Please see the following articles:

Sac Bee, Fri, 6/22: Employees: Power supply held down

Sac Bee, Fri, 6/22: Consumers cut down their own power in protest

Sac Bee, Fri, 6/22: Davis consultants had contract with Edison: The disclosures turn up the heat on the governor for hiring 
ex-Clinton aides

SD Union, Fri, 6/22: State deal may ease blackout threat
Canada to supply energy as summer demand rises 

SD Union, Fri, 6/22: Ex-worker: Duke manipulated market

LA Times, Fri, 6/22: Estimates of power profits disputed

LA Times, Fri, 6/22: Edison plans bond offer at 13% rate

LA Times, Fri, 6/22: Energy company abandons plans for Baldwin Hills plant 

SF Chron, Fri, 6/22: Western states could feel pinch from California pricing 

SF Chron, Fri, 6/22: Feds spurn Duke Energy in its bid to avoid refunds

SF Chron, Fri, 6/22: News Analysis: Davis winning Washington PR battle 
Price cap victory may rob Democrats of campaign issue

SF Chron, Fri, 6/22: Suit filed over report on power lines, health 
Deal on transmission grid could raise liability

SF Chron, Fri, 6/22: Texas power firm's shares failing (Enron spotlighted)
Power baron Enron finds fortunes fading

Mercury News, Fri, 6/22: Power firm accused of price-fixing

Mercury News, Fri, 6/22: Enron chief: Gov. Davis not to blame for energy crisis (Jeff Skilling comments, Ken Lay and Enron mentioned)

OC Register, Fri, 6/22: Three say company purposely cut power
Ex-Duke workers say repairs were curbed in order to manipulate market

OC Register, Fri, 6/22: FERC judge tackles task of generating a deal 

OC Register, Fri, 6/22: Davis seeks $9 billion refund 

OC Register, Fri, 6/22: Energy notebook: Blackouts are still a hot prospect, officials warn

OC Register, Fri, 6/22: In rolling blackouts, 'together' is all relative








Employees: Power supply held down By Kevin Yamamura and Emily Bazar Bee Capitol Bureau (Published June 22, 2001)  Three former San Diego Gas & Electric Co. employees who worked at a Duke Energy plant said Thursday that the generator destroyed working parts, withheld power supply or otherwise took actions that they believe drove up the price of electricity.  State officials said the whistle-blowers' comments at a state Senate hearing today could provide the most damaging illustration yet that power generators held down production to inflate prices on the spot market. Gov. Gray Davis has long alleged that power companies have overcharged the state and utilities.  Jimmy Olkjer, a former assistant control room operator at Duke's South Bay plant in San Diego, said in a phone interview that during the state's power shortages, Duke cut supply. Although Duke, a Charlotte, N.C.-based company, owned the plant, and it contracted with SDG&E to operate the unit, he said.  "Rather than creating more power, they were creating less," Olkjer said. "I think there was manipulation of the market."  The California Public Utilities Commission and several state legislative committees continue to investigate price manipulation allegations, and Attorney General Bill Lockyer has said he will take witnesses to a grand jury next month.  The generators have denied they manipulated the market.  "We stand behind our maintenance practices and have done a good job keeping the power flowing," Duke spokesman Tom Williams told the CBS television network.  But former mechanic Glenn Johnson said he saw generation units taken "down for economics."  Ed Edwards, also a mechanic, said he was ordered to destroy 23 pallets of working parts.  "We were asked, myself and other employees, to disperse of perfectly good parts that were used to make repairs of systems and components," Edwards said.  State Sen. Joe Dunn, D-Santa Ana, chairman of the market-manipulation committee, said his staff has been looking for employees or others with intimate knowledge of power plant operation to come forward, and he promised that others will testify at future hearings.  "It's the first time that we've had evidence from directly within power plants in California that the ramping up and ramping down of power generation was a response to price and not to demand," Dunn said.  He said he would reach no conclusions until Duke and other generators testify next month, but he added that the former employees' testimony raises suspicions "at first blush."   The Bee's Kevin Yamamura can be reached at (916) 326-5542 or kyamamura@sacbee.com .  	




        Consumers cut their own power in protest  By Silvina Mart?nez Bee Staff Writer  (Published June 22, 2001)  When the temperature hit 100 degrees at 7 p.m. Thursday, Larry Lynch turned off the air conditioner, unplugged the refrigerator, pulled out the TV cords and shut down all other appliances in the house.  Lynch, a 61-year-old newsletter publisher in Sacramento, responded to the "Roll Your Own Blackout" Thursday and joined thousands throughout the state to protest energy policies and promote conservation by stopping the use of energy from 7-10 p.m.  But the data coming off the grid at the California Independent System Operator didn't show the effort.  During the first hour of the voluntary shut-off, the demand for energy by PG&E customers in Northern California was almost the same as at the same time Wednesday, ISO officials said.  Protesters didn't expect significant changes on the grid.  "I feel it will at least send a message that we don't have to depend on it (energy)," said Jackie Bell, 37, a consultant at the Capitol joining the conservation drive from her apartment on Fulton Avenue.  "It's just a symbolic act," said Peter Lopez of Sacramento, who decided to use the evening to meditate. "Maybe I'll just go outside, stare at the stars and try to spot a few constellations in the night."  It was the longest day of the year, and one of the hottest. But those determined to advocate conservation didn't mind the sacrifice.  "People are getting focused on the fact that we have power at our end," said Joan Blades, a spokeswoman for MoveOn, a grass-roots organization in the Bay Area and one of hundreds of online groups passing along the call for the voluntary blackout.  An electrical engineer in Oakland started the "Roll Your Own Blackout" idea when he posted a note in a political chat room in April. Then an artist in Los Angeles forwarded the e-mail to a number of friends and from there it quickly spanned the globe.  By Thursday afternoon, more than 12,000 people had signed up at the MoveOn Web site to join the protest, Blades said.  Many threw blackout parties. In San Francisco, the nonprofit group Global Exchange gathered hundreds around a big bonfire at Ocean Beach.  At his home in east Sacramento, Lynch did fine without electricity for three hours. He ate tuna salad for dinner, watered the lawn and when it got dark, he opened the windows and let some air in.  "We should show that people are willing to shut the power off if the prices go too high," he said.  ISO has not declared a power emergency since May 31.  "We have seen a consistent conservation on a day-to-day basis, and it's making the difference between blackouts and no blackouts," ISO spokeswoman Stephanie McCorkle said.  McCorkle encouraged initiatives like "Roll Your Own Blackout."  "People are conserving," she said. "And we can only support this whole effort."   The Bee's Silvina Mart?nez can be reached at (916) 321-1159 or smartinez@sacbee.com .   	




Davis consultants had contract with Edison: The disclosures turn up the heat on the governor for hiring the ex-Clinton aides. By Emily Bazar Bee Capitol Bureau (Published June 22, 2001)  Two consultants hired to advise Gov. Gray Davis on energy policy officially disclosed their contract with Southern California Edison on Thursday, but Davis aides insisted it is not a conflict because "Edison and the Governor's Office have the same goal."  Communications consultants Chris Lehane and Mark Fabiani have drawn intense criticism since they were hired last month to shape the Democratic governor's public response to the state energy crisis.  The former Clinton administration communication aides -- nicknamed the "Masters of Disaster" for their spin on the Whitewater, travel office and 1996 fund-raising controversies at the Clinton White House -- have come under fire for receiving a six-month, $30,000-a-month contract, more than the governor or anyone on his staff makes.  Secretary of State Bill Jones, a Republican who is running for governor next year, has called for an investigation into potential conflicts. State Controller Kathleen Connell, a Democrat, has said she will not issue paychecks to the pair pending her own investigation.  The criticism mounted after the duo's economic interest disclosure forms were released late Thursday, showing that each has received at least $10,000 under contract from Edison in the past year.  But Davis spokeswoman Hilary McLean defended their credibility, saying there's no conflict of interest because Lehane and Fabiani both disclosed that they had worked for Edison before they signed their contracts with the state.  Besides, she added, Edison and the governor are working toward the same goal: Both want the Legislature to adopt a memorandum of understanding, a proposed agreement, that would prevent Edison from going bankrupt by financing a state purchase of the utility's transmission lines.  "It's not a conflict because there's been full disclosure," McLean said. "Edison and the Governor's Office have the same goal, passing the MOU. We're working together at this point with Edison."  But open-government groups and Republican lawmakers bristled at the notion that disclosure negates any potential conflict.  Derek Cressman of the California Public Interest Research Group pointed to a section of state law that prohibits public officials from influencing decisions if it would have "a material financial effect" on a business entity that provided them $500 or more within the last year.  "You have two individuals on the government payroll who had previously been on the Edison payroll and it's not clear to whom their loyalties are," he said. "Just because they've revealed it doesn't mean there's not a conflict there, and that they're not serving two masters."  On Thursday, Jones said he is awaiting the results of the Fair Political Practices Commission investigation and agrees with Connell's decision this week to withhold payment from the consultants.  "This further calls into question the ethics of how these individuals were hired and contracts were let," Jones said.  Senate Republican leader Jim Brulte believes there's no question that Lehane and Fabiani are violating conflict-of-interest laws and suggested that the two should be paid out of Davis' campaign funds, which had reached $26 million by Jan. 1.  Brulte, of Rancho Cucamonga, added that he would not vote for a state budget as long as Lehane and Fabiani remain on the state payroll.  "The state of California does not need to be paying political wordsmiths $30,000 a month," he said. "I just wish (Davis) were as frugal with the taxpayers' money as he is with his campaign money."   The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com .  	





