Please see the following articles:

Sac Bee, Wed, 7/18: Lawmakers debate efforts to save Edison: 
Competing bills range from a straight bailout to purchase of transmission 
lines
Sac Bee, Wed, 7/18: PG&E sues state over seizure of long-term power contracts 
Sac Bee, Wed, 7/18: Energy Digest: Advocate attacks utility rescue plan
Sac Bee, Wed, 7/18: Hour of decision: Who will pay for costly power of past, 
future?   (Editorial)
SD Union, Tues, 7/17: Utility sues state seeking millions in seized power 
contracts 
LA Times, Wed, 7/18: PG&E Sues State Over Contracts
SF Chron, Wed, 7/18: Consumer prices up as energy costs moderate 
SF Chron, Wed, 7/18: Contra Costa may upgrade 9 buildings 
$1.7 million earmarked for conservation 
SF Chron, Wed, 7/18: Lawmakers devise rival bailout plans for Edison 
Push to come up with alternative to bankruptcy before recess 
SF Chron, Wed, 7/18: News briefs on the California power crisis 
SF Chron, Wed, 7/18: State's largest utility sues state seeking millions in 
power contracts seized by governor 
Mercury News, Wed, 7/18: Surplus state power sold at loss 
Mercury News, Wed, 7/18:  Light bulb moment (Commentary)
LA Times, Wed, 7/18: California Trading, Wholesale Power Boost Duke's 
Earnings 27%
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Lawmakers debate efforts to save Edison: Competing bills range from a 
straight bailout to purchase of transmission lines. 
By Jim Sanders
Bee Capitol Bureau
(Published July 18, 2001) 
Divided legislators began wrestling Tuesday with competing proposals to keep 
one of California's largest private utilities, Southern California Edison, 
from going bankrupt. 
Pressure is rising as Edison continues to struggle with more than $3.5 
billion in debt and a tentative plan by Gov. Gray Davis to buy the utility's 
transmission lines for $2.76 billion has attracted little support. 
The question now is whether legislators will accept a modified version of the 
governor's deal, will approve an entirely different rescue plan, or will 
simply let Edison join Pacific Gas and Electric Co. in bankruptcy court. 
"We're encouraged that at least there's activity and people are grappling 
with the issues," said John Fielder, an Edison senior vice president. 
The Assembly's energy committee heard testimony on two of the competing 
proposals Tuesday. The Senate's energy committee will take up the third plan 
today. 
The issue conceivably could be decided this week, since legislators are 
scheduled to begin their summer recess Friday. 
Of the three proposals under consideration, one would authorize state 
purchase of Edison's transmission lines, one would provide an option to buy, 
and one would simply tally Edison's debts and charge ratepayers to pay them 
off. 
Some legislators favor doing nothing at all and letting a bankruptcy judge 
decide Edison's fate. 
Steve Maviglio, a spokesman for Davis, said the Democratic governor supports 
anything that "comes close" to the tentative deal, hammered out in April, to 
buy Edison's transmission lines. 
Assemblyman Fred Keeley, D-Boulder Creek, and Assembly Speaker Robert 
Hertzberg, D-Sherman Oaks, have proposed a rescue plan that would buy the 
lines at a lower price -- $2.4 billion -- and would modify the governor's 
plan substantially. 
Key elements of the bill would allow the state to buy Edison's hydroelectric 
assets if the transmission-line sale falls through, allow businesses to 
contract with private suppliers for electricity in 2003, and commit the state 
to paying only 70 cents of every dollar owed by Edison to power generators. 
The deal also would provide California with ownership or conservation 
easements to more than 20,000 acres of land, and would require Edison to 
increase its supply of alternative energy -- such as wind or solar. The 
proposal is not expected to spark new rate hikes, Keeley said. 
The Senate plan, like the Keeley-Hertzberg proposal, would require large and 
medium businesses to pay down much of Edison's debts. 
The Senate plan dedicates up to $2.5 billion in large-user rates for debts 
involving banks and renewable energy sources known as "qualifying 
facilities." 
The plan, written by Sen. Byron Sher, D-Palo Alto, seeks to leave Edison with 
$1 billion in debt from generators and marketers for the utility to work out 
on its own. 
The Senate plan would give the state a five-year option to buy Edison 
transmission lines for book value -- about $1.2 billion. 
Rather than provide conservation easements, the plan calls for Edison's 
environmentally sensitive acreage to be acquired by the state or a trust. 
Remaining parts of the proposal are similar to the governor's deal. 
A third proposal, pushed by several lawmakers, seeks to eliminate debt for 
Edison and PG&E. It would not involve transmission lines, conservation 
easements or other such elements. 
Advocates say Edison's debt stemmed largely from failed state regulatory 
policies, so the state should simply charge consumers a monthly fee to pay it 
off. 
"This is a straight bailout -- no hidden balls, no extras," said Assemblyman 
Rod Wright, D-Los Angeles. 
It is not yet known whether that monthly fee could fit within the existing 
rate structure. For home'owners, the amount is estimated at $4 in the PG&E 
service area and $2 within Edison's boundaries. 
Consumer groups are wary of the Edison rescue proposals, fearing the state 
will ultimately promise too much and get too little. 
"When a supermarket and dairy farmer both are forced to pay a 10-year bailout 
tax, the consumer pays more for milk," said Doug Heller of the Foundation for 
Taxpayer and Consumer Rights. 


