blackout visions only bad dreams 
WHAT OUTAGES? State efforts paying off 
Joe Garofoli, Chronicle Staff Writer <mailto:jgarofoli@sfchronicle.com>
Friday, July 20, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/20/MN215347.DTL>
Months ago, the experts said there might be a blackout today. 
If not today, then probably this week. 
Well, most likely this month. 
If not, then for sure sometime this summer, so Californians had better unplug 
the toaster and pray for rain because there are going to be 260 hours of 
blackouts this summer. Or more. 
It's starting to feel like the day after Y2K around here. 
An unexpected thing happened on the way to California's summer of darkness - 
- nothing. Zero blackouts this summer, thanks to Gray-friendly skies and 
Californians conserving power in record amounts. 
Now the state is so flush with power that it's selling back the surplus at a 
loss. Even Disneyland has cranked up its flashy Electrical Parade again. 
Still, the doomsayers aren't backpedaling, merely clarifying their fevered 
springtime predictions. Like Michael Zenker, of Cambridge Research 
Associates. 
"I think (the reporter) was asking me to speculate," Zenker said of his 
comment in May that there could be hundreds of hours of darkness this summer. 
Officially, he said, his organization predicted 20 to 40 hours of blackouts. 
And it doesn't plan to adjust that figure. "We've decided not to do any live 
forecasting," Zenker said. 
Who knew what the summer would bring? Not California's power officials. The 
state's Department of Water Resources was in such a blackout-fearing frenzy 
earlier this year that it purchased too much power. So, over the past few 
days, 
the state has been forced to sell power it bought for as much $133 per 
megawatt for between $15 and $30, department spokesman Oscar Hidalgo said 
yesterday. 
"If you would have told us last winter that there would be a week in July 
that there would be a surplus of power, a lot of people would have had smiles 
on their faces," Hidalgo said. 
That isn't the only fallout from the summer of surprising light. A group of 
California business and development leaders worries that the rest of the 
country is asking the same misinformed question as your Aunt Minnie in 
Cleveland: "How do all you people in California work by candlelight all the 
time?" 
That kind of ignorance cost a Hewlett-Packard manufacturing plant in 
Roseville some business two months ago. A longtime Midwestern customer was so 
afraid that his company's order wouldn't be filled on time because of 
blackouts that he sent his business to an HP plant in California's energy 
nemesis: Texas. 
"If that company thought that way, then how many others back East are 
thinking that way?" said Ken Larson, a spokesman for Hewlett-Packard. He is 
helping a $150,000, six-month promotional campaign called the Power of 
California, which will send economic and business leaders across the country 
to counter the misrepresentation that blackouts are a part of daily life in 
the Golden State. The campaign is being funded mostly with private money. 
Looking back, there was no shortage of blackout Henny Pennys last spring. 
The North American Electrical Reliability Council predicted 260 hours of 
darkness. The Bay Area Economic Council said there would be a blackout every 
business day this summer. 
Neither organization regrets yelling "Blackout!" in a crowded state. 
"At the time (March), there was good reason to expect that things would be 
that bad," said Sean Randolph, president of the Bay Area Economic Forum, a 
group of public and private leaders. 
"Without that elevation of public consciousness, we wouldn't have gotten the 
demand change (conservation) that we expected." 
Others resorted to two favorite scapegoats: the weather and the media. 
"The headlines on blackouts were around last summer," said Ellen Vancko, a 
spokeswoman for the North American Electrical Reliability Council in New 
Jersey. "You should check out your own paper." 
Besides, Vancko said, nobody could have predicted that temperatures would 
remain at or below average in California's major cities. 
Actually, temperatures were 1.3 degrees above normal at San Francisco 
International Airport in June and 3 degrees above normal in most Central 
Valley cities. And yet, no blackouts. 
Nearly every forecaster cautions that summer is only half over and the 
hottest part of the season lies ahead. 
"Conservation is still important," said Stephanie McCorkle, a spokeswoman for 
the California Independent System Operator, which runs the state's power 
grid. She offered a prediction on when Californians could relax about the 
threat of blackouts. 
"At the first frost," she said. "November, maybe?" 
E-mail Joe Garofoli at jgarofoli@sfchronicle.com 
<mailto:jgarofoli@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 








State advisers forced to sell energy stocks 
CONFLICT: Holdings called unethical 
Mark Martin, Chronicle Staff Writer <mailto:mmartin@sfchronicle.com>
Friday, July 20, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/20/MN75216.DTL>
Sacramento -- One consultant hired by the state to negotiate long-term 
electricity contracts owned stock in a company that signed billion-dollar 
deals with California. 
Another fresh hire bought more than $10,000 in stock in Enron Corp. -- the 
Houston power trader frequently vilified by Gov. Gray Davis and lawmakers -- 
as he helped the state develop electricity buying strategy. 
A top Davis lawyer told the two consultants and seven others on Wednesday 
morning to sell off stock in companies like Enron and Calpine Corp. within 
four hours or lose their jobs. 
