Please see the following articles:

Sac Bee, Tues, 7/24:  Transmission lines project draws bidders
Sac Bee, Tues, 7/24: Dan Walters: Blame game over California's energy crisis 
will continue for years  (Enron mentioned)
Sac Bee, Tues, 7/24: Initiative effort seeks to lower natural-gas prices
Sac Bee, Tues, 7/24: Daniel Weintraub: There's no shame in doing nothing for 
Edison  (Editorial)
SD Union, Mon, 7/23: State consultants don't see need for more rate hikes 
SD Union, Mon, 7/23: Senate committee told Morgan Stanley destroyed power 
records 
SD Union, Tues, 7/24: News briefs on the California power crisis
SD Union, Mon, 7/23: State sells surplus power at a loss 
LA Times, Tues, 7/24: Rush for Power Plant in Chino Raises Concerns
LA Times, Tues, 7/24: Surplus Power Sold at a Loss
LA Times, Tues, 7/24: Pacific Gas Gets 4-Month Extension on Filing Plan
SF Chron, Tues, 7/24: State sells surplus electricity at a loss 
BUY HIGH, SELL LOW: $14 million deficit 
SF Chron, Tues, 7/24: San Diego tries to undo the damage 
THE PLAN: Regional public power 
SF Chron, Tues, 7/24: 13 plans submitted to alleviate power transmission 
bottleneck 
SF Chron, Tues, 7/24: Developments in California's energy crisis 
Mercury News, Tues, 7/24: Figures show state lost big on extra power 
Mercury News, Tues, 7/24: Temperatures likely to rise all week 
Individual.com (AP), Tues, 7/24: Wholesale Competition Contributed to Trend 
of Lower Power Prices, According to New EPSA Study 
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Transmission lines project draws bidders
By Dale Kasler
Bee Staff Writer
(Published July 24, 2001) 
Aiming to ease one of the festering problems in California's energy crisis, 
13 companies and public agencies have bid for the right to widen a notorious 
bottleneck in the state's transmission lines, federal officials said Monday. 
The bidders range from the East Bay Municipal Utility District to wholesale 
power generators such as Mirant Corp., Calpine Corp. and Williams Cos. Some 
independent experts argue that if a generator wins the bid, it could use its 
control over those transmission lines to manipulate the electricity market. 
The bottleneck is Path 15, a narrow 90-mile stretch of power lines near Los 
Banos that carries electricity between Northern and Southern California. It 
has less transmission capacity than other portions of the power grid, which 
has led to blackouts. 
In January, Northern California suffered power outages in part because Path 
15 couldn't deliver the surplus electricity that was available in Southern 
California. The proposed expansion would add 1,500 megawatts of capacity. 
"It's a very big issue; there's been a lot of congestion," said Severin 
Borenstein of the University of California Energy Institute. 
In addition, the Independent System Operator, which manages the power grid, 
estimates the congestion generated by Path 15 added an estimated $221.7 
million to California's power bill in a 16-month period that ended in 
December. 
Borenstein said he believes there are considerable hidden costs as well, 
because the bottleneck has created an incentive for sellers to withhold 
power. Path 15 effectively cuts California into two separate markets, making 
it easier for sellers to manipulate each submarket to raise prices, he said. 
Pacific Gas and Electric Co., which owns the existing Path 15 transmission 
lines, already has been conducting environmental studies with an eye toward 
widening the path. To speed things along, the federal government in May asked 
for bids on the project, which sparked proposals from generators and others. 
Borenstein said having a generator widen Path 15 could bring new problems. 
Whoever builds the additional power lines owns them and can charge "tolls" to 
companies that use the lines to transmit electricity. A power generator could 
deliberately withhold supplies, thereby increasing the congestion on Path 15, 
and increase the tolls, Borenstein said. 
PG&E is among those bidding to widen the path. So is its sister company, an 
unregulated entity called PG&E National Energy Group. Other bidders include a 
partnership led by Sempra Energy Resources, an unregulated sister company of 
San Diego Gas & Electric Co. 
The federal government estimates it will take $300 million and three or four 
years to widen Path 15. The costs are ultimately paid by utility customers. 
U.S. Energy Secretary Spencer Abraham, speaking to reporters in Los Angeles 
on Monday, called the expansion of Path 15 "a critical component in solving 
the long-term power crisis in this state." 


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






Dan Walters: Blame game over California's energy crisis will continue for 
years


(Published July 24, 2001) 
The wrestling match between politicians and Enron Corp. moved into a more 
intense arena over the weekend when a state Senate investigating committee 
sought contempt penalties because the huge energy company has refused to turn 
over internal documents. 
Although Houston-based Enron owns no major power plants in California, it has 
adopted the toughest stance of all energy companies against the multiple 
investigations of why wholesale energy prices spiked so high. And it has 
become, in turn, a whipping boy for California politicians. 
At one point last spring, state Attorney General Bill Lockyer said he wanted 
criminal charges against Enron and its chairman, Kenneth Lay. "I would love 
to personally escort Lay to an 8-by-10 cell that he could share with a 
tattooed dude who says, 'Hi, my name is Spike, honey,' " Lockyer said. With 
less colorful language, Gov. Gray Davis has often castigated Texas-based 
companies as price gougers -- even though Texas firms have been fairly minor 
suppliers to California. 
Some of it is just buzzword politics. Lockyer and Davis know that 
Californians dislike anything associated with Texas, and Lay has been one of 
President Bush's major political supporters. Enron, meanwhile, cites the 
rhetoric as evidence that Lockyer, Davis and legislative investigators are 
interested less in finding the truth than in seeking scapegoats. Enron also 
filed a lawsuit challenging the legality of the Senate's subpoenas of trading 
data. 
Most other energy companies have complied with the demands, creating 
Sacramento repositories of the data under elaborate confidentiality 
agreements worked out with the special Senate committee headed by Sen. Joseph 
Dunn, D-Santa Ana. But Enron has refused, and on Saturday, Dunn submitted a 
report asking the Senate for "an appropriate coercive sanction." 
Does Enron have something to hide? Or does it sincerely believe that what's 
happening in California is political scapegoating? Are the companies' fears 
about the confidentiality of the data sought by the Senate justified? Would 
data be selectively leaked to show the firms in the worst light? Would data 
be used by competitors? Or could the information find its way into the hands 
of class-action attorneys? 
Dunn, a prominent trial attorney himself, insists that confidentiality will 
be protected and that the information being sought is only for legislative 
purposes. But Enron and the other companies have some reason to be wary of 
turning over confidential information to politicians. Similar information was 
leaked -- without penalty -- in last year's investigation of former state 
Insurance Commissioner Chuck Quackenbush. And there are indications that 
private lawyers are working closely with investigators. 
Mike Aguirre, the San Diego attorney seeking a "smoking gun" to prove 
collusion among energy companies, supplied Dunn's committee with a few 
dissident Duke Energy workers who alleged, in highly publicized hearings, 
that the firm had manipulated production at its San Diego plant to create 
artificial shortages and drive up spot market power prices. Duke then refuted 
the charges by releasing some excerpts from the records of the Independent 
System Operator, the controller of California's power grid, indicating that 
ISO had ordered the plant operational changes. 
Aguirre subsequently asked the governor's office to pressure the ISO -- now 
under Davis' direct control -- to release all of the Duke-related documents 
that would show, he says, that the firm actually manipulated the situation. 
Duke and other companies insist that the ISO-held documents are proprietary. 
Aguirre pleaded with one Davis adviser in an e-mail that "we need your help 
in properly getting this information out." But Aguirre, in an interview, said 
he had not yet obtained cooperation from Davis aides. 
The political and legal struggle to affix blame for California's energy woes 
will continue for months, perhaps years. The crisis will cost ratepayers at 
least $50 billion, and they'll want to know why as they make out their 
utility bill checks. 


The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com 
<mailto:dwalters@sacbee.com>.