The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sacbee.com 
<mailto:jsanders@sacbee.com>. 
Kevin Yamamura of The Bee Capitol Bureau contributed to this report.




PG&E sues state over seizure of long-term power contracts 
By Dale Kasler
Bee Staff Writer
(Published July 18, 2001) 
Reopening an old wound in California's energy crisis, Pacific Gas and 
Electric Co. has sued the state over a group of low-cost energy contracts 
seized almost six months ago by Gov. Gray Davis. 
The lawsuit, filed Monday in San Francisco Superior Court, stems from the 
collapse of the California Power Exchange and the state's entry into the 
power-buying business in January. 
PG&E and Southern California Edison had entered into a series of long-term 
purchase contracts through the exchange, a now-defunct market for buying and 
selling electricity. But as both utilities collapsed financially and the 
Power Exchange was clinging to life, the exchange seized the contracts and 
was about to auction them off for nonpayment of bills. 
That's when Davis stepped in. Using his emergency powers, the governor 
grabbed control of the contracts, saying he didn't want them resold at 
inflated prices. 
At the time, the exchange said the contracts were worth about $1 billion, 
with PG&E's share set at $348 million. 
But it's likely their value has fallen along with the spot market price of 
electricity. Back when the governor seized them, PG&E's contracts were for 
$60 to $130 a megawatt-hour. That was a bargain at the time, and made the 
contracts very valuable. Now that spot prices have plunged, those contracts 
are no longer such a great deal. 
PG&E's lawsuit didn't put a value on the contracts. Nevertheless, "the state 
has benefited from the contracts," said PG&E spokesman Ron Low. "We should be 
compensated." 
The state had planned to pay for the contracts, at a price to be determined 
by a state government claims board, said Davis' spokesman Steve Maviglio. But 
he said the state also expected to be taken to court over the issue. 
"We always thought we'd be fighting it out in a neutral forum," Maviglio 
said. "This comes as no surprise." 


The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com 
<mailto:dkasler@sacbee.com>.






Energy Digest: Advocate attacks utility rescue plan


(Published July 18, 2001) 
The state's consumer advocate criticized Gov. Gray Davis' proposed rescue 
plan for San Diego Gas & Electric on Tuesday, calling it too generous to the 
utility's shareholders. 
The Public Utilities Commission's Office of Ratepayer Advocates called the 
proposed deal with SDG&E and its parent company, Sempra Energy, "clearly 
excessive." 
The advocate said the state goes too far in the core element of the rescue 
plan -- the $1 billion state purchase of SDG&E's transmission lines. The 
advocate said the money would be better spent building or buying new 
generating plants. 
The plan must be approved by the Legislature and PUC. A similar plan, to buy 
Southern California Edison's transmission lines, has run into numerous 
roadblocks in the Legislature. 
--Dale Kasler








Hour of decision: Who will pay for costly power of past, future?


