Please see the following articles:

Sac Bee, Tues, 7/17: Jones demands probe of state's energy buyers 
Sac Bee, Tues, 7/17: Energy Digest: PG&E's managers will get bonuses
SD Union, Tues, 7/17: Bush's top team launches blitz for his energy agenda 
SD Union, Tues, 7/17: Davis aide foresees an end to rate hikes 
SD Union, Tues, 7/17: Bankruptcy judge lets PG&E pay managers $17.5 million 
bonus 
SD Union, Tues, 7/17: As power crisis eases, Davis sees a beneficial role for 
deregulation 
LA Times, Tues, 7/17: Churches Help Edison Aid the Poor
SF Chron, Tues, 7/17: Consumers await word on rates 
Report's delay, government bond issue raise questions about electricity price 
increase 
Mercury News, Tues, 7/17: Judge OKs bonuses for PG&E chiefs 
OC Register, Tues, 7/17: Power of lies    (Commentary) 
LA Times, Tues, 7/17: THE NATION State Losing Ground in War on Dirty Air 
Environment:
Growth, lax enforcement are blamed for rising smog levels in some areas
LA Times, Tues, 7/17: 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
LA Times, Tues, 7/17: The State Consultants' Stock Buys Questioned Energy: 
State official urges
conflict of interest probe into purchases of shares in power firms.
LA Times, Tues, 7/17: The State No Accord Near on Edison Rescue Legislature: 
With Davis' proposal
languishing and rival versions being crafted, the issue continues to be 
divisive
WSJ, Tues, 7/17: Taking Charge: Hurt by Deregulation Of Utilities, 
California  Gives Itself Lead Role
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Jones demands probe of state's energy buyers 
By Amy Chance
Bee Political Editor
(Published July 17, 2001) 
Secretary of State Bill Jones on Monday asked the state attorney general and 
the Fair Political Practices Commission to investigate whether energy 
consultants hired by the Davis administration violated state 
conflict-of-interest law by holding stock in energy generators and utilities 
while buying electricity for the state. 
Jones said recent reports that show several energy buyers held such stock, 
coupled with the fact that they failed to file reports of their financial 
holdings until last week, suggest that Gov. Gray Davis "hired them without 
any forethought and due diligence as to how they could personally and 
financially benefit from being on the state payroll." 
"This is either a miserable failure in executive management and leadership, 
or he and his administration have colluded in a blatant and possibly criminal 
conflict of interest," said Jones, a Republican seeking to challenge Davis in 
next year's governor's race. 
In particular, Jones pointed to a report filed by Vikram Budhraja, a 
consultant in the Department of Water Resources' energy resources scheduling 
division, who signed a $6.2 million, 23-month contract with the state. 
Budhraja reported that he began working for the department on Jan. 25. 
On Jan. 17 and 22, Budhraja acquired stock in Edison International valued at 
between $10,001 and $100,000. He also bought stock in Dynegy, an energy 
generator, in the same value range. He disposed of all the stock on Jan. 29, 
noting on the form that he "divested holdings upon first opportunity after 
start of services." 
He also reported that he had received income of more than $100,000 from 
Edison International as "a retainer to provide consulting services upon 
request." He noted that there was "none requested since the third quarter of 
2000." 
Jones said the contract Budhraja signed with the state, however, was dated 
Jan. 17, showing that he "entered into a $6.2 million contract with the state 
and the same day that Davis ordered a state of emergency and put the state 
into the power-buying business. Mr. Budhraja sold this stock within days and 
pocketed a significant profit." 
Davis spokesman Steven Maviglio said the contract was simply dated Jan. 17 
"for administrative payroll purposes." He said Budhraja met with Davis on 
Jan. 25 and began work for the state on Jan. 29. 
"Any activity he had with Edison International was over and done with the 
minute he started his job," Maviglio said. "He said he called his broker and 
said, 'Sell everything.' " 
Budhraja also has a letter on file with the department that says he will do 
no business with Edison while employed by the state, Maviglio said. 
While he did participate in negotiating contracts with Dynegy, Maviglio said 
he did so "weeks and months after he had sold his stock." 
Administration lawyers are still looking at reports filed last week by other 
energy schedulers and traders that show they still hold stock with energy 
generators, particularly Calpine Corp. 
The lawyers are examining whether those consultants buy electricity as part 
of their jobs and whether they have done any trading with Calpine. 
"They may be in violation, for all we know," Maviglio said. 
Representatives of the FPPC and attorney general said they are reviewing 
Jones' request. 