State deal may ease blackout threat 	
	




Canada to supply energy as summer demand rises By Ed Mendel  UNION-TRIBUNE STAFF WRITER  June 22, 2001  SACRAMENTO -- California may be able to avoid some of the blackouts predicted for this summer, thanks to a little-known power-swapping agreement with a Canadian utility.  The arrangement is expected to give California electricity in July and August from the hydroelectric generators of BC Hydro in British Columbia, despite a serious drought in the Northwest.  California has sold surplus power in recent months to the government-owned utility, which is expected to return power to the state as heat drives up the demand for electricity.          State deal may ease blackout threat   Continuing coverage: California's Power Crisis         Despite the energy crunch, the state often finds itself with surplus power that can be sold or swapped. For instance, advance power purchases that provide energy at a better price may deliver more power than needed at any given time, particularly during off-peak hours.  BC Hydro's reservoirs and hydroelectric generators are a little like an electricity storage battery. By importing California power, BC Hydro has been able to conserve water that can be released this summer to produce power for California.  As a result of the agreement and other factors, state power buyers say they are in a stronger position going into the hot summer months than they had expected. So far this week, the state has managed to get through a heat wave without so much as a Stage 1 power alert.  "We are in much better shape at this point than I imagined we would have been as little as a month ago," said Ray Hart, head of the power purchasing unit in the state Department of Water Resources.  The North American Electric Reliability Council, which last month predicted 260 hours of rolling blackouts for California this summer, has noticed a change in recent weeks.  "We don't seem to have the crisis we were all expecting," said Ellen Vancko, a council spokeswoman. "But whether that is a short-term or a long-term event we don't think anyone knows yet."  Much of the credit for avoiding blackouts is given to unexpectedly high conservation by Californians and an increased supply of power. Many generators that had been shut down for maintenance or lack of payment are now back on line.  But the hydroelectric power agreement had gone unnoticed until now.  Hart mentioned it during a Senate Energy Committee hearing this week. But he declined to reveal the amount of power banked with BC Hydro, saying it could hurt the state's competitive position in the market.  "If I start talking specifics," said Hart, "then I have to give out what I am doing every single day, and I have no market position."  In the past, California routinely sent power to a number of utilities in the Pacific Northwest during the winter when residents there needed heat. Northwest utilities returned power to California in the summer when air conditioning drove up demand.  Little was expected from the reciprocal arrangement this year because California was short of power last winter as electricity prices soared, and drought has sharply lowered reservoirs in the Northwest. But the agreement with BC Hydro will provide at least some power this summer.  The state was forced to begin buying power in January after its two largest utilities, Southern California Edison and Pacific Gas and Electric, were unable to borrow because of a $13 billion debt. The rates that the utilities could charge their customers were frozen under a failed deregulation plan as the cost of power on the wholesale market skyrocketed.  Hart said it took time to convince BC Hydro, which has demanded cash for some electricity, that it could safely do business with California despite big debts owed to generators for power they supplied to the utilities.  "We have only been able to do it for the last couple of months," said Hart. "It took a long time to get them to do it because of credit issues."  A spokesman for BC Hydro said the utility engages in power swaps but does not release the name of the other parties or the terms of the agreements.  "Our first priority is taking care of our own," said Warren Cousins of BC Hydro. "We are still looking for opportunities to help out other entities when we can."  Hart said the state has another arrangement with the federal Bonneville Power Authority, but again refused to provide details. He said the state has sold surplus power to several buyers, including the Los Angeles Department of Water and Power.  Information about state power purchases had been closely guarded until recently. Gov. Gray Davis, pressured by lawsuits and a court ruling, released edited versions last week of 38 long-term power contracts worth $43 billion.  The Davis administration said it agreed to release contract information because power prices have dropped, easing competitive pressures.    	





Ex-worker: Duke manipulated market 	
	




By Bill Ainsworth  UNION-TRIBUNE STAFF WRITER  June 22, 2001  SACRAMENTO -- A former operator at Duke Energy's Chula Vista plant said he was told frequently by company officials during the past year to alter the plant's output in a way that may have boosted electricity prices.  The operator, Jimmy Olkjer, said he was even ordered to cut power generation during energy emergencies, when the state faced rolling blackouts because of a scarce supply of electricity.  He said he believes reducing the electricity generation helped the company charge higher prices. "It looks like that's what they were doing," Olkjer said in an interview.  He and another former plant employee said that during the past year the company regularly operated its least-efficient turbine, possibly to justify higher prices.  The allegations, which they plan to repeat today at a state Senate hearing investigating power generators, provide the first insider evidence that Duke Energy may have manipulated output at its South Bay plant to drive up prices.  Duke, based in North Carolina, leases the South Bay plant from the San Diego Unified Port District.  A March report by the Independent System Operator, which manages California's electricity grid, alleged that by withholding power Duke and four other owners of generating plants have contributed to billions of dollars in overcharges to California consumers.  Tom Williams, spokesman for Duke Energy North America, said that varying the output of the generating units at the Chula Vista plant had nothing to do with trying to achieve higher prices.  He said the changes in output helped balance the state's grid by "dancing in the market" -- providing flexibility for grid managers by allowing the plant to add or reduce power quickly.  Williams added that the aging South Bay plant produced as many megawatts last year as it did in 1994.  Olkjer served as a plant operator for 18 years, mostly when the plant was owned by San Diego Gas & Electric Co. After Duke took over the plant, workers were guaranteed their jobs for two years. In April, when that period ended, Duke laid off Olkjer and other workers. Now he is retired.  During the two years Duke has managed the plant, Olkjer said, operators frequently got calls from officials with Duke Energy Trading and Marketing in Salt Lake City telling them to adjust their production schedule.  Some employees at the plant monitored the hourly price of electricity posted by the Independent System Operator and recognized a correlation, he said.  "We noticed that a lot of times when the price was down (our) megawatts would go down," he said. "If the price was up, often the megawatts would go up."  Olkjer said he was never told why he was being ordered to turn the plant's output up and down. When he asked, he said, company officials told him it was none of his business.  Still, he was puzzled, particularly when he was told to throttle down the plant during electricity emergency alerts -- as he says he did Jan. 16 when the state declared a Stage 3 alert, with the possibility of rolling blackouts.  "It doesn't make sense to cycle up and down when there's a Stage 3 alert," he said.  Duke spokesman Williams said the company may turn down units at the orders of the ISO during a Stage 3 alert because the grid manager can find cheaper power somewhere else.  Lisa Szot, spokeswoman at the ISO, said she couldn't determine whether the ISO had ordered Duke to power down its Chula Vista plant Jan. 16.  Olkjer said the frequent adjustments of power production, which sometimes occurred every half-hour, wear out the plant's equipment.  "It's harder on the machinery," he said. "It's like driving down the street putting your (foot) on the gas and then slamming on the brake."  Before deregulation, Olkjer said, the four units at Chula Vista, which have the capacity to produce 706 megawatts, had been operated steadily during much of their history.  S. David Freeman, formerly general manager of Los Angeles' Department of Water and Power and now chief energy adviser to Gov. Gray Davis, said rapid cycling had become more common under deregulation and is hard on equipment.  "We had almost 15,000 megawatts of generating capacity down for repair last winter," said Freeman, referring to what industry experts agreed was an extraordinary level of plant outages over several months.  SDG&E, which built the Chula Vista plant in the 1960s, sold it to the Port District for $110 million. In 1998 the port leased the plant to Duke Energy for 101/2 years in what critics are now calling a sweetheart deal.  The company pays minimal rent, but has made large profits. In the first quarter of this year, Duke, which owns three other plants in California, said profits rose 208 percent to $428 million from energy sales and trading.  Duke may hold the record for charging the highest price for electricity. It asked $3,880 per megawatt-hour this year. By comparison, before the energy crisis began, electricity sold for around $35 per megawatt-hour, an amount which powers about 750 homes.  Federal regulators have ordered the company to refund $20 million to the state for charging excessive prices unless the company can justify them.  In May, the company offered to pay the state to settle any price gouging investigations, but Gov. Gray Davis declined.  Olkjer and Ed Edwards Jr., who worked at the plant for 20 years before being laid off in April, said they couldn't understand why Duke ran the inefficient, high-cost turbine unit during the past year while other generators sat idle.  They said they believed it may have been an attempt to fetch a higher price for electricity because the company got extra fees when it ran.  Williams, the Duke spokesman, said the opposite was true. He said Duke ran the small turbine more frequently because it was less expensive. It ran on jet fuel, which was cheaper than the natural gas powering the other units.  Edwards said the smaller unit was run so hard that it was destroyed.  "It ran so frequently and so hard, it needed extensive repairs," he said.  Edwards told CBS News last night that plant outages at Chula Vista were prolonged because one supervisor ordered him to dump spare parts.  The former power plant employees said they felt compelled to come forward because they saw the impact the power crisis was having on their community.  "It kind of irritated me because you know there's people on a fixed income that can't afford a big utility bill," said Olkjer.  Staff writer Craig D. Rose contributed to this story.    	