Initiative effort seeks to lower natural-gas prices 
By Jim Miller
Bee Capitol Bureau
(Published July 24, 2001) 
Amid higher utility rates, the threat of rolling blackouts and legislative 
indecision on how to solve California's energy problems, there is one 
proposal to get voters involved. 
A ballot initiative to let cities, counties and other public agencies, such 
as municipal utilities and irrigation districts, buy and sell natural gas has 
been cleared for signature collection by the secretary of state's office. 
The initiative emerged from the office of Assemblyman Dennis Cardoza, 
D-Merced, whose district includes three electricity-supplying irrigation 
districts. 
To Cardoza and others, putting public agencies in the natural-gas business 
would result in lower gas and electricity prices for consumers because most 
generators run on natural gas. 
Cardoza's proposal is the first of what observers say could be several 
energy-related measures on future ballots. 
For months, consumer advocates have warned that they would use the initiative 
process if they feel lawmakers are saddling taxpayers with the costs of the 
state's botched energy deregulation. 
"As soon as we find out what the Legislature has done or has not done this 
fall, we'll react appropriately," said Jamie Court, executive director of the 
Foundation for Taxpayer and Consumer Rights, one of the groups considering an 
initiative. 
"If there's a bailout (of utilities), we'll go to the ballot box. If there 
isn't a bailout, it's not clear what we'll do," Court said. "Right now, we're 
fund raising to be able to have the capacity to do whatever needs to be 
done." 
The future of Cardoza's initiative is uncertain. 
Since its approval by the secretary of state's office May 29, there has been 
no effort to collect signatures or to raise money for a campaign. The 
initiative needs the signatures of 670,816 registered voters by Oct. 26 to 
qualify for the ballot. 
The electric industry strongly opposes the Cardoza initiative. 
"This came about during the winter because it looked like there was going to 
be a natural-gas shortage," said Stephanie Espinosa, a spokeswoman for 
Pacific Gas and Electric Co. "Since then, we've been able to provide 
sufficient natural gas to our customers." 
A recent poll, however, showed Californians may be in the mood to approve 
energy-related ballot measures. The Public Policy Institute of California 
poll found that 65 percent of all adults believe measures on the 2002 ballot 
are the best way to solve the energy crisis. Thirty percent said the 
Legislature and Gov. Gray Davis would provide the best solution. 


The Modesto Bee's Jim Miller can be reached at (916) 326-5544 or 
jmiller@modbee.com <mailto:jmiller@modbee.com>.







Daniel Weintraub: There's no shame in doing nothing for Edison


(Published July 24, 2001) 

To understand why state lawmakers are inching closer to handing over billions 
of dollars of consumers' money to California's second-largest utility, you 
need to appreciate the collective psyche of the Legislature. Not appreciate 
as in enjoy. But appreciate in a scientific way, in the manner of an 
anthropologist studying the mores of a foreign culture. 
Confronted with a big problem, legislators think they need to solve it. Doing 
nothing is not a comfortable option. It makes them feel ineffective and 
impotent. When the governor is demanding a bill, the pressure grows even more 
intense. They want to do something -- anything -- rather than having to go 
back to their districts and admit that the problem is not theirs to fix. 
In this case, though, doing nothing might be the wisest course. 
Lawmakers now have on their desks three bills that take various approaches to 
rescuing Southern California Edison from the brink of bankruptcy. The company 
has a $3.5 billion debt left over from the state's failed experiment in 
electricity deregulation. If something isn't done about it in the next few 
weeks, the utility's future is likely to wind up in the hands of a judge. 
But all three bills ignore a fundamental fact: Edison got itself into this 
mess. Maybe the utility should get itself out. 
Edison was a big cheerleader for the 1996 bill that restructured the way 
electricity was bought and sold in California. Supporting a freeze on retail 
rates, which was the centerpiece of that legislation, the company took a huge 
gamble. If wholesale prices remained low, Edison would rake in billions by 
capturing the difference between the price it paid for power and the much 
higher price it was allowed to charge its customers. The money would go to 
compensate the utility for power plants it built as a regulated monopoly, 
plants that might no longer be profitable in a free-market, competitive 
industry. 
Like all gambles, this one came with a risk. If wholesale prices rose, they 
might exceed the retail rate cap. Edison would be forced to sell its 
electricity at retail for less than it was paying in the wholesale market. 
The tide of dollars that flowed in so nicely would begin to flow back out 
again. 
And that's exactly what happened. Some of the world's smartest utility minds 
guessed wrong. An electricity surplus turned into a shortage. Wholesale 
prices soared. Things got so bad at Edison that the state stepped in to buy 
power on the company's behalf. 
But before things got ugly, Edison enjoyed two flush years of artificially 
high rates. During 1998 and 1999, the company pocketed billions from its 
customers, paid down debt and sent money to its parent firm, Edison 
International. 
Now Edison wants to divide the question. The money that flowed in, Edison 
says, the company should get to keep. And the money that flowed out -- well, 
that should be someone else's responsibility. The utility is asking the 
Legislature to ignore the first two years of hefty profits and reimburse the 
company for the one year of big losses. 
Gov. Gray Davis negotiated his version of the Edison bailout several months 
ago, but that deal was seen as so rich for the company that it went nowhere 
in the Legislature. The Senate approved its version last week, a bill that 
would reduce the payout to Edison by $1 billion and then stick business with 
the remaining tab. The Assembly, meanwhile, is considering two other 
measures, both of which would spread the pain between business and 
residential consumers. 
"This is corporate welfare at its worst," state Sen. Bill Morrow, 
R-Oceanside, said of the Senate bill. "This is not even a bailout. It's a 
corporate handout." 
Edison and the state's other big utility, Pacific Gas & Electric, which is 
already in bankruptcy, say they are entitled to the money because they never 
should have been put in the position of charging less for electricity than 
they were paying to obtain it. That's a legal argument that belongs before a 
judge. There is a good chance the court would want to balance the profits the 
utilities made under deregulation with the losses they incurred. Under that 
scenario, they wouldn't need a bailout. 
But even if the utilities were to win their case, consumers probably would 
fare no worse than they would under the various legislative proposals under 
consideration. 
Sen. Steve Peace, D-San Diego, who helped craft the 1996 bill that 
restructured the industry and who now supports the Edison bailout, lectured 
his fellow senators on the floor the other day about the need to take a risk. 
"We can do nothing and be safe," Peace said. "Or we can do something, and do 
our job." 
Everyone is weary of the state's energy crisis. It is human nature to want to 
get it behind us, to sweep it away, even at great cost. But lawmakers 
shouldn't feel it's their job to "do something" -- especially when that thing 
carries a multibillion-dollar price tag for consumers. 
This time, doing nothing means standing up for ratepayers. What's the shame 
in that? 


The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at 
dweintraub@sacbee.com <mailto:dweintraub@sacbee.com>.








