Please see the following articles:

Sac Bee, Thurs, 4/12:  "Laws aim at saving energy"

Sac Bee, Thurs, 4/12:  "Enron ordered to provide power to state's colleges"

Sac Bee, Thurs, 4/12:  "PG&E shorts counties $4.2 million:  Poorer local 
governments
say it'll be tough to get by with half a tax ration"

Sac Bee, Thurs, 4/12:  "Daniel Weintraub"   (Editorial)

San Diego Union (AP), Wed, 4/11:  "San Diego group proposes western states 
power
buyers' cartel"

San Diego Union (AP), Wed, 4/11:  "Judge orders Enron to deliver electricity 
to universities"

San Diego Union, Wed, 4/11:  "California utilities label proposed refunds 
from providers inadequate"

LA Times, Thurs, 4/12:  "Davis Approves $850 Million for Energy Conservation 
Plan"

LA Times, Thurs, 4/12:  "Failure to Buy Entire Network May Doom Davis' Power 
Deal"

LA Times, Thurs, 4/12:  "County to Sue Edison Over Nonpayment of $10 Million"

LA Times, Thurs, 4/12:  "PG&E Creditors' Committee Is Appointed"   (Mark 
Palmer quoted)

LA Times, Thurs, 4/12:  "Price Caps Excluded in FERC Plan"

SF Chron, Thurs, 4/12:  "Davis Signs $850 Billion Energy Plan 
Energy Package Signed by Davis 
$850 billion designed to boost conservation "

SF Chron (AP), Thurs, 4/12:  "Federal regulators may soon begin monitoring 
electricity market" 

SF Chron (AP), Thurs, 4/12:  "LA County joins list of those suing SoCal 
Edison "

SF Chron (AP), Thurs, 4/12:  "Developments in California's energy crisis"

SF Chron, Thurs, 4/12:  "Council Temporarily Reduces Utility Tax"

SF Chron, Thurs, 4/12:  "Start Digging, Energy Chief Tells State 
He says new power plants, not price caps, are the answer "

SF Chron, Thurs, 4/12:  "Enron Told It Can't Cut Electricity To Schools"

SF Chron, Thurs, 4/12:  "PUC Official's Investments Questioned 
Group already filed suit, charging conflict of interest"

Mercury News, Thurs, 4/12:  "Markets indicate even higher prices for summer 
power"

Mercury News, Thurs, 4/12:  "Davis signs plan offering incentives for energy 
conservation"

Mercury News, Thurs, 4/12:  "Calif. urged to form electricity 'buyers cartel' 
"

Mercury News, Thurs, 4/12:  "PG&E bankruptcuy renews focus on billions 
utility transferred"

Mercury News, Thurs, 4/12:  "Officials question utilities, generators"

OC Register, Thurs, 4/12:  "Charities join needy in power-bill struggle"

OC Register, Thurs, 4/12:  "Rate plan expands discount eligibility"

OC Register, Thurs, 4/12:  "Dimming chances for resolving power crisis"   
(Commentary)
Individual.com (AP), Thurs, 4/12:  "Utilities Allegedly Gouged Calif."

Individual.com (AP), Thurs, 4/12:  "PG&E's Money Transfers Focused On"

Individual.com (AP), Thurs, 4/12:  "States say federal government needs to 
act 
to stem energy crisis"

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Laws aim at saving energy
By Emily Bazar
BEE CAPITOL BUREAU
(Published April 12, 2001) 
Gov. Gray Davis insists that Californians who own aging appliances or shiver 
in drafty homes aren't the only ones who will benefit from two major 
energy-conservation bills he signed into law Wednesday. 
Instead, the Democratic governor -- who is wrestling with the state's energy 
crisis as summertime blackouts loom -- has billed the measures as an 
opportunity for all Californians to save precious megawatts in the critical 
coming months. 
"Clearly, the cheapest megawatt this summer is the megawatt we don't have to 
buy," said Davis, who vetoed more than $250 million from the bills, leaving 
about $860 million for energy-saving programs. 
The governor has said many times that conservation is a key element of his 
overall plan to solve the energy crisis, and that these bills -- SB 5x by 
state Sen. Byron Sher, D-Palo Alto, and AB 29x by Assemblywoman Christine 
Kehoe, D-San Diego -- embody that commitment. 
Crafted to complement each other, the measures include money for a wide range 
of programs, most of which exist. For instance, the bills dedicate millions 
of dollars to low-income families who need help paying their electricity 
bills and to families who hope to install solar panels on their roofs. 
Taken together, the conservation programs are expected to save roughly 2,000 
megawatts this summer, enough energy to power about 2 million homes, Davis 
said. 
In deciding what to veto, Davis said he shaved or eliminated provisions that 
would not yield energy savings by summertime. 
"Everything we're doing in SB 5x and AB 29x is targeted toward reducing 
electricity demand during hot summer afternoons to help avoid rolling 
blackouts," said Claudia Chandler, a spokeswoman for the California Energy 
Commission. 
Among their many provisions, the bills include $90 million in rebates or 
other incentives to encourage Californians to replace inefficient washing 
machines, air conditioners and other appliances with newer energy-saving 
models. 
Currently, rebates for energy-efficient refrigerators average about $75, plus 
the cost of removing the old refrigerator. 
The incentives will be available to customers of investor-owned utilities, 
such as Pacific Gas and Electric Co., and municipal utilities, such as the 
Sacramento Municipal Utility District. 
SMUD expects its share will be between $6 million and $9 million, said Mike 
Weedall, manager of energy services. 
Some of the $90 million also will go toward helping low-income residents 
weatherize their homes and pay their utility bills. 
In all, the measures provide $240 million in low-income assistance, 
encouraging people to install double-paned windows and insulation where they 
live to save power and reduce their energy bills. 
Senate leader John Burton, D-San Francisco, said the bills include assistance 
for California's families who can least afford the average 29 percent rate 
hike recently approved by the California Public Utilities Commission for PG&E 
and Southern California Edison customers. 
"They're the ones that will end up freezing to death when they can't pay 
their bills," Burton said. "We're doing all this (other) stuff; we ought to 
take care of them." 
The bills also include $60 million in rebates and incentives to help 
consumers and businesses reduce their lighting and $105 million to encourage 
renewable and other Earth-friendly power generation projects, such as rooftop 
solar panels. 
In order to entice Californians to participate in these programs, the 
measures provide $10 million for a public-awareness campaign. 
The measures' journeys through the Legislature, however, were fraught with 
roadblocks. The Assembly, for instance, last week added several proposals 
favorable to farmers. 
One of their proposals would have limited the amount of time interruptible 
agricultural customers could lose energy to four hours a day or 20 hours a 
month. "Interruptible" customers volunteer to lose power in emergencies in 
exchange for lower rates. 
But the changes riled Senate leaders. Eventually, the dispute was resolved by 
eliminating the Assembly amendments or rewriting them to spread the benefits 
among all customers, not just agricultural ones. 
Sandra Spelliscy, general counsel for the Planning and Conservation League, 
followed the bills' progress through the Legislature and was relieved when 
they were approved. 
"It has been clear to us for a long time that we were never going to build 
our way out of this problem for the summer," she said. 

The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com. 
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Enron ordered to provide power to state's colleges
By Claire Cooper
BEE LEGAL AFFAIRS WRITER
(Published April 12, 2001) 
SAN FRANCISCO -- A federal judge Wednesday ordered a major energy supplier to 
resume service to California's universities, ruling that the Texas-based 
company probably had no right to switch the schools to public utilities for 
their electricity. 
U.S. District Judge Phyllis J. Hamilton issued a preliminary injunction 
holding Texas-based Enron Energy Systems Inc. to the final year of a 
four-year contract to sell energy directly to the University of California 
and California State University. Unless a higher court rules otherwise, her 
order will remain effective until the results of a full-scale trial. 
The two university systems signed the contract to get relief from the risk of 
relying on shaky utilities, Hamilton said. She said the company took away 
that security when it switched 29 of the state's 33 campuses to Pacific Gas & 
Electric and Southern California Edison during the past two months. 
She noted PG&E's precarious position since filing for bankruptcy last week. 
In applying for the injunction, lawyers representing the universities argued 
that Enron was motivated by a desire to sell as much of its electricity as 
possible on the spot market, where huge profits have become available. The 
universities' contract with Enron, signed in 1998, sets their rate at 5 
percent less than the rate being charged by the utilities. 
Appearing before Hamilton in support of the schools, state Attorney General 
Bill Lockyer argued that Enron, in effect, was saying, "We don't want to sell 
power at the price we promised." 
But Enron's lawyer, A. William Urquhart, said the company had a duty to its 
shareholders to act in their economic interest. 
He said he would take the ruling to the 9th U.S. Circuit Court of Appeals 
immediately. He asked Hamilton to stay it until the circuit court can act, 
but she refused. 
In papers filed with the court, Urquhart said Enron switched many customers 
to the utilities as the "most logical way to mitigate the impact" of losses 
the company incurred after it stopped getting paid by the California 
utilities almost a year ago. 
Enron will pay the difference between the rate it promised the universities 
and the rates charged them by the utilities, he said. 
But the universities said they were losing other contracted benefits, 
including protection from the threat of blackouts and a sophisticated Enron 
metering and billing system that's an essential part of a conservation 
program. 
After the hearing, Lockyer called the ruling an important victory over a 
company that he said has best exemplified the "gouging" and "piracy" of 
California consumers during the energy crisis. 
He said an investigation by his office that could lead to civil or criminal 
charges against energy suppliers should be completed by summer. 

The Bee's Claire Cooper can be reached at (415) 551-7701 or 
ccooper@sacbee.com. 
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PG&E shorts counties $4.2 million: Poorer local governments say it'll be 
tough to get by with half a tax ration.
By Jennifer K. Morita
BEE STAFF WRITER 
(Published April 12, 2001)

After filing for bankruptcy protection last week, Pacific Gas and Electric 
Co. notified local county governments that it won't be able to pay $4.2 
million it owes them in property taxes. 
That left officials from El Dorado, Nevada, Placer, Plumas, Sacramento, 
Sutter, Yolo and Yuba counties with mixed feelings. Some said reserve funds 
will cover the losses, at least for now. But officials of other, smaller 
counties that rely on PG&E tax money to pay for public services, employees' 
salaries and various programs, are nervously crossing their fingers as they 
watch the utility's bankruptcy proceedings. 
PG&E owes California counties $79 million for the Jan. 1-June 30 property tax 
installment that was due Tuesday. It paid slightly less than half of what it 
owes. 
PG&E officials said the company was limited in what it could pay because of 
the bankruptcy filing, and paid only what was due for April 6-June 30. 
"Under the bankruptcy law we can pay our obligation going forward as part of 
normal business operation," PG&E spokesman Ron Low said Wednesday. "We would 
need the court's approval to pay any pre-petition, or pre-filing obligation." 
Low added, however, that the utility intends to ask the court to let it pay 
the balance. "We fully intend to pay the entire amount owed in property 
taxes," Low said. 
Two of the hardest-hit counties are Yuba and Plumas. 
Yuba County, one of the poorest in the state, depends heavily on PG&E tax 
dollars, said County Treasurer-Tax Collector Jim Kennedy. 
"PG&E is the largest single taxpayer in the county, and the percentage it 
represents of our total tax revenues is the largest share for any county in 
the state," Kennedy said. 
Although PG&E failed to pay its semiannual installment of $794,292, Kennedy 
remained optimistic that a check was in the mail. Still, the county will be 
receiving $417,003 less than it is owed. 
In Plumas County, where PG&E is the largest private property owner, officials 
are reeling from the tax loss. 
The utility company paid $762,519 on Tuesday, less than half the $1.6 million 
it owed. 
Plumas County government's share of the shortfall is around $250,000, said 
treasurer Barbara J. Coates. The rest goes to schools, which won't be 
affected immediately because the state will make up for the missing revenue. 
The county's loss could affect raises for all 350 employees, a countywide 
arts program, library hours and improvements to local campgrounds, said Board 
of Supervisors vice chairman Robert Meacher. 
But the long-term effects are even more disturbing, according to Meacher. 
The utility's $3.2 million annual tax payment makes up about 16 percent of 
the $20 million collected by the county. 
"The uncertainty over future tax revenues is more of an issue now than the 
actual dollars," said Meacher, who also serves as chairman of the 28-member 
Regional Council of Rural Counties. "Every county that produces hydroelectric 
energy for the state of California will be impacted -- some dramatically." 
As of Wednesday morning, Placer County had not received PG&E's second 
property tax installment of $1.9 million, Treasurer-Tax Collector Jenine 
Windeshausen said. 
PG&E officials told Windeshausen that the company will pay a little less than 
half of the property taxes it owes Placer County. 
"As far as the county is concerned, we do not anticipate any reduction of 
services due to this," Windeshausen said. "The county has set aside 
contingencies for these types of situations." 
He said PG&E's portion represents only slightly more than a half percent of 
the county's total tax collections. 
"We are going to be proactive in the bankruptcy proceedings. We're definitely 
pursuing the progress of the bankruptcy court and we're constantly being 
appraised of our status," Windeshausen said. 
PG&E pays significant property taxes to Yolo County, according to Don 
Ishikawa, chief assistant county administrator. Like every county in the 
state, Yolo keeps only a portion of that money, and the rest is distributed 
to schools, libraries and special districts. 
Ishikawa said the lost revenue would be a "big hit" for a county with an 
annual budget of only $210 million. But Yolo has enough money in reserve 
funds earmarked for property tax losses that there will be no immediate 
impact, he said. 
Nevada County Treasurer-Tax Collector E. Christina Dabis said she also is 
waiting for PG&E's second property tax payment of roughly $615,000. 
"We anticipate getting around $300,000," Dabis said. "Our tax roll is about 
$100 million and they owe us about $600,000, which is less than 1 percent." 
Sacramento County received a $607,794 check from PG&E on Wednesday, 
representing about 47.5 percent of what was due, said County Assistant Tax 
Collector Linda Pittman. 
"We'll have to wait for the bankruptcy case to see what we can do," Pittman 
said. "I'm sure we'll be filing a claim with the court for whatever we can." 
El Dorado County received $232,527 of the $489,530 that was due, according to 
Treasurer-Tax Collector C.L. Raffety. 
"They have to pay it like everyone else or they incur penalties," Raffety 
said. 
In Sutter County, PG&E failed to pay its April 10 installment of $448,484, 
Assistant County Administrator Curt Coad confirmed Tuesday. 

