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	Miyung Buster@ENRON_DEVELOPMENT
	02/28/2001 10:02 AM
		 
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		 cc: 
		 Subject: Energy Issues

Please see the following articles:


Governor Renews Criticism of Regulators 
LA Times, 2/28/2001
Energy Crisis Fails to Hamper Selling of California Bonds 
LA Times, 2/28/2001

Energy Crisis Is a Benefit to Redding
SF Chronicle, 2/28/2001

		
Davis: Power-crisis fixes almost finished 
Sac Bee, 2/28/2001

Davis passed up Duke Energy's deals
Contra Costa Times, 2/28/2001

Davis fights for backing, takes state plan to D.C. 
San Diego Union Tribune, 2/27/2001


Duke Energy Suspends Suits Vs. Calif. 
AP, IndividualNews.com, 2/28/2001

Calif. Optimistic About Power Line 
AP, IndividualNews.com, 2/28/2001

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Wednesday, February 28, 2001 

Governor Renews Criticism of Regulators 

Power: The governor implies that the panel is too ideological. Its approval 
is needed if California is to purchase the electricity transmission grid. 

By DAN MORAIN and NANCY VOGEL, Times Staff Writers 

?????WASHINGTON--Gov. Gray Davis, trying to win support for California's plan 
to buy a huge stretch of the state's electrical transmission system, took a 
swipe Tuesday at the federal commission that must bless such a deal.
?????Davis noted that President Bush has an opportunity to fill two vacancies 
on the five-member Federal Energy Regulatory Commission and will determine 
its chairman.
?????"It is my hope," Davis said, "that whoever the president chooses is a 
practical businessman or woman who lives in the real world and understands 
that when you inherit a mess, your job is to fix it, right the ship and move 
forward--as opposed to being a rigid adherent to ideology."
?????Earlier this year, Bush appointed Curt Hebert Jr., a strong free-market 
proponent who has served on the commission since 1999, as chairman. But he 
can change that appointment.
?????Hebert, a 38-year-old attorney and former Mississippi lawmaker, has said 
Davis' plan to have California buy 32,000 miles of high-tension power lines 
from the state's ailing utilities would amount to "nationalization" and might 
not be in the public interest.
?????The commission has been a strong advocate of electricity deregulation 
and, in addition to the dispute over purchase of the power grid, Davis has 
criticized its members for refusing to impose limits on soaring wholesale 
power prices, which bled California utilities of billions of dollars in the 
last nine months.
?????"We have practical problems we have to solve," he said, citing the 
billions of dollars the utilities owe power generators and banks. "My hope is 
that [Bush] places people on the FERC who understand real-world 
considerations."
?????Hebert could not be reached for comment Tuesday. The commission's two 
other members, William L. Massey and Linda K. Breathitt, Democrats appointed 
by former President Bill Clinton, were also unavailable. There are two 
vacancies on the panel.
?????Davis spoke after conferring for 30 minutes with U.S. Energy Secretary 
Spencer Abraham about the state's proposal to help the financially ailing 
utilities by purchasing the power grid. He presented Abraham with a nine-page 
memo detailing the plan and said the energy secretary would probably give him 
his views on the plan by the end of the week.
?????Last week, the governor struck a tentative deal with Southern California 
Edison to buy its portion of the grid for $2.76 billion, more than twice the 
book value. He is working on similar deals with Pacific Gas & Electric and 
San Diego Gas & Electric. Utilities could use money from the sale to 
restructure their multibillion-dollar debt.
?????Although Abraham has no direct authority over the energy commission, he 
presumably holds influence with Bush, and Davis came away from their 
conversation buoyed.
?????"If he would endorse the plan," Davis said, "that would be a leg up in 
getting FERC's approval. . . . I hope by the end of the week he will be able 
to endorse the proposal or at least endorse a modified proposal that is 
satisfactory to us.
?????"Believe me," Davis said, "I've been in enough meetings to know when 
someone is trying to be helpful and when someone is not. [Abraham] is trying 
to be helpful. He wants this problem solved, and . . . I believe he will 