Estimates of Power Profits Disputed  Electricity: A study of overcharges by suppliers may be flawed, state officials say. Davis quoted the figures to Congress.   By DOUG SMITH, ROBERT J. LOPEZ and RICH CONNELL, Times Staff Writers        Gov. Gray Davis' contention that California has been nicked for billions of dollars in inflated electricity costs is based on a study that state officials concede may have significant flaws, according to interviews and confidential government documents.      Those costs--estimated by the state to be as high as $9 billion--were central to Davis' testimony this week before a U.S. Senate committee, where he again denounced power wholesalers and urged federal regulators to "give us back the money that was wrongly taken from us."      The governor's impassioned demand, however, was based on shaky calculations. The formulas are being reworked, said Charles Robinson, vice president of California's grid operator, which prepared the study.      Robinson said he "had no idea" how much the amount allegedly overcharged by the generators might change. For now, he said, the agency stands by the numbers.      But internal documents from the California Independent System Operator warn that some of the financial assumptions used to quantify the alleged excess profits could be well off the mark.      What's more, the documents caution against relying on the agency's study as a basis for allegations of overcharging--as Davis did during his testimony Wednesday. That warning was particularly important because the documents provide for the first time a detailed accounting of how much each energy supplier prospered from the state's power troubles between last summer and February.      The largest amounts were charged by four out-of-state power companies, according to the confidential Cal-ISO report. Okalhoma-based Williams Cos. led the group with $860 million, followed by Duke Energy with $805 million, Southern Company Energy Marketing (now Mirant) with $754 million and Reliant Energy Services with $750 million.      When told of the alleged profiteering attributed to them, executives of the companies insisted the numbers were grossly overstated because of Cal-ISO's poor methodology.      Duke spokesman Tom Williams said his company's entire energy earnings for North America were less than the amount it was accused of reaping unfairly in California.      "It doesn't add up. It doesn't come close to adding up," Williams said. "What [Cal-ISO] has done is highly irresponsible math."      Paula Hall-Collins, a Williams Cos. spokeswoman, said the firm would need to study the ISO report further. But generally, she said, such reports fail to fully account for electricity production costs.      "We maintain that we have not overcharged, and that we have operated legally."      Reliant spokesman Richard Wheatley also questioned the figures, saying, "There's a lot of misinformation out of there."      A Mirant spokesman said: "We haven 't overcharged. We haven't manipulated. We haven't withheld."       Even some firms alleged to have overcharged to a much lesser degree were outraged.      Joe Ronan, vice president for government and regulatory relations at Calpine, said the $236 million attributed to his company "doesn't bear any relation to reality."      "Anybody can throw out any number," he said. "It's like McCarthyism. . . . Where is the evidence?"      A spokeswoman for Davis conceded that his refund figure was an estimate but defended it as reasonable.      "It's no surprise that the people that are gouging us want to dispute an estimate of how much they're gouging us," senior advisor Nancy McFadden said.      Despite the cautions expressed in the Cal-ISO documents, officials Thursday insisted they were not troubled that the governor referred to the agency's figures as potential overcharges.       "The way it should be characterized is the amount paid above a competitive benchmark," said Robinson, who is also Cal-ISO's general counsel.      The first version of the now-disputed Cal-ISO study was made public in March. It estimated that power sellers earned $6.3 billion in excess profits between May 2000 and last February. The report, later revised upward to $6.7 billion, became a crucial element of the Davis Administration's campaign against alleged electricity price gougers.      This week, just before Davis' appearance in Congress, the study was updated again, adding another $2.2 billions in alleged excess profits through May.      The orginal study, which did not include actual pricing data, was mostly intended to prod federal regulators into seeking information from generators that the state had been denied, Robinson said.      Thus far, the Federal Energy Regulatory Commission has ordered refunds of only $125 million. Next week FERC is convening an unusual settlement conference aimed at addressing the outstanding claims by the state, as well as those of sellers who claim they are owed hundreds of millions of dollars by California utilities.      One encouraging signal for state officials came this week when FERC reiterated an earlier order that Duke Energy pay millions in refunds. The order stemmed from the company's sale of electricity at $3,880 a megawatt hour--for thousands of hours.      FERC's order said Duke's pricing had resulted in $11 million in billings. A fair price for that power would have been $273 per megawatt hour, the agency said.      Tom Williams, a Duke spokesman, said the firm is willing to accept the lower price. He said he company has yet to collect a dime.  ---       Times staff writers Elizabeth Shogren and Dan Morain contributed to this story.	





Edison Plans Bond Offer at 13% Rate  Debt: Yield is about double what a credit-worthy company would pay, analysts say. But will investors bite?   By JERRY HIRSCH, Times Staff Writer        Edison International is offering investors what analysts are calling an unprecedented 13% interest rate for $1.2 billion in notes to refinance debt. Even so, it's far from certain that the Rosemead-based power company will find enough buyers to complete the deal.      A failure by Edison to refinance $618 million in bank debt that comes due June 30 and an additional $250 million in notes due in July could put the company precariously close to bankruptcy and cast a shadow on California's plan to sell $12.5 billion in bonds to pay for power purchases, said Dan Scotto, a bond analyst at PNB Paribas in New York.      "Even though it would at first appear to be a company setback, it would really be a major setback for the state," said Scotto, who added that Edison's credit troubles could translate into higher prices for California's proposed bond offering.      Edison, however, said Thursday that the deal is moving forward.      "We believe our deal is going well, and we are comfortable with it," said Jo Ann Goddard, vice president for investor relations. She declined to discuss other details of the offering.      Goldman Sachs Group, Edison's investment bank, expects to formally price the offering Monday. Edison officials would not comment on the proposed price of the note offering, but Wall Street sources said the power company was shopping the issue at the 13% rate.      Edison floated the plan earlier this month as a way to tap the borrowing power of a profitable subsidiary to trim debt that comes due this year and to insulate itself from a possible bankruptcy of its ailing utility unit. The utility, Southern California Edison, has lost billions of dollars on electricity sales over the last year.      The high interest rate on Edison's proposed sale of seven-year notes is about double what a credit-worthy company would pay for a similar bond or note issue and would add a premium amounting to tens of millions of dollars in annual interest costs to the company's already strapped financial condition, analysts said. It's a full two percentage points higher than the average rate for other junk, or speculative, bonds. And corporate bonds with similar ratings are going out at 9% to 10%.      Edison originally started marketing the issue at 12%, a full two percentage points higher than what analysts initially expected, but then raised the rate to 13% in recent days because it was finding few takers on Wall Street.      "The word is that they couldn't get people interested and that they might not be able to get it done," said Kurt Stabel, a money manager at Street Asset Management in Newport Beach.      The higher rate, however, might be pulling investors out of the woodwork and has increased the chance that Edison will pull off the deal, Scotto said.      "This never promised to be a day at the beach," Scotto said. "I think it is really a question of find the right price, the price at which people feel comfortable with the risk."      Both Stabel and Scotto said that Edison's note offering is unusually complicated and requires far more explaining or "selling" than typical corporate offerings.      Mission Energy Holding Co., a company created by Edison for the sole purpose of issuing these bonds, will offer the notes. The assets of Edison Mission Energy, a subsidiary that owns a network of power plants across the United States and in Asia, Australia and New Zealand, will secure the debt.      Mission Energy Holding plans to issue the proceeds to Edison in the form of dividends, giving the parent company funds to pay off a substantial portion of its debt.      The notes will have a credit rating of BB-minus and come due in 2008, according to bond rating agency Standard & Poor's. That's slightly higher than the near-default CC rating now carried by Edison.      If the offering failed, Edison would face a series of difficult choices that range from depleting its cash cushion to going back to its bankers and begging for continued forbearance.       Its SCE subsidiary already has defaulted on $931 million in bonds and notes. That triggered a default in bank lines of credit at Edison International and SCE, which has since operated under extensions from its lenders.      Edison has about $3 billion in cash, including $2 billion held by SCE, according to regulatory documents.      "This could all still unravel, but I have been impressed with [Edison's] effort to inch along so far," said Ellen Lapson, an analyst at Fitch Inc., a corporate credit rating service. "Who would have thought that they could have lasted so many months after their first default in January and still not be in bankruptcy?"      Positive developments for Edison, including a deal to hold small generators at bay with partial payments from SCE and progress at crafting a rescue plan in both the state Legislature and the Public Utilities Commission have sparked a small rally in the company's stock.       Edison shares have risen 8% this month. They gained 21 cents Thursday to close at $11.90 on the New York Stock Exchange.	








Energy Company Abandons Plans for Baldwin Hills Plant  Power: Homeowners and environmentalists rejoice at decision. The site is proposed as a 1,200-acre state park.   By JOE MOZINGO, Times Staff Writer        In a victory for environmentalists and nearby homeowners, an energy company announced Thursday that it was abandoning its plan to build a power plant on the site of a proposed state park in the Baldwin Hills.       La Jolla Energy Development Inc., in a letter to the state Energy Commission, said it was withdrawing its application for fast-track approval of the 53-megawatt plant and "will not pursue the Baldwin facility in the future."      "We listened to the community," La Jolla President Steve Wilburn said in an interview Thursday. "We need to find another place for this equipment."      The project was to be a joint venture between La Jolla and Stocker Resources, an oil company that leases the land where the trailer-sized natural-gas plant would sit.      Stocker officials said they will decide in the next few days whether they will pursue the project. "At this point it's just La Jolla pulling out," Stocker spokesman Steve Rusch said.      But most observers said it would be difficult to move forward on the fast-track schedule the state has implemented to relieve the energy crisis.      The state commission was scheduled to decide whether to approve the project today in Sacramento, but the hearing has been canceled.      The news sparked elation among environmentalists and nearby homeowners who had fought the proposal on grounds that it would pollute neighborhoods and threaten an ambitious plan to piece together 1,200 acres of public open space in the hills.      "We're getting ready to have the biggest party," said Tony Nicholas, president of the hills' United Homeowners Assn. "This shows how a community can come together for a common goal and mobilize the people in a matter of days."      About 76% of the residents in the hills are African American and many saw the issue as a matter of environmental justice.       In addition, Stocker and La Jolla were seeking approval for the plant within 21 days of filing their application, under the governor's emergency power orders. By following this fast-tracked procedure, they would have been able to avoid the normal, time-consuming environmental review process.      That angered opponents even further, and nearly 1,000 people showed up at a public hearing Monday to fight the project.      But what officials said turned the tide against the project--at a time when the energy commission is approving such plants as fast as possible--was testimony from a South Coast Air Quality Management official who said his agency would not be able to approve the plant quickly.      Executive Director Barry Wallerstein said his agency would have to conduct hearings that would take up to 60 days, pushing construction well beyond a Sept. 30 deadline set by the governor for fast-track projects. He also said it was unlikely Stocker could get needed exemptions from federal clean air laws.      In a letter to the Energy Commission this week, Wallerstein wrote: "It appears that the Baldwin Energy Facility could not begin operation until some time in the first part of 2002 at the earliest." By Wednesday night, the energy commissioner who presided over the public hearings issued a statement recommending that the rest of the commission deny the application for a plant, citing Wallerstein's concerns.      Conservationists embraced the outcome as a sign that the movement to create a park was gaining steam. The Baldwin Hills Conservancy was created last year with the idea of creating green space for the densely populated neighborhoods of south Los Angeles. With support from the governor and local politicians, the state recently bought a 68-acre parcel in the area for an unprecedented $41 million.      "This is a great day for the Baldwin Hills and all the people who have worked so hard to bring this world-class vision to reality," said Esther Feldman, president of Community Conservancy International and the main organizer to build the park.      Also applauding La Jolla's decision were state Sen. Kevin Murray (D-Culver City) and Assemblyman Herb Wesson (D-Culver City), who had come out strongly against the project. They and others questioned whether the small amount of power provided by the facility--coming online after the dog days of summer--would do much to relieve the energy crisis.      "I'm ecstatic" Wesson said. "At this point the environment has won."      The plant would have sat on what is a working oil field about 650 feet from the Kenneth Hahn State Recreation Area. And according to park proponents, it would lie in the middle of the grander state conservancy, on what would be a half-mile bridge of land arching over La Cienega Boulevard.      Rusch, the spokesman for Stocker, said much of the information circulating about the trailer-sized plant is false.      The plan did not call for "a stack with billowing smoke," he said. "If the issue is air quality, we've cleaned air quality up." In the last decade, Rusch said, the company's existing 400 oil pumps on the property have reduced nitrogen oxide emissions from 374 tons to 3 tons a year. The power plant--with two 70-foot stacks--would ultimately add about 18 tons a year.      He said the company was trying to cut its energy bills by providing its own power to pump oil, while also contributing an extra 39 megawatts to the state grid during the energy crisis.      Residents say there are more desolate places for the state to relieve the energy problem. Said Mary Ann Green, president of the Blair Hills Homeowners Assn.: "We just hope that Stocker would be responsive to the outcry from the community."	




