Please see the following articles:

Sac Bee, Thurs, 7/5: Many rural towns to escape blackouts, utility maps show

Sac Bee, Tues, 7/3: Details emerge in power contracts

SD Union, Thurs, 7/5: New FERC member seems attuned to state's woes

SD Union, Wed, 7/4: Electricity price-cap tests spark allegations

SD Union, Wed, 7/4: Renewable energy fades from picture in rush for solution

SD Union, Wed, 7/4: SDG&E spreads word of looming blackouts

SD Union, Wed, 7/4: Two more energy whistleblowers slated to come forward

SD Union, Wed, 7/4: Disabled PG&E employees ask state for help in getting 
disability checks

LA Times, Thurs, 7/5: Powerful Judge Illuminates Energy Practices Law: 
'Folksy' jurist, 72, stuns utility executives and lawyers alike with his 
courtroom incisiveness.

SF Chron, Thurs, 7/5: Davis lauds California generator 
Vote of confidence at Calpine's festival 

SF Chron, Wed, 7/4: Activists stage anti-corporate march to power plant 

SF Chron, Wed, 7/4: Davis asks PUC to let utilities cut voltage 
1% savings on energy consumption predicted

SF Chron, Wed, 7/4: Federal price limits backfire 
Some generators withhold power rather than abide by rate caps

SF Chron, Wed, 7/4: Two more energy whistleblowers slated to come forward

Mercury News, Wed, 7/4: Davis seeking cheaper contracts 

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Many rural towns to escape blackouts, utility maps show 
By Carrie Peyton
Bee Staff Writer
(Published July 5, 2001) 
Huge stretches of Northern California, including many rural foothill and 
valley communities, won't face rolling blackouts this summer, spared by a 
combination of geography and circuitry. 
Placerville and Loomis, Esparto and Isleton are among the many towns that 
will be largely or entirely bypassed by deliberate blackouts, according to 
new Pacific Gas and Electric Co. outage maps. 
Such communities are served by so few circuits that each one has been 
exempted from outages because a critical facility, such as a fire station or 
a water treatment plant, lies along the circuit somewhere, PG&E spokesman 
John Nelson said. 
Both PG&E and the Sacramento Municipal Utility District have begun shedding 
more light on their strategies for rotating outages in the wake of a 
governor's order requiring utilities to let people know where blackouts will 
strike next. 
For PG&E, that has meant quickly posting and then updating blackout maps on 
its Web site. For SMUD it has meant publicly detailing, for the first time, 
the boundaries of 78 separate rotating outage areas and listing by number 
which areas could be tapped next. 
"We were contemplating putting the map on the Web before the governor's 
order, but the timing coincided very well," said John DiStasio, SMUD's 
assistant general manager for customer service. 
SMUD updated its Web site, www.smud.org, on June 22 so that now people can 
click on "rotating outages" and then "next likely locations and map" to see 
the shape of outages to come. 
The map replaces less-precise neighborhood names, which is all SMUD supplied 
until Gov. Gray Davis ordered utilities to give the public "common 
geographical boundaries, grid or block numbers, maps or similar identifying 
information" about where outages will strike. 
With six days of rolling blackouts already behind California this year, and 
forecasts that more probably lie ahead, Davis has told utilities and the 
state Independent System Operator to give better notice of when and where 
blackouts might occur. 
Grid operators and utilities have cautioned that Davis' program of two-day, 
one-day and one-hour warnings could produce many false alarms because power 
supplies often come through at the last minute. There is also some wariness 
about outage maps, which SMUD and PG&E warn could change at any time. 
But the maps do provide insight into how each utility will roll blackouts 
through its territory. PG&E's maps, on the Web at www.pge.com under "find 
your outage block" and then "rotating outage block map," have recently been 
updated to be searchable by zip code. 
They show that the vast majority of El Dorado and Placer counties and much of 
Yolo County are in PG&E's "block 50," a designation for a circuit that won't 
be in line for rolling outages because someone along it is crucial to health 
or safety. 
Police stations, fire stations, hospitals and airports are all deemed 
essential customers that should keep functioning even when the state power 
grid is so overloaded that blackouts are needed to keep it from collapsing. 
In densely populated areas, circuits tend to be compact, leaving lots of 
neighborhoods eligible for rolling blackouts, Nelson said. 
But "in rural areas, particularly remote rural areas, a circuit can go on for 
miles and miles," Nelson said. "You can have multiple communities on one 
circuit ( (and) virtually every community has either a police station or a 
fire station or a hospital or a drinking water facility." 
That has been good news for communities like Placerville, which scrambled for 
traffic control earlier this year when a rolling outage took out the signal 
lights on Highway 50, which bisects the town of 10,000. 
"That has been our biggest concern because of the amount of traffic that goes 
through there," said City Manager John Driscoll. Placerville will be spared 
future outages because regulators now are protecting more hospitals from 
blackouts, and much of the rest of the town shares circuits with hospitals. 
"We didn't ask to be exempted out, but I feel very happy that we are. From a 
selfish standpoint, it feels very nice," Driscoll said. 

The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com. 
 



Details emerge in power contracts
By Carrie Peyton and Chris Bowman
Bee Staff Writers 
(Published July 3, 2001)

