Please see the following articles:
 
Sac Bee, Wed, 8/15: Davis sues Bush: If logic and science prevail, ethanol goes (Editorial)
 
SD Union, Wed, 8/15: PUC turns spotlight on SDG&E debt deal 
 
SD Union (Reuters), Wed, 8/15: SoCalEd owes $3.3 billion, raises specter of bankruptcy 

SF Chron, Wed, 8/15: Governor appointee liquidates stocks / DISCLOSURE: Her divestment was made after 'crusade'
 
SF Chron, Wed, 8/15: Pricing plan is guilt by association / BILLING: New system backfires on thrifty homeowners group

SF Chron, Wed, 8/15: Bush names Texan to chair energy panel

LA Times, Wed, 8/15: Enron's CEO Steps Down After 6 Months Energy: Jeffrey K. Skilling cites personal reasons for his abrupt departure, which follows several setbacks for the power giant
 
LA Times, Wed, 8/15: California Edison Hangs Hopes on Sacramento Utilities: Execs say debt load can't be eased without legislative help. A deadline passes without action
 
LA Times, Wed, 8/15: THE NATION Bush Selects Ex-Texas Regulator to Head FERC

Wash Post, Wed, 8/15: New FERC Chairman Appointed
 
WSJ, Wed, 8/15: Wood, Independent-Minded, to Head FERC

LA Times, Tues, 8/14: THE NATION Energy Issue Tops Agenda of Governors Politics: Chief executives of Western states meet in Idaho. Conspicuous by his absence is California's Gray Davis
 
SF Chron, Wed, 8/15: Developments in California's energy crisis 
 
SF Chron, Wed, 8/15: EPA delays decision on air pollution rule 

SF Chron, Wed, 8/15: EPA puts off decision on modernization rules for power plants
 
OC Register, Wed, 8/15: Energy firms taking state grants 

  _____  

 

Davis sues Bush: If logic and science prevail, ethanol goes



(Published Aug. 15, 2001) 

It would be environmental and economic lunacy for California to blend oxygen-boosting ethanol into state gasoline supplies, as the federal government stubbornly and blindly requires. But for politically influential Midwestern farmers, the federal fuel rule is a pipeline into Californians' pocketbooks. They grow the corn from which ethanol is made. 

Last month, when the Bush administration rejected California's request to waive the fuel rule, it clearly sided with Midwestern farmers against California and common sense. Now, in defense of California's economy and its environment, Gov. Gray Davis has sued the federal regulators. Good for him. 

On the environmental side, California air regulators -- hardly slouches in the nation's clean air fight -- offer persuasive evidence that state refiners can produce a gasoline blend that exceeds federal clean air standards without using an oxygenate. MTBE, the oxygenate currently used in state gasoline, has been a source of serious water pollution. The Davis administration has wisely ordered a phaseout of MTBE by 2003. 

Studies show that ethanol, the most readily available alternative to MTBE, could actually harm California's air. While it reduces carbon monoxide like other oxygenates, ethanol increases soot and emissions of nitrogen oxides and volatile organic compounds, the major ingredients in smog and the state's most persistent air pollutants. 

Ethanol imposes economic burdens as well. To produce an ethanol blend, refiners in California would have to convert their refineries at an estimated cost of $1 billion. That could add 3 cents to 5 cents extra to a gallon of gasoline at minimum. If the federal mandate remains in place, California's fuel needs would push demand for ethanol well beyond current supplies, driving prices up an additional 50 cents per gallon by some estimates. That would be an economic boon for Midwestern farmers, but a hardship for California consumers. In a state already reeling from an electricity crisis and a slowdown in its high tech sector, higher gas prices would be an unfair and unnecessary burden. 

California's message to the federal courts is simple: Let logic and science prevail. If that happens, California should win.



 

 

 

PUC turns spotlight on SDG&E debt deal 
	
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Hearing to examine plan negotiated by governor

By Craig D. Rose 
UNION-TRIBUNE STAFF WRITER 

August 15, 2001 

Even though California has avoided rolling blackouts since May, for consumers, the electricity crisis hasn't disappeared. 

The California Public Utilities Commission has scheduled a hearing tomorrow at San Diego City Hall on the deal between Gov. Gray Davis and Sempra Energy, the parent company of San Diego Gas & Electric, to do away with a $747 million debt racked up by customers. 

If paid in full, the debt will cost residential customers about $400 each and every business between $1,400 and $12,000. 

Consumer groups say the debt is fictitious -- the result of selective bookkeeping by SDG&E. The San Diego-based Utility Consumers' Action Network says ratepayers really owe nothing. 

Here are the issues in the dispute: 

What is the deal between Davis and Sempra all about? 

When rates for SDG&E's electricity customers tripled last summer because of the state's deregulation law, the Legislature put a cap on customer payments. SDG&E continued to pay sky-high prices for power but could only collect a portion of those costs from customers. 

The company kept track of the shortfall in what is known as a balancing account. Davis and SDG&E have agreed on a plan to eliminate the debt and avoid charging customers a huge balloon payment. 

Consumer advocates say the plan amounts to ratepayer gouging. The deal requires PUC approval. 

What is the source of the dispute over the debt? 

It has to do with accounting, and it's a multimillion-dollar difference of opinion. 

A key disagreement is what should be done with hundreds of millions of dollars in profits SDG&E made by selling power during the crisis. The PUC twice this year said profits from two contracts should be returned to customers. 

UCAN says the profits amount to $450 million and says SDG&E misled the public by portraying itself as simply a distributor of power. The utility says the disputed contracts belong to stockholders and has refused to disclose their value. SDG&E points out that the agreement calls for it to contribute $219 million of the profits to the state and that the state has audited the contracts regularly. 

Didn't SDG&E say it was passing along the cost of power without any markup? So how did it make the profits? 

As required under law at the time, SDG&E bought power for its customers from the state Power Exchange and passed along those costs without markup. However, SDG&E was also selling electricity into the Power Exchange at that time. 

SDG&E says the PUC earlier allowed it to keep these gains. The commission says it never granted such approval and ordered the profits returned to customers. The company is challenging that order in court. 

What does the law say? 

Under the law passed last fall that capped customer payments to SDG&E, the utility is to be repaid for shortfalls, if it prudently purchased electricity. 

The law also states that any losses incurred by SDG&E should be offset by profits derived from buying less expensive power for its customers, such as the electricity purchased under the disputed contracts. 

If that's what the law says and the commission has already ruled on these profits, why isn't the matter settled? 

The deal worked out between Davis and Sempra Energy asks the PUC to reverse its earlier ruling and award the contract profits to company shareholders. 

Two more provisions are key: SDG&E says it will contribute $219 million to reduce the customer debt. But SDG&E will also earn an additional $120 million from selling power to the state from June till the end of the year. 

Why would the governor push to reverse a commission ruling that could bring even more to consumers? 

SDG&E has filed an appeal in state court to overturn the commission ruling on the power-sale profits. The utility says it convinced Davis' negotiators that it has a strong case and would win in court. If that occurred, none of profits would go to consumers. 

UCAN and the state Office of Ratepayer Advocates, an arm of the PUC, say it is unlikely that SDG&E would prevail. 

What does SDG&E say? 

The utility says the deal is a fair compromise and good for consumers because it eliminates the possibility of lengthy litigation over several issues. 

SDG&E obtained electricity at below-market rates over the past year because it entered into the power-buying contracts several years ago, before rates skyrocketed. SDG&E says that if energy prices had dropped and the contracts turned out to be a bad deal, the utility and its stockholders would be liable, not ratepayers. 

