For Crucial California Trip, Bush Calibrates How Best to Handle State's 
Energy Crisis
The New York Times, 05/29/01

In Billing Spat, Enron Project Rejects Payment By Indian State
The Wall Street Journal, 05/29/01

El Paso Corp. a villain or scapegoat in Calif. crisis? 
Houston Chronicle, 05/29/01

Enron India: No Comment On Power Tariff Cut Reports
Dow Jones International News, 05/29/01

India's Gokak on Talks With Enron on Dabhol: Comment (Correct)
Bloomberg, 05/29/01

Enron Rejects Govt-run Power Buyer's Legal Notice, Paper Says
Bloomberg, 05/29/01

Enron Unit's Cline on Discussions With Indian Panel: Comment
Bloomberg, 05/29/01

INDIA: UPDATE 2-Enron, India panel make no progress on power row.
Reuters English News Service, 05/29/01

SWITZERLAND: Swiss Prime New Energy has bourse debut.
Reuters English News Service, 05/29/01

INDIAN GOVT REJECTS PROPOSAL TO BUY POWER FROM DABHOL PROJECT
Asia Pulse, 05/29/01

Enron's India Unit Willing To Cut Tariffs By 10% - Report
Dow Jones International News, 05/29/01

INDIA'S DABHOL POWER SET TO SLASH TARIFF BY 10%, SAYS IDBI CHIEF
Asia Pulse, 05/29/01

ENRON'S DABHOL POWER CO REJECTS STATE BOARD'S LEGAL NOTICE
Asia Pulse, 05/29/01

GEB to issue bonds against old debts
The Economic Times, 05/29/01

INDIA: Enron's Dabhol to meet key govt panel on Tuesday.
Reuters English News Service, 05/28/01

QATAR: Qatar says Dolphin deal not set back by Enron exit.
Reuters English News Service, 05/28/01

India: Dabhol project: Politics of power
Business Line (The Hindu), 05/28/01

French power plays trample Mediterranean sensitivities
South China Morning Post, 05/28/01

Feeling the heat over energy, Bush to visit California
Houston Chronicle, 05/28/01

Los Angeles Volts, Quotes and Votes From the Elect Among Us
Los Angeles Times, 05/28/01

2003 mayoral race casting a shadow
Houston Chronicle, 05/28/01

THE NATION Bush Comes Calling to an Edgy California Politics: President hopes 
to make amends with Davis, voters. Outcome could color future ties.
Los Angeles Times, 05/28/01

Commentary It Takes 2 to Tangle Our Energy Future
Los Angeles Times, 05/28/01



National Desk; Section A
For Crucial California Trip, Bush Calibrates How Best to Handle State's 
Energy Crisis
By DAVID E. SANGER

05/29/2001
The New York Times
Page 12, Column 1
c. 2001 New York Times Company

LOS ANGELES, May 28 -- Days after he suffered the biggest political setback 
of his four-month-old presidency and then won the tax cut that he staked his 
campaign upon, President Bush traveled tonight to California, carefully 
calibrating how to deal with the state's energy crisis. 
After Memorial Day celebrations in Washington and Mesa, Ariz., Mr. Bush began 
his first visit as president to the most populous state, which he lost by 
roughly 12 percentage points in November's election. The visit seems likely 
to showcase the clash between two very different energy strategies and 
political strategies.
Mr. Bush will meet briefly on Tuesday with Gov. Gray Davis, who will insist, 
as he did again today, that the federal government impose price caps on 
wholesale electric power. 
The White House says Mr. Bush will refuse, again. He will argue that such 
caps would only discourage increased production of electric power. ''We think 
that's a mistake,'' Vice President Dick Cheney said on Friday, talking about 
why he rejected those options when he prepared the energy policy the 
administration made public 10 days ago. 
But Mr. Bush knows that how he handles the California energy crisis could 
prove critical to his political fortunes, especially now that his party's 
loss of control in the Senate seems bound to slow or derail passage of major 
elements of his energy plan. 
Moreover, the president can no longer argue that the best cure for high 
energy prices is a tax cut, because that is now legislative history. As one 
of his aides said this weekend, after Congress approved the $1.35 trillion 
tax cut that will be phased in over the next 10 years, ''we will have to turn 
now to the other arguments.'' 
Most of those arguments involve urging the rest of the country not to follow 
California in a partial deregulation of the market, with disastrous results. 
Repeatedly Mr. Bush has chastised California's politicians, and by 
implication Mr. Davis himself, for ignoring politically unpalatable choices 
to avert the state's power-generating crisis. Ten days ago, standing in front 
of a hydroelectric plant in Pennsylvania, Mr. Bush used the state as Exhibit 
A for his argument about what happens when population rises, when 
over-regulation freezes the construction of new power plants and the 
stringing of new transmission lines, and when politicians fail to plan for 
the long term. 
''The problems in California shows that you cannot conserve your way to 
energy independence,'' Mr. Bush said then. 
At the same time, his aides were pointing to polls showing Mr. Davis's 
approval ratings plunging. They did not mention that Mr. Bush's ratings in 
the state were hardly any better. A series of recent polls show that roughly 
two-thirds of Californians believe Mr. Bush should be doing far more to help 
the state, though it is unclear exactly what kind of help they have in mind. 
So Mr. Bush's aides have been struggling for days to choreograph the two-day 
visit here, trying to find ways to differ with Mr. Davis without seeming 
callous about the problem or in conflict with the state. 
The betting is that Mr. Bush will focus on long-term solutions, in contrast 
to Mr. Davis's call for the quicker fix of price caps. 
The effort started today. Energy Secretary Spencer Abraham issued an order of 
chiefly symbolic importance, saying his department would move quickly to 
determine whether investors were interested in financing and co-owning a new 
transmission line that could bring more power to the state. 
''The level of interest will be a factor in the decision to build the line 
later this year,'' the Energy Department said. It said that it would proceed 
with studies of how the land could be acquired, by eminent domain if 
necessary, and that it would speed ahead with environmental reviews. 
But Mr. Abraham left wide open the question of whether Washington would go 
ahead with the project even if no private financing was available. 
''The Bush administration is taking a leadership role in addressing a 
long-neglected problem in California's electricity transmission system,'' Mr. 
Abraham said. ''California's electricity problems developed over a period of 
years and cannot be solved overnight. However, we can move now on actions 
that will help avert the same types of problems from recurring year after 
year.'' 
The statement was clearly intended as a prelude to the meeting with Mr. 
Davis, which will be closed to the press. So will a meeting with energy 
entrepreneurs. (Mr. Bush passed on Mr. Davis's suggestion of a forum with 
small-business owners and residents who have seen the lights go out.) 
Few expect Mr. Bush or Mr. Davis to change his mind about energy caps after 
their meeting. 
But for Mr. Bush it will not all be tough love. On Tuesday morning Mr. Bush 
is scheduled to travel to Camp Pendleton to repeat his call for the military 
and other federal users of power in California to flip off their switches 
whenever possible. But given his own comments, and Mr. Cheney's, about the 
limited utility of conservation, that order could strike some Californians as 
a little hollow. 
Later he will give a trade speech in Los Angeles, underscoring the message 
that if California hopes to remain the world's greatest exporter of high 
technology -- if it were a nation, California would be the world's 
sixth-largest economy -- it must find new ways to produce and deliver 
electricity. 
Already, leading Silicon Valley companies are threatening to build their 
next-generation chip fabrication plants elsewhere, probably in Texas, which 
has a surplus of generating capacity, a move that would further undermine Mr. 
Davis's stewardship. 
In fact, Mr. Bush's Texas roots will never be far from the political 
battlefield here. Mr. Davis has accused Texas energy companies of 
profiteering at California's expense. To press the case, he has hired two 
political operatives from the Clinton White House, Marc D. Fabiani and Chris 
Lehane, who are being paid tens of thousands of dollars a month to make the 
case for price caps. 
California's attorney general, Bill Lockyer, also a Democrat, suggested to 
The Wall Street Journal last week that some time in jail would be the best 
way to deal with one of Mr. Bush's biggest supporters -- Kenneth Lay, who 
heads the Enron Corporation and has sought to influence the selection of 
members of the Federal Energy Regulatory Commission. 
The comments may have been partly facetious, but they were not interpreted 
that way here.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


