Wall Street Journal, July 17, 2001 Hurt by Deregulation of Utilities,
???California Gives Itself Lead Role By REBECCA SMITH and JOHN R. EMSHWILLER 

Copley News Service, July 17, 2001, Tuesday, State and regional, 289 words,
????Davis dedicates 1st of 10 peaker plants; facility was built in 90 days,
????Kristen Green, SAN DIEGO

Copley News Service, July 17, 2001, Tuesday, State and regional, 1351 words
????, Edison rescue plan is facing an overhaul, Ed Mendel, SACRAMENTO

Los Angeles Times, July 17, 2001 Tuesday, Home Edition, Page 7, 710 words,
????The State; ; No Accord Near on Edison Rescue; Legislature: With Davis'
????proposal languishing and rival versions being crafted, the issue continues
????to be divisive., MIGUEL BUSTILLO, TIMES STAFF WRITER, SACRAMENTO

Los Angeles Times, July 17, 2001 Tuesday, Home Edition, Page 7, 1204 words,
????The State; ; Consultants' Stock Buys Questioned; Energy: State official
????urges conflict of interest probe into purchases of shares in power firms.,
????JEFFREY L. RABIN, ERIC BAILEY, TIMES STAFF WRITERS

Los Angeles Times, July 17, 2001 Tuesday, Home Edition, Page 6, 820 words,
????The Region; ; Churches Send Forth Word on Energy Savings; Power: Edison
????calls on them to help spread the news of state-mandated discounts for
????low-income customers. Many have signed up, the firm says., WILLIAM 
LOBDELL,
????TIMES STAFF WRITER

Los Angeles Times, July 17, 2001 Tuesday, Home Edition, Page 14, 970 words,
????THE NATION; ; In Support of Energy Plan, White House Burns Some Gas;
????Politics: Cheney, other Bush officials fan out to make what the president
????admits is a tough case., MEGAN GARVEY, TIMES STAFF WRITER, MONROEVILLE, 
Pa.

The San Francisco Chronicle, JULY 17, 2001, TUESDAY,, FINAL EDITION, NEWS;,
????Pg. A5, 555 words, Consumers await word on rates; ???Report's delay,
????government bond issue raise questions about electricity price increase,
????Christian Berthelsen


July 17, 2001 ????
Hurt by Deregulation of Utilities,
California Gives Itself Lead Role
By REBECCA SMITH and JOHN R. EMSHWILLER 
Staff Reporters of THE WALL STREET JOURNAL


SACRAMENTO, Calif. -- In a video made for a political roast, Gov. Gray Davis, 
mimicking the Mafia boss in "The Sopranos," complains to his therapist about 
Texas bad guys pushing electricity prices sky high. He vows to get tough. 
Soon, a Davis confederate ushers four men in 10-gallon hats into an office, 
shots ring out, and the aide, emerging blood-spattered, delivers the 
punch-line: "Tell the governor his Reliant problem is solved."

While Gov. Davis hasn't gone that far in his fight with suppliers such as 
Houston-based Reliant Energy Inc., he is in other ways trying to blast his 
way out of the crisis. His moves are coming in rapid succession after months 
of criticism of the governor for inaction, and they are fast reshaping the 
state's electricity system.

With the acquiescence of other state leaders, Gov. Davis has put California 
on the road to creating what amounts to a mammoth state-owned electric 
utility, answerable largely to the governor. Moreover, though designed to 
solve a short-term emergency, the governor's policies are loading consumers 
with obligations that could affect the economy of the most-populous state for 
15 to 20 years.

His actions in some ways hark back to the system of central control that 
preceded the disastrous 1996 foray into utility deregulation. But they aren't 
simply a return to the days of monopoly utilities strictly regulated by the 
state's Public Utilities Commission. What is emerging now is a California 
power colossus that operates in important ways beyond the reach of regulators 
or the public.

Mr. Davis says his actions will ensure that Californians have a secure supply 
of reasonably priced electricity. "This is not a power grab," the Democratic 
governor says in an interview. "I had no desire to intervene. I would get out 
tomorrow if you would let me out. This is my least-favorite thing to do."

'Colossal Failure'


Yet in the past six months, pushed by what he calls the "colossal failure" of 
a deregulation plan hatched under his Republican predecessor, the governor 
has put the state deep into the power business. In January, Mr. Davis ordered 
the state Department of Water Resources to begin buying power in place of 
California's cash-strapped utilities. Since then, the state has purchased or 
committed to purchase $45 billion to $50 billion of electricity, with some 
contracts as long as 20 years.

The governor has in effect seized control of the state's electricity-grid 
operator, the California Independent System Operator, installing his 
hand-picked team as board members. As its name implies, the ISO was supposed 
to manage the grid without favoring any one participant.

Mr. Davis also is pushing to have the state buy huge chunks of the 
transmission system that are owned by the financially beleaguered utilities. 
He recently signed into law a bill that creates a state power authority, 
whose director will be appointed by the governor. This agency, which so far 
exists just on paper, could be used to build power plants and help run a 
state-owned transmission system. Mr. Davis says that the authority is part of 
what he sees as a "hybrid" system where public power plays an important role 
augmenting private enterprise in the electricity business.

Reviving the Utilities


Having healthy utilities is extremely important, says the governor. He adds 
that he has been working hard to revive the state's two biggest utilities, 
the Pacific Gas & Electric Co. unit of PG&E Corp. and the Southern California 
Edison Co. subsidiary of Edison International. But as the state's role in the 
electricity business has grown, the utilities don't seem as essential as they 
once did.