support our proposal to get Southern California Edison back into the energy 
business."
?????Under federal law, the energy commission would have to approve 
California's purchase of the steel towers and aluminum wires of its three 
biggest private utilities. The commission could scuttle the purchase if it 
determined that state ownership would harm the public interest--a legal 
standard that gives the agency much discretion.
?????Walter Ferguson, Hebert's chief of staff, said Tuesday that Davis' plan 
would get close scrutiny.
?????"Sure, we have to be open-minded, but I'm skeptical as to how this 
helps," he said. "How does this solve the supply issue? How does this impact 
the region? Those two questions have got to be answered, because you don't 
want to make the problem worse."
?????California's proposal runs counter to the commission's 2-year-old push 
to have transmission grids operate on a wide regional scale without heed to 
political boundaries. In some parts of the Midwest and South, private 
companies have proposed operating transmission systems for profit--a trend 
endorsed by Hebert.
?????"I assume Hebert is going to be unenthusiastic, probably very 
unenthusiastic [about California's proposal]," said Richard Pierce, a George 
Washington University law professor who has observed the commission for 
decades.
?????"Nobody at FERC is going to be real happy about a state trying to take 
away from FERC jurisdiction over a large portion of a transmission grid," he 
said. "I can't imagine any commissioner will like that. So what we're talking 
about is the intensity of their dislike and whether it will be so great 
they'll say, 'No, we won't approve it.' "
?????Consumer advocates and state Senate leader John Burton (D-San Francisco) 
have endorsed state purchase of the transmission grid as a way to get 
California out from under some federal oversight. Ownership would, for 
example, allow the state to set the transmission fees that electricity 
consumers pay. Those fees now amount to about 6% of the average utility 
customer's monthly bill and are overseen by the energy commission.
?????Burton has also argued that state ownership would give California 
greater control over its own destiny should federal officials try to force 
the West to manage its interconnected grid under a single agency.
?????Federal rules already prohibit transmission grid owners from 
discriminating, through fees or rules, against the generators and marketers 
that use their lines like highways to move electricity from power plants to 
buyers.
?????Davis, in trying to win support for state purchase of the grid, has not 
focused on the freedom from federal regulators California might gain. 
Instead, he has treated the idea as a key part of a financial transaction 
necessary to revitalize debt-ridden utilities.
?????Davis said he expects that California would operate the transmission 
system within federal restrictions.
?????"I am not looking forward to any additional regulatory burdens from 
FERC," Davis said. "Obviously, we will meet the existing regulatory burden 
that we have."
?????Whether the commission will approve a state purchase of the grid and how 
long it will take to reach a decision are unknown, Edison International Chief 
Financial Officer Ted Craver told debt holders Tuesday in a conference call. 
He characterized Hebert's recent public statements on the matter as "cryptic."
?????A decision by FERC on sale of the grid could take "many months," 
according to research released Tuesday by Fitch Inc., a credit-rating firm.
?????Fitch called the tentative agreement between Edison and the state "a 
favorable step to avoid bankruptcy," but noted that several hurdles remain, 
chiefly approval by the state Legislature and the federal commission.
?????State Sen. Steve Peace (D-El Cajon) said that if the commission rejects 
California's purchase of transmission lines, the state should simply condemn 
the property.
?????"It was President Bush who told Gov. Davis that California should solve 
this," said Peace. "Gov. Davis is doing so. Certainly President Bush would 
expect the governor to use every tool at his disposal to solve it."
--- 
?????Times staff writers Richard Simon in Washington and Nancy Rivera Brooks 
in Los Angeles contributed to this story. 
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Wednesday, February 28, 2001 