Conversely, when the contracts turn a profit, the utility contends its stockholders should benefit. SDG&E also points to the $319 million in concessions it agreed to in the pact with Davis -- $219 million in returned profits and an additional $100 million in penalties to settle unrelated charges that it improperly purchased power on customers' behalf. 

What do consumer groups say? 

UCAN says all SDG&E profits from selling power should be returned to customers. The group also says the $100 million in penalties is a good deal for the utility because state regulators had not finished their review of SDG&E purchasing practices. 

What happens tomorrow? 

The PUC will hold a hearing over the plan to resolve the debt. The meeting runs from 10 a.m. to 4 p.m. in the San Diego City Council chambers, on the 12th floor of the City Administration Building, 202 C St. Members of the public can testify between 2 and 4 p.m. 

The commission is not scheduled to vote on the issue until Aug. 23. Other provisions of the Davis-Sempra agreement will be considered separately later this year. 

What's the deadline for paying the debt claimed by SDG&E? 

Under the law passed last fall, SDG&E must wait at least until the end of next year for payment of any undercollections. And the utilities commission can bump the payment deadline one more year to the end of 2003. 

Why are we dealing with this now? 

Both Davis and SDG&E said they were motivated by customer concerns over so large a debt hanging over consumers' heads. Political observers say Davis is eager to settle the debt now so it is less likely to be an issue when he seeks re-election next year. 

What does the city of San Diego say? 

Along with UCAN, the city intervened in the suit seeking to recover the disputed SDG&E profits for residents. But San Diego will not take a position on the proposed deal to settle the debt because it does not have sufficient information, City Attorney Casey Gwinn said.


 
 
 
 
 
 
SoCalEd owes $3.3 billion, raises specter of bankruptcy 
	
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REUTERS 

August 14, 2001 

ROSEMEAD, Calif. - The struggling utility Southern California Edison owes $3.3 billion for power and other costs, has only about $1.7 billion of cash, and may be unable to avoid bankruptcy if it does not get help, its corporate parent said on Tuesday in a regulatory filing. 

SoCal Edison, left nearly insolvent amid California's power crisis, remains "unable to obtain financing of any kind," the parent, Edison International, said in its quarterly report, filed with the Securities and Exchange Commission. 

Deregulation left SoCal Edison and the larger Pacific Gas & Electric Co. unable to recoup their soaring wholesale power costs. 

SoCal Edison agreed in April with Gov. Gray Davis on a rescue plan, known as the "Memorandum of Understanding," or MOU, which called on the state to buy the company's transmission assets and called for the utility to sell ratepayer-secured bonds. This required approval by the California legislature and the rate-making California Public Utilities Commission (CPUC). 

The MOU expires on Wednesday, five days before the legislature returns from recess. Rosemead, California-based Edison is meeting with state officials in the meantime. 

"SCE's future liquidity depends, in large part, on whether the MOU is implemented, or other action by the California legislature and the CPUC is taken in a manner sufficient to resolve the energy crisis and the cash flow deficit," Edison said in the filing. 

"Without a change in circumstances ... resolution of SCE's liquidity crisis and its ability to continue to operate outside of bankruptcy is uncertain," it added. 

According to the filing, as of July 31 SoCal Edison owed: 

- $1.2 billion to power generators known as "qualifying facilities;" 

- $878 million to the California Power Exchange, a clearinghouse for electricity buyers and sellers, and the California Independent System Operator, which runs most of the state's power grid; 

- $531 million on matured, defaulted commercial paper; 

- $230 million of energy credits; 

- $400 million of two defaulted note issues. 

The latest filing shows a deterioration in the company's financial situation in the past three months. As of April 30, SoCal Edison owed $3.1 billion for power and other costs and had about $1.9 billion of cash, according to an earlier regulatory filing. 

Pacific Gas, a unit of San Francisco-based PG&E Corp. , filed for bankruptcy protection on April 6. 

 
 
 
 
 
 
NEWS 
Governor appointee liquidates stocks / DISCLOSURE: Her divestment was made after 'crusade'
Robert Salladay
  
08/15/2001 
The San Francisco Chronicle 
FINAL 
Page A.1 
(Copyright 2001) 

California 's chief environmental official and head of the agency that has purchased billions of dollars in power acknowledged yesterday that she recently owned stock in energy firms while they were selling electricity to the state. 

Mary Nichols was appointed by Gov. Gray Davis as secretary of the state Resources Agency, which has political control over the Energy Commission and the Department of Water Resources, both of which exert tremendous power over California energy policy. 

Stanley Young, a spokesman for Nichols, said the investments did not represent a conflict of interest, but Nichols nevertheless sold all the energy stocks two weeks ago "when we realized there was this crusade" to review the statements of economic interest filed by Davis administration officials. 

The disclosure comes amid a series of revelations about Davis appointees who have owned energy company stocks at the same time they were making energy policy or orchestrating the purchase of power for California . The Securities and Exchange Commission is investigating possible conflicts within the administration. 

"It's a troubling pattern within the Davis administration," said Jim Knox, executive director of Common Cause, "which seems to place a very low priority on identifying and avoiding potential conflicts." 

Young said the energy stock belonged to Nichols' husband, John F. Daum, a partner in a Los Angeles law firm. Until two weeks ago, the couple owned stock in Enron, the world's largest energy trader, in power generators Williams Co. and Puget Sound Energy and in oil giant Chevron, all of which have financial interests in the workings of her energy-related departments. 

Nichols was not required to list the number of shares owned or the value of the energy stocks, only a range. According to her economic disclosure statement filed in March, the stock's value was somewhere between $40,000 and $400,000. 

Nichols and her husband have numerous other stock holdings, including substantial interests in Eli Lilly and Co., a pharmaceutical firm, Oracle, Time Warner, Worldcom Inc. long distance, Corning manufacturing and Wells Fargo Co. 

STOCKS BOUGHT BEFORE CRISIS 

The financial disclosure forms show that Nichols held her energy stocks well before California was plunged into crisis late last year when energy companies began charging unprecedented prices for power. The most recent purchase was her stock in Enron on May 24, 2000, listed at between $10,001 and $100,000, and the Williams Co. purchase on Aug. 9, 2000, also valued in the same range. 

The state Department of Water Resources has been steadily purchasing power for California consumers, filling a gap left by the financial failure of the state's investor-owned utilities. An estimated $43 billion in long-term power contracts have been signed, including one with Williams Co. The California Energy Commission has been working to speed construction of new power plants. 

Young said that Nichols' energy stock was sold to avoid the appearance of impropriety and that "the secretary has absolutely no say over the individual purchase of energy or decisions on the siting of (power plants) or the negotiating of contracts." 

'NO IMPROPRIETY HERE' 

"She is at an extremely high level in the development of the policies of departments under her purview," Young said. "From that respect, there is absolutely no impropriety here regarding her holding these stocks." 

State law requires that public officials stay clear of decisions that could affect their investments. But many exceptions are made, including if the public official avoids work or public statements that might directly change the value of their stock holdings. 

"(Nichols) has control, but the key is whether she is actually making decisions with regards to energy contracts or purchases," Knox said. "If she was in a decision-making capacity, then she would have conflict." 

$311 MILLION DEAL WITH WILLIAMS 

A review of the first three months of spot market purchases by the state shows that the Department of Water Resources bought just over a million megawatts of power from Williams for $311 million. The average price worked out to be $278 a megawatt hour. 