State consultants don't see need for more rate hikes  


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Outlook brightens; price cut may be possible by 2003 By Ed Mendel  
UNION-TRIBUNE STAFF WRITER  July 23, 2001  SACRAMENTO -- State consultants, 
releasing a new estimate of power costs with an improved outlook, said 
yesterday they do not believe an additional rate increase will be needed -- 
and a rate cut may be possible by 2003.  The state issued a long-awaited 
"revenue requirement" asking for a little more than half of the revenue from 
a record rate increase imposed by the state Public Utilities Commission 
earlier this year.  The state power-purchasing agency, the Department of 
Water Resources, wants 1.65 cents of an increase of 3 cents per kilowatt-hour 
that began last month for customers of Pacific Gas and Electric and Southern 
California Edison. 
The PUC is not expected to rule on the state's revenue request until the 
middle of next month, when the regulators also are scheduled to approve an 
increase for the customers of San Diego Gas & Electric.  PG&E and Edison did 
not immediately say whether the state's proposal would leave enough money for 
the utilities. But as if expecting criticism, the state consultants said 
utilities often ask for larger rate increases than they are granted.  An 
adviser to Gov. Gray Davis said the administration was "mocked" by critics 
when it forecast in April that the average cost of power would drop during 
the summer, even though heat would drive up the demand for power.  "Quote: 
'They just don't know what they are doing,' " consultant S. David Freeman 
recalled the critics saying. "Well, we did know what we were doing. Quite 
frankly, I think this is a good-news story of major proportions."  The widely 
derided forecast issued in April said the average cost of power that must be 
purchased on the expensive spot market would drop from $346 per megawatt-hour 
in April through June to $195 in July through September.  Now the "reasonably 
conservative" estimate is that the average price of power in July through 
September will be $129 to $130 per megawatt-hour, said Ron Nichols of 
Navigant Consulting.  Nichols attributed the price drop to a number of 
factors: long-term contracts, cooler weather, cheaper natural gas used by 
generators, more small and large generators back online and floating federal 
price caps.  The state began buying power for utility customers Jan. 17 after 
PG&E and Edison, whose rates were frozen by deregulation as wholesale power 
costs soared, ran up massive debts and were no longer able to borrow.  The 
consultants estimated that the state will have spent $13 billion on power by 
the end of next year. But they also predicted that the state power-purchasing 
fund would develop a substantial surplus by then.  "That would allow for a 
rate decrease in 2003, based on our current projections," said Joseph Fichera 
of Saber Partners.  The new revenue requirement issued by the state yesterday 
is needed for a series of actions planned by the PUC next month to pay for a 
record bond issue to repay the taxpayer-supported state general fund for 
power purchases.  Fichera said that, despite reports to the contrary, the 
recommendation is for a $12.5 billion bond -- leaving a cushion in the 
authorization of $13.4 billion. The bond will be paid off by ratepayers over 
15 years.  The consultants said their projection of state power costs is 
cautious. They assume consumer conservation will drop from 7 percent to 6 
percent, though it actually has been 11 percent and 12 percent in recent 
months.  The projections are intended to leave some ability to absorb 
unforeseen costs, such as scorching temperatures later this summer or next 
summer, or a spike in natural gas prices as happened last winter.  The cost 
projections do not include any overcharge refund from generators. Davis has 
asked federal regulators for an $8.9 billion refund and has vowed to seek 
full recovery in the courts.  The governor wants to get the state out of the 
power-buying business by the end of next year. But that requires legislative 
approval of a rescue plan for Edison that could become a model for getting 
PG&E out of bankruptcy.  The Senate, which left for a monthlong recess after 
approving a state budget early yesterday, approved an Edison rescue plan that 
the utility says is too weak to restore its ability to borrow.  The Assembly 
is struggling with two competing Edison rescue plans. Talks may continue 
during the recess in an attempt to reach an agreement before the Aug. 15 
deadline set by Davis to reach a deal to keep Edison out of bankruptcy.  The 
consultants say there is enough room in the existing rates to give the two 
utilities a revenue stream for bonds to pay off their debts -- 0.4 cent per 
kilowatt-hour for Edison and 0.7 cent for PG&E.  Fichera said he disagrees 
with speculation that falling power prices and the rate increase might give 
Edison enough revenue to avoid bankruptcy without a legislative rescue plan.  
To pay off Edison's $3.5 billion debt, he said, $2 billion would come from 
the bond, but $1.5 billion would have to come from the sale of Edison's 
transmission system to the state under the governor's plan. 







Senate committee told Morgan Stanley destroyed power records  


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ASSOCIATED PRESS  July 23, 2001  SACRAMENTO ) Morgan Stanley, a multibillion 
dollar financial firm and adviser to several power generators, destroyed 
documents that potentially could show efforts to gouge California consumers ) 
and a state Senate committee wants to know why.  The company recently also 
has come under the scrutiny of an Oregon lawmaker who is concerned the 
company's purchase of the rights to move power between California and Oregon 
could result in artificially high prices.  For several weeks, Morgan Stanley 
had told the committee it would provide the documents, but said last week 
they had been destroyed as a matter of routine "years ago," said Sen. Joe 
Dunn, D-Santa Ana, the committee's chairman.  Members of the committee are 
trying to determine whether power companies worked together to raise prices 
by purposefully holding back electricity to drive up demand.  Morgan 
Stanley's involvement would have been several years ago, when it advised 
out-of-state energy companies to buy California power plants up for sale.  A 
Morgan Stanley attorney told the Orange County Register that the company did 
not destroy any documents after Dunn's committee requested the documents May 
16.  "At the end of the project, they decided what they were going to keep 
and what they weren't going to keep, and those decisions were made years 
before the energy crisis and years before the committee existed," said Paul 
Patono, a company attorney.  Dunn noted it is not illegal to raise prices as 
long as a company doesn't collude to force prices upward.  Private utilities 
became able to sell their plants as part of the 1996 plan to deregulate the 
electricity market. Although the plants were expected to sell below their 
book value, they instead sold for up to three times that price, although the 
state then had an oversupply of electricity and old plants.  While the public 
was told deregulation would lead to lower electricity prices, energy 
officials and experts testifying before the committee have said it's unlikely 
investors would buy aging power plants if they believed that to be true.  
Dunn is curious if there was any kind of plan or advertising that said the 
plants, if bought a certain way, would give of the buyers market power in the 
wholesale electricity market.  The committee is still moving forward with 
contempt proceedings against Houston-based power marketers Enron Corp. and 
Reliant Energy for refusing to hand over documents to committee 
investigators.  New York-based Morgan Stanley, now Morgan Stanley Dean Witter 
& Co., got into the energy trading in 1984 and now is one of the top 20 U.S. 
power marketers.  The company also has come under the scope of Rep. Peter 
DeFazio, D-Ore. Morgan Stanley bought the rights to transmit just under a 
third of the power flowing between California and Oregon from the Bonneville 
Power Administration through February 2002.  DeFazio has written a letter to 
the BPA, asking that the agency make sure the Northwest keeps its "reliable, 
affordable" energy source.  "The ability of a financial services company, 
which has no obligation to serve electricity consumers, to lock up all 
available capacity for a year raises serious concerns," DeFazio wrote.  A 
company spokeswoman said Morgan Stanley acquired the transmission capacity 
from BPA to meet its power delivery obligations in the Northwest, and had no 
intention of manipulating the market. 








News briefs on the California power crisis  


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ASSOCIATED PRESS  July 24, 2001  IRVINE ) Future Olympic swimmers in Southern 
California may no longer have a training facility if the state's power crisis 
continues.  Utility bills have jumped significantly over the past couple of 
months and aquatic centers across Southern California have felt the pinch.  
At Heritage Park in Irvine, home to gold medalist Amanda Beard and silver 
medalist Aaron Peirsol, the monthly energy bill has doubled from $7,000 to 
between $13,000 and $15,000.  Officials at the Rose Bowl Aquatics Center in 
Pasadena have raised membership fees 10 percent to offset electricity costs 
that have more than doubled.  The Industry Hills Aquatics Complex in Industry 
may close its doors on Sept. 9, in part because of the rate increases.  
Gas-powered heaters and electric motors run 24 hours a day at most swimming 
centers to keep water temperatures warm. Some swim coaches said a temperature 
drop in the pool can hamper an athlete's training regiment and possibly raise 
health concerns.  Swimming facilities run on a tight budget, say coaches, and 
the soaring energy costs have eaten away any profit margins the training 
programs once had.  The Industry Hills facility has even used trash and 
methane gas from the landfill it sits on to heat the pool. But the complex 
lost about $85,000 last year and operators expect natural gas costs will 
double this winter. The property management company, which owns the land, has 
given a Sept. 9 deadline to reduce operating costs or close the swimming 
center.  ))  CHINO ) The largest of 11 power plants that are supposed to be 
built by Sept. 30 under the governor's emergency fast-track program appears 
to be running behind schedule.  The concrete foundation hasn't been poured at 
the $125-million natural gas facility, which sits near the California 
Institution for Men in Chino. The plant, being built by Delta Power Co. of 
New Jersey, would supply about 135,000 homes with electricity.  
Environmentalists warn that the plant will produce smog five times more than 
the legal limit and want state air quality officials, who will conduct a 
hearing Tuesday, to deny a final operating permit to Delta Power.  Delta 
officials said they hope to meet the Sept. 30 deadline despite the objections 
by environmentalists and residents who live near the proposed plant. They 
also pledged to install equipment by November that would reduce nitrogen 
oxide compounds, which contribute to smog.  If Delta and other energy 
companies finish their power plants by the end of September, they receive 
incentives such as eliminating environmental analyses and the ability to emit 
pollutants for months at levels exceeding state standards. 