The Bee's Jennifer Morita can be reached at (916) 773-7388 or 
jmorita@sacbee.com. 
Bee staff writers Art Campos, Robert D. Davila and Pamela Martineau, and 
correspondents Jane Braxton Little and Tom Nadeau contributed to this report. 
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Daniel Weintraub


(Published April 12, 2001) 

You wouldn't normally take energy policy advice from a consumer advocate who 
admits that the plan he has in mind for California recalls the plot of "The 
Thief" -- a 1981 thriller about a former safecracker facing down the mob. But 
these are not normal times. And Michael Shames is no normal consumer 
advocate. 
Shames is the executive director of the Utility Consumer Action Network. He 
was also the author of a 1999 paper that accurately predicted today's energy 
disaster back when most people didn't even know the state's electricity 
industry had been deregulated. Now he has teamed with University of 
California, Irvine, professor Peter Navarro to propose an audacious approach 
to breaking the grip the energy cartel has on California and the West. 
Shames and Navarro warn that if nothing is done -- and they suggest Gov. Gray 
Davis' recent moves might be worse than nothing -- California faces a summer 
of rolling blackouts and a power bill that might reach $50 billion. That's a 
catastrophe that neither the state's budget nor its economy could withstand. 
Strong measures are needed to prevent it. 
Their plan comes down to this: Fight fire with fire. Shames and Navarro want 
California, Oregon and Washington to form a cooperative to buy their energy. 
Each day, the states would set a price they consider fair and reasonable, 
given the costs of producing electricity and a generous profit margin, say 30 
percent. 
"It's a buyers' cartel," Shames says. "We would give them a dose of their own 
medicine." 
Any power plant operator that wanted to sell electricity in these three 
states would have to meet the price set by the cooperative. Those who didn't 
like the price could shut down their plants and sit out the market for the 
day. 
That's where "The Thief" comes in. In the Michael Mann film starring James 
Caan, a Mafia safecracker longs to go straight and live the American dream -- 
a house, a family, a business of his own. He gets all those things, but his 
mob ties insist he do one more job. When he resists, they threaten to take 
away all he holds dear. So he sends away his family, shuts down his business 
and burns down the house. You can't hurt me now, he says. I'm ready for you. 
Shames wants California to say to the power generators: We're ready. The 
generators' greatest weapon is the blackout. The fear of darkness leads us to 
pay any price for the electrons we need to keep the lights on. It's even 
written into state law, a requirement that the people who run our power grid 
spend whatever is necessary to keep the juice flowing. They cannot simply say 
no, sorry, your price is too high, we'll do without it today. 
Under this plan, instead of random rolling blackouts sweeping the state 
without notice, Shames and Navarro suggest rotating outages that are planned 
and telegraphed ahead of time. That would give predictability to business and 
residents, which is what most people want. It also would tip off the crooks, 
of course, who might prey on homes suddenly left without alarms. But the 
cops, forewarned as well, could mobilize ahead of them with extra patrols. 
"If the worst thing they can do to us is take away the lights, we might be 
able to cope with that," Shames said. "Then they're in trouble. Then they 
start losing big bucks. They have to answer to their stockholders." 
So far, it's a plan that a free-market economist could love. Buyers pooling 
their clout to win a better price. People sacrificing to get what they want. 
Generators free to participate, or not. Even Gary Ackerman, the glib and 
cocky spokesman for the Western Power Trading Forum, the generators' trade 
group, says it sounds fine to him. 
"Nothing wrong with a group of buyers banding together to buy a commodity," 
Ackerman says. "I've got no problem with that whatsoever. If the price they 
offer is less than the market price, we're not selling." 
That's where things could get nasty. If the blackouts grew too disruptive, 
Shames and Navarro say, Davis and his counterparts in Oregon and Washington 
would have to be willing to use their emergency powers to seize the plants 
that won't play ball. The threat to the states is too great to sit by while 
the generators extract billions of dollars from our businesses and residents 
and ride off into the sunset. 
"We are very concerned that over the next six months, a combination of market 
manipulation and the natural forces of electricity shortages will allow these 
generators to gorge on us as they never have before," Navarro said. "Is that 
tolerable? Do we just grin and bear it and give them the money, or do we do 
something?" 
Today, with Davis making incremental progress and promising that all will be 
well, this plan sounds radical. But Shames has been a prophet before. And who 
knows? By this summer, with the air conditioning off and the state budget in 
tatters, a buyers' cartel backed up by a governor with some spine might look 
downright reasonable. 

The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at 
dweintraub@sacbee.com. 
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San Diego group proposes western states power buyers' cartel 




ASSOCIATED PRESS 
April 11, 2001 
SAN DIEGO ) California, Oregon and Washington should form a cartel to force 
power suppliers into reducing electricity rates, consumer activists said 
Wednesday. 
Forming a three-state cartel could be the only way to avoid blackouts and 
steep increases in rates as power demand peaks this summer, according to the 
Utility Consumers' Action Network and a University of California, Irvine 
business professor. 
The activists said their proposal is an alternative to a plan announced last 
week by Gov. Gray Davis to survive summer demand with new power plants, 
conservation, and higher rates. 
Under the activists' plan, the states could use their combined buying power 
to force wholesale energy generators to charge an established price for 
energy, said professor Peter Navarro. 
The plan's backers say it's possible the generators could retaliate with 
blackouts, but they believe the most likely outcome is that the six major 
private wholesalers will agree to the set price. 
Should the companies refused to charge the set price, the states could 
acquire the private power plants within its borders through eminent domain, 
the legal process that government uses to acquire land for roads and other 
public works projects, Navarro said. 
So far, no legislator has stepped forward to endorse the plan but that could 
change as lawmakers continue to search for alternative solutions to the 
state's power woes. A spokesman for the governor, Steve Maviglio, said the 
idea is unlikely to win approval. 
"The million-dollar question is whether it will pass out of the Legislature," 
Maviglio said. "Given the fact that it's an untested scheme ... I don't think 
it will see the light of day." 
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Judge orders Enron to deliver electricity to universities 




By David Kravets
ASSOCIATED PRESS 
April 11, 2001 
SAN FRANCISCO ) Saying that Enron Energy Systems Inc. may be in breach of 
contract, a federal judge Wednesday ordered the Houston company to abide by 
its agreement to sell cheap power to the state's public universities. 
Enron was attempting to get out of delivering power for the final year of a 
four-year deal with the California State University and University of 
California systems. Enron, which buys power from producers and sells it on 
the market, said the contract would cost the energy concern $12 million a 
month because of skyrocketing wholesale power prices. 
Enron said the state should free Enron from its obligation and taxpayers 
should pick up the tab. 
"It's our economic interest to provide a service with the least amount of 
dollars we can provide it for," Enron attorney A. William Urquhart said. He 
later described the case as being "all about money. It's all about money." 
Enron said it would file an emergency appeal to the 9th U.S. Circuit Court of 
Appeals in San Francisco to overturn U.S. District Judge Phyllis Hamilton's 
ruling in the suit brought by the state's two university systems. 
Appearing in federal court, state Attorney General Bill Lockyer argued that 
Enron wants out of the contract so it can engage in a "marketing game" with 
the universities' promised power and sell it on the open market for 10 times 
more than what the electricity cost Enron. 
He said lawmakers may have "left the keys in the car" when they approved 
California's failed energy deregulation scheme that has prompted the energy 
crisis, "But it is still theft to steal the car." 
The judge issued a temporary injunction against Enron, forcing it to continue 
providing service as the suit brought by the universities proceeds. When the 
judge issued the order, she also said there is a likelihood Enron will lose 
the suit. 
"I am persuaded, in the end, there is a very strong likelihood of success on 
the breach of contract claim," the judge said. 
UC's annual electric bill is about $87 million and its natural gas bill is 
about $26 million. CSU annually pays about $40 million for electricity and 
$20 million for natural gas. 
The case is UC Regents vs. Enron Energy Systems Inc., 01-1006. 

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California utilities label proposed refunds from providers inadequate 




By Toby Eckert?
COPLEY NEWS SERVICE 
April 11, 2001 
WASHINGTON -- California's two biggest utilities are demanding that power 
providers who allegedly overcharged for wholesale electricity be ordered to 
pay much larger refunds than federal regulators envision. 
In a filing with regulators Monday, Southern California Edison Co. and 
Pacific Gas and Electric Co. called the proposed refunds "indefensible as a 
matter of both law and logic," saying the Federal Energy Regulatory 
Commission used a badly flawed method to calculate the overcharges. 
The utilities asked the FERC to recalculate the refunds -- which cover a 
limited amount of wholesale charges for January and February -- using the 
cost of producing the electricity as a basis. That would certainly result in 
refunds much higher than the $124 million the commission has so far 
threatened to order if the power providers can't justify their prices. 
The utilities' request for a rehearing of the FERC's March refund order comes 
after weeks of criticism from California officials and others that the 
proposed refunds fall far short of the mark. The manager of the state's power 
grid has estimated that price gouging in the wholesale electricity market has 
cost California consumers $6.2 billion over the past 10 months, a contention 
the power providers deny. 
Most of the criticism of the FERC's order has centered on the fact that the 
refunds would only apply to charges for power during the most dire shortages, 
known as Stage 3 emergencies, when wholesale electricity costs are highest. 
The utilities and other critics argue that power prices have been far from 
"just and reasonable" during other periods as well. 
FERC Chairman Curtis Hebert has defended the proposed refunds and cites them 
as evidence that the commission has been aggressive in policing California's 
power market. 
Meanwhile, a group representing small power generators asked the FERC to 
allow them to sell power to parties other than the cash-strapped utilities. 
The move would return thousands of megawatts to the state's power grid, the 
providers argue, since many of the plants shut down after the utilities 
failed to pay them. 
The California Cogeneration Council asked the FERC to allow small, 
independent power generators to sell their electricity to third parties like 
power marketers, municipal utilities and the state Department of Water 
Resources, which has been buying power on the utilities' behalf. 
Utilities are required to buy power from the so-called qualifying facilities, 
but the companies haven't been getting paid in full by Edison or PG&E, which 
declared bankruptcy last week.
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Davis Approves $850 Million for Energy Conservation Plan 

Legislation: Governor says the spending package is crucial to ease immediate 
pressures on the state. 

By ROBIN FIELDS and MIGUEL BUSTILLO, Times Staff Writers 

?????Gov. Gray Davis approved $850 million for stepped-up energy conservation 
efforts Wednesday after making good on threats to reduce the plan's size, 
vetoing $250 million in items he said would not get results fast enough.
?????Calling the spending package "the most aggressive, most expensive 
conservation effort in America," Davis depicted his signing of two 
conservation bills Wednesday as crucial in easing the state's most immediate 
power pressures.
?????" "These are programs that Californians can use right now," said 
Assemblywoman Christine Kehoe (D-San Diego), whose AB 29 was one of the 
measures.
?????The slimmed-down package provides $240 million to weatherize homes of 
low-income residents, plus millions for rebates on energy-efficient 
appliances, incentives for businesses that cut consumption, and public 
information campaigns.
?????The governor's cuts included $25.2 million for efficiency programs at 
community colleges, $50 million for California Energy Commission loans and 
grants to small businesses to streamline refrigeration facilities, and $24 
million to the Department of Corrections to retrofit generators.
?????Davis also axed a $15-million provision for a California Public 
Utilities Commission study of "real-time" metering, but he left in $35 
million for the purchase and installation of meters that allow utilities to 
calculate bills based on when power is used.
?????Severin Borenstein, director of the UC Energy Institute in Berkeley, 
estimated that the funds would cover enough meters for businesses that 
consume more than 250 kilowatt-hours a day. Such devices, coupled with a rate 
plan, could encourage conservation by commercial customers during peak 
periods when demand--and prices--are highest, he said.
?????"It is reasonable to estimate that we could take 2,000 to 3,000 
megawatts off peak usage this summer, which could save $1 billion," 
Borenstein said.
?????Davis' goal is to shave off at least 2,000 megawatts a day, enough to 
power 2 million homes. Experts estimate that the state faces an electricity 
shortfall this summer of 3,000 to 7,000 megawatts daily, depending on summer 
temperatures and hydroelectric supplies.
?????Conservation is only one prong of the state's efforts to resolve its 
power crisis.
?????Davis and executives at San Diego Gas & Electric confirmed Wednesday 
that negotiations have intensified this week over state purchase of the 
utility's transmission lines.
?????Completed deals with Edison and San Diego Gas & Electric could persuade 
the judge in PG&E's Chapter 11 bankruptcy case to order the Northern 
California behemoth to accept similar terms for its system, Davis said. 
Edison concluded a deal with the state Monday.
?????The governor performed a delicate balancing act at Wednesday's 
bill-signing in response to a report, disclosed by The Times on Wednesday, 
that several public utilities, including the Los Angeles Department of Water 
and Power, joined private suppliers in helping to drive up wholesale energy 
prices in California last summer.
?????He defended the California Independent System Operator, which is using 
the report as evidence in its effort to persuade federal regulators to compel 
suppliers--public and private--to refund $6.3 billion to the state.
?????But he also defended the DWP, although it ranked eighth on Cal-ISO's 
list of offenders for the period between May and November last year, reaping 
$17.8 million in allegedly excessive profits.
?????"The DWP sold us power, which is more than I can say for the [private] 
generators," Davis said. He even thanked DWP General Manager S. David 
Freeman, who has acted as his chief negotiator in crafting long-term power 
purchase agreements with private suppliers.
?????"Yes, they took their markup, but they came through," Davis said.
?????The chairman of a state Senate committee investigating alleged 
manipulation in the state's power market said his panel will probe the 
activities of the public agencies as well as private marketers.
?????Though the initial focus of the investigation has been on five large 
out-of-state sellers, Sen. Joe Dunn (D-Santa Ana) said, "We always intended 
to look at some of the publicly owned [suppliers], such as DWP." Dunn said 
Wednesday's report "just reinforces" the need for the review.
?????Hearings will begin next week with an examination of recent studies, 
including the Cal-ISO report, of alleged efforts to inflate prices in the 
electricity market.
?????In other developments Wednesday, a U.S. District Court judge ruled that 
Enron Energy Services Inc., a unit of Houston-based energy giant Enron Corp., 
must continue to sell electricity to California universities under the terms 
of its existing contract.
?????The UC and Cal State systems signed a four-year contract with Enron in 
1998, locking in discounted fixed rates. In February, Enron notified its 
commercial and industrial customers in California, including the 
universities, that their power would be supplied by Pacific Gas & Electric 
and Southern California Edison.
?????Enron said it will appeal the ruling to the U.S. 9th Circuit Court of 
Appeals in San Francisco.
--- 
?????Times staff writers Julie Tamaki in Sacramento and Rich Connell in Los 
Angeles contributed to this report.
------------------------------------------------------------------------------
-----------------------------
Failure to Buy Entire Network May Doom Davis' Power Deal 

