Please see the following articles:

Sac Bee, Thurs, 7/19: Energy buyers ordered to divest 
Sac Bee, Thurs, 7/19: Another contempt action 
Sac Bee, Thurs, 7/19: PUC paves way for power rate increases
SD Union, Thurs, 7/19: California selling surplus power at fraction of cost 
it paid 
SD Union, Thurs, 7/19: PUC reveals plan to transfer much of watchdog role 
SD Union, Thurs, 7/19: Variety of plans to help Edison find friends, foes 
SD Union, Thurs, 7/19: Baja is hoping energy squeeze can spark boom 
SD Union, Wed, 7/18: State deal lets SDG&E turn large profit 
SD Union, Wed, 7/18: Davis: Legislature will save Edison from bankruptcy 
LA Times, Thurs, 7/19: PUC May Cede Control Over Electricity Rates
LA Times, Thurs, 7/19: Power Firm Is Held in Contempt by State Panel
SF Chron, Thurs, 7/19: Electricity cost tops Californians' concerns 
SURVEY: Governor now getting some credit for improving the situation 
SF Chron, Thurs, 7/19: PG&E rebates snub longtime watt watchers 
WHO WINS?: Reward is easier for those unaccustomed to power scrimping 
SF Chron, Thurs, 7/19: Assembly panel OKs two bills to help Southern 
California Edison 
SF Chron, Thurs, 7/19: Cool weather brings California energy glut, causing 
state to sell surplus power at a loss 
SF Chron, Thurs, 7/19: Investigative arm of Congress issues demand letter for 
energy meetings 
Mercury News, Thurs, 7/19: Poll: Legislators, Davis blamed more than sellers 
Mercury News, Thurs, 7/19: Consumers to bear costs of state's power purchases 
OC Register, Thurs, 7/19: Conservation is cutting edge of power crisis   
(Commentary)  
NY Times, Thurs, 7/19: California's New Problem: Sudden Surplus of Energy 
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Energy buyers ordered to divest 
By Amy Chance
Bee Political Editor
(Published July 19, 2001) 
The Davis administration on Wednesday told consultants buying electricity for 
the state to sell their stock holdings in energy companies immediately or 
leave their jobs. 
Nine consultants divested by a noon deadline, but critics said Gov. Gray 
Davis acted months too late to protect the public's interest. 
The order, issued at Davis' direction, was contained in a memo to Tom 
Hannigan, director of the state Department of Water Resources. Legal Affairs 
Secretary Barry Goode wrote that it was "imperative that you give this 
instruction immediately" to those concerned. 
"We expect, and have always expected, the state's consultants to uphold the 
highest ethical standards," the memo states. "That standard is not met by 
those who hold a financial interest in one or more energy companies while 
trading on behalf of the state on energy related matters." 
Under pressure from Secretary of State Bill Jones, a Republican who hopes to 
challenge Democrat Davis for re-election next year, the administration moved 
last week to obtain statements of economic interest from the energy 
consultants. The consultants were brought on earlier this year to help the 
Department of Water Resources buy electricity on behalf of California's 
financially strapped utilities. 
The economic statements revealed that several consultants held stock in 
energy generators, including Calpine Corp. and Enron. One consultant reported 
that he sold stock holdings in Edison International and Dynegy when he began 
work for the state. 
Administration officials initially said they would review the reports for any 
conflicts, considering whether the consultants traded with companies in which 
they held stock. 
But Goode's memo, dated Wednesday, said each of the consultants should divest 
by noon that day or "the state will sever its contract with that person." The 
notice was given to the 34 people who had disclosed their interests as 
required, nine of whom reported a current financial interest in an energy 
company, according to the administration. A governor's spokesman said all of 
them divested by the deadline. 
State Attorney General Bill Lockyer, whom Jones had asked to investigate, 
told Jones in a letter Tuesday that most of Jones' allegations, including 
whether the statements of economic interest were filed on time, should be 
dealt with first by the state Fair Political Practices Commission. 
He noted that one section of applicable state law sets a high threshold for 
conflict of interest: It provides that someone holding less than 3 percent of 
the shares of a corporation does not have a conflict unless his or her total 
yearly income from dividends or other payments exceeds 5 percent of his or 
her annual income. 
But he said he would review the statements to see whether a 
conflict-of-interest investigation is warranted "in light of the legitimate 
and important public interest in the employment of public servants who are 
free of conflicting interests. ... " 
Lockyer spokesman Nathan Barankin pointed out that Jones had called into 
question the validity of state electricity contracts negotiated by the 
buyers. 
"What we're saying is that there's a public interest in getting to the bottom 
of it as quickly as possible, so there's some certainty," he said. 
Jones said simply selling the stock doesn't solve the problem. 
"Just divesting themselves of the stock, or even letting them go, doesn't 
change the conflict that's been inherent for the last five months," Jones 
said. "If someone who has a proven conflict of interest has negotiated 
contracts on behalf of the state, there is no contract." 
Jones also noted that the Davis administration says an additional 20 or more 
people it has brought on board to cope with the energy crisis have not been 
required to file disclosure statements. He said Lockyer should investigate 
whether the administration has abided by disclosure law in those cases. 
"(Davis') record is not very good when you look at the fact that I had to 
make the case to even get these statements of conflict of interest filed," 
Jones said. "It's up to the attorney general to be the judge, but the public 
has to have the information." 


The Bee's Amy Chance can be reached at (916) 326-5535 or achance@sacbee.com 
<mailto:achance@sacbee.com>. 




Another contempt action 
By Kevin Yamamura
Bee Capitol Bureau
(Published July 19, 2001) 
A state Senate committee held another energy generator in contempt Wednesday 
and may recommend today that Enron Corp. either pay fines or be removed from 
California's marketplace if it continues to withhold documents. 
Meanwhile, lawmakers in both houses spent Wednesday night debating three 
plans to prevent Southern California Edison from going into bankruptcy, 
though no one idea had broad support. 
The committee's action against Reliant Energy marked the third contempt 
finding in as many weeks by the special Senate committee investigating energy 
market manipulation. After reaching a legal disagreement over whether trade 
secrets would be protected, lawmakers voted 6-0 to push Reliant, a 
Houston-based generator, into contempt proceedings. 
The panel found five other generators in compliance with subpoenas after they 
signed confidentiality agreements earlier this week and promised to ship 
thousands of files to depositories. 
Three weeks ago, the committee found Enron and another generator, Mirant, in 
contempt. Mirant has since cooperated and escaped the committee's finding, 
but Enron filed a lawsuit in Sacramento Superior Court seeking judicial 
intervention. 
Despite ongoing discussions between the committee and Enron representatives, 
they have reached no deal to end the lawsuit or the contempt finding. 
Lawmakers therefore intend to issue a report today leading to a later Senate 
vote on contempt and subsequent penalties. 
The committee was considering two possibilities late Wednesday, said its 
chairman, Sen. Joe Dunn, D-Santa Ana. The first would impose fines that 
compound each successive day Enron remains in contempt. The second would 
exclude the Houston-based marketer from selling energy in California until it 
hands over documents. 
"We're reviewing the (legal) basis for such a recommendation," Dunn said. 
Enron spokesman Mark Palmer said he had no response to the potential 
penalties but stressed that his company is still discussing the contempt 
matter with lawmakers. 
In Reliant's case, lawmakers and the company disagreed Wednesday over whether 
the committee's own confidentiality agreement affords enough protection of 
trade secrets. 
Reliant attorney Charles Stevens said his company would rather have a court 
order to ensure that its proprietary information would be safe. But committee 
members objected to involving the state's judicial branch, charging that it 
would disrupt the separation of powers. 
Several times during the hearing, Dunn conceded that Reliant, like Enron, may 
ultimately resort to a lawsuit to resolve its disagreement with the 
committee. 
"We have not made that decision at this time," said Stevens, the Reliant 
attorney. "We've always preferred to resolve the dispute with the committee 
informally, and we continue to look for ways to do that." 
Should Reliant work out an agreement with lawmakers by cooperating with the 
document requests, the contempt vote would be purged, Dunn said. 
The Legislature last held someone in contempt in 1929, when concrete company 
officials did not comply with subpoenas in a price-fixing case. 
In a vote late Wednesday, meanwhile, the Senate's energy committee voted down 
one Edison proposal. It will be reconsidered this morning. 
Two competing Assembly proposals to keep Edison from bankruptcy were narrowly 
approved by the Energy Costs and Availability Committee. One of the 
proposals, by Assembly Speaker Robert Hertzberg and Assemblymen Fred Keeley 
and John Dutra, is scheduled for a floor vote today. 


The Bee's Kevin Yamamura can be reached at (916) 326-5542 or 
kyamamura@sacbee.com <mailto:kyamamura@sacbee.com>. 