(Published July 18, 2001) 

In the next few days, state lawmakers and regulators must make some 
unsettling choices about how to share the financial burdens of California's 
electricity debacle. 
Looking backward, they will decide how -- or whether -- to erase $3.5 billion 
in debts run up last year by Southern California Edison, when it bought 
pricey power but couldn't pass the costs on to consumers. Looking ahead, they 
will choose who, if anybody, will get out of paying for expensive power 
purchased by the state since the utilities ran out of cash last January. 
In both cases, the principle guiding the decision ought to be the same: No 
one is blameless in getting California into this mess, and no group can 
escape the pain of getting out of it. 
Democratic lawmakers in the Assembly are searching in vain for ways to hide 
the real costs from voters. Their idea is to have the large users of power 
(mostly big businesses) pay off Edison's past debts. In return, businesses 
would get some freedom to shop for cheaper power deals in the future. 
The problem is that there won't be much opportunity to shop in the coming 
years. That's because Gov. Gray Davis went out at the very peak of the market 
and bought up most of the state's future electricity supply before it went on 
sale. The strategy of locking most of California's power demand into 
long-term contracts seemed ill-advised at the time, even more so now. 
Now that the governor has done all this shopping, the Public Utilities 
Commission must assure that electric customers will pay for all that 
electricity -- $43 billion worth of power over the next decade or so. In 
addition, the PUC must commit customers to repaying the state for the power 
it has already purchased this year -- many billions on top of that. The state 
borrowed from itself to buy all this power, and is banking on a bond sale to 
pay off this debt. Unless a portion of the rate customers pay is dedicated to 
repaying those bonds, they can't be sold. 
This web of regulation, contracts and finance is so complex, so huge, it's 
hard to see how the energy leaders in a few days will find a graceful, fair 
solution. But for a political compromise to work, all the interests involved 
must take some pain. 
Southern California Edison must swallow some of its debt. Power generators 
and the state must renegotiate some of their long-term contracts so that the 
generators give back some of the bounty they reaped by market manipulation. 
And no consumer, big or small, should be allowed to avoid paying the true 
costs of the power they use. In this reckoning, there's no easy way out for 
anyone -- and especially not for the elected officials who must deliver the 
bad news.





Utility sues state seeking millions in seized power contracts  


\
objattph 
By David Kravets ASSOCIATED PRESS  July 17, 2001  SAN FRANCISCO ) 
California's largest utility sued the state Tuesday seeking reimbursement of 
millions of dollars in energy contracts the governor seized Jan. 31.  San 
Francisco-based Pacific Gas & Electric Co. said it "has received no 
compensation for the damage to its property," according to a suit filed in 
San Francisco Superior Court.  The suit came as PG&E, which filed for 
bankruptcy protection in April, struggles to repay $14.4 billion in debt to 
thousands of creditors.  Invoking constitutionally vested powers, Gov. Gray 
Davis seized the energy contracts to keep the California Power Exchange from 
liquidating them. The now-defunct exchange, which was the state's middleman 
for the buying and selling of power, wanted the contracts for itself to 
recoup hundreds of millions in unpaid power buys that PG&E owed it.  The 
governor's office acknowledged that California owes PG&E for the contracts, 
an amount that Davis wants a judge to determine. At the time they were 
seized, the state estimated their value at $160 million, while the power 
exchange priced them at $347 million.  "We seized the contracts to have 
reasonable priced power and expected that price to be set in a neutral 
forum," said Steve Maviglio, the governor's spokesman.  It's not easy to 
determine their value. Using the contracts, the state buys electricity at a 
set price, and can avoid the sky-high prices it has to pay for power bought 
at the last minute. Therefore, the contracts' value changes with the volatile 
price of electricity.  "We believe the state has benefited from the value of 
our contracts, and as a result we should be compensated," PG&E spokesman Ron 
Low said.  Low declined to place a value on the contracts.  The contracts in 
question, which the state is now using to buy electricity because the 
utility's bad credit rating restricts it from buying its own, promise power 
at rates below those being charged today by power generating companies.  
Because of the shaky financial pictures of PG&E, Southern California Edison 
Co. and San Diego Gas & Electric Co., the state in January began buying much 
of the electricity to supply the ratepayers of those utilities.  The power is 
sold to ratepayers through the utilities, which reimburse the state through 
consumers' bills. But, because of energy pricing rules that prompted the 
utilities' unstable financial footing, current rates are not enough to repay 
the state. To recoup its losses, the state is expected to sell $8 billion or 
more in bonds to be repaid through increased consumer power rates.  Under 
California's 1996 deregulation plan, the state's utilities sold many of their 
power plants and were forced to buy electricity on the market through the 
newly created power exchange.  As demand mushroomed and supplies became 
scarce, the utilities began paying substantially more for electricity than 
deregulation rules allowed them to collect from consumers.  The case is PG&E 
v. California, 322921. 