Western states could feel pinch from California pricing 
KAREN GAUDETTE, Associated Press Writer
Friday, June 22, 2001 
?2001 Associated Press 
URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/22/national0545EDT0489.DTL&type=news  
(06-22) 02:45 PDT SAN FRANCISCO (AP) -- 
When power supplies stretch thin across the West this summer, who will decide whether Silicon Valley computers, Washington apple orchards or Las Vegas casinos get first dibs on what's left? 
It's a key question raised by the decision of federal energy regulators this week to cap electricity prices throughout the West, using a formula based on California's power costs. 
Economists, energy industry executives and officials in all 11 states are beginning to analyze the fit of this new piece in the energy puzzle. 
Though most call the order a good step that could prevent price gouging, others worry the pricing system could lead to electricity shortages for California's neighbors, or prompt utilities to stock up on power contracts to fend off shortages. That could diminish any leverage power buyers might have as they compete for the remaining megawatts available each day. 
Tying the highest possible power price to California could cause a problem come winter, when power demand drops in the Golden State, said Gary Ackerman, director of the Western Power Trading Forum, which represents most sellers of energy. 
States where consumers need electricity to heat furnaces through the winter would be unable to outbid each other above the price cap, which is usually determined by a formula based on the highest bid for last-minute power during the most recent energy supply emergency in California. 
That may leave power wholesalers, and not a free market, to decide who gets the energy. 
"Certainly, California has a tremendous pull on our prices and has for probably the last year," said Claudia Rapkoch, spokeswoman for Montana Power Co., which supplies natural gas and electricity to two-thirds of the Big Sky state. "What it means for this winter, we're just going to have to wait and see." 
California utilities had much more control over power supplies before deregulation in 1996 obligated them to sell off their power plants to encourage competition. This brought lower prices for a time, but gave control over power supplies to wholesalers that aren't obligated by state law to serve the serve the best interests of local customers. 
Rather than appointing one power grid manager to decide how to divide power in the West, Ackerman predicts utilities in non-deregulated states will simply sell their power within their borders. That would hurt California, which this week imported about 10 percent of its electricity and its remaining supply from local plants owned by out-of-state power companies. 
Price cap or not, utilities in the region will watch out for each other as best they can, because they might need the favor returned, said Charles Reinhold, executive consultant for Electric Resources Strategies in Ariz. 
Saddled with rising bills that threatened to exhaust the state's budget, California recently began to sign long-term contracts with generators. Gov. Gray Davis credits the change for helping to drastically reduce prices on the spot market, which earlier this month fell below $50 per megawatt hour for the first time in a year. 
The long-term contracts, though, weren't cheap. California will pay an average of $70 per megawatt hour during the next decade under 38 different contracts signed so far. 
On the Net: 
Western Power Trading Forum: www.wptf.org  
RTO West: www.rtowest.org  
?2001 Associated Press   


Feds spurn Duke Energy in its bid to avoid refunds 
Christian Berthelsen, Chronicle Staff Writer 
Friday, June 22, 2001 
?2001 San Francisco Chronicle  
URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/22/MN95159.DTL&type=news  
Federal regulators have rejected attempts by Duke Energy Inc. to avoid refunding millions of dollars to California for charging exorbitant electricity prices in January and February. 
The Federal Energy Regulatory Commission first ordered the refunds on March 9, and Duke responded by filing a challenge. But the commission on Monday rejected the company's appeal and reiterated its earlier order, claiming Duke had abused its power in the California energy market when it sold power for $3, 880 per megawatt hour. 
"We will not tolerate abuse of market power or anticompetitive bidding or behavior," the commission said. 
Duke acknowledged this month that it had charged $3,880 per megawatt for about 5,500 megawatt hours sold to the state's major utilities in January and February, netting it more than $19 million in receivables. 
The commission did not specify how much money Duke should refund, but it directed the company to readjust its January billings for those hours to a price of $273. From a FERC document, it appears that about 2,835 hours occurred in January, which would result in a total refund for that month of $10.2 million. 
Duke is one of the companies that have been identified by both the California Independent System Operator, the manager of the state's electricity grid, and the FERC as having exercised market power and overcharged Californians for electricity. 
Meanwhile, employees at the South Bay power plant in San Diego run by Duke are expected to testify in a state Senate committee hearing today that the company ramped production up and down. That allegedly was aimed at lowering power production during shortages and attempting to drive up electricity prices on the spot market. 
The workers were employed by San Diego Gas & Electric Co. but were working under contract to Duke. 
E-mail Christian Berthelsen at cberthelsen@sfchronicle.com . 
?2001 San Francisco Chronicle    Page A - 4



NEWS ANALYSIS 
Davis winning Washington PR battle 
Price cap victory may rob Democrats of campaign issue 
Marc Sandalow, Washington Bureau Chief 
Friday, June 22, 2001 
?2001 San Francisco Chronicle  
URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/22/MN167044.DTL&type=news  
Washington -- There was a reason Gov. Gray Davis donned a dark blue jacket and endured beastly humid 90-degree heat this week in an area behind the Capitol known as the "House swamp." 
The nation was watching. And after months of political free fall, his message seemed to be taking hold. 
"California has been bilked out of $9 billion while the Federal Energy Regulatory Commission was asleep at the switch," Davis declared, repeating testimony he had delivered hours earlier in the air-conditioned confines of a Senate hearing room. 
Wiping a bead of sweat from his brow as 10 television cameras and two dozen reporters recorded the scene, the California governor apparently couldn't resist taking another shot: "For nearly a year I've been pounding on this commission to enforce the law." 
The state's energy crisis, with its volatile spot markets, out-of-state generators and dearth of alternative energy providers, is a dizzyingly complex policy puzzle. The politics are much simpler. 
Democrats present themselves as consumer crusaders, defending helpless utility customers from greedy energy conglomerates and misguided regulators. Republicans portray themselves as stewards of the free market and long-term solutions, rejecting price caps and refunds as heavy-handed overreactions with Soviet-style results. 
The Democratic populism seems to be winning the battle. Though the debate is far from settled, the consumer-oriented approach to California's energy woes has raised their hopes of winning back the House of Representatives in 2002 and the White House in 2004. 
"Republicans are scared out of their minds about this," said one gleeful Democrat on Capitol Hill, who suggested that the White House's lackadaisical response to California's problems would rile consumers from coast to coast. 
"This could rival Pete Wilson's alienation of Latinos," said the Democrat, referring to the former Republican governor's strident stand against illegal immigrants, which many blame for the party's weak standing in California. 
A sign of the GOP's concern surfaced this week with television ads, financed by anonymous sources but produced by Republican Party strategists, that blame the Democratic governor for California's energy problems. 
Democrats, who long have worried that the crisis could cost Davis a second term, now take credit for having pressured the White House and federal regulators to take a more active role. 
The Federal Energy Regulatory Commission, which had previously resisted such efforts, took steps toward controlling wholesale electricity prices Monday. Later in the week, two commissioners appointed by President Bush testified that they might be open to further price restrictions and support huge refunds to California. And just yesterday, Vice President Dick Cheney, who has been among California's most vocal critics, told Senate Democrats behind closed doors that he could support refunds to California if federal regulators agreed, according to those in the meeting. 
"There is no doubt in my mind that action (taken by federal regulators) was the direct result of pressure for price relief led primarily by the California delegation," Davis said. 
The pressure did not come only from Democrats. Republican lawmakers, some of whom fear the crisis could cost them seats in 2002, wrote FERC last week, requesting commissioners to "take further actions" to help the state. 
The Democrats' public relations success follows an effort by the party to raise the profile of its consumer crusade. Hardly a day has passed in the past several weeks without a group of Democrats holding a news conference to attack the White House, the Republican controlled House or FERC for inaction. 
But it may have just as much to do with a White House that has been far more focused on long-term energy production than the immediate concerns of Californians. Even as it engaged in a legitimate policy dispute over how to solve the power mess, the Bush administration appeared indifferent to the plight of residents experiencing skyrocketing energy bills and rolling blackouts. 
Bush tried to correct that impression with a trip to the state last month. But the damage appears to have extended beyond California. 
A CBS News/New York Times poll released this week of 1,050 adults from across the country showed that only one in three voters approved of the job Bush was doing on energy. More than half the respondents said that protecting the environment was a higher priority than producing energy, yet barely one in 10 said that Bush shared that priority. 
Some Republicans say that Bush was in a no-win position, contending that anything he did would have been attacked by California's opportunistic governor. 
"Politics is (Davis') main objective, and I don't see the Bush administration being that way," said Rep. George Radanovich, R-Fresno. 
The question for some analysts is whether Democrats might have been too successful. By pressuring the federal government to take a more active role, Democrats may lose their ability to point the finger at a convenient scapegoat. 
"Davis has always needed rate caps much less than he needed a scapegoat. Now that FERC has given him what he wants, or close enough to it, it's a lot harder for him to lay blame back on Washington when the blackouts kick in," said Dan Schnur, a GOP analyst based in San Francisco. 
E-mail Marc Sandalow at msandalow@sfchronicle.com . 
?2001 San Francisco Chronicle    Page A - 4 