International
In Billing Spat, Enron Project Rejects Payment By Indian State
By Jesse Pesta
Staff Reporter of The Wall Street Journal

05/29/2001
The Wall Street Journal
A14
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -- In an unusual twist in their quarrel over unpaid bills, Enron 
Corp.'s Indian power project, Dabhol Power Corp., has rejected a check valued 
at $29.1 million from its only customer, the Maharashtra State Electricity 
Board, to make a legal point. 
Dabhol also delivered a sharply worded four-page letter to the MSEB, 
responding to the electricity board's decision last week to rescind its 
power-purchasing contract based on a claim that Dabhol misrepresented its 
"ramp-up" speed -- the time the plant takes to go from a cold start to full 
power. "We deny that DPC have practiced any misrepresentation," Dabhol's 
letter says. "Furthermore, we do not think that the MSEB entertains any 
honest belief" in its own allegation, it says.
It's the latest in a series of rancorous exchanges as both sides try to gain 
an edge in a fight over Dabhol's power tariffs. The $3 billion power plant is 
the largest foreign investment in India, and the dispute is closely watched 
as an indicator of India's hospitality to investors from abroad. India needs 
electricity badly, but many of its state electricity boards are cash-strapped 
due to widespread power theft and lax metering. The Dabhol dispute started 
about six months ago, when the MSEB defaulted on monthly bills totaling $48 
million. 
Dabhol's critics claim its tariffs are unreasonably high, which Dabhol 
denies. Among other things, Dabhol says MSEB draws only about 15% of the 
plant's capacity, down from an average 60% or so before the dispute; the 
reduced usage boosts the per-unit price because the pricing formula includes 
some capital costs. 
In its letter, Dabhol says it rejected the 1.369-billion-rupee check because 
it came with a note saying it was submitted "under protest," a reference to 
the MSEB's decision last week to rescind the contract. "The MSEB cannot have 
it both ways," says the letter, signed by Enron executive K. Wade Cline. 
Either it's rescinding the contract, or "it is affirming the validity of the 
[contract]" by making payments. 
However, MSEB Chairman Vinay Bansal said that after the check was rejected, 
the MSEB went ahead and direct-deposited a payment to a Dabhol account, 
unaware of the letter's contents. Mr. Bansal said that he hadn't read the 
letter yet, so he wouldn't comment on it. 
He said the MSEB is eager to pay because the April bill was due on Friday. A 
Dabhol official, while unable to confirm whether payment was received, said 
it would mark "the first time in history" that the MSEB has paid on time. Mr. 
Bansal disputed that, saying he believes the two previous bills were also 
paid on time.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 