Having a financial interest in electric companies while working for the state 
on power issues was not ethical, said Barry Goode, Davis' legal affairs 
secretary, in a memo. 
All nine complied with the directive, said Davis spokesman Steve Maviglio 
said, but controversy intensified yesterday over whether some of the state's 
hired guns managing the energy crisis have conflicts of interest. 
The stock investments have come to light in the past week as 35 consultants 
hired by the state to buy and schedule power and to negotiate energy 
contracts have submitted documents detailing their personal finances. 
Most of the consultants who owned stock list their jobs as schedulers -- 
those who schedule electricity deliveries after power has been purchased. 
But others more directly involved with power trading also owned stock in 
energy companies, documents show. 
Richard Ferreira earns $200 an hour to help negotiate and manage the state's 
long-term contracts with power companies. He started his job Jan. 31. 
According to Ferreira's financial statement, he owned between $2,000 and 
$10,000 worth of stock in Calpine Corp. -- the company based in San Jose that 
announced on Feb. 28 it had signed two long-term contracts with the state 
worth $8.3 billion. 
Ferreira could not be reached for comment, and spokesmen for the Department 
of Water Resources, which hired the consultants, said he did not know if 
Ferreira worked on the Calpine contracts. 
Another consultant, Richard Nichols, bought between $10,000 and $100,000 
worth of stock in Enron in April -- more than three months after his company 
signed on with the state to help "in the procurement of power supplies," 
according to his job description. The stock buy came at a time when the 
Federal Energy Regulatory Commission was taking a hard line against wholesale 
electricity price caps for California. 
Nichols' company, Navigant Consulting, Inc., could make as much as $800,000 
for its work for the state this year. Nichols could not be reached for 
comment. 
Citing invoices from Controller Kathleen Connell's office, Secretary of State 
Bill Jones, an announced GOP candidate for governor, argued that there are at 
least seven other Navigant employees who are billing the state for work on 
energy issues. None of them have disclosed their financial interests. 
Jones said he takes issue with the Davis administration's decisions on who 
should file financial statements and who should be exempt. 
FINANCES NOT DISCLOSED
Several consultants, including two Wall Street firms that made $275,000 a 
month to negotiate the state's attempts to bail out troubled public 
utilities, have not disclosed their finances because Davis officials have 
concluded they do not fit the definition of a consultant. 
Jones has suggested that the state's long-term deals with several companies 
to deliver electricity might be invalid if negotiators had a financial stake 
in those companies. 
Maviglio said Davis officials were investigating whether there had been any 
direct conflicts. The state attorney general's office and the state's Fair 
Political Practices Commission also are reviewing Jones' allegations. 
Maviglio and a spokesman for the state's Department of Water and Power could 
not say yesterday whether new employees were asked before they were hired 
whether they had any financial stake in the energy market. 
STOCKS SOLD VOLUNTARILY
But some consultants acknowledged a potential conflict and got rid of stocks 
before this week. In his filing, Mark Skowdronski reports owning more than 
$10,000 worth of Reliant Energy stocks when he began his job in March of 
negotiating long-term contracts for the state. When he was given the task of 
negotiating with Reliant, he said he sold his stock on March 20. 
Jones has stopped short of accusing anyone of criminal activity. And a letter 
from Attorney General Bill Lockyer to Jones notes that the consultants would 
have to own more than 3 percent of a company they dealt with to be prosecuted 
criminally. 
Maviglio said the accusations come from a man who is launching his run for 
Davis' job next year. 
"This is all politics," said Steve Maviglio, Davis' press secretary. "We're 
following the law." 
He said that when the state was forced to enter the business of buying power 
earlier this year, officials had to quickly hire people who knew the energy 
business, including some who still had investments in power companies. 
"If you want a plumber, you hire a guy who has plumbing experience," Maviglio 
said. 
E-mail Mark Martin at markmartin@sfchronicle.com 
<mailto:markmartin@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 








Democrats defy Davis with bill on PUC 
Utilities panel would keep power over rates 
Lynda Gledhill, Chronicle Sacramento Bureau <mailto:lgledhill@sfchronicle.com>
Friday, July 20, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/20/
MN222719.DTL>
Sacramento -- Lawmakers moved with lightning speed yesterday to undo a plan 
that would force California regulators to raise electricity rates whenever 
state power buyers deem it necessary. 
A hastily introduced bill pits Democratic lawmakers against the 
administration of Gov. Gray Davis, which is counting on the state Public 
Utilities Commission to approve rate increases to pay for electricity without 
questioning whether the state got a good price. 
Historically, utilities bought their electricity and asked the PUC to approve 
rate hikes. The PUC decided whether the requests were justified. 
But with the utilities now deeply in debt and the state buying electricity, 
the old system has broken down. This week, the PUC issued a draft agreement 
that would guarantee the state would get as much money as it needs to pay for 
the electricity it is buying. 
Consumer advocates said the proposed agreement would force the PUC to cede 
its responsibility to protect customers from unreasonable rate increases. 