Suit filed over report on power lines, health 
Deal on transmission grid could raise liability 
Matthew Yi, Chronicle Staff Writer 
Friday, June 22, 2001 
?2001 San Francisco Chronicle  
URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/22/MN114037.DTL&type=news  
As state legislators consider Gov. Gray Davis' deal to buy part of the power grid in California, a public records advocacy group filed a lawsuit yesterday demanding that the state release a report on potential health hazards of living near high-voltage transmission lines. 
The document could be vital to how legislators vote on the $2.76 billion deal to buy Southern California Edison's power lines, said Terry Francke, general counsel for the California First Amendment Coalition, which filed the lawsuit in Alameda County Superior Court. The power line deal was brokered by the governor to help the cash-strapped utility. 
Legislators must approve the power grid purchase by Aug. 15 or the utility can back out. Davis also has a $1 billion agreement to purchase San Diego Gas and Electric's power grid, which also would require the Legislature's approval. 
Pacific Gas and Electric has not agreed to sell its transmission lines. 
The power lines report was completed in April by California Electric and Magnetic Fields Program, an agency set up by the state Department of Health Services to study the issue, Francke said. Both state agencies and their directors are named in the lawsuit. 
Efforts to keep the report secret are suspect, Francke said. 
"If it's known there's some danger . . . do you want the state owning that liability?" he asked. 
The study began in 1993 after the state Public Utilities Commission committed $7.2 million for research and education on the subject, Francke said. 
The state document deals with scientific findings on how magnetic and electric fields from transmission lines affect humans and possible policies based on those findings, he said. 
The report was scheduled to be released to the public on May 7, but "at the last minute, the Public Utilities Commission apparently instructed the staff of the EMF Program to keep the reports secret," the lawsuit said. 
State health services spokeswoman Lea Brooks said that the report was only a draft and that her department was following orders from the PUC. 
"The PUC wanted to see the draft before (it is released)," she said. "We prepared (the report) for them. We are following their request." 
Brooks refused comment on the lawsuit, saying her office hadn't seen it. PUC officials were not available for comment. 
Studies on the effects of magnetic fields have resulted in no clear consensus on their effects, Francke said. That's what makes the state study important for legislators to consider before voting on the governor's deal to buy transmission lines, he said. 
Opponents of the power grid deals say the report may add to objections to Davis' agreements with the utilities. Some legislators would rather the state help build more power generators in California. 
"They are extra nails in the coffin," said James Fisfis, spokesman for state Assembly minority leader Dave Cox, R-Fair Oaks. "We have fundamental issues with the transmission lines, but when you start stacking these items up, 
you have an undigestible deal." 
Davis' spokesman Roger Salazar said he believed the governor hadn't seen the health hazard report. 
"Obviously, if something pops up and is an issue, you'll take a look at it, but I don't think we're at that point yet," he said. 
An Alameda County Superior Court judge will hear the lawsuit on July 23, Francke said. 
E-mail Matthew Yi at myi@sfchronicle.com . 
?2001 San Francisco Chronicle    Page A - 4 



Texas power firm's shares falling 
Power baron Enron finds fortunes fading 
Christian Berthelsen, Chronicle Staff Writer 
Friday, June 22, 2001 
?2001 San Francisco Chronicle  
URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/22/BU178338.DTL&type=news  
 
There's trouble in Texas. 
Enron Corp., the Houston power firm that's profited mightily during California's energy crisis, is suffering a surprising lack of popularity on Wall Street. 
While all eyes have been on Enron's enormous profits here and its enormous pull in Washington, D.C., the reputed titan of the newly incarnated, free- wheeling power industry has lost half its market capitalization -- more than $30 billion -- since its peak in August. 
Forgive Californians for savoring a bit of schadenfreude over the Houston boys' reversal of fortunes. But what gives? Isn't this the company that was fattening up on the backs of the state's beleaguered utilities, residents and state budget? Isn't this the company with such close ties to the Bush administration that Kenneth Lay, Enron's chairman, was reported to have interviewed a candidate for a job on the commission that regulates his company? 
Yup. That Enron. 
On Monday, Enron shares hit a 52-week low of $43.07, after the Federal Energy Regulatory Commission decided to apply the same price controls to power marketers such as Enron that had applied to power-generating companies for months. That's a far cry from August, when the company's shares peaked at $90. 
"There's a whole kaleidoscope of issues that Enron is being challenged with in the marketplace right now, none of which on the surface is a major deal," said Donato J. Eassey, an analyst with Merrill Lynch Global Securities in Houston. "But when you combine them all . . . I think what's happening here is you have a crescendo with this FERC announcement. You have people saying, 'OK, the growth rate is now in question.' " 
That growth rate was an eye-popping 88.82 percent in revenues for the United States on a two-year average, and nearly 98 percent in the rest of the world. Enron officials did not respond to a request for interviews, but as the stock continued to drop Tuesday morning, chief executive Jeff Skilling issued a statement to the markets in which he reiterated "strong confidence" in its earnings guidance. The stock rebounded slightly throughout the week, closing at $44.05 yesterday. 
In a speech at the Commonwealth Club last night, Skilling blamed regulatory interference with the "free market" for investor flight from his company. 
"Our stock prices have gotten hammered," he said. "They're half what they were a year ago." 
Tumbling stock prices weren't the only bad news for Skilling last night. A protester pelted the executive with a berry pie just before he began speaking. As Skilling used paper towels to wipe the pie from his face, a woman was arrested on battery and malicious mischief charges. 
Enron isn't the only company with stock prices that soared in tandem with California's power crisis and are now suddenly headed south. Shares of Reliant Energy Inc., AES Inc. and Williams Companies Inc., which generate and sell electricity in California, and El Paso Energy Corp., which sells natural gas here, are all trading near 52-week lows. 
The main culprit appears to be the suddenly serious talk in Washington about power price controls, re-regulation and now, the possibility of big refunds being ordered for California. Even Calpine Corp. of San Jose, which has developed a reputation as an industry good guy because it has not played the spot market and has not been accused of manipulative tactics, dropped nearly 7 percent yesterday, to $37.10. But none of the companies has been hit as hard as Enron. 
Such a drastic drop in market capitalization poses serious problems for any company. It leaves it less money to invest in its own growth, and because executive compensation is so closely tied to stock price, a sharp decline makes it more difficult to retain talented leaders. 
While Enron's power wholesaling division seems to be doing fine, the firm has been buffeted by disappointments in other lines of business and other regions in recent months. In the financial press, the continuing knock on Enron is that its business lines are so new and complex, and the company is so secretive about its operations, that analysts and fund managers don't feel confident in their understanding of what it does. 
A look at the firm's recent troubles exemplifies its diversity. 
For instance, Enron has engaged in repeated battles with the state government of Maharashtra in India over a 2,184-megawatt power plant there. The Dahbol Power Co., which is 65 percent controlled by Enron, stopped construction on a second phase of the project on Sunday, claiming it is owed $48 million by the Maharashtra State Electricity Board. The state has accused Enron of charging too much and not generating enough, and stopped buying power from the plant last month. 
Closer to home, Enron has struggled with its investments in fiber-optic bandwidth. The company buys and sells unused, high-speed bandwidth space, treating it like a commodity as it does electricity, coal or natural gas. But the fiber-optic sector has imploded in recent weeks as it has become clear that for all the long-distance cable laid in the ground, there have not been enough "last mile" connections set up for users to actually take advantage of it. Earlier this year, Enron scuttled plans for a joint venture with Blockbuster to offer what it called "video on demand," in which customers at home would be able to select a video of their choice for a fee and have it transmitted via fiber-optic cables. 
Then there was the FERC ruling. For months, the agency had resisted aggressive price controls in the West, preferring to let the market run its course. But as control of the U.S. Senate was handed to Democrats this month and President Bush appointed a tough Texan regulator named Patrick Wood III to the commission, the agency changed its tune. It expanded price controls to all hours of the day, spread the controls throughout the Western region and brought previously excluded power marketers under the tent. 
So under current calculations, that means Enron could sell power for no more than $108 per megawatt in a shortage and about $90 during normal hours -- far short of the hundreds of dollars that companies were regularly charging during the past year. 
In part, the company's gyrating stock price reflects the volatile nature of the businesses Enron has decided to pursue. And the hard-charging company has a reputation for going aggressively into entirely new markets. But sometimes that approach gets it in trouble, as was the case last year, when Enron had to take a $400 million charge for its failed investment in Azurix, a global water company that set out to make a commodity out of water supply the same way it had done for electricity service, as governments privatized their water systems. The opportunities never materialized. 
Add it all together and Enron has a tough time supporting a price-earnings ratio of nearly 39, considerably above the liberal standard of health, which is 25. The company had less than $1 billion in profits on more than $100 billion in revenues last year. Still, a survey by Thomson Financial/First Call found that analysts expect Enron to deliver earnings of 42 cents per share in the second quarter (up from 34 cents last year), and $1.79 per share on the year. Most maintain a strong "buy" rating on the stock. 
But investors with big positions in Enron have taken a hit. Hardest-put of them will be the Janus funds, which, as Enron's largest mutual fund investor, held nearly $3.33 billion of its stock as of the end of April. 
In a semiannual report to investors, John Schreiber, a portfolio manager, said the stock price of the "new-age energy merchant" was a victim of negative psychology resulting from the California energy crisis. Janus declined to make fund managers available for interviews. 
"There are tremendous rewards for being first into new markets," said Raymond Niles, an energy analyst with Salomon Smith Barney in New York. "When you're an aggressive first-mover, from time to time you're going to make mistakes. But I don't think any of the mistakes Enron has made hit the core of the company." 
E-mail Christian Berthelsen at cberthelsen@sfchronicle.com . 
?2001 San Francisco Chronicle    Page B - 1 