By MIGUEL BUSTILLO and NANCY VOGEL, Times Staff Writers 

?????SACRAMENTO--Does it make sense for California to own only part of the 
state's power grid?
?????That question is dividing state legislators and energy experts after 
Gov. Gray Davis' announcement of a $2.76-billion deal to buy Southern 
California Edison's transmission lines. The deal was reached Monday, three 
days after Pacific Gas & Electric Co. balked at selling its power lines to 
the state and filed for bankruptcy.
?????Davis and Democratic legislators have pushed to purchase the whole 
transmission system owned by the state's debt-saddled private utilities. They 
reason that by owning the highway that electricity must travel to reach homes 
and businesses--a 32,000-mile web of wire that is the world's fifth-largest 
coordinated power grid--the state would gain a negotiating advantage with the 
companies that produce the power.
?????If California's transmission grid were entirely owned by the public, 
political leaders believe, the state could gain jurisdiction over key 
electricity issues now decided by the Federal Energy Regulatory Commission, 
which has been reluctant to intervene in the energy crisis. The state, not 
the commission, could then set its own transmission fees and control the flow 
of electricity across the grid.
?????Transmission charges bring in roughly $1.4 billion a year for the three 
utilities. With that money, the state could not only repay itself for the 
purchase of the power lines but also fund system upgrades to unclog 
electricity bottlenecks that contribute to blackouts.
?????"Owning the wires is a business, and this business operates at a 
profit," said Assemblyman Roderick Wright (D-Los Angeles), who will head a 
series of committee hearings on the plan to buy the Edison lines. "We're not 
going into their yards and buying old trucks or something; we are buying a 
vital piece of their electrical system."
?????However, now that Pacific Gas & Electric has opted to try to find a 
solution to its debt problem in Bankruptcy Court rather than continue 
negotiations with the state, the prospects of California acquiring the entire 
system appear uncertain at best.
?????That is generating concern about what California is getting for its 
money--and whether the state stands a chance of gaining any independence from 
federal regulators--if it buys only the lines of Edison and San Diego Gas & 
Electric. 
?????The Edison deal, which needs legislative approval, is unlikely to garner 
a single vote from Republicans--Assembly Republican leader Dave Cox (R-Fair 
Oaks) calls the grid purchase a socialistic idea. The plan may also encounter 
some Democratic opposition.
?????"It was a tough sell to begin with, and I think if you are going to only 
buy part, it becomes a tougher sell," said Assemblyman Dean Florez 
(D-Shafter).
?????And some utility experts say California gains little, if anything, 
unless it acquires the whole system.
?????"The motivating factor for buying the grid, as opposed to hydroelectric 
power plants, is because it addressed the central problem facing California: 
The federal government is unwilling to crack down on the generators that are 
ripping us off, and we need to take back control," said UC Irvine professor 
Peter Navarro. "If you only buy 40% of the system, you might as well have 
nothing."
?????California would not be able to make some of the most critical upgrades 
needed to improve the flow of electricity if it did not acquire PG&E's 
portion of the system. The worst energy bottleneck in California is the 
notorious Path 15, a series of high-voltage lines that move power between 
Southern and Northern California. Path 15 lies largely in PG&E's territory.
?????Davis and some state legislators say California still has a chance to 
buy the entire grid. Some, in fact, believe that the utility's bankruptcy 
increases the likelihood of a deal: Talks between Davis and PG&E had faltered 
in recent weeks, and a judge may have better luck bridging their differences.
?????Negotiations between the state and San Diego Gas & Electric continue, 
leaving the possibility of a deal with that utility.
?????But acquiring PG&E's portion, the largest and most important by far, now 
requires the approval of a federal Bankruptcy Court judge. And in that arena, 
the state may have to compete with private companies for the lines.
?????Trans-Elect, a Washington company that wants to create a national 
network of independently owned transmission lines, has offered to buy and 
operate the grids of Edison and PG&E for a total of $5.25 billion. The 
company has also been in contact with the Davis administration on the 
possibility of leasing the lines from California if they are bought by the 
state.
?????For the state to buy any of the systems, it needs approval from 
FERC--far from a sure thing. The commission in recent years has encouraged 
states to put management of large sections of the nation's transmission grid 
into private hands to achieve more efficient electricity flow. Even if the 
commission approved the purchase, the state may not receive any increased 
powers.
?????"FERC would like to see one large regional transmission system in the 
West," said David Clement, a transmission expert with Cambridge Energy 
Research Associates. "If FERC were to unconditionally approve the sale, then 
the transmission system owned by Edison would leave FERC authority. However, 
FERC could easily condition the sale such that the transmission grid remains 
under their authority."
------------------------------------------------------------------------------
-----------------------------

County to Sue Edison Over Nonpayment of $10 Million 

Power: It would be the latest of many small generators to seek payment for 
the enforced sale of electricity to the utility. 

By JULIE TAMAKI and NICHOLAS RICCARDI, Times Staff Writers 

?????Los Angeles County is joining the growing number of small energy 
producers suing to get paid for electricity they are forced to sell to the 
state's two biggest, nearly bankrupt utilities.
?????In recent weeks, small generators have sued to suspend contracts with 
Southern California Edison and Pacific Gas & Electric, which owe the 
producers about $1.5 billion for past electricity deliveries. The Los Angeles 
County Board of Supervisors authorized the latest lawsuit Tuesday afternoon, 
telling its lawyers to go to court to free up its 22-megawatt cogeneration 
station at the Pitchess Honor Rancho to sell power to other parties.
?????Assistant County Counsel John Krattli said the county is owed about $10 
million for electricity that it has provided Edison since November. "What it 
means is less income is coming in to the county," he said.
?????In a related matter, a creditors committee of renewable energy producers 
that has been weighing for weeks whether to force Edison into Bankruptcy 
Court voiced skepticism Wednesday that the deal Gov. Gray Davis struck with 
Edison to purchase the utility's transmission lines will be approved by the 
Legislature.
?????The producers said they are concerned that there is not enough money in 
rates charged to utility customers to pay committee members that are among 
the nearly 700 producers of alternative and renewable power in California.
?????Edison is scheduled to resume paying producers on April 16.
?????"It is critical that Edison make its first scheduled payment . . . and 
that back payment is made soon," said Jack Raudy, a committee spokesman. 
"Otherwise, an involuntary bankruptcy filing remains very possible."
?????The payment deadline coincides with a hearing in a crucial court case 
between Edison and CalEnergy that is being aired in Imperial County. A judge 
previously freed the geothermal producer from its contract with Edison 
because of the utility's failure to pay the company. The court is expected to 
rule on CalEnergy's request for $99 million in back payments and could act on 
Edison's request that CalEnergy be required to resume selling power to the 
utility.
?????A Sacramento County Superior Court judge has allowed Redding-based 
Sierra Pacific Industries to cease selling the electricity it generates to 
PG&E, freeing the company to sell about 60 megawatts of power to marketing 
companies that resell the supplies on the spot market. CalEnergy has been 
doing the same with the 270 megawatts it previously sold to Edison. One 
megawatt is enough to power 750 homes during the summer.
------------------------------------------------------------------------------
-----------------------------

PG&E Creditors' Committee Is Appointed 

Bankruptcy: Federal trustee picks panel to represent thousands with unsecured 
claims against the utility. 

By TIM REITERMAN and VIRGINIA ELLIS, Times Staff Writers 

?????SAN FRANCISCO--A committee of Pacific Gas & Electric Co. 
creditors--ranging from major banks and energy suppliers to the state of 
Tennessee and a tree-trimming company--has been selected to represent 
thousands of creditors in the utility's bankruptcy case.
?????Taking a key step in administering the bankruptcy case, U.S. Trustee 
Linda Ekstrom Stanley on Tuesday selected 11 creditors who collectively will 
serve as the eyes, ears and decision makers for those who have unsecured 
claims against the utility.
?????In choosing companies that would represent various constituencies of 
creditors, Stanley selected four financial concerns and four energy suppliers 
with total claims of almost $5 billion.
?????She also named Davey Tree Expert Co., which trims trees for PG&E and has 
a $9.6-million claim; the city of Palo Alto, which claims a $200-million 
debt; and Tennessee, which says PG&E owes $76 million.
?????All are among the 100 largest unsecured creditors of PG&E, which filed 
for Chapter 11 protection from creditors on Friday, declaring that the energy 
crisis had thrown the company $9 billion in debt.
?????Working over the weekend, the trustee's staff sent faxes to the largest 
100 creditors, asking if they wanted to serve on the creditors committee. 
Seventy-five responded affirmatively.
?????Not only was the acceptance rate extremely high, Stanley said, she was 
lobbied before the selection. "Today I am getting responses from the 
disappointed," she said. "Usually people do not want to serve."
?????The number of committee members is discretionary, although it has to be 
an odd number so there are no tie votes. Eleven is an unusually large number, 
Stanley said, adding that "there is nothing typical about this case."
?????The company's creditors touch many sectors of the nation's economy, from 
Wall Street to vendors providing goods and services to the utility.
?????The committee members include companies that provided power but were not 
paid as PG&E's financial condition worsened--Enron Corp. ($580 million), 
Dynegy Power Marketing ($255 million), KES Kingsburg L.P. ($182 million) and 
GWF Power Systems ($62 million).
?????Also named to the committee were the Bank of New York ($2.2 billion), a 
group of banks headed by Bank of America ($1.175 billion), U.S. Bank ($310 
million) and Merrill Lynch ($106 million).
?????The only trade creditor represented on the committee is employee-owned 
Davey Tree Expert Co. of Kent, Ohio. Chief Financial Officer David Adante 
said the company has trimmed brush and trees from around PG&E power lines for 
more than 30 years and has 600 employees on the account.
?????"PG&E has always been a good client for us, and we believe firmly that 
at the end of the day they are going to survive and continue to be a good 
client," Adante said.
?????Tom Milne, who represents the state of Tennessee on the committee, said, 
"This has become a political issue here."
?????The Tennessee Consolidated Retirement Fund, Milne said, holds $25 
million in commercial paper from PG&E. But the more politically volatile 
holding is the state general fund, which PG&E owes $50 million.
?????"The taxpayers of the state of Tennessee are asking why we should 
subsidize the ratepayers of California," Milne said. "Our rates have doubled 
or tripled here. Why should California be spared? We are hoping for a 100% 
return on our investment."
?????Enron Corp. spokesman Mark Palmer said, "I think in being a part of the 
solution for restructuring we offer a unique perspective, and I think that's 
why we were chosen as one of the members of the committee."
?????He declined to discuss the company's claim. "We don't talk about 
specific credit exposures, but we have told our investors, Wall Street 
analysts and journalists that we have established adequate reserves," he 
said, "and regardless of the situation in California, we will meet our 
earnings per share estimates of $1.70 to $1.75 for 2001."
?????Stanley said the committee members must put aside their individual 
interests while they act as a fiduciary for unsecured creditors. To represent 
it in court, the panel will hire an attorney, to be paid for by PG&E.
?????The committee is expected to be an important player as bankruptcy Judge 
Dennis Montali figures out who should be paid and how much as the utility 
reorganizes its financial affairs. "The judge will pay lots of attention to 
them," Stanley said. "There are many creditors and many large creditors."
--- 
?????Times staff writer Rone Tempest in Sacramento contributed to this story.
------------------------------------------------------------------------------
-----------------------------
Price Caps Excluded in FERC Plan 

Regulation: The panel's chief opposes a ceiling on charges in strategy to 
block blackouts in the West. 

