Please see the following articles:

Sac Bee, Thurs, 7/26:  FERC orders hearing on power overcharges
Sac Bee, Thurs, 7/26: Capitol Digest: A new proposal to rescue Edison 
Sac Bee, Thurs, 7/26: No bailout  (Editorial)
SD Union, Thurs, 7/26: FERC orders more hearings over refunds 
SD Union, Thurs, 7/26: Brazil's ethanol is state's trump card 
SD Union, Thurs, 7/26: New Edison rescue plan worked out 
LA Times, Thurs, 7/26: Surprise! Californians Answer the Call in Crisis
LA Times, Thurs, 7/26: Power Plant Plan Hits a Snag
SF Chron, Thurs, 7/26: NEWS ANALYSIS 
Electricity crisis lets Davis generate an image of power 
SF Chron, Thurs, 7/26: Martinez foes fighting power plant 
Area already top-heavy with industry, they say 
SF Chron, Thurs, 7/26: News briefs on the California power crisis 
SF Chron, Thurs, 7/26: PG&E cutting voltage on some circuits 
SF Chron, Thurs, 7/26: Regulators say $1 billion power refund is fair 
State sticks by $8.9 billion claim 
Mercury News, Thurs, 7/26: States' eyes are on Texas' model for creating 
power 
Mercury News, Thurs, 7/26: Panel to seek refunds from municipal utilities 
OC Register, Thurs, 7/26: Book value doesn't tell whole story  (Editorial)
OC Register, Thurs, 7/26: Online just in time 
LA Times, Thurs, 7/26: Commentary Long-Term Deals Have Chilled Electric 
Prices, if Not the Whiners
LA Times, Thurs, 7/26: THE NATION Regulators Plan Energy Rebate Settlement; 
Davis Plans Lawsuit FERC: Commission opens fact-finding process into the $8.9 
billion governor says is owed Californians
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FERC orders hearing on power overcharges
By David Whitney
Bee Washington Bureau
(Published July 26, 2001) 
WASHINGTON -- The Federal Energy Regulatory Commission ordered hearings 
Wednesday to determine how much money electricity generators will have to pay 
in refunds to California for wholesale power overcharges. 
Under the process laid out by the commission, based on the recommendations of 
an administrative law judge who tried to negotiate a settlement earlier this 
month, the dollar amounts of refunds will not be set until after a hearing to 
be completed in September. 
"Market participants need to understand that the cloud of market uncertainty 
will lift at some point soon," said the commission's chairman, Curtis Hebert. 
"Suppliers and customers soon will be able to finalize their accounting 
ledgers and again make rational purchasing and selling decisions." 
But the commission's order is unlikely to result in refunds acceptable to 
California, meaning that lawsuits and appeals over a final commission order 
are virtually certain and could stretch on for months or years. 
"This decision shows that there is a fundamental disconnect between FERC's 
responsibility to protect consumers and the actions of its commissioners," 
said Sen. Barbara Boxer, D-Calif. "Once again, FERC has shown that it is not 
up to the task, and as a result, California is left paying the price." 
Gov. Gray Davis insists the state was overcharged some $8.9 billion from May 
2000 until June 19, when the commission ordered new rules to prevent price 
gouging. 
He said Wednesday's FERC ruling validated the state's claim. "As for the 
energy profiteers and pirates, let me make clear that I will not rest until 
every dollar gouged from California businesses and residents return to 
California," Davis said. "If the FERC does not make California whole, we will 
see you in court." 
But power generators said the overcharges, if they occurred, were just a 
fraction of what the governor is demanding. In settlement negotiations before 
the administrative judge, the generators and marketers offered only about 
$700 million. 
In his July 13 recommendations to the commission, Chief Administrative Law 
Judge Curtis Wagner said refunds probably "amount to hundreds of millions of 
dollars, probably more than a billion dollars in aggregate sum." 
Despite differences between the commission's three Republicans and two 
Democrats over some of the methodology that will be used to calculate the 
refunds, the five-member panel was otherwise unanimous in its decision to 
send the matter for a hearing. 
The differences on the commission focused primarily on two issues, including 
the inclusion of publicly owned utilities like the Sacramento Municipal 
Utility District and the Los Angeles Department of Water and Power in a 
refund order. Under the Federal Power Act, the regulatory commission does not 
have authority over publicly owned utilities. 
But the Republican majority on the commission said it thought including the 
publicly owned utilities was a matter of "equity," meaning they should not be 
permitted to escape refunds for overcharges that the private generators will 
have to make. 
Commissioner William Massey questioned why the deliberate withholding of 
power by generators to incite shortages and drive up electricity costs wasn't 
being factored into the refund calculations. 
But the commission's lawyers said they had looked into that question and 
determined that without an explicit rule against withholding power from the 
market, the regulatory agency was powerless to seek economic redress on that 
ground. 

The Bee's David Whitney can be reached at (202) 383-0004 or 
dwhitney@mcclatchydc.com <mailto:dwhitney@mcclatchydc.com>. 







Capitol Digest: A new proposal to rescue Edison 


(Published July 26, 2001) 
State lawmakers Wednesday released a new proposal to save Southern California 
Edison from bankruptcy in another attempt to send Gov. Gray Davis an 
agreement by Aug. 15. 
The new package combines parts of plans from both houses but relies more 
heavily on a proposal by Assembly leaders. Some lawmakers intend to review 
the plan informally today, and it remains unclear whether a vote will come 
Friday. 
The plan would have the state issue $2.9 billion in bonds that customers 
would pay off with a portion of their electricity rates. All consumers would 
help pay down the debt for the first two years, while only larger users would 
pay thereafter. 
The state also would collect power generator refunds in an account with the 
purpose of returning them to customers. The plan would require that 10 
percent of new generation involve renewable sources, such as wind or solar. 
The state would not purchase Edison's transmission lines, as had been 
specified in an April agreement between Davis and the utility. 
Jones seeks SEC probe
California Secretary of State Bill Jones on Wednesday asked the Securities 
and Exchange Commission to investigate whether energy consultants 
to the Davis administration engaged in insider stock trading. 
Citing newly filed reports that show several state energy traders owned stock 
in energy- related companies, Jones said a federal inquiry is warranted. 
Gov. Gray Davis last week required energy traders to sell their energy stocks 
or leave their jobs. The SEC declines to comment on its investigations. 
--Bee Capitol Bureau 






No bailout 


(Published July 26, 2001) 

While most legislators are away on vacation, a few key members are meeting to 
put together a deal to rescue Southern California Edison. If this sounds 
eerily familiar, it should. California got itself into its energy mess back 
in 1996 when the Legislature let a few of its members, working with the 
utilities and business interests, write risky deregulation legislation that 
few lawmakers (they all voted for it) actually understood. 
Strangely enough, Gov. Gray Davis seeks to solve the electricity problem with 
the same disastrous process. He's pushing a weary Legislature to act quickly 
to erase Edison's debts. Worse, he is requiring the members to get Edison's 
blessing for any deal. Never mind that after many tortuous months of this 
crisis, the state and its leaders are actually in a position of strength. By 
giving Edison a veto power over any deal, the governor is placing the 
interests of an investor-owned utility before those of the public. 
If lawmakers return to Sacramento to revisit the Edison issue, they need to 
hold to a firm principle: a deal, maybe; a bailout, no. 
Residential and business customers are already on the hook to pay back 
billions of extra dollars for the high-priced power they used since January. 
They are also liable for $43 billion worth of pricey power the state has 
purchased in long-term contracts for the years ahead. This creates an 
enormous but unavoidable risk for the state's economy. 
But Edison is insisting that its shareholders had no risk for the roughly 
$3.5 billion worth of debts the utility ran up last year when its cost of 
buying electricity in the spiraling wholesale market exceeded the rate it 
charged to customers. It would be nice to live in a business world with no 
risks. Yet Edison assumed this risk when it championed the 1996 rewriting of 
the rules of electricity. A company that benefited when times were good can't 
shed its risk when the market goes haywire. 
The good news for both California and Edison is that the power situation is 
far more stable today than when Edison and Davis announced a bailout. In 
those dark days, the idea was for the state to overpay for Edison's 
transmission lines, to guarantee Edison too handsome a return for electricity 
and distribution improvements, and to force ratepayers to pay off too much of 
Edison's debts for years to come. 
None of that is necessary now. In the intervening months, the state has made 
some tough, but essential, choices. It has raised rates. It has purchased 
most of the power that Edison's customers will need for years to come. And 
thanks largely to conservation, demand is back in balance with supply, so 
prices are down. Edison's cash flow is solidly in the black, with enough to 
start paying off its debts. 
There's no reason for lawmakers to act until Edison and the governor change 
the rules of engagement. A deal that shifts the risk back to Edison, maybe. A 
hastily arranged bailout, no. The lobbyists and governor want action now. The 
public should want the Legislature to stay on vacation. 