California's power bills for the next decade probably will exceed the 
forecasts of Gov. Gray Davis, the State Controller's Office said Monday as it 
released unedited versions of long-term contracts in a new jab at the 
governor. 
The electricity contracts, which Davis' office sought in court to keep 
secret, offer a glimpse into the rapid, high-stakes deals struck early in the 
state's power crisis and illustrate the way deregulation's unraveling could 
haunt California for years to come. 
Some show that builders of new power plants could recoup the entire cost of 
those plants in four years or less. Some show lucrative swaps for power, 
including one arranged the same day California was rocked by rolling 
blackouts. 
More than two dozen additional administrative contracts detail the price 
California is paying its consultants to seek a way out of the power mess, 
from tens of thousands for Davis' aides down to $51 an hour for copying and 
phone answering. 
The governor's office defended its estimates of the state's future power 
bill. 
The 41 long-term contracts, 27 consulting contracts, five short-term deals 
and stacks of receipts and invoices released Monday by state Controller 
Kathleen Connell may just be the start. 
Her office hopes to provide details about how much California has already 
paid individual power generators in the volatile short-term, or "spot," 
market. 
The deals include so many intricate pricing formulas that Connell said she 
couldn't immediately predict exactly how high California's hourly power costs 
would go. 
Walter Barnes, chief deputy controller of finance, said the contracts 
probably would be "well in excess" of the $69 a megawatt-hour that Davis once 
said would be California's average cost for contract power for the next 
decade. 
The contracts' prices range from $55 to $249 a megawatt-hour, and most are 
more than the $69, Connell said. 
The state Department of Water Resources, the state's power buying arm, later 
revised the $69 forecast to $70 a megawatt-hour through the end of 2010, with 
the higher priced power coming first. 
If anything, those figures could decline because natural gas, the fuel for 
most new power plants, is getting cheaper, DWR spokesman Oscar Hidalgo said, 
adding that his office sticks with its forecasts. 
"We're on pretty solid ground here," he said. 
As the statewide elected official who pays California's bills, Connell 
repeatedly has criticized the governor for his electricity spending, saying 
that she never believed the contracts should be kept secret. 
But Davis' office blasted her for giving out details that power generators 
and traders could use to learn the state's negotiating positions and buying 
practices and said the information could boost wholesale prices within days. 
"When they open their electric bill next time, every Californian can thank 
Kathleen Connell for higher electricity costs," Davis spokesman Steve 
Maviglio said. 
The long-term contracts were first released June 15 by the water resources 
department with power plant names, performance data, delivery points and 
other details blocked out under heavy black strokes. 
Analysts said that was the sort of data they could have used to calculate how 
much more than the production costs the state was going to be paying for the 
electricity purchased on behalf of three cash-strapped investor-owned 
utilities. 
As analysts began sizing up some of the specifics Monday, early reactions 
were wary. 
"This just shows when the state comes in and takes over the utility system, 
we're just going to be in deep from all sorts of expenses and inefficiencies 
that we were trying to get away from" with deregulation, said Arthur 
O'Donnell, who edits a trade newsletter, California Energy Markets. 
Bill Marcus, a power consultant who had analyzed the edited contracts for a 
consumer group, quickly read through the unedited versions muttering things 
such as "offensive" and "they got absolutely ripped here." 
In one swap that was negotiated on a day of rolling blackouts in March, the 
state agreed to send Powerex, the trading arm of British Columbia's 
government utility, 2* times more electricity in the spring than Powerex 
would return in the summer. 
Although seasonal swaps are common, the 2*-to-1 ratio was a sign of "panic" 
and inexperience on the state's part, he said. 
The consultants who advise California on power deals were frenetic at the 
time, with one staffer at the Navigant consulting firm billing for hours 
worked that were the equivalent of 9.7 hours a day for 34 consecutive days. 
The power purchase terms disclosed Monday confirm many energy analysts' 
predictions that California consumers would be paying premium prices for 
years to cover the costs of the new plants coming on line. 
In several of the contracts, the state agreed to pay generators a 25 percent 
to 30 percent annual return on their plant construction costs, which could 
pay off the entire plant in four years or less. 
Before deregulation, utilities generally received 3 percent to 18 percent 
annual return on their capital investments over 30 years, said Marcus, a 
veteran energy analyst whose firm, JBS Energy Inc. of West Sacramento, 
represents ratepayer groups. 
"We're all going to have to pay more for power plants over the next 10 or 
more years because the generators are looking to pay off their plants in half 
the time," he said. 
"Beyond blackouts and price spikes, this will be the long-term legacy of 
deregulation," he said. "The private market needs a high rate of return on 
their investment." 
Several contracts were drafted in the late winter and early spring when 
California endured Stage 2 and Stage 3 energy alerts. 
The unmasked terms in some of those agreements reflect the state's 
desperation for megawatts amid fears of routine blackouts when temperatures 
and energy use began to rise in the summer. 
For example, the state agreed in a March 29 contract to pay Calpine $232 a 
megawatt-hour to supply 300 megawatts nonstop from July 1 through Sept. 30. 
But a more recent Calpine contract calls for about $59 a megawatt-hour, 
starting Oct. 1. 
Time made all the difference, said Jim Macias, a Calpine senior vice 
president. He said that last winter, Calpine couldn't guarantee that plants 
under construction in Sutter County and the East Bay would be on line by 
summer. So the company bought the power on the spot market for the state, 
Macias said. 
"Back in the winter, $232 was a good price for electricity this summer," he 
said. 
Calpine officials said that they made no money on the sale and even knocked 
15 percent off their price to maintain good relations with the state power 
buyers. 
The gesture more than paid off with the signing of the 10-year contract, said 
Kathleen Potter, Calpine spokeswoman. 
"It was a great transaction for us," Potter said. "We appreciate the 
business." 
Proponents of "free-market" energy buying have said that in the long-run, 
competitive forces would result in more-efficient, less-costly power 
generation. 
But the contracts show that pressed for more electricity this summer and 
fall, officials resorted to buying power from some of the least-efficient 
plants in the state, guaranteeing owners of these aging generators 10 more 
years of income. 
The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com.








New FERC member seems attuned to state's woes 






Texan may become agency's next chief
By Toby Eckert 
COPLEY NEWS SERVICE 
July 5, 2001 
WASHINGTON -- During his first weeks at the Federal Energy Regulatory 
Commission, Pat Wood has set a decidedly different tone in the agency's 
strained relationship with California. 
After meeting with Gov. Gray Davis last week, Wood -- who was recently 
appointed to the commission by President Bush and is widely expected to be 
named chairman soon -- praised the state's efforts to come to grips with its 
power problems. It was a stark contrast to the almost constant criticism from 
FERC Chairman Curtis Hebert. 



"It certainly seems to me that both the political leadership and the 
regulatory leadership of the state are committed to the kind of 
infrastructure upgrades that are needed to really get supply and demand back 
into whack," Wood said, referring to power plants being built in California. 
The former Texas utility regulator also raised the possibility of closer 
cooperation between FERC and state regulators, including a "joint effort" on 
inspecting power plants. State officials have accused generators of idling 
plants to drive up electricity costs, a charge generators deny. 
"If we're kind of co-regulators with the state, and in many regards we are, 
it's helpful to work off the same set of facts so you get to conclusions much 
more expeditiously," Wood said, though he was quick to add that he has not 
seen any evidence of intentional withholding of supply. 
State officials hope Wood's statements signal that FERC is poised to take a 
more aggressive role in helping the state. If elevated to chairman, Wood 
would set FERC's agenda and shape its approach to dealing with California. 
The agency regulates wholesale electricity and natural gas markets, which 
have subjected the state to skyrocketing prices. 
Wood "has brought a very good perspective to FERC," said Howard Gantman, a 
spokesman for Sen. Dianne Feinstein, D-Calif., a frequent critic of the 
commission. "He seems very interested in getting to the root of the problem 
and finding solutions." 
Throughout the crisis, the state's relationship with FERC has been poisonous. 
Davis criticized the commission for being slow to rein in electricity prices, 
while Hebert faulted the state for crafting a bad deregulation law and 
failing to build enough plants to keep up with demand. 
Davis issued a guardedly conciliatory statement after his meeting in 
Sacramento with Wood and Commissioner Nora Brownell, who is also new to FERC. 
"In a refreshing change from my past dealings over the past year with the 
agency, these commissioners offered a problem-solving approach in resolving 
California's energy challenge," Davis said. He added, "It appears that FERC 
may finally be poised to do its job controlling energy costs." 
Threats criticized
Despite the soothing words, there is no shortage of potential flash points 
between Davis and FERC. 
Wood, who professes a "religious zeal about competition," raised concerns 
about a possible move by the California Public Utilities Commission to keep 
retail power customers from shopping around for alternative providers. 
He also criticized threats that Davis and other California politicians have 
made to seize power plants and impose a windfall profits tax on power 
sellers. 
"I think the rhetoric's still pretty hot out there. If I were a generator 
looking at 50 states, one that's talking about a windfall profits tax and 
expropriation of property and all that is not a great climate," Wood said. 
For his part, Davis has questioned whether the recent price curbs imposed by 
FERC in the West will be enough to tame soaring wholesale power costs that 
have bankrupted one utility, cost the state treasury billions of dollars and 
raised consumers' power bills. 
Davis has also made it clear that he expects hefty refunds to result from the 
FERC-brokered talks between the state and power providers, which are in their 
second week. 
"I will be vigilant in insisting that Californians get their money back," 
Davis said. 
California consumer activists are taking a wait-and-see attitude toward Wood, 
saying they know little about him. 
A major role
"My impression from afar is he seems to be more moderate," said Harvey 
Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in 
Santa Monica. 
Once considered a bureaucratic backwater, the five-member FERC has come to 
play a high-profile role in the California debacle and other disputes 
involving the largely deregulated wholesale power markets. 
The commission is charged with ensuring that "just and reasonable" prices 
prevail. 
Bush is expected to make Wood the FERC chairman because Hebert is seen as too 
much of a lightning rod. 
Before coming to Washington, Wood, who turned 39 yesterday, headed the Texas 
Public Utility Commission. There he oversaw the state's move toward a 
deregulated electricity market. Like Hebert, Wood is convinced that a free 
market will deliver cheaper power to consumers than a highly regulated one. 
"I just think customers fare better when they have more choices," Wood said. 
But consumer advocates and others who have worked with Wood in Texas say his 
zeal is tempered by a healthy dose of pragmatism. 
"Bottom line, it's all about the customer. Y'all will hear me say that until 
you get sick of it," Wood said. "We want to make sure that the world we're 
moving to is better than the one we left." 