Energy Crisis Fails to Hamper Selling of California Bonds 

By MIGUEL BUSTILLO, Times Staff Writer 

?????The energy crisis is apparently not affecting California's ability to 
finance its debt.
?????California successfully sold $982 million in bonds Tuesday to provide 
funds for a variety of construction projects and already approved ballot 
measures, including last year's $2.1-billion parks bond.
?????Most of the sale, $600 million, represents new funding, while the 
remainder will be used to refinance older bonds at current, more favorable 
interest rates.
?????The general obligation bonds, overseen by state Treasurer Phil 
Angelides, will have a 4.8% rate of interest--which is actually lower than 
the last few general obligation bonds issued before the energy crisis.
?????A day before the sale, Wall Street credit-rating firm Fitch IBCA blessed 
the bond issue with a favorable AA credit rating, and reaffirmed its AA 
rating for the state's $22.6 billion in outstanding bond debt. The two other 
major rating agencies, Standard & Poor's and Moody's, rated the bonds Aa2 and 
AA, respectively.
?????In releasing its rating, Fitch analysts concluded that, although the 
energy crisis is taking a substantial toll on California's budget reserves, 
that money will eventually be repaid through a $10-billion bond issue that 
will be paid off by utility ratepayers.
?????Moreover, Fitch concluded, the state's per-capita debt of $787 is 
moderate compared with that of other states--and the California economy has 
yet to show any signs of being significantly affected by the crisis.
?????"In anything that's tangible--tax receipts, employment information--we 
have yet to see a real effect," said Fitch vice chair Claire G. Cohen.
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BUSINESS 
Energy Crisis Is a Benefit to Redding
George Raine
? 
02/28/2001 
The San Francisco Chronicle 
FINAL 
Page C1 
(Copyright 2001) 
High energy prices can create strange bedfellows. 
Just ask Morpheus Lights Inc., a powerhouse in the entertainment industry 
that has provided the lighting for the Academy Awards as well as the concerts 
of Bruce Springsteen, Shania Twain, Metallica, and Ringo Starr and his All 
Star Band. 
A fixture in Santa Clara County, the company shifted its operations three 
years ago 225 miles north of San Francisco to Redding, a city resting 
comfortably between the Cascades and the Trinity Alps that is known more for 
its Pendleton shirts and wily trout. 
The move has paid off handsomely. This city of about 78,000 has escaped the 
energy deregulation crisis that is roiling California and is, in fact, a 
seller of surplus power. 
That's good news to Morpheus, which consumes some 25,000 kilowatts a month to 
test and manufacture huge performance lighting pieces like its BriteBurst, 
which has enough power to light 3Com Park and was used in the 2000 Super Bowl 
halftime festivities. 
Morpheus is one of several success stories touted by the Economic Development 
Corporation of Shasta County, which is attempting to sell businesses on an 
outdoorsy quality of life in Redding, through which the Sacramento River 
meanders and where labor is plentiful and costs are low. 
But there's much more, the pitch goes: Redding is a unique electrical island 
unto itself, with its own electric utility and ample surplus power to sell -- 
this while investor-owned utilities mull bankruptcy and the lights and the 
patience of business owners flicker in much of the rest of California . 
Other states and regions of the country have initiated economic development 
campaigns to capitalize on California 's misfortune, seeking to lure 
businesses disgruntled by the energy crisis. 
But as much or more aggressive efforts are now being developed within 
California to convince businesses they don't need to leave because there are 
sanctuaries of electrical stability. 
NONPROFIT LOCAL UTILITY 
Redding has owned and operated its nonprofit electric utility since 1921. The 
utility purchases significant amounts of its energy from the federally 
operated Central Valley Project, through the Bonneville Power Administration 
in the Northwest, and it generates energy at its own gas-fired power plant. 
In fact, Redding Electric Utility (REU) has made so much money selling 
surplus power that it expects to pay off its debt a year from now, two years 
earlier than originally expected. 
"We are a utility that has resources in excess of our needs and that's a nice 
place to be," said Jim Feider, director of the REU. 
Several months before most Californians knew a long-term energy crisis 
loomed, the Economic Development Corporation of Shasta County, which seeks to 
attract business and the wealth it generates, began to aggressively pursue 
small and midsize Bay Area manufacturing businesses looking to expand and 
relocate. 
There is a lot of ground to make up in Shasta County, said Jim Zauher, the 
EDC president. In 1970, 19 percent of the county's workforce was in 
manufacturing and most of that was in the timber industry, which then 
tumbled. 
Since then, 4,000 jobs have been lost, and manufacturing is at 7 percent. 
That figure has been stabilized, with 1,270 new jobs in the past four years. 
The EDC has set a goal for the next five years of 1,500 jobs at $15 per hour. 
In the Shasta County-area workforce of 84,000 (71,600 in Shasta and another 
12,400 in Tehama County), a consultant's survey has identified 18,000 
underemployed workers who have the skills, education and experience that 
qualify them for a better job, said Zauher. 