Senate leader John Burton, D-San Francisco, called the agreement 
"overreaching" by the governor's Department of Water Resources, which is 
buying the state's power. 
Under Burton's bill, consumers would still have to repay $13.4 billion in 
bonds that the state plans to float to cover its purchases. But the bill 
would allow the PUC to scrutinize the state's expenses beyond those covered 
by the bond -- costs mounting to billions of dollars over the next 15 to 20 
years. 
The bill passed out of two committees with bipartisan support yesterday and 
now faces a vote by the full Senate. Both business and consumer groups 
expressed their support for the measure. 
"This is better for ratepayers," said Lenny Goldberg of the Utility Reform 
Network. "It makes the bond issue secure and gives a chance to look into all 
of the contracts." 
PUC Commissioner Richard Bilas said some change is needed to restore 
commission oversight. 
"The only check and balance on the Department of Water Resources as it is 
would be the governor," Bilas said. "I think it takes a different branch of 
government to do that oversight." 
But Bruce Van Dusen, a lawyer hired by the Department of Water Resources, 
said Burton's bill could delay the bond sale and jeopardize the general fund. 
The concern is that while Burton's bill guarantees that the bond issue would 
be repaid, it does not spell out how all the long-term electricity contracts 
that the state has signed will be covered. The contracts stipulate that the 
generators will be paid through electricity rates. 
Chronicle staff writer Bernadette Tansey contributed to this report. / E-mail 
Lynda Gledhill at lgledhill@sfchronicle.com 
<mailto:lgledhill@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 19 







Developments in California's energy crisis 
The Associated Press
Friday, July 20, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/20/state
1023EDT0173.DTL>
(07-20) 07:23 PDT (AP) -- 
Developments in California's energy crisis: 
FRIDAY:
* No power alerts Friday as electricity reserves stay above 7 percent. 
THURSDAY:
* Legislators continue struggling with competing versions of a plan crafted 
by Gov. Gray Davis to rescue Southern California Edison from bankruptcy. 
Davis' plan, announced in April, offers Edison $2.76 billion for its 
transmission system and lets the utility issue revenue bonds to repay the 
rest of their debts. Edison is estimated to have amassed $3.5 billion in 
debts from record-high wholesale electricity prices to customers. A competing 
bill by Speaker Robert Hertzberg, D-Van Nuys, and Assemblyman Fred Keeley, 
D-Boulder Creek, would trims at least $300 million from the governor's offer, 
and also would allow Edison to issue the bonds, which would be repaid by 
Edison ratepayers over a decade. 
* Pacific Gas and Electric Co. decides to extend contracts to buy electricity 
from 131 small power plants for the next five years, the utility announced 
Thursday in U.S. Bankruptcy Court. As part of the deal, the utility also will 
pay those power plants $740 million for unpaid electricity deliveries they 
had made to PG&E before it filed for federal bankruptcy protection on April 
6. The power plants throughout the state, which largely harness energy from 
the sun, wind, biomass and natural gas to produce electricity in 
environmentally friendly ways, agreed to supply PG&E with nearly 3,000 
megawatts of power for 5.37 cents per kilowatt hour on average. 
* Assemblyman John Campbell sends a letter to the director of the Department 
of Water Resources, demanding to know how much surplus power the state is 
selling and at what price. Since January, the state has bought electricity 
for the customers of three financially ailing utilities. Cooler July 
temperatures than expected have led to a sudden surplus of power, which 
energy traders say is being sold for more than $100 less than it was bought. 
State officials say the extra power shows the state planned ahead well, and 
that if the weather heats up, it will be prepared. 
* In sharp contrast to a poll released in May, Californians now say that 
although the state needs power, nuclear energy is not a safe enough source. 
The poll, released Thursday by the Public Policy Institute of California, 
showed that 55 percent of residents believe nuclear power is too dangerous, 
even if building more nuclear power plants would help alleviate the country's 
energy problems. In a Field Institute poll of 1,015 adults released in May, 
59 percent of Californians favored nuclear power and 36 percent were opposed. 
* PG&E Corp. shares rise 30 cents to close at $15.40. Shares of Edison 
International rise 25 cents to close at $14.70. Sempra shares rise 65 cents 
to close at $27.12. 
* No power alerts Thursday as electricity reserves stay above 7 percent. 
* The Senate and Assembly are expected to vote on competing versions of deals 
to rescue Southern California Edison from bankruptcy. Legislators are trying 
to clear their agendas before leaving for a monthlong summer break. 
WHAT'S NEXT:
* The Department of Water Resources, the state agency that since January has 
been buying electricity for the customers of three financially ailing 
utilities, is set to release on Friday numbers that will indicate whether 
state power regulators will need to order an electric rate increase so the 
state can recoup its power buying and administrative costs. 
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. 
Southern California Edison and Pacific Gas and Electric say they've lost 
nearly $14 billion since June 2000 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 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 is also struggling with high wholesale power costs. 