Electricity price-cap tests spark allegations 






Suppliers said to have held back; industry blames ISO
By Craig D. Rose and Bill Ainsworth 
UNION-TRIBUNE STAFF WRITERS 
July 4, 2001 
The first emergency tests of new electricity price controls have generated 
accusations that suppliers were withholding power and questions that the caps 
might need to be revised or scrapped. 
And in a case of turnabout, a power industry spokesman yesterday said the 
Independent System Operator, which manages the state's electricity grid, 
might be using the federal price caps to manipulate the electricity market. 
This time, however, the charge is that the ISO is gaming to push prices 
lower. 
At any rate, California survived its second consecutive day of power 
emergencies without blackouts under price caps recently imposed by federal 
regulators, but not without some bumps along the way. 



The main culprit was hot weather that baked Western states for two days, 
forcing the ISO to issue Stage 1 and then Stage 2 alerts. Yesterday, the ISO 
warned that rolling blackouts might hit in the afternoon. 
But as has happened often this year, the ISO bought power in the last minutes 
to avoid outages. The grid operator also credited conservation efforts with 
shaving from 2,000 to 4,000 megawatts of consumption. A megawatt can power 
about 750 homes. 
"It was a lot hotter than expected and a lot more humid," said Kristina 
Werst, spokeswoman for the ISO. 
Today, state officials expect to avoid any blackouts because of the holiday, 
which tends to decrease electricity demand, Werst said. 
The price controls ordered last month by the Federal Energy Regulatory 
Commission set up formulas for maximum prices during emergency and 
nonemergency periods. The FERC said the complex system was intended to 
balance the need for lower costs with its desire to promote a power market. 
But questions are growing about the effectiveness of the FERC price caps. 
A Department of Water Resources spokesman, which buys power for the state, 
said generators withheld between 660 and 1,500 megawatts of electricity 
during a critical period earlier this week because of the price caps. That 
would be enough to cut electricity reserves from 7 percent to 5 percent and 
bump a Stage 1 alert to a Stage 2. 
Sempra Energy Trading, a marketing unit of San Diego Gas & Electric Co.'s 
parent corporation, admitted that it ceased selling power to the state for 
what could have been a critical 30 minutes Monday. 
A spokesman for the trading company said it halted sales for the half-hour 
because it was unsure about where the ISO would set maximum prices during the 
first power emergency under the new caps. 
When power emergencies are called under the FERC plan, a new price cap is set 
based on the cost of operating the least efficient, most costly electric 
generating plant. Because the identity of that plant is unknown beforehand, 
the selling price is set retrospectively by the ISO. 
"It was unclear to the traders what the proxy price would be," said Doug 
Kline, a Sempra spokesman, who emphasized that the company's trading unit 
resells power generated by other companies. "So it was unclear whether the 
ISO would come back later and say, 'You purchased power at $70 per 
megawatt-hour but we're only going to pay you $60.'?" 
For its part, the ISO said the impact of price controls on electricity 
supplies during emergencies is still unclear. The controls this week kept 
emergency prices Monday from a little over $70 per megawatt-hour to a high of 
about $90. FERC's nonemergency price cap has been about $92 per 
megawatt-hour. 
Earlier this year, the average price per megawatt-hour was nearly $300. 
Before the power crisis hit last year, the price was about $30. 
The ISO said several factors other than the price controls might have 
contributed to tight supplies this week, including plant shutdowns in other 
states and the regional heat wave. 
But a spokeswoman for Nevada Power said the utility believed the price caps, 
or confusion over their implementation, had contributed to a power shortfall 
that led to blackouts Monday. The utility fell about 100 megawatts short of 
its need as temperatures in some of its service areas hit 122 degrees. 
"Power is tight in the region," said Sonya Heagen of Nevada Power. "What 
tipped it over (for southern Nevada) was several utilities decided to hold 
back power." 
Gary Ackerman, executive director of the Western Power Trading Forum, an 
industry group, said the FERC's price-control plan fails to allow the 
recovery of electricity transportation costs. That has the effect of keeping 
electricity in the region in which it is generated, rather than where it 
might be needed most, he said. 
Ackerman said transportation costs, which typically run from $2 to $8 per 
megawatt-hour, are more significant now that overall prices have settled into 
a $100 range. 
"They didn't mean as much to the suppliers when they were getting $400 per 
megawatt-hour," Ackerman said. 
He also said some of his members suspect the ISO made moves during power 
alerts to artificially keep prices lower. 
The FERC pricing regime sets nonemergency prices at 85 percent of the last 
full hour of a Stage 1 emergency. But this week, the ISO twice went from a 
Stage 1 to a Stage 2 alert in less than an hour. That kept the nonemergency 
price cap in place at about $92 per megawatt-hour, set back in May. 
"Some traders said the ISO is 'gaming the market' to keep the price lower," 
Ackerman said. "I have a few traders who think the price should be higher." 
The ISO rejected the charge of manipulation and said it continues to make its 
emergency declarations based on power supply and demand. The ISO also said it 
has not identified transportation costs as a problem under the FERC order. 
Other energy experts, however, said the FERC system of using the most 
inefficient power plants to set emergency prices was a mistake. 
Frank Wolak, a member of the ISO's market monitoring unit and a Stanford 
University economist, said the plan invited energy companies to keep their 
least efficient plants in operation to ensure the highest prices. 
But James Sweeney, also a Stanford professor and energy expert, said he 
preferred the FERC plan to a rigid market price cap. 
Consumer advocate Doug Heller of the Foundation for Taxpayer & Consumer 
Rights said the FERC plan is too complex and urged a return to a regulated 
system, which pays generators for their production costs plus a reasonable 
profit. Gov. Gray Davis supports a similar approach. 
Arthur O'Donnell, editor of California Energy Markets, saw much of the 
maneuvering this week as an industry road test of new price regime. 
"I think they were testing the boundaries," O'Donnell said. "This is the week 
where we test the bugs in the system." 
Copley News Service correspondent Toby Eckert and The Associated Press 
contributed to this report. 