FERC orders more hearings over refunds  


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objattph 
Commission sets 60-day timetable to sort out claims By Toby Eckert  COPLEY 
NEWS SERVICE  July 26, 2001  WASHINGTON -- Federal regulators ordered further 
hearings yesterday into how much California is due in refunds for high-priced 
electricity, but acknowledged they expect the dispute to end up in court.  
Adding another wrinkle to the long-running debate, the Federal Energy 
Regulatory Commission, or FERC, said municipal utilities and other public 
power generators that sold some of the highest-priced electricity to 
California face the possibility of paying refunds.  Those entities normally 
are not subject to FERC jurisdiction and are likely to mount a legal 
challenge. 
The commission set a 60-day timetable for sorting out the financial claims 
and counter-claims arising from the power crisis that has gripped California 
for more than a year.  FERC will then make a ruling on the state's demand for 
massive refunds and the claims by power sellers that they are owed billions 
of dollars for electricity.  State officials, who accuse the sellers of price 
gouging, have said FERC has more than enough information to order refunds 
immediately. Nonetheless, Gov. Gray Davis said the commission's decision 
"validates California's claim that significant refunds are due."  "The 
remaining question for FERC to decide is how much. California's answer 
remains the same -- $8.9 billion -- and today's action gets us closer to 
realizing that refund," Davis said in a statement.  Mark Stultz, a spokesman 
for the Electric Power Supply Association, said the process FERC outlined is 
"not going to come close to what California demanded" in refunds. The 
association represents power generators and marketers.  "We don't think 
there's any evidence to support refund obligations, but we also recognize the 
need to resolve outstanding issues and move forward," Stultz said.  FERC gave 
the California Independent System Operator 15 days to calculate how much 
wholesale power would have cost between Oct. 2, 2000, and June 20, 2001, 
using a formula based on a recent FERC order that curbed electricity prices 
in the West. The ISO manages most of the state's power grid.  A FERC 
administrative law judge will then have 45 days to hold an evidentiary 
hearing that establishes a basis the commission can use to order refunds.  
"Market participants will not have to wait long for final commission 
determination on California refunds," said FERC Chairman Curt Hebert Jr.  
FERC's order largely followed the recommendations of Curtis Wagner Jr., the 
commission's chief judge. Wagner recently presided over two weeks of 
unsuccessful settlement talks between California officials and power 
providers.  Wagner estimated that the state is due only "hundreds of millions 
of dollars, probably more than a billion dollars," but that power sellers are 
owed "even larger amounts."  Davis repeated his threat to sue the power 
providers to recover the full $8.9 billion the state is demanding.  "If the 
FERC does not make California whole, we will see you in court," he said.  
Hebert and Commissioner Pat Wood III acknowledged the issue probably is 
headed that way.  "I want you defending this thing in court . . . because it 
will go there," Wood joked to FERC staff members who drafted the 
recommendations.  Municipal utilities added to the litigation threats after 
FERC decided to make them subject to paying refunds. Public utilities, 
including the Los Angeles Department of Water and Power, sold some of the 
most expensive electricity to the state.  "I'm pretty hard pressed, almost 
mystified, on how they can find they have this legal authority," said Allen 
Mosher, director of policy analysis for American Public Power Association, 
which represents municipal utilities. "I don't think we should have to 
litigate this, but that may be the result."  Commissioners William Massey and 
Linda Key Breathitt partially dissented from FERC's order over the issue. 
Massey said he doubts the commission has the authority to order public 
utilities to pay refunds under the Federal Power Act.  "The conclusion that 
this agency has the power to tell non-jurisdictional companies to pay money 
back will come as a shock to most observers, I think," Massey said. "If 
Congress had wanted this agency to have refund authority over 
non-jurisdictional sellers it could have easily spelled that out."  But Wood 
called the decision "a natural extension" of FERC's move in April to apply 
price limits to all power sellers in the California market, including public 
utilities.  Massey, who has been one of California's chief champions on the 
commission, also objected to some elements of the formula that will be used 
to calculate potential refunds and said the order "still fails to squarely 
address" allegations that generators idled power plants to drive up prices.  
A FERC staff member indicated the allegations are still being investigated. 
"Those are non-public matters," he told Massey.  Meanwhile, FERC deferred a 
discussion of the makeup of the ISO board, which is appointed by Davis. Power 
sellers have questioned whether it can be a neutral manager of the state's 
power grid, and Hebert has raised similar concerns.  Davis has promised to 
fight any move by FERC to replace the board. 







Brazil's ethanol is state's trump card  


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By Michael Gardner  COPLEY NEWS SERVICE  July 26, 2001  SACRAMENTO -- The 
Davis administration and oil-industry buyers are in early talks to import 
ethanol from Brazil, something that could avert the threat of price spikes 
and head off a Midwest corn cartel once California banishes the additive MTBE 
from gasoline.  Brazil's emergence as a competitor in ethanol production 
could deliver more bargaining power to refiners and potentially save 
California motorists millions of dollars at the pump, state officials say.  
"The more supply the better for us," said Pat Perez, fuels manager for the 
California Energy Commission.  Brazil opened the talks by pledging as much as 
200 million gallons of ethanol, or about a third of California's annual need 
in 2003. California, which consumes about 14 billion gallons of gasoline a 
year, is about to become a lucrative ethanol market.  Brazil is the world's 
largest producer, converting a large share of its huge sugarcane crop to 
ethanol. "They have close to 1 billion gallons of idle capacity," Perez 
said.  British Petroleum, which markets Arco gasoline in California, is among 
those looking south for its ethanol.  "We're not committed to Brazil. Brazil 
came to us," said Margo Cormier, BP's West Coast business development 
manager. "In the short term, there will be tightness in the ethanol market."  
Significant imports from Brazil could reverberate from the foreign trade 
office in Washington to tiny rice farms in the Sacramento Valley.  The United 
States imposes a 54-cent-per-gallon tariff on ethanol, a barrier that could 
protect the Midwest from lower-priced competition from abroad. An dditional 
major supplier -- Brazil, for example -- also could dampen investor 
enthusiasm for California's slowly emerging ethanol industry.  Ethanol is a 
staple in fuel in Chicago, Denver and other smoggy cities, but it was 
squeezed out of the California market more than a decade ago by methyl 
tertiary butyl ether, or MTBE, a cheaper smog-fighting agent.  While 
effective in cleaning the skies, the additive polluted water sources from 
Santa Monica to Lake Tahoe, and Gov. Gray Davis stepped in two years ago, 
ordering MTBE out of gasoline by 2003.  The governor also appealed to the 
U.S. Environmental Protection Agency for a waiver of a federal mandate that 
requires refiners to add a cleansing agent. Air regulators in California say 
the state's cleaner-burning gasoline doesn't need help to comply with federal 
pollution limits.  State officials also contend California motorists could be 
socked with price spikes of up to 50 cents a gallon if Midwest 
corn-to-ethanol plants cannot feed demand. Droughts and supply interruptions 
also could cause havoc, the state warned.  President Bush rejected the 
state's appeal, bowing to pressure from agriculture and its powerful 
political allies. The decision, unless overturned, leaves California solely 
reliant on ethanol, the only proven, readily available alternative to MTBE.  
While still lobbying for a change in federal policy, California officials are 
serious about importing Brazilian ethanol to compete with producers in Iowa, 
said Bill Rukeyser, a Davis administration spokesman.  "It would be a real 
distinct irony -- with some Midwesterners putting so much energy into forcing 
their cousins on the West Coast to buy their product -- to have the situation 
come back and bite them," Rukeyser said.  That's unlikely, countered Monte 
Shaw, a spokesman for the U.S. ethanol industry. Brazil will be hard-pressed 
to match Midwest prices given the tariff and shipping costs, he said.  High 
sugar prices also could divert large amounts of cane from ethanol production, 
Shaw said.  "There's a big debate in Brazil whether they can produce enough 
for themselves," Shaw said. The Midwest, which is rapidly building more 
plants, will have more than enough to supply California in 2003, he added.  
But Brazil also plans to crank up production, said Bryan Caviness, oil 
industry analyst for Fitch Rating Service in Chicago. "Where there's demand, 
where there's price, supply will follow," he said. 