PUC paves way for power rate increases 
By Dale Kasler
Bee Staff Writer
(Published July 19, 2001) 
Sparking accusations that it's abandoning its watchdog role, the Public 
Utilities Commission took the first step Wednesday toward promising to raise 
rates as much as necessary to pay the state's electricity bills. 
PUC President Loretta Lynch released a proposed version of the promise -- a 
legally binding document known as a rate agreement. Although the agreement 
doesn't say there will be more rate hikes, it does commit the PUC to raising 
rates when requested by the state Department of Water Resources. 
The agreement is essential to the state's plan to sell $13.4 billion in bonds 
in September to cover the water department's power purchases. The department 
has been buying electricity for California's three troubled investor-owned 
utilities. 
The bonds are to be repaid with money from customers of the three utilities. 
Investors would shy away from buying the bonds unless the PUC adopted the 
rate agreement, said Zane Mann, editor of the California Municipal Bond 
Advisor newsletter. 
"Everyone's been kind of waiting for it," he said of the agreement. 
State Treasurer Phil Angelides, who is in charge of marketing the bonds, said 
in a prepared statement Wednesday that the rate agreement "must be adopted so 
that the (state's) general fund can be repaid, and to protect the state's 
fiscal solvency." Angelides has been promising potential bond buyers that the 
rate agreement would be adopted. 
The full PUC is scheduled to vote on the agreement Aug. 23. 
It's unclear whether the agreement will lead to a rate increase any time 
soon. The water department, which will release updated revenue requirements 
this week, says it doesn't think the new numbers will generate another rate 
hike beyond the 30 percent increase the PUC approved in March for Southern 
California Edison and Pacific Gas and Electric Co. 
Still, consumer advocates said the rate agreement would represent a surrender 
of the PUC's traditional job of protecting ratepayers. 
The agreement would permit "an unaccountable state agency, riddled with 
conflicts of interest, to unilaterally order rate hikes," said Harvey 
Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in 
Santa Monica. 
The water department has been accused of conflicts of interest because some 
of its consultants and energy traders own stock in energy companies. 
Rosenfield said the PUC should reject the rate agreement and "preserve their 
historic role and responsibility to protect ratepayers." 
Geoff Dryvynsyde, Lynch's legal adviser, said the "consumer groups are 
raising some good policy issues," but the commission's hands are effectively 
tied by legislation that put the state in the power-buying business and set 
in motion the bond sale. 
"The bonds are really driving this," he said. "The bonds need to be sold." 
Nevertheless, Eric Woychik, a consumer advocate with the Oakland-based group 
Strategy Integration, said ratepayers shouldn't be held responsible for 
high-priced power bought by the water department. 
"They shouldn't pay for poorly negotiated contracts and market power abuses," 
Woychik said. State officials contend they were gouged by wholesale 
generators, while consumer groups have criticized the water department for 
entering into long-term purchase contracts at prices that exceed current 
spot-market prices. Woychik noted that the state is pursuing billions in 
refunds from the power generators. 
The state has committed more than $8 billion from the treasury for power 
purchases, causing Wall Street to downgrade the state's credit rating. The 
bond offering -- the largest government bond sale in U.S. history -- is 
designed to replenish the treasury and finance future purchases. 
Despite some uncertainty about the state's finances and the effects of the 
energy crisis, the bonds should sell well, Mann said. 
"Mutual funds have been accumulating money to buy the bonds," the newsletter 
editor said. 


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





California selling surplus power at fraction of cost it paid  


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By Karen Gaudette ASSOCIATED PRESS  July 19, 2001  SAN FRANCISCO ) California 
has begun selling power for a fraction of its purchase price as cool weather 
creates an abundance of electricity, spending that has been criticized by 
some watching the state's power crisis closely.  Power the state bought at an 
average of $138 per megawatt is being sold for as little as $1, energy 
traders say, though the price is disputed by state officials.  The state 
acknowleges the power sales, but says the surplus represented only a blip in 
an otherwise typical scorching summer and that blackouts still could roll if 
temperatures increase again. 
However, the surplus power selloff could encourage criticism that the state 
bought too much power at too high a price in its haste to fend off rolling 
blackouts and power prices 10 times higher than the year before.  "If the 
price is $138 on average for a month and you have to turn around and sell a 
chunk of it for a dollar, you're not going to look real good to a number of 
people," said Gary Ackerman, executive director of the Western Power Trading 
Forum in San Jose.  "I just don't think many people in California truly 
understood what their state did when they stepped into this business."  
Unlike natural gas, extra electricity cannot be stored away for a later day. 
Since Californians haven't been running their air conditioners as often as 
expected over the past week, the state hasn't needed the entire 38,000 
megawatts it had figured it would need.  The state Department of Water 
Resources, in charge of buying power for three financially ailing utilities, 
has spent the past few months arming the state with long-term energy 
contracts while weaning itself away from buying the highest-priced power on 
the last-minute electricity market.  Those contracts, along with last month's 
20 percent boost in energy conservation and the temperate weather, mean 
there's suddenly more power than Californians can use.  Energy traders say 
the state has tried to sell as much as 6,000 megawatts at one time, Ackerman 
said.  That's around 16 percent of the 38,000 megawatts the state estimated 
it would use around this time of year, Ackerman said. A megawatt is enough 
electricity to power roughly 750 homes.  "We know from traders who have 
bought that it's gone as low as a dollar and last week we know it was as low 
as $5," Ackerman said. "When a seller shows up with an enormous amount of 
power for sale and the market knows it, it has a depressing effect on 
prices."  California Energy Markets, a trade weekly, said the state sold 
power last Thursday at $25 per megawatt ) a price that Steve Maviglio, a 
spokesman for Gov. Gray Davis, said was "much closer to reality."  The state 
"never sold anything more than 1,000 megawatts on any single day," Maviglio 
said. "(Ackerman) has no evidence" of California selling power for $1, 
Maviglio said. "California Energy Markets is much closer to reality."  Oscar 
Hidalgo, a DWR spokesman, acknowledged the state has been trying to sell as 
much as 20 percent of its daily megawatts, though he would not say at what 
price. That could put the state at a disadvantage in the market if 
competitors knew how much it was paying, Hidalgo said.  "This is unusual, but 
it was anticipated, it is typical in the power buying operation," Hidalgo 
said.  "It's better than doing nothing with surplus power," Hidalgo said. 
"Scheduling energy is a balancing act because you can't store the item."  
Hidalgo said the state is sending some of the extra electricity up to the 
Bonneville Power Administration to repay it for power it had loaned 
California earlier this year.  "This is not a bad position for us to be in 
every once in a while," Hidalgo said. "If someone were to make these 
long-term contracts go away, we would fall off a cliff and be back where we 
were in January." 








PUC reveals plan to transfer much of watchdog role  


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By Craig D. Rose  UNION-TRIBUNE STAFF WRITER  July 19, 2001  The California 
Public Utilities Commission laid out a framework yesterday for transferring 
much of its watchdog role in ensuring fair electricity rates to the state 
Department of Water Resources.  The controversial proposal is in response to 
legislation earlier this year that puts the water department in charge of 
state power purchases. Utilities commission action is needed to ensure that 
the water department has enough revenue to make the purchases and to clarify 
areas of responsibility, including oversight of power rates.  Under the draft 
agreement made public yesterday, the commission would guarantee that 
consumers pay enough to cover interest payments on a planned $13.4 billion 
bond sale later this year. The guarantee is considered an essential element 
for completing the bond sale.  The bonds' proceeds are needed to repay some 
$8 billion the water department already has spent to purchase electricity and 
to cover future payments.  California began buying electricity through the 
water department earlier this year after the state's utilities were unable to 
make purchases because of credit problems brought on by the state's failed 
deregulation plan.  No mention was made in the draft agreement of the 
possibility of further rate increases to cover electricity purchases. Some 
observers have speculated that the current rate structure, even after two 
rounds of rate increases, may not cover all costs.  On the other hand, the 
draft agreement states that the water department itself will determine if the 
prices it pays for electricity meet the legal test of being just and 
reasonable, a determination heretofore made by the utilities commission.  
Under the utilities commission's procedure, the public is invited to comment 
on the draft. An administrative law judge for the commission will consider 
the draft before issuing a proposed decision. A full commission vote is 
expected Aug. 23, a deadline that would have to be met if the bond offering 
is to proceed as planned later this year.  Harvey Rosenfield, president of 
the Foundation for Taxpayer and Consumer Rights, said the utilities 
commission's draft agreement would allow a "secretive agency of dubious 
competence controlled by the governor and completely unaccountable to the 
public" to unilaterally order rate increases.  "It was deregulation which got 
us into the mess we are in today," Rosenfield said. "Now Wall Street is 
demanding that the (utilities commission) be forced to surrender its 
authority and legal responsibility."  He urged the commission to reject the 
draft proposal.  Carl Wood, one of five members of the Public Utilities 
Commission, said the draft agreement was driven largely by legislation 
empowering the water department as an electricity purchaser. With a state 
department buying power, Wood said, oversight shifts to the governor and the 
Legislature.  Commissioner Richard Bilas said he saw the agreement as 
empowering the water department as "prosecutor, judge and jury" in matters of 
electricity purchasing.  "The argument is that it's better off this way than 
the way we were," Bilas said. "And that's true in the short run. But what 
about in the long term?" 







Variety of plans to help Edison find friends, foes  


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Agreement in Legislature doesn't seem likely soon By Ed Mendel  UNION-TRIBUNE 
STAFF WRITER  July 19, 2001  SACRAMENTO -- Plans to aid Southern California 
Edison met mixed fates in legislative committees yesterday amid opposition 
from business, consumers and Edison itself, which said one of the plans would 
not restore its ability to borrow money.  The Senate energy committee 
rejected a plan that is tough on Edison, but the committee plans to consider 
it again today.  In the Assembly, a committee approved two plans. One has the 
support of Democratic leaders, is viewed more favorably by Gov. Gray Davis 
and has not drawn opposition from Edison. The other, crafted by the committee 
chairman, Rod Wright, D-Los Angeles, and Republicans, is supported by 
businesses and Edison.  Senate President Pro Tempore John Burton, D-San 
Francisco, told an Edison official during a committee hearing that financial 
experts have told him repeatedly that bankruptcy is the logical course for 
Edison.  "They keep saying they don't understand why a business in your 
situation does not avail themselves of that," Burton said.  The Senate leader 
told the Edison official not to expect the usual legislative compromises that 
would give the utility most of what it is seeking in a rescue plan.  "I want 
to disabuse you of the fact that somehow you are going to get some great big 
deal at the end of the rainbow," Burton said. "Because you are not going 
to."  The Senate and Assembly Democratic leadership plans require businesses 
to pay off most or all of Edison's debt, while also preventing businesses 
from shopping around for cheaper power. Business groups oppose the plans 
because of those provisions.  Davis is pushing for a legislative plan that 
would keep Edison from joining Pacific Gas and Electric in bankruptcy. He 
wants an Edison rescue plan that could become a model for getting PG&E out of 
bankruptcy.  Once their financial health is restored, the utilities could 
resume buying power for their customers, allowing the state to get out of the 
power-buying business it entered in January, when the utilities were crippled 
by a failed deregulation plan and no longer able to borrow money.  But the 
lengthy and sometimes emotional debates in legislative committees yesterday 
made it clear that reaching an agreement on an Edison rescue plan in the next 
few days will not be easy.  A plan that Davis negotiated with Edison in early 
April found little support in the Legislature and is not being considered. 
Opponents said the plan was too generous to Edison.  But the alternative 
rescue plans prepared in the Legislature also are called too generous to 
Edison by a consumer group, the Foundation for Consumer and Taxpayer Rights, 
which is threatening to put an initiative on the ballot to repeal any Edison 
"bailout."  Edison, on the other hand, fears that it will be saddled with too 
much debt and placed under a regulatory system that does not assure lenders 
that the utility will be able to pay costs for operating and buying equipment 
and power.  "We don't believe this bill in its present form would restore us 
to creditworthiness," Bob Foster, an Edison vice president, told a committee 
hearing the Senate plan.  The plan by Wright and Republicans was supported by 
business groups and Edison but opposed by consumers. All ratepayers would pay 
off the Edison debt and businesses would be allowed to shop for cheaper power 
as state long-term contracts expire.  "What will come out of the mix is hard 
to tell," said Steve Maviglio, Davis' press secretary. "Everyone is working 
feverishly to get something passed in the next few days." 