This is one reason the governor has had difficulty getting a rescue package 
for Edison through the state legislature. The plan, among other things, calls 
for the state to buy Edison's transmission system for $2.76 billion and 
envisions the utility eventually resuming some power-buying chores. Talks 
over a similar rescue package for Pacific Gas failed and that utility filed 
for bankruptcy-law protection.

With the state locking up so much of California's future power needs, 
legislators openly wonder whether utility-rescue efforts are worth the 
billions of dollars they would require. In 2003, for instance, long-term 
contracts will cover 90% of the state's projected buying needs. "What does it 
mean for Edison to take over the role [of buying power] if the state already 
has signed all these contracts?" asks State Sen. Debra Bowen, a Democrat who 
heads the senate's energy committee.

Nonetheless, the governor says he is "cautiously optimistic" the legislature 
soon will approve an Edison rescue package.

Mr. Davis has been deeply enmeshed in almost every aspect of the electricity 
mess this year, after having once been relatively aloof from the burgeoning 
crisis. The state's utility-deregulation law, which was enacted in 1996, 
worked fairly well until May of last year. Under the deregulation plan, the 
state's investor-owned utilities sold off many of their power plants to other 
companies and repurchased that electricity through a state-sponsored auction. 
Consumer rates were frozen and customers were given the option to buy 
electricity from nonutility retail suppliers.

But tight electricity supplies and a flawed auction system led to a sharp 
rise in wholesale power costs. With retail rates frozen, Pacific Gas and 
Edison racked up multibillion-dollar deficits. In January, Mr. Davis declared 
an emergency and put the state into the power-buying business.

Since then, he hasn't been bashful about exercising his emergency powers. 
When Mr. Davis couldn't get legislative permission to borrow money short-term 
for power purchases, he signed an executive order authorizing the state to 
borrow up to $5 billion from commercial lenders. That borrowing is supposed 
to be repaid from a roughly $13 billion municipal-bond issue, the biggest in 
U.S. history, scheduled for later this year.

In another executive order, the governor suspended emission standards for 
power plants to let them run more hours during the peak-demand periods. And 
the state has hired a small army of energy consultants and traders.

Despite such actions, some think Mr. Davis isn't being forceful enough. For 
example, the state senate last week passed a resolution supporting the 
governor's power to "commandeer power plants" if he deems such a step to be 
necessary. Mr. Davis has said he doesn't have any plans currently to take 
such an action.

'Crisis of Governance'


The electricity mess has produced "the most extraordinary crisis of 
governance we've had in California in the postwar period," says Bruce Cain, 
director of the Institute of Governmental Studies at the University of 
California at Berkeley. Mr. Cain says more power has been placed in the 
governor's hands and, as a result, the state has "gotten away from the 
separation of powers and the checks and balances that we expect in American 
government."

Mr. Davis says his actions have been essential and are working. He credits 
the long-term power contracts with helping to cool the spot market for 
electricity, where prices in recent weeks have dropped sharply. In June, the 
state paid an average price of $167 a megawatt hour for electricity. That was 
down from $243 in May, though still far above the $25-to-$27 range of two 
years ago.

But some worry about how this rush to address a short-term problem will 
affect the longer-term future. An economic forecast issued late last month 
warned that continued heavy state involvement and spending in the electricity 
business could produce enough of a drag on the California economy to reduce 
state output by a total of $90 billion by 2005 and lead to higher 
unemployment. "California is at a crossroads" between what amounts to a 
"state takeover of the electricity industry" and a more market-oriented 
approach to fixing the problem, says the joint study by the Anderson business 
school at the University of California, Los Angeles, and Cambridge Energy 
Research Associates.

Under a law enacted in February, none of the tens of billions of dollars of 
state electricity purchases or related costs can be challenged as imprudent 
by the Public Utilities Commission. That's an immunity that regulated 
utilities in the old regime could only dream of. Then, if they spent too 
much, the PUC could make their shareholders take a hit. Under the new system, 
any purchasing missteps the state makes will be borne by consumers.

"It scares the hell out of me," says Henry Duque, a Republican PUC member 
appointed by former Gov. Pete Wilson. "The state is so busy looking after its 
own interests. ... Who's looking out for the ratepayer?"

PUC President Loretta Lynch, a Davis appointee, acknowledges that the 
commission's authority has been seriously eroded. Under the new law, the 
commission is supposed to charge consumers for whatever sum the Water 
Resources Department spends on energy. She hopes to hold hearings to review 
the spending "even if we can't do much about the result."

Gov. Davis says concern about less oversight of power purchases is a "bogus" 
issue. "It is not as if a private company or utility was making the 
decisions. The PUC doesn't need to second-guess the decisions of a public 
body," he says.

But other state moves suggest there's a role for oversight. The state is only 
now doing a conflict-of-interest inquiry after several of its new energy 
hires filled out disclosure forms that showed they held stock in big power 
suppliers to the state. The governor's press secretary, Steve Maviglio, says 
he doesn't know whether they were asked about their holdings before being 
hired. He says the state will take "appropriate action" where conflicts of 
interest are found.

The rush to beef up an outgunned state energy team may have contributed to 
the hiring problem. Early on, "we had two or three people sitting around and 
dealing with" big and savvy electricity suppliers, says Mr. Davis, almost 
like a "tee-ball team playing the New York Yankees."

The state has since hastily assembled a group of about 20 energy traders, 
headed by a 30-year-old manager with one year of experience in the energy 
business. The manager, Susan Lee, has held four jobs in the past four years 
and is getting paid up to $480,000 over two years for her services. Ms. Lee 
declines to comment.