New Edison rescue plan worked out  


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objattph 
New Edison rescue plan mapped out By Jennifer Coleman  ASSOCIATED PRESS  July 
26, 2001  CALIFORNIA'S POWER CRISIS   (or) SACRAMENTO -- The state would 
forgo buying Southern California Edison's transmission lines, under a rescue 
deal for the utility presented yesterday by Assembly leaders.  The revised 
plan would allow the utility to issue up to $2.9 billion in corporate bonds 
backed by a portion of customers' rates.  All customers would repay the 
bonds, but residential and small-business customers would have a smaller 
burden, paying only 20 percent of the total. Commercial and industrial 
customers would pay the balance.  Bond-generated money could be used only to 
pay debts to alternative generators and banks. Edison would still owe $1 
billion to other power suppliers.  But staffers at a briefing at the state 
Capitol yesterday said the utility could whittle that down by applying a tax 
refund of $400 million and negotiating with generators to reduce the debt.  
The Assembly will likely use portions of a bill by Fred Keeley, D-Boulder 
Creek, and Assembly Speaker Robert Hertzberg, D-Van Nuys, and amend them into 
an Assembly bill. That bill, and a Senate bill approved last week, will both 
have to be approved to enact the full plan.  The Senate bill, by Sens. 
Richard Polanco, D-Los Angeles, and Byron Sher, D-Stanford, would have let 
Edison issue $2.5 billion in bonds. That would be repaid by industrial power 
customers. Under the Senate plan, the state would not buy the transmission 
lines, but would have an option to do so for five years.  A third Assembly 
bill, by Assemblyman Rod Wright, D-Los Angeles, would have allowed the 
utility to issue up to $3.9 billion in bonds and wouldn't have required it to 
sell the transmission lines. Though the bill was stalled in a committee, 
portions of that plan could be used as well.  Wright proposed allowing Edison 
customers to opt for cheaper direct-access energy service as the state's 
long-term contracts for power expire. The Assembly plan now includes that 
provision starting next year.  He referred to his bill as a "straight 
bailout" of the faltering utility.  Wright has been a favorite of Southern 
California Edison since he was elected to the Assembly in 1996. The company 
has donated vans to his district, subsidized trips to Europe and South Africa 
and bought him and his staff pro basketball tickets. The company also gave 
Wright's campaign $22,000 last year.  With Wright, "Edison is getting a lot 
of bang for their buck," said Doug Heller, consumer advocate for the 
Foundation for Taxpayers and Consumers Rights.  "His single largest 
contributor is the one corporation that his most recent legislation would 
directly bail out," Heller said.  Wright is unapologetic.  "I take money from 
anyone who can legally give it and I'll disclose it (as required by law)," he 
said.  The chairman of the Assembly Energy Costs and Availability Committee, 
Wright declined to say if he still takes energy contributions, which many 
elected officials have declined since the energy crisis started.  "I don't 
intend to disclose my fund-raising strategy in the newspapers."  Brian 
Bennet, Edison vice president of external affairs, said it's standard for a 
committee chairman such as Wright to get larger contributions from a 
utility.  Wright is "a bright, capable member of the Legislature who is 
interested in promoting sound public policy," Bennett said. 






ON CALIFORNIA
Surprise! Californians Answer the Call in Crisis
Peter H. King

July 26 2001

They were rooting against us in Washington, D.C., in the oil fields of Texas 
and pretty much all across the land. This was to be the summer in which 
Californians got theirs, a summer of power blackouts followed by economic 
collapse and maybe even moments of social breakdown. Jokes were told about 
hot tubs and windmills and how many Californians it might take to screw in a 
lightbulb in the dark.

Early calls to conserve energy were derided as too little, too late. 
Conservation, as the vice president of the United States so condescendingly 
described it, perhaps was a sign of personal virtue, but certainly it was not 
the stuff of serious energy policy.

No, this time the hole was too deep. There was no way Californians could 
escape by flipping off lights, turning up thermostats. No matter what, the 
so-called golden land was going to go dark--dozens and dozens of times, the 
experts were certain--and wouldn't that be something to see? Well, here we 
sit on July 25, pawing away at a powered-up computer, all systems go, the 
grid up and humming, as it has been throughout the past couple of months. 
What happened?

Well, many things.

The soaring prices of wholesale power finally created a policy backlash, 
bringing a measure of control back to what had been a runaway market. The 
weather has been kind, proving once again that Mother Nature is a Californian 
at heart. New plants have come online. And also--and perhaps this is the most 
important reason of all--Californians have conserved, and conserved, and 
conserved.

In June, according to state figures adjusted to account for weather and 
population increases, Californians consumed 12% less electricity than they 
did in the same month last year. On the hottest day of that month, the 
so-called peak, they consumed 14% less than they had a year ago--something 
like 5,000 megawatts worth, or the output of two nuclear plants.

Final figures for July, not yet released, are expected to show similar 
patterns. A poll earlier this month found that 83% of the Californians 
surveyed were trying to conserve energy one way or another. And while nobody 
can be sure what August will bring, it has become increasingly difficult to 
imagine anything approaching the original doomsday visions.

"The fact is," said Wally McGuire, coordinator for much of the state's 
multiphased conservation program, "we are conserving like crazy."

There are many explanations given for this. Economists insist it simply was a 
matter of increasing rates--higher prices produce less consumption. 
Policymakers, in turn, cite the incentives offered to those who use less 
electricity or purchase more efficient appliances. Skeptics suggest the 
reduced consumption merely signals a slowing economy. Fear of blackouts also 
is mentioned.

Most likely, it was a bit of all these things together--along with one other 
factor that tends, oddly enough, to be overlooked: Californians did the right 
thing. They decided to work their way out of the hole, one light switch at a 
time. They came to understand that money wasted on energy was money wasted, 
period. They had better things to spend it on--as individuals and 
collectively as a state.

So they quit whining and pulled together.

They turned off unneeded lights and, on hot days, turned up thermostats.

They unplugged second refrigerators.

They purchased house fans, compact fluorescent lightbulbs and other 
energy-saving products as quickly as the hardware stores could stock them.

They learned to do their laundry later at night, after the hours of peak 
demand had passed, or save it for the weekend.

They paid attention. They made adjustments.

As McGuire said, "They got it."

And they changed the national energy debate. Remember, heading into the 
summer, the accepted wisdom was that California, which already consumes, per 
capita, less energy than most states, could not possibly conserve any more. 
Instead, Californians demonstrated that there is still a lot of energy to be 
saved on the cheap--and if it works in California. . . .

To be honest, none of it has been all that difficult. In fact, that some of 
the most effective measures were so easy raised an embarrassing question: Why 
weren't we doing these things all along? Just when exactly did a second 
refrigerator become "essential" to quality living? Who sold us on the canard 
that computers must be maintained in rooms cooled down to Eskimo levels?

That Californians, in a crisis, answered the call should not be a surprise. 
They have done it before. In fact, after the latest long drought, 
Californians became so adept at conservation that some water district 
managers started to grow nervous. They feared that the drop in demand would 
decrease revenue and cripple their budgets.