May 29, 2001
Houston Chronicle
El Paso Corp. a villain or scapegoat in Calif. crisis? 
Californians' ire grows as case resumes 
By DAVID IVANOVICH 
Copyright 2001 Houston Chronicle Washington Bureau 
WASHINGTON -- The lights keep going out in California, and people there want 
someone to blame. 
California is pointing the finger at Texas' energy companies. And first up is 
Houston's El Paso Corp. 
The California Public Utilities Commission has accused El Paso of using its 
power in the natural gas market to drive up gas prices in California. 
That behavior, Californians say, has cost the state's consumers more than 
$3.7 billion in higher energy bills and exacerbated California's dire power 
woes. 
And they want the federal agency that regulates natural gas pipelines to 
force El Paso to hand over the profits from this deal. 
At issue is whether El Paso, the nation's largest gas pipeline company, 
violated federal law by purposely withholding capacity on the biggest gas 
pipeline serving Southern California during a crucial period when gas demand 
was on the rise last year. 
By refusing to make that space available, the state agency alleges, El Paso 
was exercising its "market power" to artificially hike prices and keep them 
high. 
El Paso counters that the run-up in gas prices was caused, not by its 
actions, but by an unanticipated -- and unprecedented -- surge in demand. 
And they argue the real problem is pipeline capacity constraints within 
California, not on the supply of gas moving in pipelines bringing gas to the 
state. 
When filed more than a year ago, the state's allegations went all but 
unnoticed by the public. 
But with blackouts expected to roll across California repeatedly this summer, 
the El Paso case has morphed from an esoteric regulatory dispute into the 
test case for the legal battles spawned by the state's power debacle. 
As they wait in darkened elevators and struggle to pay soaring utility bills, 
Californians discern a pattern, argues Bruce Cain, director of the Institute 
of Governmental Studies at the University of California at Berkeley. 
"It's the same story with slightly different details," Cain said. "And people 
in California are getting very, very irritable." 
Gov. Gray Davis and other Democratic leaders have repeatedly blamed 
"out-of-state" energy firms for the state's energy woes. And they have 
excoriated the Federal Energy Commission for failing to take decisive action 
to give Californians relief. 
As President Bush visits California today, Democrats are pointing to the El 
Paso case to show how companies from Texas are ravaging California. 
Whether El Paso is an appropriate target for their anger remains an open 
question. 
El Paso operates a major pipeline system that transports natural gas from 
producing basins in areas such as West Texas and Oklahoma to Southern 
California and other parts of the Southwest. 
For years, the state's two cash-strapped utilities, Pacific Gas & Electric 
and Southern California Edison, and a local gas distribution company, 
Southern California Gas, owned the rights to transport gas along the Edison 
pipeline system. 
But as California moved to deregulate its electric industry and encourage 
competition, the California Public Utilities Commission prodded the utilities 
to give up their capacity on the El Paso line. 
That made room for other gas marketing firms to move in. 
Houston-based Dynegy held the rights to the pipeline capacity for a while. 
Then an Enron affiliate took a brief turn. 
In February 2000, El Paso's pipeline arm, El Paso Natural Gas Co., opened the 
bidding again for about 1.2 billion cubic feet of pipeline capacity. 
That space accounted for about one-third of the capacity of the El Paso line 
and about one-sixth of the total pipeline capacity running into California. 
An El Paso affiliate, El Paso Merchant Energy Co., won the rights to that 
capacity for 15 months with a $38.5 million bid. 
The California Public Utilities Commission cried foul and asked the Federal 
Energy Regulatory Commission to force El Paso Merchant to "disgorge" its 
profits earned under the contract. 
(El Paso has earned $184 million in pre-tax profits since the contract began, 
Ralph Eads, president of El Paso Merchant, testified last week.) 
The case was turned over to Curtis L. Wagner Jr., an administrative law judge 
at the Federal Energy Regulatory Commission, who acknowledged it would be a 
bellwether case. 
This much was clear. Gas prices skyrocketed at the California border last 
year, rising from an average of $2.84 a thousand cubic feet in March 2000 to 
as high as $25.08 in December, according to Southern California Edison. 
That was no small issue for California's troubled power market because nearly 
one-quarter of electric generators in California are fired by natural gas. 
In making their case, California officials pointed to the difference between 
gas prices in the gas fields in the San Juan and Permian producing basins and 
in California at the other end of the El Paso line. 
Those price differentials began to widen while Dynegy held the capacity, 
state officials said, only to expand dramatically after El Paso Merchant took 
control. 
El Paso Merchant admits significant portions of its capacity went unused. And 
the company acknowledges it was not successful at finding other players to 
take the space, despite the interest of several potential bidders. 
California officials insist the company only went through the motions of 
trying to find other shippers to take the pipeline capacity because it wanted 
to limit supplies. 
Perhaps the most tantalizing evidence in the case surrounds a Valentine's Day 
2000 presentation made by El Paso Merchant officials to El Paso chief 
executive William Wise. 
The El Paso Merchant documents are still largely held under wraps by the 
court, although portions have been revealed and others were obtained by the 
New York Times. 
In those documents, El Paso officials acknowledged the deal for the pipeline 
capacity would give the company "more control" over gas markets, including 
"the ability to influence the physical market," the Times reported. 
Lawyers for the plaintiff tried to argue that El Paso officials had crossed 
over the invisible line that is supposed to separate the operations of the 
regulated gas pipeline business and the unregulated gas trading arm. 
Wagner grew irritated with Eads last week when the El Paso Merchant executive 
appeared to equivocate when asked whether Wise approved Merchant Energy's 
plans 
"I feel you're trying to pull something over my eyes, which I don't 
appreciate," Wagner said, adding: "You have to get my blood pressure up to 
get the truth out of you." 
Wagner responded by ordering Wise to fly to Washington for an unscheduled 
appearance on the witness stand. 
Wise conceded he had, indeed, approved El Paso Merchant's plan to make a bid 
for the pipeline capacity, although he said he left it up to El Paso Merchant 
managers to decide the specifics of that bid. 
For El Paso's part, Harvard University professor Joseph Kalt argues that the 
real problem is a lack of capacity on the systems inside the state of 
California. 
In other words, even if El Paso had delivered more gas along the pipeline, 
the intrastate pipeline network would not have had the capacity to take that 
gas to users there. 
Eads also argued that if El Paso officials had been trying to push up gas 
prices, they would not have used a risk management technique known as 
"hedging." 
Hedging allows a company to protect itself against a major drop in prices, 
but it also keeps it from reaping the full benefits of a jump in prices. 
El Paso Merchant had suffered $691 million in hedging losses through March 
31, including $429 million in the first quarter of this year. 
"If we had thought that we could drive up prices ... we certainly would not 
have hedged," Eads said. 
And as for the infamous Valentine's Day, El Paso officials insist the 
comments were misconstrued, although they still want those documents to be 
kept secret. 
Testimony in the case will resume today. Wagner plans to issue his opinion by 
June 30. 




Enron India: No Comment On Power Tariff Cut Reports

05/29/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

BOMBAY -(Dow Jones)- Enron Corp.'s (ENE) Indian unit, Dabhol Power Co., 
Tuesday declined to comment on whether it would cut its power tariffs after a 
second round of talks with a top panel set up to try and resolve an ongoing 
power supply dispute. 
After a 90-minute meeting between officials from the state and central 
governments, Maharashtra State Electricity Board and Dabhol executives, an 
Enron spokesperson said he wouldn't comment on newspaper reports Tuesday that 
Dabhol Power Chief Operating Officer K. Wade Cline had told domestic lenders 
the company is ready to cut power tariffs by 10%.
Power tariffs, deemed "unaffordable" by the state government, are at the core 
of this simmering dispute. The $3.0-billion Dabhol power plant in western 
India will generate 2,184 megawatts of power when the second phase is 
completed later this year. 
After the meeting, Cline said Dabhol Power "submitted no proposals before the 
committee." Dabhol Power has consistently maintained it won't renegotiate the 
power purchase agreement between the company and the MSEB, which sets tariffs 
for consumers. 
Industry analysts say Enron may be willing to reduce the power tariffs if it 
can find other buyers for its electricity. At the moment, the state 
electricity utility is the only buyer and has defaulted on $48.0 million of 
power payments. 
Earlier in the day, an Enron spokesperson also declined to comment on a 
report New Delhi has turned down a Maharashtra state proposal that seeks the 
National Thermal Power Corp. or the Power Trading Corp. to buy and distribute 
Dabhol's power. 
Indian state officials said another meeting of the panel will be scheduled 
for later but no date has been fixed yet. 
Indian financial institutions with more than 50% loan exposure to Dabhol 
Power will meet Wednesday to devise a strategy prior to their meeting with 
foreign lenders in early June in a bid to save the power project, senior 
officials at the Industrial Development Bank of India said Monday. 
-By Steve Percy, Dow Jones Newswires, 91 22 2884211; steve.percy@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


India's Gokak on Talks With Enron on Dabhol: Comment (Correct)
2001-05-29 04:26 (New York)


     (Corrects typographical error in first paragraph.)

     Mumbai, May 29 (Bloomberg) -- A.V. Gokak, the Indian
government's nominee in discussions with Enron Corp.'s Dabhol
Power Co. in a dispute with the western province of Maharashtra,
speaks after a meeting between the power utility and the
Maharashtra State Electricity Board. This is the first time  Gokak
has attended a meeting to resolve the stand-off over payments by
the board to Dabhol.

     ``India is very keen for a resolution of this issue.
     ``We will play an active role,'' in solving the payment
dispute, he said.
     ``We will take into account interests of all sides.''

     He declined to comment on newspaper reports that the
government has rejected a proposal that Dabhol may be allowed to
sell power to other state-run utilities.