The Bee's Amy Chance can be reached at (916) 326-5535 or achance@sacbee.com 
<mailto:achance@sacbee.com>.




Energy Digest: PG&E's managers will get bonuses


(Published July 17, 2001) 
SAN FRANCISCO -- A bankruptcy judge has approved executive bonuses at Pacific 
Gas and Electric Co., saying the 223 managers who will divide the $17.5 
million pool are not responsible for California's energy woes. 
For 23 of the senior executives, the plan provides bonuses equal to their 
base pay or, in the case of PG&E President and CEO Gordon Smith, $630,000. 
The bonuses for other managers will average $60,000. 
PG&E, in proposing the payments, said it was worried that senior employees 
would flee to more secure and lucrative jobs, which could hamper the 
utility's bankruptcy reorganization. Some consumer advocates opposed it, 
saying the utility's customers ultimately would pay for it. 
But U.S. Bankruptcy Judge Dennis Montali said he had been assured that no 
effort would be made to cover the cost with future rate increases. 
In his opinion, Montali said the bonus program was needed to prevent 
resignations that could damage PG&E, making it harder for creditors to 
collect. 
--Claire Cooper 

Blackout image battled
Aiming to dispel the notion that California is paralyzed by blackouts, a 
coalition of economic development agencies today will begin a national public 
relations campaign to improve the state's image. 
The $150,000 campaign is called "The Power of California." Its goal is to 
convince the national media to create stories that show the state's economy 
hasn't been crippled by the energy crisis. 
"It's an effort on our part to fight back," said Wayne Schell, chief 
executive of the California Association for Local Economic Development. 
The campaign is funded by local and regional economic development groups, he 
said. 
Barbara Hayes, executive director of the Sacramento Area Commerce and Trade 
Organization, said she was recruiting companies in New York this spring and 
was besieged with questions about power blackouts. 
"The message that people outside California have is _ we are in the dark," 
she said. 
SACTO isn't aware of any companies that have refused to move here because of 
the energy crisis, but it's possible that some companies have stopped making 
inquiries about the region because of the crisis, she said. 
"You don't know how many 'looks' you're not getting," she said. 
The crisis has prompted business recruiters from other states to step up 
their efforts to take jobs away from California, although the groups in 
Schell's organization say they haven't lost a single company. 
California so far has escaped chronic power blackouts this summer, but some 
prominent economists have warned that the long-term power contracts signed by 
the state will leave California with high-priced electricity for years to 
come. Yet the pricing issue doesn't seem to be affecting economic development 
nearly as much as the fear of blackouts, Hayes said. 
--Dale Kasler