In the same way, those engaged in the business of selling electricity to 
Californians must now be worried. What would happen to their bottom lines if 
Californians were to keep up--or, horrors, improve upon--these summer 
conservation levels? Of course, they don't believe this will happen. They are 
counting on Californians, once the crisis has passed, to return to their old 
ways, letting the lights blaze and the air conditioners thunder all through 
the day and night.

Just for the pure fun of it, let's surprise them again. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







THE STATE
Power Plant Plan Hits a Snag
Energy: Developer hopes to complete Lancaster facility by spring. Delay is a 
minor setback for state's plans to boost production by fall.
By MITCHELL LANDSBERG
TIMES STAFF WRITER

July 26 2001

A proposed power plant in Lancaster won't be completed as scheduled this 
summer, the developer announced Wednesday, dealing another small setback to 
the state's target of adding 5,000 megawatts of new electricity by this fall.

Steve Wilburn, president of Tustin-based Electricityprovider Inc., sent a 
letter to the California Energy Commission withdrawing an application that 
had been filed under Gov. Gray Davis' 21-day emergency licensing program.

Wilburn said he intended to reapply for licensing, but would not be able to 
complete the plant by Sept. 1, as had been originally planned. Instead, he 
said, it was more likely to be finished next spring. "We just basically ran 
out of time," Wilburn said. The biggest hurdle, he said, proved to be a study 
required by Southern California Edison of the demands that the 240-megawatt 
plant would put on the utility's transmission system.

"We're realistic, and we're not going to try to jump through hoops we can't 
make," Wilburn said. "We're a little bit disappointed, obviously, and a 
little bit frustrated."

It wasn't the first setback for Wilburn in his effort to build power plants 
in the frantic atmosphere of California's electricity crisis. His company 
owns La Jolla Energy Development, which recently withdrew its application to 
build a small power plant in the Baldwin Hills neighborhood of Los Angeles 
after residents there overwhelmingly opposed it.

The Lancaster plant hasn't stirred as much dissent, but has been opposed by 
both the Planning and Conservation League and the Natural Resources Defense 
Council--in part on the grounds that it could not realistically open on time, 
and therefore wasn't eligible for the streamlined 21-day licensing process.

The Lancaster delay followed another developer's decision to abandon plans to 
build a power plant in Chula Vista. Three major power plants have opened so 
far this summer in California and 10 small "peaker" plants are expected to 
open by the end of September.

Although the state appears certain to fall short of Davis' goal of 5,000 new 
megawatts online this summer, the combination of new generation, mild weather 
and greater than expected conservation has eased the electricity crisis and 
staved off the blackouts that were expected to be frequent occurrences this 
summer. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







NEWS ANALYSIS 
Electricity crisis lets Davis generate an image of power 
Robert Salladay, Chronicle Sacramento Bureau 
<mailto:bsalladay@sfchronicle.com>
Thursday, July 26, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/26/MN147854.DTL>
Gov. Gray Davis and his current chief political strategist, Garry South, 
worked in politics during that other energy crisis and shared a common worry: 
the metaphor of cars. 
As chief of staff to Gov. Jerry Brown, Davis famously put Brown in a simple 
blue Plymouth to show his Zen-economy side. While working in the White House, 
South argued that President Jimmy Carter should keep using the presidential 
limousine to project confidence, power and optimism amid a crisis. 
More than two decades later, Davis is still working hard on his political 
imagery, as he attempts to reshape his gubernatorial office into something a 
little more oval. 
The California energy crisis and the recent 2001-02 state budget negotiations 
have given Davis an opportunity to elevate his position, to separate himself 
from the media and the California Legislature. Some believe that the process 
is transforming, and in some cases isolating, the governor. 
"The word is imperious," said Barbara O'Connor, a political communications 
professor at California State University at Sacramento, who sees an 
orchestrated effort: "He's been very clear that throughout his career there 
always is a plan to advance to the next office, whether it's the White House 
or whatever is next." 
The current changes are a continuation of a gubernatorial makeover that 
started under former Gov. Pete Wilson, who hired White House aides and 
carefully leaked and controlled information given to the media. Wilson's 
White House ambitions were clear, but ultimately they were thwarted. 
With Davis, the anecdotes add up: 
EX-CLINTON AIDES HIRED
As the energy crisis worsened this year, Davis hired two former Clinton White 
House insiders, Mark Fabiani and Chris Lehane, to manage his public relations 
effort. Davis soon began appearing frequently on the national stage, 
including a "summit" with President Bush that vaulted Davis to equal footing 
with the president. 
He hired Richard Sklar, a former Clinton administration official and envoy to 
the Balkans, to head a group accelerating the building of power plants. 
Almost every public appearance is carefully scripted, a departure from the 
more informal nature of previous governors. When Davis walks from his office 
to the press briefing room, his staff invariably rounds up schoolchildren 
touring the Capitol and lines them up to shake his hand -- as TV cameras 
roll. 
When Davis gets to the briefing room, he stands in front of a backdrop sign 
that uncannily resembles the one in the White House. 
Davis reached into New Hampshire, the home of the first presidential primary, 
to hire former legislator Steve Maviglio as his chief spokesman. He held a 
fund-raiser for the New Hampshire governor, Jeanne Shaheen, at the 2000 
Democratic Convention in Los Angeles. 
DAVIS DELEGATES MORE
Some of these changes are positive, political observers say. Davis has been 
distrustful of anyone outside a small circle of political advisers. Hiring a 
host of nationally known energy and communications experts -- and letting 
them talk to the press -- is a dramatic change for him. 
"It's a maturation," said Mark Petracca, chairman of the political science 
department at the University of California at Irvine. "It's Davis' 
recognition that you can't be the chief executive officer of any large 
corporation, whether private or public, and do it on your own. You have to be 
willing to trust and you have to be able to delegate." 
South said the only thing that has changed since Davis was elected is the 
demand of the job. 
"There is not some grand master plan to try to restructure or reposition how 
the governor's office functions or in some other fashion change his image, " 
South said. "He is what he is. He does what he does." 
Davis' way of doing business nevertheless is startling to legislative leaders 
who are used to close contact with the governor, particularly on the state 
budget. Davis is expected to sign the $101 billion spending plan today, more 
than a month after the Legislature's constitutional deadline. 
DEPUTY HANDLED BUDGET TALKS
Senior lawmakers were relegated to negotiating with Davis' chief aide, Susan 
Kennedy, which some privately said they found vaguely insulting. The governor 
called only one "Big Five" meeting with the four top legislative leaders from 
both parties. During past difficult budgets, such meetings were regular and 
helped clarify positions among the two branches of government. 
Davis let the Legislature fight with itself this year, distancing his office 
from the fray. When a Chronicle story a few weeks ago said Davis had done 
little to advance the budget, Maviglio fired off an e-mail saying "even 
Clinton" didn't get blamed for holding up the budget. 
Senate President Pro Tem John Burton, D-San Francisco, openly complained 
during the Senate's budget session that Davis was AWOL. He found a milk 
carton with Davis' picture and brought it to the Senate floor and joked that 
he was probably watching golf. 
Although Davis appears to be "externalizing" his image by appearing on the 
national stage, the recent makeover doesn't necessarily mean Davis is gearing 
up for a presidential run, Petracca said. It may be just a strategy for re- 
election next year. 
And while the governor's office has become more presidential in style, 
California has changed as well. A nation-state with a $1.3 trillion economy 
and 34 million residents, California is more economically powerful than 
nearly every other country in the world. 
"The governor of California," said Petracca, "isn't like the governor of 
Idaho or Delaware." 
E-mail Robert Salladay at rsalladay@sfchronicle.com 
<mailto:rsalladay@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 