Power firm accused of price-fixing Former employees say Duke Energy slowed production of electricity to create an artificial shortage, boost profits  BY DION NISSENBAUM  Mercury News Sacramento Bureau  SACRAMENTO -- One of the largest companies producing power in California ordered workers to throw out spare parts and shut down equipment in an effort to drive up the price of electricity, former power plant workers said Thursday.  Speaking out on the eve of appearances at a state Senate hearing, the three men offered the strongest evidence yet that at least one power producer -- Duke Energy -- sought to make more money by creating an artificial shortage that may have created huge electricity price spikes.  ``Their intent, in my opinion, was to boost the price up,'' said Glenn Johnson, a mechanic who worked for two decades at the Chula Vista power plant now run by Duke. ``If I've got the only box of penicillin in town and you're sick, I can charge a million dollars a box,'' he said. ``If you want to live, you're going to have to pay.''  Officials at Duke angrily challenged the accusations, calling them irresponsible charges by disgruntled workers who were let go in April.  ``Their allegations are just comical, just highly erroneous,'' said Tom Williams, a spokesman for Duke, which runs four plants in California that produce enough energy for nearly 2.6 million homes.  The charges come as the state heads into negotiations next week with generators over the $8.9 billion the state claims its consumers have been overcharged. Duke, based in Charlotte, N.C., came under considerable criticism when it disclosed that it charged the state a record $3,880 a megawatt-hour for power in January. Federal officials have called the charge unreasonable and ordered Duke to refund California the money.  The employees, who first made their allegations public on ``CBS Evening News'' Thursday night, will be the only witnesses today at an energy crisis hearing headed by lawmakers who suspect that power companies have been illegally gouging California.  State Sen. Joe Dunn, D-Garden Grove, chairman of a committee investigating price gouging, said the allegations raise serious concerns. ``While we still need to hear the other side of the story from Duke, if there's any truth to the information, I believe it would be devastating to the generators,'' he said.  `Perfectly good parts'  In interviews with the Mercury News Thursday night, the three former plant workers said that they were directed to scale back energy production and throw out good spare parts that kept the plant from getting up to full power for weeks.  Ed Edwards, who worked in the Southern California plant, said that he was told to get rid of many boxes of good spare parts. Edwards said he tossed more than 23 pallets of parts into a dumpster.  ``I don't know why they were throwing away perfectly good parts,'' he said. ``It didn't make sense.''  Johnson said the lack of on-site parts prevented workers from quickly fixing problems that reduced the amount of power the plant could produce. Sometimes, he said, it took weeks to get parts.  Johnson's suspicions of gouging were echoed by Jimmey Olkjer, who spent 18 years in the plant and worked as an assistant control operator.  Even at times when California regulators were warning residents the state might not be able to find enough energy to prevent imminent blackouts, Olkjer said, he was directed to scale back the amount of electricity the plant was producing.  ``In hindsight, it looks to me like they were manipulating the power,'' Olkjer said.  Duke called the allegations ``baseless'' and said the workers didn't understand the reasons for the actions. ``Continued accusations, repetitive investigations and inflammatory rhetoric concerning the company's operations in the state are distracting attention from the true issue of solving California's energy crisis,'' Duke said in a statement.  Williams did not directly dispute the worker's allegations. But he said they did not understand the reasons behind the decisions.  State directives  Duke cut back on the amount of power it was producing in response to directives from state regulators at the Independent System Operator, which runs the power grid, Williams said.  ``They did not know that the ISO was instructing them to go up and down to meet supply and demand,'' he said.  An ISO spokeswoman said that the grid manager sometimes asks generators to produce more or less power to adjust traffic on the transmission system or respond to the state's electricity needs.  Some companies ``bid'' power into the reserve market, which means these plants run only when the extra energy is tapped. ISO officials say they are prohibited from discussing individual bids.  As for the spare parts, Williams said they were eliminated as unnecessary after Duke bought the plants from San Diego Gas & Electric.  Williams said Duke has one of the best performance records in the state, with its power plants off-line for unscheduled maintenance only about 1.1 percent of the time.  All three workers were given severance packages and let go in April.  But Edwards disputed any contention that they were trying to get back at Duke.  ``I'm not a disgruntled employee,'' he said. ``I'm just telling the truth of what I saw the last two years I worked there.''  No matter what the reasons were for the decisions, Duke has made huge profits during the California energy crisis. And those profits apparently created good cheer among Duke executives.  At one party, Johnson said, executives gleefully celebrated their good fortune.  ``We're making more money than we ever thought possible,'' Johnson quoted the plant's manager as saying.  Mercury News staff writer John Woolfolk contributed to this report.  Contact Dion Nissenbaum at dnissenbaum@sjmercury.com  or (916) 441-4603. 	







Enron chief: Gov. Davis not to blame for energy crisis BY KAREN GAUDETTE Associated Press Writer SAN FRANCISCO (AP) -- California Gov. Gray Davis isn't to blame for California's power crisis, and neither are electricity wholesalers, a Texas energy executive told a crowd at the Commonwealth Club of California.  Jeffrey Skilling, CEO and president of Houston-based Enron Corp., wiped away the remnants of a pie hurled by a protester Thursday and placed the blame squarely on California's energy regulators.  The state Public Utilities Commission in the early 1990s put together a broken market by preventing utilities to pass along the full cost of power and discouraging power contracts that would have lowered dependence on buying last-minute power, Skilling said.  ``Because of these rules, the power consumers of the state of California were thrown totally to the mercy of the spot market,'' Skilling said.  PUC president Loretta Lynch defended the regulators' actions last week, saying utilities have been free to enter into long-term contracts. Utilities countered that the PUC never made clear what contracts it would accept, which left open the possibility they would later be overruled.  ``I think consumers in California are angry and they should be,'' Skilling said. ``Prices in California shouldn't be as high as they are.''  Skilling also:  --Congratulated Davis for California's ``unprecedented'' conservation  --Denied accusations that Enron chairman Kenneth Lay personally interviewed candidates for the Federal Energy Regulatory Commission, which oversees interstate energy markets  --Told the audience to expect a report that would show California municipal utilities have profited the most selling power to the state  --Said price caps ordered by FERC earlier this week would likely damage the markets and would only exacerbate the problem  --Acknowledged that municipal utilities in the state have managed to provide cheaper power to their customers and even profit from the power crisis by selling off extra power despite public control  Enron has come under fire after accusations from Davis and state officials that it and other energy companies forced electricity prices skyward by holding back supply.  Enron denies such claims, and joins other power producers in arguing that the state and utilities still owe them billions in unpaid bills. Davis acknowledges that Pacific Gas & Electric Co., which has declared bankruptcy, and Southern California Edison together still owe generators such as Enron, Duke Energy, Mirant and Reliant Energy about $2.5 billion for past electricity sales.  ``Our success is linked to efficient markets, not higher prices in California or anywhere else,'' Skilling said.  Protesters gathered outside the building wearing pig masks and carrying hand-made signs, one of which read ``Greed is the only power crisis.''  ``It's basically Enron and the other companies raising prices,'' said Bernard Greening, a Santa Clara computer programmer who said he's unhappy with the record prices for electricity and natural gas.  Pete Snoek of Tiburon said he believed what Skilling had to say.  ``I believe the energy situation has been politicized so badly,'' Snoek said, saying he was one of several in the audience to shush protesters during the meeting. ``I hear the same people out there, as if it's a sin to make any money in this country.''  State officials counter that wholesalers charged as much as $9 billion in illegal overcharges dating back to May 2000.  Companies have said California's claims are wildly exaggerated.  The Federal Energy Regulatory Commission has already estimated that wholesalers owe California $124 million in overcharges for the first four months of the year. Davis and others say that's a mere drop in the bucket.  Enron has also been tied to President Bush's hands-off approach to the energy crisis. Company chairman Kenneth Lay is a friend and one of the largest campaign contributors to Bush and the GOP. Several prominent members of the Bush administration hold stock in the company.  Enron is one of several major GOP donors accused of meeting secretly with Vice President Dick Cheney as he drafted the Bush administration's energy plan.  Enron is one of the world's leading electricity, natural gas and communications companies, with $101 billion in revenues in 2000. It owns 30,000 miles of pipeline, has 20,000 employees and is active in 40 countries. During the first quarter of this year, Enron's revenues increased 281 percent to $50.1 billion.  	







