Please see the following articles:
Sac Bee, Wed, July 25: Another push to rescue Edison
Sac Bee, Wed, July 25: PG&E questions state's cost analysis
Sac Bee, Wed, July 25: Blackouts don't justify takeout, Connell says
Sac Bee, Wed, July 25: Utilities sell excess power -- at a loss
Sac Bee, Wed, July 25: Dan Walters: Blackout threat dims, but state still 
faces  tough  energy decisions
Sac Bee, Wed, July 25: Water crisis alert sought: El Dorado Hills could run 
out by  the end of summer, officials to tell state
SD Union, Wed, July 25: PG&E, Edison disagree on rate increase 
 State says just more than half of revenue needed; rest for utilities
SD Union, Wed, July 25: News briefs on the California power crisis 
SD Union, Wed, July 25: U.S. plans upgrading of energy bottleneck 
 Firms bid on Path 15 grid job, Abraham says
LA Times, Wed, July 25: Reliant Energy sues California 
SF Chron, Wed, July 25: Electricity fire sale reflects success, experts say
SF Chron, Wed, July 25: Federal energy regulators meet Wednesday
SF Chron, Wed, July 25: Energy giant finances library improvements 
SF Chron, Wed, July 25: News briefs on the California power crisis
SF Chron, Wed, July 25: PG&E demands hearing on state power buys
 Officials blast release of erroneous data
SF Chron, Wed, July 25: State ISO vulnerable to power play
Mercury News, Wed, July 25: PG&E asks for public hearing on electricity rate 
data 
Mercury News, Wed, July 25: Energy expense strains schools
Mercury News, Wed, July 25: PG&E challenges claim that no rate will be needed
OC Register, Wed, July, 24: Energy notebook
 Official says absence of blackouts may give wrong idea
OC Register, Wed, July 24: Lawmakers adjourn without Edison deal 
Dow Jones Interactive, Wed, July 25: Arizona regulators move to kill 
electric  competition
Dow Jones Interactive, Wed, July 25: Hardin electrical generator will be 
coal  gasification plant
Dow Jones Interactive, Wed, July 25: Optimistic Edison says turnaround is 
possible  electricity
Energy Insight, Wed, July 25: Mining suffering an 'energy' shortage


Another push to rescue Edison 
By Kevin Yamamura
Be
 Capitol Bureau
(Published July 25, 2001) 
State Assembly leaders Tuesday began another attempt to strike a deal sparing 
Southern California Edison from bankruptcy, even as company officials 
predicted lawmakers would not meet their mid-August deadline. 
Gov. Gray Davis and the legislators have tried for months to craft an 
agreement that would restore Edison to financial health and thereby relieve 
California of having to purchase energy for the state's second-largest 
utility. An initial agreement worked out by Edison and the Democratic 
governor set an Aug. 15 deadline for legislative approval. 
While most lawmakers have left Sacramento for the beginning of a monthlong 
summer recess, Assembly leaders have set an ambitious schedule this week that 
could lead to a vote as soon as Friday, said Paul Hefner, a spokesman for 
Assembly Speaker Robert Hertzberg, D-Sherman Oaks. 
That scenario would require calling back 80 Assembly members from throughout 
the state and beyond. Leaders would have to negotiate a consensus deal before 
Friday. 
Even if the Assembly passes a plan, the Senate would also have to return to 
send it to the governor -- a move Senate President Pro Tem John Burton 
earlier said he did not support. 
And in a conference call Tuesday with creditors, an Edison official said he 
does not expect a final deal by the original deadline. 
"I think we have to concede the ability to get everything completed by August 
15," said Ted Craver, chief financial officer of Edison International, the 
parent company of Southern California Edison. "We do expect to continue to 
work hard on a negotiated solution." 
Edison has an estimated $3.5 billion in debts to generators, banks and 
alternative energy producers. Because any three creditors that are owed 
$10,000 each could ask a bankruptcy judge to force the issue, some lawmakers 
want to broker a deal that would ward off the threat. 
Davis has threatened to call another special legislative session to have 
lawmakers return to pass an Edison deal by Aug. 15. 
"He thinks the date is very real and that they should work toward making that 
deadline," said Steven Maviglio, a Davis spokesman. "Also, it sends a very 
strong signal to Wall Street that we intend to get this done on time." 
So far, creditors have been patient with Edison, but that won't last 
indefinitely, said Donald Sheetz, president of Street Asset Management, who 
is advising a committee of unsecured creditors. 
"It's likely within the next month that something could happen if we don't 
resolve it as quickly as possible," he said. 
But creditors seem willing to hold off "because of the diligence of the 
Legislature to work the thing out," Sheetz added. 
The Senate and the Assembly discussed three proposals last week that could 
not muster enough support to reach the governor's desk. A group of 
legislators and Davis officials is trying this week to merge the three plans 
-- two from the Assembly and one from the Senate -- into one that could gain 
support. 
The original deal between the governor and Edison focused on California 
purchasing the utility's power lines for $2.76 billion, in exchange for a 
series of obligations by the company. The Senate scrapped that plan last week 
in favor of its own. 
The Senate's proposal, SB 78xx by Sen. Byron Sher, D-Palo Alto, is now the 
anchor for a legislative deal. It would have the state issue $2.5 billion in 
bonds to pay off Edison's debts to alternative generators and banks. The 
state's large businesses would repay the money through a portion of their 
monthly rates. 
The principal Assembly plan, AB 82xx, backed by Hertzberg and written by 
Assemblyman Fred Keeley, D-Boulder Creek, would have the state purchase 
Edison's transmission grid for $2.4 billion. Another Assembly proposal would 
charge customers a monthly fee to pay off Edison's debt. 
Components of the two Assembly bills are likely to be included in either the 
Senate plan or other connected legislation to be released today. 
Bob Foster, Edison senior vice president, said he believes the two Assembly 
proposals have a "reasonable chance" of restoring the utility's credit and 
relieving the state from buying energy. But the Senate plan, he said, would 
leave Edison with $1 billion in debts that it could not absorb. 


The Bee's Kevin Yamamura can be reached at (916) 326-5542 or 
kyamamura@sacbee.com <mailto:kyamamura@sacbee.com>. 
Bee Staff Writers Emily Bazar and Carrie Peyton contributed to this report.


PG&E questions state's cost analysis 
By Carrie Peyton
Bee Staff Writer
(Published July 25, 2001) 
Pacific Gas and Electric Co. on Tuesday called for public hearings on how the 
state has calculated electricity costs for years to come. 
It said state cost projections, released to reporters Sunday evening and 
filed with regulators on Monday, appear to be too incomplete to support the 
sweeping conclusions the state made. 
In particular, PG&E said in a press release, the "missing data, discrepancies 
and conflicting claims" make it impossible to determine how much money the 
state Department of Water Resources wants to collect from PG&E customers. 
Although PG&E just passes along state power charges, it is concerned about 
the collection formula because that could affect how much money might 
eventually be available for both PG&E's ongoing operations and its past 
debts. 
PG&E filed for bankruptcy protection in April and has repeatedly clashed with 
regulators over how much money it should be allowed to charge in rates. 
State determinations about power costs "affect the property, legal rights and 
duties of PG&E," and so the utility has a right to a hearing on the issue, 
PG&E said Tuesday in a letter faxed and mailed to DWR director Thomas 
Hannigan. 
State officials acknowledged Tuesday that they had mistakenly released some 
inaccurate numbers that conflicted with their final report to the state 
Public Utilities Commission. 
But they insisted that the result is the same: No rate increase will be 
needed to repay the billions of dollars the state is spending to buy power on 
behalf of three cash-strapped utilities, including PG&E. 
"It was just an unfortunate error and somebody is trying to exploit that into 
something that it's not," said Joseph Fichera, a Wall Street financier 
advising Gov. Gray Davis. 
After studying the numbers for two days, however, PG&E felt that "there's 
very little evidence to support all the conclusions that they offered," 
utility spokesman John Nelson said. 
In particular, PG&E is concerned that the state appears to be increasing the 
amount of money it wants PG&E to pay in 2002 from 9.5 cents to 13.7 cents per 
kilowatt-hour. 
It also wants the state to explain how it can declare its own costs are "just 
and reasonable" at the same time that state agencies have been telling 
federal regulators they want refunds because wholesale power costs were 
unfair. 


The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com <mailto:cpeyton@sacbee.com>.



Blackouts don't justify takeout, Connell says 
By Ed Fletcher
Bee Capitol Bureau
(Published July 25, 2001) 
While operating in "crisis" mode, Department of Water Resources staff worked 
20-hour days, slept in conference rooms and were fed pizza and sushi by the 
state as the department tried to keep California's lights on. 
Saying the department "charged enough to feed a small army," state Controller 
Kathleen Connell now is asking those employees to pay the state back about 
$3,600 for department food purchases in January. 
"We are not going to be paying these bills," Connell told reporters Tuesday. 
The state does not buy business-hour meals for staff while they are in town, 
Connell said. Additionally, the use of a government-issued credit card to 
make the purchases was improper, she said. If the department does not require 
the employees to pay for the takeout meals, she said, the department will 
have to absorb the cost. 
The Department of Water Resources began scrambling to buy power Jan. 17 after 
Gov. Gray Davis declared a state of emergency -- the same day Northern 
California was hit with rolling power blackouts. As a result of the 
department's new responsibility, staff members buying power were asked to 
work nearly around the clock, said Oscar Hidalgo, a department spokesman. 
Buying food for staff during crisis situations is nothing out of the norm, 
Hidalgo said. 
"Under emergencies such as these ... we believe we were in a position to do 
this. Our staff did nothing other than it would do during a flood," Hidalgo 
said. 
California's recent success in keeping the lights on has led people to forget 
the level of crisis the state was in, Hidalgo said. "It seems at every turn 
... people are making Monday morning quarterback calls," he said. 
Connell and her aides said buying power is not the same as firefighters 
getting food while battling a blaze. 
They said using the "Cal-Card" for buying food is specifically prohibited. 
"It's not an open line of credit," she said. 


The Bee's Ed Fletcher can be reached at (916) 326-5548 or 
efletcher@sacbee.com <mailto:efletcher@sacbee.com>.