By NANCY VOGEL, Times Staff Writer 

?????SAN JOSE--The wholesale power price cap California politicians sought 
will not be included in an upcoming federal plan to stabilize the state's 
electricity market, the chairman of the Federal Energy Regulatory Commission 
said Wednesday.
?????Speaking in San Jose before a congressional panel, Curtis L. Hebert Jr. 
said his agency is moving swiftly to help California--but not with price caps 
because they would only lead to more blackouts.
?????"The energy is going to go to where the caps are not," said Hebert, 
whose commission has regulatory authority over roughly half the power 
consumed in the state. "The energy is going to go where the money is."
?????He appeared steadfast in his opposition to a ceiling on power prices 
across the West even as another member of his commission, Linda Key 
Breathitt, said she is willing to consider price caps.
?????Breathitt told reporters after a hearing on Western electricity troubles 
in Boise on Tuesday that the prospect of market power prices soaring even 
higher this summer makes her willing to consider short-term limits on how 
much private generators can earn. She has previously rejected price caps.
?????The third member on the federal commission--there are two 
vacancies--said Wednesday that he was heartened by Breathitt's apparent shift 
in thinking.
?????"I look forward to working with her to assure just and reasonable 
prices," said William Massey, the lone Democrat on the commission and a 
proponent of price caps.
?????The commission cannot cap prices without first launching an 
investigation of the wholesale electricity market across the West, Massey 
said.
?????"Until there are enough votes to open that formal investigation," he 
said, "it's just talk."
?????But even if Massey and Breathitt agreed to support price caps, it is not 
clear that Hebert would let a proposal come to a vote.
?????"The chairman of this agency has almost exclusive authority to control 
the agenda," Massey said.
?????President Bush has nominated two state utility regulators to the 
commission, Pat Wood of Texas and Nora Mead Brownell of Pennsylvania, but 
they have yet to be confirmed by the Senate.
?????Gov. Gray Davis spoke to Wood, a Bush loyalist, on Wednesday to lobby 
him on the need for price controls in the West. Hebert testified before a 
bipartisan panel of six members of Congress at San Jose State. Headed by Rep. 
Dan Burton (R-Ind.), the House Committee on Government Reform scheduled three 
days of hearings on California's electricity crisis this week in Sacramento, 
San Jose and San Diego.
?????Political leaders in California, Washington and Oregon have beseeched 
the federal commission to push down soaring prices that have forced utilities 
to raise their customers' rates and triggered a bankruptcy filing by 
California's biggest private utility. State leaders argue that only the 
federal government can control wholesale electricity prices, because power is 
bought and sold across state lines.
?????But the commission has so far resisted those pleas, and the governors of 
other Western states are not pushing for caps.
?????By May 1, Hebert said, his federal agency will release a plan to 
stabilize prices in California. 
?????A draft released last month would limit the prices power sellers can 
earn only when power reserves are so low in California that grid operators 
have declared a Stage 3 emergency. Then prices would be capped at roughly 
what it costs to run a small, inefficient, rarely used power plant.
?????Gary Stern, director of market monitoring for Southern California 
Edison, criticized the draft plan for considering only those times of Stage 3 
emergencies, while power sellers earn excessive profits at plenty of other 
times. There were no Stage 3 alerts last summer, for example, he said, when 
the profits of power companies soared.
?????Stern also rebutted Hebert's argument that price caps will lead to 
blackouts. Last summer, when price caps were in place, he said, the state did 
not suffer blackouts. Only after December--when the federal Energy Regulatory 
Commission lifted the cap--did supplies shrink to dangerous levels, with four 
days of rotating blackouts.
?????Stern said he believes that's because generators and marketers have no 
reason to withhold their power from the market once the price reaches the 
cap, the maximum price they will earn. Without a cap, he said, sellers can 
push prices up by not offering electricity for sale and creating a shortage.
?????"'As long as you can drive the price higher and higher," said Stern, 
"there's a strong incentive to withhold."
------------------------------------------------------------------------------
-----------------------------

Davis Signs $850 Billion Energy Plan 
Energy Package Signed by Davis 
$850 billion designed to boost conservation 
Greg Lucas, Sacramento Bureau Chief
Thursday, April 12, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
N192668.DTL 
Sacramento -- Gov. Gray Davis signed an $850 billion conservation package 
yesterday that will pour millions into loans and grants for Californians to 
make their homes and businesses more energy efficient. 
Much of the money will beef up existing conservation programs, which means 
consumers and business owners can use the aid before California's peak use 
months this summer. 
"This year, conservation must be as big a part of our summer as barbecues and 
baseball," the Democratic governor said after signing two conservation bills 
in Los Angeles. 
Using his line-item veto power, Davis cut $242 million in spending from the 
bills, including $10 million to replace bulbs in traffic lights with light- 
emitting diodes or LEDs, which use four times less energy than normal bulbs. 
Davis also took out $50 million in loans to help mini-marts and other 
convenience stores buy more energy-efficient refrigerators and $50 million in 
low-interest loans and grants to low-income residents, small businesses and 
homeowners for energy-efficiency construction or retrofit projects. 
Davis said the programs wouldn't help save energy during the summer. He 
previously said he wanted to spend $1 billion on new conservation programs. 
Among the existing programs receiving more money are ones offering loans, 
grants and cash to business, agricultural, residential and low-income 
ratepayers. 
They include rebates on purchases of new refrigerators and air conditioners, 
grants to place reflective surfaces on roofs and incentives to create "demand 
responsive" buildings that are connected to the Internet. When power alerts 
occur, thermostats or lights are automatically adjusted in the buildings to 
save energy. 
One-fifth of the money is devoted to programs helping the state's poorest 
ratepayers. 
Of the $240 million in low-income aid, $100 million will go toward 
subsidizing up to 25 percent of poor households' gas or electric bills. 
Another $120 million goes to subsidies and grants for home energy savers like 
insulation, weather-stripping and low-flow shower heads. 
For the programs it already operates, the state energy commission expects to 
begin handing out money at its April 25 meeting. 
The new programs won't be ready quite so rapidly. A spokeswoman for the 
commission expected them to be running in June. 
Among those new programs are $35 million for a voluntary program for big 
businesses to use special electricity meters to identify the time of day when 
their energy consumption is highest. Businesses could adjust their operations 
accordingly to save energy and money. 
The state's utilities, through the Public Utilities Commission, already offer 
rebate programs for customers who buy more energy-efficient refrigerators and 
air conditioners. 
The new law spends another $50 million on that program. 
For more information on these and other conservation programs visit www. 
flexyourpower.ca.gov. 
Chronicle readers' suggestions for how to cope with California's energy 
crisis: 
"I'm one of those crazy people to has to turn on a light before I walk into 
any room. I broke that habit by putting a Band-Aid over all the switches. It 
makes me think twice before I pull it off." 
John McDonald . 
"I believe Gov. Davis' proposed rebates for a 20 percent reduction of energy 
usage could be made more realistic and fair by making any reduction of energy 
usage qualify for a rate rebate of a proportional amount. For example, a 10 
percent reduction would give a 10 percent rate rebate, and even a 5 percent 
reduction would result in a 5 percent rate rebate. I predict there will be a 
lot of people who try to reduce, and succeed to a modest and laudable extent 
(15 percent, for example), but will be frustrated and disappointed that the 
goal was unrealistic -- especially for those of us who have already been 
energy conscious." 
Ralph Leighton . 
"My apartment is well shaded by large trees and the windows face northwest. I 
discovered that sheets of plastic bubble wrap makes a terrific window 
insulator. Although my windows are double pane, they are really not all that 
efficient. By simply taping sheets of bubble wrap to the inside of my 
windows, I was able to block a great deal of the heat/cold transmission 
through the windows. I would heartily recommend this idea to anyone who faces 
a similar problem. The bubble wrap is transparent and does not block the 
light." 
Michael Heinichen . 
"If you do not use your electrical fireplaces on a regular basis, switch off 
the pilot light. They might be using minimal energy but if everyone saves a 
small bit of energy, together a lot will be saved. Start using disposable 
stuff even at home so that you use the dishwasher infrequently." 
Rajvinder Kaur 
"Out of curiosity, I decided to check at what temperatures my 
refrigerator/freezer should be set and the proper setting for the hot water 
heater. . . . Both the manuals for the refrigerator and the freezer were very 
vague about settings -- they basically just told you how to set them, not at 
what levels. So, I started "tinkering" with them and determined that all 
could be set at a much lower level than where I had them set. Likewise with 
the hot water heater that I checked with a kitchen thermometer. This along 
with fewer larger wash loads has permitted me to cut my electricity use for 
March to 10.9 Kwh per day from 16.1 last year -- a savings of about 32 
percent and 18 Kwh below my baseline." 
Art Leino . 
"I take Navy-style showers (wet down, turn off the water, lather up, rinse). 
My father (a Coastie) drilled that firmly into us during the power crisis of 
the early '70s, and it paid off. You can save quite a bit of water and power 
that way." 
Suzanne Grant 
E-mail Greg Lucas at glucas@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 3 
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-----------------------------------

Federal regulators may soon begin monitoring electricity market 
KAREN GAUDETTE, Associated Press Writer
Thursday, April 12, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/12/state0
415EDT0119.DTL&type=news 
(04-12) 07:32 PDT SAN JOSE, Calif. (AP) -- Federal energy regulators would 
not promise caps on soaring energy prices, but said they hope to begin 
``monitoring and mitigating'' the wholesale electricity market by May 1. 
The Federal Energy Regulatory Commission will look at future prices to 
determine if they are just and reasonable, commission chairman Curt Hebert 
told members of the House Subcommittee on Energy Policy and Regulatory 
Affairs on Wednesday. 
The commission already has sought California power sale refunds of $124 
million, and the new system of tracking market abuses could help keep markets 
fair, Hebert said. 
Hebert left didn't say whether FERC would begin looking at daily trading 
activity in search of unfair pricing. Currently, FERC only reviews quarterly 
reports from energy traders, and periodically does spot audits of the 
markets. 
Meanwhile, on the other end of the power spectrum, a federal trustee selected 
a committee of Pacific Gas and Electric Co. creditors to represent more than 
30,000 creditors in the utility's bankruptcy case, the Los Angeles Times 
reported. 
U.S. Trustee Linda Ekstrom Stanley selected 11 creditors Tuesday who 
represent various groups of creditors and will play an important role as 
federal Bankruptcy Judge Dennis Montali determines who should be paid and how 
much during the company's financial reorganization. 
``The judge will pay lots of attention to them,'' Stanley said. ``There are 
many creditors and many large creditors.'' 
Stanly selected four financial concerns and four energy suppliers with total 
claims of nearly $5 billion. She also picked a tree-trimming company that has 
a $9.6 million claim; the city of Palo Alto, which claims a $200 million 
debt; and Tennessee, which claims PG&E owes $76 million, the newspaper 
reported. 
The committee members are among PG&E's 100 largest unsecured creditors. The 
utility filed for federal bankruptcy protection Friday, declaring the energy 
crisis had thrown the company $9 billion in debt. 
Cash-starved Southern California Edison Co. agreed Monday to sell its 
transmission lines to the state. Gov. Gray Davis said negotiations to buy the 
lines of San Diego Gas and Electric Co. began in earnest Wednesday, and once 
that deal is done, he'll ask the bankruptcy judge to force PG&E to sell the 
remaining grid to the state. 
But that will not end California's power problems. 
Hebert stressed the need to build more power plants to boost supply, to 
improve transmission infrastructure throughout the West and to create a 
``regional transmission organization'' to better manage the flow of power. 
Hebert has been the target of criticism from state officials, the utilities 
and consumer watchdog groups for refusing to cap growing wholesale power 
rates. Members of California's Democratic delegation and PG&E again asked for 
the cap to avoid summer blackouts. 
FERC only has regulatory control over roughly half California's electricity, 
Hebert testified, since the rest is imported from Canada and municipal 
utilities not under federal jurisdiction. 
``How many studies must be done before you spend a dollar and start moving 
power in the other direction?'' Hebert said. ``The conversation needs to 
stop. Someone needs to start putting shovels in the ground.'' 
Backed by U.S. Rep. Dan Burton, the Indiana Republican who chairs the 
Government Reform Committee, which houses the energy subcommittee, Hebert 
warned too many changes to the rules may drive away the very generators 
needed to lower prices in the long term by providing more supply and 
competition. 
PUC President Loretta Lynch told the panel Tuesday in Sacramento the agency 
allowed utilities to enter into such contracts last year, but the utilities 
chose not to do so. 
``What was done then was only half the job,'' said Stephen Pickett, vice 
president and general counsel for SoCal Edison. He said the PUC retained the 
right to review contracts after they were signed, which scared away 
generators unsure if they would see the money. 
Davis signed two bills Wednesday, creating more than $500 million in 
conservation initiatives and incentives. The money will reimburse homeowners 
and business owners for money spent on such items as energy-efficient 
appliances and efficient lighting. 
Also Wednesday, a federal judge intervened in another power price battle, 
ordering Enron Energy Systems Inc. of Houston to abide by its agreement to 
sell cheap power to the California State University and University of 
California systems. Enron said it would appeal. 
U.S. District Judge Phyllis Hamilton issued a temporary injunction against 
Enron, forcing it to continue providing service, and said there is a 
likelihood Enron will lose the suit. 
The state was free of power alerts Thursday morning as reserves stayed above 
7 percent. 
,2001 Associated Press ? 
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LA County joins list of those suing SoCal Edison 