The Public Utilities Commission has approved average rate increases of 37 
percent for the heaviest residential customers and 38 percent for commercial 
customers, and hikes of up to 49 percent for industrial customers and 15 
percent or 20 percent for agricultural customers to help finance the state's 
multibillion-dollar power buys. 







Energy Secretary to speak at forum on California energy crisis 
KAREN GAUDETTE, Associated Press Writer
Friday, July 20, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/20/state
0328EDT0124.DTL>
(07-20) 00:28 PDT SAN FRANCISCO (AP) -- 
U.S. Energy Secretary Spencer Abraham spent only a few minutes addressing 
California's power woes as he spoke to an audience of business leaders and 
city representatives who have seen blackouts roll through their factories and 
technology firms. 
California's power woes will not be solved with conservation and increased 
reliance on renewable energy alone, Abraham told the crowd of local business 
leaders in echoing statements from other Bush administration officials. 
"If you don't have enough energy supply you face the threat of blackouts," 
Abraham said. He devoted the rest of his speech promoting key aspects of the 
Bush administrations energy plan. 
The nation needs to expand and improve its electricity transmission system to 
make sure power can get where it needs to go, unimpaired by political and 
geographical borders, Abraham said. 
"It's not just enough to just have an adequate supply. It has to be 
reliable," Abraham told the crowd. 
Abraham urged the technology industry to focus on developing methods to move 
power more efficiently, and added that charging more for power at certain 
times of day would trigger more conservation than the government urging the 
public to cut back usage. 
He praised the efforts of Washington State-based Puget Sound Energy to bill 
its ratepayers more if they used electricity during times of highest demand 
-- when electricity is most expensive -- to encourage them to conserve or 
shift their factory production or laundry to cheaper hours of the day. 
Rather than relying solely on distant power plants for electricity, Abraham 
hopes homes and businesses will soon run their appliances on power they might 
produce in their own backyards and parking lots. 
Abraham arrived in San Francisco after telling a crowd of Hispanic community 
advocates in Milwaukee that the Bush administration saw partnerships with 
neighboring countries, including Mexico, as essential to developing untapped 
energy sources. 
Abraham's speeches around the country coincide with a House Republican effort 
to approve broad-ranging energy legislation before the end of the month when 
Congress leaves for its summer recess. 
The GOP's energy package would offer billions of dollars in tax breaks and 
favors for the coal, oil and nuclear industries as well as conservation 
incentives. That plan is similar and in some cases exceeds the energy 
blueprint outlined by President Bush two months ago. 
The package of legislation includes drilling in an Arctic wildlife refuge; 
incentives for technology to allow continued use of coal for power 
production; and tax breaks for high-mileage hybrid gas-electric automobiles. 
It exceeds the Bush plan in a provision that gives some of the largest, most 
profitable oil companies a waiver on having to pay the government royalties 
on oil and gas taken from new lease areas in the Gulf of Mexico. Bush opposed 
the royalty waiver, which critics claim amounts to a $7.3 million windfall to 
the oil companies. 
Vice President Dick Cheney is also visiting cities around the country 
promoting the Bush energy plan, fearing it is losing steam as gas prices and 
other energy costs continue to slide. 
Both the Bush plan and the House's energy package have been criticized by 
environmental groups as being too soft on expanding energy efficiency and 
conservation programs and too easy on extending tax breaks to energy 
companies. 
Some of the criticisms stem from Cheney's refusal to identify all the 
industry leaders who met with the energy task forced chaired by the vice 
president which developed the Bush energy policy. 
,2001 Associated Press 








Energy secretary in S.F. to push Bush program 
Abraham says supply is the key, not conservation 
David R. Baker, Chronicle Staff Writer <mailto:dbaker@sfchronicle.com>
Friday, July 20, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/20/
MN238054.DTL>
In San Francisco to stump for President Bush's energy plans, Energy Secretary 
Spencer Abraham yesterday praised California's conservation efforts but 
insisted that frugality alone would not solve the power crisis. 
Abraham, speaking to a group of Bay Area business leaders, warned against the 
perception that the crisis is lessening even though rolling blackouts haven't 
materialized this summer as expected. 
"There's a pervasive myth," he told people at the Bay Area Council's annual 
dinner at the San Francisco Hilton on O'Farrell Street. "It's the idea that 
we have no real energy crisis, or if we do, it can be overcome with 
conservation." 
He insisted that California and the rest of the country still need to 
increase power production, decrease dependence on foreign oil and fix an 
inadequate electricity transmission system -- key elements of the 
administration's plan. 
"We've not only got to have more supply, it has to be reliable," he said. 
Abraham also delivered a pitch aimed straight at some of the technology 
companies with representatives at the dinner, saying the government needed 
their help to create a radically different power system in decades to come. 
He described a future in which superconductors would make energy transmission 
more efficient, with electricity flowing easily across the country through a 
"transmission superhighway." 