Baja is hoping energy squeeze can spark boom  


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New electricity, gas plants seen spurring a fresh wave of growth By Diane 
Lindquist  UNION-TRIBUNE STAFF WRITER  July 19, 2001  Energy shortages in 
California and Mexico are firing hopes for a new wave of industrial 
development in Baja California, where a maquiladora slowdown has cut 
thousands of jobs.  The power squeeze has triggered a rush to build 
electricity and natural gas projects in Baja California.  Once those plants 
are up and running, energy experts and Tijuana boosters say, the state will 
be able to make an unusual pitch to global manufacturers: Come to Baja 
California, where power is plentiful, reliable and relatively cheap.  "It's a 
new frontier for Baja California," said Institute of the Americas president 
Paul Boeker, a frontier that "opens up investment opportunities that aren't 
possible at the moment."  To seize the possibilities, Tijuana's Economic 
Development Corp. is pushing the Baja California government to fund a study 
to identify the United States' biggest electricity and natural gas users.  
"When we saw the price of energy going up so high in California, we thought 
we might be able to use this as a marketing tool," said David Mayagoitia, a 
director of the development group.  The hope is that an influx of big-energy 
users, such as high-tech firms that operate clean rooms, will offset serious 
problems in the region's sputtering maquiladora industry.  Since October, 
Baja California has lost 11,700 maquiladora jobs, 4 percent of the sector's 
total. In Tijuana alone, 7,600 positions have disappeared.  "I've never seen 
so many large and small and medium companies narrow their operations in such 
a short amount of time," said Deloitte & Touche accountant Mauricio Munroy.  
Maquiladora insiders like Munroy blame the U.S. economic downturn, rising 
costs, a strong peso and a new Mexican regulatory regime for reining in the 
operations.  Mayagoitia calls it a crisis.  "Our labor costs are going up. 
We're not as competitive as other places in the world. We have to look for 
other angles."  Over the past three decades, the arrival of foreign-owned 
maquiladoras has pushed Baja California's population to 2.5 million and 
transformed the state into one of the world's manufacturing hot spots. The 
region now ranks as a top producer of televisions and other consumer 
electronic products, and many other goods.  There are 1,287 factories in the 
state, employing 278,900 workers.  New operators continue to come. Since 
October, when employment began dropping, 33 companies have established 
factories in the state. Other companies, including Korean electronics giant 
Samsung, the state's largest operator, are expanding.  But in the past nine 
months, the sector's growth has dropped below its routine double-digit rate.  
Some companies, such as Sanyo and Day Runner, have shut factories. Others are 
threatening to. And so many have trimmed operations that Munroy said, "I 
don't think we can feel comfortable the industry's going to recover."  But 
now, California's energy crisis and cross-border power demands could alter 
that picture. A natural gas pipeline and three power plants in the works will 
boost the state's electricity output by 2,200 megawatts. As much as 1,500 
megawatts could flow to California consumers.  Additional plants are 
anticipated. Mexican Energy Secretary Ernesto Martens has said there's no 
limit to the number that could be built in Baja California. And California 
and Mexican officials are considering recruiting energy companies to start 
projects in Baja California.  Meanwhile, numerous companies -- El Paso and 
Phillips, Sempra, Chevron and Chiyoda among them -- have expressed interest 
in building liquid natural gas facilities near Rosarito and Ensenada. The 
operations would convert into vapor form liquified natural gas imported from 
other regions for use in Mexico and the United States.  Such projects could 
give Baja California billions of dollars in investment, thousands of 
construction and operating jobs, and a reputation as an energy-abundant place 
to do business.  "Large energy consumers could come down here, set up 
operations and get a big break on their utilities," Mayagoitia said.  
Previously, such operators have shunned Baja California.  "They've always 
said electricity down here is not constant. There are too many fluctuations 
on the line," Mayagoitia said.  While a bigger supply would overcome that 
obstacle, other challenges must be met before the region can use energy as a 
marketing tool.  At a San Diego Dialogue forum on energy last week, Boeker 
listed the key elements needed to attract the next wave of industrial 
development to Baja California. As he sees it, they need at least one liquid 
natural gas import facility, to allow power generators to export to 
California and sell directly to companies in Baja California, and to upgrade 
the cross-border gas and electricity transmission infrastructure.  Mexico 
also needs to make sure its business laws and regulations, which in the past 
have restricted the energy sector, allow corporations to get the supplies and 
prices they need to be competitive, Mayagoitia said.  "We think if the 
numbers make sense, and they have confidence that Mexico can deliver what 
they need, then we'll have the market niche." 








State deal lets SDG&E turn large profit  


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By Craig D. Rose  UNION-TRIBUNE STAFF WRITER  July 18, 2001  When Gov. Gray 
Davis and SDG&E officials hailed an agreement last month to clear a $750 
million debt owed to the utility, they neglected to publicize a key element: 
The deal allows San Diego Gas & Electric to earn $120 million from the sale 
of electricity to California.  At the time the deal was announced, SDG&E said 
it was making a major concession by agreeing to refund $219 million in 
profits from several disputed power contracts.  The utility also said future 
power sales to the state from those contracts would be at a discount. SDG&E 
has repeatedly asserted that it earns no profit from the acquisition and sale 
of electricity, only from its delivery to customers. 

But in subsequent filings to the U.S. Securities and Exchange Commission, 
SDG&E said it will earn $120 million from the contracts.  News of the 
earnings brought a sharp response from Michael Shames, executive director of 
the Utility Consumers' Action Network, a San Diego-based group.  "What really 
irks me is that the public was told SDG&E would make a $219 million 
concession," Shames said. "It turns out that concession was less than $100 
million, or less than half of what was advertised.  "What we have found is 
that the deeper you dig into this deal, the worse it looks. It's beginning to 
be pattern."  Casey Gwinn, the San Diego city attorney, also criticized the 
belated revelation that SDG&E stands to earn substantial sums under the 
contracts. Gwinn had said that SDG&E's customers should receive the benefits 
from the deals.  "All of this should have been disclosed," said Gwinn, who 
added that it was impossible to determine the full profit SDG&E had made from 
certain power purchase agreements.  Ed Van Herik, a spokesman for SDG&E, 
reiterated the position yesterday that profit from the contracts belongs to 
the company's shareholders. Van Herik declined to comment about terms of the 
power sales to the state.  The contracts, which were signed several years 
ago, allow SDG&E to buy relatively low-priced power. The utility has made 
money by reselling that power at a higher price.  The deal to clear the $750 
million debt was announced in June along with Gov. Gray Davis' plan to 
purchase SDG&E's transmission lines for about $1 billion.  The Office of 
Ratepayer Advocates, a watchdog agency within the California Public Utilities 
Commission, said yesterday the purchase price for the transmission lines was 
"clearly excessive" and said the money might be better spent acquiring or 
building new power plants.  Steve Linsay, a program and project supervisor in 
the Office of Ratepayer Advocates, said revelation of the $120 million in 
profits SDG&E expects to earn from the sale of power heightened "pre-existing 
concerns" about the deal to settle the $750 million account.  While the 
transmission line deal will be considered by the Legislature, the Public 
Utilities Commission will rule on the separate debt agreement. A spokesman 
for the commission said yesterday the vote on the settlement is scheduled for 
Aug. 2, but the issue is on hold until the commission receives more 
information from SDG&E.  The local utility says the $750 million debt 
represents the difference between what it has paid for power and what it has 
been allowed to collect from ratepayers since last fall, when the state 
imposed a cap on customer payments.  Some feared the so-called 
undercollection would become a balloon payment, payable by local customers 
when the rate cap ended next year.  At a news conference last month, the 
governor and officials of Sempra Energy -- parent company of SDG&E -- 
described an agreement to eliminate the $750 million debt.  Consumer 
advocates raised questions about whether the proposed resolution would be as 
costly to consumers as the debt itself.  Under the state deregulation plan, 
SDG&E's profit-making business is restricted to the distribution of power. 
The Public Utilities Commission initially ruled that the profits from the 
disputed contracts should be returned to customers but SDG&E had sought to 
overturn the ruling in court.  In another key element of the deal to resolve 
the debt, SDG&E agreed to pay $100 million to end an investigation into its 
power purchasing practices.  A spokesman for the governor defended the 
agreement despite the revelation of future SDG&E profits.  "We forced them to 
return about 70 percent of the profits (from the contracts)," said Steve 
Maviglio. "And if you look at the whole picture, it is a good deal."  While 
SDG&E had said it earned no money from the sale of power, other units of 
Sempra Energy have acknowledged selling power to the state for profit. The 
California Department of Water Resources said it paid Sempra some of the 
highest prices it paid for power through the first five months of this year, 
when Sempra sold $429 million worth of electricity to the state. 








