Contra Costa Times, June 26, 2001, Tuesday, STATE AND REGIONAL NEWS, K2489,
????735 words, Davis meets with two top energy regulators, By Andrew LaMar and
????Rick Jurgens

Copley News Service, June 26, 2001, Tuesday, State and regional, 622 words,
????Governor commends 3 'heroes' in generator refunds fight, Bill Ainsworth,
????SACRAMENTO

Los Angeles Times, June 26, 2001 Tuesday, Home Edition, Page 1, 1110 words,
????Officials Oppose Utility Choice; Power: They say users leaving traditional
????firms could jeopardize state's repayment of $50 billion in energy 
purchases.
????, TIM REITERMAN, TIMES STAFF WRITER

Los Angeles Times, June 26, 2001 Tuesday, Home Edition, Page 14, 1227 words
????, THE NATION; ; State, Power Firms Urged to Make a Deal; Energy: Mediator
????says a refund pact would benefit both sides. Meanwhile, Davis tones down 
his
????rhetoric as regulators come calling., MEGAN GARVEY, DAN MORAIN, TIMES 
STAFF
????WRITERS, WASHINGTON

Los Angeles Times, June 26, 2001 Tuesday, Home Edition, Page 1, 1835 words,
????Solar Housing Tracts Taking a Place in Sun; Energy: A San Diego County
????subdivision is part of a growing revolution in building., ERIC BAILEY, 
TIMES
????STAFF WRITER, SAN DIEGO

The New York Times, June 26, 2001, Tuesday, Late Edition - Final, Section
????C; Page 7; Column 1; Business/Financial Desk, 679 words, California and
????Energy Providers in Talks Over Electric Fees, By JOSEPH KAHN, WASHINGTON,
????June 25

The Orange County Register, June 26, 2001, Tuesday, STATE AND REGIONAL NEWS
????, K2449, 519 words, Billions at stake as talks on power crisis begin in
????Washington, By Dena Bunis

San Jose Mercury News, June 26, 2001, Tuesday, STATE AND REGIONAL NEWS,
????K2338, 1365 words, Pending power plants in California face some problems, 
By
????Steve Johnson

San Jose Mercury News, June 26, 2001, Tuesday, SJ-POWER-REFUND, 931 words,
????Power Companies Debate Amounts of California Refunds, By Jim Puzzanghera

The San Francisco Chronicle, JUNE 26, 2001, TUESDAY,, FINAL EDITION, NEWS;,
????Pg. A3, 984 words, Compromise urged in electricity refund talks, Zachary
????Coile, Washington




Copyright 2001 Knight Ridder/Tribune News Service
???????????????????????Knight Ridder/Tribune News Service

??????????????????????????????Contra Costa Times

????????????????????????????June 26, 2001, Tuesday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K2489

LENGTH: 735 words

HEADLINE: Davis meets with two top energy regulators

BYLINE: By Andrew LaMar and Rick Jurgens

BODY:

??SACRAMENTO, Calif. _ State officials carried their quest for $8.9 billion in
electricity refunds to a federally ordered settlement conference with
generators, as two top energy regulators paid a visit to California and its
governor on Monday.

??More than 150 representatives of state agencies and energy producers 
gathered
in Washington, D.C., for the first of up to 15 days of closed-door talks led 
by
Curtis Wagner, the chief judge for the Federal Energy Regulatory Commission. 
The
agency has mandated the sessions to set the amount generators overcharged the
state and must pay back.

??After the meeting, the state's lead negotiator, Michael Kahn, praised Wagner
but said he could not disclose details of the talks because the judge ordered
the discussions to be kept confidential.

??Gov. Gray Davis has called for $8.9 billion to be repaid to California. The
figure comes from a study conducted by the Independent System Operator, the
agency that runs the state power grid, that claims that is the amount the 
state
was overcharged for wholesale electricity, either from private generators or
municipal utility districts, since May 2000.

??"We made it clear we want refunds in the amount the governor has indicated,"
Kahn said in a conference call with reporters. "I can tell you that it's fair 
to
say that everyone is interested in support for the numbers the governor and 
the
ISO have been using."

??Kahn acknowledged that there are several other issues on the table, as
requested by federal regulators, including the credit worthiness of 
electricity
purchasers and whether California needs more long-term power contracts to 
reduce
its reliance on the spot market.

??Wagner has said he doubts the refunds from the final settlement will top 
$2.5
billion.

??Meanwhile, the two newest members of FERC, Pat Wood and Nora Brownell,
visited Sacramento to meet with Davis. In a written statement, the governor 
said
the two promised they would ensure competition in the state's natural gas 
market
and would step up federal inspections of plants that are shut down for
unscheduled maintenance.

??"In a refreshing change from my past dealings with the agency, these
commissioners offered a problem-solving approach in resolving California's
energy challenge," Davis said.

??Loretta Lynch, president of the state Public Utilities Commission, attended
part of the meeting. The federal regulators promised "a new day at FERC," she
said. Wood, talking with reporters at the California Energy Commission, said,
"It's just a day at FERC rather than a night at FERC."

??Wood, who just joined the commission, distanced himself from its previous
actions in the California energy crisis, which started after a restructuring 
law
took effect in 1998. "The FERC should have been more thoughtful (before
approving the measure) rather than just ratifying the state's plan," he said.

??Earlier in the day, Davis said he would talk with Wood and Brownell about
three issues: natural gas; prospective refunds for electricity charges; and
allegations made by three former employees of a Duke Energy power plant.

??The employees, who testified at a Friday Senate hearing, said Duke ordered
them to throw out spare parts and lower output when California's power 
supplies
ran short in an apparent attempt to influence prices. Ed Edwards, Jimmy Olkjer
and Glenn Johnson worked at Duke's 706-megawatt South Bay plant in San Diego
County until April.

??The company, which said it billed the state a record-high $3,880 for a
megawatt-hour in January, has called the accusations "baseless." Company
officials said their orders to ramp up and down generation corresponded with 
the
direction given by the ISO.

??But at a Monday morning press conference with the three former employees,
Davis said some of the statements made by Duke officials defending the 
company's
conduct don't add up. The governor said he and other state officials have long
suspected generators engaged in such activity as part of a "concerted effort 
to
suck every dime possible out of California."

??Davis said he was especially concerned about the employees' claims, which
were backed up by control-room logs, that Duke reduced power output when the
state hit Stage 3 alerts.

??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune

??(c) 2001, Contra Costa Times (Walnut Creek, Calif.).

??Visit the Contra Costa Times on the Web at http://www.cctimes.com/
 
JOURNAL-CODE: CC

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??????????????????????Copyright 2001 Copley News Service

?????????????????????????????Copley News Service

????????????????????????????June 26, 2001, Tuesday

SECTION: State and regional

LENGTH: 622 words

HEADLINE: Governor commends 3 'heroes' in generator refunds fight

BYLINE: Bill Ainsworth

DATELINE: SACRAMENTO

BODY:

??Gov. Gray Davis praised three former employees at Duke Energy's Chula Vista
plant as ''heroes'' yesterday for coming forward with allegations that Duke 
policies created power shortages that raised electricity prices.