The United States would join Canada and Mexico in hemispheric power planning, 
and consumers would have their own home generators and sell power back to the 
grid. He also suggested that environmentally friendly hydrogen fuel devices 
could one day replace much of the need for gas and oil. 
"I challenge high-tech to embrace this agenda, to fight for this agenda, and 
apply your genius to it," Abraham said. 
His address came as the federal government's latest broad energy bill -- 
including new fuel economy requirements for sport utility vehicles and 
subsidies for clean coal technology -- was sent to the House of 
Representatives floor. Although the proposal received substantial bipartisan 
support in the House Energy and Commerce Committee, many Democrats have 
argued that it does not do enough to promote conservation. 
The Associated Press contributed to this report. / E-mail David R. Baker at 
dbaker@sfchronicle.com <mailto:dbaker@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 19 







More energy fallout 
 <mailto:chronfeedback@sfchronicle.com>
Friday, July 20, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/20/
ED56451.DTL>
THEY SAY nothing is fair in love and war. It isn't. But nor is it fair when 
it comes to energy. 
In Washington, Vice President Dick Cheney, champion of the drill-and-burn 
industry, asks the Navy to foot the electric bills for his mansion. 
At the same time, the vice president refuses to disclose the costs incurred 
by his energy task force or to reveal the hot shots from the oil and gas 
industry who helped shape its final policies. 
Closer to home, California residents brace for the aftershocks of the energy 
crisis. With the state now locked into secret, long-term and costly energy 
contracts, it is the public -- not the energy suppliers who made out like 
bandits -- who will be burdened by the billions spent purchasing electricity. 
At present, only 39 percent of those surveyed approve of the way Gov. Gray 
Davis has handled this crisis. Approval may drop even lower when California 
residents absorb the astonishing news that we suddenly enjoy an energy 
surplus and that our state is now selling it on a glutted market. 
Add to the disgruntled those folks who were already in the habit of shutting 
off lights and lowering their thermostats. For them, the mail brought no 20 
percent rebate on their electricity bill. It is the watt hogs, who never 
lowered the air conditioner and left lights burning all over their homes, 
whose paltry efforts netted them the governor's award. 
Give the governor credit for keeping the lights on in California. But his 
less-than- bold decisions will result in serious political and economic 
consequences. Soon, we will have to confront the grave reality that we have 
mortgaged many of our dreams ( for expanded health care, improved education 
and support for the mentally ill ( for a future burdened by crushing debt. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 24 








Wilson says Davis ignored warnings about energy 
Former governor defends himself 
Carla Marinucci, Chronicle Political Writer 
<mailto:cmarinucci@sfchronicle.com>
Friday, July 20, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/20/
MN187903.DTL>
Former Gov. Pete Wilson, who signed the controversial 1996 energy 
deregulation bill into law, blasted his successor Gray Davis yesterday for 
failing to aggressively use the governor's most forceful tool -- emergency 
powers -- to contain the state's energy crisis. 
"There are people who have ignored the supply and tried to blame the crisis 
on everyone else," the Republican former governor told nearly 100 academics 
and reporters at the Public Policy Institute in San Francisco yesterday. 
Arguing that Davis ignored early warnings about brewing problems and "put in 
jeopardy parks, schools and other capital needs," Wilson said the Democratic 
governor has skillfully engaged in finger-pointing and public relations to 
blur perception of the current energy troubles. 
"They've sought to blame me, and have done so with some success. . . . And 
they've found a much more profitable and exciting target, President Bush," 
said Wilson, who wryly pronounced Bush's recent trip to California as "a 
triumph -- for Davis." 
But Davis' strategy, he said, "doesn't create one watt of new power." 
Wilson's speech -- his toughest public remarks to date on the energy crisis 
-- came the day the Public Policy Institute, a nonpartisan think tank, 
released polls showing Californians now believe energy ranks far and away as 
the state's most pressing problem. Many of those voters blame Wilson, not 
Davis, for the power shortages and rolling blackouts, the poll shows. 
The former governor's sharp words were rejected by Davis' senior political 
adviser, Garry South, who said Wilson is trying to "revise history." 
"If there is one shred of evidence that Pete Wilson said one thing or raised 
one red flag about energy supply, let him produce it," South said yesterday. 
"Pete Wilson accusing Gov. Davis of being responsible (for energy) is like 
Herbert Hoover blaming FDR for the Depression. We're trying to clean up his 
mess." 
The GOP former two-term governor spoke on the issue of California energy as 
members of the Bush administration fanned out across the nation, including a 
California trip by Energy Secretary Spencer Abraham, to push the White 
House's energy policy. 
But even the president appeared to point the finger at Wilson for some of 
California's problems. "They hadn't built a power plant in 12 years" in 
California, Bush told reporters Wednesday. "And guess what? When you grow 
your state the way they have . . . it creates problems." 
Such words chafe Wilson, who produced California Energy Commission figures 
that, he said, showed that small plants were built during his administration. 