Davis: Legislature will save Edison from bankruptcy  


\
objattph 
Time running out for bailout bills By Ed Mendel  UNION-TRIBUNE STAFF WRITER  
July 18, 2001  SACRAMENTO -- Gov. Gray Davis, hoping for one of his biggest 
legislative victories, predicted yesterday that the Legislature will send him 
a plan to keep Southern California Edison out of bankruptcy.  But the 
governor's own plan, introduced more than three months ago, is not among two 
Edison rescue proposals being considered in the Assembly and a different one 
is under review in the Senate. All may come up for votes in committees 
today.  The Legislature is scheduled to leave Friday for its annual monthlong 
summer recess. Davis suggested that he may try to keep the lawmakers at the 
Capitol by calling a special session if the Edison issue is not resolved. 
"We have been working with members of both houses," Davis said. "I am 
determined to get a bill passed this week, if at all possible, to allow 
Edison to go back into business."  The state began buying power for utility 
customers in January after Edison and Pacific Gas and Electric were crippled 
by a failed deregulation plan. Davis wants the Legislature to pass an Edison 
plan that could also be a model for PG&E, which filed for bankruptcy in early 
April.  "It's very important to get Edison and then PG&E creditworthy and 
back in the business of buying power," Davis said, "so the administration can 
focus on the more important things it was elected to do."  But the two plans 
supported by Democratic leaders in both houses raise questions about whether 
they would keep Edison out of bankruptcy. The plans also are opposed by 
businesses, which would pay higher rates.  A third plan proposed by the 
Democratic chairman of the Assembly utilities committee, Rod Wright, and by a 
Republican, Keith Richman of Northridge, is likely to draw support from 
Edison and business groups but opposition from many legislators who say it is 
too generous to Edison.  Working out a compromise by Friday will be 
difficult. If negotiations continue during the recess, Davis would have the 
option of asking legislators to return for a day to vote on any proposal that 
might emerge.  The middle of August is regarded as a deadline. A memorandum 
of understanding that Davis negotiated with Edison can be waived by either 
side after Aug. 15.  And the state Public Utilities Commission is scheduled 
to take rate action a few days later in support of a $13.4 billion 
power-purchasing bond that could limit options for an Edison rescue.  In the 
Senate, the governor's plan, which was criticized for being too generous to 
Edison, was stripped from a bill and replaced with a tough plan that would 
allow Edison to issue a $2.5 billion bond to pay off its debt.  Edison would 
have to agree to a number of things, including selling power from its 
generators at cost-based rates, giving the state all of the output from a new 
power plant near Bakersfield at low rates for a decade and applying a $400 
million tax refund to its back debt.  A $1 billion debt that Edison owes 
generators, who are accused of overcharging, would be left unpaid. The Edison 
bond would be paid off not by residential customers but by businesses and 
other large users, who would not be allowed to shop around for cheaper 
power.  In the Assembly, Wright got agreement from an Edison official when he 
told a hearing that a plan backed by Assembly Democratic leaders would not 
keep Edison out of bankruptcy. Edison would be billed for $300 million worth 
of power purchased by the Independent System Operator and other obligations 
not specificed in the bill. 




PUC May Cede Control Over Electricity Rates
Energy: Chief says letting the state water agency set prices would ensure 
that ratepayers cover costs. Others say plan would leave public unprotected. 
By TIM REITERMAN and NANCY VOGEL
Times Staff Writers 

July 19 2001

SAN FRANCISCO -- California's chief utility regulator proposed Wednesday to 
provide rubber-stamp approvals of any future electricity rate increases that 
state power buyers find necessary.

This fundamental shift in the state's regulatory structure would bypass 
procedures that currently protect the interests of consumers.

The proposed agreement between the state Public Utilities Commission and the 
state Department of Water Resources is designed to guarantee that consumers 
pay enough to cover the purchase by the state of electricity for the 27 
million people served by three financially troubled utilities.

Consumer payments will be used to repay bonds the state plans to float later 
this year. The bonds will be used to reimburse the state treasury for money 
spent on electricity. The PUC is expected to formally ratify the agreement 
Aug. 23.

A spokesman for the water department said that a historic rate increase in 
March is expected to cover all of the agency's costs and that no new hikes 
will be necessary.

But under the terms of the proposed agreement, if that expectation proves 
incorrect and future hikes are needed, the PUC promises to adjust electricity 
rates to meet the department's need for revenue within 90 days, or 30 days in 
emergency situations.

"The ruling gives carte blanche to [the department] to do whatever they want 
to do," said Richard Bilas, a PUC member appointed by former Gov. Pete 
Wilson. "We don't have much control over them. I am uncomfortable with it."

If approved, the agreement would shift the oversight of electricity rates 
from the PUC, an independent regulatory body whose members are appointed by 
the governor, to a state administrative agency that is under the governor's 
direct control.

S. David Freeman, Gov. Gray Davis' chief energy advisor, said the agreement 
would essentially transform the state water department into "the equivalent 
of a municipal utility" that has sole discretion to raise revenue from its 
customers.

The PUC would only have the authority to "make sure that our math is OK, and 
we haven't gone out and bought the Brooklyn Bridge," Freeman said.

Already, however, the state's judgment in buying power has been questioned. 
The Department of Water Resources has signed long-term contracts designed to 
ensure stable supplies. But critics have charged that those contracts have 
locked the state into prices that are too high. Indeed, because of cool 
weather and reduced demand by consumers, the state--at least temporarily--is 
buying more power than California needs and has begun reselling some of it 
for considerably less than it costs.

In another energy-related development, a top executive of Southern California 
Edison Co., one of the three utilities that has been flirting with 
insolvency, criticized as inadequate a state Senate bailout bill.

The bill is a thoroughly rewritten version of a highly publicized deal Davis 
and Edison officials fashioned in April to restore the company's financial 
health. That deal called for the state to buy the utility's transmission 
lines for $2.76 billion.

At a hearing of the Senate Energy Committee, Bob Foster, an Edison vice 
president, testified that the Senate version, which is expected to be voted 
on this week, would leave Edison $1 billion short of meeting its financial 
needs.

The problems of Edison, Pacific Gas & Electric Co. and San Diego Gas & 
Electric Co. triggered the need for the deal between the PUC and the water 
department. That agreement was hammered out in high-pressure negotiations 
that involved dozens of state officials and bonding experts. It is viewed by 
state officials and bond analysts as critical to the sale this summer of the 
$13.4-billion bond issue.

But Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer 
Rights in Santa Monica, said the agreement would strip away the PUC's 
constitutional obligation to protect consumers from unreasonable rate hikes.

"This is a power play by the Davis administration, the energy companies and 
Wall Street to eliminate any public scrutiny over their conduct and the price 
of electricity for the next 10 to 15 years," he said.

The agreement is the latest step in implementing emergency legislation passed 
this year to allow the water department to buy power. The agency stepped into 
the market after the three utilities said that rates frozen under the state's 
deregulation plan were preventing them from recovering their costs and were 
threatening their solvency.

Assembly Bill 1X, signed into law by Davis in February, provided that the 
water department would be able to recover its costs and directed the PUC to 
implement an agreement to accomplish that.

The agreement also would provide assurance to Wall Street that electric rates 
would provide a reliable flow of funds that could be used to pay off the 
bonds. The state hopes to use the bonds to create a revolving fund that would 
pay for $8 billion in current and future power costs.

State Treasurer Phil Angelides said the rate agreement "must be adopted so 
that the general fund can be repaid, and to protect the state's fiscal 
solvency. . . . This agreement provides the assurance that, for the term of 
the bonds, the law will be honored so that bonds can be sold and bondholders 
repaid."

Equally important is the water department's projection of how much revenue 
the agency needs for everything from spot market power purchases and the cost 
of long-term contracts to administrative costs and debt service. That 
detailed assessment will indicate whether the increase approved in March--an 
average hike of 3 cents per kilowatt/hour--will be enough to cover the 
department's costs for the two-year period ending Dec. 31, 2002. Officials at 
the PUC and the department said the projection could be submitted as soon as 
Friday.

"We do not anticipate that [the department] will be seeking any further 
increase beyond the increase announced by the PUC last spring," said 
department spokesman Oscar Hidalgo. "We're well within the 3-cent increase."

The department's statement of its revenue needs has ramifications not only 
for consumers, but also for utilities. Utility officials fear that their own 
costs might not be covered after the department takes its share of the 
revenue from monthly bills.

PG&E spokesman Ron Low said the company's lawyers are assessing the proposed 
agreement but would have no comment on it until they can see the water 
department's revenue requirement. He said the company hopes there will be 
enough left "to ensure our customers are treated fairly" and to cover the 
company's costs, including payments for the power it produces and purchases 
through contracts.

Edison officials said they would not comment until they received more 
information.

The proposed agreement, though not unanticipated, would reduce the role of 
the PUC in one of the most pivotal chapters of the energy crisis.

Normally, the PUC holds hearings and conducts "prudency" reviews before 
making decisions on rate increases, but the water department would not be 
subject to the same procedures.

"It will not be a review where we say you were imprudent, you goofed up and 
will have to eat the cost, or you badly negotiated these contracts," said 
Commissioner Jeff Brown, who was part of the negotiations.

Brown said the two agencies had differences over issues such as whether the 
water department's administrative costs should be covered by the rate 
agreement and the extent of the PUC's review. But he said the overriding 
concern was that the state's bond sale not be delayed or otherwise 
jeopardized by uncertainty about the water department's ability to meet its 
financial obligations.

"I wish we were not in this situation," he said. "But when we started doing 
purchases, the state was the only credit-worthy entity. We're swimming 
upstream."

Commissioner Bilas said that although the bond sale is highly important, he 
is concerned that the water department will not be subject to governmental 
checks and balances because the department head reports directly to Davis.

"If the governor believes the director of [the department] is doing a bad 
job, he can be removed," Bilas said. "But it is a matter of how much faith 
you have in individuals rather than faith in a system."