State sells surplus power at a loss  


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ASSOCIATED PRESS  July 23, 2001  LOS ANGELES ) State officials sold excess 
electricity at a loss of nearly $14 million in the first 16 days of July ) 
roughly 4.5 percent of the total amount the state spent on power during that 
period.  According to the Department of Water Resources, the state purchased 
3.5 million megawatt-hours at an average price of $118 per megawatt-hour. It 
sold off 177,000 surplus megawatt-hours at an average price of $36.95 per 
megawatt-hour.  Industry officials told the Los Angeles Times it is routine 
for utilities and electric companies to at times either sell power at a loss, 
work out an exchange or give it away when they find themselves with surplus 
power. However, some say this is an indication that the state government does 
not belong in the power business.  The sales of surplus power "get to the 
issue of, do these people really know what they're doing? Are they really 
competent to be managing this to the lowest cost for the ratepayers?" said 
Assemblyman John Campbell, R-Irvine. "It reinforces to me that we should get 
the state out of doing this as soon as practically possible."  Department of 
Water Resources Director Thomas Hannigan disclosed the details in response to 
an inquiry by Campbell.  Assemblyman Roderick Wright, D-Los Angeles, said he 
did not see a problem with DWR's power sales.  "Right now the summer is 
cool," said Wright, who is also chairman of the Assembly utilities committee. 
"If this had been a normal July, we would have used all that power."  
Department of Water Resources officials expect the sales to stop if 
temperatures heat up later this week.  Department spokesman Oscar Hidalgo 
said the sales show that the water department has stabilized the state's 
electricity market. The average price the department has paid for a 
megawatt-hour is falling, from $271 in May to $119 in June to $89 so far in 
July.  Since January, the state has spent more than $8 billion buying 
electricity for the customers of three financially ailing utilities ) Pacific 
Gas and Electric Co., Southern California Edison Co. and San Diego Gas and 
Electric Co.  The state had to take over buying electricity to keep the 
state's lights on after federal energy regulators ruled that only 
creditworthy entities could buy electricity. 







CHINO
Rush for Power Plant in Chino Raises Concerns
Energy: The facility may exceed pollution limits if it begins operations by 
Sept. 30. Opponents say that would endanger public health.
By TERENCE MONMANEY
TIMES STAFF WRITER

July 24 2001

CHINO -- Seldom are government bureaucrats criticized for moving too quickly, 
but so goes the battle here over a power plant slated for the sun-blasted 
grounds of a men's prison.

The proposed plant--big enough to supply 135,000 homes--is one of five in 
California that have been licensed to start up despite exceeding pollution 
standards as part of Gov. Gray Davis' rush to bring more power online.

The program, covering small to mid-size facilities that run during hours of 
peak demand, slashes licensing review from a year to three weeks, eliminates 
comprehensive environmental analyses, and authorizes plants to emit 
pollutants for months at levels exceeding state and federal air quality laws. 
The catch is that the plants must operate by Sept. 30 or those rare and 
lucrative incentives could be withdrawn--a possibility confronting developers 
of the Chino plant, which a growing number of environmentalists opposes.

So far, with only 69 days left until the deadline, workers haven't poured a 
drop of concrete foundation for the $125-million natural gas-burning 
facility, developed by Delta Power Co. of New Jersey. The site is on the 
outskirts of the California Institution for Men.

The proposed plant, the largest of 11 so-called peakers given expedited 
approval, is galvanizing opposition to the governor's emergency fast-track 
program. Environmentalists decry the fact that until the plant installs 
devices to reduce nitrogen oxide compounds, which contribute to smog, the 
level of the pollutant will reach five times the legal limit.

Five groups, including the Natural Resources Defense Council and the Planning 
and Conservation League, have joined in petitioning state air quality 
officials to deny the plant a final operating permit. They contend that 
excess nitrogen oxides will endanger public health and that the fast-track 
process jeopardizes decades of gains against smog.

"We're not necessarily opposed to a power plant on the site," said Gail 
Ruderman Feuer, an attorney in the Los Angeles office of the Natural 
Resources Defense Council. "We're just opposed to one without environmental 
review and without all the pollution controls."

Critics also are wary of the fast-track process because the state has a 
vested interest in making sure the plants are built quickly. The Davis 
administration has promised to spend billions buying electricity from plants 
that aren't built yet.

"It's a massive subterfuge," said Sandra Spelliscy, an attorney with the 
Planning and Conservation League in Sacramento.

Jay Roland, manager of the Chino facility for Pegasus Power Partners, a 
subsidiary of Delta, said the extra nitrogen oxides released from the plant 
for a month or so are "not going to cause damage to anybody."

Roland said he is so frustrated by the "interveners," he sometimes wishes the 
whole state would go dark, to underscore the power shortage that the plant is 
intended to address.

Though opponents have made a tough job even tougher, he said he hoped to make 
the end-of-summer deadline. Missing it could mean applying to the state all 
over again under the old rules, he said. "Then I sit here nine months with 
$120 million in equipment that's not generating any revenue."

State officials said it was necessary to approve the extra-polluting plants 
because of the need to avoid blackouts and because there is a backlog of 
emissions-control equipment. Besides, they said, state-of-the-art gas-burning 
plants emit fewer pollutants without controls than do many older plants with 
them.

Kevin Kennedy, a California Energy Commission official who reviewed the Chino 
project, acknowledged that public involvement in the process has suffered 
somewhat. "It's been difficult to get the word out . . . to make sure people 
in the communities have enough information to know what's going on."

Site Seems Ideal for Power Plant

In many respects, the 11-acre Chino site looks right for a power plant. It 
rests on flat surplus land at the northern boundary of the state's largest 
prison property, where grasslands cover hundreds of acres.

Half a mile away is a booming warehouse district and a Southern California 
Edison substation, which would relay the new power to the transmission grid.

Moreover, Pegasus runs a small power plant on the prison property across a 
narrow utility road from the site. Supplying steam and a few megawatts to the 
penal institution, the company sells the bulk of its 27 megawatt output to 
Edison.

Delta's president, Dean Vanech, bristles at charges that his company doesn't 
care about the environment.

He said equipment to reduce nitrogen oxide compounds won't be available until 
around November, at which time engineers will work "as quickly as humanly 
possible" to install it. Other air pollutants, such as carbon monoxide and 
microscopic dust particles, will be controlled from the beginning.

Also, though energy officials reviewed the proposal in a matter of weeks, 
they closely scrutinized the company's nine-part application, which took two 
months and $1 million to assemble, plant officials say.

The company moved the plant's site after biologists discovered two protected 
bird species nesting nearby--burrowing owls and red-tailed hawks. That 
required engineers to redesign gas, water and transmission lines and tinker 
with the plant structure, Roland said.

Owlets in a nest by a proposed transmission tower still pose an obstacle. "We 
have to wait for the babies to leave," construction manager Robert Surette 
said.

Key decisions over the plant's future lie with the South Coast Air Quality 
Management District, the air pollution agency, which said in May it would 
give the Chino plant a construction permit.

But after environmental groups petitioned in late June, the agency asked 
Pegasus for more data describing the possible impact of elevated levels of 
nitrogen oxides on people in the plant's vicinity.

"We're still in the evaluation phase, and we're not going to prejudge this 
project," said district executive director Barry Wallerstein.

He said the plant emissions were probably negligible compared with those from 
the parade of diesel trucks in the nearby warehouse district. Those "could be 
a larger health hazard to the community than this particular power plant," he 
said.

