FYI.  This article tracks well with the information we've thus far received 
and that I passed along on the call this morning. 
----- Forwarded by Jeff Dasovich/NA/Enron on 12/19/2000 12:06 PM -----

	Joseph Alamo
	12/19/2000 11:51 AM
		 
		 To: Miyung Buster/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
		 cc: Susan J Mara/NA/Enron, Sandra McCubbin/NA/Enron, Jeff Dasovich/NA/Enron, 
Mona L Petrochko/NA/Enron, Roger Yang/SFO/EES@EES, Paul Kaufman/PDX/ECT@ECT, 
Lysa Akin/PDX/ECT@ECT
		 Subject: San Francisco Chronicle, Tues 12/19: "Utilities Want Rates To 
Increase About 20%
Utilities, State Wrangling Over Rate Hikes for Power"

Utilities Want Rates To Increase About 20%
Utilities, State Wrangling Over Rate Hikes for Power 
David Lazarus, Chronicle Staff Writer
Tuesday,?December 19, 2000 
,2000 San Francisco Chronicle 
Top-secret talks between state officials and PG&E became bogged down 
yesterday over how much customers' bills should be raised to rescue the 
utility from financial ruin, sources said. 
State officials are pushing for Pacific Gas and Electric Co. and Southern 
California Edison to accept a 10 percent rate increase, while the utilities 
are asking for a rate increase almost double that amount, the sources said. 
An accord, first reported in The Chronicle on Saturday, still could be 
announced any time this week, the sources said, noting that Gov. Gray Davis 
was maintaining pressure for the two sides to come to terms as quickly as 
possible. 
However, the sources said, both sides are digging in their heels as the talks 
intensify. 
The impasse makes it unlikely that the California Public Utilities Commission 
will lift a rate freeze affecting the two utilities at its meeting on 
Thursday, even though the matter already has been placed on the commission's 
agenda. 
"Everyone is still trying to nail down different pieces of this mess," one 
source said. 
The negotiations began last week and continued through the weekend. However, 
sources familiar with the talks said PG&E and Edison were reluctant to 
compromise over how much they should be able to raise customers' bills and, 
in turn, how much of a combined $8 billion in outstanding debt the two 
utilities would have to swallow. 
Representatives of the utilities, the PUC and the governor's office declined 
to discuss the matter on the record yesterday. 
But sources said there was an increasing sense of urgency on the governor's 
part to extricate PG&E and Edison from their current financial woes and focus 
instead on California's chronic power shortages. 
State officials called a Stage 1 energy emergency yesterday afternoon as 
electricity reserves once again slipped to dangerously low levels. 
Large-scale industrial users were urged to reduce consumption. 
The governor is said to be eager to show some progress in tackling 
California's energy crisis, especially in light of measures announced by 
federal regulators on Friday that critics say do not go far enough. 
The Federal Energy Regulatory Commission announced several steps intended to 
reduce volatility in wholesale power prices, but stopped short of a long- 
sought cap on wholesale rates. 
Davis said the commission "abdicated its responsibility to the people in the 
West," while Sen. Dianne Feinstein characterized federal authorities as 
fiddling while Rome burns. 
Federal authorities will meet today in Sacramento with representatives of 
utilities and power companies, along with state politicians, to discuss ways 
to relieve California's energy shortage. 
Meanwhile, PG&E and Edison have warned of possible bankruptcy if they are 
unable to pass along to customers billions of dollars in extra costs accrued 
since wholesale power prices spiked over the summer. 
Because of the existing rate freeze, the two utilities so far have had to 
absorb all such costs as losses. 
Under terms of the deal now on the table, PG&E would absorb about half the 
roughly $5 billion in expenses it has incurred, while Edison would absorb a 
nearly equal percentage of its $3 billion in debt, sources said. 
The utilities, however, are fighting hard to pass on even more of the debt to 
customers in the form of higher rates, they said. 
PG&E held a special briefing for legislative aides in Sacramento yesterday at 
which utility officials made their case for a speedy bailout. 
"They said they need to solve this, and they need to solve it now," said one 
participant in the meeting. 
But the officials were less forthcoming about how much the utility would 
compromise to find a workable solution. "There wasn't a lot of wiggle room," 
the participant said. 
A source close to the PUC said state regulators would be ready to take up the 
matter of the rate freeze whenever a deal was reached with the utilities on 
how much customers' bills would go up. 
The source said the PUC probably would accept the utilities' argument that 
conditions for ending the rate freeze had been met months ago. The 
commissioners would then pass an emergency measure allowing rates to increase 
immediately. 
PUC President Loretta Lynch, who sources said was actively involved in the 
weekend negotiations, probably would introduce the emergency measure when a 
deal is reached. Swift approval by the five-member commission almost 
certainly would follow. 
"If some kind of accord is reached, we will be morally obligated to go 
forward," one source said. 
Still, consumer activists blasted the pending deal yesterday, calling instead 
for all parties to hold their negotiations in the public arena. 
"This is a gross violation of basic concepts of due process and fair play," 
said Nettie Hoge, executive director of The Utility Reform Network in San 
Francisco. "Utility rates in this state are supposed to be determined via a 
public process, not through back room deals between politicians and the 
utilities." 
Added John Gamboa, executive director of San Francisco's Greenlining 
Institute: "Back room deals are what led to our utility-backed deregulation 
scheme in the first place." 
E-mail David Lazarus at dlazarus@sfchronicle.com.