??For the second time in recent days, the three plant veterans dominated 
events
in Sacramento with explosive allegations of mismanagement and market
manipulation by a company that has reaped enormous profits in California. 

??Ed Edwards, Glenn Johnson and Jimmy Olkjer made those claims, under oath, on
Friday before a state Senate committee.

??Davis and other Democratic politicians yesterday said these first insider
accounts of how power plant operations might have manipulated prices will help
the state in its attempt to get $9 billion in refunds from Duke and other 
energy
generating companies.

??''There's no question in my mind a lot of money has been stolen from
California, and these men are going to help us get it back,'' said 
Assemblywoman
Barbara Matthews, D-Tracy.

??The ex-employees told Davis that Duke risked jeopardizing equipment by
constantly powering the 706-megawatt plant up and down, dumped new spare parts
and took working turbines off-line for ''economic reasons.''

??Davis said the power plant workers confirmed his suspicions that North
Carolina-based Duke and other companies engaged in price gouging.

??''There's a concerted effort to suck every dime out of California and send 
it
back to Houston or North Carolina,'' he said.

??Davis cautioned that he hadn't yet heard Duke's version of events. ''The
company is entitled to their point of view,'' he said. ''But they've got some
explaining to do.''

??Duke Energy spokesman Tom Williams called the governor's meeting with the
former workers ''unfair and unproductive.''

??Williams said a review of company logs shows that during a Stage 3 energy
alert the Chula Vista plant powered down under orders from California's 
electricity grid manager, the Independent System Operator.

??He said the company was doing its job by supplying the state with ''spinning
reserves'' that could be added to the system in 10 minutes to balance the load
that is, to make sure that supply equaled demand.

??ISO spokeswoman Stephanie McCorkle said the agency buys four types of
ancillary services to balance the load, including spinning reserves.

??But she said only Duke can release information from Jan. 16. Williams said
Duke soon plans to release logs from that day and several others.

??Meanwhile, another former Chula Vista plant employee confirmed the
allegations of the other three workers. All of them had worked for San Diego 
Gas
& Electric when the utility owned the plant before Duke took over its 
operation.
Duke was required to keep the SDG&E employees on for two years, but it then 
let
many of them go.

??Rick Connors, a former operator who turned down an offer from Duke to stay 
on
at the South Bay plant, said the plant output frequently was down for 
''economic
reasons.''

??The governor brought up those allegations during a subsequent meeting with
two new FERC commissioners, Pat Wood and Nora Brownell. Davis asked the 
federal
regulators to look into possible price gouging, the high price of natural gas
and the $9 billion in refunds he is seeking.

??After meeting with Davis, Wood said he thinks California will emerge from 
the
energy crisis in 2003 or 2004 and become an energy trendsetter. He said he
believes California leaders have the will to build more power plants and 
improve
natural gas pipelines that fuel new generators. But he cautioned that there 
will
be ''some short-term pain.''

??''I think you folks will seem some blackouts this summer,'' he said.

Staff writer Ed Mendel contributed to this report.



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??????????????????????Copyright 2001 / Los Angeles Times

??????????????????????????????Los Angeles Times

?????????????????????June 26, 2001 Tuesday ?Home Edition

SECTION: California; Part 2; Page 1; Metro Desk

LENGTH: 1110 words

HEADLINE: Officials Oppose Utility Choice;
Power: They say users leaving traditional firms could jeopardize state's
repayment of $50 billion in energy purchases.

BYLINE: TIM REITERMAN, TIMES STAFF WRITER

BODY:

??Consumer choice was a mantra when California moved in 1996 to restructure 
its
electricity industry. But the right of utility customers to shop around for
power is falling victim to the state's own strategy to drag itself from the
energy debacle.

??Warning of a "spiral of declining customers and rising power rates," top
state officials are calling for swift action to curtail the freedom of utility
patrons to buy from alternative electricity providers.

??They fear that California's ability to pay for nearly $50 billion in past 
and
future electricity purchases would be jeopardized unless regulators or
legislators suspend or restrict the state's so-called direct-access program. A
flight of customers from the traditional utilities, the officials say, would
saddle the remaining businesses and consumers with paying off an unfair share 
of
those billions.

??Under direct access, thousands of utility customers--ranging from big
commercial and industrial users to environmentally aware residential consumers
who wanted "green power"--signed up with companies promising lower prices,
better service or the security of long-term contracts.

??But the energy crisis changed all that.

??In January, the state's Department of Water Resources became the major
electricity purchaser for most Californians, as skyrocketing wholesale prices
put Pacific Gas & Electric Co. and Southern California Edison deeply into debt
and many suppliers refused to sell to them. The same legislation that 
authorized
the department's purchases called on the California Public Utilities 
Commission
to suspend direct access until the state stops buying power--which could be
almost two decades under some of the long-term contracts the state has signed
with suppliers.

??The commission is poised to vote Thursday on a proposal to suspend direct
access by July 1, and it is expected to pass. Bills in the Legislature would
resurrect the program while requiring new customers to pay "exit fees" 
designed
to protect the state's planned $13.4-billion bond sale for electricity
purchases, but the proposals have been mired in negotiations.

??In any case, state officials say they can ill afford to lose big commercial
and industrial users as utility customers help pay off the state's current $
8-billion power tab and more than $40 billion in long-term power contracts.

??"If such customers are permitted to 'exit the system' without [paying] their
share of costs incurred by DWR . . . the burden of covering debt service
payments will fall on a smaller base of remaining customers, significantly and
unfairly increasing their power rates," said a June 12 memo from state 
Treasurer
Phil Angelides and the heads of the Finance and Water Resources departments to
the PUC and the Legislature.

??"There is a concern that as power rates paid by the remaining customers 
would
rise, customers would have additional economic incentive to abandon DWR power,
creating a spiral of declining customers and rising power rates," the memo 
said.

??Statewide, the total number of direct-access customers has fallen from a 
peak
of more than 200,000 to about 88,000 in mid-May. Figures from the California
Energy Commission show that these customers--including hotel and hospital
chains, factories, farms, the state's university systems and about 78,000
residences--accounted for about 2.1% of the power consumed in California.

??The level of participation by residential customers was 1.1%--about a third
as high as for large commercial and industrial customers.

??The penetration rates were much higher early this year, when about 13% of
industrial users had direct-access contracts. But many providers sent their
customers back to Edison, PG&E and San Diego Gas & Electric, as wholesale 
energy
costs soared and they could not compete with the utilities, whose rates were
frozen by the 1996 deregulation law.

??One provider, AES NewEnergy, claims 60 to 70 customers, ranging from
mom-and-pop stores to grocery chains. About a year ago, the company had 150 to
200 customers.

??"Direct access is at the heart of the concept of competition and choice,"
said Aaron Thomas, the company's manager of government relations. "The [PUC]
order stinks, and it is not necessary to put a stake in the heart of direct
access to float a bond."

??Said Rick Counihan, a spokesman for Green Mountain Energy: "Unless we see a
legislative solution, direct access is dead. We're being driven out of
California."