Enron Rejects Govt-run Power Buyer's Legal Notice, Paper Says
2001-05-28 23:26 (New York)


     New Delhi, May 29 (Bloomberg) -- Enron Corp.-promoted Dabhol
Power Company has rejected the government-run Maharashtra State
Electricity Board's legal notice terminating their power purchase
agreement, Business Standard reported, citing Managing Director K.
Wade Cline's written reply.
     In the reply, Enron said ``the legal notice is not acceptable
to us, as according to the PPA (power purchase agreement), the
MSEB does not have the right to rescind the agreement,'' the paper
reported.
     The Maharashtra electricity board Thursday told Dabhol Power
it was canceling the contract, six days after the company served
the board notice it was set to pull out of the project, India's
largest single foreign investment, in six months.
     Meanwhile, Indian lenders to Dabhol will meet Wednesday to
discuss ways to convince overseas counterparts to salvage the $3
billion power project, which is caught up in a payment dispute.
     Dabhol is owed 3 billion rupees ($63.9 million) for power
supplied in December and January. The board has refused to pay the
bills saying they're too high. It has imposed a 4 billion rupee
penalty on Dabhol for failing to supply power at full capacity on
Jan. 28.


Enron Unit's Cline on Discussions With Indian Panel: Comment
2001-05-29 03:25 (New York)


     Mumbai, May 29 (Bloomberg) -- Wade Cline, managing director
of Enron Corp.'s Dabhol Power Co., comments on a meeting between
Dabhol and a committee that was set up to resolve a stand-off over
payments by Maharashtra State Electricity Board. MSEB owes Dabhol
3 billion rupees ($63 million) for power supply in December and
January.

     ``We had a good meeting. We discussed a lot of things.
Discussions are ongoing and we'll meet again.''

On Dabhol's plans to cut power tariffs by 10 percent:

     ``No proposals were submitted before the committee.''



INDIA: UPDATE 2-Enron, India panel make no progress on power row.
By Sriram Ramakrishnan

05/29/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, May 29 (Reuters) - Talks between U.S. energy giant Enron Corp's 
Indian unit and a government panel ended on Tuesday without resolving a 
contentious dispute over a giant $2.9 billion power project, officials said. 
But they said the talks will continue.
Participants at the meeting, which lasted an hour, discussed the issue of a 
reduction in tariff rates charged by Enron's unit for the power it sells to 
Indian state utility the Maharashtra State Electricity Board (MSEB), 
government and company officials said. 
Also discussed was the option of a third entity, apart from the sole buyer 
MSEB, purchasing the power from the second phase of the project. 
"We had a good meeting. We discussed a lot of issues. But no proposals were 
submitted," K. Wade Kline, chief operating officer, Enron India Pvt Ltd, told 
reporters. 
V.M. Lal, principal secretary to the Maharashtra government, said the 
discussions will continue with Dabhol Power Company, which is 65 percent 
owned by Houston-based Enron . 
"We are negotiating on the various issues that are coming in the way of the 
project," he told reporters, adding that no date has been fixed for the next 
meeting. 
Enron and MSEB have been sparring for over six months on the 2,184 MW 
project, which was originally slated to sell its entire output to MSEB at a 
fixed price. 
The row is seen as a test case of India's ability to attract foreign 
investment in the power sector, which needs 100,000 MW over the next 10 years 
to meet growing demand. 
MSEB began buying the 740 MW of power produced by the the project's first 
phase in May 1999, but late last year, it started to default on payments 
saying the tariffs were too high. 
It also decided against buying the 1,444 MW of power produced by the 
project's second phase, which is expected to be delayed from its scheduled 
completion next month. 
Dabhol issued a notice this month to cancel its power purchase deal over this 
issue and said the cost of power will drop when the second phase is completed 
and the plant switches over to a cheaper natural gas fuel. 
RENEGOTIATE TARIFFS 
To resolve the dispute, the Maharashtra government formed a panel last month 
to renegotiate the tariffs, headed by former bureaucrat Madhav Godbole who 
had earlier chaired a committee which recommended a series of steps to bring 
down the project tariff. 
Dabhol had said before Tuesday's meeting, that it does not agree with the 
committee's recommendations and hence does not believe the new panel would 
find a solution. 
The meeting was attended by key executives of Dabhol, the Maharashtra State 
Electricity Board (MSEB) and representatives of the federal and state 
governments. 
Indian lenders to Dabhol will meet in Bombay on Wednesday to try and find a 
way to protect their interests in the project, a lender said on Monday. 
The meeting's top priority will be the adoption of a common strategy to 
convince foreign lenders not to invoke guarantees issued by local financial 
institutions and banks. 
The project, which is being built at a total cost of $2.9 billion, is being 
funded through $2 billion of loans. Of this amount, local lenders have 
contributed $1.4 billion and foreign lenders have provided the rest. 
Foreign lenders are protected by guarantees issued by domestic banks and 
financial institutions. They have called a meeting on June 5 and 6 in 
Singapore to discuss invoking guarantees on their loans in the project. 
At stake is not just the investment in the project, but also India's efforts 
to reform the power sector. Indian lenders would also take a hit on their 
books if their foreign counterparts insist on payments. (Additional reporting 
by Maria Abraham) 
($1 = 46.98 Indian rupees).

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


SWITZERLAND: Swiss Prime New Energy has bourse debut.

05/29/2001
Reuters English News Service
(C) Reuters Limited 2001.

ZURICH, May 29 (Reuters) - Shares in Swiss investment company Prime New 
Energy AG, which invests in sustainable energy technology, start trading on 
the Swiss SWX stock market on Tuesday, lead manager Credit Suisse Asset 
Management said. 
CSAM, part of Credit Suisse Group , said in a statement the company completed 
a placement of 700,000 bearer shares at 93 Swiss francs on April 12.
The listed shares will be included in the investment company segment of the 
SWX and its index. 
The company was founded in October 2000 and targets long-term capital growth 
by investing in the future-oriented domain on the energy sector in North 
America and Europe. 
The founding shareholders include the pension funds of the canton of 
Baselland, Credit Suisse Group, SBB Swiss railways and the Siemens companies 
in Switzerland. 
Prime New Energy is headed by Stefan Maechler, managing director of Credit 
Suisse Asset Management, which is also responsible for managing the 
portfolio. 
Prime New Energy (www.prime-new-energy.com) said net asset value per share 
stood at 105.59 Swiss francs on May 25, having set a year high of 106.66 on 
May 22. The year low was 81.39 on April 4. 
Investments include stakes in listed companies Calpine Corp , Mirant , 
Aixtron , Enron Corp , Ballard Power Systems , Capstone Turbine Corp and 
Gamesa . 
The total investment volume was 187 million francs on April 30.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIAN GOVT REJECTS PROPOSAL TO BUY POWER FROM DABHOL PROJECT