Good Enough


Even so, Mr. Davis argues, state negotiators did well enough. They managed to 
help lower current power costs, he notes, although that required signing 
deals that could force the state to "pay a little more" than it otherwise 
would have in the years ahead. "I think Californians are willing to accept 
that bargain," he says.

Still, he and some other state leaders are urging the PUC to revoke a 
fundamental tenet of deregulation: the right of consumers to shop around for 
low-cost electricity. Removing this option is essential to prevent a "jail 
break" of customers seeking prices lower than what the state must charge, 
says Carl Wood, one of Mr. Davis's three Democratic appointees to the 
five-member PUC. A flight of customers could leave too few to pay for 
state-purchased power and repay the planned bonds. The PUC is scheduled to 
vote in August on the request to revoke consumer choice.

Some users are concerned about being stuck with what amounts to a state 
monopoly. "We don't want to lose our options" to shop for lower-cost 
electricity, says Shawn Covell, a senior manager at Qualcomm Inc., the 
telephone-equipment maker. Earlier this year, Qualcomm signed an agreement to 
buy power from an alternative supplier, the kind of move state officials seek 
to ban.

While consumer choice is in doubt, public disclosure has already been 
lessened in some ways. For months, the state refused to divulge terms of 
power deals it was signing, saying that doing so would harm negotiations on 
additional contracts. It finally made public the long-term contracts this 
month after a lawsuit by a group of newspapers, including The Wall Street 
Journal. Details of short-term power purchases were disclosed for the first 
time on July 9. They showed the state spent nearly $8 billion on spot-market 
purchases in the first five months of 2001, exceeding its projections.

Some Davis allies are troubled. "Decisions are being made, with almost no 
public discussion, that foreclose other options," says Ms. Bowen, the state 
senator, who is close enough to the governor that she played his therapist in 
the "Sopranos" skit. While Sen. Bowen says the governor needed to act 
forcefully, she is troubled that so much power has been bought at what she 
fears will prove to be extremely high prices in the years ahead. Still, she 
voted for the bill that gave the executive branch carte blanche to make those 
huge commitments.

The right to go to court also has been limited. Under a law soon to take 
effect, challenges to certain aspects of the planned $13 billion bond issue 
can be taken only to the state Supreme Court. That panel has accepted only 
two utility-related cases over the past decade. Backers of the measure say it 
gives adequate opportunity for review without unduly slowing the bond 
offering.

'One Voice'


The state's enlarged role in the utility business was on display when 
negotiators convened recently at the Federal Energy Regulatory Commission in 
Washington to discuss alleged supplier overcharges. California's major 
utilities played only a secondary role, even though they paid much of the 
purported overcharges and ran up giant deficits in doing so. The governor had 
named one of his advisers, Michael Kahn, as head of the 20-person state 
delegation, and Mr. Kahn says the delegation "spoke with one voice -- mine."

Mr. Kahn told FERC that California was owed $8.9 billion in refunds. Others, 
including the FERC administrative-law judge overseeing the talks, said the 
number was probably much lower. The state wouldn't budge, and the talks ended 
without an agreement. Last week the judge recommended that a "trial-like" 
proceeding be held to sort out who owes what to whom.

Mr. Davis says the state will go to an actual court if it doesn't get all the 
money it is seeking through the FERC proceedings. And he vows to do whatever 
else is necessary to get California through the electricity crisis. "I have 
no desire to subsume the legitimate role of the private sector," he says. 
But, he adds, Californians got such a "raw deal" from the deregulation mess 
that "I have had to had take a very militant, hard-line view."

Write to Rebecca Smith at rebecca.smith@wsj.com and John R. Emshwiller at 
john.emshwiller@wsj.com


Copyright 2001 Copley News Service
Copley News Service
July 17, 2001, Tuesday

SECTION: State and regional

LENGTH: 289 words

HEADLINE: Davis dedicates 1st of 10 peaker plants; facility was built in 90 
days

BYLINE: Kristen Green

DATELINE: SAN DIEGO

BODY:

??Gov. Gray Davis dedicated a new power plant in Otay Mesa yesterday, the 
first
of 10 facilities that are being built quickly to provide California extra 
power
when supplies are tight.

??The Larkspur Energy Project, just east of Brown Field, was built in 90 days
under a program designed by the governor to find more electricity for the
energy-starved state.

??''You can't move any faster than that to put megawatts on the grid,'' Davis
said during a news conference at the plant.

??A spokesman said Davis squeezed in the San Diego appearance between a 
morning
budget meeting in Los Angeles and budget negotiations in Sacramento in the
afternoon. He has held news conferences for the opening of three major power
plants and has visited several others in the past few months.

??The Otay Mesa plant, operated by Boston-based InterGen, was the first to win
approval under the governor's 21-day emergency procedure for siting ''peaker
plants'' facilities that can be used when energy supplies dip dangerously low.
It also is the first gas-fired power plant to open in San Diego County in 40
years. The plant produces 90 megawatts, enough to power at least 6,750 homes.

??Nine more peaker facilities are expected to be built by October, including 
an
additional plant near the border that was approved Wednesday.

??Although peaker plants are intended to operate only when power supplies fall
to critical levels, the state has eased those regulations to cope with the
ongoing crisis. InterGen officials said the InterGen plant will run an average
of 12 hours a day for the next couple of years. The new natural-gas powered
plant, which opened July 9, was running after the news conference.



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

????????????????????????????July 17, 2001, Tuesday

SECTION: State and regional

LENGTH: 1351 words

HEADLINE: Edison rescue plan is facing an overhaul

BYLINE: Ed Mendel

DATELINE: SACRAMENTO

BODY:

??Southern California Edison appeared to move a step closer to bankruptcy
yesterday as business and consumer groups criticized a rescue plan written by
Democratic leaders in the Assembly.