Renewable energy fades from picture in rush for solution 






By Ed Mendel 
UNION-TRIBUNE STAFF WRITER 
July 4, 2001 
SACRAMENTO -- The electricity crisis is putting the squeeze on the renewable 
energy industry: the power plants that use the sun, wind or underground heat. 
The environmentally friendly, alternative energy provides about 12 percent of 
the state's power. But the energy crunch and the state's effort to resolve it 
could end up shrinking the role of renewable energy in the coming years just 
as backers were hoping to see it expand. 
For example: 
?Long-term power contracts obtained by the state to reduce costs will cover 
most state needs for a decade. Nearly all of the contracts are with natural 
gas-fired plants, reducing the long-term market for new renewable plants. 
?The uncertainty and lack of payment resulting from the crisis have slowed 
the development of renewable plants under an incentive program created as 
part of the state electricity deregulation plan. 
?Regulators are poised to prevent marketers from selling electricity, 
including "green power" from renewable sources, directly to customers. A 
large base of ratepayers must stay in the state program to pay off a power 
bond of up to $13.4 billion over 15 years. The state Public Utilities 
Commission yesterday for the second time put off a decision whether to 
curtail such direct access. 
State and federal programs had been encouraging renewable energy to reduce 
dependency on the new wave of relatively clean and efficient natural-gas 
power plants. The cost of electricity from those plants could go up if the 
demand for gas outpaces supply. 
Renewable energy, with the exception of some biomass plants, also avoids the 
pollution problems of power plants fueled by oil and coal -- not to mention 
the safety and radioactive waste-disposal problems of nuclear power. 
A spokesman for a coalition of renewable generators and environmental groups 
said he thinks renewable energy has suffered during the electricity crisis 
because of a lack of attention, not a shift in state policy. 
"I think the renewables are an unintended casualty," said V. John White of 
the Center for Energy Efficiency and Renewable Technologies. 
The state became a major player in the power equation in January when it 
began buying power for debt-ridden utilities. 
State officials say they would like to have a mix of power to spread the risk 
if something goes wrong with one source. For example, soaring natural gas 
prices last winter were part of the reason for the high cost of electricity. 
In a trade-off, the state scrambled to obtain long-term contracts that would 
lower the price of electricity now in exchange for prices that are expected 
to be above the market in the years to come. 
The 38 contracts, worth $43 billion over the next decade, will help finance 
the construction of gas-fired power plants. About 70 percent of the power 
will come from plants that have not yet been built. 
Only four of the contracts are for renewable power, and their 120 megawatts 
is a tiny fraction of the total amount of power now under state contract. A 
megawatt can provide power for 750 to 1,000 homes. 
"We agree the portfolio is lopsided and should be more diverse than it is," 
Ray Hart, head of the power purchasing unit in the state Department of Water 
Resources, told the Senate Energy Committee last month. 
The state has agreements in principle on an additional 19 contracts for 1,270 
megawatts from renewable sources. Most of the power, 1,172 megawatts, would 
come from wind generation. 
"Anything could happen," said Oscar Hidalgo, a Water Resources spokesman. "It 
could increase or decrease, depending on what gets signed." 
One renewable generator, CalEnergy, said the state rejected its offer to 
provide 340 megawatts from a geothermal plant in the Imperial Valley for 20 
years at 6.9 cents per kilowatt-hour, a price that is said to be the 10-year 
average of the state contracts. 
"We were astonished," said Jonathan Weisgall, CalEnergy vice president. 
Hidalgo said state power purchasers "don't recall the specifics" of the 
CalEnergy offer. He said the proposal may have been rejected because of its 
length, the time of the power delivery, or other reasons. 
"They may have to regroup, restructure, repackage, and look for what we 
want," Hidalgo said. 
Under deregulation, part of monthly ratepayer bills were earmarked for a fund 
to encourage renewable energy sources. The fund provides five-year incentives 
of up to 1.5 cents per kilowatt hour. 
The state held auctions in 1998 and again last summer that awarded $202 
million in incentives for dozens of new small renewable plants that could 
produce about 1,000 megawatts. The average incentive was .4 cents per 
kilowatt hour. 
But at this point, said Marwan Masri of the California Energy Commission, 
only plants capable of producing 180 megawatts have been completed. 
"There is the overall issue of who will buy the power," said Masri, "and at 
what price and for how long." 
A firm that specialized in marketing "green power" from renewable sources for 
the environmentally conscious has taken a double hit from the electricity 
crisis. 
Green Mountain Energy of Austin, Texas., sells power to customers in a part 
of deregulation that is often called "direct access," which bypassed 
utilities and later the state after it began buying power for utility 
customers. 
The firm canceled contracts with 50,000 customers because the price was 
indexed to the state Power Exchange, which went bankrupt last spring after 
the debt-ridden utilities defaulted on their debt. 
Green Mountain still has contracts with about 7,000 customers in San Diego 
County who receive power under contracts at a fixed rate, 8.5 cents per 
kilowatt-hour. 
The state Public Utilities Commission is still expected to prohibit future 
direct-access contracts, a step directed by the legislation authorizing the 
state to buy power for utility customers. 
"That was the second blow to us," said Rick Counihan of Green Mountain. "It 
meant that we couldn't go out and buy a block of fixed-price power to sell to 
customers." 
The ban on direct-access contracts is vigorously opposed by business groups, 
who say that direct access would lower the cost of doing business in 
California. 
But supporters of the direct-access ban say that if customers bypass the 
utilities, the remaining ratepayers will be stuck with paying off a bond of 
up to $13.4 billion that is expected to be issued in September for power 
costs. 
Despite the problems, some representatives of the renewable energy industry 
are optimistic about its potential for growth in the future. 
"A lot of the market is being served by rapidly aging power plants that 
should be replaced," said Jan Smutny-Jones of the Independent Energy 
Producers. "I think we also are going to see additional demand." 
Moreover, state government may take more steps to encourage the renewable 
industry. 
The Energy Commission is proposing a goal for the incentive program that 
would increase the amount of power coming from renewable sources to 17 
percent of the total by 2006, up from 12 percent. 
State Sen. Byron Sher, D-Stanford, has introduced a bill, SB 531, that would 
set a goal of increasing the renewable share of state power to 20 percent by 
2010.