05/29/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, May 29 Asia Pulse - The Indian federal government has refused a 
proposal by the Maharashtra state government that it purchase electricity 
from the Enron-promoted Dabhol Power Company, which is currently embroiled in 
a legal battle with the state. 
"How can Central utilities buy power from DPC and sell it elsewhere when it 
is not possible for the Maharashtra government to buy it," the federal Power 
Minister, Suresh Prabhu, told PTI in an interview.
"A solution has to be found out which will have to be both in the national 
interest as well as acceptable to the investors... by asking National Thermal 
Power Corporation to buy power we can't have a solution," he said. 
Stating that he had made his stand clear to the Maharashtra Chief Minister, 
Vilasrao Deshmukh, when he came with the proposal to meet him and the Finance 
Minister, Yashwant Sinha, Prabhu said "what appears a solution can prove to 
be a precursor to a problem later." 
In the wake of the ongoing fight between DPC and the Maharashtra State 
Electricity Board over the payment issue and legalities of power purchase 
agreement, Deshmukh had asked the federal government to bail out the state by 
instructing the NTPC and the Power Trading Corporation (PTC) to buy power 
from the second phase of DPC, to be commissioned later this year. 
Prabhu said states were the users of the electricity and not the federal 
government, which was only playing the role of a facilitator by generating 
and supplying power. 
(PTI) 29-05 2002

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Enron's India Unit Willing To Cut Tariffs By 10% - Report

05/29/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- Dabhol Power Co., the Indian unit of Enron Corp. 
(ENE), has told its domestic lenders that it's willing to cut tariffs by at 
least 10% in an attempt to resolve a dispute with Indian authorities. 
"The DPC (Dabhol Power) managing director met me recently. He is agreeable to 
cutting tariff by 10%. I am sure it can even be reduced further," S.K. 
Chakrabarti, chairman and managing director of the Industrial Development 
Bank of India, was quoted by the Business Standard newspaper as saying 
Tuesday.
IDBI has a total loan exposure of 21.58 billion rupees ($1=INR46.9750) to 
Dabhol Power. 
The $3 billion Dabhol Power project, India's biggest foreign investment 
project, is situated in the western Indian state of Maharashtra. 
The project, which will generate 1,444 megawatts of electricity when the 
second phase is completed later this year, is at the center of a dispute 
between the state government and Dabhol Power over what the government claims 
are "unaffordable" power tariffs. 
The statement government hasn't been paying its dues to Dabhol Power and the 
company on May 19 issued a preliminary termination notice to the Maharashtra 
State Electricity Board, or MSEB. 
Indian financial institutions with outstanding loans to Dabhol, including 
IDBI, will meet Wednesday to agree on a common stance prior to their meeting 
with foreign lenders in early June. The lenders are hoping to save the power 
project, which is facing severe cash flow difficulties because of nonpayment 
by the state electricity body. 

Separately, a negotiating panel that includes officials from the state and 
central government and MSEB will meet senior executives of Dabhol Power later 
Tuesday in a bid to resolve their differences. 
In a separate report Tuesday, the Financial Express newspaper said the Indian 
government had rejected a proposal by the Maharashtra government that 
National Thermal Power Corp. or Power Trading Corp. be asked to buy and 
distribute power from Dabhol Power. 
The report quoted unnamed government officials as saying that the 
consequences of commercial decisions taken by the state government or the 
MSEB won't be passed on to consumers across the country. 
-By Muneeza Arjuman, Dow Jones Newswires; 91-11-461-9427; 
muneeza.arjuman@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIA'S DABHOL POWER SET TO SLASH TARIFF BY 10%, SAYS IDBI CHIEF

05/29/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

MUMBAI, May 29 Asia Pulse - Enron promoted Dabhol Power Company (DPC) is 
ready to slash its tariff by 10 per cent after the second phase of the 2,184 
mw project is functional in June first week, the leading financial 
institution Industrial Development Bank of India (IDBI) acting chairman and 
managing director S K Chakrabarti said here. 
"DPC has assured its Indian lenders that it was willing to reduce the tariff 
after firing of the 1,444 MW second phase. The per unit price would also 
reduce by another 10 per cent when the plant switches to Liquified Natural 
Gas as fuel", Chakrabarti said.
He said there was hope that DPC's tariff would come down at Rs 3.50 per unit 
after LNG use. 
Meanwhile, Indian lenders would meet on May 30 to chalk out a strategy for 
pressurising their foreign counterparts not to escalate the crisis by 
withdrawing from the USD three billion project. 
"There is a rift between domestic and foreign lenders, but the forthcoming 
meeting will formulate our future course of action to convince the latter not 
to precipitate the crisis any further in the June 4-6 Singapore meet", he 
said. 
"IDBI's exposure to DPC project is to the tune of Rs 21.58 billion (US$459 
million) including guarantees worth Rs 15.28 billion and rupee loans of Rs 
6.30 billion," Chakrabarti said. 
For the first time, the Indian lenders today disclosed their exact exposure 
to DPC, which stood at Rs 66 billion. Chakrabarti said adding other domestic 
lenders were ICICI, State Bank of India and Canara Bank. 
(PTI) 29-05 1609

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


ENRON'S DABHOL POWER CO REJECTS STATE BOARD'S LEGAL NOTICE

05/29/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

MUMBAI, May 29 Asia Pulse - Enron's Dabhol Power Company (DPC) has rejected 
the Maharashtra State Electricity Board's (MSEB) legal notice for 
"rescinding" the PPA, saying "it did not have the right to do so," as the two 
partners get ready to plead their case before the state Electricity 
Regulatory Commission (MERC) tomorrow. 
In a three-page response to the MSEB's May 24 legal notice, Enron India 
managing director K Wade Cline has said "The legal notice is not acceptable 
to us, as according to the PPA, MSEB does not have the right to rescind the 
agreement," the state government sources told PTI here today.
In its notice, the MSEB has questioned the legal validity of the entire PPA 
as per the Indian Contracts' Act (ICA) 1872 and later also went a step 
further by filing a petition in MERC. 
"Other than non-acceptance of our legal notice, the DPC has continued its 
demand for an escrow account, knowing fully well that MSEB has filed a caveat 
in the Mumbai high court for not activating the sam," sources said. 
The DPC has also demanded an increase in LC (letter of credit) amount in line 
with the PPA, as the MSEB was supposed to do 21 days before the firing of its 
second phase on June six, they said. 
(PTI) 29-05 1143