??Green Mountain, a Vermont-based company that sells power from renewable
sources, has seen its California customer base shrink from 60,000 to 7,000, 
all
in San Diego and Orange counties.

??Although they have never fled en masse to direct access, many businesses and
institutions want to maintain direct access as an option, especially because 
it
is uncertain whether the state's power contracts will prove to be a bargain 
or a
bust in the long run.

??Bill Dombrowski, president of the California Retailers Assn., representing
more than 50 large companies, said it is important to maintain direct access 
as
an option because "the market is in a shambles."

??"At its peak, before the market was dysfunctional, you saw 5% to 10%
reductions [in electricity rates] compared to local utilities, which is
significant dollars when you are talking about larger companies," he said.

??Like other proponents, Dombrowski maintains that the fears expressed by 
state
officials and Wall Street bond underwriters are exaggerated.

??"Realistically, you will not see a wave of people going to direct access," 
he
said.

??The utilities commission measure, which would halt new direct-access
enrollments, was put off until this week in hopes that a solution could be
worked out in Sacramento. PUC Commissioner Jeff Brown, one of three appointees
of Gov. Gray Davis on the five-member commission, said that, like the 
governor,
he favors direct access on philosophical grounds but sees no way to avoid
suspending the program.

??"We are tied up in the realities of the bond sale," he said. "If the
Legislature wants to do something in the future, fine."

??Commissioner Richard Bilas, another supporter of direct access, acknowledges
that "it could at the margins jeopardize the bond sale." But direct access, he
said, "is what restructuring was about in the first place. . . . Without it, 
you
no longer have restructuring."

??Advocates of direct access remain hopeful that a legislative solution could
balance the desires of the business community and the bond underwriters. A 
bill
by state Sen. Debra Bowen (D-Marina del Rey) would require exit fees and other
provisions sought by state finance officials.

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??????????????????????????????Los Angeles Times

?????????????????????June 26, 2001 Tuesday ?Home Edition

SECTION: Part A; Part 1; Page 14; National Desk

LENGTH: 1227 words

HEADLINE: THE NATION;
;
State, Power Firms Urged to Make a Deal;
Energy: Mediator says a refund pact would benefit both sides. Meanwhile, Davis
tones down his rhetoric as regulators come calling.

BYLINE: MEGAN GARVEY, DAN MORAIN, TIMES STAFF WRITERS

DATELINE: WASHINGTON

BODY:

??After being vilified for months by Gov. Gray Davis, federal energy 
regulators
here and in Sacramento took steps Monday to show they are determined to 
respond
to California's energy crisis.

?????A top federal regulator began mediating Davis' demand for nearly $9
billion in what the governor says are overcharges by power generators--and
warned a room full of dark-suited lawyers, energy executives and state 
officials
here that they will be "far better off" if they decide among themselves how 
big
a refund the state is due.

?????Meanwhile, in Sacramento, Patrick H. Wood III and Nora M. Brownell,
President Bush's first appointees to the five-member Federal Energy Regulatory
Commission, spent the afternoon conferring with Davis and legislative leaders.
Then they held a fact-finding hearing with California regulators on the high
price of natural gas, the fuel that spins most new electricity turbines in
California. ?

?????"We're going to be working together through tough issues," Brownell said.
"We're going to work through them and solve them and move forward. ?It is a 
lot
easier when people have sat down and gotten to know each other."

?????Davis has been attacking federal energy regulators--a majority of whom 
are
holdovers from the Clinton administration--for failing to take a variety of
steps to bail California out of its energy woes.

?????On Monday, however, Davis toned down his bellicose attacks on the federal
commission. Brownell and Wood, Davis said, are "committed to working together
with us to drive down the price of natural gas in California to get it closer 
to
what the rest of the country is paying."

??????"I think we are turning a corner," Davis said, as temperatures across 
the
state were moderate and electricity demand was low. "Conservation has been
spectacular. Californians have responded heroically. The federal government is
now finally taking some positive actions. The outlook looks much more positive
than it did two months ago."

?????The developments in Washington and Sacramento come as Davis issues
campaign-style demands for more aid from the federal government and as polls
show that voters are skeptical of how Davis and Bush are handling 
California's 
energy crisis.

??????Republican lawmakers in Sacramento contend that the regulatory 
commission
has granted Davis virtually everything he has sought. The commission earlier
this month imposed temporary price restraints, a step Davis said is helping to
lower wholesale electricity prices paid by the state.

?????Senate Republican leader Jim Brulte said Monday that he has "no doubt" 
the
commission, known as FERC, will order power generators to issue refunds to
California, as Davis has requested.

?????But Brulte, of Rancho Cucamonga, also predicted that Davis will find the
order wanting: "The governor's game is a political one. . . . The Davis
administration has a clear strategy--that no matter what FERC does, it isn't
enough."

?????In Washington, the roughly 150 participants who showed up for day one of 
a
15-day settlement conference on refunds showed little sign they were ready to
agree, at least not yet.

?????For now, the differences remain considerable: about $9 billion in refunds
demanded by California's representatives at the talks, plus $6 billion more 
that
other Western states say they have been unfairly charged. Power generators 
hotly
dispute those figures.

?????"The time to put California's past energy problems to rest and structure 
a
new arrangement for California's energy future is now," said Curtis L. Wagner,
the chief administrative law judge for FERC. "We can do it if we try."

??????Wagner, who told reporters last week he believed refunds of about $2
billion were probably justified, is mediating the closed-door talks. ?Davis is
asking that the refunds cover the period since May 2000.

?????"These out-of-state energy companies are taking us for a ride," Davis 
said
in a brief interview in Sacramento on Monday. "I am determined to get every
penny back that California is owed. The generators have bilked us mercilessly,
and I'm fighting back. I'm not giving up nothing."

?????Consumers wouldn't see refunds directly. Rather, the money would go to 
the
state or to private utilities, such as Southern California Edison, for
electricity purchases made during the energy crisis.

?????Participants in the Washington meeting represent about 70 entities with
stakes in the electricity dispute. If they fail to reach agreement among
themselves within the allotted 15 days, Wagner will have seven days to make a
formal recommendation of his own to FERC's five-member governing board.

?????The settlement negotiations are confidential; Wagner promised those
present he would shred his notes and transcripts at their completion. He 
allowed
reporters in the hearing room, where oversized pots of coffee perched on every
table, only long enough to listen to his opening remarks and to a prepared
statement he read from two of the five FERC commissioners.

?????Wagner, who asked that all sides send advocates with the authority to
reach an agreement, said the issues to be resolved include:

?????* Refunds for past electricity purchases, including how much money is
involved and who needs to be paid.

?????* Moving additional quantities of electricity off the spot market and 
into
long-term contracts.

?????* Ensuring that generators receive payment for electricity already
provided.

?????* The bankruptcy of Pacific Gas & Electric.

??????Wagner said the talks also should address whether any settlement 
provides
generators with immunity from existing and future lawsuits and prosecutions.