SDG&E spreads word of looming blackouts 






By Jeff McDonald 
UNION-TRIBUNE STAFF WRITER 
July 4, 2001 
While power supplies dwindled and the likelihood of blackouts loomed, San 
Diego Gas & Electric Co. for the first time yesterday was able to warn 
customers in advance that they might go dark. 
Under increasing pressure from businesses and residents, SDG&E launched a new 
system to notify customers by pager and e-mail whenever the state declares 
supply emergencies that might lead to blackouts. 
Some 5,000 customers signed up for the warnings, which ended up being false 
alarms by midafternoon when the Independent System Operator, which manages 
the state's electricity grid, was able to find enough megawatts to avoid the 
first blackouts since May. 
"This at least gives people the opportunity to make a switch over to backup 
generation, to power down essential equipment or to back up critical files," 
SDG&E spokesman Ed Van Herik said. 
"It's definitely an improvement, but we'll certainly look for ways to 
increase the effectiveness of the notification process." 
Even so, the warnings from SDG&E came barely an hour before the ISO was 
expected to issue a Stage 3 power alert, meaning that demand had climbed to 
within 1.5 percent of available supplies. As it turned out, the state never 
rose above a Stage 2 alert. 
As the threat of blackouts continues to vex state power officials, early 
warnings about potential outages have become a key issue for businesses and 
residents who rely on uninterrupted service. 
During blackouts earlier this year, darkened traffic lights caused numerous 
accidents, people were stranded in elevators and business owners complained 
of losses that could have been minimized. 
"Regular notification is a good idea," said Samuel Ingersoll-Weng of the San 
Diego Community Technology Group, which works with hundreds of local 
organizations to promote computer literacy. 
"It would be very helpful in terms of scheduling staff, canceling or holding 
classes and also to protect equipment from power spikes or suddenly being 
shut off," he said. 
For most of the year, SDG&E was telephoning a small number of such customers 
on mornings they worried that demand for electricity might exceed supplies. 
But the problem is that when orders to pull megawatts from the grid come from 
the ISO, the utility has only minutes to cut supplies and there has been 
little time to warn people they may lose power. 
Yesterday, SDG&E was told 90 minutes ahead of time that a Stage 3 warning 
would likely be called at 3 p.m. The company issued the mass e-mails and 
pages within 30 minutes. 
Gov. Gray Davis announced plans this spring to provide neighborhoods 48-, 
24-and 1-hour notices when blackout orders might be called. The ISO issued no 
such notice yesterday, when it came the closest it had in weeks to ordering 
blackouts. 
Ratepayers interested in signing up to be notified early of potential 
blackouts can call the utility at (800) 411-SDGE. 












Two more energy whistleblowers slated to come forward 






By Don Thompson
ASSOCIATED PRESS 
July 4, 2001 
SACRAMENTO ) Two more former workers at a San Diego-area Duke Energy plant 
are slated to talk with state investigators Thursday, echoing concerns by 
other employees over how the plant was run when the state needed its power 
most. 
However, another former worker at the Chula Vista plant said he discarded 
perfectly good equipment three to five years ago, while the plant was still 
owned by San Diego Gas and Electric. 
"Stuff that cost $3- to $5,000 we were throwing away," said Don Perkins of 
Alpine, a mechanic at SDG&E plants for nearly 25 years. 
That undercuts testimony from other former workers who told the Senate Select 
Committee to Investigate Price Manipulation of the Wholesale Energy Market 
last month that they discarded valuable repair parts on the orders of Duke 
supervisors. 
Like the other former SDG&E employees who have come forward, Perkins was not 
hired by Duke when it took over full operation of the plant in April. Perkins 
said he is happy in retirement, but like his former co-workers believes Duke 
was driving up energy prices ) which the company vehemently denies. 
He and the three other former workers suggested Duke did not adequately 
maintain its equipment, leading to unnecessary repairs they said cut power 
generation and may have helped boost prices by cutting supply. That included 
running a 15-megawatt jet-fuel fired turbine until it broke down. 
"We ran the heck out of the plant, you bet we did,"responded Duke spokesman 
Tom Williams. But he said the plant had fewer outages under Duke's ownership 
than while it was owned by SDG&E. 
Duke eventually had to completely rebuild the jet-fuel fired turbine, 
Williams said. 
"It ran more last year than the previous 37 years combined, because the state 
needed the power," Williams said. 
An attorney for Lt. Gov. Cruz Bustamante, who is to introduce the two new 
whistleblowers Thursday, said they will echo their co-workers complaints that 
maintenance slipped once Duke took over the plant. 
Williams dismissed the news conference as "a media event" and the workers' 
complaints as old news the company has rebutted since the earlier testimony 
before the committee. 












Disabled PG&E employees ask state for help in getting disability checks 






ASSOCIATED PRESS 
July 4, 2001 
SAN FRANCISCO ) After not receiving checks for work-related disabilities for 
months, more than 200 Pacific Gas and Electric Co. employees have asked the 
state to take over their disability payments. 
The employees stopped getting checks after Pacific Service Employees 
Association sent them a letter saying it did not have enough funds. Until 
this year, the association had paid almost all of PG&E's disability claims. 
PG&E said it has no legal responsibility to help the disabled workers and 
blames the employee association. But workers waiting for their payments 
disagree. 
"The association and PG&E are one and the same," A.J. Cavallaro, an 
electrical engineer with PG&E for 25 years who is on disability leave due to 
a sleep disorder, told the San Francisco Chronicle. 
Originally created by PG&E workers to organize social events, the association 
has its own board of directors and is legally separate from the utility and 
its parent company. The association began offering a short-term disability 
plan to PG&E workers in 1949. 
Pacific Service transferred its members to the State Disability Insurance 
plan on Jan. 1. But about 230 PG&E workers decided to stay with the 
association's plan after they were told they would continue to receive their 
disability checks. 
Mike Colon, the association's general manager filed an appeal with the 
California Unemployment Insurance Appeals Board for the state to take over 
the group's payments. 
Ralph Hilton, chief counsel for the appeals board in Sacramento, said that if 
the board decides the state should take over the payments, checks would be 
issued within days of the ruling. 
Workers may have to wait until August for the case to be heard. 