Bush's top team launches blitz for his energy agenda  


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Plan has stagnated as crisis diminishes By Toby Eckert  COPLEY NEWS SERVICE  
July 17, 2001  MONROEVILLE, Pa. -- Seeking to reignite President Bush's push 
for a new energy policy, Vice President Dick Cheney and other administration 
officials yesterday warned that the nation still faces significant challenges 
despite recent drops in gasoline prices and California's easing power woes.  
Cheney and members of Bush's Cabinet fanned out across the nation to promote 
the administration's plans for more oil, coal and nuclear power production. 
At the same time, they tried to deflect criticism of the plan by stressing 
elements that would promote conservation and renewable energy sources.  "The 
fact of the matter is that we are now dependent and will be dependent for the 
foreseeable future on petroleum products for our transportation needs," said 
Cheney, who was battling laryngitis as he addressed a town hall-style meeting 
here. 
The vice president yesterday strongly advocated energy conservation, a notion 
he once famously dismissed as a "personal virtue."  "Most of the financial 
incentives we recommend are in the area of conservation and renewables," said 
the architect of the administration plan. "We're not advocating subsidies for 
oil companies and coal companies and gas companies."  But environmental 
activists, who protested outside the event, continued their attack on the 
policy. They say it is tilted toward more production of fossil fuels at the 
expense of innovative approaches to fuel efficiency and alternative power 
sources such as the wind and the sun.  "America really needs clean energy 
solutions, not more pollution," said Morgan Sheets, an activist with the 
Pennsylvania Public Interest Research Group. The administration plan, she 
told reporters, relies on "unreliable, unsustainable, dirty sources of 
power."  The administration's renewed energy campaign comes at a time when 
the policy has been slowed by a combination of political and economic forces. 
They range from the Democratic takeover of the Senate to falling gasoline 
prices to a stabilized electricity market in California.  Cheney took about a 
dozen questions in the humid gymnasium at the Community College of Allegheny 
County, outside Pittsburgh. With his voice suffering, Cheney handed off some 
of his speaking and answering chores to aides and politicians who joined him 
on stage.  In response to a question about the administration's promotion of 
expanded nuclear power, Cheney said it could reduce global warming and has an 
improved safety record.  A man in the audience who identified himself as a 
member of the senior citizens advocacy group AARP said older residents were 
paying higher electricity bills because of the state's deregulation of the 
power industry. The Bush administration, which supports the move toward open 
electricity markets, has held Pennsylvania up as an example of successful 
deregulation, contrasting it with California's disastrous experience.  "We 
feel that since the deregulation that we are in the same position (with power 
companies) as we are dealing with OPEC," said the AARP member, referring to 
foreign oil-producing countries.  Cheney handed the question over to 
Pennsylvania Gov. Tom Ridge, who said power prices in Pennsylvania have gone 
from 15 percent above the national average before deregulation to as much as 
4 percent below it since the markets opened up.  While the audience may not 
have been completely friendly, the administration chose favorable turf to 
deliver its message. Investing in clean-coal technology and increasing coal 
use -- a major part of the Bush plan -- is a big pocketbook issue in this 
mining state, which Bush narrowly lost in last year's election.  "We need a 
shot in the arm for those counties" that are dependent on mining, said Sen. 
Rick Santorum, R-Pa., who joined Cheney on the stage.  Cabinet members held 
similar meetings, but none on the West Coast. EPA Administrator Christie 
Whitman was in Connecticut, Commerce Secretary Don Evans in North Carolina, 
Transportation Secretary Norman Mineta in Ohio, Energy Secretary Spencer 
Abraham in Illinois and Interior Secretary Gale Norton in South Dakota.  Bush 
unveiled the energy policy with much fanfare in May, marking it as a central 
initiative of his young administration. But two months later, major elements 
of the proposal are languishing, notably efforts to expand oil exploration 
and drilling on federal lands, including Alaska's Arctic National Wildlife 
Refuge.  From the start, polls showed that Americans felt the policy was too 
heavily tilted toward expanding energy production rather than conservation, 
and that it favored corporate interests over the environment. Many on Capitol 
Hill were wary of embracing the plan.  A recent USA Today/CNN/Gallup poll 
showed that 45 percent of Americans approve of Bush's handling of the energy 
issue.  But the energy crisis atmosphere of earlier this year has largely 
dissipated, robbing the Bush plan of momentum.  "The only thing that will be 
able to revive it is $3-per-gallon gasoline. As energy prices decrease, the 
steam goes out of the issue," said Marshall Wittmann, senior fellow at the 
conservative Hudson Institute in Washington, D.C.  Though the administration 
scored a victory on the energy front last week when the Senate blocked an 
effort to halt new drilling in the Gulf of Mexico, Wittmann predicted that, 
barring some new crisis, Bush will get little of what he wants from Congress. 
Indeed, the Senate also voted to block energy production at national 
monuments and the House voted to ban drilling in the Great Lakes.  The idea 
of allowing oil and gas exploration in the arctic refuge has been moribund 
for some time on Capitol Hill.  "Congress has no stomach to tackle the energy 
issue," Wittmann said.  He added that the administration will get an energy 
plan out of Congress, but "it just won't be very substantive." 