Two weeks ago, the Shasta County EDC retained a Silicon Valley insider, Bill 
Haerle, former vice president for government relations and national accounts 
at the American Electronics Association, and former MCI executive, as a 
consultant. The EDC wants Haerle to create access to "low-tech" or "mid-tech" 
manufacturers. 
"First, a company has to decide the threshold question, whether it can 
operate in the greater Redding area. Then they look at the cost of doing 
business and a large component of that is a reliable source of reasonable 
energy. The third is the labor pool," said Haerle. 
STAYING IN STATE 
"Shasta County offers a solution without leaving the state. But this is a 
highly sensitive issue and we don't want to appear to be poaching," he said. 
"We are looking for smaller companies that could flourish in the greater 
Redding area." 
Haerle has yet to reel in a company, but the path has been cleared by 
Morpheus Lights, which moved up nearly three years ago, and a handful of 
other small and midsize businesses in the past year. 
In addition to energy savings, Morpheus has seen other dividends. The 
lighting company, which was paying $1.55 a square foot for space in Santa 
Clara, pays approximately 25 cents per square foot in Redding. This enabled 
the company to move from a 30,000-square-foot space in Santa Clara to one 
with 42,000 square feet in Redding. 
The extra space enables concert tour stage and lighting designers to conduct 
rehearsals with the computerized systems at the Redding site, said Dan 
English, Morpheus' vice president of operations. 
"We can be anywhere, as long as it's close to a major freeway, because the 
equipment travels by truck. There's I-5," said English. 
Nearby, Knauf Fiber Glass of Shelbyville, Ind., a leading U.S. manufacturer 
of thermal and acoustical fiber-glass insulations, is building a $140 million 
plant in Shasta Lake City. Some 2,000 people have applied for the plant's 150 
jobs. 
Shasta Lake City, too, has its own utility but does not generate power. It 
buys power from the federal government and also contracts with Enron for 
supplemental needs, and is negotiating for more to ensure a 24-hour operation 
for Knauf. 
Redding's energy situation is enviable. The REU reaches its demand peak at 
215 megawatts in the summer, when its has access to between 285 and 300 
megawatts, said director Feider. The excess is sold. 
SELF-SUFFICIENCY GOAL 
In the early 1990s, REU made a strategic decision to make costly capital 
expenditures so that it could be more self-sufficent instead of being subject 
to market conditions, said Feider. 
When the electricity deregulation bill was signed in 1996, REU worried that 
with its debt of $300 million from those improvements it would be at risk in 
a competitive environment. As a result, it decided in 1997 to eliminate it 
with a controversial 23 percent surcharge on customer bills. 
The rates went from 8 cents a kilowatt hour to 10 cents, and the plan in 1997 
was for the surcharge to continue through 2004. But Redding has prospered in 
the surplus power market and now expects to eliminate the surcharge in early 
2002. 
Now, if everything goes according to form, the district could see a return to 
a rate of 8 cents, said Feider. 
Kevin Risse moved his Risse Racing, a high-end bicycle component 
manufacturer, from Sunnyvale in June 2000. "We came up and heard the spiel 
and power was one thing and, in hindsight, it turned out to be pretty 
important," said Risse. 
In Sunnyvale, his PG&E bill was $2,000 a month. In Redding, he pays from $800 
to $1,000 monthly. Risse moved from a 4,000-square- foot space to an 
8,000-square-foot building and cut his rent by more than half. It fell from 
$1 per square foot to 35 cents, said Risse, whose company builds bicycle 
shock absorbers and forks. 
"There are things we miss about the Bay Area, culturally, but, at the same 
time, I lived in Redwood City and sometimes it was a 20- minute commute and 
sometimes one hour and 20 minutes," he said. 
"There are people who worked for me with rents going up and they are caught 
in a loop and there's nothing they can do. But now they're paying $400 a 
month in Redding rather than $1,000 in the Bay Area." 
Chris King Precision Components, also a maker of sophisticated bicycle 
components, was synonymous with Santa Barbara for 25 years, but the tight 
labor market and cost of living for blue-color workers no longer made 
economic sense, said King, who now employes 60 people in Redding. 
King said that in 1996, he placed an ad for an assembly worker and got 50 
applications. In 1999, he placed the same ad and got one application. "The 
labor market was strangling us," he said. 
In Redding, he received 2,000 applications for jobs at his plant, where he 
will employ about 100 this summer. "But there is a lot of chaff in this 
area," he said of the labor pool. "It's a low-cost area that has 
traditionally gone boom and bust, mostly bust," said King. 
King said he is confident he can maintain a blue-collar workforce adequate to 
the test of manufacturing what he described as the "Rolls Royce" standard in 
the bicycle industry. However, he said he has concerns about his ability to 
attract higher-paid designers with degrees in mechanical engineering. 
"You can go skiing in 45 minutes, and the environmental part of the equation 
is pretty incredible," King said of the Shasta County area. "But there's no 
foreign film theater here, no culture. There's middle-class shopping, and you 
need to entertain executive people or engineers or creative people. Unless 
they like fishing." 