Thursday, April 12, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/12/state0
115EDT0376.DTL&type=news 
(04-12) 01:15 EDT LOS ANGELES (AP) -- Small energy producers who have sued 
Southern California Edison over nonpayment will soon be joined by Los Angeles 
County. 
The Board of Supervisors on Tuesday authorized a lawsuit against the utility, 
which owes about $10 million for electricity provided since November by the 
22-megawatt co-generation station at the Pitchess Honor Rancho. 
Several small power generators have sued to suspend contracts with both 
Edison and Pacific Gas & Electric, which owe the producers about $1.5 billion 
for past electricity sales. PG&E, which recently filed for bankruptcy 
protection, had been paying the small generators about 15 cents on the dollar 
since November. Edison has made no payments, but is scheduled to resume 
paying producers April 16. 
In one case, a hearing has been scheduled for April 16 in Imperial County 
over a lawsuit filed by CalEnergy against Edison. A judge previously allowed 
the geothermal producer out of its contract because the utility failed to pay 
the company. The court is expected to rule on CalEnergy's request for $99 
million in back payments and could also rule on Edison's request to require 
CalEnergy to resume selling it power. 
CalEnergy has been selling the 270 megawatts it previously provided to Edison 
on the spot market. 
Edison and PG&E claim they've lost nearly $14 billion since June because of 
high wholesale prices that the state's electricity deregulation law bars them 
from passing onto ratepayers. PG&E filed for federal bankruptcy protection 
April 6, saying that state regulators and lawmakers failed to help the 
utility remain solvent. 
In a related matter, a Tulare lighting company sued SoCal Edison on Tuesday 
claiming the utility violated state law by failing to implement a 10 percent 
rate cut mandated under the state's 1996 deregulation law. Anchor Lighting is 
seeking class-action status for business and residential customers in the 
lawsuit filed in Los Angeles Superior Court. The action seeks unspecified 
compensatory and exemplary damages. 
Steven Conroy, a spokesman for SoCal Edison, said he had not seen the lawsuit 
and could not comment. 
,2001 Associated Press ? 
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Developments in California's energy crisis 
The Associated Press
Thursday, April 12, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/12/state0
418EDT0120.DTL&type=news 
, , -- (04-12) 07:30 PDT Here is a look at developments in California's 
energy crisis: 
THURSDAY:< ?-- The House Government Reform Committee plans energy hearings in San Diego. ?-- The state remains free of power alerts Thursday morning as reserves stay ?above 7 percent. ?-- Sen. Dianne Feinstein, D-Calif., speaks to Silicon Valley CEOs about the ?energy shortage. ?-- Gov. Gray Davis' energy advisers and officials from San Diego Gas & ?Electric Co. continue meeting about the sale of transmission lines to the ?state. ?-- Business leaders plan to gather at the state Capitol to discuss energy ?problems. ?WEDNESDAY:< 
-- Negotiations began in earnest with SDG&E for a state buyout of its 
transmission lines. Once that deal is done, Davis said he hopes to persuade 
the bankruptcy judge in San Francisco to force PG&E to accept a similar deal. 
The state already reached an agreement to buy Southern California Edison's 
transmission lines. 
-- Curt Hebert, chairman of Federal Energy Regulatory Commission, told 
congressmen meeting in San Jose that FERC hopes to begin ``monitoring and 
mitigating'' the energy markets by May 1. This would allow FERC to influence 
prices preemptively. Hebert, a strong free-market advocate, stopped short of 
promising caps on soaring energy prices, stressing the need to build more 
power plants and improve the transmission system to better manage the energy 
flow. 
-- The 9th U.S. Circuit Court of Appeals said FERC is not required to order 
immediate refunds to ratepayers as the city of San Diego demands. The city 
asked FERC to order rebates to consumers who suffered ``unjust and 
unreasonable'' electricity bills last year. ``FERC's delay is not so 
unreasonable,'' said the court, adding that it is confident FERC will review 
the charges. 
-- A federal judge ordered Enron Energy Systems Inc. to abide by its 
agreement to sell cheap power to California's public universities. Enron, 
which said it would appeal, has tried to get out of delivering power for the 
final year of the four-year deal. Enron -- whose parent company is the 
nation's largest energy trader -- says honoring the contract would cost it 
$12 million a month because of skyrocketing wholesale power prices, and that 
taxpayers should pick up the tab. State Attorney General Bill Lockyer says 
Enron wants to play a ``marketing game'' and sell the universities' promised 
power on the open market for 10 times what it cost Enron. 
--Lockyer says whistle blowers who help prove energy wholesalers illegally 
profited from the state's power problems would be entitled to a percentage of 
the state's recovery. Lockyer estimated could range from $50 million to 
hundreds of millions of dollars. Lockyer's office is investigating whether 
the market was illegally manipulated -- a charge wholesalers deny. 
-- Bankruptcy experts say Pacific Gas and Electric's creditors will target 
$4.63 billion the utility transferred to its parent company while receiving 
no investments in return. Lawyers will likely exhume e-mail exchanges among 
PG&E management, take depositions from top executives and pore over reams of 
documents in search of evidence, said Bill Zewadski, co-chairman of the 
American Bar Association's bankruptcy litigation subcommittee. 
-- Standard & Poor's said there is a ``strong likelihood'' that SoCal 
Edison's credit rating will be raised if its $27.6 billion transmission lines 
deal receives final approval. But the company's ratings, now at junk bond 
level, won't return to where they stood before soaring wholesale electricity 
prices buried the utility in debt. In any event, no action will be taken 
until the transmission line sale is approved by state and federal regulators, 
as well as the California legislature, S&P said. 
-- Davis signed two bills creating more than $500 million in conservation 
initiatives and incentives. The money will reimburse homeowners and business 
owners for money spent on energy-efficient appliances and more efficient 
lighting. Lawmakers at the ceremony in Los Angeles blasted power generators 
for putting profits first. ``Generators from out of state have no sense of 
patriotism or compassion for their fellow citizens,'' said Assemblyman Gil 
Cedillo, D-Los Angeles. 
--California Rep. George Radanovich announces his request for a General 
Accounting Office study of the energy crisis has been granted. He requested 
the investigation in March citing concerns about allegations of price gouging 
and market manipulation in California's wholesale power market. 
-- Consumer activists proposed forming an energy buyers cartel among 
California, Oregon and Washington to force suppliers to reduce electricity 
rates. The united front could be the only way to avoid blackouts and steep 
rate increases as demand peaks this summer, according to the Utility 
Consumers' Action Network. 
-- No power alerts were called as reserves stayed above 7 percent. 
-- Shares of PG&E Corp. dipped 4 cents, or 0.5 percent, to close at $8.46. 
Edison International stock closed at $12.02, up 64 cents, or 5.6 percent. 
< 
WHAT'S NEXT:< ?-- The House Government Reform Committee plans energy hearings in San Diego ?on Thursday. ?-- Edison and PG&E are expected to file their 2000 earnings reports April 17. ?-- The state Senate starts hearings April 18 in its inquiry into allegations ?that electricity suppliers illegally withheld power to drive up California's ?wholesale prices. Wholesalers deny such accusations. ?-- Also April 18, the Assembly plans to resume hearings in its inquiry into ?California's highest-in-the-nation natural gas prices. ?< ?THE PROBLEM:< 
High demand, high wholesale energy costs, transmission glitches and a tight 
supply worsened by scarce hydroelectric power in the Northwest and 
maintenance at aging California power plants are all factors in California's 
electricity crisis. 
Edison and PG&E say they've lost nearly $14 billion since June to high 
wholesale prices that the state's electricity deregulation law bars them from 
passing onto ratepayers. PG&E, saying it hasn't received the help it needs 
from regulators or state lawmakers, filed for federal bankruptcy protection 
April 6. 
Electricity and natural gas suppliers, scared off by the two companies' poor 
credit ratings, are refusing to sell to them, leading the state in January to 
start buying power for the utilities' nearly 9 million residential and 
business customers. The state is also buying power for a third investor-owned 
utility, San Diego Gas & Electric, which is in better financial shape than 
much larger Edison and PG&E but also struggling with high wholesale power 
costs. 
The Public Utilities Commission has raised rates up to 46 percent to help 
finance the state's multibillion-dollar power-buying. 
Even before those increases, California residents paid some of the highest 
prices in the nation for electricity. Federal statistics from October show 
residential customers in California paid an average of 10.7 cents per 
kilowatt hour, or 26 percent more than the nationwide average of 8.5 cents. 
Only customers in New England, New York, Alaska and Hawaii paid more. 
,2001 Associated Press ? 
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Council Temporarily Reduces Utility Tax 
Chronicle Staff Report
Thursday, April 12, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
NL160902.DTL&type=news 
Oakland City Council members, saying the city should share the pain of 
increasing energy bills, have agreed to freeze the utility tax on poor 
residents and reduce it for the rest of Oaklanders. 
The council voted Tuesday to adopt a six-month change in its 7.5 percent tax 
on utility bills, effective immediately. 
Most residents will see the tax drop to 6 percent, saving the typical 
customer about $2.25 on a $150 monthly bill from PG&E. 
The tax will be suspended altogether for low-income residents who already 
qualify for lower PG&E rates, about 12 percent of Oakland residents. They 
already pay a lower city utility tax rate of 5.5 percent. 
,2001 San Francisco Chronicle ? Page?A - 23 
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Start Digging, Energy Chief Tells State 
He says new power plants, not price caps, are the answer 
Marshall Wilson, Zachary Coile, Chronicle Staff Writers
Thursday, April 12, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
N186703.DTL&type=news 
The federal energy official being pressured by Democrats to help California 
out of its power mess ventured into the heart of blackout country yesterday, 
but gave the locals no indication he wanted Washington to get involved. 
Rather than bend to pressure from Western lawmakers to support wholesale 
price controls on energy sales, Curt Hebert, chairman of the Federal Energy 
Regulatory Commission, lectured Californians that the only way out of the 
crisis is to "start putting shovels in the ground" and build more power 
plants. 
Even as Hebert was testifying about what a disaster price caps would be 
during a House committee hearing being held at San Jose State University, 
Sen. Dianne Feinstein, D-Calif., was in San Francisco renewing her push for 
exactly the remedy the FERC chairman opposes. 
FERC has questioned whether the prices some energy providers have charged in 
California were reasonable, Feinstein noted in a meeting with The Chronicle's 
editorial board. "But they refuse to (cap prices) under a very ideological, 
free-market doctrine." 
In Silicon Valley, where businesses say rolling blackouts have cost them 
millions of dollars and are putting a crimp in the economy, Hebert told 
members of the House Committee on Government Reform that price controls "do 
not promote long-term consumer welfare." 
He stressed over and over that California's problems are the result of what 
he termed the state's failure to unleash market forces. 
"The demand for electricity continues to expand while supply fails to keep 
pace," Hebert said. "Someone needs to start putting shovels in the ground." 
Gov. Gray Davis and other state lawmakers have conceded that California erred 
in not approving any major power plants for more than a decade. But they 
point out that seven new plants are under construction in California, 
including four that will be done by this summer, and 10 more are waiting for 
final permits. 
State lawmakers asked FERC this week to impose price caps for 18 months, in 
part to give California time to get more power on line. 
Feinstein plans to introduce a bill later this month to force FERC to impose 
temporary wholesale price controls on energy sold in the Western states. 
The bill got a major boost last month when Sen. Gordon Smith of Oregon, a 
free-market Republican, agreed to sign on as a co-sponsor after Feinstein 
included a provision requiring states to allow utilities to charger higher 
electricity rates to recoup their costs. 
Feinstein said the federal government's role should be to provide price 
stability until California is able to build enough new power plants. 
"I can't stress enough the effect on California," she said. "We're not 
dealing with automobiles. We're dealing with a basic staple of life." 
Yesterday's hearing was called by Rep. Dan Burton, R-Indiana, who began the 
day by saying, "We didn't come here to point fingers. We came here to listen 
and to learn." 
The panel didn't want to listen to about a dozen protesters who were hustled 
out by security guards. The protesters wanted to talk to the panel and 
question Hebert. 
The state's energy crisis may be headline news, but a forum next door on how 
to find a job in "creative careers" sponsored by San Jose State's English 
Department was packed. Students read books and napped outside the hearing 
room. 
Campus officials did not dim the lights in the room, a common way these days 
to cut energy demand. Burton, however, exhibited some solidarity with 
Northern Californians subjected to rolling blackouts. 
"The first time I ever experienced a rolling blackout was down around Carmel 
the other night when we were having dinner with some friends," Burton said 
during a break. "There wasn't a light on as far as we could see." 
E-mail Marshall Wilson at marshallwilson@sfchronicle.com, and Zachary Coile 
at zcoile@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 3 
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Enron Told It Can't Cut Electricity To Schools 
Bob Egelko, Chronicle Staff Writer
Thursday, April 12, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/M
N136368.DTL&type=news 
A federal judge ordered energy giant Enron to restore direct electric service 
to the University of California and the California State University system 
yesterday. Enron had wanted to abandon its agreements with the universities 
so it could sell the power for more money elsewhere. 
U.S. District Judge Phyllis Hamilton issued the injunction after a hearing in 
which an Enron lawyer said the company was entitled to act in its own 
economic interest, and state Attorney General Bill Lockyer accused Enron of 
gouging Californians. 
Enron Energy Systems signed four-year contracts with the two university 
systems in 1998, agreeing to supply power for 5 percent less than the price 
cap set by the state's 1996 deregulation law. All the campuses were covered 
except UCLA and UC-Riverside, which buy electricity from municipal suppliers. 
The contracts were due to run through next March, but Enron dropped direct 
service to the universities Feb. 1 and left them to rely on power supplies 
from Pacific Gas & Electric and Southern California Edison Co. Enron, 
meanwhile, brokered sales of the same electricity at much higher prices on 
the spot market. 
Enron promised to keep its promise of low rates for the rest of the contract, 
but the universities said the change to utility service would hurt their 
conservation efforts and expose them to the risk of blackouts. They also said 
losing their status as direct-power purchasers could exclude them from future 
long-term purchases, costing them as much as $297 million over 10 years. 
Shifting two of the state's biggest energy consumers to utility service also 
increased the need for power purchases by the state, which took over that 
role in January after PG&E and Edison defaulted on payments to power plants. 
Lockyer, the state's top lawyer, said yesterday that Enron was costing the 
state $12 million a month by refusing to honor contracts with the university 
and other customers who had signed long-term, fixed-price agreements. 
In issuing an injunction restoring the universities to direct service, 
Hamilton said the language of the contracts indicates that "Enron did not 
have the right to return the university systems to the utilities." She cited 
the "precarious position of PG&E," which filed for bankruptcy last Friday, 
and said the universities had bought some protection from the risks of 
utility service when they signed the contracts. 
Enron attorney A. William Urquhart said the company would seek an emergency 
stay from the U.S. Court of Appeals in San Francisco. 
"It is unreasonable that a publicly traded company like Enron would not try 
to manage its risk by returning the universities to utility service," 
Urquhart said. 
,2001 San Francisco Chronicle ? Page?A - 4 
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PUC Official's Investments Questioned 
Group already filed suit, charging conflict of interest 
Todd Wallack, Chronicle Staff Writer
Thursday, April 12, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/12/B
U116693.DTL&type=news 
A consumer watchdog group, which filed suit last year to oust one of the 
state's top utility regulators for investing in a mobile phone company, is 
now questioning some of his other holdings. 
The Foundation for Taxpayer and Consumer Rights in Santa Monica said six of 
Henry Duque's other investments may pose serious conflicts of interest -- 
including one in a company involved in the current energy crisis. 
Duque, appointed to the California Public Utilities Commission by former 
Governor Pete Wilson in 1995, put money in: 
-- A trust that received much of its proceeds from selling natural gas to 
Duke Energy, one of the key electricity suppliers in California. Duque owned 
shares in the San Juan Basin Royalty Trust from April 7, 2000 to Sept. 20, 
2000. 
Foundation lawyer Pamela Pressley said the investment was worrisome because 
Duque was in a position to vote on policies that might favor maintaining 
higher wholesale energy prices. 
-- Telewest Communications, a British cable and phone company that is owned 
largely by utilities regulated by the PUC. The company was originally a joint 
venture of TCI and US West, which are both registered with the agency as 
telecommunications carriers. AT&T acquired a significant interest in the 
company after it purchased Media One, which was split off from US West. Duque 
owned stock in Telewest from April 6, 2000 to Sept. 25, 2000. 
-- Loral Space and Communications, which began a satellite-based telephone 
company in San Jose called GlobalStar Telecommunications. Duque owned shares 
from September 14, 1999 to June 16, 2000. 
-- NTL, a British cable television operator, which acquired Cable & Wireless 
Communications' consumer arm. Cable & Wireless' U.S. arm is subject to 
regulation by the PUC, the foundation said. Duque sold his stake in the firm 
on Sept. 20, 2000. 
-- Two firms that supply equipment to AT&T and other telecommunications firms 
regulated by the PUC. Paradyne makes DSL equipment, which helps provide 
high-speed Internet access. Vertel develops software called "middleware" for 
the telecommunications market. Duque owned stock in both companies at the end 
of the year. 
"If these allegations are true, Mr. Duque should resign," said Robert 
Fellmeth, director of the Center for Public Interest Law at the University of 
San Diego. 
Duque's attorney has already acknowledged that the investment in the wireless 
company was an oversight, but dismissed the latest complaints as unfounded. 
"It's silly," said attorney Joseph Remcho. "It's no wonder they (the 
foundation) are not being helpful" in solving the energy crisis. 
Pressley, the foundation attorney, first raised the issue in a letter to PUC 
President Loretta Lynch yesterday, and provided a copy to The Chronicle. In 
light of the findings, Pressley said the PUC should reverse its decision to 
pay Duque's legal fees to fight a suit to remove him from office. PUC lawyer 
Gary Cohen declined comment, adding that the agency hasn't had a chance yet 
to review the complaints. 
In December, the foundation asked a San Francisco Superior Court judge to 
oust Duque because he bought 700 shares in Nextel Communications, the 
nation's fifth-largest wireless phone company. State rules bar PUC 
commissioners from owning stock in companies regulated by the agency. 
Nextel is registered with the PUC as a utility, and Duque has voted on 
several matters involving either Nextel or the cellular phone industry as a 
whole. A hearing has not been scheduled so far in the case, Remcho said. 
Another consumer advocate said he didn't think the latest investments would 
make much difference. 
"He has already violated the law (by investing in Nextel) and refused to 
resign," said Michael Shames, executive director of the Utility Consumers' 
Action Network. 
Unlike the Nextel investment, Shames said he didn't think the other 
investments were illegal. But he thought the law should be changed to bar 
commissioners in the future from investing in industries they regulate, even 
if the specific company isn't registered as a utility with the PUC, he said. 
"These are examples of the interconnectedness of this industry," Shames said. 
"All the companies within the industry are connected, so whether they have 
come up before the commission shouldn't matter." 
E-mail Todd Wallack at twallack@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?B - 1 
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Markets indicate even higher prices for summer power 
Posted at 10:31 p.m. PDT Wednesday, April 11, 2001 
BY JOHN WOOLFOLK 
AND JENNIFER BJORHUS 