?????The statement from FERC commissioners Wood and Brownell encouraged
participants to "focus on what they absolutely need and not what they want." 
But
sorting out which is which may prove challenging.

??????The head of California's delegation, for example, reiterated Davis'
demands for $8.9 billion in refunds.

?????"We want our refunds. We want them now," Michael Kahn, one of Davis' top
energy advisors, told reporters during a break in the negotiations.

?????Kahn said the officials he is representing--the governor, state
legislators, the Electricity Oversight Board and the Public Utilities
Commission--consider the $8.9 billion figure to be an "extremely conservative
estimate."

?????He indicated the delegation had little interest in relinquishing the 
right
to sue for additional funds, even if power generators offered to make refunds
for time periods before the Oct. 2 cutoff that FERC has proposed.

?????As they have in the past, electricity generators staked out a far
different position, characterizing as "absurd" the state's overcharge 
estimate.

?????"We've done absolutely nothing wrong," said Tom Williams, a spokesman for
Duke Energy Co., adding that his company was "gratified that all the parties 
are
at the table to discuss this."

?????The settlement negotiations were mandated by FERC last week as the agency
put in place an expanded "price mitigation plan" for Western electricity
markets.

?????*

?????Garvey reported from Washington and Morain from Sacramento.

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??????????????????????????????Los Angeles Times

?????????????????????June 26, 2001 Tuesday ?Home Edition

SECTION: Part A; Part 1; Page 1; Metro Desk

LENGTH: 1835 words

HEADLINE: Solar Housing Tracts Taking a Place in Sun;
Energy: A San Diego County subdivision is part of a growing revolution in
building.

BYLINE: ERIC BAILEY, TIMES STAFF WRITER

DATELINE: SAN DIEGO

BODY:

??Tom Day sees a lot to love about his family's brand new house. ?Perched in a
high-end subdivision on this city's booming northeast fringe, the dun-hued
Mediterranean boasts a castle-turret entry, a lofty master suite, a mesa-top
view.

?????But aesthetics aren't all that attracted Day. His new home will also help
pay the power bill.

?????With photovoltaic panels atop a triangle of south-facing tile roof and a
solar water heater perched along a western ridge, the two-story house is part 
of
a quiet revolution taking shape in these times of energy anemia.

?????The Day clan just moved into one of California's first solar 
subdivisions,
a new home development that attempts on a mass-production scale to tap the 
sun's
energy--and offset residential utility bills that have been soaring toward the
ozone layer.

?????For the solar industry, it is another important step in an uphill slog 
for
respectability. Energy experts say solar's future could well hinge on whether
the building industry embraces it for the thousands of new homes, offices and
commercial structures erected each year in the Golden State.

?????Several factors have conspired to make solar an option for builders.

?????The cost of photovoltaic panels, the thin silicon wafers that turn 
photons
of light into electricity, has dropped dramatically in the last decade.
Meanwhile, newly pumped-up government subsidies and skyrocketing electric 
bills
in California have made solar energy tantalizingly competitive with 
electricity
produced by smokestack power plants.

?????A study at Princeton University concluded earlier this year that two key
states--California and New York--are ripe for explosive growth in solar. Both
share the right combination of high electricity prices and white-hot housing
markets.

?????In California, about 150,000 new homes are built in a typical year. If
each carried a standard 2-kilowatt photovoltaic system, it would eliminate the
need for a 300-megawatt power plant.

?????"I really think builders are starting to come around," said V. John 
White,
lobbyist for a solar coalition. "We need solar to be like a carpet upgrade or
landscaping improvement."

?????Tom Day and his family are some of the first home-buying pioneers to reap
the benefits.

?????At his old house, Day saw energy costs soar to $500 one recent month. ?So
solar's clean, inflation-proof power was a no-brainer. Rolling blackouts are 
no
longer a worry.

?????Building solar into new homes has distinct advantages over slapping 
panels
on an existing roof, the standard practice for a generation.

?????On a new home such as Day's, the system can be designed into the project
from the ground up. Installation is less expensive, what with electricians and
plumbers already on site. Costs to the developer, Shea Homes, were cut because
the solar panels for the subdivision were purchased in bulk.

?????Day, meanwhile, avoided a huge upfront hit. To install solar on an
existing home, the bill can rise as high as $20,000 or more without a 
government
rebates. Day had to pay $6,000. Best of all, he rolled it all into the 
mortgage
for his new home at a low interest rate. His electricity costs pencil out much
better because of that long-term financing.

?????The system also adds resale value to his house, no small consideration in
a state where homeowners tend to move about every five years.

?????More immediately, he looks forward to watching his electric meter spin
backward on occasions when the system generates more juice than the family 
uses.
On average, the 1.2-kilowatt panels should provide a third of the family's
electricity. And when the sun isn't shining, the Days' power comes off the 
grid.

?????"When we heard solar was available," said Day, "we absolutely jumped at
it."

??Industry Cites Reasons for Caution

??????But even with the energy crisis, builders aren't diving wildly into
solar. The reluctance springs from concerns about further hiking building 
costs,
lingering questions about solar's allure to buyers and legal worries in a 
state
crowded with construction-defect lawyers.

?????Some buyers would still prefer vaulted ceilings and wood floors to a 
solar
panel. Even at Shea Homes, which has seen its solar houses sell briskly,
officials want more market analysis before fully committing to photovotaics 
for
developments still on the drawing board.

?????"We hope to do more," said Ryan Green, Shea's community development
manager. "But if we put in solar and people don't want it, they'll go 
somewhere
else."

?????Solar is a standard feature on 100 houses in Shea's Scripps Highlands
development. Another 160 offer it as an option to home buyers.

?????But a few never had a chance. Joanna Staikopoulos lives just up the 
street
from Tom Day. Her home was in the development's first phase, when solar wasn't
offered.

?????She's dejected, but talks of approaching Shea to ask that panels be 
fitted
after the fact.

??????"We would love to have it," said Staikopoulos, a postal clerk. In her
native Greece, she said, "every home has solar. It's wonderful."

?????At Shea's solar subdivision, one of two buyers snap it up, said Pamela
Beaird, a sales associate. And that's without much prodding.

?????"I don't try to push it," Beaird said. She also avoids estimates of power
or financial savings. The calculus can vary so widely depending on a 
homeowner's
energy use, Beaird said, "we don't go there."

?????Though the development community forges cautiously forward, subsidies 
from
the state and some utilities are slicing away a big chunk of financial risk.

?????The Sacramento Municipal Utility District offers one of the nation's most
aggressive solar programs, and has stimulated several new-home projects. Solar
is also spilling into adjoining counties. Last week, U.S. ?Homes announced 
plans
to build the nation's biggest solar subdivision, with photovoltaics on 917 
homes
in nearby Placer County.

?????The Sacramento utility district can put a 2-kilowatt system atop a
customer's roof for $4,800--about a quarter the unsubsidized retail rate. 
?That
subsidy program helped lure a photovoltaic assembly plant to the capital city,
boosting availability of panels.

??????In Los Angeles, the Department of Water and Power accomplished a similar
feat, offering incentives that helped convince Siemens Solar Industries to 
build
a plant in town.