Utilities sell excess power -- at a loss 
By Carrie Peyton
Bee Staff Writer
(Published July 25, 2001) 
Nobody expected a year like this. 
First there were blackouts in January, when there's supposed to be a surplus 
of power. 
Now utilities are dumping excess electricity in July, a month when they're 
used to barely squeaking by. 
So what's going on? 
California is using less power than expected because of a surge in 
conservation and unseasonably cool weather. 
So those who stocked up -- including the state Department of Water Resources 
and the Sacramento Municipal Utility District -- are now selling megawatts 
for less than they paid. 
The state sold 177,571 megawatt hours of surplus power in the first half of 
July for an average of about $37 a megawatt hour, after lining up supplies 
for an average of $118 per megawatt hour -- a loss of about $14 million over 
16 days. 
Those who want California out of the power-buying business call this proof 
that electricity is better left to private businesses, which will buy more 
wisely because they're trying to maximize profits. 
"History has proven that there is nothing less efficient than a 
government-run monopoly," said Assemblyman John Campbell, who prodded the 
state to release the statistics on its power-sale losses. 
Campbell, R-Irvine, said Tuesday that his office will be requesting more data 
from the Water Resources Department, possibly as early as today, to bring 
more scrutiny to pre-July losses and to any ongoing sales. 
"The broader issue here is, in the past, when an Edison or a PG&E does this, 
their shareholders bear the loss," he said. 
That's not generally the case, say those who have monitored utility issues 
for years. Investor-owned utilities such as Pacific Gas and Electric Co. have 
long been allowed to pass reasonable costs along to ratepayers, although 
regulators have disallowed costs that were found to be serious blunders. 
There is nothing in the surplus sales that looks like a blunder at this 
point, said Mike Florio, an attorney for The Utility Reform Network, a 
consumer group that often has gone to regulators to challenge utility 
spending. 
"Everyone on occasion sells power at a loss. Enron sells power at a loss," he 
said. "The question is, what is their track record over an extended period?" 
Unless utilities want to buy all their power in the costly spot market, they 
will always have too much electricity on some days and too little on others, 
said Jim Tracy, SMUD's planning director. 
That's because they will buy power in advance, in blocks, to lock in lower 
prices than they expect at the last minute. 
"When we buy a contract, it's for every day of the week," Tracy said. "If 
it's 98 degrees, we need it. If it's 88 degrees, we don't need it." 
It's very common for utilities to be 1 percent to 2 percent off on their 
forecasts over a year's time, and in any single month it's not uncommon to be 
3 percent to 5 percent off target, largely because of fluctuations in 
weather, Tracy said. The variations can get even more dramatic over shorter 
periods. 
"You could have a real cool June and a hot July and they offset themselves in 
the big picture," he said. 
But this year has been much less predictable than usual for SMUD and other 
utilities, he added, because the public has responded so well to pleas for 
conservation. 
SMUD began unloading power at a loss in spring, when it first became obvious 
its customers were cutting back on use, sometimes by as much as 10 percent, 
and it went through another round of sales in July as temperatures stayed 
well below normal. 
"It's hurting us," Tracy said. "It's nice and cool, so our customers don't 
want it ... (and) we're selling it for less than what we planned." 
He said he couldn't provide any detailed figures because SMUD staffers 
generally don't prepare reports on individual sales; instead, they just give 
the utility's elected board a monthly report on overall finances. 
While SMUD has taken a hit so far, Tracy said, he still expects to come in on 
target for power purchases this fiscal year. 
The state Department of Water Resources also minimized its losses from power 
sales, saying it had purchased about 5 percent more power than it needed 
between July 1 and July 16, a variation well within industry norms for a 
two-week period. 
This is really normal," said Pete Garris, chief of operations for the state's 
power-buying arm. 
"The July temperatures and the conservation have made forecasting a little 
bit harder," he acknowledged, but he said he still hopes to end the year 
within 5 percent of the projections supplied to his office by the state's 
three big utilities. 


The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com <mailto:cpeyton@sacbee.com>.



Dan Walters: Blackout threat dims, but state still faces tough energy 
decisions


(Published July 25, 2001) 
Unusually cool summer weather, and conservation efforts, have lowered power 
consumption in California and forestalled -- at least for the moment -- the 
threat of blackouts, but political and financial aspects of the energy crisis 
remain very unsettled. 
When the Legislature recessed for a monthlong vacation, it left behind the 
highly controversial issue of whether the state should rescue Southern 
California Edison from the threat of bankruptcy. The larger Pacific Gas and 
Electric Co. has already sought bankruptcy protection, and Edison officials 
have said that without state intervention, Edison would likely follow. 
The Legislature's inability to agree on an Edison plan after weeks of public 
and private debate and negotiations -- and the likelihood that nothing will 
happen until late August, at the earliest -- add more complexity to an 
already uncertain financial picture. 
Had the Legislature simply rejected Gov. Gray Davis' bailout deal with 
Edison, at least the utility, its creditors, the state Public Utilities 
Commission and other players in the financial game would have known 
something. But by leaving it unsettled -- not only what kind of plan, but 
whether there will be any plan at all -- the Legislature left a very key 
piece of the puzzle unfilled. 
The state Department of Water Resources, which has been buying power for 
California ever since the utilities lost their ability to borrow money in 
January, declared this week that it can refinance the state's $8 billion-plus 
in power purchase debts, plus pay for future power buys, within the existing 
utility rate structure, which includes a hefty rate boost enacted last 
spring. But those assurances are dependent on keeping wholesale power rates, 
which have declined dramatically in recent weeks, low and that, in turn, 
depends on the unregulated prices of natural gas. 
The Department of Water Resources also says there's enough "headroom" in the 
rate to begin chipping away at the utilities' $13 billion-plus in power 
purchase debt, but that's pure conjecture at this point. Had the Legislature, 
Davis and Edison agreed on a bailout scheme, the dimensions of Edison's debt 
would have been known. The Legislature is insisting that Edison's parent 
company and its debtors absorb some debt, rather than place it all on 
ratepayers -- but how big a "haircut," if any, will be decreed is also 
uncertain. 
The uncertainty extends to the Public Utilities Commission, which must decide 
soon how the revenue stream is to be divided among various claimants, whether 
rates need another boost, whether Edison's parent company should share 
liability for its debts, and whether the Department of Water Resources will 
be allowed to pass along its costs to ratepayers without PUC agreement. 
If this all sounds very confusing, it's because it is. Even the experts don't 
know whether all of these elements can fit together in some workable fashion 
-- uncertainty that was reflected in the sharp questions Tuesday to the 
firm's chief financial officer, Ted Craver, by holders of Edison debt. 
Craver described the legislative bailout plan as "still a work in progress" 
and expressed optimism that a working group of legislators and Davis 
administration officials could agree on a compromise scheme. 
Craver, under persistent questioning, indicated that Edison would be willing 
to allow an Aug. 15 deadline for enacting its deal with Davis to slide -- an 
important element, since the Legislature won't return to Sacramento until 
Aug. 20. But he said that even if there's agreement on a deal, Edison still 
doesn't know whether it will mesh with the pending Department of Water 
Resources and PUC actions that will affect rates. 
So while power blackouts are not imminent, the tightly interwoven issues of 
bailing out Edison, the Department of Water Resources' power purchases, the 
pending state bond issue, and PUC policy remain up in the air. And there are 
absolutely no guarantees that those involved can make it all work. They are, 
after all, the folks who created this mess in the first place by 
restructuring utilities through expedient politics and reacting slowly when 
matters began to deteriorate last year. 


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



Water crisis alert sought: El Dorado Hills could run out by the end of 
summer, officials to tell state. 
By Peter Hecht
Bee Staff Writer 
(Published July 25, 2001)

Warning that the community of El Dorado Hills could run out of water by the 
end of summer, El Dorado County water officials said Tuesday they will ask 
state and federal officials to declare a water crisis and allow them to pump 
more water from Folsom Lake. 
Amid heated exchanges at a Monday night community meeting, board members of 
the El Dorado Irrigation District were unable to agree on a plan that would 
have required strict water conservation measures for the fast-growing 
community bordering Sacramento County. 
So on Tuesday, district officials went to work on a strategy to obtain more 
water from Folsom Lake, construct a new pipeline to bring water down from the 
upper Sierra or negotiate to purchase water from other agencies. 
"We will not allow the system to run empty," EID General Manager Bill Wilkins 
said. He said the district was writing to the state Water Resources Control 
Board, asking the agency to throw its political weight behind the district's 
bid for more Folsom Lake water. 
The EID argues it is entitled to take more than its current allotment from 
Folsom Lake by exercising its water rights for a hydroelectric dam and water 
delivery system -- called Project 184 -- in eastern El Dorado County. The 
system, heavily damaged by storms in 1997, is able to pull out only about 
two-thirds of the water it normally would take from the American River. The 
remainder merely flows down into Folsom Lake. 
But, citing a shrunken lake level due to low snowmelt this year, the U.S. 
Bureau of Reclamation cut the amount that all regional water districts could 
pull from Folsom Lake by 15 percent. Federal officials say the EID is 
entitled no special treatment. 
Tom Aiken, the bureau's Central California manager, said the EID's request to 
pull 1,700 to 2,000 acre-feet of water from Folsom Lake above its allotment 
for the year could draw too much cold water from deeper depths of the lake. 
The bureau must release a certain amount of cold water into the American 
River to protect steelhead and salmon populations downstream, he said. 
Aiken also said the EID had plenty of time to plan for its water needs 
because the bureau issued warnings, starting in February, that lake levels 
would be low. 
But the EID says it is in trouble because Folsom Lake is the primary water 
source for El Dorado Hills. While the EID has had problems with Project 184, 
the agency also has been unable to ship water to El Dorado Hills from some 
reservoirs in eastern El Dorado County as a result of restrictions imposed by 
the state Department of Health Services. 
That agency ordered the EID to construct enclosed water tanks to prevent 
pollutants from entering treated water basins. Until the work is done, two 
primary water storage basins can't be used to supply water to western El 
Dorado County. 
EID officials say El Dorado Hills, a booming community of more than 20,000 
residents, needs 6,700 acre-feet of water from Folsom Lake to meet the needs 
of current residents and an ongoing surge in residential construction. EID 
officials say they'll only receive about 5,350 acre-feet from Folsom Lake as 
a result of the cutbacks ordered by the Bureau of Reclamation. 
At Monday night's special meeting, EID board member Al Vargas and other 
officials warned that the community would run out of water by September if 
urgent action is not taken. "We're in a crisis situation and we need to do 
something," Vargas said. 
He urged the EID to immediately declare a Stage 3 "water emergency" for El 
Dorado Hills. Such a declaration would allow the EID to conduct hearings on 
whether to issue citations for failure to conserve water, suspend water meter 
sales and impose higher, drought-year water rates. 
On June 18, the EID imposed a Stage 2 "water warning" that sought a 5 percent 
to 10 percent reduction in water use for all customers in the EID's more than 
200-square-mile service area in El Dorado County. Mandatory measures included 
prohibitions against using potable, or drinking, water to wash driveways and 
parking lots or to fill ponds. 
With only three of five EID board members present Monday night, Vargas and 
fellow board member Howard Kastan voted to order the more severe Stage 3 
"water emergency" restrictions for El Dorado Hills. The plan failed to win 
the required three votes to pass when board member Dirk Gillmeister declined 
to go along. 
Gillmeister said he wanted to delay action until an Aug. 6 meeting when two 
other board members would be present. 
Vargas, saying there was no time to waste, voted against continuing the item. 
"The board has consistently tried to sweep this under the rug as if there is 
no problem here." 
Ultimately, the board directed the EID staff to pursue three possible 
options: begin negotiations to buy water from other agencies, seek more water 
from Folsom Lake or build a $300,000 pipeline to carry more water from 
eastern El Dorado County. 
But Wilkins said the pipeline project, which would take up to 45 days to 
complete, would would free up only 600 to 800 acre-feet for El Dorado Hills, 
much less than needed. 
While the EID wants more water from Folsom Lake, its failure to adopt 
stricter conservation measures may not help politically. 
"We felt if they would implement mandatory water conservation measures 
immediately, they could probably squeeze through" and meet their needs for 
the year, Aiken said. 