PG&E Sues State Over Contracts
From Bloomberg News

July 18 2001

SAN FRANCISCO -- PG&E Corp.'s Pacific Gas & Electric Co. utility sued 
California on Tuesday, saying it wants to be paid for the wholesale 
electricity contracts the state seized in January.

Gov. Gray Davis took away Pacific Gas' 12-month forward contracts to ensure a 
sufficient and continuous supply of electricity for the state. At the time, 
California estimated the contracts were worth $150 million.

Pacific Gas claims the contracts had "significant value" because they allowed 
the utility to receive power for less than current market rates. "Although 
PG&E has demanded just compensation from the [state], PG&E has received no 
compensation for the damage to its property," the utility said in court 
papers filed Monday in San Francisco Superior Court.

The company, which filed for Chapter 11 protection in April, is seeking 
damages and attorney fees. The state claimed in January that the contracts 
would have delivered enough electricity to power 100,000 to 500,000 homes for 
6 cents to 13 cents per kilowatt-hour.

Officials in the governor's office did not immediately return calls seeking 
comment. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 




Consumer prices up as energy costs moderate 
LEIGH STROPE, Associated Press Writer
Wednesday, July 18, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/18/finan
cial0837EDT0023.DTL>
(07-18) 05:37 PDT WASHINGTON (AP) -- 
Consumer inflation edged up last month as electricity prices continued to 
surge, while the cost of gasoline and other energy products retreated. 
The Labor Department reported Wednesday that the Consumer Price Index, the 
government's most closely watched inflation measure, climbed by a seasonally 
adjusted 0.2 percent in June. The index was up 3.8 percent for the year. 
The new reading on consumer prices matched analysts' expectations. 
The "core" rate of inflation, which excludes volatile energy and food prices, 
rose 0.3 percent in June compared with just 0.1 percent in May. 
,2001 Associated Press 






Contra Costa may upgrade 9 buildings 
$1.7 million earmarked for conservation 
Jason B. Johnson, Chronicle Staff Writer <mailto:jbjohnson@sfchronicle.com>
Wednesday, July 18, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/18/
MNC199898.DTL>
Contra Costa will spend as much as $1.7 million to conserve energy at the 
county's nine worst "energy hog" buildings under a proposal approved 
yesterday by the Board of Supervisors. 
The measure is part of a larger effort the board in March agreed to undertake 
to reduce the county's energy use by up to 10 percent. 
A private company will install upgraded heating, ventilation and air 
conditioning control systems at the nine buildings, resulting in savings of 
just under $200,000 a year. 
"What we've done is pick our energy hogs," said Bart Gilbert, the county's 
general services director. "To start the process of making our buildings more 
energy efficient." 
County officials had no difficulty in identifying the hogs, which tended to 
be large buildings that serve a variety of uses and are open as much as 24- 
hours a day, seven days a week, said Gilbert. 
Eight of the buildings are in Martinez, the county seat, and one is in 
Antioch. They include the Bray Courts building in downtown Martinez, 
sheriff's offices and morgue, and the Employment and Human Services building 
in Antioch. 
One energy waster is the 120,000-square-foot Summit Center, an office 
building on Arnold Drive in Martinez that the county acquired last year. 
The building's cooling system activates at a particular setting -- 76 
degrees. So it shuts down completely when the temperature reaches below that 
setting and won't turn on until it reaches about 79 degrees. 
But new digital technology controls allow the system to gradually reduce or 
increase power without having to shut down, which saves energy. 
"When you turn the system on everything doesn't kick in, everything doesn't 
come on full speed," said Gilbert. "That's a tremendous savings." 
The county will contract with Syserco Inc. of Fremont to install the new 
control systems from July through June 30, 2002. 
County officials believe that the plan will reduce demand by 700,000 kilowatt 
hours and pay for itself in about five years by reducing energy costs. 
The county has applied for a low-interest loan from the state's Energy 
Department that would cover about half the plan's costs. It is one of several 
Bay Area communities seeking such loans during the energy crisis. 
In the past two months, state officials have received $50 million worth of 
new loan applications from city and county governments. 
Before the energy crisis, the department would average between $5 and 10 
million in loan applications, said Virginia Lew, project manager for the 
department's Energy Partnership Program. 
San Francisco is set to receive $5 million in loans for replacing inefficient 
lighting at San Francisco General Hospital and city traffic signals. 
Solano County will receive $1.1 million for lighting and efficiency projects 
similar to those in Contra Costa, while Santa Rosa was given $1.5 million for 
water and wastewater treatment facility upgrades. 
Oakland officials are awaiting approval of the city's application for about 
$400,000 for a combination of lighting and ventilation efficiency projects. 
e-mail Jason B. Johnson at jbjohnson@sfchronicle.com 
<mailto:jbjohnson@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 17 