The agency also bought 246,800 megawatts of power from Enron for $45 million, or an average of $181 a megawatt hour. Puget Sound sold California 100 megawatts during the height of the power crisis in January for $40,000, or $400 a megawatt hour. 

Puget Energy Inc. is the holding company for Puget Sound Energy, a regulated utility providing electric and gas service to Western Washington, and InfrastruX, which provides contracting services to the electric power, telecommunications and natural gas industries. 

The reports also showed that Nichols owned between $10,001 and $100,000 in General Electric Co. stock, but Young could not immediately confirm whether the stock was sold two weeks ago by Nichols and her husband. The stock was purchased in December 2000. 

G.E. is a major manufacturer of gas turbine generators that are in short supply and vital for the operation of power plants being built around California . 

Without commenting on whether Nichols violated any ethics rules, Davis spokeswoman Hilary McLean said the state Fair Political Practices Commission has ultimate authority over any possible conflict with any state official. 



 

 

 

NEWS 
Pricing plan is guilt by association / BILLING: New system backfires on thrifty homeowners group
Matthew Yi
  
08/15/2001 
The San Francisco Chronicle 
FINAL 
Page A.1 
(Copyright 2001) 

Emeryville's Watergate Community Association is no energy hog, although it's being treated like one. 

Timothy Sutherland, general manager of the homeowners group, has been dimming hallway lights, installing motion sensor light switches and screwing in low-wattage bulbs -- all in hopes of cutting back energy use. 

It has worked. He's shaved off about 10 percent in electricity usage compared with a year ago. 

But he just about had a heart attack when he saw the June bill from Pacific Gas and Electric Co., the same kind of shock being felt throughout California this summer as many homeowners associations peek warily at their PG&E bills. 

Sutherland's June bill doubled to nearly $30,000, and he can blame the California Public Utilities Commission, which in May approved a five-tier electricity -rate increase designed to punish power hogs. 

But the 1,249-home Watergate is more of a miser than a hog -- so why the humongous bill? It's a classic Catch 22. Because all of the Watergate's common-area power usage is routed into just 11 PG&E meters and because each of those meters has relatively low baseline levels, the excess electricity is being charged at much higher amounts. 

In the past, those meters didn't even have baseline amounts. Now, with the new five-tier rate system, the same meters are alloted baseline levels similar to a single-family home's. Go over those baselines -- and the Watergate does by leaps and bounds -- and your electricity bill goes through the roof. 

"Once they made that decision, they threw the baby out with the bathwater," Sutherland said of the PUC. "It's completely unfair. . . . It's a way of saying common interest developments must pay the highest (energy) rate allowed by law." 

Homeowners associations that manage large condominium buildings or townhouse complexes with lots of amenities, such as power-draining swimming pools, are being hit the hardest. 

"We're starting to get calls from our members," said Karen D. Conlon, president of the California Association of Community Managers. "Basically, people are saying their ( electricity ) bills have doubled." 

California has 33,000 homeowners associations, and about 8.5 million residents are believed to be a part of one, she said. 

Because annual budgets are already set for most associations, managers are left to dip into reserve funds while stalling renovation projects and freezing staff hiring, Conlon said. 

Unless the PUC comes up with a solution quickly, the increased costs would inevitably be passed on to residents when new budgets are set for next year, she said. 

BOOSTING FEES 

In San Francisco, at least one condominium complex has increased the monthly homeowners association fee by 10 percent to cover electricity bills that have skyrocketed by 80 percent. 

"If we didn't, we would have a deficit," said Pat Clock, general manager at Opera Plaza, which has 451 units in three separate towers on Van Ness Avenue and Turk Street. "And that's what a lot of people are doing around here." 

At the Watergate buildings, under the new tiered system, each of the 11 meters was allotted only 7.7 kilowatt hours of baseline power per day in June and 10.4 kilowatt hours in July. The baseline takes into account variables such as climate and season. 

But with 7,098 light bulbs illuminating 6.4 miles of hallways, 27 elevators, 27 building lobbies and stairwells; 45 light fixtures shining on four streets and 353 parking spaces; lighting for six parking garages with 1,300 parking spaces and a 20,500-square-foot bayfront boardwalk, Watergate is way beyond the top tier of 300 percent above the baseline. 

In June, when the new baseline levels went into effect, Watergate's usage was 5,000 percent over the limit, and in July, more than 4,000 percent over the baseline. 

"It doesn't make any sense. We don't mind paying more if we use more, but if we use less than prior years, we shouldn't be paying more," Sutherland said. 

PLEA FOR HELP 

Last month, he fired off letters detailing Watergate's woes to the state PUC, PG&E and state public officials, including Gov. Gray Davis. 

So far, nobody has written back. 

Representatives of both PG&E and the governor's office told The Chronicle that it is a PUC problem. 

Paul Clanon, the PUC's energy division director, called the conundrum an "unintended" consequence. 

"Nobody anticipated (this) was going to happen," Clanon said. "I wouldn't point any fingers. . . . We understand the problem and we're looking at how to fix it." 

The PUC has received numerous complaints from managers of homeowners associations, Clanon said. The issue will be addressed in public hearings later this year as the commission grapples with a variety of complaints about the new tiered system. 

ADJUSTING THE BASELINE 

Many argue that the baseline levels need to be reformulated because they haven't been updated since 1994. 

One possible solution for homeowners groups is to simply give them higher baselines, said Clanon. But until there's a fix, the bills will have to be paid. And refunds down the road aren't in the cards, he said. 

Not all homeowners associations are griping. 

At the mammoth Woodbridge Village Association in the Orange County community of Irvine, encompassing 9,000 single-family homes, Executive Director Bob Figeira isn't fretting. 

Despite having 50 swimming pools, 35 parks, 24 tennis courts, 11 volleyball courts and two lakes, the local grid is divided among more than 100 electric meters -- each with separate bills. 

"We're all divided, so each one of those meters uses less power than a single home," Figeira said. "But I could see how some associations might have some big problems. . . . Some of these (associations) will go broke if it goes on like this." 


 

 

 

NEWS 
Bush names Texan to chair energy panel
Zachary Coile
  
08/15/2001 
The San Francisco Chronicle 
FINAL 
Page A.9 
(Copyright 2001) 

President Bush completed a long-expected change of leadership at the Federal Energy Regulatory Commission yesterday by naming his friend and fellow Texan Patrick Wood III as chairman of the much- criticized agency that oversees the nation's energy system. 

Wood, nominated to the commission by Bush in April, will replace Chairman Curt Hebert Jr., who announced last week that he will resign Aug. 31. 

In an interview with The Chronicle, Wood agreed with critics who say the agency has failed to monitor and respond to market abuses by energy firms -- a problem he says he will address immediately. 

"It requires a certain level of aggressiveness that we have not done," Wood said. 

The soon-to-be chairman said he is already working with Sen. Dianne Feinstein, D-Calif., to add $6 million to next year's regulatory commission budget. Wood said he will use the money to hire traders and other energy company employees to work for the government as watchdogs. 

"The best kind of hire would be someone who has done this on the other side," he said. 

By appointing Wood, Bush installed an ally at the helm of the agency, which has been sharply criticized for not responding to skyrocketing energy prices in California and the West over the past year. Wood was chairman of the Texas Public Utility Commission when Bush was governor. 

Wood has also found an unlikely ally in Gov. Gray Davis, who has bashed federal regulators but praised the Texas regulator as someone who could improve the agency's response to the state's energy woes. 

"The governor has generally felt that Pat Wood has been very open and receptive to at least listening to what California 's issues are," said Roger Salazar, a spokesman for Davis. 