Martinez foes fighting power plant 
Area already top-heavy with industry, they say 
Jason B. Johnson, Chronicle Staff Writer <mailto:jbjohnson@sfchronicle.com>
Thursday, July 26, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/26/
MNC239070.DTL>
Martinez -- A proposal to build a 50-megawatt power plant in Martinez is 
drawing heat from residents who fear it would increase pollution in a region 
already burdened with large refineries and industrial plants. 
A local developer and a Southern California power firm want to team up to 
build build a natural gas-fired "peaker" plant on city-owned land near the 
former Shell Oil refinery now operated by Equilon Enterprises. 
Some residents fear that such a plant would reduce air quality by releasing 
thousands of pounds of carbon dioxide, nitrogen and sulfur dioxide. 
Critics complain that the county already has more than its fair share of 
power plants and other heavy industry. 
Some question the need for so many new plants, considering that the state 
seems to have turned a corner in its battle to stave off rolling blackouts 
and keep energy prices down. 
"The people in that area are already downwind from (Equilon)," said Kathleen 
Nimr, a Martinez resident and a council member with the Contra Costa Green 
party. 
Nimr said its been hard to get details about the plant from city officials, 
which only adds to the suspicion felt by residents. 
"There are just a lot of concerns that this was done behind closed doors," 
said Nimr. 
That location had been identified by the California Energy Commission as a 
potential plant site because it had easy access to water, a fuel source, and 
a way to plug into the state power grid. 
The peaker plant proposal comes from Evergreen Power, a partnership between 
Concord developer Thomas Denova, and Sterling Power Systems, of Southern 
California, said Richard Pearson, the city's acting community development 
director. 
About three months ago several power outfits came to city and expressed 
interest in building a new plant on the site, prompting officials to send out 
several requests for proposals. 
Martinez City Councilman Rob Schroder said it is much too early to tell if 
the city will approve construction of a new plant. He said the council first 
wants to gauge public support for the idea. 
Schroder said he has also talked with county Supervisor Mark DeSaulnier and 
Concord and Pleasant Hill officials about forming a committee to explore the 
idea of creating a local power authority. 
"It may come down where this isn't feasible at all," said Schroder. "We have 
to ask is this going to be good or bad for the city of Martinez overall. 
"There may be an opportunity here to provide an economic stream for the 
city," said Schroder. "The environmental aspects are important, and the 
economic aspects are important as well," he said. 
E-mail Jason B. Johnson at jbjohnson@sfchronicle.com 
<mailto:jbjohnson@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 17 







News briefs on the California power crisis 
The Associated Press
Thursday, July 26, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/26/state
0723EDT0147.DTL>
(07-26) 04:23 PDT LANCASTER, Calif. (AP) -- 
A company has withdrawn its application to build a power plant here, saying 
they wouldn't be able to finish by the end of the summer. 
Steve Wilburn, president of electricityprovider Inc. of Tustin, notified the 
California Energy Commission on Wednesday about the setback. 
"We just basically ran out of time," said Wilburn, referring to the 
governor's emergency fast-track program to build more power plants by Sept. 
30. "We're realistic, and we're not going to try to jump through hoops we 
can't make." 
Wilburn said the biggest hurdle was finishing a study required by Southern 
California Edison about the impact the 240-megawatt plant would have on the 
utility's transmission system. 
The company plans to reapply for a license and could have the plant 
operational next spring. 
It's the second major blow for the energy company, which withdrew its 
application to build a plant in Baldwin Hills after residents opposed it. 
Three major power plants have opened so far this summer in California and 10 
small peaker plants are expected to open by Sept. 30. 

FRESNO, Calif. (AP) -- A bailout of Southern California Edison may mean a 
loss of up to $5 million annually in property taxes. 
County officials are concerned that a provision of the Edison rescue plan 
would put thousands of acres in eastern Fresno County into a conservation 
easement. The result would mean the land would be taken off the property tax 
rolls. 
Gov. Gray Davis has said counties will recoup any lost property tax revenues 
brought on by the Edison plan. But county officials don't believe Davis' 
pledge and may be forced to sue the state if necessary. 
"It's really arrogance on the part of the government that they would come in 
here and take everything they want," said Supervisor Bob Waterston. 
The state initially wanted to buy Edison's transmission lines but a revised 
plan would allow the utility to issue up to $2.9 billion in corporate bonds 
backed by a portion of customers' rates. 
Glen Cardaronella, regional manager for the Edison company in Tulare, said 
the state has told county officials about the conservation easement from the 
beginning. 
,2001 Associated Press 







PG&E cutting voltage on some circuits 
Chronicle Staff Report <mailto:chronfeedback@sfchronicle.com>
Thursday, July 26, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/26/
MN168593.DTL>
Pacific Gas and Electric Co. will lower the voltage on about 10 percent of 
its circuits in the next three months, a move that will slightly reduce the 
number of megawatts it uses, the company said. 
About 300 circuits -- which deliver power to as many as 450,000 customers -- 
will be affected. The company says by lowering the voltage on the circuits, 
it could save about 30 or 40 megawatts. Customers won't notice the change, 
spokesman Jon Tremayne said. 
Some energy experts have suggested that the state could lower its energy 
usage by 500 megawatts if utilities lowered their voltage by 2.5 percent. 
That's enough megawatts to power 500,000 homes. 
The California Public Utilities Commission is investigating changing its 
rules to allow utilities to lower voltages even further. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 3 








Regulators say $1 billion power refund is fair 
State sticks by $8.9 billion claim 
Carolyn Lochhead, Chronicle Washington Bureau 
<mailto:clochhead@sfchronicle.com>
Thursday, July 26, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/26/
MN176793.DTL>
Washington -- Federal regulators largely accepted the findings of an 
administrative law judge yesterday who said California should receive about 
$1 billion in refunds for electricity overcharges. 
That would be far less than the $8.9 billion that California maintains it was 
overbilled by energy companies. 
The Federal Energy Regulatory Commission did not put a dollar figure on the 
amount of the refunds California should expect, instead ordering hearings on 
the issue. But the agency ordered that calculations for refunds be based on a 
price-control formula it imposed in June to tame wholesale power prices. 
That formula would call for refunds to be based on the spot price of 
electricity sold by the least-efficient plant during power emergencies from 
Oct. 2 of last year to June 20. 
California wanted alleged overcharges from as far back as May 2000 to be 
considered and disagreed with the spot-price formula. 
Sen. Barbara Boxer, D-Calif., said the commission's decision showed that 
"there is a fundamental disconnect between FERC's responsibility to protect 
consumers and the actions of its commissioners. Once again, FERC has shown 
that it is not up to the task, and as a result, California is left paying the 
price." 
Gov. Gray Davis, however, said the agency's move "validates California's 
claim that significant refunds are due California residents and businesses." 
Davis also lobbed another shot at the generators: "As for the energy 
profiteers and pirates, let me make clear that I will not rest until every 
dollar gouged from California businesses and residents returns to 
California." 
California officials had feared that yesterday's commission meeting might 
result in a separate move to dismantle the state's Independent System 
Operator, 
which runs California's power grid, in favor of a regional power-buying 
authority. However, the commission did not act on the issue. 
The decision on the refunds came after two weeks of settlement talks between 
California and power generators that ended in failure earlier this month. The 
generators offered around $700 million in refunds and contended they were 
still owed hundreds of millions in unpaid bills for power they sold to the 
state. 
Regulatory commission Judge Curtis Wagner oversaw the talks and found that 
the state had failed to muster evidence for the $8.9 billion. But Wagner said 
it was clear that "very large refunds are due," citing a figure of about $1 
billion and perhaps more. 
Yesterday, the commission gave the ISO 15 days to produce evidence of 
overcharges. After that, the agency will hold 45 days of hearings to produce 
findings that a new administrative law judge would certify. The ruling would 
include money owed to the generators as well as refunds to the state. 
Commissioners made clear that they expected the issue ultimately to wind up 
in federal court. "This is going to the circuit (court) anyway," said 
Chairman Curt Hebert. 
Indeed, ISO Chairman Michael Kahn said that if the commission ordered 
anything short of $8.9 billion, "rest assured . . . (it) will be litigated." 
The commission also decided that power sales by municipal utilities should be 
included in considering refunds. That brought criticism from two Democratic 
commission members, William Massey and Linda Breathitt, who said the 
commission had no jurisdiction over publicly owned utilities. 
A Chronicle analysis of spot market purchases by the state during the first 
three months of the year showed that public agencies in California and 
elsewhere charged an average of about $344 per megawatt hour, while private 
companies charged less than $250. 
Massey called the inclusion of municipal utilities, mainly the Los Angeles 
Department of Power and Water, a breathtaking extension of the commission's 
authority, saying he thought it was going to "be a shock to the marketplace." 
The commission lacks regulatory authority over municipal utilities, federal 
hydroelectric plants and rural electricity cooperatives. But commissioner 
Patrick Wood argued that the prices charged to California by municipal 
utilities were "a natural extension" of the agency's order. 
E-mail Carolyn Lochhead at clochhead@sfchronicle.com 
<mailto:clochhead@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 3 