Public Hearing to Be Held Today

The air quality agency has scheduled a public hearing today at its Diamond 
Bar office to weigh issuing the plant a waiver needed to exceed state air 
quality standards. The U.S. Environmental Protection Agency has indicated it 
will not prosecute the Pegasus plant for temporarily emitting more nitrogen 
oxides than the federal Clean Air Act permits.

Vanech of Delta said the company would want to build the plant even if it had 
not received expedited approval: "The reason we're doing the project is that 
we have a favorable long-term view of the California energy market.'

Delta operates 13 power plants nationwide, five of them in California on 
state-controlled property.

The Chino plant promises to benefit this diverse, mostly blue-collar city of 
66,000. Although the developer is leasing the property from the state, Delta 
agreed to pay the city $500,000 up front, plus $75,000 annually and millions 
more over the years in water and natural gas fees.

Vanech said the half-million-dollar "host fee" was compensation to City Hall 
for its swift handling of the project's mountainous paperwork and for the 
wear and tear that construction crews will cause on city roads.

In the neighborhood closest to the plant, where large new houses rest on 
half-acre lots fronted by bridle paths, residents seemed divided.

Jim Tippings, 59, who is retired, said he didn't have a problem with the 
plant running a month or so without full nitrogen oxide controls: "I don't 
think a month is going to hurt us." Rising utility bills are what really 
hurt, he said.

Up the street, 35-year-old Kent Hobbenslefken was not aware that a power 
plant was going up a mile away. A former hazardous waste manager who sells 
health insurance, he was skeptical of the need to run the generators without 
full pollution controls, just to meet a bureaucratic deadline.

"What's a couple of months delay?" he said. "We're already in the crisis. 
What's it going to do for John Q. Public? Are our rates going to go down? I 
don't think so."

MORE INSIDE

Power glut: An excess forces sale of power at a $14-million loss. B8

Getting soaked: High utility costs threaten swimming programs. D1 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







Surplus Power Sold at a Loss
Electricity: Cool summer and effective conservation efforts result in excess 
supplies. Industry officials say it's a routine move.
By NANCY VOGEL
TIMES STAFF WRITER

July 24 2001

SACRAMENTO -- Caught with an excess of electricity as a result of cool 
weather and heavy conservation, the state government sold power at a loss 
approaching $14 million in the first 16 days of July.

The loss amounts to roughly 3.5% of the total amount the state spent on power 
during that period.

To keep power flowing to 27 million Californians, the state purchased 3.5 
million megawatt-hours at an average price of $118 per megawatt-hour, 
according to the state Department of Water Resources. It sold off 177,000 
surplus megawatt-hours at an average price of $36.95 per megawatt-hour. 
Department of Water Resources Director Thomas Hannigan disclosed the details 
in response to an inquiry by Assemblyman John Campbell (R-Irvine).

The sales of surplus power "get to the issue of, do these people really know 
what they're doing? Are they really competent to be managing this to the 
lowest cost for the ratepayers?" Campbell said. "It reinforces to me that we 
should get the state out of doing this as soon as practically possible."

Industry officials, however, say it is routine for utilities and electricity 
companies to at times find themselves with more electricity than their 
customers need. They either sell the power at a loss, work out an exchange of 
power or give it away.

"It's not all that uncommon for utilities to be buying one day and selling 
the next," said one Pacific Northwest trader who asked not to be identified 
because his company does not permit him to talk to reporters. He said a rule 
of thumb in the industry is to match supply to demand within 1% to 2%, 
although "5% on a load like California isn't that much."

Assemblyman Roderick Wright (D-Los Angeles), chairman of the Assembly 
utilities committee, said he did not see a problem with DWR's power sales.

"Right now the summer is cool," he said. "If this had been a normal July, we 
would have used all that power."

"The worm could have turned the other way."

Department of Water Resources spokesman Oscar Hidalgo said the state's crew 
of 15 power purchasers found themselves selling a "very minimal" amount of 
electricity in May. In June, more power was sold, but less than was sold in 
July, he said. The department has not released those figures.

Department officials expect the sales to stop if temperatures heat up later 
this week.

The water department was thrust into the role of buying 30% to 50% of the 
state's overall electricity in January after the state's major utilities 
became so financially crippled by high wholesale electricity prices that 
energy companies refused to sell to them.

The department has so far spent roughly $8 billion of taxpayer money 
purchasing power that is sent to the customers of Pacific Gas & Electric, 
Southern California Edison and San Diego Gas & Electric.

Hidalgo said the sales show that the water department has stabilized the 
state's electricity market. The average price the department has paid for a 
megawatt-hour is falling, from $271 in May to $119 in June to $89 so far in 
July.

"If we were out scrambling for power right now," Hidalgo said, "the market 
would reflect that and adjust to it, and we would most likely be paying much 
more in overall purchases."

Campbell said he assumes the department sold its most expensive, marginal 
megawatts of power. But Hidalgo said that is not necessarily so. The 
department does not track what it paid for the power it sells, he said.

The department's statement to Campbell shows sales to 25 different companies, 
including the federal Bonneville Power Administration, the Los Angeles 
Department of Water and Power, and several private energy companies that 
bought power plants from California's utilities under the state's 1996 
deregulation scheme. Those firms include Dynegy Corp., Reliant Energy, Mirant 
Corp. and Duke Energy. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







Pacific Gas Gets 4-Month Extension on Filing Plan
Bloomberg News

July 24 2001

PG&E Corp.'s Pacific Gas & Electric, California's largest utility, won a 
four-month extension to file a Chapter 11 recovery plan free from 
interference from creditors and other groups.

The utility's sole right to file a plan was extended from Aug. 6 to Dec. 6. 
Creditors, shareholders and others with a stake in the case could have 
presented their own plans had the extension not been granted.

Companies reorganizing under Chapter 11 have the sole right to advance a 
recovery plan in the first 120 days after filing for bankruptcy. Courts 
routinely extend this period in large and complex cases. A committee 
representing unsecured creditors in court papers said it "firmly believes 
that all parties in interest should move quickly and provide assurance that 
any filed plan will pay creditors in full and remedy PG&E's various issues 
and problems."

PG&E Corp. shares fell 75 cents to close at to $14.25 on the New York Stock 
Exchange. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 








State sells surplus electricity at a loss 
BUY HIGH, SELL LOW: $14 million deficit 
Paul Feist, Lynda Gledhill, Chronicle Staff Writers 
<mailto:lgledhill@sfchronicle.com>
Tuesday, July 24, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/24/MN217124.DTL>
California has lost $14 million during the past three weeks selling surplus 
electricity back to power generators as mild temperatures and energy 
conservation slackened demand statewide. 
The state, which has spent more than $8 billion purchasing power on behalf of 
financially troubled utilities, became an electricity seller this month, 
racking up losses and triggering criticism from Republican lawmakers and 
consumer groups. 
State Department of Water Resources Director Thomas M. Hannigan said in a 
letter that since July 1, the state had sold 177,571 megawatt hours at a rate 
of $36.95 each. California paid just over $118 a megawatt hour for the 
electricity, Hannigan said in the letter to Assemblyman John Campbell, R- 
Irvine. 
Some of the exports to 25 buyers went to out-of-state power providers such as 
Atlanta-based Mirant and Texas-based Reliant Energy, which a state Senate 
committee has found in contempt for not complying with subpoenas for 
documents as part of its investigation into alleged price manipulation. 
Excess electricity also went to public power agencies such as the Los Angeles 
Department of Water and Power and even abroad to Powerex, the trading arm of 
BC Hydro. The giant Canadian power firm has started issuing rebates to its 
customers, citing "strong exports" to California and elsewhere earlier this 
year. 
"To me this reinforces the idea that the state should get out of the power 
buying business as soon as practically possible," Campbell said. 
TAXPAYERS GET STUCK
When Pacific Gas & Electric Co. or Southern California Edison makes a similar 
mistake, he said, shareholders pay for it. But when the Department of Water 
Resources is to blame, taxpayers are left holding the bag. 
A spokesman for Gov. Gray Davis defended the losses, calling them minuscule 
in the bigger context of the state's power-purchasing strategy. 
"This is all an inexact science," said Davis spokesman Steve Maviglio. "This 
has been a handful of days over seven months, and the amount is minuscule. If 
the choice is keeping the lights on or having rolling blackouts, it's a small 
risk to take." 
Because power can't be stored, all power trading operations are occasionally 
forced to sell excess electricity, Maviglio said. He said that people would 
have laughed in January had the administration predicted that the state would 
have more than enough power this summer. 
Mild weather and a strong conservation effort by Californians have led to 
days when the state hasn't needed all the power it has on hand. 
SHARP DROP IN DEMAND
In recent days, the peak load on California's grid has been around 33,000 
megawatts -- far below the 40,000-plus megawatt demand that can come on a hot 
summer day. 
"When we bought power at these prices, who would have thought that it was 
going to be the coolest July in 20 years?" said Assemblyman Rod Wright, D-Los 
Angeles. "The problem becomes when you second-guess things." 
The state Department of Water Resources has negotiated about $43 billion 
worth of electricity contracts spanning 15 to 20 years. The contracts were 
made public after media organizations, including The Chronicle, and GOP 
lawmakers sued the Davis administration. 
Consumer groups yesterday criticized the losses, calling them an inevitable 
byproduct of the state's entry into the power-buying business. 
"It's one of the costs of secrecy. You've got an agency that is totally 
unaccountable to the public," said Doug Heller, a consumer advocate with the 
Foundation for Taxpayer and Consumer Rights. "They haven't done a great job 
of serving the public's needs for energy procurement." 
Assemblywoman Carole Migden, D-San Francisco, said Campbell and other critics 
were not being fair to the Davis administration. 
"You can't say at one time get the energy situation under control, but then 
question every line item a month out," she said. 
E-mail the reporters at pfeist@sfchronicle.com 
<mailto:pfeist@sfchronicle.com> and lgledhill@sfchronicle.com 
<mailto:lgledhill@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 







