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Date: Wed, 21 Mar 2001 12:53:52 -0600
From: "Tracey Bradley" <tbradley@bracepatt.com>
To: "Paul Fox" <pfox@bracepatt.com>
Cc: "Ronald Carroll" <rcarroll@bracepatt.com>
Subject: WSJ - California Legislators Seek Ouster Of State's Top Utilities 
Regulator
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FYI

March 21, 2001

California Legislators Seek Ouster
Of State's Top Utilities Regulator

By Mitchel Benson and John Emshwiller
Staff Reporters of The Wall Street Journal

SACRAMENTO, Calif. -- With blackouts again rolling across the state and 
lawmakers losing faith in Gov. Gray Davis, legislators called for the 
resignation of the state's top utility regulator and threatened to cut off 
further money for buying electricity.

The second straight day of blackouts, in which power had to be cut to the 
equivalent of 500,000 homes, resulted from a combination of unseasonably warm 
temperatures and a high-level of power-plant outages. Those factors are 
likely to worsen as a warm spring turns to a hot summer, and Californians 
switch on air conditioning.

The continuing crisis, originally sparked by a utility-deregulation plan gone 
awry, is draining the patience of political and business leaders, who are 
stepping up their criticisms of Gov. Davis. Tuesday, Assembly Republican 
Leader Bill Campbell of Orange County called on Mr. Davis's appointee, Public 
Utilities Commission President Loretta Lynch, to resign, and for the governor 
to "replace her with an energy expert in which Californians could have 
complete confidence."

Ms. Lynch, an attorney, had no background in energy or utilities when the 
governor appointed her as PUC chief a year ago, long before any blackouts.

"We have no confidence that Loretta Lynch will play a constructive role in 
solving this energy crisis in the weeks and months ahead," Mr. Campbell wrote 
the governor in a letter released Tuesday. "Leaders seek to eliminate 
barriers to progress. Loretta Lynch stands in the way of a quick solution to 
California's energy problem."

Mr. Campbell and other Assembly Republicans attacked Ms. Lynch for delaying 
"critical decision-making." In recent weeks, the PUC has been trying to 
determine how to divide current retail electricity revenues among utilities, 
their creditors and the state. The commission's decision is considered 
critical to the success of the state's ability to sell an estimated $10 
billion in bonds to help finance continuing electricity purchases. The 
Republicans say the PUC's inaction has put the bond issue "in jeopardy and 
Californians at higher risk of rolling blackouts." The PUC is expected to 
take up this matter again next week.

Ms. Lynch couldn't be reached for comment, but Steven Maviglio, a spokesman 
for Mr. Davis, dismissed the complaints. Pointing out that the state's flawed 
deregulation plan is based on legislation signed by then-GOP Gov. Pete Wilson 
in 1996, Mr. Maviglio said, "If the Republicans want to continue to play 
politics, good luck and God bless. I think Republicans are bankrupt of ideas, 
and instead of offering constructive solutions, they're playing games."

California's legislative plan to deregulate electricity has been derailed by 
several flaws, including the fact that wholesale rates were allowed to 
escalate while retail rates were frozen for several years. At the same time, 
the state experienced an expansion that sent demand soaring while no new 
generating capacity was added.

It's not only Republicans who are putting additional heat on the governor and 
the PUC. Sen. Steve Peace, a Democrat who is chairman of the Joint 
Legislative Budget Committee, is balking at the latest request by the 
administration for emergency electricity funding, saying he fears there isn't 
yet any mechanism in place for the state to be repaid.

On Monday, state finance director Tim Gage requested another $500 million, 
his sixth such request since Feb. 5. Mr. Gage said the Davis administration 
is "sympathetic to the senator's concerns, and we are hopeful that the PUC 
will act appropriately to resolve them."

As recriminations rose in Sacramento, officials in Los Angeles and Long Beach 
took aim at natural-gas suppliers. City attorneys filed suits in state court 
against units of Sempra Energy and El Paso Corp. claiming they conspired to 
manipulate gas supplies to drive up prices and eliminate competition. The 
cities are seeking injunctions and monetary damages.

In recent months, natural-gas prices in California have soared higher than in 
the rest of the country. Beyond the impact on gas consumers, the trend has 
put upward pressure on wholesale electricity prices, since gas is a major 
power-plant fuel.

A spokesman for El Paso said it hadn't yet been formally notified of the 
cities' suits, but in response to private suits last December alleging 
conspiracy, it issued an "unequivocal denial" of the claims. A Sempra 
spokesman couldn't be reached.

Write to Mitchel Benson at mitchel.benson@wsj.com and John Emshwiller at 
john.emshwiller@wsj.com