Davis aide foresees an end to rate hikes  


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objattph 
ASSOCIATED PRESS  July 16, 2001  LOS ANGELES -- The state is spending far 
less to buy power now than two months ago, and as a result there should be no 
more immediate rate increases, the governor's senior energy adviser said 
yesterday.  S. David Freeman told reporters in a conference call that the 
recent drop in spot market prices for power means that no new rate increases 
will be necessary "for the foreseeable future."  In May, the state was 
spending close to $100 million per day for power. In the past week, that 
figure stood at $30 million or less per day, said B.B. Blevins, assistant 
director for energy at the state Department of Water Resources.  So far in 
July, the state has paid on average $82 per megawatt hour for power purchased 
on the spot market. That compares with an average cost in May of $271 per 
megawatt hour on the spot market.  Overall, the state has paid on average 
$133 per megawatt hour this month, compared with an average of $243 per 
megawatt hour in May, Blevins said.  A megawatt hour is enough electricity to 
serve 1,000 typical homes for one hour.  In May, spot market purchases 
accounted for close to 45 percent of the state's power buys. So far in July 
they have made up closer to 5 percent.  The officials attributed the lowered 
prices to residents' conservation efforts, milder weather, long-term 
contracts the state entered into with power suppliers and a recent federal 
order imposing market-based price limits when energy reserves run low.  The 
Department of Water Resources plans to file its revenue requirements with the 
state Public Utilities Commission -- the agency that sets rates -- in the 
coming week. After that, the state's utilities will stake their claims.  
There has been widespread speculation that another rate increase would be 
necessary, in part to back bonds the state plans to issue to repay the 
state's general fund about $8 billion.  That's how much the state has spent 
since January, when it got in the power-buying business because generators 
began refusing to sell to the state's crippled utilities. The PUC ordered a 
50 percent rate increase in May for customers of Pacific Gas and Electric and 
Southern California Edison.  The state's utilities also may claim they are 
owed for the power generated at power plants they still own, but Freeman said 
new rate increases would not be necessary even if that was taken into 
consideration.  "In my opinion, the existing rates are plenty high to cover 
the needs for the foreseeable future," Freeman said. "There may be a 
difference of opinion on that subject, and the utilities traditionally file 
for more than what they get, let me put it that way."






Bankruptcy judge lets PG&E pay managers $17.5 million bonus  


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objattph 
By Karen Gaudette ASSOCIATED PRESS  July 16, 2001  SAN FRANCISCO ) 
California's largest utility can pay its top managers $17.5 million in 
bonuses to help keep them from leaving the financially troubled company, a 
federal bankruptcy judge has ruled.  However, Pacific Gas and Electric Co. 
should not fund those bonuses by raising its customers' electric rates, U.S. 
Bankruptcy Judge Dennis Montali emphasized, pointing to a promise from the 
company it would seek other ways to fund the bonuses.  Montali ruled that 
PG&E had crafted a reasonable employee retention program, and said opponents 
to the bonuses had not presented enough evidence to suggest the utility's 
employees would be paid more than other companies in similar circumstances.  
"PG&E has presented evidence of widespread concern among managers that they 
will lose their jobs; other companies hiring away a number of key managers; 
likely harm to the estate if PG&E loses more key employees," Montali wrote in 
a statement issued Friday.  Montali said it was not the role of the 
bankruptcy court to tell PG&E which employees should receive the money or to 
assess which employees required a bonus to stay with PG&E.  PG&E filed for 
federal bankruptcy protection April 6. High power prices and state law 
preventing PG&E from raising rates to make up for the difference contributed 
to the company's financial slide.  "As we move through the Chapter 11 process 
it is important to ensure the continuity of normal business operations. The 
program is designed to retain the key employees that manage the safe delivery 
of electricity and natural gas to our customers," said Ron Low, a PG&E 
spokesman.  The city and county of San Francisco had disputed the bonuses, 
and argued that PG&E did not show enough proof that top managers would leave 
if they weren't paid the extra money.  "San Francisco appears to be one of 
the only (cities) that has stood up for the public in this case and it is 
concerned that somewhere along the line that California is going to end up 
bailing out PG&E one way or another," said Irving Sulmeyer, an attorney 
representing the city and county.  Sulmeyer also argued that PG&E ought to 
first pay its debts to the more than 50,000 businesses, cities and 
individuals to whom it owes money.  "On one hand, PG&E doesn't have money to 
buy electricity ... but at the same time it can give its president a 100 
percent bonus, which didn't seem quite right," Sulmeyer said.  Employees will 
begin receiving the bonuses as early as January 2002, so long as the company 
files by New Year's Day its plan for how it will reorganize itself 
financially.  The bonuses will be shared by dozens of employees, including 
six senior officers: Gordon Smith, president and chief executive officer; 
Kent Harvey, senior vice president and chief financial officer; Roger Peters, 
senior vice president and general counsel; Jim Randolph, senior vice 
president; Dan Richard, senior vice president; Greg Rueger, senior vice 
president. 