In fact, he argued, the 1996 deregulation bill encouraged energy producers to 
seek state approval for new plants. 
While acknowledging the 1996 bill he signed was "flawed," Wilson said, "I 
thought the flaws would be addressed." 
"We knew it was not a perfect free market mechanism," said Wilson, adding 
that he had strong reservations about the utility rate caps included in the 
legislation. "(That) was a gamble, but it was one that paid off for while." 
But, he insisted, the bill -- which critics say kicked off California's 
energy woes -- had benefits for the state. 
Wilson said it was believed deregulation would spur private industry to build 
new plants that would fuel industry and "lots of jobs for Californians." 
Deregulation was also seen as a means to balance power companies' concerns 
about a lengthy, "nightmarish" process -- which he said dated to the early 
1970s -- to build large power plants. 
Davis "is now posing in front of those plants" opening because of decisions 
made before he took office, Wilson noted. "I hope that he's pleased with our 
handiwork." 
Wilson, also lambasted Davis for failing to heed 1998 warnings from the 
California Energy Commission about coming blackouts. 
And, Wilson said, as the state faced rolling blackouts, job losses, and 
skyrocketing energy costs, Davis failed to use one of his greatest tools in a 
crisis: emergency powers. 
Wilson noted that after the 1994 Northridge earthquake, estimates suggested 
it would take 2 1/2 years to rebuild downed freeways and overpasses. He used 
his emergency powers to offer incentives to contractors that rebuilt the 
bridges within 65 days. 
South, noting that Davis has used his emergency powers to deal with the 
energy crisis, said there is no comparison between an earthquake and a full- 
blown statewide energy crisis. 
E-mail Carla Marinucci at cmarinucci@sfchronicle.com 
<mailto:cmarinucci@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 19








California buzzing with power - but for how long? 
SAN FRANCISCO (Reuters) - Gray skies, chill fog, unseasonable rain, and 
moderate temperatures might not make for a perfect California summer -- but 
this year, it is exactly what the sun-loving state was praying for. 
With power supplies critically short and forecasts of summer blackouts 
swirling, California headed into the hot months geared up for repeated power 
outages that threatened to throw the West Coast into chaos. 
But a state that prides itself in defying prediction has done it again, 
sailing through the first weeks of summer with so much power it is selling 
its excess on the open market. 
``Various forecasters have predicted various horror stories, and we have got 
through the summer so far without blackouts,'' said Steve Maviglio, spokesman 
for Gov. Gray Davis -- who has staked his career on beating the blackouts. 
``But the situation is unpredictable, and the weather is the most 
unpredictable thing of all.'' 
No one is saying California's energy crisis is over. The state is still 
struggling to control the wreckage of its power deregulation scheme, a 1996 
policy which was supposed to bring lower power prices and more consumer 
choice. Instead it sparked spiraling wholesale power costs, a major utility 
bankruptcy, critical power shortages, and six days of blackouts between 
January and May. 
The last outages swept the state May 8, unplugging tens of thousands of 
customers in what industry experts warned was the first of as many as 260 
hours of summer blackouts. 
The absence of new blackouts has been attributed to consumer conservation 
among the state's 34 million residents, improved power supplies, increased 
federal price controls and above all, the unexpected blessing of a dreary 
summer. 
``Mother Nature has been very, very kind to us,'' said Severin Borenstein, 
director of the University of California Energy Institute. 
While temperatures have been several degrees lower than normal over the past 
few days throughout California, meteorologists say the summer so far has 
actually been marginally warmer than most. 
But the state has so far escaped the governor's worst nightmare -- a searing 
stretch of extremely hot days that sends people running to their air 
conditioners. 
``Temperatures have been nominally above normal, but you haven't had a lot of 
extremely hot days. If it's only moderately warm, the state can deal with 
it,'' said Ed O'Lenic of the National Weather Service's Climate Prediction 
Center. ''The cloudiness and the precipitation has probably helped.'' 
The cooperative weather has been matched by Californians' own conservation 
efforts. Electricity use, adjusted for economic and population growth and 
weather, has been falling steadily every month this year, culminating in a 
12.3 percent savings in June compared with the year-ago level. 
Conservation during the critical peak demand hours, when the threat of 
blackouts is greatest, cut use an even more significant 14.1 percent -- a 
saving of some 5,570 megawatts, or the equivalent of five big nuclear power 
plants. 
The energy picture -- further improved by three new power plants -- has 
boosted supplies to such a degree that California recently found itself 
selling extra power on the open market. 
Locked in to long-term purchasing contracts and unable to store the 
electricity, California has dumped excess power for prices far lower than it 
paid, leaving consumer groups fuming. 
Officials dismiss the complaints as absurd, noting the amount of power 
involved is ``inconsequential'' and stressing the entire state's power supply 
could tip back into crisis within 24 hours of the start of a heat wave. 
``After being blasted for blackouts, I am very happy to be criticized for 
having a tiny bit too much,'' said David Freeman, Davis' chief energy 
adviser. 