The Bee's Peter Hecht can be reached at (916) 608-8667 or phecht@sacbee.com 
<mailto:phecht@sacbee.com>.


PG&E, Edison disagree on rate increase 

State says just more than half of revenue needed; rest for utilities
By Ed Mendel 
UNION-TRIBUNE STAFF WRITER 
July 25, 2001 
SACRAMENTO -- Pacific Gas & Electric yesterday sharply questioned whether the 
Davis administration can avoid an additional rate increase, but a Southern 
California Edison official said the existing rates may cover all the costs. 
The opposite reactions to an administration proposal for splitting rate 
revenue between the state and the utilities reflects differing views of how 
Gov. Gray Davis has handled the electricity crisis. 
PG&E broke off negotiations with Davis in early April and filed for 
bankruptcy. Edison has been working with Davis on a legislative rescue plan 
to avoid bankruptcy, and the Assembly may be asked to return Friday to vote 
on the proposal. 
The latest disagreement is over the administration's announcement Sunday that 
the state will need only a little more than half of the revenue from a record 
rate increase, leaving the rest for the struggling utilities. 
The increase began appearing in the bills of PG&E and Edison customers last 
month. The Public Utilities Commission is expected to approve a similar rate 
increase for San Diego Gas & Electric next month. 
The Davis administration said it will need 1.65 cents of a 3 cents per 
kilowatt-hour rate increase for PG&E and Edison customers to pay off a $12.5 
billion power bond that will be issued in the fall. 
Davis consultants, after weeks of speculation, said no additional rate 
increases will be needed to cover the bond, pay for long-term power contracts 
and provide a revenue stream for additional bonds to pay off utility debts. 
But PG&E and Edison reached different conclusions after looking at the 
information that the administration provided to the PUC. The commission will 
decide how to split the rate revenue next month. 
Edison's chief financial officer, Ted Craver, told bondholders during a 
conference call yesterday that all of the costs appear to fit into the 
existing rates, if the administration's model and numbers are accepted. 
"But we must remember that we started deregulation with forecasts that made 
it look like everything fit, too," Craver said. "We are facing highly 
volatile gas prices." 
PG&E said the information provided by the administration seems to add up to 
an additional rate increase next year and called for a public hearing. PG&E 
said the administration filing only contains data for the next 18 months. 
"Such an omission makes it impossible to analyze (the administration's) 
claims to the media that a rate decrease could be likely in 2003," PG&E said 
in a statement. 
The governor's press secretary, Steve Maviglio, said yesterday evening that 
the administration is preparing a point-by-point refutation of the issues 
raised in PG&E's statement. 
The Senate approved an Edison rescue plan last week before leaving for a 
monthlong summer recess. Assembly Speaker Robert Hertzberg, D-Van Nuys, 
adjourned the Assembly on call. 
The speaker's press secretary said a working group is meeting with 
representatives of the Senate and the administration on a modification of the 
Senate plan that may be ready for an Assembly vote as soon as Friday. 

News briefs on the California power crisis 

ASSOCIATED PRESS 
July 25, 2001 
RIVERSIDE ) The Board of Supervisors wants a proposed power-line route that 
would run through the southwest part of the county to stay clear of cities. 
The board will ask the state Public Utilities Commission to direct San Diego 
Gas and Electric, which has submitted the power-line plans, to look for 
alternate routes, including areas east of Temecula. 
The utility wants to run a 500,000-volt power line through southwestern 
Riverside County connecting its power grid with Southern California Edison's. 
The plan, which is estimated at $271 million, must be approved by PUC 
members. 
SDG&E officials said they are willing to meet with county administrators to 
discuss alternative routes. Residents opposing the project said the utility 
should upgrade its existing lines. 
))

DIAMOND BAR ) Air quality officials on Tuesday rejected a proposal by an 
energy company to start building a power plant near a state prison because 
there aren't strict smog prevention measures in place. 
The South Coast Air Quality Management District told Delta Power Co. of New 
Jersey to come back Aug. 22 with a revised plan. That will leave a little 
more than a month before the plant is supposed to be operational under the 
governor's emergency fast-track program for new power plants. 
Delta wants to build a power plant near the California Institution for Men in 
Chino which would supply about 135,000 homes with electricity. The natural 
gas facility would cost about $125 million. 
The governor's emergency plan eases pollution restrictions and shortens the 
review process but the plant still must receive approval by the AQMD. 
The agency agreed to give Delta a permit back in May. But after 
environmentalists protested, board members expressed concerns about excess 
nitrogen dioxide that would be emitted by the plant. 
"We're under an obligation to act quickly, but we're under no obligation to 
suspend our rules," AQMD official Peter Mieras said Tuesday. 
))

SAN LUIS OBISPO ) Pacific Gas and Electric Co. has been cutting down trees 
near its nuclear power plant to reduce the possibility of a fire that could 
knock out power lines during peak demand. 
However, utility officials said Tuesday that it won't cut as many trees as it 
had originally planned. PG&E officials said they would cut about 7 percent of 
the trees and not the 30 to 50 percent once planned. 
"We found that we were able to get the canopy separation we need by removing 
fewer trees," said Jeff Lewis, PG&E spokesman. 
PG&E began cutting down the trees last week beneath high-voltage lines 
connected to the Diablo Canyon nuclear power plant. Work won't be completed 
for another two weeks. 

U.S. plans upgrading of energy bottleneck 

Firms bid on Path 15 grid job, Abraham says
By Gordon Smith 
COPLEY NEWS SERVICE 
July 24, 2001 
LOS ANGELES -- Raising the political stakes in a battle over how to solve the 
state's power crisis -- and who will get credit for it -- Energy Secretary 
Spencer Abraham said yesterday that the federal government plans to have 
private companies upgrade central California's Path 15, a bottleneck in the 
state's electrical transmission grid. 
Abraham, speaking at a news conference here, said federal officials have 
received 13 bids from unspecified companies interested in building a third 
transmission line along an 84-mile corridor between Los Banos, in Merced 
County, and Gates, near Coalinga in Fresno County. The line and related 
improvements would enable an additional 1,500 megawatts -- enough power for 
1.5 million households -- to flow from generating plants in Southern 
California to the northern part of the state, he said. 
"There have been moments during the recent blackouts when the southern part 
of the state had an excess (of power) . . . and we couldn't get the 
electricity from the south to the north," Abraham said. "Fifteen hundred 
megawatts would have made a major difference." 
The bids from private contractors mean the line, which will cost an estimated 
$300 million, can now be built "in a way that doesn't require either the 
taxpayers or ratepayers of California or the United States of America to have 
to take responsibility for it," Abraham said. 
However, that claim was contradicted by Michael Hacskaylo, an administrator 
for the Western Area Power Administration who appeared with Abraham. 
Hacskaylo said ratepayers ultimately would bear the cost of building the line 
through higher electricity rates. 
"One way or another there will probably be a transmission rate charge to move 
power over this (new line) . . . and it would show up in the overall cost of 
power. It would not, I think, show up as a separate charge" on electricity 
bills, he said. 
Yesterday's announcement by Abraham caught state officials by surprise. Steve 
Maviglio, a spokesman for Gov. Gray Davis, said the governor did not know of 
the announcement in advance and was unaware of details of the federal 
proposal to upgrade Path 15. 
"The governor is skeptical of any effort by private companies to increase 
their stranglehold over the power system in California," Maviglio said. 
John Tremayne, a spokesman for Pacific Gas and Electric, which owns the 
existing Path 15 transmission lines, said the company has been working with 
the California Public Utilities Commission for months on a separate proposal 
to upgrade Path 15 on its own. 
More recently, PG&E also has cooperated with federal officials seeking to 
take command of the project, Tremayne said, and the company is willing to do 
a limited amount of the expansion work in conjunction with other partners. 
"We are continuing to work on both" project alternatives, he said. 
Carl Wood, a PUC commissioner, called the Department of Energy's proposal 
"not helpful . . . they're giving us help in areas where we don't need it." 
Meanwhile, Gregg Fishman, a spokesman for the California Independent System 
Operator, which manages most of the state's power grid, said Path 15 needs to 
be upgraded but noted that his agency is neutral on whether it should be 
accomplished under the direction of federal or state officials. 
Members of President George Bush's Cabinet have made a concerted effort in 
recent weeks to stump for the administration's recently announced energy 
policy, and yesterday's announcement was in that vein. 
Abraham said that solving the long-standing problem of the Path 15 bottleneck 
"was one of the recommendations in the president's energy plan." 
"The kinds of costs being borne by the people and the economies in the 
communities affected (by blackouts) will be considerably greater if we don't 
act soon," he added.

