Wood said yesterday that his job had been made easier by the efforts of California consumers to conserve energy. He praised the governor, the utilities and the California Public Utilities Commission for their efforts to stave off blackouts. 

"I've been proud of what California has done in terms of energy conservation," Wood said. "I think that's going to be the story of the summer." 

But Wood also praised what he called the "much-vilified Texas generators" for keeping their plants running to keep power flowing to the electricity grid. 

Despite his cozier relations with the state, Wood may clash with Davis and other California leaders on some key issues. 

Those include California 's claim it is owed $9 billion in alleged overcharges for electricity , an issue before a regulatory commission administrative law judge. 

"If the parties want to settle, fine," Wood said. "We've given them a deadline. . . . We just need to do that and get it over with and move on to something more positive and future-oriented." 




 

 

Business; Financial Desk 
Enron's CEO Steps Down After 6 Months Energy: Jeffrey K. Skilling cites personal reasons for his abrupt departure, which follows several setbacks for the power giant.
THOMAS S. MULLIGAN
  
08/15/2001 
Los Angeles Times 
Home Edition 
Page C-1 
Copyright 2001 / The Times Mirror Company 

NEW YORK -- Jeffrey K. Skilling stunned the energy industry by abruptly resigning Tuesday as chief executive of energy-trading giant Enron Corp., barely six months into a job for which he'd been groomed for years. 

Skilling's departure follows a series of setbacks for Enron, including seeing its huge investment in the fiber-optic telecommunications sector turn sour and facing accusations of electricity price-gouging in California . The company's stock price has lost half its value this year. 

Skilling, 48, called his resignation "a purely personal decision" having "nothing to do with Enron." 

By leaving voluntarily, Skilling will forfeit a severance package that would have been worth several million dollars. The normally outspoken Skilling declined to offer further explanation, prompting analysts to ask whether another shoe might drop. 

Enron Chairman Kenneth Lay told reporters and analysts in a conference call Tuesday evening that he would immediately assume Skilling's duties and extend his own employment contract by two years, through 2005, to provide ample time to craft a succession plan. 

Skilling and Lay were the main architects of Enron's spectacular transformation from a natural-gas pipeline firm into a lean, high-tech trader of everything from oil to wood pulp to pollution credits. 

Though solidly profitable and much admired for its innovativeness, Enron has stumbled lately and seen its stock price decline from a peak of $90.75 last August. 

Shares of Houston-based Enron closed at $42.93 on Tuesday on the New York Stock Exchange, up 78 cents. However, the stock tumbled in after-hours trading on word of Skilling's resignation, which came after the market close. 

A major setback has been the near-collapse of the telecommunications sector, where Enron had made a big push into the trading of fiber-optic bandwidth. A promising start for that business quickly turned into losses that reached $102 million before taxes in the quarter just ended. 

"It's very clear that they have been struggling with their business model of late," Raymond James analyst Frederick Schultz said Tuesday night. 

Enron is one of the independent power suppliers accused by California officials of price-gouging during the state's electricity crisis. In the meantime, however, natural gas and electricity prices have fallen, and Wall Street has grown concerned that federal efforts to push for energy price caps will affect long-term growth. 

Skilling's sudden departure may anger some institutional investors, Schultz said, since the executive has spent time in recent months wooing mutual funds and pension funds to invest in Enron stock. 

The analysts and reporters for the trade publications that follow Enron most closely seemed flummoxed by Tuesday's developments. 

Curt N. Launer of Credit Suisse First Boston asked whether the company anticipated filing "any disclosure to tell us any other items behind this surprising news." 

"There's nothing to disclose," Skilling replied. "The company's in great shape." 

Prudential Securities analyst M. Carol Coale found Skilling's timing odd, in that he was recently engaged to be married and has just completed construction of a large home in Houston. 

"Something's just not sitting right with me," she said. "It seems odd that he would walk away from a severance worth millions." 

Lay explained during the conference call that the severance pay called for in Skilling's contract, which expires in 2003, does not take effect if the separation is voluntary. 

Skilling last year cashed in stock options for gains of $62 million, according to Enron filings with the Securities and Exchange Commission. Lay's gains were nearly double that, at $123 million in 2000, according to the documents. 

Such cash-outs were part of the cause of a volatile exchange between Skilling and Boston-based analyst Richard L. Grubman of Highfields Capital Management during a conference call in April to discuss Enron's first-quarter earnings. 

After Grubman criticized Skilling for not having certain financial information available, Skilling fired back, calling the analyst a vulgar name. 

"He's got some nerve," Grubman said afterward, according to the Toronto Globe & Mail. 

Top Enron executives sold 7 million shares at prices in the $70s and $80s, Grubman said, adding, "Now the stock is in the high $50s, low $60s and I'm an . . . because I ask about the balance sheet?" 

Lay, who was Enron chief executive for 15 years before giving way to Skilling in February, has been scrutinized recently for his close political ties to the Bush administration. 

Lay acknowledged Tuesday that he has met once this year with Vice President Richard Cheney and had two telephone conversations with President Bush's top political aide, Karl Rove. 

However, "most comments about my influence on energy policy or on the administration are grossly exaggerated," Lay said. 

Lay insisted that Skilling's decision should not be seen as a sign of a conflict over Enron's strategy. 

"There is absolutely no change in our business direction or business strategy," Lay said, noting that he and Skilling had been working together to formulate the strategy since the 1980s, when Skilling was still a consultant at McKinsey & Co. 

Analysts said Skilling may have chafed at the length of time it took him to finally be elevated to chief executive. They believe he forced Lay's hand last year by putting out word with analysts that he had been offered another post in London. 

Whatever personal issues may have influenced Skilling's resignation, the job was doubtless a pressure cooker. 

Skilling spent part of last week in England, offering the company's condolences on the death of three workers killed in an explosion at an Enron-owned power plant there. 

The company also has been embroiled in a long dispute with the Indian state of Maharashtra over that government's refusal to buy power from an Enron-backed plant. 

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC) 

Power Shortage 

Enron shares have lost half their value over the last year after soaring in the first half of 2000. 

* 

Enron shares, monthly closes and latest on the NYSE 

Tuesday:$42.93, up $0.78 

Source: Bloomberg News 


 

 

 

Business; Financial Desk 
California Edison Hangs Hopes on Sacramento Utilities: Execs say debt load can't be eased without legislative help. A deadline passes without action.
JERRY HIRSCH; NANCY RIVERA BROOKS
  
08/15/2001 
Los Angeles Times 
Home Edition 
Page C-2 
Copyright 2001 / The Times Mirror Company 

Legislative action in the next month probably will determine whether Southern California Edison escapes filing for bankruptcy, executives at the troubled electric utility said Tuesday. 

Edison executives said they were resigned to seeing the original deadline for state lawmakers to craft a rescue plan expire today without action but expected lawmakers to address the issue when they return to Sacramento on Monday. 

Theodore Craver Jr., chief financial officer of Edison International, the utility's corporate parent, said the next few weeks will prove crucial as the Legislature heads for its next recess Sept. 15. 

"We need legislative or regulatory relief to get the revenue to pay" back debt, Craver told creditors in a conference call. 

The Legislature adjourned last month without agreeing on a rescue plan for the Rosemead-based utility, which piled up billions of dollars in losses on power sales when energy prices spiked late last year and earlier this year. 

The state Senate passed a bill last month that would allow SCE to pay off $2.5 billion of its debt through collections from ratepayers but still leave the company with about $1.4 billion in debt and interest charges that it would have to finance on its own. SCE, which has about $1.7 billion in cash, said such a plan would leave it short of the investment-grade credit ratings it needs to refinance debt and conduct business. 