The question now is whether California will be able to keep up its energy 
balancing act for the rest of the summer. 
The North American Electric Reliability Council (NERC), an industry group 
which projected the 260 hours of blackouts this summer, has conceded those 
forecasts might have been high. But it points to continued problems dogging 
California's energy system including transmission bottlenecks, and inadequate 
power generation. 
Officials and industry analysts say the biggest danger the state faces is a 
sudden change in the weather, followed closely by a relaxation of consumer 
conservation efforts. 
Those worries are increased by the fact that August and September are 
historically the hottest months across the most heavily-populated areas of 
California, where late autumn heat waves are not uncommon. 
``When we get the three-day, West-wide heat wave we are in deep trouble, and 
it is very likely we will get that sort of a heat wave at some point,'' 
Borenstein said. 
Vancko of NERC said the current spate of good news about California's power 
situation could soon be a memory. ``Nobody thinks this is more than a 
temporary respite,'' she said. ``We may have dodged the bullet but we haven't 
bitten it.''










Western Utilities Appeal To Protect Their Customers California Bail-Out by 
FERC Threatens to Increase Bills for Millions of Customers 

July 20, 2001    <JavaScript:userButton(> <JavaScript:userButton(>  BELLEVUE, 
Wash.--(BUSINESS WIRE)--July 19, 2001 via NewsEdge Corporation -  West-wide 
price controls on electricity implemented June 19 by the Federal Energy 
Regulatory Commission threaten to prolong the energy crisis affecting the 
West, according to petitions filed today with FERC by utilities serving 
millions of customers.  If not revised, the price controls will quickly 
result in higher bills for those customers.  "The FERC action in June was 
focused solely on solving the immediate crisis in California," said Tim 
Hogan, Puget Sound Energy's vice president, External Affairs. "The unintended 
consequence is that it has aggravated the crisis for utilities and their 
customers in surrounding states, as we experienced during the early July 
blackouts in Nevada." In addition, one western utility, Avista Corp. of 
Spokane, Wash., on July 18 announced a 37 percent power cost surcharge filing 
as a direct result of the FERC price controls.  In today's FERC filing, Puget 
Sound Energy said price controls are discouraging new generating facilities 
and demand-side management programs in the West, which will cause the current 
shortage of power to continue, resulting in extended periods of high consumer 
costs. Already, more than 1,300 megawatts of planned new generation for the 
region have been cancelled due to the effects of the price controls.  
Utilities routinely sell on the wholesale market excess power and rely on 
those sales to offset purchases they have to make when their customers need 
additional power. The price controls, as currently structured, threaten to 
force utilities to sell power at a loss, resulting in additional costs that 
will have to be passed on to their customers.  "Puget Sound Energy customers, 
as well as those of other utilities, are the ones who are at risk of paying 
the price for the California bail-out under the current FERC plan," Hogan 
said. "Our ability to continue the successful effort to balance our energy 
portfolio and keep customers' rates stable has been damaged during the rush 
to solve California's problem."  PSE and other utilities filing today asked 
FERC to review its June 19 order and make modifications to the price controls 
that will not only stabilize wholesale prices in California, but also prevent 
the crisis from spreading to other states. The recommended changes would 
allow the market to set prices that would encourage new generation and allow 
utilities to effectively manage their energy purchases and sales so their 
customers would not pay higher costs.  CONTACT: Puget Sound Energy | Media 
Relations | Grant Ringel, 888/831-7250 | or | Investor Relations | Julie 
Williams, 425/462-3808








National Desk; Section A 
Rate Proposal For Electricity In California 

07/20/2001 
The New York Times 
Page 15, Column 1 
c. 2001 New York Times Company 
SAN FRANCISCO, July 19 -- A proposed agreement between state regulators and 
the agency that buys electricity for millions of Californians would allow the 
state to raise electric rates without outside review. 
The California Public Utilities Commission issued the agreement on Wednesday 
and it will become effective after a period for public comment in August. 
The proposal explains how the commission will work with the Department of 
Water Resources to ensure that the state is repaid for the billions of 
dollars it has spent buying electricity for customers of three financially 
ailing utilities. 
In the agreement, the commission vows to assess electric rates at least 
annually and adjust them so the department has enough money to pay for its 
power purchases and administrative costs. 
Harvey Rosenfield, the president of the Foundation for Taxpayer and Consumer 
Rights, said on Wednesday that under the agreement the commission waived the 
right to deny a rate increase if it was deemed unfair to California 
ratepayers. Mr. Rosenfield said the agreement gave unelected officials ''the 
unilateral right to order rate increases for the next 15 years.'' 
Geoff Dryvynsyde, a legal adviser at the Public Utilities Commission, said 
the commission would be ''no longer in charge of determining what costs are 
reasonable before it changes rates.'' 
The commission's agreement is a vital step toward California 's efforts to 
issue $13 billion in bonds to recoup the more than $8 billion it has spent 
since January buying electricity . 