As power crisis eases, Davis sees a beneficial role for deregulation  


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objattph 
By Ed Mendel  July 16, 2001  SACRAMENTO -- If the electricity crisis has in 
fact eased -- now that the state no longer is hemorrhaging cash and the 
threat of daily blackouts seems to have eased -- how does it all end?  The 
man at the helm of the ship of state, Gov. Gray Davis, apparently thinks it 
should end much as it began, with some form of deregulation in which power is 
purchased on the open market.  As the state was sucked into the power crisis, 
Davis at first maintained that a properly constructed deregulation could 
work, and then appeared to waffle.  But as power prices drop and a wave of 
new power plants comes on line, the governor is again clearly saying, without 
spelling out the details, that the general concept of deregulation can work.  
In fact, Davis said it twice this month as he threw the switch on a new 
540-megawatt power plant north of Sacramento. He said the state expects to 
have a 15 percent surplus of power by the end of 2004.  That's the magic 
number that Federal Reserve Chairman Alan Greenspan told him is needed to 
create a market in which competition will hold down prices.  "Then 
electricity deregulation can work," Davis said. Later in his remarks he said 
it again: By 2004 the state will be "very close" to the 15 percent surplus 
that Greenspan says is needed "in order for deregulation to function."  A big 
factor in the crisis is that California had not built a major power plant 
(more than 300 megawatts) in more than a decade and was forced to import 
about 20 percent of its power from out-of-state generators.  The state Energy 
Commission forecasts that the construction of power sources will produce an 
additional 20,000 megawatts by the end of 2004, creating the 15 percent 
surplus.  All of the new generation -- major power plants, small plants 
operating only during peak-load periods and upgraded old plants -- would be 
created through investments by private businesses.  And if the private sector 
does not build enough new generation, Davis signed legislation earlier this 
year creating a new state power authority, which could issue as much as $5 
billion in bonds to build or buy power plants.  However, the other part of 
the governor's broad plan for ending the electricity crisis may be more 
difficult.  Davis wants the financially crippled utilities to be back on 
their feet and able to resume buying power for their customers by the end of 
next year, allowing the state to get out of the power-buying business.  His 
plan to keep Southern California Edison out of bankruptcy has stalled in the 
Legislature, branded as a too-generous "bailout." Even if an Edison plan is 
approved, Pacific Gas & Electric creditors would have to be convinced that a 
similar deal is good enough for them to bring PG&E out of bankruptcy.  This 
week, the Legislature may finally vote on an Edison plan, including an 
Assembly Democratic proposal to leave residences and small businesses under 
traditional regulation and allow large users to shop around for power.  It's 
a chance to shift the focus from crisis management to what the electricity 
system should look like in the long run.  The main alternatives to 
deregulation are reregulation, where privately owned utilities produce their 
own power under rates set by the state, or a statewide publicly owned system, 
similar to the Los Angeles Department of Water and Power.  If Edison is 
allowed to slide into bankruptcy, which could take years to resolve, there 
will be plenty of time for debate.  Ed Mendel is Capitol bureau chief for the 
Union-Tribune. 








Churches Help Edison Aid the Poor
Energy: With an assist from the pulpit, a program to provide discounted 
electricity to those in need flourishes.
WILLIAM LOBDELL
TIMES STAFF WRITER

July 17 2001

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 skyrocketing 
rate increases.

Refugio Gomez, 62, a part-time janitor, signed up for the program last month 
at 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 this weekend.

The utility is concentrating its efforts initially in Catholic and 
African-American churches, primarily because of their large 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 besieged company. But getting lower 
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 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 Southern California 
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: 
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."

Energy Crisis Prompts Change in Church Policy

The Catholic church sometimes allows other information to be distributed at 
Mass, 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 shoppers 
outside retail malls.

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

At a booth in a Los Angeles shopping center, Edison workers earlier this 
month signed up only two dozen customers in a half-day of work.

Edison workers volunteer time on Sundays to pass out information at churches. 
More than 100 employees turned out on a single Sunday in April to volunteer 
at nearly two dozen sites in Orange County.

"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 wary immigrants and large institutions that 
provide relief services, said John Wilcox, chair of religious studies and 
director for the Center for Professional Ethics at Manhattan College in 
Riverdale, N.Y.