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


GEB to issue bonds against old debts
Kamlesh Trivedi

05/29/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

WHEN the dispute over past outstanding has turned relations between Enron and 
Maharashtra state Electricity Board sour, Gujarat state Electricity Board has 
come out with a trend setting concept to retire past debt of independent 
power projects. 
GEB has decided to issue bonds worth Rs 650 crore to two of the three 
independent power projects in the state, Gujarat Powergen Eenergy Corporation 
and Gujarat Industries Power Company Limited against their old debts.
Bonds will be issued by GEB during the first week of June. GPEC will be 
issued bonds worth Rs 400 crore, while GIPCO will be issued bonds worth Rs 
250 crores to settle the past dues according to sources in the state energy 
department. 
GPEC will be issued bonds with option of four, five and six years of maturity 
period. While GIPCO, which will be issued bonds worth Rs 250 crore, will have 
maturity period options of six, seven and eight years. 
With a fluid situation in the market, GEB is still indecisive about the 
coupon rates to be offered on bonds to IPPs. A similar offer for the third 
independent power project Essar power, is believed to be in the process. 
GEB, which has been facing severe financial crunch for the past few years, 
will now be worried only about current power purchase bills raised by IPPs. 
Thanks to subsidy payment arrangement in cash on monthly basis facilitated by 
Gujarat Electricity Regulatory Commission, GEB now has some liquidity to pay 
current bills of IPPs and so IPPs are worried only about the past dues, said 
sources. 
Past accumulated outstanding of the independent power projects was a major 
headache for GEB. Infact, two of the three IPPs, GPEC and Essar power had 
brought in pressure on the state government to settle down the past dues. 
Outstanding had become such a serious issue, that at one point of time, Essar 
power, in its wisdom, had also considered dragging the state government to 
the court.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIA: Enron's Dabhol to meet key govt panel on Tuesday.

05/28/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, May 29 (Reuters) - Officials at U.S. energy giant Enron Corp's Indian 
unit are scheduled to meet with a state government panel on Tuesday to 
discuss the fate of a controversial $2.9 billion power project. 
But analysts said the meeting is unlikely to yield any result as Dabhol Power 
Company, owned 65 percent by Houston-based Enron , has already announced that 
it regards the meeting as a courtesy call only.
The panel was formed last month by the Maharashtra state government to 
renegotiate the tariffs charged by the 2,184 MW power project. 
Maharashtra State Electricity Board (MSEB), which agreed in 1995 to buy the 
plant's entire output, says the power is too costly and has defaulted on $48 
million of power payments. 
Dabhol issued a notice this month to cancel its power purchase deal. 
The Maharashtra government has asked the panel to renegotiate the project 
with Dabhol and bring down the tariff. 
The panel is headed by Madhav Godbole, a former bureaucrat, who earlier 
headed a committee which recommended a series of steps to bring down the 
project tariff. 
Dabhol has said that it does not agree with the committee's recommendations 
and hence does not believe the new panel would find a solution. 
LENDERS MEET 
Indian lenders to Dabhol will meet in Bombay on Wednesday to try and find a 
way to protect their interests in the project, a lender said on Monday. 
The meeting's top priority will be the adoption of a common strategy to 
convince foreign lenders not to invoke guarantees issued by local financial 
institutions and banks. 
The project is being built at a total cost of $2.9 billion, of which $2 
billion has been funded through loans. Of this amount, the local lenders have 
contributed $1.4 billion and foreign lenders have provided the rest. 
Foreign lenders are protected by guarantees issued by domestic banks and 
financial institutions. They have called a meeting on June 5 and 6 in 
Singapore to discuss invoking guarantees on their loans in the project. 
At stake is not just the investment in the project, but also India's efforts 
to reform the power sector. Indian lenders would also take a hit on their 
books if their foreign counterparts insist on payments.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


QATAR: Qatar says Dolphin deal not set back by Enron exit.

05/28/2001
Reuters English News Service
(C) Reuters Limited 2001.

DOHA, May 28 (Reuters) - Qatari Oil Minister Abdullah bin Hamad al-Attiyah 
said momentum had not slowed on a $3.5 billion project to route Qatari gas to 
the United Arab Emirates after Enron Corp bowed out of Dolphin Energy Ltd 
(DEL). 
"Actually it is the opposite, for there are seven international firms each 
larger than Enron that are competing for its stake," Attiyah was quoted by 
the official Qatari news agency QNA as saying late on Sunday.
Enron last week sold its 24.5 percent stake in DEL to the UAE Offsets Group 
(UOG) for an undisclosed amount, raising the UAE firm's stake to 75.5 
percent. 
DEL has said several companies, including its other partner in the project, 
France's TotalFinaElf , were interested in acquiring Enron's stake. 
In March, Qatar and DEL signed a "commmercial term sheet agreement" which 
outlined the conditions of the upstream agreement for the long-awaited 
project. 
The two sides aim to sign a production sharing agreement before the end of 
the third quarter 2001.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