Reliant Energy Sues California
   
By Associated Press 
HOUSTON -- Reliant Energy Cos. has sued California to recover money the 
company says it is owed under power contracts it signed with the state.

Reliant said it is owed $337 million for unpaid power bills in California, 
but the lawsuit involves only a portion of that amount. A Reliant spokesman 
did not immediately have a dollar figure available and the company did not 
specify in the lawsuit how much it is seeking.

The lawsuit, filed Friday in Los Angeles Superior Court, applies to contracts 
that Reliant made through the California Power Exchange Corp., the 
now-defunct exchange that was the state's middleman for the buying and 
selling of power.

Among the contracts Reliant entered into were those for future purchases, the 
Houston Chronicle reported Wednesday.

Reliant said in its lawsuit that because of defaults by purchasers Pacific 
Gas & Electric Co. and Southern California Edison Co., the Power Exchange 
started liquidating contracts to distribute money to companies such as 
Reliant.

But the state seized the contracts before the liquidation was complete and 
transferred the rights to the California Department of Water Resources, the 
suit said.

Reliant said that constitutes taking the Power Exchange's property rights 
without just compensation under the California constitution.

The Houston-based company says it should be paid for the reasonable value of 
the contracts and hasn't been compensated for damages it suffered when the 
state took the contracts.

Steven Maviglio, press secretary for California Gov. Gray Davis, called the 
lawsuit "just another example of Reliant having no shame when it comes to 
greed."

Maviglio told the newspaper that the state has said it will pay a fair and 
just value for the contracts. The state's compensation and claims board is 
expected to come up with the amount, but Maviglio said that may take some 
time.

(PROFILE (CO:Southern California Edison Co.; TS:SCE;) ) 

For information about reprinting this article, go to 
<http://www.lats.com/rights/register.htm> 




Electricity fire sale reflects success, experts say 
Lynda Gledhill, Chronicle Sacramento Bureau <mailto:lgledhill@sfchronicle.com>
Wednesday, July 25, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/25/
MN218245.DTL>
Sacramento -- California's sale of surplus electricity at a loss during the 
first few weeks of July is a natural consequence of the state's entry into 
the power- buying business, several energy analysts said yesterday. 
While critics blasted the administration for what they called inept handling 
of power purchases, some energy experts and representatives of Gov. Gray 
Davis said the numbers actually reflect a turnaround in the state's energy 
market. 
State officials disclosed this week that mild weather and strong conservation 
efforts left California with more power than it needed on some days. 
During the first three weeks of July, the state sold 117,571 megawatt hours 
at a loss estimated to be about $14 million. The sale represents about 5 
percent of all electricity purchased during the same period. 
"We have achieved one goal -- which is to bring some normalcy to the entire 
process," said Oscar Hidalgo, spokesman for the Department of Water 
Resources, the agency purchasing the state's power. "The same things that 
happen normally to a utility are happening to us." 
Hidalgo said California is now the biggest power buyer in the nation. "We 
have an impact on the markets every day," he said. "They know when we don't 
need power, and the prices go down. They see the market conditions and . . . 
adjust to our needs." 
Susan Oto of the Sacramento Municipal Utility District said her district 
sometimes finds itself, as does the state, in the position of having to sell 
off surplus power. 
"It's not unusual when you look at an annual basis to be off 1 or 2 percent 
either way," she said. "If you look at one day or one month the fluctuations 
are going to look much larger." 
Since Jan. 17, the state has bought $8 billion of power for California's 
troubled utilities. It has also entered into a series of long-term contracts 
that will continue to provide power for the next 15 to 20 years. 
Some energy experts said the loss is not alarming given the unusual July 
weather. 
"This wouldn't be an issue if it was a hot July and the prices were high," 
said Mark Bernstein, a senior policy analyst with Rand. 
Bernstein said more moderate prices have the energy market on a more even 
trend, although he expects natural gas prices rising again as more power 
plants come on line. 
The key is for the state not to buy too much power at high prices that it 
will be constantly selling at a loss, said Michael Florio of The Utility 
Reform Network. "At this point, the losses look like pretty small potatoes," 
he said. "The questions are: What is the magnitude and have they seriously 
overbought into the future?" 
Hidalgo, who did not dispute the estimated $14 million loss figure, said the 
Department of Water Resources tries to strike a balance in its contracts. The 
goal has been to have a mix of contracts that include peak power, long- term 
and short-term supply. 
State power buyers intend to have about 95 percent of estimated demand -- 
which is determined by the utilities -- lined up in advance, leaving a small 
amount exposed to the volatile spot market. 
According to documents released at the end of May, the state has about 40 
percent of the estimated demand for the third quarter of the year locked up 
in long-term contracts. 
"There are going to be days when there is a surplus and days when we are 
short," Hidalgo said. "This is a product that is bought based on a weather 
forecast. If we had planned on July being cool and it wasn't, we would have 
been in big trouble." 
In a letter to Assemblyman John Campbell, R-Irvine, the director of the DWR 
said that since July 1, the state had sold 177,571 megawatt hours at a rate 
of $36.95 each, while it paid just over $118 a megawatt hour for about 3.5 
million megawatts over the same period. 
E-mail Lynda Gledhill at lgledhill@sfchronicle.com 
<mailto:lgledhill@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 10 


Federal energy regulators meet Wednesday 
MARK SHERMAN, Associated Press Writer
Wednesday, July 25, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/25/natio
nal1916EDT0220.DTL>
(07-25) 00:01 PDT WASHINGTON (AP) -- 
With California's energy crisis in a relative lull, federal energy regulators 
are taking one last look at the state's power issues before they begin a long 
summer break. 
The Federal Energy Regulatory Commission meets Wednesday for the last time 
until after Labor Day. Among the agenda items are the recommendations of 
FERC's chief administrative law judge, who failed to broker a settlement 
between California and power wholesalers on allegations of overcharges. 
Judge Curtis L. Wagner Jr. called for a trial-like hearing within 60 days to 
resolve the dispute. California claims generators overcharged by $8.9 
billion; wholesalers offered to refund slightly more than $700 million. 
After presiding over 15 days of closed-door talks at the commissioners' 
request, Wagner said California failed to make its case for $8.9 billion, but 
"that very large refunds are due is clear." He said refunds could amount to 
"hundreds of millions of dollars, probably more than $1 billion." 
California officials have said they hope FERC will reject Wagner's 
recommendation for several reasons; for one thing, California wants 
overcharges dating back to May 2000; Wagner suggested going back only to 
October. 
FERC ordered the talks in the hope that brief, but intense negotiations could 
produce a settlement, particularly with the threat of regulatory action 
hanging over the participants. 
Michael Kahn is chairman of the California Independent System Operator, which 
manages most of the state's electricity grid, and California's lead 
negotiator in the talks. He said commissioners have more than enough evidence 
to support ordering refunds on Wednesday. 
"I hope they don't order 60 more days of hearings and all that," Kahn said. 
"FERC has in front of it an enormous record." 
Commissioners also may discuss the independence of the ISO board of 
directors. Wagner referred to the board's independence as a "joke," according 
to participants in the failed negotiations. And energy suppliers have 
complained that the board, appointed by Gov. Gray Davis, is too closely 
allied with the state Department of Water Resources, which buys power for the 
state. 
Davis succeeded in replacing the old board of directors, which included 
energy industry representatives. Davis said they ignored consumer interests. 
FERC imposed around-the-clock controls on wholesale power prices in June. 
Previously prices were capped only during power emergencies. But a 
combination of mild weather, conservation and new power plants has given 
California a reprieve from power emergencies and rolling blackouts. 
Electricity has been so plentiful in July that the state has resold 5 percent 
of the electricity it had purchased at a loss of $14 million. 
,2001 Associated Press 

MARTINEZ 
Energy giant finances library improvements 
 <mailto:chronfeedback@sfchronicle.com>
Wednesday, July 25, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/25/
MNL1690155.DTL>
Contra Costa County supervisors accepted a $2 million donation from energy 
giant Mirant Corp. yesterday to improve library service in east Contra Costa. 
The donation by Mirant, which has been under investigation for alleged energy 
price manipulation, will give $400,000 a year over the next five years to 
libraries in the region. The county librarian will work with the East Region 
Library Board to develop a plan for using the donation. 
Compiled from Chronicle staff reports 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 14 


News briefs on the California power crisis 
The Associated Press
Wednesday, July 25, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/25/state
0643EDT0130.DTL>
(07-25) 03:43 PDT RIVERSIDE, Calif. (AP) -- 
The Board of Supervisors wants a proposed power-line route that would run 
through the southwest part of the county to stay clear of cities. 
The board will ask the state Public Utilities Commission to direct San Diego 
Gas and Electric, which has submitted the power-line plans, to look for 
alternate routes, including areas east of Temecula. 
The utility wants to run a 500,000-volt power line through southwestern 
Riverside County connecting its power grid with Southern California Edison's. 
The plan, which is estimated at $271 million, must be approved by PUC 
members. 
SDG&E officials said they are willing to meet with county administrators to 
discuss alternative routes. Residents opposing the project said the utility 
should upgrade its existing lines. 

DIAMOND BAR, Calif. (AP) -- Air quality officials on Tuesday rejected a 
proposal by an energy company to start building a power plant near a state 
prison because there aren't strict smog prevention measures in place. 
The South Coast Air Quality Management District told Delta Power Co. of New 
Jersey to come back Aug. 22 with a revised plan. That will leave a little 
more than a month before the plant is supposed to be operational under the 
governor's emergency fast-track program for new power plants. 
Delta wants to built a power plant near the Chino Institute for Men in Chino, 
Calif., which would supply about 135,000 homes with electricity. The natural 
gas facility would cost about $125 million. 
The governor's emergency plan eases pollution restrictions and shortens the 
review process but the plant still must receive approval by the AQMD. 
The agency agreed to give Delta a permit back in May. But after 
environmentalists protested, board members expressed concerns about excess 
nitrogen dioxide that would be emitted by the plant. 
"We're under an obligation to act quickly, but we're under no obligation to 
suspend our rules," AQMD official Peter Mieras said Tuesday. 