Besides paying off its back debt, Southern California Edison also needs to have the state change the rules of deregulation to allow the utility to routinely recover what it pays for electricity as wholesale prices rise or fall, Craver said. 

Credit-rating and Wall Street analysts agree that without such a legislative change, investors would be reluctant to lend the company money because a sudden rise in the cost of power could tip the utility back into insolvency. 

An Assembly proposal would be more generous, allowing the utility to use ratepayer-financed bonds to cover all but $500 million of its past debt. The bill has passed through several committees but has yet to be voted on by the full Assembly. 

An earlier agreement between the utility and Gov. Gray Davis called for the state to buy SCE's transmission lines for $2.8 billion and issue ratepayer-supported bonds to pay off its remaining debt. Under terms of that agreement, the Legislature was to have passed enabling legislation by today, but the plan failed to gain the support of lawmakers. 

Separately Tuesday, the utility filed documents with the Securities and Exchange Commission warning--as it has for months--that without state action it could be headed into U.S. Bankruptcy Court. 

SCE said it had a total of $3.3 billion in unpaid and overdue debts as of July 31. That includes $1.2 billion to a group of generally small or alternative-power generators known in the industry as qualifying facilities; $878 million to the California Power Exchange, the now-defunct power market in which the utilities and large independent power generators did business; $931 million in defaulted notes and bonds; and $230 million in other debt. 

After factoring in its cash holdings, SCE has a deficit of $1.9 billion, the company said in its filing. 

Consumer advocate Doug Heller said Edison's bankruptcy alarms are intended to pressure the Legislature and Public Utilities Commission into approving a plan to pay off the utility's debts. 

"It's pretty clear that they will use the threat of bankruptcy to get as much money out of ratepayers as they can," said Heller of the Foundation for Taxpayer & Consumer Rights, a Santa Monica-based activist group. 

Despite the dire warnings by Edison, its financial situation has improved because of a rate increase of 3 cents a kilowatt-hour that went into effect in June and declining prices for natural gas, a key component in generating electricity . 

Nevertheless, the utility has told the PUC that it fears another rate increase will be needed to cover its own power costs, the projected electricity costs of the California Department of Water Resources and other transition costs. The water agency has been buying electricity for SCE and PG&E Corp.'s Pacific Gas & Electric Co. since mid-January, when the utilities ran so low on cash that generators refused to sell to them. 

SCE, PG&E and Sempra Energy's San Diego Gas & Electric, in filings Tuesday with the PUC, again called for public hearings on the water agency's revenue needs. 

Pacific Gas & Electric said Tuesday that the agency had vastly overestimated the amount of money it needs to pay for the agency's power purchases. The San Francisco-based utility said the state overestimated both the price of power on the spot market and how much natural gas will cost in future years. 

Shares of Edison International rose 8 cents to $14.06 on the New York Stock Exchange.

 

 

 

 

National Desk 
THE NATION Bush Selects Ex-Texas Regulator to Head FERC
RICARDO ALONSO-ZALDIVAR
  
08/15/2001 
Los Angeles Times 
Home Edition 
Page A-20 
Copyright 2001 / The Times Mirror Company 

WASHINGTON -- President Bush on Tuesday named Patrick H. Wood III, a former Texas utility regulator with a pragmatic, hands-on style, to be the next chairman of the Federal Energy Regulatory Commission. 

Akin to a national utilities commission, FERC has the power to set wholesale electricity rates, making it a key player in California 's efforts to recover from the energy crisis. But the commission initially took a hands-off approach, drawing bitter criticism from state officials. 

In June, FERC finally imposed price limits throughout the West, while also ordering generators to sell any available power when needed. Wood--then a new commissioner--helped create the consensus for that decision, which has been cited for helping to ensure an unexpectedly calm summer. 

Wood is an advocate of electricity deregulation who nonetheless believes that markets must be closely policed and government should intervene if consumers aren't benefiting. 

"Pat Wood is someone who accepts the proposition that markets have to be constructed," said Mark Cooper, a regulatory expert at the Consumer Federation of America and frequent FERC critic. "He understands that markets are not born as mature adults--they can go very wrong and when that happens, they have to be disciplined." 

Wood said Tuesday that his main goal will be to help deregulated electricity markets take root in all 50 states. About half the states have taken steps toward deregulation, but many are holding back in view of California 's problems. Wood said he would also ask Congress for authority to set up regional market monitoring offices around the country. 

"My top one priority is to get competitive energy markets in this country," Wood said. "That is what I am about. That is what I was picked for. To do that, we need to be credible, adept and open-minded. . . . People may not care about who we are, but they do care about what happens as a result of what we do." 

Sen. Dianne Feinstein (D-Calif.), a leader on energy issues in the state's congressional delegation, welcomed Wood's appointment. "As a sensible problem-solver, Pat Wood places practicality over ideology," Feinstein said in a statement. Wood "will hopefully give some needed teeth to an agency that for far too long has delayed in coming to the aid of California ." 

Since being confirmed as a commission member by the Senate in late May, Wood, 39, has taken an increasingly active role at the agency. A longtime political ally of the president, Wood was immediately chosen by Bush to be his special intermediary to California Gov. Gray Davis. 

Wood also made common cause with FERC Commissioner William L. Massey, a Democrat who for months had been the lonely advocate of a more activist role. Wood's arrival shifted the balance of power on the five-member commission toward those who favored intervention to head off further problems in the West. 

When FERC Chairman Curtis L. Hebert Jr. announced last week that he would resign at the end of the month, it cleared the way for Wood's long-expected promotion. Separately, Entergy, a New Orleans-based energy conglomerate, announced Tuesday that Hebert will join its ranks as a senior lobbyist. 

Industry officials also said they were pleased with Wood's appointment, which will take effect Sept. 1 and does not require further Senate action. 

As chairman, Wood will set FERC's agenda and oversee a staff of 1,200 with a budget of $175 million. But his honeymoon may be short-lived, as he faces resistance on several policy fronts. 

For example, with regard to California , FERC is unlikely to order anything like the $9 billion that Gov. Davis is demanding in refunds from power producers. 

And the agency is on a collision course with the governor over the independence of the nonprofit entity that operates the state's electric grid. Under a new California law, Davis appoints the governing board of the California Independent System Operator. But FERC policy requires the board to be insulated from political control. 

"Stay tuned," Wood said. "That's not anything I'm willing to discuss at this point."

 

 

 

 

Financial 
New FERC Chairman Appointed
Peter Behr
  
08/15/2001 
The Washington Post 
FINAL 
Page E03 
Copyright 2001, The Washington Post Co. All Rights Reserved 

President Bush yesterday named fellow Texan Pat Wood III to be chairman of the Federal Energy Regulatory Commission, putting an unconventional ally at the head of the federal agency that oversees the restructuring of the nation's electricity industry. 

Wood, the former chief energy regulator in Texas, was appointed a FERC commissioner by Bush and joined the agency in June. But his appointment as chairman had to await the resignation of Chairman Curt L. Hebert Jr., which takes effect at the end of this month. 

A strong advocate of energy deregulation, Wood has surprised some industry officials and analysts by pushing for around-the-clock electricity -price restraints in California and other western states, and supporting California 's bid for refunds from power suppliers. 

Yesterday, Wood said he wouldn't discuss his plans for FERC until after he talks with its other commissioners. "I want us to do the agenda as a team as opposed to a Pat Wood show." 