California wants to improve its credit rating to lower interest rates on the 
bonds and to assure Wall Street of a reliable stream of money rolling in from 
electric rates. 
In May, the Public Utilities Commission issued a record rate increase that 
followed another January increase of roughly 10 percent. 
The state has bought electricity for the customers of three companies since 
January, when the utilities warned the state that high power prices and the 
inability to recoup their costs through frozen electric rates were driving 
them into bankruptcy. 








Metro Desk 
Edison Bailout Bills Remain Stalled
MIGUEL BUSTILLO; CARL INGRAM

07/20/2001 
Los Angeles Times 
Home Edition 
Page A-25 
Copyright 2001 / The Times Mirror Company 
SACRAMENTO -- Leading lawmakers conceded they would probably leave on their 
summer break without passing legislation aimed at rescuing Southern 
California Edison from its financial straits as competing bailouts stalled in 
the Legislature Thursday. 
The Assembly is expected to consider one of two rival measures to save Edison 
today, and the Senate is expected to take up an Edison rescue deal of its 
own. 
But all three pending measures face long odds and none have sufficient 
support to clear both houses, legislative leaders said. 
With the Legislature set to quit for the summer as early as today, the 
leaders predicted they would be forced to continue negotiations during the 
monthlong recess in hopes of brokering a deal. 
"I can't imagine that in the next 24 hours" lawmakers will reach consensus on 
an Edison rescue, said Assemblyman Fred Keeley (D-Boulder Creek), who 
coauthored one of the lower house's rescue bills with Assembly Speaker Bob 
Hertzberg (D-Sherman Oaks). 
One indication of the lack of enthusiasm for the legislation is that Keeley 
himself does not support the measure that bears his name. "I don't believe 
that this bill in its current form should become law," he said. "This bill is 
not ready." 
The maneuvering in both houses Thursday capped a day of frenetic activity in 
the state Capitol, which has become flooded with cell phone-carrying 
lobbyists seeking to influence the Edison deal for seemingly every special 
interest in the state. 
Yet amid the flurry of action, there seemed little chance of actually making 
law. Many of the participants said the legislative debate appeared to be less 
an attempt to pass a bill than a war of one-upsmanship between the houses to 
see who could "lob a grenade" into the rival house and go home until August. 
That way, if Edison soon winds up in Bankruptcy Court, leaders of each house 
could argue they were not to blame. 
Hoping to head off a growing sentiment among lawmakers that bankruptcy may 
not be such a bad alternative, Gov. Gray Davis spent the day working the 
phones in hopes of persuading legislators that a government rescue of Edison 
would be good for the state. 
To avoid mass blackouts, California has been purchasing billions of dollars 
worth of electricity since the beginning of this year because the state's two 
largest private utilities, Edison and Pacific Gas & Electric, are no longer 
credit-worthy enough to buy power on behalf of their customers. 
The utilities lost that status and ran up billions in debt the last two years 
because they were paying high prices for power on the wholesale market and 
could not recover those costs from customers because of a state-imposed rate 
freeze. 
As a result, the state government is stuck in the power-buying business until 
the utilities regain their financial footing--an expensive predicament that 
threatens the state's financial health. 
Davis attempted to head off the crisis by negotiating rescues of the two 
utilities, but PG&E lost faith in the talks and opted to take itself into 
Bankruptcy Court in April, embarrassing the Democratic governor. 
Days later, Davis reached a tentative rescue deal with Southern California 
Edison. But the plan hit the Legislature with a thud amid concerns it was 
overly generous to Edison, and it has languished for months. 
Last week, lawmakers finally picked up the pace and began moving forward with 
a series of competing proposals to alter the governor's deal with Edison. But 
it was clear from the outset that no consensus had emerged, and many 
lawmakers are becoming convinced that legislative inaction--even if it means 
bankruptcy--may be the best way to resolve Edison's financial predicament. 
"We're bailing out people who don't need to be bailed out," said Sen. Ross 
Johnson (R-Irvine). 
Legislative leaders hoped to pass something before today when the Assembly 
and Senate are scheduled to break for their traditional summer recess. The 
date is considered important because Edison and Davis had set an Aug. 15 
deadline for lawmakers to take action on the rescue deal. If no bill is 
passed by then--as seems likely--the utility has the right to walk away from 
negotiations. 
However, it became evident Thursday that the dueling measures making their 
way through both houses lacked strong support. 
In the Assembly, the Hertzberg-Keeley bill, a modification of Davis' original 
plan, was competing against a rival bill by Assemblyman Rod Wright (D-Los 
Angeles), who had teamed with Republicans to push what he bluntly called a 
"straight bailout" of Edison. 
In the Senate, Davis' original plan was amended by Sen. Byron Sher 
(D-Stanford) and turned into a trimmed-down rescue plan that was opposed by 
Edison. 
Sher's bill was voted down twice in policy committees Wednesday and Thursday, 
but it was resuscitated both times, and is now on the Senate floor.