PHOTO (2); Caption: (1) Dan English and Lisa Pendegrast displayed some of 
their lights for rock 'n' roll concerts inside the Morpheus Lights testing 
facility in Redding, (2) Chris King, who moved his bicycle component plant to 
Shasta County a year ago, said he's happy he made the move after learning 
that his old site in Santa Barbara was experiencing rolling blackouts. / John 
Storey/The Chronicle 
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Davis: Power-crisis fixes almost finished 
By David Whitney
Bee Washington Bureau
(Published Feb. 28, 2001) 
WASHINGTON -- California Gov. Gray Davis said Tuesday the state is two weeks 
to a month away from completing all the "legislative fixes" to its 
electricity crisis, and that with "a little luck and a lot of conservation" 
he hopes to avoid power blackouts this summer when demand is at its peak. 
"I see light at the end of the tunnel and it's not a train," Davis said 
during a luncheon speech before the California State Society. "It is the 
lights staying on in the state." But the governor, who spent much of his time 
here at the National Governors Association's winter meeting fending off 
questions about the state's power situation, left for New York City on 
Tuesday afternoon without any firm endorsements from the Bush administration. 
And despite his rosy recap of his administration's progress, he acknowledged 
that difficult work remains before deals can be reached to revive 
cash-starved utilities teetering on bankruptcy, particularly Pacific Gas and 
Electric Co. 
Davis said that he thought he might have an agreement soon -- perhaps by the 
end of the week -- with Southern California Edison permitting it to sell 
revenue bonds to repay debts to power wholesalers in exchange for state 
acquisition of their electric transmission lines. 
"PG&E is taking a little longer," the governor said. "Its debt is two times 
as big. It's a little more complicated situation -- two, three four weeks at 
the outside and we'll have PG&E worked out." 
PG&E declined to comment on the governor's timetable, but spokesman John 
Nelson confirmed that company officials will take part in talks with the 
Governor's Office this week. 
Deals to take over the utilities' power lines would put the state in the 
electricity transmission business, even though it's intention is to lease the 
day-to-day operations back to the utilities. But Davis said the deals would 
complete "all the legislative fixes" and put the state on course toward 
stabilizing supplies and price. 
"Does this mean we are home free and don't have to worry about anything?" the 
governor said. "No, but it means we are basically on the downside of the 
problem." 
Striking deals with the utilities is not the only remaining problem, however. 
State purchase of the transmission lines would require approval by the 
Federal Energy Regulatory Commission. 
Davis was scouting for help Tuesday from Energy Secretary Spencer Abraham on 
that front. 
In a brief meeting with reporters, Davis described Abraham as "open" to the 
transmission line purchase. Davis said he presented the secretary with a 
nine-page memo on the Southern California Edison transaction, and Abraham 
said he'd review it and get back to the governor by the end of the week. 
"If he would endorse the plan, that would be a big leg up in terms of getting 
the FERC's approval," Davis said, even though Abraham cannot simply order the 
FERC to approve the deal. "I hope by the end of the week he'll be able to 
endorse the proposal or at least endorse a modified proposal that is 
satisfactory to us." 
In his speech to the California State Society, an organization of 
Californians who live and work in the Washington area, Davis said the state 
is on course to add new generating plants over three years so that supply 
exceeds demand. 
But to make it through the summer, Californians are going to have to work 
hard to reduce consumption, he said. Residences are being asked to curb usage 
by 10 percent, and mechanisms are in place to squeeze similar savings from 
industries and commercial buildings through mandatory curtailments and cash 
incentives. 
"We are practicing what we preach," Davis said. 
He said his wife has turned down the thermostat in their home to 55 degrees. 
"I go to bed with a heavy sweat shirt on, sweat pants, three blankets and a 
comforter," Davis said. "Going to the kitchen is like going to Antarctica. My 
office is so dark at night you could develop film in it." 
Davis meets today with analysts on Wall Street, where he will carry forward 
the same message he delivered Tuesday -- that California is on the road to 
energy self-sufficiency. 
"We'll have utilities back in business paying their bills," he said. "We'll 
have long-term contracts for power at greatly reduced prices. We'll have a 
very aggressive conservation program. And we'll have a public power authority 
not unlike New York, the state of Washington and Tennessee." 
Bee staff writer Carrie Peyton contributed to this report.
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Published Wednesday, February 28, 2001 
Davis passed up Duke Energy's deals
The supplier's offers last summer could have helped avoid blackouts this year 
By Mike Taugher
TIMES STAFF WRITER 
As the California energy crisis was beginning to brew last summer, one of the 
state's largest electricity suppliers made Gov. Gray Davis a pair of offers 
to smooth the state's energy convulsions. 
Looking back, the governor may be regretting that he dismissed the proposals. 
Duke Energy said it could sell enough electricity for 2 million homes for 
five years at what is now considered a very low price of $50 per 
megawatt-hour. 
And Duke said that if the governor helped speed up permits, the company could 
build enough new portable units to power an additional 500,000 homes. 