Lawmakers devise rival bailout plans for Edison 
Push to come up with alternative to bankruptcy before recess 
Lynda Gledhill, Chronicle Sacramento Bureau <mailto:lgledhill@sfchronicle.com>
Wednesday, July 18, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/18/
MN76320.DTL>
Sacramento -- Lawmakers are struggling this week to agree on a plan to keep 
Southern California Edison from declaring bankruptcy as they rush to complete 
business before Friday's scheduled summer recess. 
After months of talking about a solution and dismissing one agreed to by 
Edison and Gov. Gray Davis, lawmakers now have several competing proposals to 
consider. 
A plan introduced last week by Assembly Speaker Robert Hertzberg, D-Sherman 
Oaks (Los Angeles County), was debated for several hours yesterday, along 
with a GOP-backed alternative by Assemblyman Roderick Wright, D-Los Angeles. 
The two plans, which are scheduled for votes today in the Assembly Energy 
Costs and Availability Committee, take sharply different approaches: 
-- Hertzberg's plan would pay $2.4 billion for Edison's transmission lines to 
help cover the utility's estimated $3.5 billion debt. The utility would be 
allowed to pay off its remaining debt by issuing bonds. 
The utility would repay the bonds using ratepayer money. For the first two 
years, all customers would pay for the debt, but after that the largest users 
would pay off the rest. 
-- Wright calls his plan a "straight bailout." It would allow the utility to 
issue bonds to cover all of its debt and impose a $2 a month rate increase 
for all users until the debt is paid. 
The Senate also introduced its own plan. A bill by Sen. Byron Sher, D-Palo 
Alto, would give the state a five-year option to buy the transmission lines 
and would have the state back only $2.5 billion of the utility's debt. 
Since Davis announced a deal with Edison earlier this year, lawmakers, 
business groups and consumer advocates have all expressed reservations with 
one aspect or another of it. Opposition has usually focused on the state 
purchase of Edison's transmission lines. 
The flurry of activity this week is an effort by lawmakers to take some kind 
of vote before they adjourn. The Edison agreement has an Aug. 15 deadline for 
approval by the Legislature. 
Brian Bennett, a spokesman for Edison, said creditors view that date as 
extremely important. 
"We're as close to bankruptcy as our creditors want us to be," he said. "Is 
it a drop dead date? I don't know, but it is clearly an important date." 
Consumer groups have denounced Wright's plan, and at least one calls 
Hertzberg's proposal just another bailout and said it would cost Californians 
$6.7 billion over the next 10 years. 
"We cannot be seduced by big businesses paying a bailout tax," said Doug 
Heller, a consumer advocate with the Foundation for Taxpayer and Consumer 
Rights. "At the end of the day, we know businesses will pass these costs on 
to the consumer." 
Included in the 76-page Hertzberg bill are provisions that would allow large 
companies to buy their power directly from a provider instead of going 
through the utility after 2003. 
But a coalition of large business groups also said they are strongly opposed 
to the plan because it does not allow for immediate direct access. 
"Ultimately, we think our companies buying power for themselves is the best 
solution," said Jack Stewart, president of the California Manufacturers and 
Technology Association. "If businesses think there's a light at the end of 
the tunnel where they see lower rates coming, they might tough it out and 
stay." 
Wright argues that the beauty of his proposal is that it could easily apply 
to the Pacific Gas and Electric Co. service area if the company wanted to use 
it as a way out of bankruptcy court. He estimates that PG&E customers would 
pay about $4 a month to help the company pay off its debt. 
"This is a straight bailout," Wright said. "This is not a hidden bill. There 
are extras." 
Wright said he believes his constituents would rather pay an extra $2 than be 
unemployed because their business left the state due to high energy costs. 
Business groups said the idea makes sense. 
"What good would it do to have your electricity bill reduced by $10 or $15 
but not have a job?" said Bill Hauck, president of the California Business 
Roundtable. 
Whatever plan is eventually authorized would be used to convince the PG&E 
bankruptcy judge to follow a similar model for that company, giving the state 
those transmission lines as well. 
The purchase of the transmission lines has been at the center of Davis' plan. 
He argues that the purchase will give the state the ability to upgrade the 
system, allowing a better flow of power between Northern and Southern 
California and a decreased chance of blackouts. 
But opponents argue that the state is getting one-third of a complicated 
system that will cost billions to upgrade and operate. 
"It's like buying a car with three wheels -- it is not going to get out of 
the lot," consumer advocate Heller said. 
E-mail Lynda Gledhill at lgledhill@sfchronicle.com 
<mailto:lgledhill@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 14 