Commissioner Carl Wood, one of Davis' three appointees on the five-member 
commission, pointed out that the PUC was set up to protect the interests of 
the customers of private utility companies with a monopoly. "When a public 
agency takes over [the purchase of power], things like a prudency review do 
not have the same meaning," he said.

PUC President Loretta Lynch, who published the proposed agreement and 
solicited comment on it, could not be reached Wednesday.

Her legal advisor, Geoff Dryvynsyde, said the commission has to make a public 
policy choice that weighs the need to sell the bonds against its own 
authority to set rates.

"There is lots to balance here," he said. "A really important consideration 
is the bond deal, and the rate agreement is important to getting that done." 
--- 
Reiterman reported from San Francisco, Vogel from Sacramento. Times staff 
writer Carl Ingram contributed to this story. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







IN BRIEF / SACRAMENTO
Power Firm Is Held in Contempt by State Panel
From Times Staff, Wire Reports

July 19 2001

A state Senate committee voted unanimously Wednesday to hold Texas-based 
Reliant Energy Inc. in contempt for failing to comply with a demand to 
produce secret business records.

Reliant is one of seven power generators under investigation by the Senate 
committee for failing to obey a subpoena for documents the companies consider 
to be trade secrets or proprietary information.

Reliant attorney Charles J. Stevens said that compliance with the committee's 
demands potentially would expose the company's most secret information to its 
competitors. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 




Electricity cost tops Californians' concerns 
SURVEY: Governor now getting some credit for improving the situation 
John Wildermuth, Chronicle Political Writer 
<mailto:jwildermuth@sfchronicle.com>
Thursday, July 19, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/19/MN199435.DTL>
 
</cgi-bin/object.cgi?object=/chronicle/pictures/2001/07/19/mn_chronsurvey.jpg&
paper=chronicle&file=MN199435.DTL&directory=/c/a/2001/07/19&type=printable> 
</cgi-bin/object.cgi?object=/chronicle/pictures/2001/07/19/mn_chronsurvey.jpg&
paper=chronicle&file=MN199435.DTL&directory=/c/a/2001/07/19&type=printable>
The lights have stayed on this summer, but California residents are more 
anxious than ever about the state's energy crunch, according to a survey 
released today. 
"People are still very worried," said Marc Baldassare, who directed the poll 
for the Public Policy Institute of California. "They're not convinced we're 
totally out of danger." 
While a record number of residents list electricity prices as the state's top 
problem, Gov. Gray Davis seems to be getting some credit for improving a bad 
situation. 
The poll found only 39 percent of those surveyed approve of the way Davis is 
dealing with the power problems, but that's a steady increase from the 29 
percent mark he had in a similar survey two months ago. 
"As time goes by without any significant new problems, people realize that an 
effort has been made," Baldassare said. "If things aren't normal, they don't 
seem to be getting any worse." 
More than half those surveyed list electricity prices as the state's top 
concern, with all other worries paling by comparison. Education, the leading 
issue just last year, was listed as the state's most important issue by only 
9 percent of those surveyed, with jobs and the economy third with 5 percent. 
"People need to realize that there's not an endless supply of power and oil, 
" said Austin Eddy of San Francisco, one of those surveyed. "Maybe these 
problems can serve as a wake-up call." 
The poll of 2,007 Californians, conducted July 1 to July 10, has a margin of 
error of plus or minus 2 percentage points. 
The overall news for the governor in the survey isn't good despite the upturn 
in numbers for his attempt to ease the power crunch. Davis is still getting 
his share of blame, and it is showing in his approval ratings. Only 44 
percent like the job he is doing as governor, while 45 percent are unhappy 
with his performance. That's down slightly from his 46 percent approval 
rating in May and far below the 63 percent mark Davis had in a January 
survey. 
APPORTIONING THE BLAME
Those polled still give utility companies, such as Pacific Gas and Electric 
Co., and former Gov. Pete Wilson and the legislators who approved utility 
deregulation much of the blame for the current crisis, but they are 
increasingly calling Davis and the current Legislature to account. The 
percentage of people who blame Davis for the power problems jumped from 10 
percent in May to 16 percent in the new survey. 
"People are less likely to look in the past for blame and more willing to 
look at the current situation," Baldassare said. "They are moving toward 
blaming the people in charge now." 
But Davis seems to be winning the high-stakes public relations battle he's 
having with President Bush over the energy crisis. Bush saw his approval 
rating in the state skid from 57 percent in May to 47 percent today while the 
proportion of people who disapprove of the way he's handled the power woes 
jumped from 56 percent to 63 percent. 
When asked who is more to blame for the state's electricity problems, 26 
percent of those surveyed chose Davis to 12 percent who chose Bush. 
But when asked who is providing better solutions to the problem, 34 percent 
chose the governor compared with 8 percent who give Bush the nod. 
BAD MARKS FOR BUSH
"The energy problem has hurt Bush," Baldassare said. "Very few people think 
he's come up with good solutions." 
Much of Bush's proposed energy plan runs contrary to California's 
preferences. The president's program backs oil drilling in environmentally 
sensitive areas, calls for the possibility of more nuclear plants and opposes 
oil price controls. 
"I don't think Bush has his priorities straight," Eddy said. "He's not 
concerned about finding alternative ways of doing things and changing the way 
things are done." 
The new poll shows 56 percent of those surveyed favoring price controls, 57 
percent opposed to nuclear power plants in their region and 71 percent 
against oil exploration in federally protected areas. 
More than two-thirds of those surveyed, including half the Republicans, 
believe that the environment must be protected, even if it means higher 
prices for gas and electricity. 
"Bush has talked about the need to increase the energy supply, but his ideas 
have not gained any traction in California," Baldassare said. "A lot of 
people here oppose a trade-off with energy and the environment." 

CHART 1:
E-mail John Wildermuth at jwildermuth@sfchronicle.com 
<mailto:jwildermuth@sfchronicle.com>. 
Worried
   Top three concerns of Californians, according to a new poll:
   Electricity prices, deregulation
   56%
   Schools, education
   9%
   Jobs, economy, unemployment
   5%
   Source: Public Policy Institute of California



CHART 2:
   Approval ratings
   For the first time, a majority of state residents view the energy crunch 
as 
California's No. 1 problem, according to a Public Policy Institute of 
California poll. At the same time, the public's view of Gov. Gray Davis' 
handling of the energy crisis has improved since May while residents are more 
critical of President Bush's actions than they were two months ago.
   -- Do you approve or disapprove of the way that Gray Davis is handling the 
issue of the electricity problem in California?
   May 2001 
Approve 29%
Disapprove 60%
Don't know 11%
   July 2001 
Approve 39%
Disapprove 51%
Don't know 10%
CHART 3
   -- Do you approve or disapprove of the way that President Bush is handling 
the issue of the electricity problem in California?
   May 2001 
Approve 33%
Disapprove 56%
Don't know 11%
   
   July 2001
Approve 28%
Disapprove 63%
Don't know 9%
   The survey of 2,007 California residents was conducted July 1-10. It has a 
margin of error of plus or minus 2 percentage points.  
   Source: Public Policy Institute of California 
   Chronicle Graphic

,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 







PG&E rebates snub longtime watt watchers 
WHO WINS?: Reward is easier for those unaccustomed to power scrimping 
Joe Garofoli, Chronicle Staff Writer <mailto:jgarofoli@sfchronicle.com>
Thursday, July 19, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/19/MN144662.DTL>
If you've spent months squinting through dimly lit nights and still didn't 
get a 20 percent rebate on your most recent utility bill, you're going to 
hate hearing about Anne Crawford. 
Conserving enough electricity to get a refund from Pacific Gas and Electric 
Co. was "too easy" for the resident of San Francisco's Noe Valley. She merely 
replaced a handful of high-wattage bulbs, turned off her computer, and voila 
-- 
her electricity usage dropped 29 percent over last year. 
That makes Crawford a winner in Gov. Gray Davis' new program that cuts 20 
percent off the bills of customers who reduce their usage 20 percent. 
Crawford's payoff: $6.09, less than the average residential rebate of $10.78. 
Like most winners, Crawford endured little hardship to receive a credit on 
her bill. 
"I hear all these stories about all these heroic things people did," Crawford 
said, "but I didn't really do anything special." 
If only it were that easy. Nearly a third of PG&E customers have opened their 
bills this month to find a credit for conserving, but many of the 71 percent 
who didn't are ticked. They complain that the program rewards watt hogs who 
needed to conserve instead of the conservationists who have been doing the 
right thing for years. 
But that is of little consequence to the 510,000 PG&E residential customers 
who have received $5.5 million in rebates so far. (The utility is nine days 
through its 21-day billing cycle.) 
Chip Gibbons knows how he's going to spend the $4.03 burning a hole in his 
pocket. 
"It's not enough to buy a bargain movie ticket, so I think I'm going to get a 
10-pound bag of Kitty Litter," said Gibbons, who cut his electricity 
consumption at his Castro apartment by half. 
Gibbons' secret: "My roommate moved out." 
NO REWARD TOO SMALL
Some rebate winners were glad to see huge conservation investments pay off. 
Robyn Simonett dropped $700 on a new energy-efficient refrigerator to replace 
the 15-year-old model in her Berkeley bungalow. That, combined with keeping 
the thermostat at 62 degrees, made all those days of typing in gloves with 
the fingertips removed and doing jumping jacks on the hour worth the struggle 
once she opened her PG&E bill. 
Her cash reward: $3. 
"I went, 'Woo-hoo, yeah,' " Simonett said. "Hey, it's something." 
Psychically, it's good to get cash back from PG&E after months of soaring 
rates, agreed Leonard Graff, winner of a $7 rebate for conservation at his 
San Francisco home. And while it may look like he's in the hole after 
spending $150 on fluorescent bulbs and a new lamp to replace a watt-sucking 
torchere, "those bulbs will pay for themselves soon. I'll have them for 10 
years." 
If only Gretchen Beck had rebate cash to spend on cat box filler. She saved 
19 percent -- just missing the rebate threshold. She couldn't have done much 
more. She didn't watch TV for three months, used only the lights she needed, 
turned off all the right things. Maybe if she unplugged her electric mattress 
warmer, she might have. . . . 
"No way," said the resident of San Francisco's Bernal Heights. "I'd unplug my 
refrigerator first." 
WATT WASTERS CASHING IN
Beck wasn't bitter about not getting a rebate. Some also-rans, however, 
complained about the unfairness of rewarding watt hogs while overlooking 
PG&E's good energy citizens. 
Privately, one PG&E official said, "We tried to tell the governor's office 
that when they came up with this program." 
"It's unfair to people who have been efficient all along," said Marc Acheson, 
an Oakland resident who bundled up, bought energy-efficient bulbs and did all 
the right things long before there was an energy crisis. The downside to 
doing the right thing: Acheson doesn't think he'll get a rebate when his bill 
arrives. 
"There should be something for people like my wife and I, who won't get a 
refund. But I guess this program is meeting its target: people who were 
wasting a lot." 
A PAT ON THE BACK
Don't look to the governor's office for a reward for longtime 
conservationists. Davis feels they've already received one. 
"Their reward is the years of savings they've had for doing the right thing, 
" said Davis spokesman Roger Salazar. "The governor considers them the real 
heroes of this crisis." 
Being called a hero is nice, but many customers said they would prefer cold 
hard cash. 
The program had to make targets of watt hogs, as Salazar said, because that's 
where the most waste was. Besides, he said, the hogs will be hit by the new 
rate increases approved by the state Public Utilities Commission. 
PG&E estimated that 65 percent of its residential customers would be paying 
higher rates for their June bills. Only customers who stay within 130 percent 
of their baselines will be immune from further rate increases. 
For those who didn't get a rebate in this billing cycle, they'll get another 
shot in July, August and September usage. But Beck still won't unplug her 
mattress warmer for a rebate. 
"At this point, I'm going to say screw it," Beck said. "I'm already a low 
user, and I've got more important things going on in my life." 
E-mail Joe Garofoli at jgarofoli@sfchronicle.com 
<mailto:jgarofoli@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 