Those offers embodied what has become two of the governor's top strategies in 
dealing with the crisis -- stabilizing the price of electricity through 
relatively long-term commitments and boosting generation to avoid blackouts 
this summer. 
As it was, though, Duke spokesman Tom Williams said his company never 
received a response to its July 31 proposal. 
In hindsight, Davis' inaction could prove costly. The governor's campaign to 
enter into long-term deals for electricity has produced just a handful of 
modest contracts, and there is some doubt that the governor's goal to speed 
up construction of small portable power plants to power millions of homes 
will be reached by summer. 
"We're pleased he's got that sense of urgency," Williams said. "We displayed 
that sense of urgency on July 31." 
Davis spokesman Steve Maviglio said at the time the offer was made, Duke's 
proposal was expensive and there was uncertainty about how the energy crisis 
would take shape. In hindsight, the Duke proposal "seems like the deal of the 
century today," Maviglio said. "The question is, where's that offer today? 
... They're not at the table now with a reasonable offer." 
Had the governor decided to help Duke get permits for the new "peaker 
plants," he could already be halfway to his goal of getting 1,000 megawatts 
worth of new peaker plants by this summer. 
Now, however, Duke says its offers are off the table. The units the company 
would have used in California are now committed to the Midwest, and Duke has 
become hesitant to invest more money in a state where it has more than $400 
million in uncollected power bills from the state's utilities, according to 
Williams. 
Moreover, Williams and others said it would be difficult for energy companies 
to meet Davis' goal of 1,000 megawatts from new peaker power plants by summer 
because, even under a new speedy permitting process announced by Davis three 
weeks ago, it still can take months to line up equipment and get it 
constructed and on line. 
The dilemma for California this summer shapes up like this: various estimates 
predict that the amount of electricity that will be available will fall short 
of demand by 5,000 megawatts to nearly 7,000 megawatts, or enough electricity 
to power 5 million to 7 million homes. 
Davis has called for enough conservation to cut demand by 3,700 megawatts and 
has unveiled initiatives he hopes will boost generation by 5,000 megawatts. 
If successful, that would be enough to avoid rolling blackouts this summer, 
according to state energy officials. 
Nearly half of the new generation sought by Davis would come from peaker 
plants, including 1,000 megawatts of new peaker plants that the governor 
wants to attract to the state and another 1,300 megawatts from peaker plants 
to be built by energy firms that have signed contracts with the California 
Independent System Operator. 
There is uncertainty on both counts. The Department of Water Resources, which 
has stepped into the energy-buying field because of the financial collapse of 
the utilities that have backed the ISO's purchasing, is attempting to 
renegotiate some of the contracts energy companies entered into with the ISO. 
That has alarmed some contractors. 
And even if no agreements are scuttled through renegotiations with the water 
resources agency, the ISO never figured on seeing all 1,300 megawatts it 
signed up for to actually materialize. 
"We viewed the prospect of getting all 1,300 megawatts as unlikely," said 
Brian Theaker, ISO's manager of reliability contracts. "It was going to be 
very difficult, if not impossible, for all 1,300 megawatts to hit the 
ground." 
And even with a speedier licensing process, it might be difficult to get the 
other 1,000 megawatts of new peakers built in time for summer. 
"If you don't have the equipment in hand, it's very difficult to get it at 
this late stage of the game," Theaker said, citing conversations with 
industry officials. 
Still, state officials are confident that the governor's goals to boost power 
production from peaker plants and through increased energy conservation will 
work. 
"With increased generation and the reduction in demand, we should be able to 
avoid rolling blackouts this summer," said Energy Commission spokeswoman 
Claudia Chandler. 
Chandler said the new peaker plants, which can be transported on a flatbed 
truck and can be as small as a large backyard storage shed, still could be 
running by summer if applications are filed by mid-April. 
But the Energy Commission has yet to receive a single application for a new 
peaker power plant. 
"That kind of is putting us on pins and needles," Chandler said. "We are 
talking to developers, though. They indicate they will be submitting 
applications late this week or next." 
Meanwhile, Davis met in Washington, D.C., with Energy Secretary Spencer 
Abraham to discuss California's plans to buy 26,000 miles of electricity 
transmission lines now owned by three financially troubled utility companies. 
Speculation has surfaced in recent days that federal regulators are opposed 
to the plan and would reject it. Curtis Hebert, the chairman of the Federal 
Energy Regulatory Commission, has said the state takeover of the lines would 
be "against the best interests of the American public." 
A spokeswoman for the regulatory commission said Tuesday the panel has not 
discussed or taken a position on the California plan. 
Hilary McLean, a spokeswoman for the governor, characterized Davis' meeting 
with Abraham as "productive" and said the two had pledged to work together 
and continue discussing the issue. 
Davis is scheduled today to fly to New York, where he will meet with Wall 
Street analysts, before flying back to California tonight. 
Staff writer Andrew LaMar contributed to this story. 
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Davis fights for backing, takes state plan to D.C. 