Mercury News 


With severe power shortages predicted for the West, energy traders are 
already selling this summer's electricity at prices that far exceed previous 
years and put California's power bill on an alarming trajectory. 
August contracts in Western markets are now trading for as much as $750 per 
megawatt-hour -- five times last August's average price of $147 and well 
above the August 1999 average price of $40. 
``There's really no limit that I can see,'' said Stanford University 
economist Frank Wolak, chief market analyst for the state's main power grid, 
adding that without some price control, ``the sky's the limit this summer.'' 
No one knows just what an August day will cost California for power. But the 
arcane world of energy futures trading hints at what California may be paying 
on the spot market, where about 10 percent of the state's power is being 
bought to make up for daily shortfalls. If today's market activity is any 
indiction, it suggests the bidding on electricity this summer, when demand 
surges, could get worse than during the most critical shortages this past 
winter. 
``It's going to be an ugly summer,'' predicted Dan Pigeon, director of 
wholesale marketing for Calgary-based TransAlta Energy Marketing. 
California's mounting daily power costs have been a growing concern since 
mid-January when the state stepped in to buy electricity for its ailing 
private utilities, Pacific Gas & Electric Co. and Southern California Edison. 
The two companies are unable to buy power because of the massive debt they 
built up buying power for more than they can charge their 9 million 
customers. 
The state is buying more than a third of the utilities' electricity with no 
end in sight. PG&E has filed for bankruptcy and a proposed deal with Edison 
is months from final approval. 
Higher bill certain 
It's hard to say what California's power cost could be this year because 
state officials have refused to disclose what they are paying, citing 
concerns about negotiating advantage. 
But with market prices spiraling, experts say this year's bill is sure to be 
higher than expected. Average spot prices today, in what is normally a cheap 
month, are already an astronomical $315 per megawatt-hour, more than 10 times 
the average over the last three years. 
A megawatt-hour, the standard wholesale unit of electricity, powers about 
1,000 homes for an hour. California consumes 18 million megawatt-hours in a 
summer month. 
``The run-up in prices bodes poorly for the state in a big way,'' said 
Michael Shames, executive director of the Utility Consumers' Action Network 
in San Diego. ``The dollars we're talking about are huge.'' 
The total cost of power in California was $7 billion in 1999 and $27 billion 
last year. Shames expects the state to spend $50 billion this year, while 
Wolak says the tab will more likely be $70 billion. 
State officials have put the cost at up to $27 billion for 18 months, but 
Severin Borenstein, director of the University of California Energy 
Institute, and other market watchers doubt state officials are including the 
growing costs of summer power contracts. 
The state is believed to be paying about $50 million a day for power now, but 
if Shames or Wolak are right, that could put the average cost at $137 million 
to $192 million a day. 
Last-minute purchases 
State efforts to secure cheap power contracts for this summer and beyond have 
fallen short, covering just a third of the power it needs. The rest must be 
bought in expensive day-ahead and spot markets. 
It's unclear whether the state's $50 million daily estimate even includes 
last-minute spot market buys, which are handled by the transmission grid 
operator. State officials refused to discuss the matter. 
But experts say it's unlikely the state is counting those costs, which now 
are running about $20 million a day. 
``This is additional money you're paying,'' Wolak said. 
What has Wolak and other experts more worried, however, is the growing cost 
of electricity futures for this summer. 
Futures are contracts reserving the right to buy a commodity such as 
electricity at a set price on a later date. Like stocks and bonds, they are 
traded on several exchanges, including the New York Mercantile Exchange. 
``Futures prices reflect people's best estimate of what the spot price would 
be at that time,'' Wolak said. 
Energy companies that trade electricity futures are loathe to talk about the 
high summer prices because of accusations about price gouging. 
Mark Palmer, spokesman for Texas-based Enron Corp., said his company is 
paying high prices, too. ``If we're buying for $750, we're going to turn 
around and try to sell at $751,'' he said. ``The spreads between the prices 
at which we're buying and we're selling are tiny.'' 
Experts, however, warn that prices could go higher. 
In December, when California went to Stage 3 alerts, Pigeon of TransAlta 
Energy Marketing saw spot prices soar. ``There was a weekend when our coal 
plant tripped off, we were buying at $5,000 an hour,'' he said. 
If California is on the brink of blackouts for days, as expected, prices will 
``jump like crazy,'' said Marshall Clark, who manages natural gas contracts 
for the state. ``The market has just gotten more riskier, much more 
complex.'' 
The state's neighbors are facing the same high-priced contracts for summer 
deliveries. 
``It's not just a California problem,'' said Tom Williams, spokesman for Duke 
Energy North America. ``This is a Western crisis.'' 
Blackout showdown 
With federal regulators still resisting the regional wholesale price caps 
state leaders hope for, market experts and consumers suggest a more radical 
approach: refusing to pay the higher prices, even if it means blackouts. 
``It would be a game of chicken,'' said Borenstein with the University of 
California Energy Institute. ``The question is, is the state willing to take 
the blackouts to make the point that we won't pay prices that are way above 
competitive levels?'' 


Contact John Woolfolk at jwoolfolk@sjmercury.com or (408) 278-3410. 
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Davis signs plan offering incentives for energy conservation 
LOS ANGELES -- Gov. Gray Davis signed his long-promised electricity 
conservation plan into law Wednesday, saying the $850 million package should 
save thousands of megawatts and reduce the prospect of rolling blackouts this 
summer. 
The measures are intended to address the energy needs of households and 
businesses, with provisions ranging from rebates to ratepayers who buy more 
efficient refrigerators and washing machines to free installation of 
lighting, air conditioning and heating in commercial buildings. 
``We want to make sure that every building, every office building, every 
retail shop, every high-tech community, every agriculture concern squeezes 
down the megawatts they use as much as humanly possible and still allows them 
to make a profit,'' Davis said. 
Here are a few of the plan's energy-reduction incentives: 
?$60 million for high-efficiency lighting in commercial buildings. 
?$50 million in low-interest loans for schools and municipalities to practice 
energy efficiency. 
?$50 million for energy-efficient household appliances. 
The conservation plan follows by two days the state's agreement to buy 
transmission lines from Southern California Edison. The state Legislature and 
the California Public Utilities Commission still must sign off on the Edison 
arrangement, but the energy-saving measures go into effect immediately. 
``This is a race against time,'' Davis told reporters. ``We'll be contacting 
the largest customers, the businesses that consume the most electricity. 
We'll say to them, `We have the equipment; when can we come install it?' 
We're not waiting for them to call us.'' 
The law allocates $105 million to promote renewable energy and clean 
electricity distribution projects. It also sets aside $240 million in grants, 
weatherization loans and discounts for low-income electricity users. 
For Theresa Bailey, coordinator of a Salvation Army energy assistance program 
in Oakland, the provision for cash-strapped customers comes right on time. 
``People are really getting panicky about their bills, and I see lines of 
people every day,'' Bailey said. ``I'm worried that I'm going to be shut 
down, because I'm going to run out of money real quick. It would be really 
nice if we could get more money.'' 
Surrounded by legislative co-sponsors, Davis signed the bills outside Los 
Angeles' municipally owned Department of Water and Power headquarters, where 
a canopy of solar panels shades cars in the parking lot and electric vehicles 
are part of the company fleet. The public utility is exempt from 
deregulation, which the governor, other Democrats and consumer advocates have 
blamed for contributing to California's electricity crisis. 
``This was a hard bill to get passed, and it's absolutely critical if we are 
going to have any chance of mitigating the summer blackout problem,'' said 
state Sen. Byron Sher, D-Redwood City, a lead sponsor who wasn't able to 
attend the Los Angeles ceremony. ``Reduction in usage is the only tool 
available in the short term.'' 
The legislation, if fully implemented, could reduce California's demand by 
almost half the 4,000 to 5,000 megawatts Davis hopes to save this summer. A 
megawatt supplies enough power for from 750 to 1,000 homes. 
``These bills this summer can prevent 34 days of rolling blackouts'' each 
day, which could temporarily darken 5 million homes, said Assembly Majority 
Leader Kevin Shelley, D-San Francisco. 
Since the extent of the energy crisis became clear late last year, California 
residents have cut their electricity consumption 8 percent. State officials 
hope to achieve 10 percent savings during the high-demand summer. 

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Calif. urged to form electricity ``buyers cartel'' 
LOS ANGELES (Reuters) - California was urged Wednesday to fight back against 
a ``sellers cartel'', blamed for driving up wholesale electricity prices in 
the state, and form a ''buyers cartel'' with energy-starved neighbors Oregon 
and Washington. 
The call was made in a report co-authored by economist Peter Navarro of the 
University of California-Irvine and Michael Shames of the San Diego-based 
consumer group The Utility Consumers' Action Network (UCAN). 
In the report, the authors also argued that if sellers failed to produce 
ample power at a price set by the ``buyers cartel,'' California should sieze 
in-state power plants. 
The report warned that without such action California could face a 
blackout-riddled summer and some $50 billion in extra costs buying power on 
the open market. 
``To avert this disaster, we propose California join with the other `victim 
states' of Oregon and Washington to form a `buyer's cartel,''' the report 
said. 
``We propose offering to pay a reasonable price to the (sellers) cartel 
members - but not a penny more,'' it said. 
Wholesale power prices have skyrocketed in the last year and some blame a 
group of out-of-state power companies, some of whom purchased plants which 
the state's utilities sold as part of the deregulation of California's 
electricity industry. 
The report named Mirant Corp., Enron Corp., Dynegy Inc., Reliant Energy Inc. 
and Williams Cos. Inc. as members of the ``sellers cartel.'' 
``Using their market power, they have demonstrated that they are both willing 
and able to manufacture artificial shortages,'' the report said. 
MERCHANT MARKETERS DENY ANY WRONGDOING 
Merchant power marketers have repeatedly denied any wrongdoing in 
California's chaotic wholesale electricity market, arguing that the prices 
they charge reflect the underlying cost of power generation, tight supplies 
throughout the region, and the high financial risk of doing business in the 
state. 
The report said a fair price would be calculated daily based on natural gas 
prices and other factors. It would include a generous profit margin and would 
result in an average price of 15 to 20 cents per kilowatt hour. It noted that 
the current futures price for the summer was close to 60 cents. 
``This summer of darkness will no doubt be an orgy of price-gouging by the 
cartel -- as prices on the wholesale market are expected to double or triple 
from their already exorbitant levels,'' it said. 
California state lawmakers Tuesday at a meeting in Boise, Idaho pleaded with 
federal regulators to impose cost-based rates for both electricity and 
natural gas for the next 18 months in 11 western states. 
Federal regulators have been reluctant to impose price controls and they are 
also opposed by many of the inland western states who fear they would cushion 
consumers rather than give them the kind of price shock needed to spur energy 
conservation. 
The chronic shortage of power in West is caused partly by growing demand 
linked to the region's strong economic and population growth in recent years. 
There have also been few power plants built during the last decade, partly 
due to uncertainty surrounding the deregulation of the electric utility 
industry. 
Summer power shortages will be exacerbated by a drought in the Pacific 
Northwest which will severely curtail output from the region's massive system 
of hydropower dams, which in good years provide about 70 percent of the 
Northwest's electricity.