      Three say company purposely cut power  Ex-Duke workers say repairs were curbed in order to manipulate output.  June 22, 2001  By KIMBERLY KINDY The Orange County Register         FORMER DUKE ENERGY employees Ed Edwards, left, Glenn Johnson, center, and Jimmy Olkjer are to appear before a state Senate committee today. Photo: Dave Yoder / The Register     Three former Duke Energy workers say they were ordered to tamper with equipment at a San Diego County power plant - causing mechanical problems that helped drive up electricity prices during the state's energy crisis.  The workers say they will offer eyewitness testimony to a state Senate committee today - the first public accounts from power plant employees of how energy production may have been manipulated.  Duke officials deny most of the allegations. The whistle-blowers - mechanics Ed Edwards and Glenn Johnson and control room operator Jimmy Olkjer - lost their jobs four months ago.  State Sen. Joe Dunn, the Santa Ana Democrat who is chairing the investigative committee on price-fixing, said his staff will attempt to verify the accounts from the whistle-blowers. But their mere presence in a Capitol hearing room is expected to set off a media circus. And if the accusations are true, it could have wide-ranging effects on the North Carolina company's operations in California. Duke officials were working late into the night to prepare for the hearing and have scheduled a news conference later today.  "They were doing all kinds of things that didn't make sense," Johnson said in an interview. "But if you asked them why, to explain, they told you to shut up and do your job."  The testimony comes on the heels of a Federal Energy Regulatory Commission ruling Thursday ordering Duke to refund $10 million in overcharges for January 2001.  "This information lends credence to the concern that there was a deliberate strategy for outages for the sole purpose of impacting price," Dunn said. "What they are saying is disturbing."  Duke Energy spokesman Tom Williams said the fact that the former workers lost their jobs may be shaping their testimony.  "The proof is in the pudding. Production is up and we've had fewer forced outages since we've taken over,'' said Williams.  But control-room logs obtained by The Orange County Register show Duke's trading arm ordered its South Bay power plant in Chula Vista to reduce production minutes after Stage Three alerts were issued. The logs are for January 2001 - the same month that Duke was accused of overcharging in California.  The three former Duke workers each worked at the Chula Vista plant for more than two decades when it was owned by San Diego Gas & Electric. They lost their jobs when Duke assembled a new team to run the plant.  The three whistle-blowers outlined their accusations in interviews with the Register. The accusations include:  The company ordered workers to throw unopened boxes of bolts, steam seals, valves and other parts into Dumpsters. The parts were needed to perform routine maintenance but were no longer available when repairs were required. Duke officials acknowledge that new parts were discarded, but say the high inventory tax made it more efficient to order parts as needed because they could be delivered within 24 hours.  Edwards and Johnson say they were ordered to dismantle critical equipment necessary for the generating units to run at full capacity. Because parts were thrown away, they couldn't make repairs and generators ran at diminished capacity for days or weeks. Energy experts say this allegation, if true, would allow Duke to withhold energy from the marketplace, which could drive up the price. Duke officials counter that production has increased at its power plants and forced outages have decreased since they took over. But in late 2000, there was a spike in outages at the Chula Vista plant, according to records kept by the state's power-grid operator. The plant reported 3,000 hours of outages from October through December. There were relatively few outages before that.  The mechanics say the inability to perform repairs forced them to use a small, expensive generator that was rarely powered up before Duke took over the plant. Experts say that could have been used to exploit federal rules allowing generators to justify prices based on the costliest units online.  Olkjer says he received orders from Duke's trading arm to reduce production. Then, when energy prices jumped, he would get new instructions to power up again. Duke officials did not respond to Olkjer's claim.  Stanford professor Frank Wolak, an expert in California's energy market, said that if their testimony can be proven, the state could be refunded millions of dollars and future energy prices could be dramatically reduced.  "What they are saying is amazing. This is a classic plot. I've always wondered how they kept the generators out for so long,'' said Wolak, who heads an electricity market surveillance for the California agency that oversees the buying and selling of power. "They were very happy to have them off-line because it allowed them to make more money.  Wolak said the testimony seems to back up research conducted by the state Independent System Operator, which runs most of the state's power grid and oversees the buying and selling of electricity in California.  In a report to federal regulators, ISO said that from May to November 2000, Duke withheld electricity from the state's power grid 80 percent of the time. The report accused more than a dozen power plant companies of powering down generators to create scarcity in the marketplace that would in turn drive up prices.  In a separate report, the state power grid operator accused Duke of overcharging California again in January of this year, resulting in the $10 million refund order. Duke officials say charging $3,880 a megawatt-hour was justified during a short period of time. Federal regulators disagreed and said the power merchant should have charged no more than $273 per megawatt-hour.  Williams, Duke's spokesman, said that the company has been an ethical operator.  "All but 1.1 percent of the time, we were operating. That's very good,'' said Williams, adding that when SDG&E owned the plant forced outages took place 1.8 percent of the time.  But Dunn said that if the testimony from the whistle-blowers is true, and Duke had the ability to manipulate prices, federal regulators would be required under the Federal Power Act to move them out of the competitive marketplace.  This would mean they would be moved back into a "cost-based" market structure and would only be allowed to recover costs at a fair rate of return.  "This would bring the prices down dramatically in California,'' Dunn said. "What generators fear most is being returned to cost-based rate regulation."             Allegations  of market manipulation Nearly a dozen investigations are under way to determine if  energy producers  illegally manipulated California's dysfunctional electricity market. Here are the main allegations:  Was power  deliberately withheld to boost prices?  Several investigators, including the Public Utilities Commission, the California attorney general and the Federal Energy Regulatory Commission, are trying to determine if the largest generators and power marketers - including Duke, Reliant, Mirant and Dynegy - shut down power plants at key times. Federal  Environmental Protection Agency records showed times in December when Tulsa-based Williams throttled back at midday, letting  Williams boost profits at other plants it  controlled, including a  Huntington Beach plant owned by AES Corp.   Were financial  incentives offered to plant operators who shut down?  Federal regulators have settled a case for $8.million with Williams. Among the allegations: Williams offered ffinancial incentives to AES if it would keep its plants offline. Williams has denied any wrongdoing.  Did companies  collude?  Traders and producers were able to share  information on Web sites that helped them determine when to get the highest prices for electricity. Attorney General Bill Lockyer is investigating other  allegations of collusion.   Were workers ordered to fake outages?  Three former Duke  employees will testify today that they were ordered to create  malfunctions at a San Diego County power plant, allowing the  company to command higher prices at other Duke-owned power plants. Duke denies this.  RELATED STORIES  * FERC judge tackles task of generating a deal  * California's blackout forecasts rolled back                	





      FERC judge tackles task of generating a deal  He's described as a down-to-earth gentleman, but one who 'can slice you up' if you cross him.  June 22, 2001  By DENA BUNIS The Orange County Register  WASHINGTON - He's a plain-talking, folksy Southern gentleman. But if the nation's chief energy judge, Curtis Lee Wagner Jr., believes the players in Monday's megaconference aren't dealing straight with each other, watch out.  "He's kind of like (President) Reagan -- a big-picture guy," says Patrick Wood, the newest federal energy commissioner who's known Wagner for years. "He can tell a story that always fits the situation." But cross him, and "he can slice you up like a Veg-O-Matic."  The 72-year-old Tennessee lawyer has been the Federal Energy Regulatory Commission's chief judge for 22 years. His 47 years of government service includes being a lawyer with the military and Justice Department.  And beginning Monday, he'll have California's electricity crisis in his hands. All the players -- from the state to utilities to power generators -- will be in one room trying to settle who owes whom money and how much.  The state wants $9 billion in refunds from generators they say charged too much for electricity. The generators want billions from the utilities and the state that they say didn't pay the bill for other power they bought. And California's ratepayers just want to keep the lights on.  "I don't think there's $9 billion," Wagner said Thursday from his office at FERC headquarters. "I think there may be a billion or so."  He spent much of the day fielding calls from some of the several hundred people who could show up in his hearing room Monday.  "Let's see, I've talked to Reliant, to Dynergy once, Mirant. I'm going to talk to Dynergy again this afternoon. And I've talked to the governor's office, and I've talked to some FERC folks, to someone from Oregon and some municipalities in California. Oh, and I've talked to the fellow who is going to represent the city of Los Angeles."  Wagner likes to know what he's getting into ahead of time. He makes a habit of talking to everyone individually.  Monday's is the kind of deal Wagner likes best. Rather than a formal trial where he wears the robe, pounds the gavel and renders a decision after both sides make their cases, settlement conferences give him a chance to wheel and deal.  "First thing, I'll make an opening statement of some kind, give 'em a pep talk," Wagner said. "And if we have any big wheels there I'll let them say a thing or two."  After the introductions, he'll start to work through the issues. He'll take one guy aside, he said, then maybe two. Then maybe a group. And little by little he hopes to bring them together.  By all accounts this case could be more difficult than any he has handled.  "This has got more dollars,'' Wagner said.  Thursday, Wagner asked California's Independent System Operator and the power sellers for information that can help him sort out the complicated issues. He wants the ISO to calculate what wholesale electricity prices wold have been had the price caps FERC ordered Monday been in effect in the fall of 2000. And he wants the power companies to tell him how much power they have to sell - short and long term.  And as if his task wasn't difficult enough, FERC has asked Wagner to make this deal in 15 days.  "It's pretty tight," he said, "but it can be done."  Stephen Angle, a Washington lawyer who represents power producers and utilities, ran FERC's trial section for 14 years. The California case is one of the most difficult he's seen. But he's not counting Wagner out.  "I have learned that it's unwise to assume he won't be successful," Angle said. The odds that Wagner will get a deal? "Fifty-fifty."  This is not the only high-profile case that's taking up the chief's time these days. He's presiding over a FERC inquiry into whether El Paso Energy Corp., a large natural gas pipeline owner, is overcharging California.  Wagner has a history of taking impossible cases.  Angle says he recently worked with the judge on a dispute in the Midwest.  "That was a case where few people thought would be successful," Angle said. It had been on FERC's docket for years. Wagner got the people talking and emerged with a settlement.  And Monday won't be Wagner's first effort at solving California's energy crisis.  Last December, he got the parties together to try to break the logjam over the long-term contracting issue. But just as he was getting a head of steam on that, says Wood, the Clinton administration yanked the deal away from Wagner and tried to broker it themselves.  "I know he's too much of a gentleman to say it. But that was a missed opportunity."  Now he'll be reuniting some of the same parties that were together six months ago.  Because of Wagner's longevity on the bench, almost every lawyer or energy executive who is likely to be in the hearing Monday will have had some dealings with him.  "He'll be very clear. He will not mince words," said former FERC Chairman James Hoecker. "He will make his impatience with any dawdling very, very obvious to everyone.''   	