News briefs on the California power crisis 

Wednesday, July 18, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/18/state
0913EDT0146.DTL>
(07-18) 06:13 PDT (AP) -- diuriegr1 ?By The Associated Press?SAN DIEGO (AP) -- County supervisors want to eliminate a $100 fee for ?installing solar power systems to spur interest in the alternative energy ?source. ?Supervisor Ron Roberts proposed waiving the fee at the board's Tuesday ?meeting. A new ordinance may be ready for the supervisors' approval in two ?months. ?The fee is charged to homeowners who live in the unincorporated areas of the ?county. Solar power systems for hot water heaters can cost about $4,000 and ?home units can cost about $26,000. ?The county has been issuing more permits for solar units this year and ?expects to issue 250 permits by December. Two years ago, the county issued ?only 12. ?TEMECULA, Calif. (AP) -- An Indian burial ground sits in the way of a ?proposed power-line route and tribal members have asked U.S. Sen. Barbara ?Boxer to help preserve the site. ?Boxer, D-Calif., last week introduced an amendment to the Interior ?Appropriations bill that would place more than 700 acres of land owned by the ?Pechanga tribe in a federal trust. If approved, the legislation would allow ?the tribe to bypass the procedure review by the Bureau of Indian Affairs. ?San Diego Gas & Electric wants to run a 500,000-volt power line through the ?area. The $271 million route would run through southwestern Riverside County ?and link the utility's grid with one operated by Southern California Edison. ?SDG&E officials said the proposed federal legislation wouldn't derail the ?company's project. ?"I don't think it jeopardizes the project," said SDG&E spokeswoman Jacqueline ?Howells. "There are variations of our line that don't require that land, and ?there are alternatives further west." ?The state's Public Utilities Commission must still approve the project. ?The tribe recently purchased the site, which has one of the state's oldest ?oak trees. It is also home to several village sites and areas used for ?cremation. Tribal chairman Mark Macarro said the amendment wasn't ?specifically meant to block the power line project but rather to preserve the ?land from development. ?,2001 Associated Press ???????State's largest utility sues state seeking millions in power contracts seized ?by governor ?DAVID KRAVETS, Associated Press Writer?Wednesday, July 18, 2001 ?,2001 Associated Press ?URL: ?<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/18/natio?nal0848EDT0542.DTL>?(07-18) 05:48 PDT SAN FRANCISCO (AP) -- ?California's largest utility has sued the state seeking reimbursement of ?millions of dollars in energy contracts seized by the governor. ?San Francisco-based Pacific Gas & Electric Co. "has received no compensation ?for the damage to its property," the company said in a lawsuit filed Tuesday ?in San Francisco Superior Court. ?PG&E filed for bankruptcy protection in April and is struggling to repay ?$14.4 billion to thousands of creditors. ?Gov. Gray Davis seized the energy contracts on Jan. 31 to keep the California ?Power Exchange from liquidating them. The now-defunct exchange, which had ?been the state's middleman for buying and selling power, wanted the contracts ?to recoup hundreds of millions of dollars that PG&E owed it. ?The governor's office acknowledged that California owes PG&E for the ?contracts, an amount that Davis wants a judge to determine. At the time they ?were seized, the state estimated their value at $160 million, while the power ?exchange priced them at $347 million. ?"We seized the contracts to have reasonable priced power and expected that ?price to be set in a neutral forum," said Steve Maviglio, the governor's ?spokesman. ?Under the contracts, the state buys electricity at a set price rather than ?paying higher prices for power bought at the last minute. Therefore, the ?contracts' value changes with the volatile price of electricity. ?"We believe the state has benefited from the value of our contracts, and as a ?result we should be compensated," PG&E spokesman Ron Low said. ?Low declined to place a value