??In a surprising move, the Democratic chairman of the Assembly utilities
committee also denounced the leadership's plan and joined with a Republican to
sketch the outline of an alternative plan to rescue Edison.

??''I have told the author I ain't voting for it at gunpoint,'' said
Assemblyman Rod Wright, D-Los Angeles, chairman of the Assembly Utilities and
Commerce Committee.

??Assembly leaders say they are determined to have a floor vote on a rescue
plan before the Legislature's scheduled departure Friday for its monthlong
summer recess, which ends Aug. 20.

??Unless there is a breakthrough, there might be no legislative action before
Aug. 15, when a memorandum of understanding negotiated by Gov. Gray Davis and
Edison more than three months ago can be waived by either party.

??More important than that deadline, some legislators think, is action planned
by the state Public Utilities Commission in mid-August to support the sale of 
a
bond of up to $13.4 billion.

??The bond will repay the taxpayer-supported state general fund for power
purchases made since January and cover some future purchases. The bond will be
paid off by ratepayers over 15 years.

??The PUC, carrying out previous legislation, is expected to ban the
direct-access contracts sought by businesses that allow utility customers to
shop for cheaper power.

??The ban will ensure that enough customers remain in the system to pay off 
the
bond and, in a more recent development, the dozens of long-term power 
contracts
signed by the state at above-market prices.

??The PUC also plans to allocate revenue from monthly ratepayer bills to pay
off the bond, further narrowing the options for working out an Edison rescue
plan in the Legislature.

??The Democratic leadership plan, by Assemblyman Fred Keeley, D-Boulder Creek,
is an alternative to an agreement negotiated by Davis and Edison that
legislators said was too generous to Edison. Davis' agreement calls for the
state to buy Edison's transmission system for $2.8 billion.

??Keeley was not optimistic about the fate of the bill yesterday as he 
compared
it to treaty negotiations. ''It's time for us to show the world what our best
work product is ... and put it up for a vote,'' Keeley said.

??A spokesman for the governor said Davis could support the measure if it had 
a
few alterations, such as tightening up a provision to make sure that monthly
ratepayer revenue pays off the bond.

??''There are a lot more things to like than not to like at this point,'' said
Steve Maviglio, Davis' press secretary.

??However, Californians for Energy, a coalition of business groups, said the
bill could ''deal a deathblow to many businesses'' by preventing them from
shopping for cheaper power.

??The bill would ban direct-access contracts for at least two years as all
customers help pay off the Edison debt, estimated at $3.5 billion. After two
years, only large users would pay off the remaining Edison debt.

??''If we don't bring rationality and fairness to the state's electricity 
structure,'' said Allan Zaremberg, president of the California Chamber of
Commerce, ''we're going to see California companies expanding and relocating 
to
states where the rates are fair.''

??A consumer group, the Foundation for Taxpayer and Consumer Rights, vowed to
pursue an initiative to overturn the plan if it is enacted. Doug Heller of the
foundation said that buying the Edison transmission system and paying off the
Edison debt would cost consumers $6.7 billion.

??''Lawmakers have attempted to wrap the utility plan in a protective 
covering,
but the fact remains that this bill would force energy consumers and taxpayers
to transfer billions of dollars to utility companies,'' Heller said.

??Wright, chairman of the Assembly utility committee, joined with Assemblyman
Keith Richman, R-Northridge, to outline a plan that would require all 
ratepayers
to pay off the Edison debt and would not purchase the Edison transmission
system.

??''Just come clean and just pay for it,'' Wright said. ''I don't want to own
their wires, and I don't need to own their wires to resolve their arrearage.''

??In addition to paying off the Edison debt, Wright said, the plan also would
allow direct-access contracts for businesses as the state's expensive 
long-term
contracts expire.

??Wright said some of the contracts are for a year or less and will be 
expiring
soon. He said that any refund from overcharges by generators would be used to
reduce the Edison debt.



??WAGNER-CNS-SD-07-16-01 2248PST



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

?????????????????????July 17, 2001 Tuesday ?Home Edition

SECTION: California; Part 2; Page 7; Metro Desk

LENGTH: 710 words

HEADLINE: The State;
;
No Accord Near on Edison Rescue;
Legislature: With Davis' proposal languishing and rival versions being 
crafted,
the issue continues to be divisive.

BYLINE: MIGUEL BUSTILLO, TIMES STAFF WRITER

DATELINE: SACRAMENTO

BODY:

??The California Assembly has yet to begin debating an alternative plan to 
save
Southern California Edison from bankruptcy--but already Monday, fissures were
emerging that could signal trouble for the measure by Democratic leaders.

??Consumer groups blasted a new bill spearheaded by Assembly Speaker Bob
Hertzberg, calling it a bailout every bit as bad for ratepayers as Gov. Gray
Davis' original deal to rescue the Rosemead-based utility.

??"Lawmakers have attempted to wrap the utility bailout plan in a protective
covering," said Doug Heller of the Foundation for Taxpayer and Consumer 
Rights,
"but the fact remains that this bill would force energy consumers and 
taxpayers
to transfer billions of dollars to utility companies."

??Meanwhile, a group of Democrats and Republicans in the lower house began
developing another alternative, one they said more cleanly rescued Edison
without any pretense that the state was getting something of equal value in
return.

??"If we've demonstrated anything in the past few months, it's that the state
of California has no business being in the power business," said Assemblyman 
Joe
Canciamilla (D-Pittsburg), among those discussing the new alternative plan.