SAN LUIS OBISPO, Calif. (AP) -- Pacific Gas and Electric Co. has been cutting 
down trees near its nuclear power plant to reduce the possibility of a fire 
that could knock out power lines during peak demand. 
However, utility officials said Tuesday that it won't cut as many trees as it 
had originally planned. PG&E officials said they would cut about 7 percent of 
the trees and not the 30 to 50 percent once planned. 
"We found that we were able to get the canopy separation we need by removing 
fewer trees," said Jeff Lewis, PG&E spokesman. 
PG&E began cutting down the trees last week beneath high-voltage lines 
connected to the Diablo Canyon nuclear power plant. Work won't be completed 
for another two weeks. 
,2001 Associated Press 


PG&E demands hearing on state power buys 
Officials blast release of erroneous data 
Bernadette Tansey, Chronicle Staff Writer <mailto:btansey@sfchronicle.com>
Wednesday, July 25, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/25/
MN74804.DTL>
State officials who reassured California consumers that they would be spared 
further electricity rate increases failed to back up their claims, Pacific 
Gas and Electric Co. officials said yesterday as they demanded a public 
hearing on the cost of state power purchases. 
Officials of California's largest utility said the data issued Sunday and 
Monday by the state Department of Water Resources about its long-term 
electricity contracts are so sketchy and inconsistent that it is impossible 
to tell how much customers will have to pay -- and whether current rates will 
cover PG&E's costs. 
"The more they appear to keep information from the public, the harder it will 
be for people to accept their statements, like, 'There won't be another rate 
increase,' " said PG&E spokesman John Nelson. 
The utility released a letter urging the Department of Water Resources to 
hold an evidentiary hearing at which it would publicly detail its 
expenditures and flesh out its conclusion that rate increases will not be 
necessary. 
Gov. Gray Davis' aides reacted angrily to PG&E's position, saying the utility 
had been invited to ask the state for any additional information it needed. 
"They're dazed and confused," said Davis financial adviser Joseph Fichera, 
chief executive officer of Saber Partners LLC. 
Fichera said PG&E participated in a telephone conference call Monday in which 
administration officials answered questions about the state's power purchases 
and the $12.6 billion bond issue that will reimburse the state for advancing 
the money. He said PG&E had refused to share information with the state on 
the operating costs that it wants covered through utility rates. 
PG&E says that after Department of Water Resources officials told reporters 
Sunday that no rate increase was needed and that a decrease was even possible 
by 2003, the department filed revised numbers Monday that reflected increases 
of up to $930 million in its revenue needs from PG&E customers. 
Fichera said PG&E is making hay out of an innocent mistake by a state 
employee who issued an initial report containing the wrong numbers -- a 
mistake that was quickly corrected. 
"They're making charges based on an erroneous document," Fichera said. 
At stake for PG&E is the leftover money to pay the utility's costs after the 
state takes its share for power purchases -- a split that will be reviewed by 
the state Public Utilities Commission. Under state legislation that 
authorized the Department of Water Resources to buy power for the utilities 
starting in January, the PUC has no authority to disapprove any of the 
agency's expenditures. 
E-mail Bernadette Tansey at btansey@sfchronicle.com 
<mailto:btansey@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 10 


State ISO vulnerable to power play / 
Zachary Coile, Edward Epstein, Chronicle Washington Bureau 
<mailto:zcoile@sfchronicle.com>
Wednesday, July 25, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/25/
MN205555.DTL>
Washington -- A nasty power struggle is looming between Gov. Gray Davis and 
federal energy regulators over who should control California's energy market. 
The possible outcome? The five Davis appointees on the board of the 
California Independent System Operator, which runs the state's power grid, 
will be dumped in favor of a new board composed of so-called disinterested 
parties -- mostly energy experts from industry and academia. 
Davis' press spokesman, Steve Maviglio, said this week that the state has 
been told informally that the Federal Energy Regulatory Commission's move 
could come as early as today. When it does, the state will fight. 
"The governor says he will declare nuclear war if they take the ISO away from 
the state," Maviglio said. 
Regulatory commission officials are poised to discuss the change at the 
urging of private electricity producers who complain that the current Cal-ISO 
board fails to meet federal requirements and is weighted against them. 
But consumer advocates wonder why the commission would make changes in the 
state's energy program just when it seems that California might be digging 
its way out of its crisis through a combination of conservation and power 
plant construction. 
The timing of the possible regulatory commission order is a question mark, 
however. California congressional sources say members of the regulatory 
commission staff have told them the move probably won't come soon. 
The furor started earlier this month when regulatory commission Chairman Curt 
Hebert was quoted as saying that he wants to issue an order to replace the 
current Cal-ISO board as soon as August. 
But the commission could delay such an order in an attempt to first deal with 
other pressing topics. These include ordering a 60-day evidentiary hearing 
into California's demand for $8.9 billion in alleged overcharges by power 
generators. Or it could be that Hebert cannot muster a majority of the 
five-member federal regulatory board to support him. 
WHERE STATE COMES FROM
The state's position is that federal authorities, who have clashed repeatedly 
with Davis during the state's energy crisis, do not have the legal power to 
"take away a state-created authority," said Maviglio. 
The idea of stripping away state control of the ISO is being pushed by the 
Electric Power Supply Association, a group of 42 power marketers and sellers. 
The group petitioned the commission to reorganize the board in April. 
Industry representatives argue that the five-member board is too politically 
tied to the Democratic governor and the Legislature, and to the state through 
the Department of Water Resources, which is California's No. 1 power buyer. 
The power producers have been up in arms since January, when the state 
replaced a 26-member ISO board balanced between power producers and consumers 
with the smaller five-member board handpicked by the governor. 
Davis argued that the old board was unwieldy and clogged with people directly 
beholden to the power industry. The new board would be more responsive to the 
state's needs, state officials argued. 
That's the problem, power producers said. 
CONTROL AT STAKE
"It gives too much control to the buyer, which is the state," said Lynne 
Church, president of the industry association. 
Church said she has member marketers and power sellers who would like to sell 
directly to customers, especially California's big industrial power buyers. 
But because the state is about to float a multibillion-dollar bond measure 
for electricity purchases, it will require that all power sales go through 
the state and not through such private buyers. 
"They're just going to be able to keep (competitors) out of the grid," Church 
said. She said an impartial ISO board would help ensure an open marketplace. 
Mark Stultz, a vice president of the power suppliers' association, said his 
group hopes that a possible regulatory commission order to regear the ISO 
would be the first step toward creating one or two regional power buying 
authorities for the entire Western U.S. grid. 
"We'd be happy with a larger regional transmission organization, one with 
greater independence," Stultz said. 
But Marc Cooper of the Consumer Federation of America said that shaking up 
the ISO is a bad idea. 
"It would appear California has made a lot of progress in dealing with the 
problem," he said. "Why do they want to fuss with these people?" 
MOTIVES SUSPECT
Cooper said he distrusted the power companies' motives for dismantling the 
current ISO. 
"These guys are not interested in the public interest, only in the private 
interest," he said. 
E-mail the writers at zcoile@sfchronicle.com <mailto:zcoile@sfchronicle.com> 
and eepstein@sfchronicle.com <mailto:eepstein@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 


PG&E asks for public hearing on electricity rate data
SACRAMENTO (AP) -- Pacific Gas and Electric Co. officials asked Tuesday for a 
public hearing on revised state revenue requirement figures it says show PG&E 
customers could see a 44 percent rate increase in 2003. 
The California Department of Water Resources said no rate increase should be 
necessary under updated figures it filed Monday with the California Public 
Utilities Commission. 
``The new CDWR filing makes clear that the department is seeking to charge 
PG&E customers a much higher rate, especially in 2002,'' the utility said in 
a letter to DWR. 
Utility officials said the DWR will need to charge PG&E customers 13.7 cents 
per kilowatt hour in 2002. The department currently gets 9.5 cents per 
kilowatt hour for power purchased for PG&E customers. 
In a conference call with reporters, Gov. Gray Davis' energy advisers said 
PG&E was distorting the numbers. 
``There will be no need to change rates to implement this plan,'' said Joseph 
Fichera, a consultant with Saber Partners who advises Davis. 
The DWR has been purchasing electricity for customers of three California 
utilities -- Southern California Edison, San Diego Gas and Electric Co., and 
PG&E -- since January, when energy wholesalers stopped selling to the 
companies because they had amassed more than $14 billion in debts.