?????But the biggest constraint in California remains a lack of manufacturing
capacity, said Don Osborne, the Sacramento utility district's renewable
generation superintendent. "Anything we can do to stimulate new production is
going to help lower the costs for PV and help our subsidy dollars go further."

?????Or be eliminated entirely. The goal of solar advocates is to expand the
U.S. market so photovoltaics can compete without the government subsidies that
have long been a prop.

?????Such market-building is no easy task. The solar industry has seen boom 
and
bust cycles before, most notably when subsidies evaporated after the 1970s
energy crisis. Some boosters fear a similar scenario when the current problems
fade. Instead of blindly ratcheting up production, company executives are
putting a premium on sustainable business growth.

?????Howard Wenger, a vice president at Delaware-based AstroPower Inc., one of
the nation's largest photovoltaic manufacturers, compares PV to development of
the personal computer: "The first ones were very expensive, but they got more
efficient and prices came down. We need to follow the same path."

??Mixed Signals From Washington

?????Meanwhile, Washington is rife with mixed signals about solar. Congress is
now eyeing a 15% tax credit. But the Bush administration's new energy policy
focuses on fossil fuels. Moreover, the president irked solar advocates by
threatening to slash funds for renewable energy research.

??????In California, conflicting agendas also rule. Though state lawmakers are
pushing further subsidies and loans for solar, Gov. Gray Davis has focused on
traditional power sources to drag the state out of the current mess; 95% of 
the
new energy production will be fueled by natural gas.

?????"This approach is frightening," said Daniel M. Kammen, director at UC
Berkeley's Renewable and Appropriate Energy Laboratory. "If we learned 
anything
from the oil crisis in the '70s, it's that diversity is our only insurance.
We're setting ourselves up again for crisis."

?????Instead of erecting smokestack behemoths, the state should help build an
army of rooftop solar systems and windmill farms, Kammen said. "It would be 
like
turning off Niagara Falls and replacing it with a bunch of little waterfalls."

?????Kammen and others say government needs to do more. Solar boosters want a
federal mandate that power producers generate a portion of their
electricity--perhaps as much as 20%--from nonpolluting sources like solar, 
wind
and geothermal.

??????Changes in energy billing could also help. Solar fares well under the
growing practice of "real-time pricing," charging more for electricity used
during peak hours. Photovoltaics work best in the afternoon when demand is
highest.

?????Though residential customers aren't now subject to such peak pricing,
large commercial buildings face it, making solar an option to cut costs. ?One
company, PowerLight Corp. of Berkeley, expects to see a 400% increase in
production of its commercial rooftop panels.

?????"There's this perception that PV is not ready for prime time," said Kari
Smith, PowerLight's regulatory affairs manager. "We want to demonstrate to the
state that it's viable and ready to go."

?????Some of the nation's biggest utilities haven't been much help to solar.
Among the testiest sticking points has been net metering--the practice of
letting homeowners sell excess solar electricity back to the grid.

?????Private utilities have long feared that rooftop solar could dent their
balance sheets. Though about 30 states, including California, now permit net
metering, most allow a homeowner to sell back only enough electricity to break
even. Many also cap the total amount of net metering at 0.1% of a utility's
total peak demand, further hindering the potential growth of solar.

?????Much of that could be rendered moot, solar boosters say, if builders get
into the game in a big way. Factories would sprout, production would 
skyrocket,
prices would fall.

?????"It's akin to landing the Mayflower," Osborne said. "It's the settlement
of a New World."

??*

?????MORE INSIDE

?????Refund talks: Mediator urges state, power firms to bargain. A14

?????RELATED STORIES

?????Utility choice: State urges an end to direct-access program. B1

?????Off grid: Santa Monica apartments will generate own power. C1

GRAPHIC: PHOTO: Doris and Tom Day are framed by a window in their new home in 
a
San Diego County subdivision that relies on solar energy. They no longer worry
about high energy bills and rolling blackouts. PHOTOGRAPHER: KAREN TAPIA / Los
Angeles Times

LOAD-DATE: June 26, 2001

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??????????????????Copyright 2001 The New York Times Company

??????????????????????????????The New York Times

?????????????????June 26, 2001, Tuesday, Late Edition - Final

SECTION: Section C; Page 7; Column 1; Business/Financial Desk

LENGTH: 679 words

HEADLINE: California and Energy Providers in Talks Over Electric Fees

BYLINE: ?By JOSEPH KAHN

DATELINE: WASHINGTON, June 25

BODY:

??For the first time since the end of the Clinton administration, California 
and the companies that sell it electricity sat at the same table today to try 
to
resolve a multibillion-dollar feud over the state's energy bills.

??California is demanding that power companies refund as much as $9 billion 
for
what it says were overcharges, while power companies say that the state's 
nearly
insolvent utilities owe them billions of dollars. City and state officials 
from
across the West are also participating in the negotiations.

???The Federal Energy Regulatory Commission convened the talks, which are
scheduled to last up to two weeks. The sessions are the first since top 
Clinton
administration officials tried and failed to broker a settlement to 
California's
electricity crisis in their waning days in office.

??"The time to put California's past energy problems to rest and structure a
new arrangement for California's energy future is now," said Curtis Wagner, an
administrative law judge for the energy commission who is presiding over the
settlement talks.

??The proceeding, which was standing-room-only on opening day, attracted 
scores
of people representing multiple sides in the dispute. The main participants 
are
electricity generating companies, electric utilities, and public officials 
from
state and local governments and regulatory agencies.

??Mr. Wagner urged the public officials and companies involved to reach an
agreement on how much California and other states in the Western grid should
have paid for power over the last year, when California's partly deregulated 
market broke down. He said that if they failed to do so by July 10, he would
recommend a solution to the energy agency's five commissioners, who would then
have the option of imposing a settlement.

??Wholesale power costs in California, which totaled $7 billion in 1999, 
soared
to about $27 billion last year and, by some state estimates, could double 
again
this year. The higher costs, which have not been fully passed along to
consumers, have rendered California's two main utility companies unable to pay
their bills and forced the state to buy power in their place.

??The opening bid by Gov. Gray Davis, who set out his views in a letter sent 
to
the energy commission today, is that the leading electricity generators should
refund about $9 billion that "they have overcharged the people of the state of
California." Michael Kahn, chairman of the California Independent System
Operator, is leading the state delegation.

??Generating companies have dismissed that figure as grossly inflated. They
acknowledge that prices are high. But they say the charges are linked to
shortages of natural gas, a crucial fuel for electricity generation, and were
set fairly in a free market.

??The companies also contend that a large proportion of what they have billed
California is a credit premium justified because wobbly utilities owe them as
much as $15 billion. Reliant Energy, Duke Energy, the Williams Companies, the 
Enron Corporation and the Mirant Corporation are among the major sellers of
electricity in the Western region.

??The energy commission, which has the duty of determining "just and
reasonable" electricity prices under a New Deal-era law, long ago found that 
the
California market had become dysfunctional and that prices were unjustified. 
But
the agency has struggled to come up with a method for determining fair rates,
changing its method three times in recent months.