??Unlike the Davis or Hertzberg versions, this latest plan would not include
state acquisition of the utility's transmission lines.

??Judge OKs PG&E Bonuses

??In other energy news, a federal bankruptcy judge in San Francisco ruled
Monday that PG&E can pay more than 200 top managers $17.5 million in bonuses,
but must keep a promise not to pay for them by raising customer's utility 
rates.

??Judge Dennis Montali said he was not about to second guess PG&E's decision
that it needs to pay the bonuses to prevent key employees from resigning as it
reorganizes its financial affairs.

??He rejected opposition from the U.S. trustee's office and the city of San
Francisco, saying PG&E had provided evidence of widespread concern among
managers that they would lose their jobs and of other companies hiring away 
key
managers.

??In the Legislature, lawmakers have been trying to find a way to avoid having
Edison join PG&E in Bankruptcy Court. Until the two utilities become
credit-worthy again, the state will have to continue buying electricity on 
their
behalf to pass along to California's consumers.

??The two utilities ran up billions in debt earlier this year and last because
they were buying electricity on the wholesale market for much more than they
could pass on to consumers under a state-imposed rate freeze.

??PG&E took itself into Bankruptcy Court in April rather than continue talks
with Davis, but the governor and Edison reached a tentative rescue deal days
later.

??The Edison deal was dubbed a bailout by consumer groups, which threatened an
initiative challenge if it was approved. And it met with skepticism from
lawmakers, who questioned the $2.76-billion price tag for transmission lines. 
It
has languished in the Legislature.

??After months of near-inactivity, lawmakers in the Senate and Assembly last
week began to craft dueling alternative rescue plans in hopes of passing
something before their annual summer recess begins Friday.

??The two houses remain unable to agree on what the alternative to the Davis
plan should be, so each is advancing its own idea. Hertzberg (D-Sherman Oaks)
introduced a bill he wrote with three colleagues Friday. The Senate team, led 
by
Byron Sher (D-Stanford), is still shaping a deal and has yet to introduce
legislation.

??Consumer Groups Opposed

??The Hertzberg bill, AB 82xx, would place most of the financial burden of
Edison's rescue on big business and other large consumers of electricity.
Nonetheless, consumer groups fear the costs will be borne by everyone as
businesses pass down the costs to customers.

??Because the bill also offers carrots to business and environmental groups as
a way to win the votes of various legislators, consumer groups compared it 
with
the measure that deregulated California's power market in 1996.

??The details of the Hertzberg bill, which is even more complex than the
original Davis deal, are causing concern among some lawmakers, who have taken 
it
upon themselves to come up with what they say is a simpler and more honest
bailout for Edison.

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

?????????????????????July 17, 2001 Tuesday ?Home Edition

SECTION: California; Part 2; Page 7; Metro Desk

LENGTH: 1204 words

HEADLINE: The State;
;
Consultants' Stock Buys Questioned;
Energy: State official urges conflict of interest probe into purchases of 
shares
in power firms.

BYLINE: JEFFREY L. RABIN, ERIC BAILEY, TIMES STAFF WRITERS

BODY:

??Secretary of State Bill Jones on Monday urged California's attorney general
to investigate possible conflict of interest violations by consultants hired 
to
help the Davis administration navigate the energy crisis.

??Jones, a Republican candidate for governor, said at a Los Angeles news
conference that Atty. Gen. Bill Lockyer and the state Fair Political Practices
Commission should determine whether seven of the consultants have conflicts of
interest because they own stock in one or more energy companies.

??He also asked the state's chief law enforcement officer to immediately
determine whether the governor's office violated state law by exempting 21 of
the 45 consultants from financial disclosure requirements.

??"I am gravely concerned that a cloud of illegality and collusion exists at
the highest level of our state government due to the actions and the conscious
policy of secrecy of Gov. Davis," Jones said.

??That brought a sharp retort from the governor's spokesman, Steve Maviglio,
who attacked Jones for engaging in campaign politics.

??"The secretary of state has a five-person team bankrolled by the taxpayers
attempting to dig up dirt for political reasons," Maviglio charged.

??"This is politics pure and simple being played by a candidate desperate to
get his name in the paper," Maviglio said. If there are any violations of the
law, he added, "they're going to be addressed."

??The secretary of state's entry into the energy controversy poses yet another
headache for Davis as he prepares to run for a second term next year. Already,
the GOP and some power producers have begun airing commercials critical of
Davis' handling of the power crunch, forcing the governor to dip into his own
campaign funds to fight back.

??Jones, as the state's chief elections officer, contends that his concerns 
are
not just political. He noted that he appoints one of the five members of the
Fair Political Practices Commission, which enforces campaign finance and
conflict of interest laws.

??Among other things, Jones questioned why Vikram Budhraja, head of the
Electric Power Group, a Pasadena energy consulting firm, bought stock in 
Edison
International and Dynegy Corp. in the days before he went to work for the 
state.

??Budhraja was hired under a $6.2-million contract between his firm and the
state Department of Water Resources that was signed on Jan. 18. Like two 
dozens
of the consultants hired by the state, he did not complete a financial
disclosure statement until last week, more than six months after he went to 
work
for the department, which now buys power for the state's three largest
utilities.

??The financial disclosure statement filed by Budhraja last Thursday shows 
that
he bought between $10,000 and $100,000 worth of Dynegy stock on Jan. 11. Six
days later, he bought between $10,000 and $100,000 of Edison stock.

??That was the same day that Davis declared a state of emergency because of 
the
energy crisis and ordered the Department of Water Resources to begin buying
power on behalf of the state's financially troubled major utilities.