India: Dabhol project: Politics of power

05/28/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

IT ALWAYS looked as if the Maharashtra Government had a definite plan while 
renegotiating with Dabhol Power Company (read Enron). The plan perhaps was to 
get some cosmetic changes in tariff and give DPC large benefits such as sales 
tax exemption for naphtha; reduction in interest rates of loans; and third 
party sales in the hope of getting the Centre to make NTPC and other Central 
utilities buy the costly power. This would look as if the contract has been 
renegotiated to ease the burden on Maharashtra when in fact the burden would 
have been distributed among several States and the Centre. The ultimate 
beneficiary would be Enron which would continue to keep a contract executed 
so blatantly against public interest. The real objective of the Maharashtra 
Government and perhaps the Centre is to give the controversy a decent burial. 
The party was spoilt by a statement by the Nationalist Congress Party 
President, Mr Sharad Pawar, criticising the re- negotiating Committee 
Chairman, Mr Madhav Godbole. The latter resigned, but was convinced to 
retract it. But it cannot be forgotten that it was Mr Pawar as Chief Minister 
of Maharashtra, who had bypassed a lot of objections to give the project to 
Enron.
Now it has become convenient for the Maharashtra Government to say that the 
State is suffering because of the decisions of the BJP-Shiv Sena Government. 
While the role of the BJP-Shiv Sena Government in reopening and permitting 
Phase II and integration of the LNG terminal, by which means Enron can 
recover the capital costs many times over, is utterly deplorable, it can not 
be lost sight of that it was Mr Pawar's government that brought in Enron. 
As Mr Praful Patel rightly said in STAR News' Newshour, the project had the 
blessings also of the then Prime Minister, Mr P. V. Narasimha Rao, and his 
Finance Minister, Dr Manmohan Singh. All of them, pushing for reforms, wanted 
a project in double-quick time and they ignored the several layers of 
approval process. 
The real story is described in a civil suit filed in 1995 by the then 
BJP-Shiv Sena Government in the Bombay High Court. It is another matter that 
this civil suit was mysteriously withdrawn after the Enron head, Ms Rebecca 
Mark, met the powers that be in Maharashtra, including the Shiv Sena chief. 
The suit - drafted by such eminent lawyers as, Prashant Bhushan, Nitin 
Pradhan, C. J. Sawant, the then Advocate General, and F. S. Nariman - tells 
the interesting story of how the Pawar government went out of its way to 
favour Enron by giving approvals even after the elections were announced and 
conducted in the State - a gross violation of the election code. To this day, 
neither the Congress nor the BJP-Shiv Sena nor the NCP governments has had 
the courage to speak the truth -perhaps because all of them were 
beneficiaries. Here are a few passages from the suit to judge the actions of 
the Pawar government: A After the calling of elections for the Maharashtra 
State Assembly, after expiry of its full term, the following documents came 
to be executed namely (i) Amendment to PPA dated 2/2/1995, (ii) Consent 
Agreement dated 23/24.2.1995, and (iii) Fuel Management Agreement dated 
25.2.1995. As mentioned above, all the aforesaid documents were in aid of and 
supportive of the PPA dated 8.12.1993 (later amended as mentioned above). 
Elections were called for by a press note dated 8.12.94 and a notification 
date 10.1.95 and were held from 9-12 February, 1995, but announcement of 
results was deferred in order to complete election process in other States 
which were to take place. It was this deferment of results which was taken 
advantage of and the letters/agreements were executed and/or exchanged during 
this period. 
A By reason of Clause 2 of PPA, the status of the PPA was that of an 
agreement not enforceable by law until all conditions precedents had been 
fully satisfied and/or bona fide waived as provided in the PPA itself. 
However, by a letter dated 25.2.1995 these conditions precedents were waived. 
The so-called waiver was not bona fide but was deceptive and fraudulent. 
* The unholy haste with which the purported financial closure was sought to 
be achieved was clearly in order to reap the benefit of the huge sum of $20 
million admittedly already spent by the principal shareholder of the First 
Defendant (Enron) described by them euphemistically as 'educational 
expenses'; (the testimony of Ms Linda Powers specifically states that: 
"Moreover, our company spent an enormous amount of its own money 
approximately $20 million on this education and project development process 
alone not including any project costs... Why do we, and other developers 
include such things in our project? To win local support and support of the 
authorities, and contribute to the general improvement of conditions, and 
contribute to the general improvement of conditions in the area". In the 
purported refutation also enclosed in the letter dated 18.8.1995 of the First 
Defendant, it is stated that $20 million included "engineering, financing, 
legal, travel and administrative costs actually totalling a sum in excess of 
$20 million as of 29.3.1995.") * 20.6.1992 - (within five days of arrival in 
India and within three days of arrival in Bombay) The Enron team arrived in 
India on June 15 and spent two days visiting various sites in addition to 
meeting people in Delhi and Bombay. A memorandum of understanding was signed 
between the Second Defendant (represented by Mr Ajit M. Nimbalkar), then 
Chairman of the Second Defendant, Ms Rebecca Mark of Enron, and Mr Douglas 
Mcfadden of General Electric Corporation. 
The term sheet annexed to the MoU opens with the following: "Electrical Power 
Purchase Contract" - Contract for 20 years term between Power Venture and 
MSEB to be structured to achieve an all in price of US$ 0.073/kWh, comprised 
a fixed monthly capacity payment calculating at the Indian rate of inflation 
each year and a per-kWh energy payment equal to the per-kWh operating cost 
(as defined below). 
(ii) Thus, the purported decision to set up a huge power generation project 
in the private sector with a foreclosed obligation on a statutory corporation 
to buy power from the private sector at a predetermined unprecedentedly high 
rate was taken in a great hurry without there being any public debate on the 
said issue apart from there being any detailed consideration of the matter. 
A Before the PPA was executed in December 1993, the following events 
occurred: 
(a) The World Bank expressed its opposition to the project and advised that 
it was not viable, not in the interest of Maharashtra in particular and the 
country, the public and the consumers, in general. This objection was brushed 
aside by Enron which said, in a letter, that "the World Bank opinion can be 
changed", that "we (Enron) will engage a PR firm and hopefully manage the 
media from here on" (June 1993). 
A The Central Electricity Authority had drawn attention to several aspects of 
the MoU including: 
(i) The all-in price is a departure from the existing norms and parameters 
notified by the Government under Section 43 A(2) of the Electricity (Supply) 
Act, 1948. 
(ii) Denominating the price in US dollars is also a departure from the 
existing norms. 
(iii) We take it that the price of 0.073 kWh will be applicable from 1996 
when power would be available. 
* The PPA violates the tariff guidelines in force issued on December 8, 1993. 
The tariff guidelines permitted only a return of 16 per cent on equity but 
the PPA allows a return much in excess of 25 per cent. 
Second, the tariff notification puts a cap on Operation and Maintenance (O&M) 
charges at 2.5 per cent of the capital cost. In the case of the PPA the O&M 
changes were over Rs 90 crore annually which is over three per cent of the 
capital cost. The PPA was not even structured in accordance with the said 
notification. 
The tariff notification allows payments only for the actual fuel consumed and 
not for deemed consumption. In the present case the heat rate guaranteed by 
the Dabhol Power Company to the MSEB is 7605 BTU per unit while the heat rate 
guaranteed by GEC to DPC is considerably lower. Under the PPA about 25 per 
cent of this difference and deemed consumption and actual consumption is 
allowed to be retained by DPC, contrary to the tariff notification. 
All these are but a few paragraphs of the 600-page civil suit. Perhaps had 
the then Maharashtra Government persisted with the arbitration the 
compensation would have been far less than what could be anticipated now. 
However, for reasons best known to the BJP-Shiv Sena combine, the suit was 
withdrawn and its government appointed a review committee which integrated 
the LNG plant with the power plant and gave the green signal for the second 
phase. The net result was a higher tariff than what was negotiated by the 
Pawar Government. 
The project has come a full circle now. Now the effort is on to distribute 
the burden across the country. This is evident by the Maharashtra Government 
turning to the Centre and its representative A. V. Gokak, and stating that 
the Centre is evaluating various options including of the Power Trading 
Corporation to buy the power from DPC and distribute it to all the States. 
But at what price? Not lower than negotiated under the PPA of course with 
cosmetic concessions by Enron and a lot of sacrifices by the State and the 
Centre. But is this what we want? 
- S. Padmanabhan

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


French power plays trample Mediterranean sensitivities

05/28/2001
South China Morning Post
8
(c) Copyright 2001 South China Morning Post Publishers. All Rights Reserved.