??So far, the agency has identified about $125 million in potential
overcharges. But that number was reached using a restrictive method that the
agency has since abandoned.

??Last week, the agency adopted a new price control regime that is intended to
limit price spikes throughout the West. If the controls it is using now were
retroactively applied to electricity sales made over the last year, the
generators would be asked to refund much more money. By some estimates, the
refunds could total more than $1 billion but seem likely to fall well short of
the $9 billion California is seeking.


??http://www.nytimes.com
 
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??????????????Copyright 2001 Knight Ridder/Tribune News Service
???????????????????????Knight Ridder/Tribune News Service

??????????????????????????The Orange County Register

????????????????????????????June 26, 2001, Tuesday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K2449

LENGTH: 519 words

HEADLINE: Billions at stake as talks on power crisis begin in Washington

BYLINE: By Dena Bunis

BODY:

??WASHINGTON _ On the first day of talks over how to settle billions of 
dollars
of refund claims and other issues surrounding California's electricity 
crisis, a
federal energy judge gave a friendly warning to the more than 140 people in 
his
hearing room:

??"I can tell you now that you are far better off to work out the refund issue
in these settlement hearings than to have me recommend an answer to the
commission," Curtis L. Wagner, chief administrative law judge for the Federal
Energy Regulatory Commission, said Monday.

??FERC ordered a 15-day settlement conference for stakeholders in the
electricity crisis to resolve such issues as alleged generator overcharges, 
how
much power generators still have to sell to California and the future of
long-term contracts.

??The first day ended where it began:

??"California wants $8.9 billion worth of refunds," Michael Kahn, chairman of
California's Independent System Operator and Gov. Gray Davis' representative 
at
the talks, said during a break.

??Kahn and the rest of the state delegation met for an hour and a half with
Wagner Monday afternoon. Kahn then promptly got on a plane for California. The
state has until Wednesday to produce more information for the judge.

??Wagner later with power sellers in an effort to understand their position,
which is that the state's refund figure is laughable.

??"Now we're ready to get down to brass tacks," Wagner said. The veteran 
energy
jurist wasn't phased by Kahn and Davis' hard line on the $9 billion refunds,
even after Wagner signaled last week that he thought there would be only a
couple of billion in refunds.

??"Everybody has to stick to their guns for awhile," Wagner said. The judge
wouldn't say how he arrived at his refund estimate. But within Davis' $9 
billion
estimate is more than $4 billion that he says is owed to the state by entities
over which FERC has no control, such as municipal power companies. In 
addition,
the state has calculated the $9 billion based on overcharges from May 2000 to
May 2001. FERC began calculating overcharges in October 2001.

??There's no way, Kahn said, that the state will abandon its overcharge claims
for last summer.

??The first day's proceedings was largely theater. The conference started with
a statement from Wagner, including his reading of a letter from new FERC
commissioners Patrick Wood and Nora Brownell, both of whom were in Sacramento
Monday researching the natural gas issue.

??"This is not the place to debate the shopping list," Wood and Brownell's
letter said. "Nor is it a place to assign blame. Everyone must leave with
something more than they can in with."

??Then representatives from the power sellers, the utilities, the state and
interests from through the West introducing themselves to each other.

??After that, Wagner closed the conference and admonished all the parties not
to talk about what goes on in the closed hearing room.

??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune

??(c) 2001, The Orange County Register (Santa Ana, Calif.).

??Visit the Register on the World Wide Web at http://www.ocregister.com/
 
JOURNAL-CODE: OC

LOAD-DATE: June 26, 2001

??????????????????????????????11 of 58 DOCUMENTS

??????????????Copyright 2001 Knight Ridder/Tribune News Service
???????????????????????Knight Ridder/Tribune News Service

????????????????????????????San Jose Mercury News

????????????????????????????June 26, 2001, Tuesday

SECTION: STATE AND REGIONAL NEWS

KR-ACC-NO: ?K2338

LENGTH: 1365 words

HEADLINE: Pending power plants in California face some problems

BYLINE: By Steve Johnson

BODY:

??SAN JOSE, Calif. _ Although California's summer energy outlook seems to be
brightening, state leaders still are counting on new power plants to boost
competition and lower electricity prices in years to come.

??They may end up disappointed.

??Even with 42 new power plants in the works before the California Energy
Commission as of early last week, the state can't be sure of how much power 
they
will produce or what prices they will charge, experts say. That could prove
troublesome, since 70 percent of the power the state plans to buy through
long-term contracts is supposed to come from these new plants.

??Nor is there any guarantee of the price these plants might charge for the
rest of their power on the spot market, despite last Monday's order by federal
regulators to generally limit spot prices across the West.

??Like much of what has happened since the state passed deregulation, the
future appears cloudy. Here's why:

??_Critics say the price caps ordered Monday by the Federal Energy Regulatory
Commission contain loopholes that could allow California's electricity costs 
to
soar on days when it is desperate for power. When the San Jose Mercury News
asked 12 of the companies involved in the recently approved or pending power
plants if they could promise that their spot market prices would be cheaper 
than
what California has been paying recently, none could.

??_Of the 25 mostly private entities involved in these new power plant
projects, only six are generators new to the state, and most of their plants 
are
relatively small. That may slow the development of a more competitive
electricity market, which state officials say is needed to lower prices.

??_More than a third of the electricity to be produced by these new operations
would be controlled by firms accused in recent lawsuits or governmental 
actions
of questionable pricing and, in some cases, outright gouging. State officials
claim that some of these companies, among other things, have shut down their
plants when electricity demand was high to artificially crimp supplies and
inflate prices.

??_Some experts doubt that all of the proposed plants will get built. Several
power companies acknowledged that the intense criticism of them by California 
officials and uncertainties over the economic viability of owning plants here
could cause them to delay or even abandon their projects. Others suspect these
firms eventually may cancel some of the plants they have proposed, to keep 
power
in short supply and prices high.

??"I'm concerned," said California Public Utilities Commissioner Carl Wood,
when asked about the makeup of the firms proposing the new plants. "It's the
same cartel. We will have more generation, but we will have the same players
owning and controlling it."

??Such comments irk power suppliers, who have repeatedly denied breaking any
laws or regulations governing the sale of wholesale electricity. Many of these
entrepreneurs find it particularly galling that the very state officials
accusing them of price gouging are begging them to build plants in California.

??Few politicians have been as vehement in their denunciation of electricity 
suppliers as Gov. Gray Davis. Yet he is among those relying heavily on the new
power plants these companies are developing to help pull California out of its
energy crisis.

??"Eventually when supply and demand come back into something approaching
balance, there will be genuine price competition," Davis said in December. He
repeated the point earlier this month, proclaiming that "by the fall of 2003, 
we
will have more power than we need. That will solve the long-term problem."

??Davis isn't alone. Although power costs have fallen in recent weeks and
federal officials may impose tougher price controls on electricity, the
assumption that more plants is the key to solving California's troubles is 
taken
as gospel by many state and federal officials.