'Lots of people' in capital wary of transmission-grid takeover
By Toby Eckert?
COPLEY NEWS SERVICE 
February 27, 2001 
WASHINGTON -- Gov. Gray Davis, worried about possible federal opposition to 
the state's plan to take control of California's power transmission system, 
said he will lobby Energy Secretary Spencer Abraham on the plan in a meeting 
today. 
"Clearly, we have to persuade lots of people in Washington that what we're 
doing is the right thing," Davis said yesterday, citing recent news reports 
that indicate opposition to the plan from the head of the Federal Energy 
Regulatory Commission, or FERC. 
The commission appears to have authority over approving the plan. 








Hydropower net needs a 'miracle' 
Edison: No more money to bury power lines underground 
? 



After joining other governors in a wide-ranging meeting with President Bush 
at the White House, Davis also said "there may be some give" on the Bush 
administration's opposition to price controls on wholesale electricity if 
power generators are assured a healthy profit. He did not elaborate. 
A White House spokeswoman said she was unaware of any change in the 
administration's stance on price controls. 
FERC Chairman Curtis Hebert has declined to comment on how the commission 
might rule on California's plan to acquire 26,000 miles of utility-owned 
electricity transmission lines as part of a strategy for solving the state's 
power crisis. 
But in an interview with the Dow Jones news service last week, he indicated 
the plan may run counter to FERC's policy of encouraging the development of 
regional transmission organizations, or RTOs, to manage access to power 
grids. 
"Anything that moves in the opposite direction of RTOs .?.?. is against the 
best interests of the American public," he was quoted as saying. 
Davis said Hebert's comments "raised concerns in my mind. And I want 
Secretary Abraham to understand the motivation for doing this is to solve the 
problem, allow the utilities to get back into business, pay off the 
generators and the banks, and begin to stabilize the market." 
While Abraham does not have direct authority over the issue, he is part of an 
energy policy team appointed by Bush. Davis sees winning Abraham's backing of 
the plan as a possible key to federal approval. 
"I think that team's assessment of the progress we're making will have a lot 
to do with how Washington responds, including the FERC," Davis said. 
Davis will also pitch his plans for ending the crisis to Wall Street analysts 
tomorrow. However, he said he had no meetings planned with FERC officials. 
The Democratic governor acknowledged that many California Republicans are 
philosophically opposed to the state buying the transmission lines. 
"Some people in Washington, I think, see this as more of an ideological 
statement" by the Democrat-controlled state government, Davis said. "As a 
governor, I see it as a practical solution to a problem we're trying to deal 
with." 
The state wants to acquire the transmission system from Pacific Gas and 
Electric, Southern California Edison and San Diego Gas and Electric as a 
condition for helping the utilities pay off some $13 billion in debt they 
have accumulated. The debt is a product of soaring costs for wholesale power 
that the utilities have been unable to fully recover from consumers under 
state law. 
Davis announced a tentative agreement last week to buy Edison's power lines 
for $2.76 billion. 
The purchase plan also will allow the state to upgrade the transmission 
system and fix bottlenecks in the flow of electricity within California and 
from neighboring states such as Arizona, Davis said. 
He and other governors stressed the importance of improving the power grid in 
a discussion yesterday with Abraham, Environmental Protection Agency 
Administrator Christie Whitman and Interior Secretary Gale Norton. 
"We'll need federal approval and, hopefully, federal assistance on the 
financing of those improvements" in California, Davis said. 
The governor has tangled with FERC on numerous aspects of the power crisis. 
The commission, which has authority over the wholesale power market, has 
resisted Davis' proposal to cap wholesale prices in the West. Bush and 
Abraham have, too. 
But Davis suggested that temporary "cost-plus" price limits -- in which 
wholesale rates would reflect the cost of producing the power, plus a set 
profit margin -- may still be an option. 
In San Diego yesterday, House Speaker Dennis Hastert, R-Ill., emphasized that 
California needed to resolve its own energy problems and rework its 
deregulation plan. But Hastert held out the possibility of caps on the 
wholesale price of electricity, which have bipartisan support from California 
representatives and senators. 
"Maybe we can do that on a short-term, focused way, but you have to go back 
and fix the legislation," Hastert said in a meeting with The San Diego 
Union-Tribune's editorial board. 
Davis indicated that he discussed the power crisis in general terms with Bush 
and would have a more detailed talk with Abraham. 
Bush "invited me to call on him directly if we need more assistance," Davis 
said.
? 
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Duke Energy Suspends Suits Vs. Calif.



