An excerpt from a recent article:  
"Davis - who told reporters Monday that the state "is at war" with 
Houston-based generators - is expected to meet with representatives from a 
dozen energy companies Wednesday to discuss "unpaid debts, credit issues and 
the supply of power." Those generators include Mirant, Williams and Duke 
Energy. 
At the meeting Wednesday, Davis will attempt to get the generators to take a 
haircut on hundreds of millions of dollars of power bills owed by PG&E Corp. 
unit Pacific Gas & Electric and Edison International unit Southern California 
Edison. In exchange, a person close to Davis said, the governor may promise 
to veto the windfall profits tax bill if it reaches his desk." 


Generators Warn Of Blackouts If Calif OKs Windfall Tax Updated: Tuesday, May 
8, 2001 07:19 PM ET 
By Jason Leopold 
Of DOW JONES NEWSWIRES 
LOS ANGELES (Dow Jones)--Legislation to place a windfall profits tax on sales 
of electricity into California will deter investments in new generation and 
drive power out of the state, raising the risk of blackouts, wholesale-market 
power suppliers said Tuesday. 
"It would be totally counterproductive and prolong California's misery for 
years to come," said Gary Ackerman, executive director of the Western Power 
Trading Forum, an industry group. "New plants in California wouldn't get 
built, and existing plants would cease operating. There would be blackouts 
all day long" 
On Monday, the Senate passed, by a vote of 25-12, a bill to tax at 100% sales 
of electricity into California above $80 a megawatt-hour. A separate windfall 
profits tax bill with a three-tiered rate system is moving through the 
Assembly's committees and could come up for a vote in the full house later 
this week. Electricity priced at $60/MWh would be taxed at 50%, sales of 
power over $90/MWh would be taxed at 70% and electricity sales over $120/MWh 
would be taxed at 90%. 
Gov. Gray Davis has said he is "open" to the concept of windfall profits tax 
on electricity sold into California, but hasn't said whether he supports the 
bills moving through the Legislature. 
Generators said they would seriously consider scrapping plans to build 
much-needed new generation in California if the measure is signed into law. 
"We do have some concerns on how (the bill) would affect new generation," 
said Mirant Corp. spokesman Chuck Griffin, whose company is investing about 
$500 million in new power plants in Northern California. "We have said all 
along that before we are able to build this generation we need to make a good 
assessment of the business environment in the state, and the (windfall 
profits tax) is certainly a factor." 
Tim Thuston, managing director of government relations for Williams Cos., 
said a windfall profits tax is "confiscatory" and the state is trying to 
circumvent the Federal Energy Regulatory Commission. 
"I can tell you we think its a very poor idea," Thuston said. "I'm 
speculating, but I think any time a state starts seizing profits it would 
deter investment in that state." 
Duke Energy, a power supplier investing more than $600 million in new power 
plants in California, wouldn't comment on how the tax would affect its plans. 
Mirant - following Williams' lead - supports short-term regional price 
controls if they would bring stability to the state's wholesale power market, 
Griffin said. 
"We have expressed that we may be comfortable with some form of temporary 
price mitigation in order to get through this crisis," Griffin said. 
But the base prices for electricity written into the windfall-tax bills are 
much lower than generators' actual costs, Ackerman said. 
"Today's gas prices are much higher than that," he said. "Everybody would 
automatically sell out of state." 
Lawmakers Unmoved 
Lawmakers aren't overly concerned with negative implications if the measure 
becomes law. 
"If the price for rolling out the welcome for generators is 10 to 30 times 
more than Californians paid for power last year, then we ought to build our 
own plants," said state Sen. Debra Bowen, D-Redondo Beach, and chairwoman of 
the Senate energy committee. "The state's motto is 'Eureka,' not 'Welcome to 
California, please come gouge us.'" 
Paul Van Dyke, press secretary to state Sen. Nell Soto, D-Ontario, who is 
sponsoring the windfall profits tax bill in the Senate, said "there's no 
evidence that leaving things the way they are now will be better." 
"California has a limited policy chest, and federal energy regulators are not 
moving fast enough to solve the problems," Van Dyke said. "California needs 
to build up its tool chest. So at the end of the day, whether we solve this 
problem through windfall profits or a negotiated agreement with the 
generators, the bottom line is consumers cannot be gouged." 
Davis - who told reporters Monday that the state "is at war" with 
Houston-based generators - is expected to meet with representatives from a 
dozen energy companies Wednesday to discuss "unpaid debts, credit issues and 
the supply of power." Those generators include Mirant, Williams and Duke 
Energy. 
At the meeting Wednesday, Davis will attempt to get the generators to take a 
haircut on hundreds of millions of dollars of power bills owed by PG&E Corp. 
unit Southern California Edison. In exchange, a person close to Davis said, 
the governor may promise to veto the windfall profits tax bill if it reaches 
his desk. 
The governor's office wouldn't comment on the substance of the meeting 
Wednesday. 
Wall Street analysts said the measure could have severe effects on 
California's economy if it passes and will pressure generators' shares as the 
bills move through the Legislature. 
"We expect weakness in (generators) shares with California exposure," Dan 
Ford, an analyst with Lehman Brothers, said in a research note Tuesday. "A 
windfall profits tax bill will motivate generation developers to remove 
existing and new capital to other states and potentially destroy California's 
already softening economy." 
Ultimately, however, Ford expects the bill to be used as a bargaining chip 
rather than passed. 
The tax also raises regulatory questions, several lawmakers said. In essence, 
California is attempting to set wholesale power rates, which are governed by 
the Federal Energy Regulatory Commission. 
A FERC commissioner wouldn't comment directly on the issue, but told Dow 
Jones Newswires that the state has "no jurisdiction on wholesale power rates 
and does not have the legal authority to adjust rates set by FERC." 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com <mailto:jason.leopold@dowjones.com>