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PG&E bankruptcy renews focus on billions utility transferred 
SAN FRANCISCO (AP) -- Pacific Gas and Electric is bankrupt and its holding 
company remains profitable, partly because the utility transferred billions 
of dollars to its corporate parent in the years leading up to its financial 
collapse. Is this fair? 
Whether the money handed over to PG&E Corp. represented business as usual or 
a reckless raid on the utility's finances will likely become a pivotal issue 
in the bankruptcy case, affecting millions of customers and thousands of 
creditors. 
There's plenty of money to haggle over. From 1997 through September 2000, the 
utility paid $4.63 billion to the parent company and received nothing in 
return, according to a state-ordered audit completed in January. 
In another controversial move made the night before the April 6 bankruptcy 
filing, the utility paid 6,000 employees a total $50 million in bonuses and 
raises -- an average of more than $8,000 per worker. 
``I would expect that the creditors are going to be looking at all that 
transferred money as money that they should have been getting paid by the 
utility,'' said bankruptcy professor Judy Beckner Sloan of the Southwestern 
University School of Law in Los Angeles. 
The stakes are so large that the peripheral trial -- which is known as an 
``adversary proceeding'' and is expected to revolve around this thorny legal 
question -- may overshadow the main event. 
To get to the bottom of what happened, lawyers will likely exhume e-mail 
exchanges among PG&E management, depose top executives and pore over reams of 
documents, said Tampa, Fla. lawyer Bill Zewadski, co-chair of the American 
Bar Association's bankruptcy litigation subcommittee. 
``It's going to be a very complicated process, something that could drag on 
for years,'' Zewadski predicted. 
Even if the creditors decide to go after the money that flowed from the 
utility to parent company, it will be difficult, if not impossible, to 
recover the cash, bankruptcy experts say. 
The parent company, which made $753 million during the first nine months of 
2000, up 40 percent from the same period the year before, already has spent 
most of the utility money to pay shareholder dividends and buy back stock to 
boost its market value. The parent company also invested $838 million in its 
still-thriving power-generating subsidiaries. 
Those unregulated subsidiaries, lumped together as the National Energy Group, 
aren't a part of the regulated utility, but they conceivably could be pulled 
in if creditors prove the parent company's investments in National Energy 
should have been made in the utility instead. 
Should a judge decide the parent company acted wrongfully and there isn't 
enough money to repay the utility's creditors, the bankruptcy code allows for 
a court judgment holding the parent company liable, said Kenneth N. Klee, a 
bankruptcy professor at the UCLA School of Law. 
If the liability were large enough, it could also force the parent company 
into bankruptcy. 
PG&E Corp. executives are confident that the parent company and unregulated 
subsidiaries will be shielded from the utility's bankruptcy case. 
``We fully expect that the financial condition of PG&E Corp. and (National 
Energy) will be unaffected'' by the utility's bankruptcy, PG&E chief 
financial officer Peter Darbee assured investors during a conference call 
last week. 
Darbee reiterated previous statements that PG&E followed all the state's 
rules governing the relationship between holding companies and regulated 
utilities. 
The California Public Utilities Commission isn't so sure. Three days before 
the bankruptcy filing, the regulators opened an investigation into whether 
the parent company illegally took the utility's money or shirked its 
responsibility to assure the utility had adequate capital. 
The parent company made a move to insulate itself and National Energy from 
the utility's financial woes in December when it received federal regulatory 
approval to reshuffle its corporate structure in a maneuver known as 
``ringfencing.'' The term refers to the concept of building a barrier between 
a company's stable and high-risk operations. 
The walls separating the utility from the parent and other subsidiaries are 
another offshoot of the 1996 California law that deregulated the state's 
electricity market. 
It seems ironic now, but regulators ordered PG&E to splinter into distinct 
companies to protect the then-rich utility in case something went awry at the 
parent company or the unregulated businesses. 
To drag the parent company and National Energy into the bankruptcy case, the 
creditors will have to prove that the money taken from the utility 
represented ``fraudulent transfers,'' bankruptcy experts said. 
This doesn't mean there must be evidence of actual fraud. Rather, the 
creditors will have to show that the utility relinquished its assets while 
receiving ``less than reasonably equivalent'' value in return, said 
University of Missouri bankruptcy professor Robert Lawless. 
The parent company didn't invest anything in the utility from 1997 through 
September 2000, according to the state-ordered audit. 
Part of the PUC's investigation is focused on whether the parent company 
should have either been putting more money in the utility or pulling less 
cash out of its subsidiary to build the equivalent of a rainy-day fund. 
PG&E's utility had been thriving until wholesale electricity prices shot up 
in May 2000, driving up the cost of delivering power far beyond what 
regulators allowed to be passed on to consumers. 
In 1998 and 1999, the utility's profit totaled $1.5 billion on combined 
revenues of $18.2 billion. In the nine months ending in February 2000, the 
utility said its wholesale electricity costs exceeded its revenue by $8.9 
billion. 
Even as it fell into a deeper hole, the utility continued to transfer money 
to its parent company until late last year, when PG&E Corp. finally suspended 
its shareholder dividends. 
``If all the utility was doing was paying dividends to its parent, this is 
going to be a difficult case for the creditors to win,'' Lawless said. 
Zewadski concurred, noting that ``it's part of a subsidiary's job to pay its 
profits to the corporate parent.''

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Officials question utilities, generators 
Published Thursday, April 12, 2001, in the San Jose Mercury News 
BY MICHELLE GUIDO 

Mercury News 


Officials from California's two major utilities and two of its smaller power 
generators were in the hot seat in San Jose on Wednesday, fielding questions 
from federal lawmakers about their role in the state's power crisis. 
On Day 2 of a three-day swing through California, three Republican members of 
a U.S. House subcommittee on energy policy and three local Democratic 
representatives heard testimony from utility officials and from the chairman 
of the Federal Energy Regulatory Commission. 
The energy crisis is expected to bring rolling blackouts to California 
through the summer months, and energy officials warned on Wednesday that the 
high prices consumers face here undoubtedly will spill over into neighboring 
states if FERC doesn't cap prices now. 
But FERC Chairman Curt L. H,bert Jr. reiterated what he said Tuesday at a 
Western energy summit in Boise: He does not support price caps on electricity 
-- in California or any of the Western states. 
``The energy is going to go where the caps are not, and nine out of 11 
Western state governors have said they don't want price caps in their 
states,'' H,bert said. ``A cap sends us in the wrong direction.'' 
Instead, he said, by May 1, FERC will unveil a plan to monitor energy prices 
and in some cases, might ease the price of energy sold on California's more 
expensive spot markets. He wouldn't elaborate, but made it clear those 
adjustments would not include price caps. 
Government Reform Committee Chairman Dan Burton of Indiana opened the hearing 
by saying the committee's mission was not to ``point fingers.'' 
``We wanted to see if there were ways the federal government and the state 
government could work together to get past this crisis,'' he said. 
At one point early in the hearing, demonstrators attempted to address the 
lawmakers. They were ushered out of the room by security personnel. 
Burton was joined by Republican representatives Doug Ose of Woodland and 
Steve Horn of Lakewood. Also participating in the hearings were Democratic 
representatives Zoe Lofgren and Michael Honda of San Jose and Barbara Lee of 
Oakland. 
The Democrats pushed strongly for FERC to consider price caps. 
``We need to gain control of this out-of-control market and gain control of 
the price gouging,'' Lofgren said. 
Honda concurred: ``We believe that FERC has a responsibility and they've even 
said that rates are unjust and unreasonable. We need short-term caps.'' 
It was clear that Burton doesn't believe that price caps are the answer. On 
several occasions, he suggested that capping energy prices might result in 
even more blackouts as summer approaches. 
Lee suggested that some people believe the only way out of the crisis is some 
form of re-regulation. But Dede Hapner, vice president of regulatory 
relations for PG&E, said she wasn't sure that was the answer. 
``We still think a correctly structured market could work. It's certainly 
working in other states,'' Hapner said. ``In retrospect, the way the 
deregulation market was structured was designed to fail.'' 
Today the hearings move to San Diego, where members will hear from 
representatives of generators that have been accused of overcharging 
California, including Reliant Energy, Sempra Energy and Williams Energy 
Services. 


Contact Michelle Guido at mguido@sjmercury.com or (408) 295-3984.

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Charities join needy in power-bill struggle 
With families rationing energy and money, relief agencies fear they'll be 
unable to help in summer. 
April 12, 2001 
By HANH KIM QUACH
The Orange County Register 
GARDEN GROVE - Kim Paris' children have a choice once it gets dark: They can 
either watch TV, or color. Not both. 
The reason is because the television uses electricity. So does the lamp by 
which her children color. 
"With the (energy) situation, I can't afford the bill (for both)," said 
Paris, who is struggling to pay off six months of energy bills totaling 
nearly $2,000. "There's always a compromise in my house." 
People in Paris' situation are being helped by Orange County nonprofits in 
this year's energy crisis, but several local charities report that emergency 
energy assistance is draining their coffers quickly. 
Some charities fear they won't have any cash left to help by summer. 
And once the money is gone, "the needy go without," said Kathy Kifaya, 
director of the Orange County Community Development Council's utility 
services. 
"They become homeless, or they stay in their apartments living without 
electricity, heat, air conditioning. They're living in unhealthy situations; 
they become sicker; they miss school; they go without food," she said. 
The drain on money is due in part to larger bills. Natural-gas shortages this 
winter pushed up heating bills. 
And charities are still reeling from last summer, when bills for south-county 
residents in San Diego Gas & Electric's territory briefly tripled when the 
utility passed a key threshold under the state's deregulation law and was 
allowed to pass its full electricity costs onto consumers. The state later 
enacted a law to reduce and cap the amount SDG&E customers have to pay. 
So large is the demand that the Salvation Army's best-funded centers in 
central Orange County run out of their monthly allotment within two weeks. 
"It's just going really fast," said Bonnie Miller, a Lutheran Social Services 
program manager for emergency assistance. "We're seeing more bills that are 
over $200 for one month." She points to $20,000 in donations, which vanished 
in 2 1/2 weeks. Usually, that would have lasted at least six weeks. 
The energy crunch could also crush many low-income families who have settled 
in the county's cheapest -- but once-trendy -- 1970s-era all-electric 
apartments, which have few energy-efficient appliances, she said. 
MORE PEOPLE IN NEED OF MORE ASSISTANCE 
The higher bills have caused more residents to turn to the charities. 
The Orange County Community Development Council typically receives about 
4,000 calls a month for utility help. But in the past five months, as 
residents countywide needed assistance to afford natural-gas bills, the 
organization has received about 7,000 calls a month, Kifaya said. 
This summer, with electricity-rate increases and other energy problems, she 
suspects it'll receive 10,000 calls a month. The organization signs up 
eligible residents for federal assistance with their bills. It also conducts 
45-minute classes on energy conservation. 
"We're really bracing for April, May and June," she said. "We don't know how 
bad it's going to get." 
CREATIVE MONEY SHUFFLING 
Lupe Savastano at Catholic Charities of Orange County has gotten more 
creative with assistance, collaborating with other charities to help one 
family. Sometimes she pays a portion of a family's rent equal to the utility 
bill so that the client can free up the cash for electricity. 
But she's still concerned about what's coming up this summer. 
"A lot of people are going to have their services disconnected," Savastano 
said. 
In the meantime, families will continue to impose strict conservation 
measures. 
Kelly Massengale in Westminster has scaled back to three loads of laundry a 
week -- half as many as she used to do. The TV is off when no one is 
watching, and the heater is hardly ever switched on. Her gas bill last month 
was $45; the electric bill was $94. Massengale, who lives with her mother and 
two children, ages 3 and 6, said she'll walk more and use the bus to save 
money to pay for rate increases. 
But some things she can't afford to change, like the energy-guzzling 
refrigerator the family has used since she was 11. Now, she's 34. 
"Nobody can afford the increases," she said. 
Meanwhile, for Paris, every single kilowatt-hour counts. 
A single mother of children ages 7 through 14, Paris has to make do with the 
$1,030 she receives a month in child support -- $850 of which pays for rent 
at her all-electric apartment. 
She unplugs her appliances to keep even the smallest amount of electricity 
from draining into the cords. She only plugs in what she's using for the 
moment. 
Said Paris: "I'm trying to do everything I can." 
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Rate plan expands discount eligibility 
PowerPower 200,000 more in area would qualify under higher income ceiling. 
April 12, 2001 
The Orange County Register 
About 200,000 more Southern Californians would qualify for discounted utility 
bills under a rate system proposed by state regulators last month. 
The rate system, which is expected to be approved this month, would allow a 
family of four earning $30,100 to qualify for the program, called California 
Alternative Rates of Energy, or CARE. Previously, only families earning less 
than $25,800 were eligible. 
Families enrolled in the CARE program are exempt from rate increases - 
including last month's rise of as much as 36 percent and January's 9 percent 
increase. 
The discounts have been a relief, albeit small, for Kim Paris of Garden 
Grove. When Paris moved into her all-electric apartment six months ago, she 
didn't realize a broken heater was guzzling energy. Because of a 
misunderstanding with her landlord, she didn't switch the utility service 
into her name until recently. By that time, she had accumulated a bill of 
$2,300. 
"It upset me a lot because if I would have known that (heater) was causing my 
bill to go up, I would have (unplugged) it a long time ago,'' Paris said. 
Enrolling in CARE has shaved nearly one-fourth off the bill. But she still 
can't afford it. That's why she has become militant about conservation. 
She tells her five daughters, "If you can see even a little bit without a 
light, you don't need it.'' 
About 1 million customers in Southern California Edison's service area are 
eligible under the new guidelines, said John Nall, coordinator of the 
program. 
The program, however, is undersubscribed, officials say. Only 55 percent of 
those eligible take advantage of the reduced rates. 
Ratepayers subsidize the discounts and other programs, such as one to help 
make older homes more energy-efficient. The total charge for the Public 
Purpose Programs is less than 3 percent of an average bill. 
Ratepayers who qualify for the discount can apply through their utility. To 
contact area utilities, call: 
Southern California Edison: (800) 447-6620 
San Diego Gas & Electric: (800) 411-SDGE (7343)
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Thursday, April 12, 2001 