      Davis seeks $9 billion refund  The governor tells a Senate panel that power operators 'bilked our state.'  June 21, 2001  By DENA BUNIS and KATE BERRY The Orange County Register  WASHINGTON - Gov. Gray Davis told anyone here who would listen Wednesday that overcharges from what he calls greedy power generators have now risen to $9 billion - $2 billion more than earlier reported.  And he wants that money back.  The governor said if the meetings federal regulators have ordered next week to try and hammer out the differences between power companies, utilities and the state do not end with that kind of money in California's pocket, he'll be back.  "They must be required to give us back our money,'' Davis told the Senate Government Affairs Committee during two hours of testimony and questioning. It was the first time California's chief executive has testified on the state's crisis. "It is unconscionable that FERC looked the other way while energy companies bilked our state for up to $9 billion."  The $9 billion is the amount California's Independent System Operator says generators overcharged utilities and the state from May 2000 to May of this year. It had initially calculated that between May 2000 and February 2001 there were $6.7 billion in overcharges, Davis said. Those figures are a far cry from the $124 million that the Federal Energy Regulatory Commission says were overcharges. That's because FERC only looked at three months of rates and only when the state was in an energy alert.  The governor faced tough, pointed questioning from Republican members and glowing praise and sympathy for his state's plight from Democratic colleagues.  Everything from refunds to long-term contracts will be on the table at next week's settlement meeting. FERC has given the parties until July 9 to make a deal.  If they can't, the administrative judge overseeing the talks will make a recommendation to FERC, which can order the paybacks. Sen. Barbara Boxer introduced a bill Wednesday to require refunds if FERC doesn't act.  Not surprisingly, generators don't see the refund issue the governor's way.  "It's just crazy," said Tom Williams, a spokesman at Duke Energy. "I don't know how they're coming up with these numbers."  And there's skepticism about next week's talks.  "The negotiations are going to be like the SALT Treaty," said Gary Ackerman, president of the Western Power Trading Forum, which represents power suppliers. "I question whether it can happen and work out."  Also at issue is money generators say they are owed by the utilities. Davis said that's about $2.5 billion. But power companies say it's more like $5.5 billion to $6.5 billion.  Whatever the figure, Davis said, "we want to see their money in our pockets before we talk about working anything out on their end."  The settlement conference was part of FERC's order instituting around-the-clock price caps for California and its 10 Western neighbors. Those price caps were made possible, experts agree, because California lawmakers from both sides of the aisle riled up the public enough over the issue that the Bush administration felt the heat.  The question is whether that can work with refunds.  "Pressure could come from a number of places," said Charles Cook, a nonpartisan political analyst who has followed California's crisis. "It could come from Republican members from the state, from party donors in California who (President George W.) Bush is going to have to go back to, and then maybe from his economic advisers who say that California can't be allowed to go belly up."  Davis and Sen. Dianne Feinstein, D-Calif., said new FERC Commissioner Patrick Wood, a confidant of Bush, has been receptive to their refund pleas. That was the case Wednesday when Wood - expected to be named FERC chairman sometime this year - told members of the Senate panel that refunds "may be an important tool in the regulatory toolbox. If we're to be a vigilant market cop, we need to make sure that our bite matches our bark."  Wood and the other new commissioner, Nora Mead Brownell, will meet with Davis in Sacramento on Monday.               RELATED STORY  * Energy notebook               	



      Energy notebook  Blackouts are still a hot prospect, officials warn  June 21, 2001  By the Associated Press  BERKELEY - Experts at the University of California Energy Institute say residents statewide should not be comforted by the fact that widespread blackouts have been avoided recently.  "I would say this is not a great sign that we're going to skate by later this summer," said Severen Borenstein, a UC Berkeley economist who heads the institute. "It doesn't look like the system right now can handle a blazing, hot day. If it's real hot in Northern and Southern California, we're going to have blackouts."  Greg Fishman, a spokesman for the California Independent System Operator, which controls the state's electricity grid, said ISO preferred to look on the bright side.  "Does the fact that we're meeting electricity demand today mean we're out of the woods? No, but is the fact that we're meeting demand today good? Sure it is," Fishman said.  Air conditioners are the single biggest factor in summer electricity demand.  "If thermostats on air conditioners were turned to 78 degrees across the state, this problem would pretty much go away," Borenstein said.  Davis' plan to buy SDG&E grid has fans and critics  SAN DIEGO - Gov. Gray Davis' plan for the state to buy San Diego Gas & Electric Co.'s transmission system, owned by parent company Sempra Energy, is getting mixed reaction.  Under the plan unveiled Monday, the state would buy the system for $1 billion, and a $747 million debt owed to the utility by its customers would be forgiven.  "It would seem that anything that in the short term lets the ratepayers off the hook, particularly small businesses that can ill afford drastic balloon payments, is a good thing," said Suzanne Strassburger of Escondido's Downtown Business Association.  Douglas Heller, a consumer advocate with the Foundation for Taxpayer and Consumer Rights, called the deal "a cruel joke on the part of Gov. Davis to say that he's burst the balloon payment, because we're going to be paying for it. We're applying that much to buy out Sempra's transmission lines."  GE tries to enter state's transmission-lines business  SACRAMENTO - Through an alliance with a little-known start-up company, General Electric Co. is trying to enter California's transmission- lines business.  Although Trans-Elect, a 2-year-old company based in Washington, has no experience in the transmission business, it has the financial support of GE's $66 billion financial arm, GE Capital. Trans-Elect's latest offer comes as Gov. Gray Davis seeks legislative approval for his plan to buy the transmission lines of both San Diego Gas & Electric and Southern California Edison.  Any involvement by GE in the state's transmission grid could be a conflict of interest, said a lawmaker involved in the efforts to end California's power crisis.  "You've got someone with generation and transmission systems, how do they keep them separate and do they?" said Assemblyman Fred Keeley, D-Boulder Creek. "That's a concern for me. Would they have the ability to restrict competitors' access to transmissions?"  Bob Mitchell, Trans-Elect's vice president, said the company made its offer believing that the Legislature won't approve the deals to buy the two utilities' lines.  GE joined forces with Trans-Elect on March 14, when GE Capital Services Structured Finances Group Inc. announced it had bought a minority stake in the company. Neither company would reveal the size of the investment.  In other news:  A state board unanimously voted to reclaim its role in setting property taxes for electricity generators. Supporters say the Board of Equalization's decision could mean millions of dollars in higher taxes for electricity companies. The EOB will resume setting the assessed value of plants that produce at least 50 megawatts of power and are owned by generating companies whose rates are not controlled by the state.  Despite hot temperatures in much of the state, blackouts were averted Wednesday as power reserves remained above 7 percent. Track the state's blackout warnings on the Web at www.caiso.com/SystemStatus.html .   	





      In rolling blackouts, 'together' is all relative  June 21, 2001  I have a confession to make: I'm an N001. And as an N001 I can't help feeling a little guilty.  I feel guilty that I won't be called upon to share the pain of all those A001s in  Irvine and Laguna Woods, or the M003s in Costa Mesa and Cypress. While the M011s in Fountain  Valley suffer and sweat through rolling blackouts, I'll be sitting pretty.  Because I'm an N001. And the dirty little secret about rolling power blackouts is how many of us are out there.  Allow me to explain.  As you may have heard, Southern California Edison has been required to set up a public notification system for rolling blackouts. If you hear on the news that the power guys are expecting rolling blackouts, you can go to a Web site (www.sce.com ) or call a toll-free phone number (800-611-1911) to see if your "rotating outage group" is on the list for going temporarily dark.  How do you know which group you're in? On your Edison power bill, next to your account number, there's a code that starts with A or M - A001, A002, M001, M002 and so on. That's your outage group number.  But wait. There's another category of outage group. If your power bill has the code number N001 on it, it means that you're exempt from rolling blackouts.  You see, under Public Utilities Commission rules, electric power customers who provide "essential public health, safety and security services" - such as fire and police stations, hospitals, jails and so on - are automatically exempt from rolling blackouts, even if they have emergency generators on site. And because of the way electric power service is set up, anybody who's on the same circuit with an essential service provider is also exempt from rolling blackouts.  For example, my house shares a circuit with a fire station. So I'm an exempt N001, as are the other power customers on the same circuit.  But here's the kicker: According to an Edison spokesman, 50 percent of all Edison customers are N001s - that is, they share circuits with essential service providers, and thus are currently exempt from rolling blackouts.  Let me repeat that: Half of all Edison customers are exempt from rolling blackouts. (For San Diego Gas & Electric customers it's 40 percent.)  Mind you, this isn't something Edison likes to publicize. When I asked about it for a column three months ago, Edison said it didn't know how many power customers are automatically exempt. And when the company unveiled its blackout warning plan this week, neither the Edison press release nor news reports mentioned the 50 percent exemption figure.  True, even exempt power customers can be affected by rolling blackouts - at work, at the store, at a traffic light.  Still, the next time you hear some power company or government official say, "We're all in this together," don't believe it. When it comes to rolling blackouts, the truth is that only half of us are really all in this together.  And even an N001 can see that isn't fair.