Energy expense strains schools
Utilities eat into increased state funding for education, despite efforts by 
districts
to conserve and a $250 million allocation
by the Legislature to help pay power bills. 
BY JESSICA PORTNER
Mercury News 
Even as they rejoice in the record schools budget Gov. Gray Davis is set to 
sign into the law this week, Silicon Valley educators are preparing to chop 
programs, halt hiring, and freeze salary increases as they brace for another 
year of soaring utility bills. 
District leaders say the $250 million included in the budget to help schools 
cover their higher power costs is not nearly enough to patch the holes 
created in their finances by electricity bills that have doubled in some 
cases in two years. 
``We are planning for the worst,'' said Jim Ritchie, superintendent of 
Moreland School District in West San Jose. Ritchie said the elementary 
district may not be able to hire as many teachers as it might need next year 
after dipping into reserves to pay an anticipated $600,000 utility bill. 
``It's like taking it out of the cookie jar,'' Ritchie said. ``Taking it out 
for utilities means you can't take it out if you need a new teacher.'' 
Education was by far the biggest winner in the state budget battle that ended 
Monday. The final legislation, which Davis has said he would sign by week's 
end, increases K-12 spending by 8.5 percent to $32.5 billion in the fiscal 
year that began July 1. That brings state spending to about $7,200 per 
student. 
In addition to a 3.8 percent cost-of-living adjustment that schools may use 
as they please, the budget includes $200 million for schools that score in 
the bottom half on state tests. Several competing bills still winding through 
the Legislature would determine exactly how schools should spend that money. 
The budget also includes $30 million more to expand after-school programs as 
well as $40 million in additional school aid to correct historic funding 
inequities among districts. 
The $250 million to offset energy costs will provide approximately $35 per 
student to every district that reduces its energy consumption 10 percent, the 
California Association of School Business Officials estimates. 
Many local educators said they were relieved that school aid was not slashed 
during a budget year when everything seemed to be on the table. But they 
added that this year's increase of 8.5 percent feels less generous 
considering that the education budget grew 15 percent last year when the 
state was flush. 
The double-digit raises districts negotiated with teachers' unions last year 
seem unlikely to be repeated, given the growing energy costs. District 
leaders said they approved those large teacher raises to draw more candidates 
to the area and to retain teachers fleeing the high costs of Silicon Valley. 
Cupertino schools Superintendent William Bragg said the ballooning cost of 
power is cutting into the money that might be set aside for new salary 
increases this year. Bragg said the district expects to spend $1.7 million on 
power this year, a 70 percent increase over two years ago. Energy-guzzling 
school construction has added to the increased cost. 
``We are finding our available balance is shrinking,'' Bragg said. ``We want 
money that isn't tied to specific things.'' 
Bragg added that he may rely now even more on parents to help raise funds for 
``extras like more art and music classes.'' 
In Redwood City, where energy costs are projected to double to $1.1 million, 
Superintendent Ronald Crates said he will have to chop the counseling staff 
from 11 to five and may not hire a new Spanish translator. 
``This was not something I wanted to do,'' Crates said. 
School business leaders add that there's no guarantee that the state energy 
subsidy will become perennial. Utilities could impose yet another rate 
increase, they say, and schools reserves could be drained by even higher 
energy bills for years. 
But teachers' union leaders balked at districts' contentions that they are 
low on funds, calling it a bargaining ploy to avoid raises next year. 
``They're going to have to do some belt-tightening but it's not nearly as 
extreme as they're making it out to be,'' said Bob Nichols, Santa Clara 
County representative of the California Teachers Association. 
Nichols said energy costs in California represent a relatively small amount 
-- about 2 percent -- of a district's budget, according to a survey conducted 
by CTA in the spring. 
To earn their share of the new state energy subsidy, many districts are for 
the first time this year methodically building energy-conservation measures 
into their long-term budget planning. Many now routinely shut off lights and 
computers at night, and ration air-conditioning and heating use. 
Rhonda Farber, superintendent of Campbell Union High School District, said 
her district may change swimming season from fall to spring to save on 
pool-heating costs. ``We are doing things to try to conserve,'' Farber said. 
``If we use eight light bulbs, can't we use six?'' 
Joe Hamilton, superintendent of the Fremont Union High School District, said 
his schools now set thermostats at 75 degrees and have installed 
lower-wattage fluorescent light bulbs. To the dismay of his staff, he said, 
the district has even asked teachers to remove mini-refrigerators from 
classrooms. 
In the San Jose Unified School District, facilities manager Carl Cimino said 
the district will try to hold the expected increase in its power bills to 
$700,000 this year through aggressive conservation. 
``This school district is committed to pursuing these avenues so we are less 
beholden to the energy market,'' Cimino said. 
The district plans to install solar panels on more than a dozen buildings 
this year and will install new energy-efficient heaters in school pools. 
``Schools in California have become much more conscious about saving 
energy,'' said Merrilee Harrigan, senior program manager for the Green 
Schools Program at the Alliance to Save Energy in Washington, D.C. 
Nationwide, schools spend more money annually on utilities than they do on 
textbooks or computers, Harrigan said. 
Hamilton said the energy crisis underscores the need for schools to keep 
their financial houses in order -- even as the state is struggling. 
``You can blame the governor, the former Legislature, the utilities. There is 
plenty of blame to go around,'' he said. ``But we just have to work our way 
out of this.'' 

Contact Jessica Portner at jportner@sjmercury.com 
<mailto:jportner@sjmercury.com> or (408) 920-2729


PG&E challenges claim that no rate hike will be needed
BY MICHAEL BAZELEY <mailto:mbazeley@sjmercury.com> 
Mercury News 
Pacific Gas & Electric Co. on Tuesday questioned claims by state energy 
advisers that utility customers will not have to face another rate increase, 
saying officials misrepresented how much money the state needs to continue 
buying power for Californians. 
PG&E officials stopped short of saying they think state regulators should 
impose another rate increase. But they said data released by the state 
Department of Water Resources this week conflicts with statements by state 
officials that no rate increase is necessary. 
The utility sent a letter to the department calling for a special hearing to 
examine the issue. 
The water department has been buying power on behalf of the state's 
financially ailing utilities since January. On Sunday and Monday, the 
department released data showing how much ratepayer money it needs to cover 
its costs. 
During a Sunday conference call with reporters, the state's top energy 
advisers said there already is enough money coming in from ratepayers to pay 
for the state's power costs and the utilities' costs. 
Specifically, officials said the department would need to keep only about 
half of a 3-cent-a-kilowatt-hour rate increase imposed in March. The rest 
could go to the utilities, they said. 
But PG&E officials, after analyzing the department's figures, said it appears 
the state would need to keep the entire increase and more -- forcing another 
rate increase. 
``It raises far too many questions,'' said PG&E spokesman John Nelson. ``It 
doesn't track.'' 
State officials said they stand by their numbers and the belief that no rate 
increase is needed. 
``The numbers are all sound,'' said Steve Maviglio, spokesman for Gov. Gray 
Davis. ``We're very happy with them.'' 
The state Public Utilities Commission has the final authority over rates, and 
commission staffers have said it is too soon to tell if an increase will be 
needed. 

Contact Michael Bazeley at mbazeley@sjmercury.com 
<mailto:mbazeley@sjmercury.com> or (415) 434-1018. 


Energy notebook 
Official says absence of blackouts may give wrong idea. 
July 24, 2001 
From staff and news service reports 
NEWPORT BEACH The relatively few blackouts seen in California this summer 
because of mild weather, a slowing economy and strong conservation efforts 
could send the wrong message to the state and nation, U.S. Energy Secretary 
Spencer Abraham warned Monday. 
Speaking at a Republican fund-raising luncheon in Newport Beach, Abraham said 
the lack of one key symptom of the energy crisis - blackouts - didn't mean 
the crisis was easing. 
The former Michigan senator said the United States would need to import 
almost half its energy by 2020 without a long, sustained increase in domestic 
energy production. In a brief interview, Abraham said Gov. Gray Davis needs 
to focus on this energy gap, not his 2002 re-election needs. 
Abraham was in California to announce a federal plan to help alleviate a 
transmission bottleneck that has kept power from flowing freely throughout 
the state during times of peak usage. The plan calls for expanding the 
state's power grid along so-called Path 15 by attracting private investment 
for the $300 million project. 
In other news: 
A Senate committee investigating possible price manipulation has given the 
full Senate a report asking for Houston-based Enron Corp. to be cited for 
contempt. The Senate Select Committee to Investigate Price Manipulation of 
the Wholesale Energy Market says Enron failed to comply with a subpoena for 
financial and trading documents. The Senate recessed Sunday until Aug. 20 and 
could take up the matter when it returns. 
Secretary of State Bill Jones asked the state Assembly to allot $250,000 for 
a legislative review into whether Gov. Gray Davis' advisers complied with 
conflict-of-interest laws. Jones, a Republican who plans to challenge Davis 
in the next election, said the advisers failed to disclose that they held 
stock in energy companies. The Senate rejected a proposal Saturday to earmark 
that money for a bipartisan investigation. 
U.S. Bankruptcy Judge Dennis Montali gave Pacific Gas & Electric Co. four 
additional months to produce a reorganization plan in its Chapter 11 filing. 
The Department of Water Resources said that since July 1, the state had sold 
177,571 megawatt hours at $36.95 each. During the same time, DWR purchased 
3.5 million megawatt hours of electricity at $118 per megawatt hour. That 
amounts to a loss of about $14 million. Assemblyman John Campbell, R-Irvine, 
says it's proof the state needs to get out of the power business. DWR 
spokesman Oscar Hildalgo says it's normal for utilities to sell excess power 
they have purchased.


Lawmakers adjourn without Edison deal 
Energy: The utility is still optimistic of receiving a bailout. 
July 24, 2001 
By KATE BERRY 
and JOHN HOWARD
The Orange County Register 
The state Assembly adjourned Monday for a monthlong recess without approving 
a rescue plan for Southern California Edison, which believes it can stave off 
bankruptcy even if lawmakers fail to come up with a solution by an Aug. 15 
deadline. 
Gov. Gray Davis, the main proponent of a rescue for the state's No. 2 
utility, may still call lawmakers back for a special session to deal with the 
matter. 
Even though the Assembly failed to enact a rescue plan, Edison remains 
hopeful that a legislative solution to its financial woes will eventually 
emerge, because the Senate passed a bailout bill Friday. The Senate adjourned 
earlier. 
"In our view, it's just a matter of time," said Brian Bennet, vice president 
of external affairs for Edison International, the utility's parent company. 
"What's really encouraging is that all the naysayers said this would never 
happen. In less than four months, we have lawmakers on the record, saying a 
legislative solution is preferable to bankruptcy." 
Assembly Speaker Bob Hertzberg, D-Van Nuys, will form a group of six to eight 
lawmakers to write legislation for an Edison bailout during the summer 
recess. 
The original bailout deal between Edison and Davis called for the state to 
purchase Edison's transmission lines for $2.76 billion. That deal set Aug. 15 
as the date after which Edison could walk away if the Legislature hadn't 
approved it. Legislators called Davis' plan too generous to Edison and 
instead proposed their own alternatives. 
Members of the Renewable Energy Creditors Committee, a group of 10 generators 
that are owed $1.8 billion by Edison, said the Aug. 15 deadline was arbitrary 
and that creditors would wait for a legislative solution. 
"We want to keep Edison out of bankruptcy," said Kelly Lloyd, chief financial 
officer at Enxco, which operates a wind farm in Palm Springs. 
The Senate bill and three Assembly proposals provide differing solutions to 
the problem Edison faces: how to come up with enough money from ratepayers to 
pay $3.5 billion in debt and restore the utility to creditworthiness so it 
can buy power. 
The company and utility analysts say the Senate plan, sponsored by Richard 
Polanco, D-Los Angeles, would not restore the utility to full financial 
health because it would leave Edison with $1 billion in debt that would have 
to be negotiated with creditors. 
That bill, SB78, would allow Edison to float $2.5 billion in bonds to cover 
its back debt, which would be paid off by businesses that use more than 500 
kilowatts of power during peak periods. Under the plan, the state would have 
the option of buying Edison's transmission lines for $1.2 billion. It also 
would give the state Public Utilities Commission the go-ahead to investigate 
the transfer over a four-year period of $4.8 billion by the utility to Edison 
International. Edison says its parent company used the money to buy back 
stock, to pay dividends and to fund projects at another subsidiary, Mission 
Energy. 
If Edison is forced into bankruptcy, which could happen if three creditors 
band together to do so, California could be stuck buying electricity for the 
4.3 million ratepayers served by the utility for the several years that 
bankruptcy proceedings would likely last. 
However, the state's Department of Water Resources, which has been buying 
power for the state's three investor-owned utilities since January, said 
Sunday that a recent hike in electricity rates may provide enough money to 
cover the cost of power with some left over for Edison to start paying down 
its debt. 
Edison bailout plan at a glance 
The Senate approved a bailout last week for Southern California Edison that 
would cover about $2.5 billion of the utility's back debt and give the state 
the option of buying the company's transmission lines. 
But the Senate plan drew little support in the Assembly, where rival rescue 
plans have been drawn up. For months, the Assembly has been unable to reach 
agreement on an Edison bailout. 
The Assembly recessed until Aug. 20 without resolving the bailout dispute. 
The Senate recessed earlier. 
Lawmakers and the governor's staff are putting together a working group of 
legislators and staff members to try to work out a compromise on the bailout 
during the Legislature's recess. The group will try to come up with a plan it 
can present to lawmakers for a vote. 