National Desk 
THE NATION Powerful Judge Illuminates Energy Practices Law: 'Folksy' jurist, 
72, stuns utility executives and lawyers alike with his courtroom 
incisiveness.
RICARDO ALONSO-ZALDIVAR
? 
07/05/2001 
Los Angeles Times 
Home Edition 
Page A-12 
Copyright 2001 / The Times Mirror Company 
WASHINGTON -- The silver-haired judge handling federal negotiations on 
refunds for alleged overcharges by power generators in California is often 
described as a Southern gentleman. 
But Curtis L. Wagner Jr. can lose the folksy charm in a New York minute. 
Wagner, chief judge of the Federal Energy Regulatory Commission, showed his 
knack for cutting through nonsense when he tangled with a smooth energy 
company executive in his hearing room in May. The executive confidently 
insisted he didn't need his boss' approval to enter into a $39-million 
natural gas transportation deal. 
Wagner didn't buy it. 
"I'm appalled that you're trying to pull this over my eyes," intoned the 
judge, stunning a courtroom of high-priced lawyers into catatonic silence. 
"Just answer my question . . . 
"Did you get approval . . . whether you got it after the meeting, whether you 
got it the day before, whether you got it in the head while you were both 
relieving yourselves?" 
Added Wagner, owner of a 32-foot sailboat named "Hizzoner": "The head, for 
non-boating people, is the restroom." 
Visibly squirming, the witness acknowledged that his boss had, in fact, OKd 
the deal. 
That kind of mettle prompted FERC's governing board to assign the overcharge 
settlement case to the 72-year-old judge, who likes to stay in shape by 
attending early-morning aerobics classes in the agency's exercise room. "I 
think Judge Wagner is the toughest tool in our toolbox," said FERC 
Commissioner Patrick H. Wood III. 
Expectations are low that anybody can bridge the chasm between California and 
electricity generators and marketers, with the state alleging it was gouged 
by $9 billion and the companies muttering about governmental extortion. 
"There are some very large numbers being talked about, which makes it 
unlikely that the companies would want to agree to a settlement," said Kit 
Konolidge, an electricity industry analyst with Morgan Stanley in New York. 
But in an interview, Wagner said he feels "pretty good" about the chances. "I 
never give up until the very end. With these things, it looks impossible, and 
then all of a sudden it comes together." 
FERC, the equivalent of a national utility commission, is also dangling some 
carrots in front of the parties. Along with refunds, Wagner is trying to get 
a deal on long-term contracts for power and guarantees that the generators, 
which are owed hundreds of millions of dollars, will be paid. 
The commission set a short time frame for the negotiations, which are to 
conclude Monday. If a settlement is not reachable, FERC would impose its own 
solution. A mandated settlement is likely to be challenged in federal court, 
where it could bog down for years. 
FERC employs more than a dozen administrative law judges like Wagner to hear 
disputes involving the companies it regulates. While presiding over the 
closed-door settlement talks, Wagner has traded his robes for a business 
suit. 
He has come down from the bench and sits at a table, eye-level with more than 
140 lawyers in his hearing room. "There's a lot of billable hours there," he 
said. 
The lawyers have been sorted into three big working groups, representing 
state agencies, power sellers and energy marketers. The negotiations are 
expected to intensify this week, and participants said Wagner admonished all 
sides on Friday to be ready to deal or face summary judgment from the FERC 
commission. 
The judge has been variously quoted as saying that $1 billion, $2 billion or 
$2.5 billion might be an appropriate total refund. "None of those [figures] 
are really attributable to me. I did make a statement--and I probably 
shouldn't have--that it was probably less than $9 billion." Of the $9 billion 
in overcharges claimed by the state, only $5.4 billion is attributable to 
sellers within FERC's jurisdiction. 
James J. Hoecker, immediate past FERC chairman in the Clinton administration, 
said that, in 23 years as chief judge, Wagner has built a reputation for 
making things happen in difficult situations. 
"What is behind that is a lot of years on the bench and a certain amount of 
self-confidence," Hoecker said. "He has the ability . . . to move the parties 
closer together. Sometimes that requires some fairly dramatic statements, 
which are calculated to get people to feel the heat and get more creative 
about the flexibility they might have." 
A senior FERC official said Wagner is like a pitcher who gets called from the 
bullpen when the game is on the line. "When things are tough, we turn stuff 
over to Curtis," said the official, who asked not to be identified. 
Wagner has had many big cases over the years, on matters too arcane to garner 
national attention. 
He is handling a second major case before FERC. It involves allegations that 
Houston-based El Paso Corp. manipulated California 's natural gas market last 
year, thereby adding an estimated $3.7 billion to the state's energy costs. 
It was in that case that he grilled the executive. 
Success in the California settlement negotiations would cap Wagner's 47th 
year as a government lawyer. The Tennessee native started at the Justice 
Department on Aug. 2, 1954. He got into regulatory law by representing the 
military in railroad disputes arising from the Korean War. After serving as a 
civilian lawyer for the Army for more than a decade, he joined FERC's 
predecessor agency in 1974. 
But Wagner, a widower, doesn't dwell on his place in the annals of FERC. He 
tells agency employees he is working too many hours and missing his aerobics 
classes. 





Davis lauds California generator 
Vote of confidence at Calpine's festival 
Suzanne Herel, Chronicle Staff Writer
Thursday, July 5, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/05/M
N166801.DTL 
Gov. Gray Davis took the stage at the San Jose America Festival yesterday and 
pledged to "keep the lights on" -- with the help of the Calpine energy 
company, which sponsored the fete. 
"You've heard me say some pretty tough things about out-of-state energy 
companies trying to bleed us dry," said Davis, standing against the backdrop 
of a huge Calpine banner proclaiming, "Reliable Energy for a Brighter 
Future." 
"Calpine is from California," he said. "They're going to make sure the lights 
stay on." 
Davis was a surprise guest sandwiched between musical acts Nina Storey and 
John Brown's Body during the daylong Fourth of July festival, which featured 
music, food and vendors near the San Jose Airport. 
The governor thanked the crowd of at least 1,000 for joining other 
Californians in conserving energy. Conservation surpassed the 10 percent mark 
statewide in May and June, he said. 
"We could not get through the summer without you doing your part," he said. 
Davis was introduced by Calpine chief executive Peter Cartwright -- whose 
multimillion-dollar stock option cash-in made news last month -- and San Jose 
Mayor Ron Gonzalez, who unsuccessfully opposed Calpine's planned 600-megawatt 
Metcalf Energy Center in Coyote Valley. 
In an interview after his appearance, Davis countered criticism leveled at 
him this week by State Controller Kathleen Connell, who accused him of 
foolishly locking California into expensive long-term energy contracts. 
"You have to look at the total cost of electricity," he said. 
The state paid $109 million in May, he said, but that cost dropped to about 
$33 million last month. 
Earlier yesterday, after walking in the Redwood City Fourth of July parade, 
Davis said that the price drop was a direct result of the long-term 
contracts. 
"That would not have happened without the security and stability of long- 
term contracts," he said. "We did the right thing." 
In San Jose, he also said that the $15 million the state was paying 
consultants to help negotiate power contracts was money well spent. 
"Before, it was like the Yankees winning the World Series against the sandlot 
baseball team," he said. "We're finally getting some stars on our team. " 
E-mail Suzanne Herel at sherel@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 2 