But he said there is a clear need to strengthen FERC's oversight and investigative staff to see that the deregulation of electricity produces competition, not monopoly profits. "People say, 'He's not for free markets.' Yes, I am. But we have to get there first. 

"At the beginning of a market it's like a teenager. The parents let you out with the car, but they stay up all night until the kids get home. And one day it all works."

 

 

 

 

 <http://nrstg1s.djnr.com/cgi-bin/DJInteractive?cgi=WEB_PUB_DETAILS&GJANum=970662028&page=st_channels/pubdetails&SC=J&NEWSC=J&Single=On&logo=yes> 
Economy 

Wood, Independent-Minded, to Head FERC
---
New Energy-Panel
Chief Praised for
`Vision' of Deregulation
By Richard B. Schmitt
  
08/15/2001 
The Wall Street Journal 
Page A2 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

WASHINGTON -- When President Bush named fellow Texan Pat Wood III to the Federal Energy Regulatory Commission last spring, it was a popular choice back home. Some of the state's utilities were happy to see him go. 

After all, Mr. Wood, as chairman of the Texas public-utility commission, had helped implement a deregulation scheme that wasn't always friendly to the interests of the state's biggest electric companies. Upstart power generators were given a boost to start competing with their entrenched rivals. Even consumer groups considered him reasonable. 

"Pat was the smartest chairman we have ever had," says Tom Smith, director of the Texas office of Public Citizen, a nonpartisan consumer-advocacy group. "He had a good vision of how to make deregulated markets work." 

Now, Mr. Wood is having a chance to extend that vision. Yesterday, President Bush elevated him to be chairman of the FERC, effective Sept. 1, to succeed Mississippi Republican Curt Hebert, who resigned last week to take a job in private industry. While both men are staunch believers in free markets, Mr. Wood is considered more likely to suggest interventionist measures when those markets break down. 

The Wood approach may surprise those who think Bush administration appointees are either unfailingly friendly to the energy industry, or reflexively opposed to market intervention. Already, the FERC, which was criticized earlier this year for taking a hands-off approach to California 's recent power problems, seems more energized. Since Mr. Wood, 39 years old, was first appointed to the commission three months ago, the agency has set price caps on wholesale electricity sales in California , and ordered a hearing that may result in a billion or so dollars in refunds to the state from Texas energy companies. 

At the same time, Mr. Wood has helped chart an aggressive course to restructure the nation's power lines into a sort of interstate highway system for electricity , which he says will foster more competition and consumer choice. 

"I never thought I would be so happy to see two new Republicans," William Massey, a Clinton appointee to the FERC, says of Mr. Wood and Nora Brownell, another Bush appointee. "I have been very heartened. They believe in promoting markets. But they will absolutely insist that markets provide consumer benefits." 

Still, some utilities are already chafing at the newly resurgent FERC. Financial analysts attribute a recent decline in utility stocks in part to concerns that FERC under Mr. Wood will adopt tough new rules of the road such as limits on their ability to do power deals with affiliate companies. 

Some also see politics at work: His view of the deregulated world largely coincides with that of Enron Corp., the giant Houston energy company, whose chairman, Kenneth Lay, was one of the largest single contributors to the Bush presidential campaign. Both think the country should have a seamless web of power lines that any energy company can tap into freely. Lately, some utility lawyers in Washington have taken to calling the FERC under Mr. Wood the "Federal Enron Regulatory Commission." 

Mr. Wood says in an interview, "I am always glad to have allies where I can," but dismisses the idea that Enron has any unusual influence with him. 

And conversely, some think that because he is so close to Mr. Bush, Mr. Wood actually will have the power to do what he wants without outside interference. 

Certainly, Mr. Wood is deeply rooted in Texas energy circles. He was born in the refinery town of Port Arthur and worked as an engineer on an offshore oil rig after college. When oil prices sagged in the 1980s, he ditched the job to get a law degree at Harvard, followed by a stint at the Houston law firm Baker Botts. Later, he worked as a legal adviser at FERC and the Texas Railroad Commission. He was appointed to the Texas public-utility commission in 1995. 

Mr. Wood says the real influence in his life and work comes less from oil than pharmaceuticals: His father has operated an independent pharmacy in Port Arthur for years. In the 1980s, when the big chain stores invaded his territory, the elder Mr. Wood was faced with being driven out of business. He kept afloat by computerizing his operations and by hooking up with other independents to increase their buying power. 

In Texas, the son helped prod what he calls "some of the biggest `just-say-no' utilities in the country" into supporting a bill that will open up the state to retail electric competition starting next year. 

Initially, the industry balked at giving up its monopoly status. Mr. Wood responded by scrutinizing standard rate increases and questioning their costs. 

Over the years, Mr. Wood had run-ins over everything from the pricing of transmission service to new entrants -- which utilities thought didn't fairly reflect their own expenses -- and legislation requiring the utilities to offer customer rebates sooner than the deregulation law required. 

At FERC, he is trying to replicate the experience on a larger scale. He envisions once-localized transmission grids combined into giant regional networks that in theory provide seamless "open access" to competing generators. 

He wants the cost of hooking up new power plants to the grids to be borne throughout the system; that is a reversal of current FERC policy, which requires generators to foot those bills on their own. 
  ---
                     The FERC Files

  Here's a list of issues facing the Federal Energy Regulatory
Commission, as Pat Wood III takes over as chairman, effective Sept. 1.

  --  California  request for $9 billion in refunds from Texas energy
companies for alleged  electricity  overcharges.

  -- Plans to establish four giant regional transmission grids around
the country to form an "interstate highway" of the  electricity 
industry.

  -- Complaint that El Paso Corp. artificially inflated natural-gas
prices in  California  over the last year.

  -- Possible new rules that could limit the ability of wholesale
 electricity  generators to charge market-based rates, and restrict
their ability to do power deals with affiliate companies.




 

National Desk
THE NATION Energy Issue Tops Agenda of Governors Politics: Chief executives of Western states meet in Idaho. Conspicuous by his absence is California's Gray Davis.
JULIE CART
TIMES STAFF WRITER

08/14/2001
Los Angeles Times
Home Edition
A-8
Copyright 2001 / The Times Mirror Company



COEUR d'ALENE, Idaho -- A conference of the Western Governors Assn. called to discuss wildfires and energy devolved Monday into another denunciation of Gov. Gray Davis of California, whose repeated failure to attend these sessions was said to be impeding solutions to the region's problems. 

In his 2 1/2 years in office, Davis has attended only one of at least six full-fledged meetings of the WGA, an association of chief executives from 18 Western states that tries to present a common voice to Washington on the region's needs.


California-bashing is nothing new in the Republican-dominated group, especially with a Democrat in Sacramento. But as the energy crisis has focused so heavily on California, governors are increasingly frustrated that Davis is a constant no-show. His sole appearance was at the group's "energy summit" in February. 

Idaho Gov. Dirk Kempthorne went so far as to say that Davis' absence at the meetings has hampered the group's effort to resolve the West's energy problems. 

"Gov. Davis should be here," Kempthorne said at the end of Monday's energy session, which dealt with ways to transmit power from the West's energy-rich, sparsely populated states to energy-hungry California. "No one state can be an island. We need to work together." 

Davis was not the only Western governor who failed to attend this meeting--five others didn't attend either. Davis' predecessor, Pete Wilson, also made a habit of missing the several WGA sessions each year. 

A spokeswoman for Davis said a "personal scheduling conflict" prevented Davis' attendance. California was represented at the conference by Deborah Slon, a legislative affairs liaison. 