Arizona Regulators Move To Kill Electric Competition Grp By Anne Brady 
07/25/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, 
Inc.) Of DOW JONES NEWSWIRES 
  
   (This story was published late Tuesday)  
   
PHOENIX -(Dow Jones)- The Arizona Corporation Commission took a major step 
Tuesday toward terminating the organization charged with overseeing electric 
utility competition in the state. 
Although one of the three commissioners favored abolishing the Arizona 
Independent Scheduling Administrator immediately, the regulatory panel 
decided instead to begin a 90-day process during which time parties will file 
comments and commission staff will prepare a report, including 
recommendations for commission action. 
"Let's kill the AISA now," advocated Commissioner Jim Irvin, noting that 
there currently is no competition for electric service in Arizona to 
administrate. 
"What scheduling did AISA do yesterday? What scheduling did AISA do today? 
The answer is none," said Irvin. "There is no competition. There is no need 
for an AISA. ... What are we doing other than throwing money away? We're 
asking the utilities to throw ratepayers' money away." 
In the past, commission staff engineer Jerry Smith has described the 
continued existence of the AISA as critical to competition evolving in 
Arizona for electric service because it would ensure equal access to the 
electric grid. 
The question of the continued need for the AISA, now that Federal Energy 
Regulatory Commission, or FERC, has approved the operating protocols it 
drafted and participating utilities are abiding by them, was raised by 
Commissioner Marc Spitzer, who noted in a July 12 letter to the other board 
members that competition had not evolved in Arizona as expected when the AISA 
was established. 
"With the crisis in California, the winds have shifted for now," and a 
competitive landscape is taking longer than anticipated to evolve, Spitzer 
wrote. He concluded that it would be wasteful to continue spending money on 
the AISA "when its only remaining mission" is to ensure fair competition 
where no competition exists. 
In that letter, Spitzer also described a proposed regional successor agency, 
the Desert Southwest Transmission and Reliability Operator, or Desert STAR, 
as "on the threshold of existence." 
However, even as Spitzer was writing that letter, the FERC announced that it 
now wants four big electric transmission organizations formed to manage the 
flow of electricity in the Northeast, Southeast, Midwest and West. These 
mega-regional transmission organizations, or RTOs, would replace the smaller 
RTOs such as Desert STAR, proposed to operate the electric grid in Arizona, 
New Mexico, Colorado, eastern Wyoming and west Texas. 
"I was operating under the assumption of an imminent filing (by Desert STAR) 
with FERC that has been thrown into chaos," said Spitzer, who nevertheless 
made the motion to begin the process of considering when and how to terminate 
the AISA. 
"I don't think docketing this reflects a retreat from competition," Spitzer 
said. "It is ending a financial obligation to something no longer necessary." 
Representatives of Arizona Public Service Co., a division of Pinnacle West 
Capital Corp. (PNW), and Tucson Electric Power Co., a subsidiary of Unisource 
Inc. (UNS), spoke in favor of eliminating the AISA. 
-By Anne Brady, Dow Jones Newswires, 602-258-2003; anne.brady@dowjones.com 


News briefs on the California power crisis By The Associated Press 07/25/2001 
Associated Press Newswires Copyright 2001. The Associated Press. All Rights 
Reserved. RIVERSIDE, Calif. (AP) - The Board of Supervisors wants a proposed 
power-line route that would run through the southwest part of the county to 
stay clear of cities.
The board will ask the state Public Utilities Commission to direct San Diego 
Gas and Electric, which has submitted the power-line plans, to look for 
alternate routes, including areas east of Temecula. 
The utility wants to run a 500,000-volt power line through southwestern 
Riverside County connecting its power grid with Southern California Edison's. 
The plan, which is estimated at $271 million, must be approved by PUC members.
SDG&E officials said they are willing to meet with county administrators to 
discuss alternative routes. Residents opposing the project said the utility 
should upgrade its existing lines.
--
DIAMOND BAR, Calif. (AP) - Air quality officials on Tuesday rejected a 
proposal by an energy company to start building a power plant near a state 
prison because there aren't strict smog prevention measures in place.
The South Coast Air Quality Management District told Delta Power Co. of New 
Jersey to come back Aug. 22 with a revised plan. That will leave a little 
more than a month before the plant is supposed to be operational under the 
governor's emergency fast-track program for new power plants.
Delta wants to built a power plant near the Chino Institute for Men in Chino, 
Calif., which would supply about 135,000 homes with electricity. The natural 
gas facility would cost about $125 million.
The governor's emergency plan eases pollution restrictions and shortens the 
review process but the plant still must receive approval by the AQMD.
The agency agreed to give Delta a permit back in May. But after 
environmentalists protested, board members expressed concerns about excess 
nitrogen dioxide that would be emitted by the plant.
"We're under an obligation to act quickly, but we're under no obligation to 
suspend our rules," AQMD official Peter Mieras said Tuesday.
--
SAN LUIS OBISPO, Calif. (AP) - Pacific Gas and Electric Co. has been cutting 
down trees near its nuclear power plant to reduce the possibility of a fire 
that could knock out power lines during peak demand.
However, utility officials said Tuesday that it won't cut as many trees as it 
had originally planned. PG&E officials said they would cut about 7 percent of 
the trees and not the 30 to 50 percent once planned.
"We found that we were able to get the canopy separation we need by removing 
fewer trees," said Jeff Lewis, PG&E spokesman.
PG&E began cutting down the trees last week beneath high-voltage lines 
connected to the Diablo Canyon nuclear power plant. Work won't be completed 
for another two weeks. 


Hardin electrical generator will be coal gasification plant 07/25/2001 
Associated Press Newswires Copyright 2001. The Associated Press. All Rights 
Reserved. BILLINGS (AP) - A 100-megawatt power plant to be built near Hardin 
will generate its electricity with gas from coal and byproduct energy from 
two related operations, one of the owners says.
Dick Vinson, who has a lumber mill at Trout Creek, and his partner, Lloyd 
Debruycker, a Dutton cattleman, have a contract with Montana Power Co. for 
the electricity. The contract, at less that 4 cents a kilowatt, will be 
reviewed by the state Public Service Commission review in Helena Thursday. 
Vinson and Debruycker formed Rocky Mountain Power Inc., which will build the 
coal gasification plant, plus an ethanol and cement block plant. The other 
two plants will provide byproduct energy to the coal gasification unit, 
Vinson said.
Vinson said Rocky Mountain Power is negotiating in the private sector for the 
$50 million to $60 million needed to build the three plants. He declined to 
identify financial institutions.
He said the power plant will employ 35 people, and the two other businesses 
will hire 125 more.
"The power will stay in Montana," Vinson said.
Montana Power Co. announced Monday that it has a contract to buy the power, 
which is pegged to be online by July 1, 2002.
The site will be the former Holly Sugar Corp. plant just northwest of Hardin, 
which was closed in 1971. Vinson said Debruycker paid for the site on Monday.
Vinson said he has applied for an air quality permit from the Department of 
Environmental Quality. Industrial water rights that come with the property 
have been acquired, and a long-term contract with Westmoreland Resources for 
just over 500,000 tons of coal per year is pending.
Coal gasification is a process that turns coal into a gas similar to natural 
gas, which then can be burned to run a turbine. Vinson said coal gasification 
is "the cleanest way to burn coal." 