San Diego tries to undo the damage 
THE PLAN: Regional public power 
David Lazarus, Chronicle Staff Writer <mailto:dlazarus@sfchronicle.com>
Tuesday, July 24, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/24/MN190387.DTL>
San Diego -- This city, which was first to bear the brunt of the state's 
energy crisis a year ago as electricity bills tripled, is now aiming to be 
first with a long- term solution: regional public power. 
A bill is making its way through the Legislature -- and being fought at every 
turn by the power industry -- to make San Diego County one of the largest 
municipal utility districts in the nation. 
If the measure fails, San Diego officials intend to refashion the local water 
authority as an alternative utility hub that would construct efficient new 
plants and steal business away from costlier, decades-old facilities owned by 
out-of-state generators. 
Some consumer advocates believe that San Diego's efforts could serve as a 
model for large-scale public power systems in Northern California. 
"If we can pull this off, we can bring down prices and show the way to energy 
independence," said Rep. Bob Filner, D-San Diego. "If we don't change the 
rules, we're going to be back where we were." 
It won't be easy, though. Even if San Diego can overcome vigorous opposition 
from power companies, its public-power scheme still could run afoul of Gov. 
Gray Davis, who is counting on statewide revenue to finance next month's 
municipal bond offering, the largest in U.S. history. Going its own way as a 
municipal utility district would mean San Diego could avoid purchasing 
electricity from the state Department of Water Resources, thus reducing the 
flow of cash into California's coffers. 
Steve Maviglio, a spokesman for the governor, said Davis would not take a 
position on San Diego's public-power bill until it cleared the Legislature. 
"But the governor would obviously look extremely carefully at anything that 
would affect revenue to pay off the bonds," he said. 
Twelve months after California's energy crisis first erupted in San Diego, 
leading to statewide blackouts and financial catastrophe for utilities, 
residents of this city, to a large extent, have tried to put last summer's 
difficulties behind them. 
San Diego Gas & Electric Co., owned by Sempra Energy, had been the first of 
California's three investor-owned utilities to pay off outstanding debts and 
thus qualify for a lifting of the rate freeze that accompanied deregulation 
of the state's power market. 
Unfortunately for San Diegans, wholesale electricity prices suddenly 
skyrocketed, and San Diego Gas & Electric was free to pass along its rising 
costs directly to consumers. 
Customers of Pacific Gas and Electric Co. and Southern California Edison were 
still protected by the rate freeze and thus saw no changes in their power 
bills -- although the two utilities, in turn, were forced to absorb about $14 
billion in unrecovered expenses. 
San Diego power rates subsequently were limited by state regulators to 
restore stability to the local market -- but not before many residential and 
business customers saw their monthly bills go through the roof. 
"I'm still paying almost double what I was paying before," said George 
Aguilar, owner of a downtown jewelry store. "We should talk to lawyers and 
sue the people in the government responsible for this. It was pure 
negligence." 
WELL-INFORMED POLITICIANS
In fact, San Diego's political leaders are now among the best informed in the 
nation about energy issues and the volatility of electricity markets. 
When power bills spiked last year, outraged consumers demanded that their 
representatives take steps to remedy the situation. Democrats and Republicans 
alike took a crash course in the frequently arcane minutiae of the energy 
business. 
"We didn't create this problem. We didn't make any mistakes," said San Diego 
Supervisor Dianne Jacob, who has been among the most aggressive local 
politicians in responding to the energy mess and is a leading proponent of 
the county's public-power plan. 
"But one way or another, we're going to have to pay for it," she said. "This 
was a very bad experiment." 
Her solution is to establish a vast municipal utility that essentially would 
take over the entire service area of San Diego Gas & Electric, which provides 
power to 1.2 million customers. 
PLANS FOR NEW POWER PLANTS
The county-run utility would build its own power plants and renewable- energy 
resources and would transmit electricity to customers over existing San Diego 
Gas & Electric lines. Funding for the municipal utility's activities is not 
yet clear. 
"There's no question in my mind that we can generate power for less than what 
the generators are putting on the market," Jacob said. 
REGIONAL APPROACH PRAISED
Medea Benjamin, a San Francisco consumer advocate, said the regional approach 
sought by San Diego -- which requires a rewriting of state law -- would 
benefit consumers by making construction of new plants more economically 
feasible. 
Municipal utility districts statewide are now limited to individual cities. 
The Los Angeles Department of Water and Power is one of the few large enough 
to generate its own juice and sell off excess capacity. 
San Francisco voters will be asked in November whether to replace the 
existing San Francisco Public Utilities Commission with an independent power 
and water authority. 
"It would be wonderful if San Diego's disastrous experience with deregulation 
results in them taking a leadership role in creation of regional public 
power," Benjamin said. 
Not everyone, however, backs the plan. San Diego Gas & Electric's parent, 
Sempra, has actively lobbied against the public-power bill in Sacramento, 
fearing that it would allow seizure of the utility's distribution system by a 
county energy authority. 
"It's unclear what the bill is trying to accomplish," said Art Larson, a 
Sempra spokesman. "California's energy crisis isn't a local-utility problem. 
It's a demand-and-supply problem." 
PUBLIC OWNERSHIP CRITICIZED
Another considerable opponent of the plan is Jessie Knight, head of the San 
Diego Regional Chamber of Commerce and a former member of the state Public 
Utilities Commission. 
He believes that public officials are no match for savvy power-industry 
executives in a competitive marketplace and that the county cannot guarantee 
lower rates by building its own plants. 
"This thing looks like the biggest shell game in the world," Knight said. 
Moreover, he said, he could not see how San Diego would win legislative 
backing for regional public power when state authorities, including the 
governor, were counting on revenue from all customers to back California's 
multibillion-dollar bond offering. 
Assemblyman Mark Wyland, R-Escondido (San Diego County), author of the 
public-power bill, said it was too soon for anyone to speculate about San 
Diego's breaking away from the rest of the state's power grid. 
"We have to be realistic about the future of this," he said. "Right now, 
SDG&E is the utility in San Diego County, and there is no intent to transform 
that overnight." 
Meanwhile, in case Wyland's bill is defeated, a separate legislative effort 
is taking shape to expand the San Diego water authority's jurisdiction to 
include electricity. 
E-mail David Lazarus at dlazarus@sfchronicle.com 
<mailto:dlazarus@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1 