Assembly panel OKs two bills to help Southern California Edison 
Lynda Gledhill, Chronicle Sacramento Bureau <mailto:lgledhill@sfchronicle.com>
Thursday, July 19, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/19/
MN186516.DTL>
Sacramento -- Two sharply contrasting plans to prevent debt-ridden Southern 
California Edison from being dragged into bankruptcy cleared a key Assembly 
committee last night, but a third measure stalled in the Senate. 
The first bill approved by the Assembly Energy Cost and Availability 
Committee calls for the state to purchase Edison's transmission lines for 
$2.4 billion as a way to help the utility out of its estimated $3.5 billion 
in debt. 
The plan drew criticism from business and consumer groups, and many lawmakers 
who said other aspects of the rescue plan are too complicated wondered openly 
if it wouldn't be better to let the utility to go bankrupt. 
But Assemblyman Fred Keeley, D-Boulder Creek, an author of the bill, said 
before the 11-to-9 vote that lawmakers have to work with legislation that is 
complicated and not entirely pleasing. 
"If this was easy, or if this was simple, we wouldn't call it a crisis," he 
said. "This is far beyond a problem or a policy that we can debate and as a 
consequence the solutions are neither simple or easy." 
After a day of furious activity, the close vote -- with some Democrats 
joining Republicans in opposition -- may spell trouble when it reaches the 
floor of the Assembly. 
The Assembly Appropriations Committee approved the plan 12 to 6 late last 
night, setting up a floor vote for today. 
The second plan that cleared the Assembly committee would be a "straight 
bailout," said its author, Assemblyman Rod Wright, D-Los Angeles. It was 
approved 12 to 3. The Appropriations Committee did not take up Wright's bill. 
The state would back $3.5 billion in bonds issued by the utility and then be 
repaid through a $2-a-month charge for Edison ratepayers. 
The Edison deal is considered a linchpin to getting the state out of the 
power-buying business, something that is costing taxpayers upward of $50 
million a day. If Edison joins Pacific Gas and Electric Co. in Bankruptcy 
Court, there is no clear way out of the electricity-buying business for the 
state. 
Gov. Gray Davis has said that he hopes any rescue plan for Edison would be 
used as a model for PG&E to get out of court and back into the power-buying 
business. 
Also, a Senate committee defeated another proposal after the company said it 
would not work. The bill would let the utility issue $2.5 billion in revenue 
bonds, to be repaid by ratepayers. 
The Senate Energy Utilities and Communications Committee's 4-to-3 vote came 
as lawmakers struggle to approve some kind of rescue plan before the end of 
the week, when they are scheduled to start a monthlong recess. The bill 
needed five votes to pass and the chairwoman of the panel said another vote 
would be taken today. 
Sen. Jackie Speier, D-Hillsborough, who abstained from voting in the 
committee, said the bill was defeated because senators weren't prepared to 
send it to the floor yet. 
"The bill does not have broad support in the Democratic caucus," said Speier, 
who opposes the bill. 
Edison objects to the bill by Sen. Byron Sher, D-Palo Alto, because it 
contains no way for the company to pay back the other $1 billion it owes 
generators. Bob Foster, an Edison vice president, said the goal of a rescue 
plan is to remove the state from the electricity business and restore the 
utility to creditworthiness. 
"This bill can't do that," he said in a Senate hearing. 
Sher's proposal would also give the state a five-year option to purchase the 
transition lines and would make the largest commercial businesses pay for all 
of the debt. 
Business groups and consumer organizations blasted the measure. 
"We think you should spread the cost proportionally to all ratepayers," said 
Dominic DiMare of the California Chamber of Commerce. "This is businesses 
subsidizing residents. Everyone used energy during this time period that the 
debt was accrued, and everyone should pay their share." 
Doug Heller of the Foundation for Taxpayer and Consumer Rights said consumers 
will see the cost in the end through higher prices passed on by businesses. 
But Senate leader John Burton said the proposal by Sher was the only one that 
might be approved by the Senate. 
"It's a fair, just and equitable offer," he said. "It puts the burden on 
those who can most afford it, and it doesn't overpay for the transmission 
lines. 
Many lawmakers say letting Edison go into bankruptcy may be better than 
rushing through a rescue plan. 
With each house likely to pass different versions of a rescue plan, it is 
unclear if the difference will be resolved before the break, or if lawmakers 
will be called back to vote on a final plan during their vacation. 
An agreement between Gov. Davis and Edison, which has been all but dismissed 
by lawmakers who say it is too generous to the utility, contains an Aug. 15 
deadline. 

Saving Edison 
A comparison of three bills that attempt to rescue financially troubled 
Southern California Edison: . 
AB82xx by Assemblyman Fred Keeley, D-Boulder Creek (Santa Cruz) and Assembly 
Speaker Robert Hertzberg, D-Sherman Oaks (Los Angeles County) 
TRANSMISSION LINES
Proposes spending $2.4 billion for transmission lines to help cover the 
utility's estimated $3.5 billion in debt. 
BACK DEBT (All of the plans allow the utility to issue bonds to repay the 
debt, but each has it repaid by customers in a different way) Debt not 
covered by the sale of transmission lines will be paid back by all ratepayers 
for two years, then fall exclusively on the shoulders of large commercial 
customers. Money raised will be placed in a trust account of an amount equal 
to 70 percent of the utility's back debt. Generators owed money can either 
accept partial payment or fight the trust in court. 
DIRECT ACCESS
Phases in the ability of consumers to bypass the utility and contract 
directly for power. As the state's obligation to purchase power is reduced, 
customers may opt for direct access during specified open enrollment periods, 
to occur at least twice a year. . 
AB83xx by Assemblyman Rod Wright, D-Los Angeles 
TRANSMISSION LINES
No purchase of transmission lines. 
BACK DEBT
All of the debt will be paid for by all customers with a $2-per-month charge. 
DIRECT ACCESS
Same . 
SB78xx by Senator Byron Sher, D-Palo Alto, and Richard Polanco, D-Los Angeles 
TRANSMISSION LINES
Includes a 5-year option for the state to purchase the lines for $1.2 
billion. 
BACK DEBT
It would only allow $2.5 billion to be paid to alternative power generators 
and banks and does not deal with the $1 billion owed to generators. All of 
the $2.5 billion would be paid by large commercial customers. 
DIRECT ACCESS
Does not address the issue. 
Chronicle Graphic 
E-mail Lynda Gledhill at lgledhill@sfchronicle.com 
<mailto:lgledhill@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 14 








Cool weather brings California energy glut, causing state to sell surplus 
power at a loss 
KAREN GAUDETTE, Associated Press Writer
Thursday, July 19, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/19/finan
cial0358EDT0024.DTL>
(07-19) 00:58 PDT SAN FRANCISCO (AP) -- 
Unseasonably cool weather has turned the California power crisis on its head, 
with recent energy shortages giving way to a glut that's prompted the state 
to sell excess power at a loss. 
In some cases, traders say, energy bought at an average of $138 per megawatt 
is being sold for as little as $1 per megawatt. 
State officials acknowledged selling excess power over the past week, but 
disputed the prices. They said the sales are a blip during a long, hot summer 
and blackouts are still possible if the mercury soars. 
"This is unusual, but it was anticipated, it is typical in the power buying 
operation," said Oscar Hidalgo, a spokesman for the Department of Water 
Resources, which is in charge of buying power for three financially ailing 
utilities. "It's better than doing nothing with surplus power." 
The agency has spent the past few months arming the state with long-term 
energy contracts while weaning itself away from buying high-priced power on 
the last-minute electricity market. 
Those contracts, along with the temperate weather and a boost in energy 
conservation, mean there's suddenly more power than Californians can use. 
Hidalgo acknowledged the state has been trying to sell as much as 20 percent 
of its daily megawatts, though he would not say at what price. 
"We know from traders who have bought that it's gone as low as a dollar and 
last week we know it was as low as $5," said Gary Ackerman, executive 
director of the Western Power Trading Forum in San Jose. 
Unlike natural gas, extra electricity cannot be stored and used later. Since 
Californians haven't been running their air conditioners as often as expected 
over the past week, the state hasn't needed the entire 38,000 megawatts it 
had figured it would need. A megawatt is enough electricity to power roughly 
750 homes. 
The surplus power sell-off could encourage criticism that the state bought 
too much power at too high a price in its haste to fend off blackouts. 
"If the price is $138 on average for a month and you have to turn around and 
sell a chunk of it for a dollar, you're not going to look real good to a 
number of people," Ackerman said. "I just don't think many people in 
California truly understood what their state did when they stepped into this 
business." 
Steve Maviglio, a spokesman for Gov. Gray Davis, said Ackerman has no 
evidence of California selling power for $1 a megawatt. He said a 
$25-per-megawatt price mentioned by California Energy Markets, a trade 
weekly, was "much closer to reality." 
Some of the extra electricity is being sent to the Bonneville Power 
Administration, a power supplier in the Pacific Northwest, to repay it for 
power it loaned California earlier this year, Hidalgo said. 