??On Jan. 22, Budhraja again bought between $10,000 and $100,000 of Edison
stock. On his disclosure statement, he indicated that he began work for the
state Jan. 25 and sold the stock on Jan. 29--the first opportunity he had to
divest his holdings.

??Jones told reporters that Budhraja's investments in Edison grew by 44% to
47%, while his Dynegy investment increased 28% in that brief period.

??Budhraja was also on retainer as a consultant to Edison International,
earning more than $100,000 in the year before becoming a contractor for the
state.

??Maviglio said Budhraja wrote a letter to DWR Deputy Director Ray Hart saying
he had no dealings with Edison International. He also was not involved in any
long-term contracting with Edison.

??Any profits Budhraja made from the stock are irrelevant because the stock 
was
sold by the time he was on the job, Maviglio said.

??Another consultant, Bernard Barretto, who describes himself as an energy
trader/scheduler for the state, disclosed last week that he purchased stock in
power producer Enron Corp. But no date or amount of the purchase was listed.

??Financial disclosure forms filed last week by five other consultants show
they all own stock in Calpine Corp., a major California-based power 
wholesaler.

??Energy trader Elaine L. Griffin bought between $10,000 and $100,000 worth of
Calpine stock on Feb. 1. Her contract with the state began Feb. 20. Griffin's
newly completed economic disclosure statement does not show her selling the
stock. Herman Leung, who went to work as an electricity scheduler in March,
bought between $2,000 and $10,000 worth of Calpine stock on Jan. 22.

??Schedulers William F. Mead, Peggy Cheng and Constantine Louie also disclosed
that they own stock in Calpine. Mead, in fact, said his holdings ranged 
between
$100,000 and $1 million. But their forms contain an important omission: The
consultants do not say when they purchased the shares.

??Oscar Hidalgo, a Water Resources spokesman, said the agency's attorney is
reviewing all the past purchases to ensure that no laws were violated by
contractors buying power or negotiating long-term contracts with companies in
which they held stock.

??"We're reviewing all that to see if [there were] any problems with any past
negotiations," Hidalgo said. "We're looking at all the records in past buys or
trades so we understand who exactly did what."

??He said it's a "very big task" that will take weeks to complete.

??In the meantime, those contractors who have disclosed stock ownership have
been recused from working with generators in which they have a financial
interest.

??The governor's spokesman said several of the contractors who own stock in
Calpine are not traders, and thus do not have direct dealings with the 
company.

??"If you own Calpine stock and aren't doing any business with Calpine, then
you're fine," Maviglio said.

??Calpine is one of a number of firms that negotiated long-term contracts with
the state and that have come under fire from critics who say they will saddle
consumers with artificially high electricity costs for years to come.

??For weeks, Jones has been sharply critical of the administration's failure 
to
require its consultants to file conflict of interest forms, which must be
completed within 30 days of a person starting work.

??The governor's spokesman said the administration was told by the state's
political watchdog agency that only consultants serving in a staff capacity or
participating in decisions must file the forms.

??As a result, he said, only two dozen of the 45 consultants were required to
complete the paperwork--most of them "hastily and clumsily" prepared last 
week,
according to the secretary of state.

??Two of those who have not filed are Wall Street executives Joseph Fichera 
and
Michael Hoffman, key advisors to Davis on his plans to rescue California's
debt-ridden utilities. In that role, according to their contract, they could
make millions.

??Maviglio said the two men, who have done extensive work for private energy
companies, are "squeaky clean," but he would not elaborate.

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

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

?????????????????????July 17, 2001 Tuesday ?Home Edition

SECTION: California; Part 2; Page 6; Metro Desk

LENGTH: 820 words

HEADLINE: The Region;
;
Churches Send Forth Word on Energy Savings;
Power: Edison calls on them to help spread the news of state-mandated 
discounts
for low-income customers. Many have signed up, the firm says.

BYLINE: WILLIAM LOBDELL, TIMES STAFF WRITER

BODY:

??Southern California Edison has enlisted the help of an unlikely
ally--churches--to sign up thousands of low-income customers for hefty 
discounts
on rising utility bills.

??In just a few months, pastors, priests and church volunteers have become
Edison's most effective tool in telling the poor about a state-mandated 
program
that offers 20% off electric bills and exemptions from rate increases.

??Refugio Gomez, a 62-year-old part-time janitor, signed up for the program
last month at the Our Lady of Victory in Compton, the church where he works.
Since then, his monthly electric bill has been cut from $48 to $18.

??"I hadn't heard about the program before," Gomez said. "[Church volunteers]
helped me with the forms."

??The pioneer faith-based program began with 22 Orange County Catholic 
churches
in April and now is being rolled out throughout Southern California. Edison
employees will be at five churches in the South Bay area this weekend.

??The utility company initially has concentrated its efforts in Catholic and
African American churches, primarily because of their sizable congregations 
and,
in the case of the Catholics, their large-scale organizations.

??But Edison officials say they plan to use a wide range of religious
organizations, including synagogues, mosques and temples, before the campaign
ends in the fall.

??"It's a really fantastic way to get the word out," said Pastor Steve 
Overton,
who had Edison workers hand out information Sunday at his Christian Chapel
Foursquare Church in Moreno Valley. "The church is called to help the poor.
We're doing what the Lord wants us to do."

??Church leaders say they are aware that their endorsement of an Edison 
program
can produce a halo effect for the embattled company. But getting cheaper
electric rates for their low-income congregants overrides those concerns.

??"We're not doing this to help Southern California Edison," said Jaime Soto,
auxiliary bishop for the Roman Catholic Diocese of Orange. "We're doing this 
to
help our parishioners."