"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." 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







Consumers await word on rates 
Report's delay, government bond issue raise questions about electricity price 
increase 
Christian Berthelsen, Chronicle Staff Writer 
<mailto:cberthelsen@sfchronicle.com>
Tuesday, July 17, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/17/
MN136406.DTL>
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 
<mailto:cberthelsen@sfchronicle.com> 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 5 








Judge OKs bonuses for PG&E chiefs 
Published Tuesday, July 17, 2001, in the San Jose Mercury News 

Contra Costa Times 


A U.S. bankruptcy judge in San Francisco has approved Pacific Gas & Electric 
Co.'s request to give $17.5 million in retention bonuses to top managers. 
In an eight-page ruling issued Friday, Judge Dennis Montali rejected critics' 
allegations that the bonuses would reward those responsible for California's 
energy crisis. 
Under the plan, PG&E's top 23 executives will receive the equivalent of a 
year's base salary to stay with the company. Another 203 will receive bonuses 
of 25 percent to 75 percent of their salaries. 
The utility's six most senior executives, due a combined $2 million, will 
receive their bonuses only if PG&E successfully files a reorganization plan. 
Those executives will receive one-third of their bonus if the company files a 
plan by Jan. 1 and the remaining two-thirds once Montali approves that plan 
or a competing plan. 
The other managers will be awarded half their bonuses on the first 
anniversary of PG&E's April 6 bankruptcy filing. The second half will come 
either on the second anniversary of the filing or upon confirmation of a 
reorganization plan. 
``Consumers are outraged,'' said Mindy Spatt, spokeswoman for the Utility 
Reform Network. ``Most of us don't expect to get these kinds of bonuses if we 
perform well, let alone if we screw up.''







Power of lies 
Davis, Legislature ruin two electrical companies and try to cover it up

GLEN EVANS Mr. Evans, who lives in Lake Forest, is an employee of Southern 
California Edison and invests in its stock.
Billy throws a ball through Mrs. Smith's window. But when she comes out, he 
blames it on Bobby, the neighborhood bully. Mrs. Smith believes Billy because 
he seems nice, and, well, nobody likes Bobby. 
If you knew you could get away with blaming someone else for your own 
mistake, would you do it? That's exactly what the California Legislature and 
Gov. Gray Davis have done.
Polls say most people believe SCE and PG&E are responsible for California's 
energy crisis. Truth is, our politicians bear full responsibility. No one, 
except those very politicians, claims otherwise. I challenge Gray Davis and 
the California Legislature to find one reputable expert in any relevant field 
who doesn't agree on a simple fact: If retail prices for electricity had 
followed the wholesale cost, none of the problems we now have would have 
happened.
Moreover, If SCE and PG&E had been treated fairly, they would have been saved 
from financial ruin. Davis and the Legislature have many folks believing 
these utilities were somehow responsible for the law which forced them to 
sell power, their only product, for less than cost. But public gullibility 
does not justify public servants lying, just like Billy, and blaming somebody 
else to save themselves.
Rather than simply admit their mistake, Davis and the Legislature were 
willing to let two reputable, century-old utilities go $15 billion in debt - 
obligated to deliver power, but allowed to recover only a tiny fraction of 
the cost. They knew it was dishonest, but the alternative - asking the public 
to simply pay for the electricity they used - was too dangerous politically.
When SCE and PG&E attempted to defend themselves, our politicians made it 
known that the utilities had "funneled cash" to their parent companies, 
rather than use it to pay down their debt. Truth is, the amount of money was 
insignificant compared to the utilities' debts and it would have been just 
plain stupid for a company to take its last bit of cash and throw it after 
all the rest so blatantly "appropriated" by the state.
This transaction was common knowledge within the Legislature, having been 
arranged and approved by members, and its own audit acknowledged the money 
was handled properly. Many people expressed shock at this "news'' and vowed 
there would now be no "bailout" of these utilities.
But then came the state's own crisis - the utilities' debt was so massive 
nobody would lend them any more money. The state was forced to step in to 
keep the lights on, and everything changed.
Within weeks the state found out just how enormous the expense was they had 
been forcing the utilities to bear. The Public Utilities Commission voted to 
raise rates and, reluctantly, Davis acknowledged that an increase might be 
necessary after all.
Now came perhaps the cleverest deception. The rate increase had nothing to do 
with the utilities. All of the money from the increase went straight to the 
state to pay its bills. Even knowing they caused the utilities' debt, and 
could fix it, they wouldn't even share this increase. But because the 
increase would show up on the utility bill, everyone would naturally assume 
it was the utilities who were now raking in even more money. So with a simple 
lie of omission - just don't say anything - nobody would ever know every 
penny of that rate increase went straight to pay the state's debt. Not one 
cent went to the utilities, still strapped with huge debts and one, PG&E, now 
driven into bankruptcy.
Finally, a personal response to another common accusation - that SCE and PG&E 
somehow took all the money out before they went into debt and the 
stockholders got it all. I'm an SCE employee. I've worked in field service 
for Edison for more than half my life.
I've had such confidence in my company and it's management that I considered 
their stock the best retirement investment I could make. So for 26 years I've 
had money deducted from every paycheck to purchase stock. It was meant to 
guarantee my retirement security.
I had hoped I would actually be retired by now, and with the stress this 
situation has put on we employees, I truly wish I could. But all the money we 
stockholders are supposed to have is just another lie. I have lost more than 
two thirds of my life savings and am simply unable to retire now.
Thanks, Billy! 