13 plans submitted to alleviate power transmission bottleneck 
Carolyn Lochhead, Chronicle Washington Bureau 
<mailto:clochhead@sfchronicle.com>
Tuesday, July 24, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/24/
MN185739.DTL>

Washington -- More than a dozen private investors have turned in proposals to 
ease a Central Valley bottleneck in California's electricity transmission 
grid that can contribute to blackouts in Northern California, Energy 
Secretary Spencer Abraham said yesterday. 
The 13 investment plans were in response to the Bush administration's 
national energy plan, which called for the expansion of Path 15, an 84-mile 
stretch of interconnected transmission lines located between Los Banos 
(Merced County) and Coalinga (Fresno County). The lines form the main link 
for power flows between the northern and southern parts of the state. 
"When we announced our plan in May to upgrade Path 15, it was dismissed as an 
old idea on which little had ever been done," Abraham said in a statement. 
"Today, I am pleased to announce that those days of neglect and inaction are 
over." 
The administration's plan calls for $230 million in new investment from local 
utilities and other private entities. Abraham called it "the first concrete 
step to relieve congestion on the state's power grid." 
The Bush administration, he said, "is taking a leadership role in addressing 
a long-neglected problem in Caifornia's electricity transmission system." 
Pacific Gas and Electric Co. owns Path 15. During the late 1980s, the utility 
held public hearings in the Central Valley to discuss a possible expansion, 
but dropped the plans after concluding that existing transmission lines could 
handle future demand. 
When California's electricity shortages began to mount last year, Path 15 
proved to be a major bottleneck. By preventing an increased flow of power 
from the southern to the northern parts of the state, it contributed to 
blackouts in Northern California. Earlier this year, the state PUC ordered an 
upgrade to the transmission system. 
The federal Western Area Power Administration, which manages hydropower 
projects in the Central Valley, is conducting studies for the Path 15 
expansion and will be holding environmental impact hearings in Coalinga on 
Aug. 
27 and in Los Banos on Aug. 28. More information is available on the agency's 
Web site at www.WAPA.gov <http://www.WAPA.gov>. 
The agency will review the proposals and make a recommendation to Abraham. 
The proposals were made by, among others, PG&E Corp., Calpine Corp. and 
Mirant Corp, the Western Area Power Administration said. 
The expansion plans calls for a third transmission line and other upgrades 
that would permit an additional 1,500 megawatts of transmission capacity, 
enough to power 1.5 million homes. Construction time is estimated at three to 
four years and would cost $300 million. 
The companies are expected to recapture their investment by adding a 
surcharge on power transmitted over the new lines, Abraham said. 
The expansion is likely to follow the same route identified in the hearings a 
decade ago, running in a 2,000-foot-wide corridor through the foothills west 
of Interstate 5, mainly over privately owned ranchland. 
In a related development, Sen. Barbara Boxer, D-Calif., hailed an agreement 
between the House and Senate to spend $1.3 million for the new environmental 
impact report and feasibility studies to expand Path 15. The money will go to 
the Western Area Power Administration. 

Tell us what you think -- What are your suggestions for saving energy? Send 
your best tips to Energy Desk, San Francisco Chronicle, 901 Mission St., San 
Francisco CA 94103; or put your ideas in an energy-efficient e-mail to 
energysaver@sfchronicle.com <mailto:energysaver@sfchronicle.com>. 
Chronicle news services contributed to this report. / E-mail Carolyn Lochhead 
at clochhead@sfchronicle.com <mailto:clochhead@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 10 







Developments in California's energy crisis 
The Associated Press
Tuesday, July 24, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/24/state
1037EDT0155.DTL>
(07-24) 07:37 PDT (AP) -- 
Developments in California's energy crisis: 
TUESDAY:
* No power alerts Tuesday as electricity reserves stay above 7 percent. 
MONDAY:
* U.S. Energy Secretary Spencer Abraham unveils a plan to help alleviate a 
transmission bottleneck that has kept power from flowing freely throughout 
the state during times of peak usage. The plan calls for expanding the 
state's power grid along so-called Path 15 by attracting private investment 
for the $300 million project. 
* A Senate committee investigating possible price manipulation has given the 
full Senate a report asking for Houston-based Enron Corp. to be cited for 
contempt. The Senate Select Committee to Investigate Price Manipulation of 
the Wholesale Energy Market says Enron failed to comply with a subpoena for 
financial and trading documents. The Senate recessed Sunday until Aug. 20 and 
could take up the matter when it returns. 
* Secretary of State Bill Jones asks the state Assembly to allot $250,000 for 
a legislative review into whether Gov. Gray Davis' advisers complied with 
conflicts of interest laws. Jones, a Republican who plans to challenge Davis 
in the next election, says the advisers failed to disclose that they held 
stock in energy companies. The Senate rejected a proposal Saturday to earmark 
that money for a bipartisan investigation. Steve Maviglio, Davis' spokesman, 
says the governor's office, the attorney general and the Fair Political 
Practices Commission are "working together to resolve any conflicts of 
interest and to deal appropriately with any violations." 
* U.S. Bankruptcy Judge Dennis Montali gives Pacific Gas and Electric Co. 
four additional months to produce a reorganization plan in its Chapter 11 
filing. PG&E lawyers had argued for the extension because of the complexity 
of the case. The bankruptcy case is believed to be the largest ever. 
* The Department of Water Resources says that since July 1, the state has 
sold 177,571 megawatt hours at $36.95 each. During the same time, DWR 
purchased 3.5 million megawatt hours of electricity at $118 per megawatt 
hour. That amounts to a loss of about $14 million. Assemblyman John Campbell, 
R-Irvine, says it's proof the state needs to get out of the power business. 
DWR spokesman Oscar Hildalgo says it's normal for utilities to sell excess 
power they have purchased. 
* Shares of Edison International close at $13.67, down 57 cents. PG&E Corp. 
stock close at $14.25, down 75 cents. Shares of Sempra Energy, the parent 
company of San Diego Gas & Electric Co., close at $25.20, down $1.09. 
* No power alerts Monday as electricity reserves stay above 7 percent. 
WHAT'S NEXT:
* The deadline for the Legislature to approve Davis' rescue deal for Southern 
California Edison is Aug. 15. 
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight 
supply worsened by scarce hydroelectric power in the Northwest and 
maintenance at aging California power plants are all factors in California's 
electricity crisis. 
Southern California Edison and Pacific Gas and Electric say they've lost 
nearly $14 billion since June 2000 to high wholesale prices the state's 
electricity deregulation law bars them from passing on to consumers. PG&E, 
saying it hasn't received the help it needs from regulators or state 
lawmakers, filed for federal bankruptcy protection April 6. Electricity and 
natural gas suppliers, scared off by the companies' poor credit ratings, are 
refusing to sell to them, leading the state in January to start buying power 
for the utilities' nearly 9 million residential and business customers. The 
state is also buying power for a third investor-owned utility, San Diego Gas 
& Electric, which is in better financial shape than much larger Edison and 
PG&E but is also struggling with high wholesale power costs. 
The Public Utilities Commission has approved average rate increases of 37 
percent for the heaviest residential customers and 38 percent for commercial 
customers, and hikes of up to 49 percent for industrial customers and 15 
percent or 20 percent for agricultural customers to help finance the state's 
multibillion-dollar power buys. 