Dimming chances for resolving power crisis 
We're still not convinced that the California government should buy the 60 
percent of the state's power grid owned by the three big utilities (20 
percent is owned by the municipal utilities and 20 percent by the federal 
government). But on Monday one of the utilities, Southern California Edison, 
worked out an agreement with Gov. Gray Davis to sell its portion of the grid 
for $2.76 billion. 
"The deal would allow the state to take possession of Edison's 12,000-mile 
network of power lines at a price more than twice its book value," reported 
the Register. "Edison would use that money and issue $2 billion in bonds to 
pay off about $5.4 billion in debt, which it accumulated by purchasing power 
at high prices that couldn't be passed on to consumers under a rate freeze.
"Both Edison- and state-issued bonds will be paid off by ratepayers via their 
electricity bills." The company would end its lawsuits against the state. 
"Edison also agreed to invest $3 billion over five years in improvements to 
the transmission lines. And its corporate parent would contribute $420 
million to reduce the utility's debt."
In a conference call we joined with other reporters yesterday, Gov. Davis 
explained that he hopes the Legislature will take up the matter when it 
returns to the capitol next Monday and quickly draft legislation for the 
purchase. He also will meet on Wednesday with Sempra Energy, the parent 
company of San Diego Gas & Electric, and hopes to work out a similar 
agreement.
As to Pacific Gas & Electric, which last week declared bankruptcy, he hopes 
to convince "the bankruptcy court that we are the appropriate buyer" of 
PG&E's portion of the power grid.
We asked the governor about how politics would be kept out of the process of 
building and maintaining the grid, to prevent legislators from rigging the 
system to favor their districts. "There will be a specific agency responsible 
for efficiency of the grid and what improvements would be necessary," he 
replied. "It will be a power agency to which I will make all the 
appointments."
Given that this electricity problem has been bumbled by other state-appointed 
entities - the Public Utilities Commission, the Independent System Operator 
and the Power Exchange - we fail to see how yet another public agency would 
be better than private-sector operation.
If the deal for the grid somehow falls through for financial reasons, then 
what would happen? "Plan B," the governor said, is "we get assets of 
comparable value" such as "hydroelectric facilities" owned by the utilities. 
"Or they give us cheap power to make up the difference." That would mean even 
more state ownership and control of the electricity industry.
Finally, if it's approved by the Legislature, this is going to be an 
exceedingly complicated transaction. 
The governor said the whole deal "would take at least a year to conclude" 
because it involves "20,000 documents going back at least 100 years." By 
contrast, he pointed out, transactions solely in the private sector, even of 
this magnitude, usually can be completed in a matter of a few months.
To us, that's one more reason against government ownership: These have been 
private assets for a century and entangling government in the matter means 
more complication, not less.
The Legislature first should closely scrutinize the power-grid purchase 
proposal, then reject it. In the forefront should be two local Democrats, 
Sen. Joe Dunn of Garden Grove and Assemblyman Lou Correa of Santa Ana. If 
this power problem isn't solved but is made worse, it will be their party, 
with its large majorities in both houses, that suffers in the 2002 election. 
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Utilities Allegedly Gouged Calif.



LOS ANGELES (AP) via NewsEdge Corporation  -
Private power wholesalers have been blamed
for driving up California's electricity prices but even
government-owned utilities allegedly manipulated the market,
maximizing profits and inflaming the energy crisis, according to a
confidential document obtained by the Los Angeles Times.


The document shows that the power providers, including the Los
Angeles Department of Water and Power, influenced the spiraling
costs of wholesale electricity between May and November 2000.


The DWP was eighth on the list of alleged price gougers for
seeking high prices during periods of high demand, which helped
inflate costs across the entire spot market, the document said.


The document decodes the identities of unnamed power providers
in a recent study by the California Independent System Operator.
CISO examined thousands of hours of bidding practices for 20 large
electricity providers.


DWP General Manager S. David Freeman called the findings
``outrageous.''


``We have consistently charged (CISO) our cost plus 15
percent,'' Freeman said. ``It's not as though we're up there
peddling a bunch of power to jam it down their throats.''


In addition to the DWP, the document singles out two other
government-run agencies that it said consistently inflated prices:
the federally owned Bonneville Power Administration in the Pacific
Northwest, and the trading arm of Canada's BC Hydro in British
Columbia.


BC Hydro reaped the most in what the state's power-grid operator
deemed ``excess profits.'' The Canadian agency took in $176
million, several times the amount of allegedly excessive earnings
collected by all but one private generator. Second on the list was
Atlanta-based Mirant which collected nearly $97 million.


The companies cited said they broke no state rules and abided by
California's 1996 deregulation law, the Times reported Wednesday.


BC Hydro officials acknowledged, however, that they anticipated
periods of severe power shortages and let their reservoirs fill
with water overnight, then opened them to produce cheap
hydroelectric power to sell at a premium.


``It was the marketplace that determined what the price of
electricity would be at any given time,'' BC Hydro spokesman Wayne
Cousins told the Times. ``We helped keep the lights on in
California.''
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PG&E's Money Transfers Focused On



By MICHAEL LIEDTKE
AP Business Writer
SAN FRANCISCO (AP) via NewsEdge Corporation  -
Pacific Gas and Electric is in bankruptcy
court, but its holding company remains profitable, partly because
the utility transferred billions of dollars to its corporate parent
in the years leading up to its financial collapse. Is this fair?


Whether the money handed over to PG&amp;E Corp. represented business
as usual or a raid on the utility's finances will probably become a
pivotal issue in the bankruptcy case, affecting millions of
customers and thousands of creditors.


From 1997 through September 2000, the utility paid $4.63 billion
to the parent company and received nothing in return, according to
a state-ordered audit completed in January.


In another controversial move made the night before the Chapter
11 bankruptcy filing April 6, the utility paid 6,000 employees a
total $50 million in bonuses and raises _ an average of more than
$8,000 per worker.


``I would expect that the creditors are going to be looking at
all that transferred money as money that they should have been
getting paid by the utility,'' said bankruptcy professor Judy
Beckner Sloan of the Southwestern University School of Law in Los
Angeles.


To get to the bottom of what happened, lawyers will probably
exhume e-mail exchanges among PG&amp;E management, take depositions
from top executives and pore over reams of documents, said Tampa,
Fla., lawyer Bill Zewadski, co-chairman of the American Bar
Association's bankruptcy litigation subcommittee.


``It's going to be a very complicated process, something that
could drag on for years,'' Zewadski said.


Even if the creditors decide to go after the money that flowed
from the utility to parent company, it will be difficult, if not
impossible, to recover the cash.


Pacific Gas and Electric and Southern California Edison, the
state's two biggest utilities, say they have lost more than $13
billion since June because of skyrocketing wholesale power prices
and California's 1996 deregulation law, which bars them from
passing those costs on to customers.


The crisis has led to rolling blackouts over the past few months
and warnings from the two utilities that they were sliding toward
ruin.


PG&amp;E, which made $753 million during the first nine months of
2000, up 40 percent from the same period the year before, already
has spent most of the utility money to pay shareholder dividends
and buy back stock to boost its market value. The parent company
also invested $838 million in its still-thriving power-generating
subsidiaries.


Those unregulated subsidiaries, lumped together as the National
Energy Group, are not a part of the regulated utility, but they
could be pulled into the bankruptcy case if creditors prove the
parent company's investments in National Energy should have been
made in the utility instead.


Should a judge decide the parent company acted wrongfully and
there isn't enough money to repay the utility's creditors, the
bankruptcy code allows for a court judgment holding the parent
company liable, said Kenneth N. Klee, a bankruptcy professor at the
UCLA School of Law.


If the liability were large enough, it could also force the
parent company into bankruptcy.


PG&amp;E executives said they are confident that the parent company
and unregulated subsidiaries will be shielded from the utility's
bankruptcy case.


PG&amp;E chief financial officer Peter Darbee said the parent
company followed all the state's rules governing the relationship
between holding companies and regulated utilities.


The California Public Utilities Commission is not so sure. Three
days before the bankruptcy filing, the regulators opened an
investigation into whether the parent company illegally took the
utility's money or shirked its responsibility to assure the utility
had adequate capital.


The parent company made a move to insulate itself and National
Energy from the utility's financial woes in December when it
received federal regulatory approval to reshuffle its corporate
structure in a maneuver known as ``ringfencing.'' The term refers
to the concept of building a barrier between a company's stable
operations and its high-risk ones.


The walls separating the utility from the parent and other
subsidiaries are, paradoxically, an offshoot of the deregulation
law.


At the time, regulators ordered PG&amp;E to splinter into distinct
companies to protect the then-rich utility in case something went
awry at the parent company or the unregulated businesses.
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States say federal government needs to act to stem energy crisis



By H. JOSEF HEBERT
Associated Press Writer
BOISE, Idaho (AP) via NewsEdge Corporation  -
A six-hour brainstorming session between
federal and state energy regulators ended with a clear message:
Western states want more help from Washington to corral the
region's deepening power crisis.


The three members of the Federal Energy Regulatory Commission
flew to Idaho for what Chairman Curtis Hebert called ``frank
discussions'' with officials from 11 Western states about the
astronomical electricity prices that have spread from California to
almost every corner of the region.


And the Washington regulators got an earful.


``Montana is taking a hell of a hit because of this market,''
declared Gary Feland, whose job it is to approve requests by the
state's utilities to pass wholesale price increases on to their
retail customers.


``Politically we're getting beat up,'' added Feland.


In many states, retail electricity sales are still regulated,
but wholesale markets are not. The state officials warned that many
of the electricity rate increases, stemming from wholesale price
run-ups, have yet to reach consumers, but will in the coming months
as states have no choice but to approve them.


Much of the discussion focused on whether FERC, which regulates
the wholesale power market, should temporarily impose price
controls to ease the impact of what one of the commissioners,
William Massey, called ``a looming disaster'' this summer if
nothing more is done.


Afterward, Hebert tallied up the results: Five states opposed
such controls, three wanted them desperately and three others were
not sure. Previously, the latter three had lined up in the ``no''
column.


Hebert has made clear his opposition to renewed price regulation
_ even temporarily to address an emergency _ because he argues that
a free market is the only way to get people to build more power
plants and transmission lines and create the ``price signal'' to
foster conservation.


His position drew support from Vice President Dick Cheney in a
telephone interview with the Associated Press in Olympia,
Washington.


``The problem with price caps is that they don't solve the
problem,'' said Cheney. ``Just look at California, where they had
caps applied at the retail level that, coupled with the requirement
to buy power on the spot market, has driven PG&amp;E into bankruptcy.''


Pacific Gas &amp; Electric, California's largest utility, said last
week it had debts of dlrs 9 billion and filed for Chapter 11
bankruptcy protection.


Like the state officials, FERC is deeply split on the issue of
price controls.


``It is wrong to put the entire Western economy in harm's way
solely to protect a price signal arising from a dysfunctional
market,'' Massey said. ``Our passion for the market must be
tempered with commonsense.''


A contingent from California submitted a proposal calling for
cost-based price caps for 18 months on wholesale electricity and
natural gas sales across the West. Only FERC can impose such caps.


``We have done our part. We cannot do it alone,'' Bob Herzberg,
speaker of California's Assembly, told the three FERC
commissioners. The Californians listed the state's response to its
power problems so far: Actions to boost conservation, increase
retails electricity rates and speed up power plant construction.
Still, they bemoaned that California this year was expected to
spend dlrs 65 billion on electricity, nearly 10 times its power
bill in 1999.


Hebert insisted that the FERC ``is doing everything it can'' to
ensure just and reasonable prices and cited the commission's action
to seek dlrs 124 million in refunds on California power sales. He
also said the commission plans soon to approve a new system of
tracking market abuses.


Officials from Washington state and Oregon joined California in
the plea for temporary price regulation. The Northwest has been hit
by a severe drought, making less hydro-generated electricity
available and forcing greater reliance on the high-priced spot
market. On Monday the Bonneville Power Authority said it may have
to nearly triple what it charges for its power if demand doesn't
drop sharply and reduce the need of spot market purchases.


In a surprising development, Wyoming, Utah and New Mexico said
they no longer were sure that price controls would be such a bad
thing. And even those opposed to price caps, like Montana's Feland,
criticized FERC for not being more aggressive in challenging prices
_ many of them now 10 times what they were a year ago _ as
unreasonable.


___=???Associated Press Writer David Ammons in Olympia, Wash.,?contributed to this report.???