on the contracts. ?,2001 Associated Press ?????Surplus state power sold at loss ?Posted at 11:50 p.m. PDT Tuesday, July 17, 2001 ?BY JOHN WOOLFOLK ??Mercury News ???State officials who bought power contracts averaging $138 per megawatt-hour ?for this month are selling some of the power back for as little as $1 per ?megawatt-hour, traders say. ?After scrambling this spring for every megawatt it could buy to stave off ?summer blackouts, cool weather and decreased demand have left the state ?holding more power than it needs and selling the surplus for whatever it can ?get. ?State officials won't say how much they are selling the power for, but ?acknowledged unloading surplus electricity. ?``We're seeing certain times of the day where we may not need power that we ?previously thought we needed, and we're selling it on the open market,'' said ?Oscar Hidalgo, spokesman for the state Department of Water Resources. ``We're ?probably moving a little more power than we anticipated, but I don't think ?anybody anticipated a July like we're experiencing.'' ?Utilities routinely sell surplus contract power when demand is lower than ?expected. But the state's recent sell-off could fuel criticism that ?California bought too much power at too high a price, fearing rolling ?blackouts and soaring prices this summer. ?``There's a painful lesson to be learned when you overbuy when supplies are ?tight,'' said Gary Ackerman, executive director of the Western Power Trading ?Forum. ``Anybody can lose money in this business, and the state of California ?is getting a taste of that.'' ?The state in the past week has sold anywhere from 10 to 20 percent of its ?available power, Hidalgo said. On Tuesday, the state had up to 40,000 ?megawatts available, while demand hovered around 32,000 megawatts, according ?to the power grid operator. ?Must be sold ?Because electricity cannot be stored, power purchased in contracts for a ?later date would be wasted if not used or sold. ?``It's better than losing it altogether,'' Hidalgo said. ``The way the ?electricity business is set up, you either use it or move it. You can't put ?it in a bottle and put it on a shelf.'' ?State officials would not say how much they've made in sales to offset ?purchase costs, citing concerns about jeopardizing their bargaining position. ?According to California Energy Markets, a trade weekly, the state was ?unloading power last Thursday at $25 per megawatt-hour. Ackerman said the ?state has been selling power for as little as $1 to $5 per megawatt-hour. ?Power was selling on the spot market for $20 to $40 per megawatt-hour ?Tuesday. ?The state, which assumed the role of power buyer for California's biggest ?utilities in January, expected to sell surplus power from time to time, ?although not quite this much, Hidalgo said. Even with demand down, the state ?still is buying more power than it sells, he said. ?With temperatures throughout the West unseasonably low in recent weeks, other ?utilities also are selling their surplus power at a loss. ?``That's an accepted operating risk we always assume,'' said Scott Simms, ?spokesman for Portland General Electric, adding that recent federal price ?caps are lower than what the Oregon utility paid. ``Sometimes you gain, ?sometimes you lose. Hopefully, if you planned well, you end up winning.'' ?Whether the state planned well or overbought is hard to say. The contracts ?could prove invaluable if another heat wave threatens blackouts. Ackerman ?likened power contracts to insurance -- a prudent move to guard against ?shortages and price spikes, even if it turns out you don't need it. ?At the very least, the current situation underscores the importance of ?weather in the volatile electricity market. Traders pore over forecasts and ?even buy weather insurance, Ackerman said. ?Demand and prices have been so low that some energy companies are shutting ?down the small power plants called ``peakers.'' ?Hidalgo said the state has no regrets. ?