LOS ANGELES (AP) via NewsEdge Corporation  -
Duke Energy Corp. suspended a lawsuit against
the state on Monday after the California Department of Water
Resources agreed to buy power from Duke that was formerly being
provided under contracts with two financially troubled utilities.


Duke said Monday it will suspend until April 30 its lawsuit
against Gov. Gray Davis, who had commandeered Duke's long-term
energy contracts with Southern California Edison and Pacific Gas
and Electric.


Duke sued Davis after the governor announced plans to allow the
California Power Exchange to sell the contracts as a way to pay
debts owed by SoCal Edison and PG&amp;E. The power generator argued
that Davis exceeded his authority under the state's Emergency
Services Act.


Under a settlement announced Monday, the water resources
department will buy power on behalf of residential and business
customers that was previously being delivered to Edison and PG&amp;E.


``We see this as progress. It's a step that takes us in the
positive direction,'' said Roger Salazar, spokesman for Davis.


Bill Hall, head of Duke's California operations, said the
agreement ``gives California consumers the benefit of the long-term
contract price that was negotiated with the utilities before they
defaulted. And it allows Duke to provide electricity through an
entity that can pay us for it.''


SoCal Edison and PG&amp;E, California's two biggest utilities, have
lost nearly $13 billion in part because the state's deregulation
plan prohibits them from passing on skyrocketing wholesale power
prices to consumers.


With SoCal Edison and PG&amp;E near bankruptcy, the California
Department of Water Resources was authorized last month to buy
power.


Duke said the interim settlement expires April 30, when a court
hearing on Duke's suit is scheduled in U.S. District Court in Los
Angeles.


Also on Monday, Duke suspended a case it brought against the
California Independent System Operator, which manages 75 percent of
the state's power grid.


Duke and other power generators sued the ISO after the water
resources department said it would not pay for power bought on the
expensive spot market. The ISO had said it would bill the nearly
bankrupt utilities for that power.


When power generators tried to pull out of the spot market, the
ISO sued and a federal judge ordered companies to keep selling to
the state. That order was allowed to expire last week while the
state and the generators work on a settlement.
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Calif. Optimistic About Power Line



By DAVID HO
Associated Press Writer
WASHINGTON (AP) via NewsEdge Corporation  -
California Gov. Gray Davis said Tuesday that
he is confident the Bush administration will support the state's
$2.7 billion proposal to ease energy woes by buying Southern
California Edison's electricity transmission system.


Supporters of the plan say it could lead to quick improvements
of a bottlenecked system overdue for repairs. But critics contend
the proposal saddles the state with an antiquated network that
could prove costly to fix.


Davis said he presented a nine-page proposal to Energy Secretary
Spencer Abraham and he expects a response by the end of the week.


Abraham ``wants this problem solved and he's been very
supportive,'' Davis said. ``He's recommended approval on every
request I've made, and I believe he will support our proposal.''


Energy Department spokesman Joe Davis said Abraham is reviewing
the proposal but wouldn't comment on whether he would endorse it.


On Friday, the governor announced a deal to purchase the power
lines and require Edison International, the utility's parent
company, to sell cheap power to the state for a decade.


Federal approval is required for the proposal, which does not
include the state's other major investor-owned utilities, Pacific
Gas &amp; Electric and San Diego Gas and Electric.


Negotiations are continuing with all three utilities to buy
their 26,000 miles of transmission lines for a cost that could
range from $4.5 billion to $7 billion.


Edison and PG&amp;E have said they have accumulated nearly $13
billion in losses because the state's 1996 deregulation law
prevented them from passing the true costs of wholesale energy to
their customers. The governor's plan would infuse the utilities
with part of the cash they need to remain solvent.


Some state lawmakers have said the long-term costs of the plan
outweigh the immediate benefits because the transmission lines need
repairs that could cost an estimated $1 billion a year.


Addressing a lunch for the California State Society attended by
members of the state's congressional delegation, Davis outlined his
plans to solve the power problems by building new power plants and
working with the energy industry.


``We have a real challenge this summer and the following
summer,'' he said. ``The third year I think enough generation will
be online so that we're in much better shape.''


Davis has issued executive orders to shorten the approval
process for new plants and expects to gain 5,000 megawatts by
summer _ enough to power about 5 million homes.


In addition to increasing power production, Davis emphasized the
need for greater conservation, advising his state's consumers to
turn off lights in empty rooms, unplug unused appliances and lower
thermostats.


``In my house, my wife has the thermostat down to 55 degrees,''
he said. ``Going to the kitchen in the middle of the night is like
a trip to Antarctica.''