Optimistic Edison Says Turnaround Is Possible Electricity: A rescue plan is 
due in August, but utility executives say they foresee sufficient revenue 
with current rates. JERRY HIRSCH; NANCY RIVERA BROOKS TIMES STAFF WRITERS 
07/25/2001 Los Angeles Times Home Edition Page C-1 Copyright 2001 / The Times 
Mirror Company Although it looks unlikely that the Legislature will agree on 
a financial rescue plan for Southern California Edison by an Aug. 15 
deadline, officials at the troubled utility said Tuesday that they were 
content to let negotiations continue, in essence granting an informal 
extension to the agreement between the company and Gov. Gray Davis.
Speaking to creditors in a conference call, the executives also conceded that 
a financial turnaround for Southern California Edison looks possible within 
current electricity rates based on their assessment of Department of Water 
Resources energy price forecasts. 
The utility's preliminary review of the state's projections, released Sunday, 
indicated that there is enough revenue to be derived from current rates to 
cover a $12.5-billion bond offering to pay for DWR's power purchases this 
year and to cover an Edison bond offering to pay its $3.5 billion in energy 
debts.
"It does appear that things fit under existing rates," said Theodore Craver 
Jr., chief financial officer of Edison International, the utility's corporate 
parent.
Craver added that the utility has not completed its review.
But Pacific Gas & Electric Co., the Northern California utility that is in 
bankruptcy proceedings, was much less assured about DWR's calculations and 
called for a public evidentiary hearing on the agency's rate requirements and 
the cost it is incurring to purchase power.
"Given the tremendous importance of this issue--that is, the determination of 
how much our customers will be required to pay for electricity purchases by 
DWR now and in the future--this lack of information should be a cause of 
great concern for all parties," the utility said in a statement.
The utility, a unit of PG&E Corp., released a detailed, critical
response to the water department's description of its revenue needs, saying 
the numbers don't add up and are inconsistent. For example, the utility said, 
it appears that the water department will collect several cents more per 
kilowatt-hour from utility customers in 2002 than in 2001.
But Davis administration officials called that a false comparison, saying 
that overall collections in 2002 will be greater to compensate for the fact 
that the water department collected money from utility customers for only 
half of 2001.
"Perhaps if PG&E had been more willing to cooperate they wouldn't be so 
confused," said Steve Maviglio, spokesman for Davis. "We've asked them 
repeatedly for numbers and information and they've been contentious as usual."
The California Public Utilities Commission, which sets utility rates, on 
Tuesday also asked the water agency to provide more information on its rate 
requirements. The PUC scheduled a workshop for Friday in San Francisco at 
which DWR representatives will explain how they reached their revenue 
conclusions.
Edison said it would still would need some combination of legislative and 
regulatory approval to use a slice of the revenue from current rates to pay 
off its back debts.
Though both houses of the Legislature recessed this month without agreeing on 
a rescue plan for Edison, Craver said negotiations among representatives of 
Gov. Davis, the utility and lawmakers continue.
He said Edison remains committed to negotiating a solution outside Bankruptcy 
Court.
Last week, the state Senate passed a bill that would allow Edison to float 
$2.5 billion in bonds to pay off debt accumulated by buying electricity for 
more than it could charge customers. The bill limits the ways the company can 
spend cash raised in the offering, and is about $1 billion less than Edison 
was seeking. The Assembly adjourned without passing similar legislation but 
has worked on two rescue plans more generous to Edison.
None of the measures includes the proposed $2.8-billion purchase of Edison's 
transmission grid that was envisioned in the utility's original rescue 
agreement with Davis.
"This is still a work in progress, notwithstanding the legislative recess," 
Craver said.
Edison once seemed likely to join Pacific Gas & Electric in U.S. Bankruptcy 
Court, but a reversal in energy prices has given the Rosemead-based company 
breathing room.
Falling natural gas prices have slashed the cost of Edison's power purchases 
and generation in half since February. Also, the utility's cash flow improved 
after it started collecting a record 3-cent-a-kilowatt-hour rate increase in 
June.
"Gas prices being down and the weather being relatively moderate and people 
conserving has settled the situation a bit," said analyst Brian Youngberg of 
the Edward Jones investment firm in St. Louis. "But there are a lot of moving 
pieces, and this thing probably won't be settled for years."
Key to keeping Southern California Edison free of Bankruptcy Court is whether 
creditors--not Edison itself--believe that progress continues after the Aug. 
15 deadline, Youngberg said.
Youngberg said he remains convinced that Edison would not voluntarily file 
for protection and would end up in bankruptcy only if forced there by unhappy 
creditors.
Though the utility's initial review of the DWR projections are positive, 
Craver said he still has some questions about the DWR plan, which would take 
1.65 cents from every kilowatt-hour sold to repay money the state spent when 
it jumped into the power business in January.
Edison shares fell 42 cents to close at $13.25 Tuesday on the New York Stock 
Exchange.
*
Times staff writer Nancy Vogel in Sacramento contributed to this report. 


Mining suffering an 'energy' shortage

With more than 51% of this country's electricity produced by coal-fired 
plants, and more plants being announced seemingly every week, good times 
would appear to be returning to the nation's coalfields.
But from east to west across the land, there's a glitch in the good times*a 
situation that, while not affecting power plant operators just yet, could 
have a significant impact in the not-so-distant future. 

The problem is labor, and not the traditional union vs. management battles 
the coal industry has endured since the first piece of the black mineral was 
pulled from the ground. 

No, this time the issue is lack of manpower, which management says stretches 
across the job spectrum, but labor says is a contrived situation designed to 
keep laid-off union workers out of work. 

High quotes on contracts
Companies that fire with coal need not be worried right now; most coal is 
purchased through long-term contracts. 

Still, plant operators need to keep an eye on the problem. Utilities are the 
dominant consumer of U.S. coal, last year purchasing roughly 857.6 million 
short tons, or 79.4% of all coal consumed in 2000, at an average price of 
$24.25 per ton, according to U.S. Department of Energy, Energy Information 
Administration statistics. 

Spot market prices have skyrocketed within the last year and coal operators 
finally are feeling confident enough that higher prices are not an anomaly 
that they are raising*in some cases significantly*their quotes on new term 
pacts. 

"One- and two-year contract prices being quoted are definitely much higher 
than they were a year ago," said Mark Morey, a principal in RDI's Coal 
Consulting Group in Arlington, Va. 

According to data from RDI Consulting, the price for Central Appalachia high 
Btu, low sulphur coal has jumped to roughly $40 to $45/ton, from about 
$25/ton a year ago. 

Out West, Powder River Basin, 8,800 Btu compliance coal has jumped to $10-$14 
per ton, from roughly $4.50 per ton one year ago. 

Such prices could cause real consternation for power plant operators in a 
deregulated world, where higher costs can't always be passed directly to 
customers. 

Many reasons for 'dismal situation'
"It's just a dismal situation," according to Jim Thompson, the Knoxville, 
Tenn.-based general manager of Energy Publishing, which tracks coal and 
energy markets. "Some companies have delayed expansion projects and even the 
opening of new mines. You talk to some people now and they say trying to get 
help is even worse than trying to get (environmental) permits." 

The personnel shortage in the coal industry is not an overnight situation; 
the labor pool has been draining for a number of years, and coal operators 
did little to replenish the supply. One reason was that the price for coal 
was nearly as stagnant as pools of water in an abandoned strip mine. At the 
same time, productivity numbers were climbing as mechanized mining machines 
took the places of rank-and-file. 

Indeed, between 1950 and 2000, DOE data show productivity jumped 468% for 
underground mines, to 4.09 tons per miner per hour, from 0.72 tons per miner 
per hour. Surface mining production rose 435.2%, to 10.49 tons per hour per 
miner from 1.96. 

But technology also has led to personnel shortages*someone has to be trained 
to operate the high-tech equipment that most of today's mines utilize. 

"These are engineers working in today's mines," said RDI's Morey. "You have a 
much more sophisticated work force today." 

You also have a group of workers who got tired of the industry's 
boom-and-bust modus operandi, who followed opportunities in other industries 
and in other areas of the country, and relocated from the coal fields of 
Appalachia, Illinois and others. 

And when workers leave, they take their families with them*telling their sons 
and daughters on the way to nirvana that they shouldn't look back when it 
comes to working in the mine. 

The result? Operators, big and small, are crying for electricians, mechanics, 
machine operators, engineers*even management personnel. Companies are getting 
aggressive, utilizing radio advertising, even, it's rumored, setting up 
recruiting tables outside the mouths of competitors' mines. 

"It used to be the little operators were the training grounds for the big 
guys," said independent coal consultant Stanley C. Suboleski of Midlothian, 
Va. "But part of what we are seeing today is that with coal prices higher, 
the little guys can pay better and their people aren't leaving for the bigger 
companies." 

Mining engineering programs can't keep up
At the nation's mining engineering schools, roughly 100 to 120 graduates a 
year have hit the job market over the last 10 to 15 years. However, those 
numbers vary widely, depending on student perceptions. 

"Thirty years ago, Penn State (Pennsylvania State University's Mining 
Engineering program) graduated 10 students," said Christopher Bise, the 
George and Anne Deike chair in mining engineering and professor of mining, 
industrial health and safety at Penn State. "Then a year or two after that, 
people saw the energy crisis and we had 75 to 80 graduates a year by the late 
'70s. By the early 1980s, we had more mining engineers than could be absorbed 
and enrollment gradually decreased into the '90s." 

Now, demand is back big time, according to Bise, but the student mining 
engineers are not. 

"We're averaging about seven or eight graduates a year, but I would like 12 
to 15 a year," he said. "There is a greater demand than I can supply." 

At the University of Kentucky, the mining engineering program has averaged 
seven to eight graduates per year for the last decade. Last September, just 
one incoming freshman entered the program. 

"But with the renewed emphasis on energy, the new administration with an 
energy policy, we're counting on 15, perhaps as many as 20 students 
registering this fall," said Richard Sweigard, chairman of the Lexington, 
Ky., UK mining engineering program. 

Graduates are hired right out of school, generally by Central Appalachian 
companies, Sweigard said. But within the last two years, outside firms have 
come calling. 

"We've had TXU and Peter Kiewit come to Lexington looking for mining 
engineers," he said. "A few companies have called pleading for people, but 
what more can I do?" 

UMWA maintains no shortage
While the companies are crying, the United Mine Workers of America (UMWA) 
says there is no shortage, that thousands of union personnel sit idle. 

"We don't believe there is a shortage of personnel; based on existing 
panelists there are available miners," said Doug Gibson, communications 
director of the Fairfax, Va.-based UMWA. 

A "panelist" is a member of a "panel," a list created when a union mine lays 
off workers. Those workers must be called back when the mine starts hiring. 
Gibson said there are roughly 11,000 panelists in Pennsylvania alone, and 
"thousands" also in West Virginia. 

"We feel the workers are not being called back due to age or anti-union 
bias," he said. 

Situation may grow worse
If indeed the labor shortage is real and critical in the coalfields across 
the country, industry watchers see it continuing*if not growing worse*in the 
future. 

With so many people leaving the industry, coupled with young people bypassing 
it for something a bit more stable, less dangerous, more appealing, etc., the 
average age in the nation's coalfields ranges from the low to mid-50s. 

Thus within a decade, the entire workforce could be turned upside down. 

"The shortage only will get worse within the next few years," the University 
of Kentucky's Sweigard said.