??About 62% of an estimated 1 million eligible customers participate in the
discount program that was started by the state Public Utilities Commission in
1989, Edison officials said. A family of four must earn less than $31,100 a 
year
to be eligible for the program, which is also offered by the Gas Co.

??Religious institutions based in low-income areas have been able to knock 
down
barriers that have hindered Edison's past efforts to reach out to the poor:
wariness and suspicion from recent immigrants, language and cultural
differences, and ineffective marketing campaigns.

??When the energy crisis began, Frank Quevedo, an Edison vice president,
decided religious organizations offered the best chance to reach customers who
would suffer the most from rising electric bills.

??He met with Soto, who provided demographic information from the diocese's 56
parishes.

??"He knew the [community] in a way we couldn't," Quevedo said. "He knew which
churches had the most seniors, low-income parishioners, limited English
speakers. We had great results."

??Other information sometimes is allowed to be distributed at Catholic church
services, but it usually revolves around health programs, immigration issues 
and
education on voter registration.

??"We generally do not do business with business," Soto said. "But the extent
of the energy crisis and its impact on the poor made me rethink that policy.
I've been pleasantly surprised at how many people we've reached."

??A priest's endorsement of Edison's discount program, plus church volunteers
helping fellow congregants fill out Edison forms, has proven far more 
effective
than inserting fliers in monthly bills or trying to engage harried shoppers
outside retail malls.

??In Orange County, more than 1,000 churchgoing customers took advantage of 
the
discount in a single day. At Compton's Our Lady of Victory, more than 200
congregants joined the program. Through the churches, Edison also had handed 
out
80,000 sign-up forms that parishioners have taken home.

??Edison workers volunteer time on Sundays to pass out information at 
churches.
"It's really a humbling experience for us," said Rocio Contreras, a board 
member
of the company's Latino employees' association. "What was really neat was to
have the priests and fathers there, letting the parishioners know who we are 
and
why we were there. That made a difference."

??Churches are a natural go-between for wary immigrants and institutions that
provide poverty-relief services, said John Wilcox, chairman of religious 
studies
and director of the Center for Professional Ethics at Manhattan College.

??"It's really using churches in an area where they're already very 
effective,"
he said. "My only concern would be that the church needs to be an honest 
broker.
The church probably has the greatest amount of trust among the poor.
[Immigrants] are so vulnerable."

GRAPHIC: PHOTO: (San Fernando Valley Edition) Pat Click, left, and Barbara
Bowman tell Connie Maddics, seated, about Edison's rebate plan. PHOTOGRAPHER:
ANNIE WELLS / Los Angeles Times

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

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

?????????????????????July 17, 2001 Tuesday ?Home Edition

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

LENGTH: 970 words

HEADLINE: THE NATION;
;
In Support of Energy Plan, White House Burns Some Gas;
Politics: Cheney, other Bush officials fan out to make what the president 
admits
is a tough case.

BYLINE: MEGAN GARVEY, TIMES STAFF WRITER

DATELINE: MONROEVILLE, Pa.

BODY:

??With his top officials dispatched to several states to try to recharge the
White House's coolly received energy policy, President Bush on Monday conceded
that the plan may be a harder sell now that oil prices are down and California
is experiencing fewer rolling blackouts.

??"Any time there's not an immediate problem that's apparent to people, it's
tough to convince people to think long-term," Bush said.

??Vice President Dick Cheney, the plan's chief architect, joined other top
administration officials and Republican members of Congress in public meetings
to bolster support for the initiative.

??At a town hall meeting in this Pittsburgh suburb, Cheney, suffering from
laryngitis, used his ailing voice to warn that a failure to generate new 
energy
would be a "storm cloud out there on the horizon for the American economy."

??Earlier in the day, in comments delivered by his wife, Lynne, a last-minute
stand-in, the vice president offered a retooled message about conservation 
that
signaled a marked change from his comments of just a few months ago.

??"Conservation is a must," Lynne Cheney told a conference of county 
executives
gathered in Philadelphia, reading her husband's speech from a TelePrompTer.

??Previously, Cheney touted supply-oriented solutions and dismissively called
conservation a "sign of personal virtue" but "not a sufficient basis for a
sound, comprehensive energy policy."

??Those comments, as well as Cheney's former role as head of a Texas-based oil
supply company, had made the vice president a target for foes of the White 
House
approach. And in the last few months, between problems with his heart and the
flap over his conservation remarks, the man considered by many to be the most
powerful vice president in history had been less visible on the national 
stage.

??But he was front and center Monday--hoarse voice notwithstanding.

??Elsewhere, Energy Secretary Spencer Abraham, Interior Secretary Gale A.
Norton, Transportation Secretary Norman Y. Mineta and Environmental Protection
Administration chief Christie Whitman made town hall appearances from
Connecticut to South Dakota.

??Democrats on Capitol Hill criticized the public relations blitz, saying the
massive tax cut will make it difficult to fund any conservation initiatives. 
An
energy bill dealing with nuclear energy, hydropower, clean-coal technology and
conservation is scheduled to come before the House Energy and Commerce 
Committee
today.

??They also questioned why none of the president's surrogates were dispatched
to the region struggling the most with energy supply needs: the West Coast.

??"Out of 105 recommendations in the [administration's] plan, not one is
relevant to the situation in California, Oregon, Washington or other parts of
the West," said Rep. Bob Filner (D-San Diego).

??In front of a friendly audience under hot lights in the gymnasium at the
Community College of Allegheny County, Cheney strained his voice to answer
questions.