Investigative arm of Congress issues demand letter for energy meetings 
PETE YOST, Associated Press Writer
Thursday, July 19, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/19/natio
nal0311EDT0466.DTL>
(07-19) 00:11 PDT WASHINGTON (AP) -- 
The investigative arm of Congress demanded Wednesday that Vice President Dick 
Cheney identify all the industry leaders who helped formulate the Bush 
administration's energy policy. Refusal could lead to a court fight. 
The White House, which is reviewing the request, said it would work with the 
General Accounting Office to resolve the issue. 
The GAO letter follows repeated refusals by the vice president's office to 
provide names and titles of participants who met with the energy task force 
chaired by Cheney. 
Under the law, the GAO could sue if the Bush administration fails to supply 
the data within 20 days. 
This is the first demand letter ever issued by the GAO to the vice president 
of the United States, said Democratic Reps. John Dingell and Henry Waxman, 
who directed the agency to review the task force's work nearly three months 
ago. 
The vice president's lawyer has told the GAO there were nine meetings of the 
task force and that staffers also met with many people to gather information. 
The result was an energy policy, announced May 17, that is aimed at 
increasing the nation's supply of energy. It includes expanded oil and gas 
drilling on public land and a rejuvenated nuclear power system. 
White House spokeswoman Anne Womack said the letter is under review, and "we 
will continue to work with the GAO to resolve this issue." 
The vice president's office "has continued on its course of secrecy and 
obstinance," Dingell said in a statement. 
"The White House should simply try telling the truth ... and stop hiding 
information that Congress and the public have a right to see," said Waxman. 
A top Cheney aide, Mary Matalin, said Waxman and Dingell should "stop wasting 
taxpayers' money" with their confrontation with the vice president. "If they 
want to know what happened in the energy task force meetings, they need look 
no further than the policy we sent to the Hill," she said. 
The White House's position is that the GAO is entitled to information on the 
task force's costs, but that the congressional watchdog agency doesn't have 
authority to ask for lists of those with whom the task force met. 
Waxman is also pressing for a Justice Department investigation of Karl Rove 
over the Bush political strategist's energy-related meetings. 
The White House has acknowledged that Rove participated in meetings on the 
administration's energy policy while he owned stock in energy companies such 
as Texas-based Enron Corp. The White House has supplied no details on Rove's 
meetings. 






Poll: Legislators, Davis blamed more than sellers 
Posted at 10:08 p.m. PDT Wednesday, July 18, 2001 
BY STEVE 
JOHNSON 
Mercury News 

Despite months of loudly accusing electricity suppliers of price gouging and 
leaving the state in a terrible mess, Gov. Gray Davis and legislative leaders 
haven't convinced most Californians, a new poll suggests. 
When the Public Policy Institute of California asked 2,007 adults this month 
who was mostly responsible for the energy crisis, Davis and lawmakers were 
blamed more than private power sellers. 
Moreover, most of those surveyed said they preferred having businesses in 
charge of producing and distributing electricity in California and that it 
would be a bad idea for state government to take over that role. 
``It means that the efforts to single out the power generators has really not 
been very effective on the part of the governor or the Legislature,'' said 
Mark Baldassare, who directed the non-profit research group's poll released 
today. ``Californians look to a whole group of actors in this crisis as 
playing major parts in the problem.'' 
The poll was conducted before the Mercury News reported Wednesday that the 
state was selling costly surplus power at bargain prices, a move that had one 
lawmaker calling for more details from the governor. It was one of a number 
of recent instances in which state officials had to defend their own energy 
dealings. And as they have done in the past, they responded by blaming 
generators for most of the state's problems. 
But today's poll heartened some electricity suppliers, who say they are tired 
of the barrage of price-gouging allegations being leveled at them. 
``Wow, maybe the public understands that this problem is a lot more complex, 
which is what we've been saying all along,'' said Patrick Dorinson, of Mirant 
Corp., which has several major power plants in the Bay Area and is among the 
nation's biggest electricity suppliers. ``Maybe it also indicates that the 
public is getting tired of the blame game.'' 
But some experts said the poll may simply underscore a misunderstanding about 
the difference between utilities and other electricity sellers. 
Asked who ``is most to blame for the current electricity situation in 
California,'' 22 percent picked the former governor and Legislature, 16 
percent picked the current governor and Legislature, and 10 percent listed 
power generators. 
However, electric utilities companies were picked by 23 percent, even though 
they've given up much of their electricity-producing responsibilities to 
private firms under the state's 1996 energy deregulation law. 
Davis and other state officials have repeatedly accused private electricity 
sellers of overcharging the state and helping drive Pacific Gas & Electric 
Co. into bankruptcy. Still, ``most consumers don't know the difference'' 
between utilities and the firms that supply power to the utilities, said 
Steve Maviglio, Davis' chief spokesman. 
Even some experts hired by the energy industry say it's easy for the public 
to be confused. 
The way power is bought and sold in this deregulated energy marketplace 
probably mystifies many, said Marty Wilson, who has polled about 6,000 
Californians this year for Reliant Energy of Houston. 
Nevertheless, Wilson added that his polling also finds little support for the 
notion that power suppliers are primarily to blame. About 40 percent of those 
he has questioned attribute the state's energy problems to the 1996 law. By 
contrast, the percent of people who blamed private power suppliers was less 
than half that, he said, adding, ``they clearly see this as a failure of 
government.'' 
Still, Davis isn't likely to ease up on his criticism of private power 
suppliers. ``The governor will continue to point the finger at whoever he 
sees as causing prices to rise,'' Maviglio said, ``and the No. 1 villain is 
generators.'' 
S. David Freeman, Davis' chief energy adviser, reiterated that point during a 
meeting Wednesday with the Mercury News editorial board. He defended the 
state's attacks on energy companies and credited the relentless pressure for 
forcing federal regulators recently to consider ordering significant refunds 
from the firms. 
``We did some things right, and one of them was calling attention to the fact 
that we were being robbed,'' Freeman said. 
Consumers were given the least amount of blame for the state's energy 
problems in the Public Policy Institute survey. 
More than four out of five -- 81 percent -- said they were closely watching 
news reports about the energy crisis, and 56 percent said the biggest single 
issue facing California was the price and availability of electricity. That 
was the first time in the survey's three-year history that a majority of 
respondents had named the same issue as the most important problem. 
Most of those questioned also said they were trying hard to conserve. ``Six 
in 10 residents say they have done `a lot'' to reduce their use of 
electricity and appliances at home during peak hours,'' the survey found. 
Belief in the importance of conservation was equally strong among Democrats 
and Republicans. But the survey found significant differences among ethnic 
and income groups. 
``Public support for conservation is strongest among younger, less educated 
and lower-income residents,'' it concluded. Moreover, by a ratio of 25 
percent to 16 percent, it said, ``Latinos are more likely than non-Hispanic 
whites to favor conservation as the solution to today's electricity 
problems.'' 


Mercury News Staff Writer John Wolfolk contributed to this report. 


Contact Steve Johnson at sjohnson@sjmercury.com 
<mailto:sjohnson@sjmercury.com> or (408) 920-5043. 








Consumers to bear costs of state's power purchases 
Posted at 10:30 p.m. PDT Wednesday, July 18, 2001 
BY MICHAEL BAZELEY 

Mercury News 


State energy regulators have reluctantly signed away one of their most 
fundamental consumer protection roles: the right to question and reject 
requests for higher power rates. 
Under a proposed rate agreement with the state Department of Water Resources 
released Wednesday, the Public Utilities Commission promises to pass all the 
state's power-buying costs directly to consumers. 
Unlike its relationship with utilities such as Pacific Gas & Electric, the 
utilities commission will not be able to audit the department's books or 
question its expenses. And it will have just 90 days to raise rates if the 
state concludes it needs more money. 
``Previously, we had discretion to raise rates or not raise rates,'' said 
Commissioner Jeff Brown. ``Here, we're in a situation where it's a bill -- 
pay it.'' 
The rate agreement, which the commission is expected to approve next month, 
marks a sea change for the agency. 
The commission has acted as a check against exorbitant energy rates by 
reviewing utility costs and setting rates it deemed reasonable. 
But now the state has stepped into the power-buying business, purchasing a 
third or more of the energy used statewide. The state wants to finance its 
costs with $13.4 billion in bonds but says it needs to guarantee investors 
that consumers will repay them. 
The agreement comes as no surprise. A state law passed in January says the 
commission must set rates to cover the water resources agency's bills. 
Nonetheless, some consumer groups are fuming. 
``It is effectively a blank check for the state,'' said Doug Heller, of the 
Foundation for Taxpayer and Consumer Rights. ``Any costs the state incurs -- 
whether it be consultants for Gray Davis or trips to Texas -- anything they 
pass on is considered just and reasonable. That's deregulation on crack.'' 
Under the 17-page agreement, the Department of Water Resources will 
periodically send a ``revenue requirement'' to state utilities regulators. 
The regulators will use the document to set rates within the 90-day time 
frame. 
If the department starts to run short of cash -- because of dramatic spikes 
in the price of power, for instance -- the commission could be forced to 
adjust rates within 30 days. 
The commission would have minimal discretion to challenge the state's revenue 
requests, according to the agreement, beyond pointing out ``arithmetic 
error'' or costs not related to paying off the bonds or buying power. 
State officials said they cannot sell the bonds if investors believe the 
commission might reject any of the state's power-buying costs. 
At the same time, they said, officials are scrutinizing every contract they 
negotiate with power generators to make sure consumers are getting the best 
deal. 
``Every contract is critiqued within our department,'' said Oscar Hidalgo, 
spokesman for the water resources department. ``And a lot of the 
administrative costs are handled the same way.'' 
Under the new arrangement, utilities would still have to justify their costs 
when asking for a rate increase, but the state would not. 
Whether rates will need to go up again soon is not clear. The commission has 
already voted in two big rate increases this year, one in January and another 
in March. The state is expected to give the commission its latest revenue 
requirement Friday. State officials say that, with falling power prices, they 
do not see a need for higher rates. 