Figures show state lost big on extra power 
Posted at 9:53 p.m. PDT Monday, July 23, 2001 
BY JOHN WOOLFOLK 

Mercury News 


State figures show California may have lost about $14 million this month 
selling surplus electricity for less than it cost. 
The Mercury News disclosed last week that some power was being sold at a 
loss. But the new figures provide the first indication of just how much 
excess power the state bought in its desperate effort to avoid blackouts -- 
and how cheaply some of that power was sold when it turned out not to be 
needed. 
A Republican lawmaker said Monday the loss also shows Democratic Gov. Gray 
Davis' energy policies are needlessly costing consumers. 
``This whole thing is a mess,'' said Assemblyman John Campbell, R-Irvine, who 
requested details of the state's surplus power sales. ``The government needs 
to get out of the power business before it costs Californians even more 
money.'' 
A state spokesman didn't dispute the $14 million figure outright but said it 
is an approximation based on average prices and that the actual loss probably 
is less. 
``It's a number I'm sure he likes very much, but it's definitely an estimated 
number, and it could be far lower,'' said Oscar Hidalgo, spokesman for the 
state Department of Water Resources. 
Campbell responded that the loss also could be higher. 
The state has spent $415 million on power so far this month. 
State officials last week confirmed that cool weather and consumer 
conservation have left California holding more power than it needs. The 
revelation was a stunning turnaround for a state that months ago was paying 
top dollar for power, expecting shortages this summer. 
Price that was paid 
The state bought 3.5 million megawatt-hours of electricity for July at an 
average price of $118 per megawatt-hour, according to a response Friday by 
the Department of Water Resources to Campbell's inquiry. The state has sold 
178,000 surplus megawatt-hours in July at an average price of $37, the 
department said. 
Based on those average prices, the state paid $21 million for the surplus 
power, which it sold for $6.5 million -- $14.5 million less than it cost. 
A more precise calculation of the state's loss is difficult because purchased 
power is acquired at different times and prices and pooled as a 
``portfolio.'' 
Purchases included long-term contracts that averaged $138 per megawatt-hour 
as well as cheaper spot-market buys. 
State officials last week said they were selling surplus at $15 to $30 a 
megawatt-hour, while some traders cited unconfirmed sales as low as $1. 
Hidalgo noted that the surplus sales represent just 5 percent of California's 
July purchases, which totaled $415 million. The $6.5 million from sales will 
help lower the state's power bill, he said, adding that utilities routinely 
sell some extra electricity. 
``Despite the fact that we're in somewhat of a surplus, any power-buying 
operation in the world is going to have to plan for these types of 
situations,'' Hidalgo said. ``It's not unique, and in fact it's normal 
operating procedure for any utility.'' 
Other Western utilities, including Portland General Electric in Oregon, have 
said they, too, are selling some surplus power at a loss and describe it as a 
cost of doing business. 
The suppliers buying the state's surplus electricity on the cheap include the 
big out-of-state energy companies that the governor has called price-gouging 
``snakes.'' Among them are Duke Energy, Dynegy Power and Marketing, El Paso 
Power Services, Mirant, Reliant Energy and Williams Energy. 
`Best bid' taken 
Hidalgo said the state took the best offers it could find. 
``It's only reasonable to get the best bid you can,'' he said. 
Campbell said the $14 million loss is troubling because ratepayers or 
taxpayers will have to cover the cost, whereas a private utility could be 
forced to eat the expense if regulators determined it was unreasonable. 
State officials say what's more important is that the overall cost of power 
is dropping, from an average daily tab of $64 million in May to $25 million 
this month, in part because the state has so much power. 


Contact John Woolfolk at jwoolfolk@sjmercury.com 
<mailto:jwoolfolk@sjmercury.com> or (408) 278-3410. 







Temperatures likely to rise all week 
Published Tuesday, July 24, 2001, in the San Jose Mercury News 
BY DANA HULL 

Mercury News 


Temperatures throughout the Bay Area are expected to rise each day this week, 
and some inland cities could see low 100s by Thursday or Friday. 
Despite the warming trend, officials for the California Independent System 
Operator said Monday they should get by without any rolling blackouts. Hotter 
temperatures, often accompanied by spikes in air conditioning use, can strain 
the state's electric grid. 
``We believe we'll be fine this week,'' said Lorie O'Donley of the ISO. ``Our 
understanding of the forecast is some localized heat in Northern 
California,'' but the coastal regions and Southern California will be more 
moderate. 
Meteorologists say that the atmospheric ``upper trough,'' or cool air, is 
moving out of the Bay Area. 
``Cool air has been parked over the West Coast and California,'' said Ryan 
Walbrun, a meteorologist with the National Weather Service. ``It moved in 
shortly after the Fourth of July, but that system is weakening and will move 
out. Things will heat up in the Central Valley and eastern portions of the 
Bay Area. It will be a gradual warming trend during the work week.'' 


Contact Dana Hull at dhull@sjmercury.com <mailto:dhull@sjmercury.com> or 
(510) 790-7311. 







Wholesale Competition Contributed to Trend of Lower Power Prices, According 
to New EPSA Study 

July 24, 2001    <JavaScript:userButton(>  WASHINGTON, July 23 /PRNewswire/ 
via NewsEdge Corporation -  Calls for a return to cost-plus rate regulation 
in the wake of the California power crisis are misplaced, according to an 
independent study released today that found that competitive markets 
contributed to a 36 percent decline in retail electricity prices among 
surveyed utilities.  "That decrease is in sharp contrast to the increases 
that consumers experienced in the days of solely cost-plus rate regulation," 
said Electric Power Supply Association President Lynne H. Church, who 
released the findings during a media luncheon in conjunction with the group's 
summer membership meeting. "This analysis is evidence that we should continue 
to move forward toward more competition in order to apply downward pressure 
on prices."  The study: "Assessing the 'Good Old Days' of Cost-Plus 
Regulation," analyzed sales data for 60 of the nation's investor-owned 
utilities during 1985-1999, when traditional cost-plus rate regulation began 
evolving toward more competition. Complete sales figures for 2000 were not 
yet available when the study was completed. The study was commissioned by 
EPSA and conducted by Craig Roach, Ph.D, principal of Boston Pacific Co.  "In 
the wake of the California power crisis, some people have expressed a longing 
for a return to the 'good' old days of cost-plus regulation, but those days 
were far from good," Roach said. "People seem to forget that, in the days of 
cost-plus regulation between 1970 and 1985, inflation-adjusted electricity 
prices actually increased 25 percent for residential customers and increased 
86 percent for industrial/commercial customers."  "So much for the good old 
days," Church said. "The price increases under cost-plus regulation were 
precisely what drove the start of electricity competition in the early and 
mid-1980s."  During the 1985-1999 period, according to the analysis, 
inflation-adjusted electricity prices decreased an average 30 percent for 
residential customers and 36 percent for industrial/commercial customers.  
"We should not allow the problems in California to cast a false shadow on 
competition," Church said. "The evidence presented in this study makes it 
clear that it would be counterproductive and unwise to go back to the old 
ways."  "It is important to understand that what happened in California 
resulted, in part, from market rules that prohibited basic risk management," 
Roach said. "Specifically, utilities were required to take on the risk of 
selling at a fixed price to customers, but not allowed to manage that risk by 
arranging contracts with fixed-price suppliers or use other risk management 
tools. Managing risk appropriately benefits consumers, and risk management is 
more efficient and effective in a truly competitive regime."  "This study 
bolsters our belief that the Federal Energy Regulatory Commission should 
continue to move expeditiously toward more efficient wholesale markets, 
states should continue to move quickly toward opening their retail power 
markets, and Congress should quickly adopt comprehensive legislation to help 
them along," Church said.  Note: A copy of the complete study is available at 
www.bostonpacific.com/powerprices .  EPSA is the national trade association 
representing independent power producers and power marketers active in U.S. 
and global power markets. As suppliers of reliable, clean, competitively 
priced electricity, EPSA members seek to bring the benefits of competition to 
all electricity customers.  Contact: Mark Stultz, 202-628-8200  Audrey Duff, 
202-354-8205  MAKE YOUR OPINION COUNT - Click Here  
http://tbutton.prnewswire.com/prn/11690X71763169  SOURCE Electric Power 
Supply Association  CONTACT: Mark Stultz of Electric Power Supply 
Association, +1-202-628-8200; or Audrey Duff, +1-202-354-8205, for Electric 
Power Supply Association  Web site: http://www.epsa.org 
http://www.bostonpacific.com/powerprices