"I don't think you should interpret that as a lack of attention and lack of interest," said Davis spokeswoman Hilary McLean. "He has a great deal of respect for his fellow governors. We certainly count on and appreciate our neighbors in the West. " 

But some governors here are baffled that Davis can't find time to meet with them at a time when so many issues so crucial to California are on the table. 

"These are issues concerning his state," said Arizona Gov. Jane Dee Hull. "It would be better for him to make his points face to face, rather than through aides. It's hard to make your case if you are not here." 

Wyoming Gov. Jim Geringer threatened to send the region's power to the East rather than California. He coined the phrase, "OTC--Other Than California" to suggest a strategy to sell surplus power elsewhere. 

"For the governor of California not to be here to participate removes California from the opportunity to have a partnership that's beneficial to all," Geringer said. "He really should look at his priorities. What I think Gov. Davis should do is look beyond political opportunity and look to the long-term viability of the state." 

Davis missed a spirited discussion among federal and state officials of one of the central puzzles in the energy debate: how to move the region's abundant and diverse energy resources to where they are needed most. The transmission of energy to where it is needed is a challenge in such states as Wyoming and Montana, where coal mines are remote and unconnected to power transmission lines. 

"We've got the resources," Geringer said. "We are just having a heck of a time getting those resources where they are needed." 

The construction of power transmission lines is a private-sector issue and the governors discussed how to encourage the multibillion-dollar investment required to string a line of massive transmission towers across some of the nation's most rugged terrain. 

The governors heard from utility company executives who bemoaned the federal bureaucracy that makes building transmission towers a multiyear effort. 

The aesthetic issue of states not wanting the unattractive towers dominating their landscapes was also discussed. That brought up, again, California. Jack Davis, an executive with Arizona's largest utility company, reluctantly invoked the Golden State to illustrate the problem. 

"I'll use the most convenient whipping boy," he said. "States argue, 'We put these [towers] in my backyard so it will heat their spas in California.' That's what we're facing."



 
 
 
 
 
 
Developments in California's energy crisis 
The Associated Press
Wednesday, August 15, 2001 
?2001 Associated Press 

URL: <http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/08/15/state1037EDT0065.DTL>

(08-15) 07:37 PDT (AP) -- 

Developments in California's energy crisis: 


WEDNESDAY:


* No power alerts Wednesday as electricity reserves remain above seven percent. 


TUESDAY:


* No power alerts Tuesday as electricity reserves remain above seven percent. 


MONDAY:


* Gov. Gray Davis names four board members of the state's first public power authority, tapping S. David Freeman, his chief energy adviser and an ardent supporter of public power, as chairman of the California Consumer Power and Conservation Financing Authority. 

Two of Davis' four appointees to the board also are board members of a nonprofit foundation funded by utilities and energy companies, prompting an immediate outcry from consumer advocates who say those members are too close to the energy industry. The other appointees are Sunne W. McPeak, Donald Vial and John R. Stevens, former staff director for the governor. The fifth member of the board, by statute, is State Treasurer Phil Angelides. 

The power authority, approved by the Legislature this spring, will be able to issue up to $5 billion in bonds to buy, lease or build power plants. 

* The city and county of San Francisco takes the first step to end its contract to sell low-cost power to the Turlock Irrigation District, saying it needs to stem financial losses in the escalating energy market. The city files a notice of termination with the district, to which it has sold electricity since 1987. San Francisco sells power generated by the Hetch Hetchy reservoir to irrigation districts in Turlock and Modesto at a fixed rate. The contracts were to expire in 2015. However, they require the city to supply the power even when Hetch Hetchy is not operating, forcing it to buy expensive power on the open market. Turlock has not yet formally responded and discussions with Modesto are under way. 

* Shares of PG&E Corp. rise 2 cents to close at $16.05. Shares of Edison International fall 3 cents to close at $13.98. Shares of Sempra Energy, parent company of San Diego Gas and Electric Co., rise 9 cents to close at $26.71. 

* No power alerts Monday as electricity reserves stay above 7 percent. 


WHAT'S NEXT:


* The deadline for the Legislature to approve Davis' rescue deal for Southern California Edison is Aug. 15. 

* Critics of the Department of Water Resources' revenue requirements have until Tuesday to file comments with the PUC. 

* PUC Commissioner Carl Wood hears arguments on an agreement between San Diego Gas & Electric and Gov. Gray Davis on Thursday at San Diego City Council Chambers. 


THE PROBLEM:


High demand, high wholesale energy costs, transmission glitches and a tight supply worsened by scarce hydroelectric power in the Northwest and maintenance at aging California power plants are all factors in California's electricity crisis. 

Southern California Edison and Pacific Gas and Electric say they've lost nearly $14 billion since June 2000 to high wholesale prices the state's electricity deregulation law bars them from passing on to consumers. PG&E, saying it hasn't received the help it needs from regulators or state lawmakers, filed for federal bankruptcy protection April 6. Electricity and natural gas suppliers, scared off by the companies' poor credit ratings, are refusing to sell to them, leading the state in January to start buying power for the utilities' nearly 9 million residential and business customers. The state is also buying power for a third investor-owned utility, San Diego Gas & Electric, which is in better financial shape than much larger Edison and PG&E but is also struggling with high wholesale +power+ costs. 

The Public Utilities Commission has approved average rate increases of 37 percent for the heaviest residential customers and 38 percent for commercial customers, and hikes of up to 49 percent for industrial customers and 15 percent or 20 percent for agricultural customers to help finance the state's multibillion-dollar power buys. 


 
 
 
 
 
 
EPA delays decision on air pollution rule 
New York Times <mailto:chronfeedback@sfchronicle.com>
Wednesday, August 15, 2001 
?2001 San Francisco Chronicle <http://www.sfgate.com/chronicle/info/copyright> 

URL: <http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/08/15/MN147470.DTL>

Washington -- The Bush administration postponed yesterday its decision on how to overhaul a key anti-pollution program as top officials struggled to devise a new strategy that could ease the regulatory burden on the energy industry without being viewed as an environmental rollback. 

The Environmental Protection Agency announced that it would not issue a reassessment of an air pollution rule by Friday, as President Bush ordered it to do this spring. The agency said the review would be delayed until September, 

when the administration will propose a comprehensive strategy to control pollution in a more flexible and less intrusive way. 

The delay shows how jittery the administration has become as it seeks to carry out some elements of Bush's national energy strategy. The president announced the plan with fanfare in May, but his administration has come under steady fire from Democrats and national environmental groups who accuse it of tilting too much in favor of industry supporters at the expense of clean air and water. 

At issue is the so-called new source review, which requires the installation of the latest pollution control equipment whenever new power plants, refineries and industrial facilities are built or substantially upgraded. Established by the Clean Air Act of 1970, it is aimed at curtailing smokestack emissions from some 22,000 facilities nationwide, including primary sources of pollutants like nitrogen oxide, sulfur dioxide and mercury. 

Jeffrey Holmstead, the EPA's assistant administrator for air and radiation, said the review was delayed because the administration wanted to present a broad pollution-control strategy as a whole, rather than announcing policies in pieces and potentially giving critics more opportunities to attack. 

"It has quickly become apparent that environmental groups will portray any changes in this program as changes that will kill people," Holmstead said. "We want to lay out our vision for a multipollutants strategy and show that we will achieve better environmental protection at lower cost." 

Several other EPA officials said that another reason for the delay was that EPA and Department of Energy officials did not agree on whether new source review substantially inhibited energy production -- and did not agree on how much it needed to be changed. 