Activists stage anti-corporate march to power plant 
GISELE DURHAM, Associated Press Writer
Wednesday, July 4, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/04/state2
024EDT0201.DTL 
(07-04) 17:24 PDT LONG BEACH, Calif. (AP) -- 
Consumer activists rallied against rising energy prices and pledged their 
independence from corporate "tyrants" amid Fourth of July celebrations 
Wednesday. 
About 200 people carrying signs reading " public power, not corporate 
bailout" and "human need, not corporate greed" marched two miles from a local 
park in the Los Angeles suburb to the Alamitos generating station. 
"We feel we have been gouged and bled dry," said Medea Benjamin, founding 
director of Global Exchange, a San Francisco-based consumer advocacy group. 
"We've been treated the way tyrants treat their servants." 
The protest was a joint effort of several national and local consumer 
activist organizations. No arrests were made, although dozens of police 
officers were out in force for crowd control. 
Earlier this week, a federal judge issued a temporary restraining order 
preventing the city from enforcing an ordinance that could have blocked the 
march. 
The law requires organizers of public protests to give 30 days notice of the 
event, post an insurance bond and pay for police protection at the rate of 
$55 per hour for each officer. 
At the plant, organizers had intended to serve officials with a "notice of 
seizure by eminent domain" declaring the facility to be public property. But 
nobody appeared at the front gate. The demonstrators posted the notice on the 
chain-link fence and staged about a 40-minute rally before dispersing. 
The symbolic notice was meant to emphasize the groups' discontent with 
skyrocketing power prices during the past year, the use of state budget money 
for power purchases, and the activists' desire to have the state take over 
power plants to stabilize market prices. 
"The money they're making off of us is criminal," said Loni Baker, one of the 
marchers. "They're greed is taking money away from our kids' schools." 
Representatives of Arlington, Va.-based AES, Corp., which owns the plant, did 
not immediately return calls seeking comment. 
Last month, the U.S. Justice Department opened an antitrust investigation 
into a power sales partnership between AES and Williams Energy, the Tulsa, 
Okla.-based company that sells power for AES under an exclusive marketing 
agreement. 
Both companies have denied wrongdoing but in May, Williams agreed to refund 
$8 million after the Federal Energy Regulatory Commission accused of the 
company of temporarily closing AES plants to drive up power prices. 





Davis asks PUC to let utilities cut voltage 
1% savings on energy consumption predicted 
David Perlman, Chronicle Science Editor
Wednesday, July 4, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/04/M
N29133.DTL 
Gov. Gray Davis asked the Public Utilities Commission yesterday to allow 
electric companies to lower voltage levels on power lines delivering 
electricity to consumers this summer. 
The move will save about 1 percent in the state's electricity consumption, 
the equivalent of building a new 500-megawatt power plant. 
Lowering voltages by 2.5 percent will prove barely noticeable by domestic 
users who might see their incandescent light bulbs dim slightly. 
Refrigerators and electric motors, such as those that run air conditioners, 
should operate more efficiently on the lower voltages, experts said. 
The move should save consumers about 1 percent on their electricity bills, 
according to Energy Commissioner Arthur Rosenfeld. 
With support already promised by the state's major power companies, the PUC 
is expected to approve the change in its voltage rules within weeks, Robert 
Kinosian, energy adviser to PUC President Loretta Lynch, said at a Sacramento 
press conference. 
Similar voltage decreases have gone into effect in several other states 
during power emergencies in recent years, Rosenfeld said. But this is the 
first time it will occur statewide throughout an entire period of peak power 
demand. 
PUC rules now require power companies to deliver between 114 and 126 volts to 
consumers all the time. 
Less than two months ago, Bill Wattenburg, a maverick engineer and longtime 
consultant to the Lawrence Livermore National Laboratory, assembled a team to 
test the effects on lights, appliances, microwave ovens and motors operating 
at voltages that were lowered by 5 percent or more. 
At the press conference yesterday, Wattenburg said those tests -- conducted 
with utility company senior engineers -- showed that no devices were damaged, 
nor was their performance impaired. But cooking food on electric ranges -- 
whether boiling water or making a roast reach a given temperature -- would 
take longer and consume slightly more power under any lowered voltage, he 
said. 
John Ballance, director of network engineering at Southern California Edison, 
said his company is equipped to control its voltage levels electronically and 
can lower them as soon as the PUC approves the change. 
But Pacific Gas & Electric Co. operates differently and will have to change 
its voltage levels at each of its 2,400 substations individually -- a task 
that could take several weeks, Rosenfeld said. 
"This proposal may well achieve new efficiencies and reduce electric bills 
for California ratepayers," Davis said in a statement. "I urge the PUC to 
give it serious consideration." 
E-mail David Perlman at dperlman@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 13 





Federal price limits backfire 
Some generators withhold power rather than abide by rate caps 
David Lazarus, Chronicle Staff Writer
Wednesday, July 4, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/04/M
N186091.DTL 
Officials in California and Nevada, after months of lobbying for federal 
regulators to cap Western power prices, warned yesterday that the newly 
imposed limits have had the unintended consequence of increasing a threat of 
blackouts in the two states. 
The warnings were issued as California came within minutes of rolling 
blackouts yesterday afternoon, and one day after the first-ever rolling 
blackouts in Las Vegas forced energy-hungry casinos to shut off fountains and 
reduce air conditioning. 
The two states are asking the Federal Energy Regulatory Commission to take a 
closer look at the so-called price mitigation plan and come up with revisions 
that would deter power companies from withholding electricity during 
shortages. 
"We need some clarity to this order," said Oscar Hidalgo, a spokesman for the 
California Department of Water Resources, which is spending billions of 
dollars to keep the state's lights on. 
"Generators need to be held accountable," he said. 
The crux of the problem is that price limits kick in during shortages, yet 
power companies say these caps force them to sell power at below-market rates 
during periods of high demand. 
Some companies have responded by holding back power rather than face the 
expense of shipping electricity from state to state. Each mile that 
electricity must be transmitted adds to the overall cost. 
"No one's going to pay for transmission if the cost is near the caps," said 
Gary Ackerman, executive director of the Western Power Trading Forum, an 
energy-industry association in Menlo Park. 
Ackerman said several companies in his organization decided that there was no 
economic advantage to offering power in regional markets when price controls 
are in effect. 
"This means individual regions like California or Las Vegas could end up not 
having enough," Ackerman said. "It increases the threat of blackouts." 
BLACKOUT ALERT CANCELED
California authorities issued a blackout alert at 1:45 p.m. yesterday when 
power reserves dipped to dangerously low levels. They canceled the alert 
about an hour later, after finding additional supplies. 
"Everyone in the West is fighting for megawatts," said Stephanie McCorkle, a 
spokeswoman for the California Independent System Operator, which oversees 
the state's power network. 
The Golden State's latest brush with lights-out conditions came a day after 
Nevada experienced its own rolling blackouts for the first time, prompting 
heavy power users such as the MGM Grand and Caesars Palace to dim their 
lights. 
Don Soderberg, chairman of the Nevada Public Utilities Commission, said that 
the sudden power emergency took state authorities by surprise and that they 
are investigating to see what role the federal price limits may have had in 
exacerbating Monday's shortage. 
"We're looking very closely at this," he said. "There seems to be a potential 
for unintended consequences." 
Specifically, Soderberg said Nevada is focusing on operators of older, less- 
efficient plants who would find profit margins shrinking, if not vanishing, 
under capped prices. 
"We're going to see how the caps might have played into this," he said. 
The federal ceiling in 10 Western states, excluding California, is about $92 
per megawatt hour. In California, a 10 percent surcharge is added because of 
the state's credit risk, bringing the price to just over $101. 
Ackerman at the Western Power Trading Forum said regional price controls have 
extended California's power crisis to neighboring states. 
"California sneezed and the rest of the region caught the virus," he said. 
'LAWYERS LOOKING FOR LOOPHOLES' 
California and Nevada officials, however, said that they still have faith 
that price limits can stabilize Western electricity markets but that federal 
regulators may have to tweak the system so that power companies cannot 
withhold output. 
"The generators have banks of lawyers looking for loopholes (in the plan)," 
said Hidalgo at the Department of Water Resources. 
Unfortunately, it may take some time for the regulators to revisit an issue 
that they took up only with the greatest reluctance. For months, federal 
regulators refused to impose price controls, preferring instead to let supply 
and demand determine costs. 
Hidalgo said that when it appeared that power companies were throttling back 
on output Monday, California officials immediately dialed the hot line number 
provided by the Federal Energy Regulatory Commission in case of emergencies. 
"No one answered," he said. "They were closed." 
State officials tried again yesterday, and this time were told that the 
commission would look into the matter. They were not given a time frame for 
when the commission might come up with a response. 
E-mail David Lazarus at dlazarus@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 1 