??It seems logical enough. More power presumably would not only ease the 
threat
of blackouts, but relieve California of the need to pay exorbitant prices on
days when electricity is in short supply.

??But calculating how much more power the state will wind up with, based on 
how
many plants are on the drawing board, is risky, say some state regulators and
consumer advocates.

??"I have no confidence at the moment that a majority of those new plants will
ever materialize," because power companies are likely to maintain an 
electricity
shortage to keep prices high, said Michael Shames, of the Utility Consumers
Action Network. "Why would they want to change what they've got? They've got a
sweet deal."

??Another reason plants might not get built is politics. Several firms with
projects in the works claimed that threats by state officials to seize their
plants or impose a windfall profits tax on their sales had made it harder to
obtain financing.

??"Every time these politicians start spouting off to improve their own
political careers, they don't realize the damage they're doing," said Gary
Ackerman of the Western Power Trading Forum.

??Just this month, Mirant Corp. of Atlanta received state permission to build 
a
530 megawatt plant in Contra Costa County _ enough to supply power to about
400,000 homes _ and it has applied to build a similarly-sized generator in San
Francisco. But its spokesman Chuck Griffin said both projects are on hold, 
until
Mirant feels more comfortable about the state's political and economic 
climate.

??"We have to be able to determine that it's going to be a viable investment,"
he said.

??Even if all 42 plants are built, many of the companies proposing them were
skittish about promising cheaper prices. They said it depends on such things 
as
the future cost of natural gas, which many of their plants use for fuel.

??One firm California is counting on is Calpine Corp. of San Jose, which
already commands a modest fleet of small plants in the state and is developing
nearly one fourth of the 42 new plants.

??Although Calpine has earned huge profits in recent months, it has a
relatively good reputation among consumer advocates and state investigators 
who
have reviewed its confidential power sales data. Moreover, Calpine's name is
conspicuously absent from recent lawsuits and federal legal filings that have
either accused other firms of gouging or questioned the reasonableness of 
their
prices.

??Much of the power to be generated from Calpine's new plants will be sold in
long-term contracts to the state, according to company spokesman Bill
Highlander. But like other suppliers, he was vague about what it would charge
for the rest.

??"It kind of depends on a whole number of factors," Highlander said, 
including
how much people conserve and how much power California can continue importing
from other states. Since no one can predict such things today, he added, 
"that's
what makes it so difficult."

??If anyone should be concerned about the price of power it's the folks at 
PG&E
Corp., who have blamed high electricity costs for forcing their utility _
Pacific Gas & Electric Co. _ into bankruptcy. But even they wouldn't speculate
about how much they would charge for the power from their 1,048 megawatt plant
in Kern County, which is to be built by their unregulated affiliate, PG&E
National Energy Group. PG&E's energy trading arm is among the suppliers 
accused
of questionable pricing practices, although PG&E officials have denied any
wrongdoing.

??By the time the Kern County plant is done in two years, "if we have a
situation where we are seeing a lot more generation come on line in the state,
economic law should dictate that prices will come down," said PG&E Corp.
spokesman Greg Pruett. But that's not for certain, he said, adding, "we've all
gone to school about how topsy-turvy the market could become."

??Like every other generator, PG&E doesn't plan to spend a lot of money
building a plant just to wind up giving away its electricity. "Obviously,"
Pruett said, "everyone who invests in these is doing so to earn a profit."

??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune

??(c) 2001, San Jose Mercury News (San Jose, Calif.).

??Visit Mercury Center, the World Wide Web site of the Mercury News, at
http://www.sjmercury.com/
 
JOURNAL-CODE: SJ

LOAD-DATE: June 26, 2001

??????????????????????????????13 of 58 DOCUMENTS

??????????????Copyright 2001 Knight Ridder/Tribune Business News
??????????????????????Copyright 2001 San Jose Mercury News

????????????????????????????San Jose Mercury News

????????????????????????????June 26, 2001, Tuesday

KR-ACC-NO: SJ-POWER-REFUND

LENGTH: 931 words

HEADLINE: Power Companies Debate Amounts of California Refunds

BYLINE: By Jim Puzzanghera

BODY:


??WASHINGTON, D.C.--The warring parties in the California electricity crisis
funneled into a room here Monday morning to try to cut through the animosity 
and
agree how much in refunds the state will get from energy suppliers.

??Billions of dollars are at stake as legal teams from California, its
utilities and dozens of power suppliers try to negotiate a settlement by July
10. The Federal Energy Regulatory Commission set up the settlement conference 
to
resolve California's claims that energy suppliers overcharged the state $ 8.9
billion for power since last spring.

??The commission has ordered about $ 124 million in refunds for a small 
portion
of that time. Power companies balk at the suggestion they overcharged, saying 
it
is they who are owed billions by state utilities who haven't paid their bills
for electricity purchases.

??If the parties can't settle the dispute during the talks, Judge Curtis
Wagner, a straight-talking, 72-year-old administrative law judge, will 
recommend
a solution to the commission.

??"I can tell you now that you're far better off to work out the refund issues
in these settlement proceedings than to have me recommend an answer to the
commission," Wagner warned the 150 participants before the confidential talks
began. "The time to put California's past energy problems to rest and 
structure
a new arrangement for California's energy future is now. We can do it if we
try."

??Early indications were that a settlement will be difficult, although state
and federal officials in Sacramento talked with optimism about a new level of
cooperation.

??But at the meeting in Washington, the head of California's team gave no
ground Monday, reiterating the state's position that it wants all of the $ 8.9
billion Gov. Gray Davis demanded during congressional testimony last week.
Michael Kahn, chairman of the state's Independent System Operator, said that 
all
the parties in California -- the governor, the attorney general, the ISO, the
Public Utilities Commission and the three investor-owned utilities -- are
presenting a unified front.

??"We are all together along with representatives from the Legislature in
saying the same thing to FERC and saying the same thing to the generators: We
want our refunds. We want them now and we want that to be the first order of
business," Kahn said.

??Kahn said that the $ 8.9 billion figure is bolstered by initial estimates by
the state of overcharges if a new price-limit formula approved by the 
commission
last week had been in effect since May 2000. The total is "an extremely
conservative estimate" and the state would ask for "a lot more money" if the
issue is referred to the commission for action, or if the whole dispute goes 
to
court. The total amount of electricity purchases by California and its 
utilities
during that 13-month period was $ 43.8 billion.

??But how far back the state could seek refunds is one of several issues 
Wagner
said must be determined in the settlement talks. The commission has said it 
only
has authority to order refunds from last October, though everything is subject
to negotiations. Wagner said last week he believes the amount suppliers owe 
the
state is about $ 2.5 billion.

??The state estimates it was overcharged $ 2.94 billion from May 2000 to
September 2000, according to a confidential ISO breakdown obtained by the
Mercury News. The breakdown of alleged overcharges by 44 suppliers only goes
through February 2001, when the state estimated overcharges at $ 6.8 billion, 
a
figure recently updated through the end of May to $ 8.9 billion.