Energy Secretary Spencer Abraham has favored a thorough overhaul that would greatly reduce the program's burden on utilities and oil companies and potentially end some existing enforcement actions, these officials said. EPA Administrator Christie Whitman proposed more modest revisions -- many of which were originally considered by the Clinton administration -- that would make the program more flexible but preserve existing lawsuits and enforcement actions under the rule, they said. 

Whitman has said that she hopes to phase out new source review and some other enforcement programs as they apply to utilities by consolidating them in a broad strategy. 

The strategy would set tighter limits on national emissions of major pollutants, but allow utilities to trade credits among themselves -- in effect, 

letting the market dictate how the limits are met. The system is more flexible, proponents say, and would require less plant-by-plant enforcement. 

?2001 San Francisco Chronicle <http://www.sfgate.com/chronicle/info/copyright>   Page A - 5 

 

 

 

EPA puts off decision on modernization rules for power plants 
PHILIP BRASHER, Associated Press Writer
Wednesday, August 15, 2001 
?2001 Associated Press 

URL: <http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/08/15/financial0644EDT0013.DTL>

(08-15) 03:44 PDT WASHINGTON (AP) -- 

The Bush administration has put off announcing whether it will stop tightening pollution requirements for power plants that are being repaired or upgraded. Environmentalists worry that the delay is a signal that industry will win changes in the rules. 

The Environmental Protection Agency postponed the decision until September, when it will propose legislation for reducing emissions of three major air pollutants. 

"Our top priority is protecting public health and the environment, and we are in the final stages of developing a comprehensive strategy that will allow us to take the next step forward into a new generation of air pollution controls," EPA Administrator Christie Whitman said Tuesday. 

At issue is the EPA's "new source review" program, which is supposed to minimize air pollution from new factories, power plants and refineries. 

Power industry officials say EPA has applied the regulations to routine maintenance and replacement work, making plant maintenance schedules longer and more costly. Environmentalists want the program left intact. 

The postponement "sends a clear signal that EPA is headed in the wrong direction," said Rebecca Stanfield, an attorney for the U.S. Public Interest Research Group. "They're looking to obscure the impact of what they're doing by putting into the context of a bigger legislative proposal." 

In a statement, the EPA noted that the National Governors' Association last week called for reform of the program "to achieve improvements that enhance the environment and increase energy production capacity." 

The EPA's evaluation of the program was ordered by a task force, headed by Vice President Dick Cheney, that predicted the need for 1,300 new power plants. The agency held four hearings around the country and received 130,000 written comments on the issue, and was to report to President Bush by Friday. 

The Justice Department is separately reviewing enforcement actions that have been brought under the program to see if they were legal under the Clean Air Act. 

The legislation that the EPA is expected to propose next month will set caps on emissions of nitrogen, sulfur and mercury while allowing the industry to find the most cost-effective means of compliance, the agency said. 

The administration has refused to include carbon dioxide among those pollutants, despite its link to global warming. 

"We are developing a comprehensive approach to improving our efforts to control air pollution, to achieve significant reductions in air pollution while simultaneously streamlining the regulatory process so it works better, achieving real reductions and full industry compliance at far less cost," Whitman said. 


 

 

 

Energy firms taking state grants 

Utilities: Sempra and Calpine receive up to $1 million in subsidies for employee training meant to keep jobs in the state. 

August 15, 2001 

By HANH KIM QUACH
The Orange County Register 

Two energy companies that have made hefty profits off California's energy crisis are also cashing in on the state's business-financed employee- training subsidies used to groom employees and keep jobs in California. 

San Jose-based Calpine Corp., which has cornered a large chunk of the long-term energy contracts with the state, in December was granted $1 million to train 100 employees to work at their new in-state power plants. The money is expected to be reimbursed to the company over two years. 

Sempra Energy, parent company of San Diego Gas & Electric, expects to receive $409,000 to train about 500 workers on a new $6.5 million computer system and improve their business and communication skills. 

The companies say they're contributing to California's economy by giving their employees more valuable skills and are breaking no laws by tapping these funds. 

In fact, they're no different from the Wal-Marts and Oakleys that have also drawn from this state training account and their gains have been in some cases similar if not more. 

"We are working with the system,'' said Bill Highlander, Calpine spokesman. 

But energy companies strike an emotional chord for lawmakers and consumer advocates, who questioned whether it's appropriate for energy companies in particular - whose profit margins have soared during the energy crisis - should be getting this money at the expense of other businesses. 

"It's really appalling because those companies have made so much money in California. The last thing they need is a state-subsidized training problem. We certainly don't need to teach them how to make any more money,'' said Sen. Debra Bowen, D-Marina del Rey. 

Sen. Joe Dunn, D-Santa Ana, agreed. 

"This seems to be companies flush with cash trying to get more cash. That's disturbing that there are many businesses operating on a very thin margin that could benefit very well for the employees,'' he said. 

The money comes from the California Employment Training Panel, established in 1983 at the height of a recession and massive layoffs. All for-profit businesses pay a special tax, at the rate of about $7-per-employee per year, amassing about $80 million annually. 

Initially, the panel was formed to help the unemployed get job training and retrain workers with jobs, but whose skills were becoming outdated as technology changed. 

In 1994, state law was narrowed to allow only businesses with out-of-state competition to retrain their employees, although money is available for companies wishing to retrain highly skilled workers in specific jobs, or businesses in high-unemployment areas. 

Other large companies that have tapped Employment Training Panel money include: Wal-Mart Stores Inc. with $1.2 million in Porterville to train 850 workers in vocational English as a Second Language, computer and manufacturing skills; Disneyland with $1.3 million to train 600 employees in commercial and management skills; and Frito-Lay Inc. with $124,410 to train 122 workers in management, business and computer skills. 

In fact, about 41 percent of the $49.7 million disbursed for training last year went to the largest companies with more than 500 employees. At times, such disbursements raised eyebrows within and outside the panel, but "there is no 'means test''' to assess "does this big business really need this money,'' said Peter Demauro, the panel's general counsel. 

Both energy companies say the money is needed. 

"It's not a matter of Sempra Energy's net income. It's really about companies keeping their employees in tiptop skill shape,'' said Sempra spokeswoman Laura Farmer. 

Sempra's "cash conservation'' efforts left its information technology department with about half of what it had been spending for computer training. Without the state's money, training would go at a slower place, said Mirin Wu, the company's director of software development. 

And if information technology employees didn't have the skills, then Sempra's subsidiary companies might turn to out-of-state computer firms for their needs, she said. 

Critics say both Sempra and Calpine can afford training. 

Sempra Energy's profits climbed 8.8 percent over the last year, while Calpine's profits more than tripled, by 240 percent, last year. Some of the non-energy companies did better than that, some worse. Wal-Mart gained 17 percent this past year and Walt Disney Co. lost 30 percent. 

Sempra and Calpine have also made a hefty sum from the state. From January through May 31, Sempra sold $429 million in power to California. Meanwhile, Calpine walked away with $29 million. And the two have invested a combined $812,000 to influence the Legislature this year, documents show. 

"It seems pretty inappropriate for the generators who have been making windfall profits at California's expense to be using (the state's) money to subsidize the training of their workers. Their profits are high enough to invest in their workers,'' said Nettie Hoge, executive director of the consumer group The Utility Reform Network. "And not to be anti-generator, (but) it means that these resources aren't available for those working in other sectors of the economy who actually have been harmed by high energy costs.'' 

Register staff writer James Kelleher contributed to this report.