States' eyes are on Texas' model for creating power 
Posted at 11:26 p.m. PDT Wednesday, July 25, 2001 
BY DION 
NISSENBAUM 
Mercury News Sacramento Bureau 

SACRAMENTO -- Californians looking for someone to blame for their energy woes 
have created a convenient scapegoat in their search for villains: cowboy 
boot-wearing Texas electricity barons who are making billions in profits. 
But if you look beyond the stereotype, the Lone Star state may offer 
California a surprising solution for its energy woes. 
Texas is drawing attention, not for its vast oil fields, but for its 
expanding acres of wind turbines -- a symbol of the state's success in 
fostering a homegrown alternative energy industry. 
A Texas initiative -- signed by then-Gov. George W. Bush -- has been so 
successful that California environmentalists are holding it up as a model for 
the state to follow. 
``It's the most successful example that we've seen across the country,'' said 
Matt Freedman, an attorney with the Utility Reform Network, a San 
Francisco-based consumer group. ``Gov. Gray Davis has a chance to show that 
he can do Bush one better.'' 
On Friday, Davis administration sources said, the Democratic governor is 
expected to embrace a similar plan that would increase the amount of power 
California draws from renewable energy companies. 
Heightened interest 
California's energy crisis has sparked an increased interest in renewable 
energy at the state and national level not seen since the gas lines of the 
1970s. 
From Sacramento to Washington, lawmakers are taking a new look at ways to 
build more plants that rely on the sun, wind or water instead of natural gas, 
coal or uranium. 
To do so, 13 states, including Texas, have passed laws that attempt to set 
aside a certain portion of the energy market for alternative energy 
companies. 
The Texas law commits the state to building 2,000 megawatts of renewable 
energy -- about 2 percent of its overall energy use -- by 2009. Texas expects 
to be halfway to that goal by the end of this year. 
To ensure a market for the power, state power providers are required to draw 
a slice of their energy from renewable energy companies. 
While California already has a much more vibrant alternative energy market -- 
10 to 12 percent of its energy comes from renewable power -- the state has no 
similar targets. 
Environmentalists are joining with state leaders like Sen. Byron Sher, 
D-Redwood City, and Assemblyman Fred Keeley, D-Santa Cruz, to change that. 
Both lawmakers are trying to refine legislation that would call on California 
to draw 20 percent of its power from alternative energy sources by 2010. 
Friday, sources said, Davis is expected to unveil a new plan that would 
require state power providers to draw 17 percent of their energy from 
renewable energy companies by 2006. 
The governor plans to unveil the details during a visit to an alternative 
energy company in Berkeley. 
Although many agree with the idea in principle, there is heated debate over 
how to meet that goal. 
Natural gas plants 
The challenge has also been compounded by the $43 billion in long-term 
contracts the state locked in to buy 20 years worth of power. While state law 
called on contract negotiators to get as much renewable power as they could, 
they ended up relying heavily on natural-gas fired plants. More than 90 
percent of the contracts are with such plants, according to a report by the 
California Public Interest Research Group. 
The contracts have come under fire from critics who contend that they will 
force the state into paying artificially high prices for years. There is also 
concern that relying so heavily on plants fueled by natural gas would leave 
California vulnerable to another energy crisis. 
Alternative energy companies said they offered good deals to the state but 
were shut out of the process. 
``It really threatens to cut off the renewable energy industry in 
California,'' said Jonathan Weisgall, vice president of legislative and 
regulatory affairs at CalEnergy, one of the state's largest alternative 
energy companies. 
S. David Freeman, the governor's point man during the contract negotiations, 
conceded that the state had failed to do enough to reach out to alternative 
energy companies. 
``They're right to criticize us now,'' he said. ``We haven't achieved the 
kind of results that we need. So we're playing catch-up ball.'' 
Critics are hoping that California will re-negotiate some of the contracts 
and create more room for alternative energy companies. 
The alternative energy debate has also heated up in Washington, where Bush 
has taken flak for proposing an energy policy with a heavy emphasis on 
boosting drilling for oil and gas. 
Lawmakers including Sen. James Jeffords, a Vermont independent, has proposed 
pushing the nation's renewable energy supplies from 2 percent to 20 percent 
by 2020. 
Holding out hope 
Supporters of the plan are hoping that Bush will look back on what he did as 
governor when he finalizes his national proposal. 
``We still hold out some hope that President Bush will decide to incorporate 
some elements of the Texas model in federal energy policy,'' said Alan Nogee, 
director of the clean energy program for the Union of Concerned Scientists. 


Mercury News Staff Writer Brandon Bailey contributed to this report. 


Contact Dion Nissenbaum at dnissenbaum@sjmercury.com 
<mailto:dnissenbaum@sjmercury.com> or (916) 441-4603. 







Panel to seek refunds from municipal utilities 
Posted at 10:25 p.m. PDT Wednesday, July 25, 2001 
BY JIM PUZZANGHERA AND JOHN WOOLFOLK 

Mercury News 


WASHINGTON -- The battle over electricity refunds for California got more 
contentious Wednesday as federal regulators voted to seek refunds from 
municipal utilities, which say they are exempted from federal regulation. 
The move means the state could get more than the roughly $1 billion suggested 
by a judge who oversaw failed settlement talks, but still less than the $8.9 
billion state leaders demand. 
But the Federal Energy Regulatory Commission conceded any refunds are 
probably a long way off because the whole issue appears headed to court. 
The commission's controversial decision came as it set up a 60-day process to 
determine the full amount in refunds owed to California for electricity 
overcharges. 
Commissioners unanimously approved a judge's recommendation for a formula 
that California officials say would deny them $3 billion in refunds from May 
to October 2000. 
The only major change the commission made to the judge's recommendations was 
to include municipal utilities and other public power suppliers in the refund 
process. The state's Independent System Operator has estimated that public 
power suppliers overcharged California by about $761 million from Oct. 2, 
2000, to May 2001. 
``We don't think we owe anything,'' said Jerry Jordan, executive director of 
the California Municipal Utilities Association. Most municipal utilities buy 
more power than they sell and have raised rates. Palo Alto's electric 
utility, for example, has raised rates 43 percent in the past year. 
Three of the five commissioners said they had the authority to force refunds 
from municipal utilities because those utilities sell power in California 
under market rules set up by the Federal Energy Regulatory Commission. Last 
month, the commission set up a price-control plan for California and the West 
that also covered municipal utilities and other public power suppliers. 
But the American Public Power Association said the three commissioners are 
wrong, arguing that the Federal Power Act specifically exempts such utilities 
from regulation. 
Two commissioners voted against extending the refund order to municipal 
utilities, which have sold excess power to California during its electricity 
crisis and like other suppliers often received sky-high prices in the state's 
scramble to avoid blackouts. 
Robert Massey and Linda Breathitt, the two Democrats on the five-member 
panel, agreed with the other commissioners that it was fair to seek refunds 
from public power suppliers as well as private ones. But they argued the 
Federal Power Act doesn't give the commission any authority over municipal 
utilities or other public power entities, such as the Bonneville Power 
Administration in the Pacific Northwest. 
``It seems to me that was a breathtaking reach,'' Massey said. 
The commission's actions came after two weeks of talks in Washington ended 
July 9 with no settlement on refund amounts. The commission's chief 
administrative judge, Curt Wagner, oversaw those talks and said the state 
failed to prove its $8.9 billion claim. Wagner estimated the amount is closer 
to $1 billion. 
On Wednesday, commission Chairman Curt H,bert offered no estimate of how much 
in refunds the state might get. ``A lot'' is all H,bert would say. So far, 
the commission has ordered $125 million in refunds for overcharges during 
selected periods this past winter. 
California Gov. Gray Davis said the commission's decision validates the 
state's claim it is due significant refunds. 
``The remaining question for FERC to decide is how much. California's answer 
remains the same -- $8.9 billion,'' Davis said. ``As for the energy 
profiteers and pirates, let me make clear that I will not rest until every 
dollar gouged from California businesses and residents returns to California. 
If the FERC does not make California whole, we will see you in court.'' 
Julie Simon, vice president of policy for the Electric Power Supply 
Association, said no refunds are due California. 
``We don't think anybody engaged in behavior that's inappropriate,'' Simon 
said. The commission is ``responding to political pressures not economics or 
market realities.'' 