Two more energy whistleblowers slated to come forward 
DON THOMPSON, Associated Press Writer
Wednesday, July 4, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/04/state0
336EDT0118.DTL 
(07-04) 00:36 PDT SACRAMENTO (AP) -- 
Two more former workers at a San Diego-area Duke Energy plant are slated to 
talk with state investigators Thursday, echoing concerns by other employees 
over how the plant was run when the state needed its power most. 
However, another former worker at the Chula Vista plant said he discarded 
perfectly good equipment three to five years ago, while the plant was still 
owned by San Diego Gas and Electric. 
"Stuff that cost $3- to $5,000 we were throwing away," said Don Perkins of 
Alpine, a mechanic at SDG&E plants for nearly 25 years. 
That undercuts testimony from other former workers who told the Senate Select 
Committee to Investigate Price Manipulation of the Wholesale Energy Market 
last month that they discarded valuable repair parts on the orders of Duke 
supervisors. 
Like the other former SDG&E employees who have come forward, Perkins was not 
hired by Duke when it took over full operation of the plant in April. Perkins 
said he is happy in retirement, but like his former co-workers believes Duke 
was driving up energy prices -- which the company vehemently denies. 
He and the three other former workers suggested Duke did not adequately 
maintain its equipment, leading to unnecessary repairs they said cut power 
generation and may have helped boost prices by cutting supply. That included 
running a 15-megawatt jet-fuel fired turbine until it broke down. 
"We ran the heck out of the plant, you bet we did,"responded Duke spokesman 
Tom Williams. But he said the plant had fewer outages under Duke's ownership 
than while it was owned by SDG&E. 
Duke eventually had to completely rebuild the jet-fuel fired turbine, 
Williams said. 
"It ran more last year than the previous 37 years combined, because the state 
needed the power," Williams said. 
An attorney for Lt. Gov. Cruz Bustamante, who is to introduce the two new 
whistleblowers Thursday, said they will echo their co-workers complaints that 
maintenance slipped once Duke took over the plant. 
Williams dismissed the news conference as "a media event" and the workers' 
complaints as old news the company has rebutted since the earlier testimony 
before the committee. 
,2001 Associated Press ? 








Davis seeking cheaper contracts 
Posted at 10:33 p.m. PDT Wednesday, July 4, 2001 
BY JOHN WOOLFOLK 

Mercury News 


California officials are asking energy companies for better deals on the 
state's long-term power contracts as a way to settle a dispute over billions 
of dollars in electricity costs from the past year, Gov. Gray Davis said 
Wednesday. 
In closed-door Washington, D.C., settlement talks scheduled to conclude 
Monday, state officials are demanding that energy companies forgo $8.9 
billion in bills for electricity that the state argues was overpriced. 
But Davis, during a San Jose visit Wednesday, said the state would consider 
accepting some of that refund in the form of cheaper long-term contracts, a 
move that could appease critics who say the $43 billion deals cost far too 
much. 
The governor's comments shed light on the state's bargaining strategy in the 
negotiations. Few details have emerged from the talks since the judge 
overseeing them imposed a gag order. 
``We've made suggestions, we've offered various ways in which people could 
get us $8.9 billion,'' Davis said. ``We've said it doesn't have to be all 
cash. You can give it to us in lower contract prices than you otherwise would 
have given to us. You can renegotiate our existing contracts and save us 
money. However you want to do it, it's just got to net out to $8.9 billion.'' 
It's unclear how those offers have been received by energy suppliers, who 
have insisted their prices were fair given the uncertainty over whether they 
would ever get paid. Several major companies, including Duke Energy and 
Enron, say they're owed millions of dollars from the state and its major 
utilities. 
Paula Hall-Collins, a spokeswoman for Williams Companies, which signed 
several contracts with the state in February to deliver power over the next 
10 years, said she could not comment. 
But one industry official said it was encouraging to see the governor show 
some flexibility and that the concept seems reasonable. 
``We take that as a positive,'' said Gary Ackerman, executive director of the 
Western Power Trading Forum, a trade association. ``If he wants to talk some 
trade-off in renegotiating the contracts, that doesn't seem to be totally out 
of hand. We're not going to turn away any serious offer.'' 
But Ackerman said the state needs to give a little on its refund target. 
The $8.9 billion, a figure estimated by the state's power grid analysts for 
sales from May 2000 to May 2001, has been widely challenged by industry 
leaders. Even the judge overseeing the settlement talks said it's probably 
too high. 
``I don't think it serves the state of California for the state to hold fast 
to a number, any more than it does for my members to do the same,'' Ackerman 
said. ``It just doesn't get to a solution. There's got to be some give and 
take, and we certainly haven't heard that until now from the governor.'' 
The state began buying electricity in January for its largest utilities after 
they became so saddled with debt from high power prices that energy companies 
refused to sell to them. The state has spent about $8 billion since then in 
daily and short-term purchases. 
The Davis administration signed $43 billion worth of electricity contracts 
with 18 energy suppliers for power over the next 10 years and has dozens of 
deals pending. The contracts are aimed at lowering the amount of power the 
state has to buy in daily markets, where prices have soared. 
Davis has credited the contracts with lowering the state's power costs from 
$100 million a day or more in May to about $33 million a day. His chief 
energy negotiator, S.?David Freeman, has said he's proud of the contracts. 
But Davis has faced blistering criticism about the deals from Republican 
lawmakers, state Controller Kathleen Connell and consumer advocates, who say 
the contracts will soak consumers with high electricity prices for many 
years. 
Davis initially sought contracts at prices around $55 per megawatt-hour, but 
the deals signed so far average $70 per megawatt-hour. 
That was a bargain earlier this year when daily prices averaged more than 
$200 per megawatt-hour. But average daily prices have since fallen to $89 
during peak hours and as low as $56 during low-demand periods. 
The average daily price in 1999 was about $30 per megawatt-hour. 
If the state and power suppliers cannot reach an agreement by Monday, they 
can request an additional 10 days. Otherwise, the judge will recommend a 
settlement and the five-member Federal Energy Regulatory Commission will vote 
on it. 
So far, the two sides still seem far apart. 
``It's very, very difficult,'' said Davis, who named the state's negotiators 
to the Washington talks. ``We'll see on Monday whether or not agreements are 
made. My hope is that a settlement will be reached. It's possible one will 
be.'' 


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