??In one of the night's few sharp moments, Pennsylvania Gov. Thomas J. Ridge, 
a
Republican, took a swipe at California, noting: "We weren't the first state to
deregulate natural gas or electricity, but we were the first state to do it
right."

??Cheney again pushed many of the same tenets of the policy his energy task
force unveiled this spring: responsible exploration and production, the need 
to
reduce dependence on foreign oil sources, and the role new technology can play
in meeting energy demands.

??At the day's first event, he watched from the sidelines in Philadelphia as
Lynne Cheney, taking his place at the lectern, reiterated the
administration's strong opposition to the Kyoto treaty.

??"President Bush agrees that the approach of Kyoto was flawed and 
unworkable,"
she said on the eve of the president's second trip to Europe, where the U.S.
position is controversial. "It would have produced little or no net benefit to
the global environment, while imposing massive job losses on the American
economy."

??But the same speech contained his most extensive and positive comments to
date about the role of conservation during an energy crunch.

??"This is one of the guiding principles of the president's energy policy:
making better use of energy, through conservation and the latest technology,"
his wife said for him.

??The administration's stress on conservation, however, came with caveats, 
both
from Bush and Cheney.

??During an Oval Office ceremony where he received a bust of Winston 
Churchill,
Bush sounded a note of caution about California's woes.

??"It should be worrisome to people that the state that's had the best
conservation efforts is the state that's had brownouts," Bush said, 
emphasizing
the need for a long-term energy policy that includes developing new sources of
energy.

??Cheney's speech warned that he and Bush "do not accept the false choice
between more energy and a safer environment." And during the brief time Cheney
used his own voice Monday, he once again pointed out the reality of current 
U.S.
energy needs when it comes to petroleum.

??"The fact of the matter is we are dependent and will be dependent on
gasoline," he said.

??For some of the White House's biggest environmental critics, the subtle
policy shift expressed Monday didn't change any minds.

??"Conversions begin with lip service," said Carl Pope, president of the 
Sierra
Club. "But all we're seeing so far is lip service. I hope we see more."

??*

??Times staff writers Edwin Chen and Richard Simon contributed to this story
from Washington.

??*

??RELATED STORIES

??Discount: Churches help Edison spread word to poor people. B6

??Edison rescue: Legislature works on alternatives to Davis' plan. B7

??Power trip: Available electricity and low rates give L.A. an edge. C1

??Lighten up: Campaign is aimed at countering state's dark image. C2

GRAPHIC: PHOTO: Vice President Dick Cheney, who has laryngitis, coughs as his
wife, Lynne, discusses the Bush administration's energy plan. PHOTOGRAPHER:
Associated Press

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

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

????????????????????JULY 17, 2001, TUESDAY, FINAL EDITION

SECTION: NEWS; Pg. A5

LENGTH: 555 words

HEADLINE: Consumers await word on rates;

Report's delay, government bond issue raise questions about electricity price
increase

SOURCE: Chronicle Staff Writer

BYLINE: Christian Berthelsen

BODY:
California electricity customers should find out this week whether they will 
be
hit with yet another rate increase, this time to lay the groundwork for a huge
state government bond issue.

???The state Department of Water Resources was expected to issue its report on
the subject last week. The report has been delayed twice while the Department 
of
Finance works feverishly to determine whether it can justify a bond that has
grown by nearly $1 billion with the existing money coming in from ratepayers.

???State officials, including S. David Freeman, a chief energy adviser to Gov.
Gray Davis, say they do not believe a third rate increase will be necessary. 
But
the increased size of the bond issue and the reporting delays have raised
questions. Officials refused to rule out an increase.

???State regulators have already approved two rate increases this year, of 9
percent in January and up to 37 percent in May. The May increase was the 
largest
in California history.

???Since January, the California government has been buying power on behalf of
the state's beleaguered utilities, which were no longer financially sound 
after
skyrocketing wholesale power prices drained them of cash and credit. The
utilities, which continue to supply power to customers and bill them, have 
been
paying the state no more than they receive in revenues, leaving the state
government to pick up the tab for the shortfall.

???The bond issue was intended to pay the state's general fund back for that
shortfall. It also would finance some power purchases into the future and 
cover
the cost of bailing out Southern California Edison. California recently
increased the size of the bond issue by $900 million, bringing the total to $
13.4 billion.

???Wall Street bankers and legislators have sought to limit how much debt the
state can issue, saying the bond issue should be no larger than four times the
state's annual receipts from ratepayers. But with state leaders seeking to
increase the size of the bond issue by some 6 percent, questions have come up
about whether a rate increase is in the offing.

???State officials and regulators say they are unsure of whether an increase
will be necessary. While some numbers and estimates have been provided, a
completed report has not. Complicating matters, a rebate program created by 
the
state to encourage people to conserve electricity is now cutting into the
state's revenue finances.

???In a conference call on Sunday, Freeman said increases would not be sought.

???"We have no need for a rate increase at this time, in my opinion," he said.
"As far as I'm concerned, looking at these numbers, we have no need for a rate
increase" in the next year.

???But in the same conversation, Freeman acknowledged he was offering nothing
more than his "professional opinion." Conditions have improved considerably in
recent weeks. Rate increases that took effect last month have finally brought 
an
increased revenue stream to the state, and the average cost of power dropped 
by
half this month, to $133 per megawatt hour.

???The change led Terry Shu, an analyst with JP Morgan, to ask in a conference
call with Pacific Gas and Electric executives last week whether "overall cash
flow numbers for the DWR ought to look much much better."E-mail Christian
Berthelsen at cberthelsen@sfchronicle.com
 
GRAPHIC: PHOTO

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