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








Conservation is cutting edge of power crisis 
July 19, 2001 
By Jonathan Lansner
The Orange County Register 
The Edison bill has arrived. It was almost as exciting a mailbox event as the 
seemingly regular arrival of a sweepstakes envelope. 
Best of all, the bill said, "You won!" Well, it really didn't say that. But 
it might as well have. 
The family's electric bill did note that we sliced our electricity use by a 
third from a year ago. Whoopee! 
Because we conserved so well, we got a 16-buck rebate. Now, for full 
disclosure, we sort of cheated. Thanks to a remodeling job in progress, we 
have no air conditioner to abuse. But we weren't the only ones cashing in on 
conservation, so to speak. 
According to Edison, 31percent of its residential customers in June took the 
conservation bait: Cut electricity usage by 20 percent, get a state-funded 20 
percent rebate. 
For the month, 287,224 families in these parts got $2.5 million in rebates - 
or nearly nine bucks a household. That's state taxpayer money at work. 
Now that sum's no grand windfall. Nor does it fully negate the year's rate 
hikes. But it generates spendable cash. And it's an important conservation 
message. 
Those 287,224 families earning a June rebate saved what seems at first glance 
to be a smidgen of the state's monthly energy usage. You know, $2.5million 
looks like pocket change when headlines talk of billion-dollar deals and/or 
overcharges. 
However, consider this math: That $2.5million would buy roughly 24,000 
megawatts of electricity, using Edison's average cost of power this year. 
Believe it or not, 24,000 megawatts is more than a half-day of typical 
statewide use. Not bad conservation by customers of just one of three major 
utilities in the state. 
Then roughly double that figure because the state handed out nearly $3million 
in June rebates to commercial users for their savings. 
You know, this conservation thing is more than a sound bite. One reason the 
lights have stayed on this summer in California to date is that demand is 
down by as much as 12 percent. 
Sure, the weather's unseasonably pleasant, keeping many air conditioners off. 
And a painful technology slump shuttered some energy-guzzling factories. 
Nevertheless, the populace also is well aware of the higher energy costs. 
Average Joes and Janes appear very willing to play the money-saving game. 
Compact fluorescent light bulbs, ceiling or attic fans, and double-pane glass 
aren't just home-improvement hype. 
Forget politics. Forget finger-pointing. Please remember basic economics. 
Price motivates consumers to action. Discounts typically lure crowds. 
Surcharges usually scare off buyers. 
The fact that nearly one-third of Edison's residential customers slashed 
energy use in the face of nearly 40 percent rate hikes and a 20 percent 
rebate carrot clearly proves that point. 
Whine all you want about what caused the energy mess. Blame the incompetent 
Sacramento crowd. Blame the bungling utilities. Blame the shady out-of town 
generators. Heck, blame L.A.'s stealthy Department of Water and Power. 
Nevertheless, when you talk solutions, conservation is the most logical 
choice. 







National Desk; Section A 
California's New Problem: Sudden Surplus of Energy 
By JAMES STERNGOLD 

07/19/2001 
The New York Times 
Page 1, Column 1 
c. 2001 New York Times Company 
LOS ANGELES, July 18 -- After months of warnings about power shortages and 
forced blackouts, an unusually cool July and surprisingly effective 
conservation efforts have put California in a stunning position: it has so 
much electricity on its hands that it is selling its surplus into a glutted 
market. 
In fact, state officials said today, after spending much of the winter and 
spring scrambling to line up new supplies of electricity at a cost of tens of 
billions of dollars, the agency that is in charge of buying power has 
actually been selling some back at a loss this week. 
Oscar Hidalgo, the spokesman for the Department of Water Resources, which 
became the state's main buyer of power after soaring wholesale prices pushed 
private utilities toward bankruptcy this year, would not provide exact 
figures on how much the state was selling or how much money it was losing. 
But the department has said it was paying on average $133 per megawatt-hour 
this month, much of which it is obliged to buy whether it needs it or not, 
under long-term contracts signed in recent months. By contrast, officials 
say, the department at times has sold some of that power back into the market 
at prices as low as $15 per megawatt-hour. 
Mr. Hidalgo insisted that the surplus power could quickly vanish if 
temperatures soar as expected in August. 
Some consumer groups, which have bitterly criticized the state's energy 
policies in the crisis, seized on the sales as evidence of what they said was 
a poorly thought-out plan that had left the state at the mercy of a merciless 
market. 
''This state agency has no expertise in trading,'' said Harvey Rosenfield, an 
official at the Foundation for Taxpayer and Consumer Rights. ''It is 
amateurish at best and sometimes incompetent, negotiating with a bunch of 
M.B.A.'s whose goal is to soak California. The state was panicked into 
leaping into this business, and it is being outwitted.'' 
But a spokesman for Gov. Gray Davis defended the state's purchases, saying 
its response to an emergency has produced greater reliability and, in the 
long term, a greater supply of power. 
''Like we said all along, we're doing everything within our power to control 
the situation and stabilize things,'' said Steve Maviglio, the governor's 
spokesman. ''But the weather is not within our control. When the utilities 
were in this business, they ran into this situation routinely.'' 
On Monday, for example, the high temperature in San Diego was 70 degrees, 
compared with an average of 77 degrees. In San Francisco, the high was 66, 
compared with an average of 72, and in Fresno it was 87, down from the 
average of 99. That meant that air-conditioners across the state were turned 
down. 
But officials said that the weather was not the only factor in relieving the 
sense of crisis in California and that the state's conservation program had 
produced a significant reduction in demand. 
The state energy commission has said that total demand was down 12 percent 
this June from June 2000, adjusted for the weather and economic growth. 
The conservation program provides rebates for buying certain energy-efficient 
appliances and special discounts for large consumers that reduce their power 
needs sharply from previous years. 
In addition, state and federal office buildings have instituted conservation 
measures, including turning off lights and computers at night and adjusting 
thermostats. 
Also, big rate increases, of as much as 40 percent in certain instances, 
kicked in this June, encouraging consumers to cut electricity use further. 
Some experts have warned that while a sense of crisis has helped produce the 
big reductions in demand, as soon as people feel that the emergency has 
passed at least some will return to their old ways and demand may rise again. 
According to the California Independent System Operator, which manages the 
power system, peak demand today was expected to be 32,651 megawatts, and the 
available supply was slightly above 40,000 megawatts. 
In January, the state suffered several power emergencies in which it was 
forced to pay more than $1,000 a megawatt at times of critical shortages. 
But even with those purchases, utilities were forced to cut power in some 
places when the demand exceeded the supply. The last time the state had to 
resort to blackouts was on May 8. 
After the emergencies in the winter, the state frantically lined up power 
purchases on contracts ranging from a few months to 10 years and more. 
The state tried to put together a diverse portfolio of contracts that would 
ease the shortages but not lock the government into paying too much if prices 
declined in the future. Energy experts expected some declines in prices but 
not this quickly. 
The Department of Water Resources paid an average of $243 per megawatt in 
May, but the price has now dropped to $133 per megawatt on average this 
month, some of that in the form of spot purchases and some under the 
long-term contracts. Mr. Hidalgo said the department's sales of power back to 
the market had been at $15 to $30 per megawatt. 
Some energy traders said the state was just paying the price any market 
participant must accept. 
''They're not doing anything imprudent,'' said Patrick Dorinson, a spokesman 
for the Mirant Corporation, a large power generator and trader. ''They're 
just finding out how the markets work. Everything is built on forecasting, 
and sometimes the forecasts are wrong.'' 
Mr. Maviglio, the governor's spokesman, said the state's planning was built 
on forecasts of a harsher summer and less conservation. ''The forecasts have 
turned out to be far more conservative than the reality,'' he said. 
Mr. Rosenfield countered: ''We've been outwitted. They goofed, and it looks 
like taxpayer money is being thrown down the toilet.'' 
In May, the amount of power the state needed to buy on the so-called spot 
market, which means purchases in which the electricity would be supplied 
immediately, accounted for close to 45 percent of the total purchases. 
Typically, longer-term contracts are at fixed prices, while spot purchases 
can be enormously volatile. 
But because of the reduced demand in July, spot purchases have made up just 5 
percent or so of the Department of Water Resource's total purchases, and at 
the times of lowest demand, like this week, officials have decided to get 
what they can by reselling excess power. 
''This is a normal business practice,'' Mr. Hidalgo said. ''We can buy power 
and we can sell power. I don't think anyone would have predicted that we 
would have found ourselves in this position in July. But we're not out of the 
woods. August could be raging hot.'' 

Photo: Cecelia Paez sorted customer bills yesterday at Southern California 
Edison's office in Rosemead, Calif. After months of blackouts, the power 
situation took an unexpected turn this month, leaving the state with a 
surplus. (Associated Press)(pg. A20)