Contact Jim Puzzanghera at jpuzzanghera@sjmercury.com 
<mailto:jpuzzanghera@sjmercury.com> or (202) 383-6043. 







Book value doesn't tell whole story 
July 26, 2001 
By JONATHAN LANSNER
The Orange County Register 
California's state Senate believes that paying more than book value is a 
crime. 
In mud wrestling better known as legislation before summer vacation, the 
Senate last week passed an Edison bail out bill that says the state will pay 
only book value for its transmission lines. 
That contrasts to a deal between the governor and the utility for a price of 
$2.8 billion, twice book value. The potential shortfall created by the 
Senate's lower price could toss Edison into bankruptcy. 
Seems lawmakers think only fools pay above book value. Maybe they haven't 
eyed their stock portfolios recently. Did you know that the U.S. stock 
market, as measured by the Standard & Poor's 500, trades today at five times 
book value? 
Let's remember that book value ain't often what it sounds like. It's a quirky 
part of the art - not science - of accounting. Very simply, many companies 
keep book values of assets they own low - near acquisition or building costs 
- because raising book values can cause tax headaches. 
Book values vary widely by industry and companies. 
Old-economy businesses, such as capital-intensive manufacturing, usually own 
huge factories. These assets tend to sell for modest premiums to book value. 
So, according to Morningstar data, steel stocks have traded at 1.4 times book 
value for the past five years. 
Conversely, industries where intangible brainpower, not tangible machinery, 
is key - or ones that may own few assets, such as retailers - typically sell 
at high multiples of book value. Thus, biotech stocks trade at 12 times book 
value; computer software shops at 15. 
Heck, even battered electric utilities traded at two times book during the 
past five years, Morningstar says. 
Let us stroll down Wall Street. I looked at five-year average price-to-book 
ratios among 800 or so firms that had growing profits and revenues the past 
three years. 
Those trading at about book value are a thin group - largely real estate 
trusts, which often keep book values near market levels. 
At two times book you see financial service outfits such as Countrywide and 
Irvine's Fidelity; homebuilders including KB Homes; and national players in 
tough businesses such as lumber's Weyerhaeuser or brewer Coors. When you get 
near triple book value, giants like Alcoa, Chevron, Merrill Lynch and 
Southwest Air show up. 
At five times book, you enter rarefied air. Hilton. Jack In The Box. American 
Express. Starbucks. And AES, buyer of Edison's Southern California power 
plants. 
Once you reach 10 times book and above, it's the Hall of Fame. Names like 
Procter & Gamble, Merck and Charles Schwab. Plus, this is the province of 
technology. Microsoft and BMC and Dell. Even Orange County's QLogic and 
Emulex. Plus, this survey's best - communication-gear maker Plantronics - at 
19 times book. 
If state senators think Edison's getting too sweet a deal from the governor, 
then fine. But claiming that the deal stinks because the state might pay 
above book value doesn't add up. 
FRIDAY: What Lansner thinks the state should really ask Edison for. 







Online just in time 
Companies scramble to build new power plants while mild weather and 
conservation help Californians avoid blackouts. 
July 26, 2001 
By MARY ANN MILBOURN
The Orange County Register 
It's a race against time and so far California's winning - so far. 
Heading into the summer, the state's electricity situation looked dire. 
Experts projected that on peak-demand days, the state would fall 5,000 
megawatts short of supply - enough to supply nearly 3.8 million homes. 
But an unusually mild summer and stepped-up conservation by consumers has 
bought the state time - time it's used for a pull-out-all- the-stops effort 
to get new power plants approved and built. 
The effort is slowly beginning to pay off: 
Three major new plants are already online, producing 1,415 megawatts. One 
megawatt supplies 750 homes. 
By the end of the month, two so-called peaker facilities - those authorized 
to run only during periods of peak demand - will start coming online, 
providing another 225 megawatts. 
Next month, the refurbishment of two mothballed units at the AES Huntington 
Beach plant will be completed, adding another 450 megawatts to the power 
grid. Also, two more peaker plants totaling 80 megawatts will begin coming 
online. 
If all goes according to schedule, four full-time plants and 10 peaker 
facilities capable of producing a total of 2,729 megawatts - about half the 
state's shortfall - are expected to be online by Sept. 30. 
And that's just for the conventional power plants. State energy officials say 
other renewable energy projects like wind, geothermal and biomass will bring 
the total available to about 3,000 megawatts by the end of September. 
"This is a huge step in the right direction," says Severin Borenstein, an 
economist at the University of California Energy Institute in Berkeley. "If 
we continue with the very aggressive conservation, we could get through the 
summer without blackouts." 
But things are still dicey and changing almost daily. 
"We don't know what's going to happen with the weather," said Bob Therkelsen, 
who oversees plant construction for the California Energy Commission. 
National weather forecasters predict slightly higher than normal temperatures 
for the next two months, a time when California often sees its peak power 
demand. 
"If we have a heat storm that affects not only California, but the rest of 
the Western states, it's still going to be a regional as well as local 
challenge," Therkelsen said. 
And the easy part of plant construction may be over as planned plants face a 
variety of hurdles: 
La Paloma, a 1,048-megawatt plant in Kern County, was to have its first units 
up by December. Construction delays have pushed that back to next March. 
The Energy Provider Inc. on Wednesday withdrew its application for a 21-day 
approval for its 240-megawatt peaker plant in Lancaster because a technical 
study of how it will connect to the grid was delayed. 
It will now have to go through a four-month approval process. 
The Pegasus Chino plant, a 180-megawatt facility, was delayed this week by 
the South Coast Air Quality Management District, making it unlikely that it 
will make the Sept. 30 completion deadline for plants approved under an 
emergency order issued by the governor. 
Plant approvals are expected to further slow after the governor's executive 
order expires because they will once again be subject to a more lengthy 
California Environmental Quality Act review. 
And even as officials rush to build new plants, they must deal with aging 
facilities that are in need of maintenance and upgrades and soon will reach 
the end of their productive lives. 
A 337-megawatt unit in Contra Costa County owned by Mirant Corp. will be off- 
line for 12 to 14 weeks beginning in early September for air-quality 
retrofitting. 
Separately, Mirant officials are in discussions with the state about 
air-quality waivers for four other 47-year-old units at their Pittsburg 
plant. The company says that unless it gets the waivers, it will retire the 
units in January because they are so old it's not worth retrofitting them. 
That would take 600 megawatts offline, essentially erasing the increase in 
power provided by Calpine's nearby 555- megawatt Los Medanos plant that just 
opened. 
Because of these kinds of trade-offs, energy officials continue to emphasize 
the need to keep moving forward with construction and for the public to keep 
conserving. 
"If the public decides it's all over, (that) we've won the war, we could end 
up having problems again," Therkelsen says. 