??For the whole period between May 2000 and February 2001, the biggest
overchargers were Williams Energy Services Corp., $ 861 million; Duke Energy
Trading and Marketing, $ 805 million; and Southern Company Energy Marketing, $
754 million.

??Among other subjects to be negotiated are who should get refunds and 
immunity
for suppliers from future lawsuits for overcharges. In convening the
negotiations, FERC commissioners said they hoped many issues could be 
addressed
in addition to refunds, including more long-term contracts between the state 
and
power suppliers.

??At the end of the first day of talks, Wagner said the state and some others
were digging in. In all, about 50 different parties sent
representatives, ranging from energy suppliers to utilities to municipalities.
Wagner admonished them all to keep the talks confidential.

??"Everybody has to stick to their guns for a while," he said, noting the
negotiations may have to go late into the evenings and on weekends to meet the
deadline.

??In Sacramento Monday, the two newest commissioners to join FERC -- Pat Wood
and Nora Brownell -- both praised California for its handling of the energy
crisis.

??Wood, a Texan appointed by President Bush who is expected to become the next
FERC chairman, said he had come to California to help "patch up" the state's
strained relationship with federal regulators.

??After meeting with Davis and legislative leaders, Wood said he was "more
hopeful today than I was at any time in the past year."

??"They are very committed to getting this energy cowboy back on the bucking
bronco," he said.

??Davis, who has bashed Bush and federal regulators for weeks, also changed 
his
tone.

??"From my conversations with these commissioners, it appears that FERC may
finally be poised to do its job controlling energy costs," he said in a 
prepared
statement.


??-----

??To see more of the San Jose Mercury News, or to subscribe to the newspaper,
go to http://www.sjmercury.com
 


JOURNAL-CODE: SJ

LOAD-DATE: June 26, 2001

??????????????????????????????14 of 58 DOCUMENTS

?????????????????Copyright 2001 The Chronicle Publishing Co.

?????????????????????????The San Francisco Chronicle

????????????????????JUNE 26, 2001, TUESDAY, FINAL EDITION

SECTION: NEWS; Pg. A3

LENGTH: 984 words

HEADLINE: Compromise urged in electricity refund talks

SOURCE: Chronicle Washington Bureau

BYLINE: Zachary Coile

DATELINE: Washington

BODY:
With armies of lawyers on each side, California officials and representatives 
of
the nation's power generators began the first day of federally ordered
settlement talks yesterday far apart on the issue of electricity refunds.

???California officials, including attorneys for the investor-owned utilities,
stuck to their claim that the state was owed nearly $9 billion in alleged
overcharges by the generators.

???But electricity suppliers were equally adamant in their opposition to
refunds, arguing the prices they charged were legitimate. Suppliers are
demanding payment for billions of dollars they are owed for electricity 
already
sold into the state.

???The mediator in the talks, veteran Federal Energy Regulatory Commission
administrative law Judge Curtis L. Wagner Jr., warned both sides they would 
have
to compromise -- or accept a settlement imposed by federal regulators.

???"The time to put California's past energy problems to rest and structure a
new arrangement for California's energy future is now," Wagner said. "We can 
do
it if we try."

???The difficulty of the task was made clear when the judge asked those in the
hearing room yesterday to stand and identify themselves. About 140 people --
nearly all lawyers -- stood to declare which state, city, power exchange or
generator they represented.

???In addition to a host of energy firms, other Western states are involved in
the talks. Officials in Washington and Oregon say they may ask for up to $6
billion in refunds.

???Wagner opened the talks by reading a letter from new FERC Commissioners
Patrick Wood and Nora Mead Brownell urging both sides to compromise.

???"Parties must only focus on what they absolutely need, not what they want,"
the statement read. "This is not the place to debate the shopping list, nor is
it the place to assign blame."

???If the parties can't settle the money fight in 15 days, Wagner will have
seven days to recommend action to FERC's five commissioners.

???"I can tell you now that you are far better off to work out the refund 
issue
in these settlement proceedings than to have me recommend an answer to the
commission," Wagner said.

???As the talks started in Washington, Wood and Brownell met yesterday in
Sacramento with Gov. Gray Davis, legislative leaders and other groups involved
in solving the energy crisis.

???Davis said in a statement that he was more encouraged by FERC's actions
recently since the two joined the regulatory body.

???"In a refreshing change . . . these commissioners offered a problem-solving
approach in resolving California's energy challenge," Davis said.

???Wood expressed optimism the settlement talks would be fruitful.

???"I think it is far better to settle than to stretch out through litigation,
even if the state were to ultimately prevail," he said. "This is really 
(about)
businesspeople who need to re-establish a business relationship that has been
poisoned."

???Although the divide between California officials and the generators is 
vast,
some have faith in the mediator, a 72-year-old judge with a track record of
reaching settlements in difficult cases.

???"He's a miracle worker," said FERC commissioner William Massey. "He's very
good at persuading parties that it's in their best interests to settle rather
than proceed" with lawsuits.

???Wagner set the tone yesterday by ordering reporters out of the hearing room
after half an hour explaining the ground rules. And Wagner warned participants
to keep the discussions confidential.

???"I would hate to read something in the business section tomorrow that
somebody said here today," Wagner said.

???Michael Kahn, chairman of California's Independent System Operator, said 
the
state would hold firm to its request for $8.9 billion in refunds. Any refunds
would go to the electricity buyers -- the utilities and the Department of 
Water
Resources, which has bought energy on behalf of the state since January.

???But to suppliers, even the word "refund" is an unacceptable term.

???"Certainly, you will not find a supplier who will agree that they have been
overcharging anyone in California, so clearly any refund obligation will be
contested," said Mark Stultz, a vice president of the Electric Power Supply
Association, which represents the generators. "The suppliers will argue the
charges were appropriate for the market conditions."

???State officials may face difficulty recovering the full amount, based on
electricity sales from May 2000 to May 2001. Under FERC rules, overcharges can
only be authorized after a formal investigation is ordered, which began Oct. 
2,
2000.

???"There is no way that we're going to do anything to compromise those
claims," Kahn said. "That includes last summer, when San Diegans were terribly
overcharged. That includes last summer, when there were no credit problems, 
and
the gas situation was not anywhere near as severe as it was later in the year,
and still there were hideous (electricity) prices."

??--------------------------------------------------------------------

???POWER ISSUES

???These are some of the items administrative law Judge Curtis L. Wagner Jr.
expects to tackle during settlement talks between Western state officials and
power generators:

???-- -- California's claim that the generators overcharged the state by 
nearly
$9 billion for electricity.

???-- Generators' claims of overdue payments, estimated at several billion
dollars, due them from PG&E and other utilities.

???-- Long-term power contracts, which would reduce the amount of power
California must purchase on the volatile spot market.

???-- Ensuring a creditworthy party to pay for power.

???-- Natural gas prices and pipeline capacity, particularly in Southern
California.

???-- PG&E's bankruptcy proceedings.

??Source: Chronicle staff and news services

??Chronicle staff writer Lynda Gledhill contributed to this report from
Sacramento. / E-mail Zachary Coile at zcoile@sfchronicle.com.

LOAD-DATE: June 26, 2001