Metro Desk 
THE NATION State Losing Ground in War on Dirty Air Environment: Growth, lax 
enforcement are blamed for rising smog levels in some areas.
GARY POLAKOVIC

07/17/2001 
Los Angeles Times 
Home Edition 
Page A-1 
Copyright 2001 / The Times Mirror Company 
California 's war on air pollution is beginning to falter as smog-control 
efforts increasingly fall behind the state's never-ending growth. 
From the Sierra Nevada to Ventura beaches, San Francisco Bay to the Salton 
Sea, some of the nation's most polluted regions are slipping in their 
commitment to clean air, according to air quality officials from around the 
state. The cost of delayed cleanup is prolonged damage to human lungs, 
spoiled forests and crops, and the pervasive pall of dirty air. 
In the San Joaquin Valley, so little progress has been made recently that the 
U.S. Environmental Protection Agency is poised to declare the 
25,000-square-mile area a "severe" smog zone, a status shared by only 10 
other U.S. regions. 
Cities such as Bakersfield and Fresno are beginning to challenge the Los 
Angeles region--where air quality has shown steady improvement--and Houston 
for the nation's air pollution crown. Sequoia National Park, which is 
immediately downwind of the valley, has the worst smog of any national park; 
more days of unhealthy ozone were recorded there last year than in Los 
Angeles and New York City combined. The valley has the most lackluster record 
against air pollution of any California region. 
The San Joaquin Valley Air Quality Management District blames the Bay Area 
for much of its pollution, but the EPA says the smog increasingly is 
home-grown. Local air quality officials have blocked control measures adopted 
elsewhere, insisting that they meet a cost-effectiveness yardstick more 
restrictive than used in Los Angeles or San Francisco. The EPA directed the 
district last year to implement at least six rules regulating emissions from 
paints, solvents and oil tanks that had been set aside, but some have still 
not been approved. 
To meet the standards, which are set at the levels required to prevent damage 
to human health, smog-forming emissions would have to be cut by an additional 
300 tons daily--equivalent to removing nearly one-third of all the cars, 
factories and oil operations in the valley. Instead, the EPA is leaning 
toward putting off compliance until 2007, although officials acknowledge smog 
might not be tamed by then either. 
"It doesn't look good. There's a lot that still needs to be done, and you 
wonder why a lot hasn't been done earlier," said John Ungvarsky, an 
environmental scientist at the EPA. 
The Bay Area also has trouble. 
After years of effort, the region in 1995 reached the health-based standard 
for ozone, the main component of smog. But pollution has resurged, and today 
it once again exceeds federal limits. Now, the Bay Area Air Quality 
Management District is trying to regain the upper hand, but it won't be easy. 
It faces the daunting task of eliminating 246 tons of hydrocarbons daily over 
the next four years. 
Environmentalists and the EPA said Bay Area smog fighters have not been tough 
enough on oil refineries, but local officials say greater reductions are 
needed from power plants and diesel generators as well as ports and airports, 
some of which are under federal jurisdiction. 
Backsliding is also evident in dust clouds ranging from Palm Springs to 
Indio, where machinery from a construction boom grinds soil that the wind 
blows all over the Coachella Valley. 
Windblown dust is the dominant source of a serious problem with particulate 
pollution in the desert region. Particulates can lodge deep in the lungs and 
have been linked to an increased risk of cancer, lung disease and premature 
death. 
The region, which suffers some of the worst dust storms in the nation, had 
the problem licked in 1996 when recession slowed down the construction 
industry. But as the building boom revived with the economy, enforcement 
efforts failed to keep up, and pollution has returned. Today, the valley once 
again exceeds limits for microscopic wind-blown dust, said Bill Kelly, 
spokesman for the South Coast Air Quality Management District. 
"They didn't keep up the emphasis on dust controls they had in the past," 
Kelly said. "They need to redouble their efforts to get back into attainment" 
of smog standards. 
Even in Southern California , which has had the best record in the country 
for smog reduction, high levels of carbon monoxide--a poison gas emitted 
principally from tailpipes--continue to pervade South-Central Los Angeles. 
The pollutant was supposed to have been eliminated last year, under 
provisions of the federal Clean Air Act. And although regional air pollution 
officials have succeeded in eliminating it elsewhere in the Los Angeles 
Basin, carbon monoxide in South-Central has remained a problem. 