``What we were doing was making sure we had an available supply with these ?contracts,'' Hidalgo said. ``We were facing scarcity in the market early on. ?There wasn't enough supply to fulfill the need. What the contracts have done ?is obligated the producers to give us power.'' ?Blackout threat fades ?The state's daily power costs have fallen from more than $100 million in May ?to less than $26 million in July, Hidalgo said, and there hasn't been a ?blackout in two months. While some of the surplus power is sold on the ?market, it is also being traded to Northwestern hydropower utilities to cover ?past debts, he said. ?``This is not a bad position for us to be in,'' Hidalgo said, adding that the ?situation could always take a turn for the worse. ``We can't lose sight of ?the fact that we're still in an emergency situation. If this was routine, ?this crisis would be over. We're not out of the woods.'' ???Contact John Woolfolk at jwoolfolk@sjmercury.com ?<mailto:jwoolfolk@sjmercury.com> or (408) 278-3410. ????????Light bulb moment ?Published Wednesday, July 18, 2001, in the San Jose Mercury News ?NOW it all makes sense. Dick Cheney hasn't been pushing to drill for more oil ?and gas because of his pals in the energy business. It's because of his ?electric bill. ?The veep mansion, it turns out, consumes electricity the way a 1965 ?Oldsmobile burned gas. The bill for this year -- $186,000 -- shouldn't have ?to come out of Cheney's budget, the White House says. It should be paid by ?the Navy, which owns the property. ?No way, we say -- unless the house lights have some national defense value. ?Perhaps blinding the pilots of incoming fighter jets? ?The Bush team says California should just face up to market prices. So why ?not Cheney? ?But there is an alternative, as we've discovered out here. Conservation. It ?works. Really. ?Cheney's got a 33-room house. Do they all have to be lit up all the time? ?????Business; Financial Desk ?California Trading, Wholesale Power Boost Duke's Earnings 27%?THOMAS S. MULLIGAN??07/18/2001 ?Los Angeles Times ?Home Edition ?Page C-2 ?Copyright 2001 / The Times Mirror Company ?Pushed by the explosive growth of its trading and wholesale-power businesses, ?Duke Energy Corp. on Tuesday reported a 27% increase in second-quarter ?profit, narrowly topping Wall Street estimates. ?Duke's net income was $419 million, or 53 cents per share, in the quarter ?ended June 30, up from $329 million, or 44 cents, in the year-ago quarter. ?The consensus estimate of industry analysts was 52 cents per share. ?Revenue for the quarter leaped 43% to $15.6 billion. ?Shares rose 38 cents to close at $42.03 on the New York Stock Exchange. ?Charlotte, N.C.-based Duke, like other out-of-state independent power ?producers, is under fire from Gov. Gray Davis for allegedly overcharging for ?electricity from its California generating plants. ?Duke does not break out its California results, but its profits from soaring ?spot-market prices in California during the quarter probably amounted to no ?more than a penny or two per share, according to analyst Jeff Gildersleeves ?of Argus Research in New York. ?California accounts for about 10% of Duke's U.S. wholesale-power business, ?and about 90% of its California power is sold through long-term contracts ?rather than on the spot market, the company has said. ?Those long-term contracts are a source of worry for investors, Gildersleeves ?said. Neither Duke nor the state has disclosed whether the contract prices ?can be adjusted downward if spot-market prices fall, he said. If the prices ?are not firm, it could represent a risk to future profits, he added, ?especially if spot prices continue to fall. ?Duke's North American Wholesale Energy business unit posted second-quarter ?operating earnings of $251 million, up 128% from $110 million a year earlier. ?Analyst Timothy M. Winter of A.G. Edwards in St. Louis said the overall ?quarter was "very good," considering that Duke's earnings from its ?regulated-utility business in North and South Carolina actually were flat ?because of mild weather, a slowing economy and increased costs associated ?with some nuclear generating facilities being out of operation. ???PHOTO: Duke, which owns a plant in Morro Bay, beat analyst estimates.; ; ?PHOTOGRAPHER: CAROLYN COLE / Los Angeles Times ?