California ; Metro Desk 
Commentary Long-Term Deals Have Chilled Electric Prices, if Not the Whiners
S. DAVID FREEMAN

07/26/2001 
Los Angeles Times 
Home Edition 
Page B-15 
Copyright 2001 / The Times Mirror Company 
California 's energy prices started coming down last month, and critics began 
recanting their predictions of disaster and shrinking their forecasts of 
rolling blackouts. Maybe the only ones not surprised were Gov. Gray Davis and 
those of us negotiating the long-term power contracts for the state. 
In January, the utilities were on the edge of insolvency. Many observers saw 
that the only way to keep the lights on was for the state to take over the 
purchasing of power. We were paying $250 a megawatt-hour then. For a few days 
in January, Duke Power charged an unconscionable $3,880 a megawatt-hour, and 
in May Reliant Energy charged $1,900. So few people thought that long-term 
prices would be anywhere near what we've achieved. 
In fact, in February, many were taken aback when we were able to negotiate 
prices of $70 per megawatt-hour over the next 10 years. Now it's July. Spot 
prices have come down, and critics now claim we paid too much for those same 
contracts. Sure, conservation has helped, and natural gas prices have gone 
down. New generation--enticed in part by the long-term contracts--is coming 
on line. 
But the critics fail to see that we have lower prices largely because the 
contracts cut the amount of power we have to buy now on the spot market. In 
January we bought nearly all the power on the spot market. By June, with 41 
long-term agreements in place, we were buying about half in forward contracts 
and half on the spot market. The impact was visible. In May, the price of 
power on the spot market averaged $271 a megawatt-hour. In June, this had 
come down to $99, driven down by lower demand on the spot market. 
In May we purchased 4 million megawatt-hours on the spot market. In June, 
with long-term contracts and other measures in place, we cut that figure in 
half. Where in May the state paid an average of $64.5 million a day with 
three days exceeding the $100 million mark for power, in June on average it 
paid only about $34.5 million a day. The expected wave of rolling blackouts 
in May and June never came to be. There's even a small power surplus now on 
some days when it's unusually cool. 
Does anyone believe that we would have done better by continuing to buy on 
the volatile spot market? State Controller Kathleen Connell and other critics 
say we panicked and paid too much for long-term contracts because of high 
natural gas prices. But they fail to see that we negotiated contracts 
precisely with the volatility of natural gas in mind. The erratic price 
levels of natural gas, spiking 1,000% from December 1999 to December 2000, 
played a big role in the increase in the price of power. So we hedged our 
bets. We negotiated about half of those long-term contracts at fixed prices, 
giving us long-term stability. But we set half to go up and down with the 
price of gas. 
The current average price of our long-term contracts is 6.9 cents a 
kilowatt-hour. As natural gas prices get back down to reasonable levels, the 
contract prices tied to natural gas will drop, lowering that average rate. If 
natural gas prices rise, the long-term contracts will look good. 
The critics are equally ill-informed on other aspects of the contracts. 
They've charged that the prices we negotiated fluctuate widely, up to $249 a 
megawatt-hour. But there's a difference between the base load contracts for 
power at between 6 cents and 8 cents a kilowatt-hour and those for so-called 
peaker power at higher prices. You don't need to be an economist to figure 
out that if you've got a peaker plant used only a few hours a year, the cost 
for electricity from that plant is going to be relatively high. But peaker 
power is only a small part of the contract package. Critics also charge that 
the contracts allow the generators too high a return on investments. Returns 
from market prices under the botched deregulation structure that Davis 
inherited are not as low as what you'd get on a cost-of-service basis. 
We are not fully beyond the crisis yet, but we are making real progress as a 
result of Davis' programs. It's unrealistic, however, for anybody to think we 
could do at the bargaining table what the Federal Energy Regulatory 
Commission has failed to do as a regulatory agency. In effect, the house was 
on fire. We were like the fire department. But rather than recognize that the 
house was saved, critics like Connell spend all their time whining about the 
water damage. 








National Desk 
THE NATION Regulators Plan Energy Rebate Settlement; Davis Plans Lawsuit 
FERC: Commission opens fact-finding process into the $8.9 billion governor 
says is owed Californians.
RICARDO ALONSO-ZALDIVAR

07/26/2001 
Los Angeles Times 
Home Edition 
Page A-17 
Copyright 2001 / The Times Mirror Company 
WASHINGTON -- Federal regulators said Wednesday that they intend to impose a 
settlement in the bitter dispute over the $8.9 billion that California claims 
it was overcharged by power sellers, but they conceded their solution will 
probably be challenged in court. 
"This is going to the circuit [court] anyway," said Federal Energy Regulatory 
Commission Chairman Curtis L. Hebert Jr. after the commission agreed on a 
method for estimating alleged electricity overcharges and ordering refunds. 
The FERC action begins a fact-finding process that is not expected to produce 
a refund estimate until this fall. That estimate, which will have to go back 
to the commission for final approval, is widely expected to be much lower 
than the amount the state is demanding. 
In another significant development, FERC said it may also demand refunds from 
publicly owned utilities, such as the Los Angeles Department of Water and 
Power, that are outside the commission's legal jurisdiction. That potential 
expansion of FERC's authority is likely to be hotly contested. 
In a statement during a previous FERC proceeding, DWP lawyer Marcia 
Haber-Kamine asserted that the city agency had not overcharged and, in any 
event, was beyond the federal government's reach. "Actions taken by the 
commission cannot be imposed on LADWP," Haber-Kamine said. 
However, FERC commissioners said all power sellers, whether Texas energy 
merchants or California municipalities, should be subject to the same 
scrutiny. 
The FERC board, meeting for the last time this summer, postponed a showdown 
with Gov. Gray Davis over control of the nonprofit corporation that runs the 
state's electric grid. 
According to federal rules, the California grid operator, known as Cal-ISO, 
should be governed by an independent board. But a state law enacted earlier 
this year gave Davis the power to appoint all five members. 
Davis' control is a sore point with federal regulators, who are trying to 
link state electric grids into broader regional networks--an "interstate 
highway" for power sales. The issue was scheduled for commission action 
Wednesday but was removed from the agenda at the last minute. Asked by a 
reporter when FERC is going to act, Hebert responded: "Not yet." 
A senior FERC official said commissioners had been unable to agree on how to 
resolve the standoff. FERC officials say the agency has the authority to 
dismiss the board appointed by the governor, but commissioners were hesitant 
to embark on such a confrontational course midway through the summer power 
peak. 
The commission also acted to more closely monitor the California natural gas 
market, approving an order that will require pipeline operators to provide 
regulators with detailed pricing information. 
Wednesday's meeting came amid growing evidence that the crisis in California 
is receding. Although August looms, power prices in California have fallen 
amid ample supply. Since January, FERC has moved from an initial hands-off 
stance to increasingly active intervention that it says has helped assure the 
supply of electricity and limit prices. 
This fall, the agency may be under new leadership. It is widely rumored that 
Hebert will step aside in favor of Patrick H. Wood III, a Texas regulator 
recently named to the commission by President Bush. Wood supports 
deregulation but has said he believes government must take an active role in 
policing markets and protecting consumers. 
FERC's decision on electricity refunds largely tracked the recommendations of 
its chief administrative law judge, who tried to broker a settlement earlier 
this month between the state and power sellers. 
At the time, the judge said California may be owed more than $1 billion but 
not the $8.9 billion that Davis claims. 
The judge also predicted that debts still owed to power generators by the 
state's utilities are likely to exceed any potential refund. 
In a statement Wednesday, Davis said he would not settle for anything less 
than $8.9 billion. 
"As for the energy profiteers and pirates, let me make clear that I will not 
rest until every dollar gouged from California businesses and residents 
returns to California ," said the governor. "If the FERC does not make 
California whole, we will see you in court." 
Under the procedure approved Wednesday, FERC will try to estimate what a fair 
price for power would have been from the earliest date on which it can base 
refunds--Oct. 2, 2000--to the date FERC's price limits took effect throughout 
the West, June 20. 
That limitation alone is likely to chop several billion dollars from the 
refund claimed by California . 
Under the FERC order, the California grid operator now must supply federal 
regulators with the raw data on power sales needed to calculate a refund. 
After the data are received, a FERC administrative law judge will hold 
hearings and make a recommendation to the commission. 
Southern California Edison said the order does not go far enough because it 
does not include "the hundreds of millions of dollars in excess costs paid by 
SCE throughout the summer of 2000." Edison also wants FERC to extend its 
remedies beyond spot electricity markets to "all [ electricity ] markets 
tainted by the exercise of market power." 
Commissioners also ordered a preliminary hearing to determine whether refunds 
are also due in Oregon and Washington. To date, FERC has ordered power 
sellers to refund more than $125 million in California . 
* 
Times staff writer Nancy Vogel in Sacramento contributed to this story.