Meanwhile, a key program to cut emissions from 360 of the region's biggest 
industrial polluters has not worked. 
The setbacks could tarnish California 's reputation as a leader in the fight 
for clean air, environmental activists say. 
As a result of the resurgent pollution, millions of residents will continue 
to breathe unhealthy air for many more years than Congress envisioned when it 
set cleanup deadlines for California under the 1990 Clean Air Act amendments. 
"Things are slip-sliding away," said Sierra Club lobbyist V. John White. "We 
gave ourselves all these victory laps and cheered ourselves, and then we 
started losing resolve. We've stopped pushing." 
The slowdown in smog improvement "bothers me," said Alan C. Lloyd, chairman 
of the state Air Resources Board. "We need to understand what is going on, 
what we are doing right, and what we are doing wrong." 
That evaluation has begun as air quality officials develop comprehensive new 
cleanup plans for smoggy cities. To achieve smog-fighting goals, officials 
say, those plans will have to deal aggressively with diesel-powered engines, 
solvent-based paints, consumer products and machinery used at harbors and 
airports, which are among the largest and least controlled pollution sources. 
Drafts of the plans are expected to be completed this summer, followed by 
public hearings. 
California continues to have a better record on smog cleanup than any other 
state, said Joseph M. Norbeck, director of the Center for Environmental 
Research and Technology at UC Riverside. 
But smog cleanup is not getting any easier. Growth is overtaking it. 
More cars, trucks, boats, businesses, chemicals and consumer products fill 
the air with emissions. The state's economy expanded by 9.2% last year, and 
although economic growth has slowed markedly this year, the state's 
population continues to increase. New car sales last year were up 11% 
statewide, adding 2 million vehicles--nearly half of them trucks and sport 
utility vehicles, which spew out substantially more pollution than standard 
passenger cars. A record 34 million people live in California , and each day 
they release 68.3 million pounds of pollutants into the sky, according to the 
Air Resources Board. 
"The growth is starting to catch up with the gains we've made," said Jack 
Broadbent, administrator of air programs for the EPA's California office. 
"We're at a point in time where a lot of the attainment dates are 
approaching. If we're going to attain those deadlines, you have to put 
controls in now." 
The state's electricity crisis is complicating matters. Throughout California 
, power plant emissions are surging as pollution controls are relaxed to 
prevent blackouts. When the lights threaten to go out, businesses switch on 
backup diesel generators, the dirtiest power source and a contributor to 
deteriorating air quality in the Bay Area. 
"We need some leadership on this issue and we are not seeing it," said Larry 
Berg, a Calabasas air quality consultant and a former director for the South 
Coast Air Quality Management District and USC's Jesse Unruh Institute of 
Politics. "The historical memory about what's going on with air pollution and 
public health is not on the minds of people in Sacramento. They need to 
refocus."








National Desk 
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

07/17/2001 
Los Angeles Times 
Home Edition 
Page A-14 
Copyright 2001 / The Times Mirror Company 
MONROEVILLE, Pa. -- 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 


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





California ; Metro Desk 
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

07/17/2001 
Los Angeles Times 
Home Edition 
Page B-7 
Copyright 2001 / The Times Mirror Company 
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. 






California ; Metro Desk 
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

07/17/2001 
Los Angeles Times 
Home Edition 
Page B-7 
Copyright 2001 / The Times Mirror Company 
SACRAMENTO -- 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.








Taking Charge:
Hurt by Deregulation
Of Utilities, California 
Gives Itself Lead Role
---
State Becomes Major Buyer
Of Electricity and Faces
Little Oversight of Deals
---
Gov. Davis: `Not a Power Grab'
By Rebecca Smith and John R. Emshwiller

07/17/2001 
The Wall Street Journal 
Page A1 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
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." 
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. 
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 the 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 powerplants" 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. 
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. 
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. 
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."