An electric storm is raging over the western Mediterranean. French power 
plays have become a charged issue in Italy and Spain. French state monopoly 
power company Electricite de France (EdF) caused a furore in Rome last week 
by grabbing 20.1 per cent of Italian industrial group Montedison. 
Montedison has majority holdings in energy producers Edison and Sondel. 
Together, these two modern and thrusting companies, soon to be merged, have 
6,000 megawatts of generation capacity - 12 per cent of Italy's active 
production capacity. Projects coming on stream will take that share to about 
22 per cent within three years.
Italy's shocked response was to rush through a decree limiting voting rights 
of foreign companies buying into its generation industry to 2 per cent - 
unless Italian companies are allowed reciprocal access to the buyer's 
domestic energy markets. 
It is a response learned from the Spanish Government, which has suspended the 
voting rights of the foreign companies that recently acquired its 
fourth-largest power company, Hidrocantabrico. One of those is Electricidade 
de Portugal (EdP), 30 per cent owned by the Portuguese Government. The other 
is Germany's third-largest producer, Energie Baden Wuerttemberg (EnBW), 34.5 
per cent owned by the French monopoly EdF. 
Spain is acting under a new "EdF Law" intended to keep state-owned foreign 
groups from controlling its utilities. The thinking behind it is similar to 
Madrid's restrictions on shareholdings by foreign telecommuications companies 
in which governments still hold a "golden share". The golden-share law, used 
to scupper a deal between Spanish phone company Telefonica and Holland's KPN, 
has been challenged by the European Commission. 
This is not what the European Union's single market is supposed to be about. 
The idea is to foster free movement of capital and investment between member 
nations, not to give governments the excuse for nationalistic grandstanding 
and protectionism. 
Nor is EdF is the kind of investor the single market was designed to 
encourage. France is liberalising its electricity market more slowly than 
many other EU countries, permitting only the minimum outside competition 
allowed under EU rules. It also bans companies from taking a stake in EdF. In 
a sense, EdF is doing what state monopolies facing eventual privatisation 
always do - moving into markets where liberalisation is further advanced and 
barriers to entry are lower. 
It has a war chest overflowing from a high domestic-price policy and can snap 
up newly privatised shares of other former monopolies abroad or buy stakes in 
struggling newcomers. 
That is what it has been doing in Italy, where the former state monopoly Enel 
is being forced to sell off capacity. Much would have gone to Montedison, but 
it may go elsewhere if EdF is seen to be in control. 
Eventually, EU pressure to liberalise will mean EdF will have to face serious 
competition on its domestic market. Some market opening has already been 
forced on it, despite the best efforts of the French Government. 
The company says it has already "lost 48 clients, representing roughly 3 per 
cent of sales, to the benefit of the German companies RWE and E.On, America's 
Enron, Spain's Endesa, the Franco-Belgian company Electrabel and [upstart 
French rival] Suez," reports the Paris daily Le Monde . It will also have to 
put a further 6,000 megawatts, or 6 per cent of production, up for sale later 
this year as a condition for EU approval of the EnBW purchase. 
But that is not enough to satisfy its neighbours, who want EdF tamed, at 
least for as long as it remains under state protection. The EU's commission 
would dearly like to be able to agree. 
Commission President Romano Prodi, a former Italian prime minister, 
uncomfortably admits Brussels needs to study what can be done about companies 
which can buy but cannot be bought. Commissioner for Energy Loyola de 
Palacio, who happens to be Spanish, has argued fiercely there is no point in 
privatising state companies only to have them re-nationalised by someone 
else's government. 
Nonetheless, the commission has taken Spain to court over the golden-shares 
law and is investigating the decision against EnBW and EdP. Mr Prodi has also 
signalled he will also "look very closely" at the Italian law. 
Fearing the battle could reverse years of painful effort to liberalise the 
utilities market, the commission argues it is better to pressure Paris to 
open the French market than to let Rome and Madrid close theirs. That is 
correct in principle. Market liberalisation is a fundamental pillar of 
European integration and national barriers cannot simply be re-erected at the 
first sign of cross-border investment. 
In practice, however, the Italian and Spanish reactions may be rather more 
effective at concentrating French minds than lectures from Brussels. 
If EdF finds its foreign forays thwarted, it may decide for itself that some 
domestic liberalisation is necessary. 
After all, a little competition at home may be a relatively small price to 
pay for the success of an international expansion programme intended to 
ensure half the company's sales are generated outside France by 2005. That is 
double the proportion achieved in 2000.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


A
Feeling the heat over energy, Bush to visit California
BENNETT ROTH, Houston Chronicle Washington Bureau
Staff

05/28/2001
Houston Chronicle
3 STAR
1
(Copyright 2001)

WASHINGTON - After keeping his distance from California for months, President 
Bush finally will travel to the Golden State today to confront an energy 
crisis that threatens to darken the futures of politicians on both coasts. 
The trip comes at a time when the White House and California's Democratic 
Gov. Gray Davis have been engaged in a cross-country war of words, each 
blaming the other for the state's rolling blackouts and escalating energy 
prices.
Prodded by nervous state Republicans who fear voters are coming to see the 
White House as indifferent to the crisis, Bush will focus on energy problems 
during the two-day swing. 
The trip tentatively includes a tour of Camp Pendleton Marine Corps Base, a 
speech to the Los Angeles World Affairs Council and a trip to Sequoia 
National Park. 
Perhaps most significant, Bush has agreed to meet with Davis - at the 
governor's request - to discuss their differences over how to resolve the 
energy crunch. 
The stakes are high for both. Although Bush and Davis are of different 
parties, political experts say voters in the nation's most populous state 
could hold both of them responsible for a summer of inconvenience and high 
utility bills. 
"Voters don't look at the energy crisis in an ideological mode," said Allan 
Hoffenblum, a Los Angeles-based Republican consultant. "It is, `Why can't I 
turn on my lights?' and, `Why are my electric rates so high?' " 
A recent poll by the Public Policy Institute of California found that voters 
statewide gave both Bush and Davis low marks in the way they have dealt with 
the energy crisis. The survey found 56 percent of Californians disapproved of 
Bush's handling of the matter. Davis fared even worse, with 62 percent of 
respondents saying they are unhappy with his performance. 
For many Republicans, Bush's visit is not a moment too soon. 
Having lost all but one statewide elected position in their increasingly 
Democratic state, they have been eager to get a high- profile Republican 
there to rally the troops. 
Furthermore, some political observers say Davis' latest strategy - linking 
Bush to the Texas-based energy companies the governor charges are responsible 
for high prices - is beginning to resonate with voters. 
"He is pointing his fingers at (energy-price) gougers in Texas and gougers in 
Houston," said Sherry Bebitch Jeffe, a senior scholar at the University of 
Southern California. 
She was referring to recent attacks by Davis and other Democrats against 
Houston-based Reliant Energy and Enron Corp., which have supplied energy to 
California. 
Until recently, Bush has been reluctant to return to a state where voters 
rejected him by a 12-percentage-point margin last November. The big loss came 
despite the fact that Bush campaigned hard there and pumped millions of 
dollars into a statewide effort. 
Since assuming office, Bush has traveled to more than half of the states 
before scheduling a trip to California. 
And he has waited longer than any president in the last three decades to make 
his first visit to the Golden State. 
Bill Clinton, who cruised to two California victories, headed to the West 
Coast after his first month in office and returned frequently. 
Critics say Bush has been trying to avoid the energy mess, which is the No. 1 
topic from San Diego to San Francisco. 
Initially, White House advisers dismissed the state's energy crunch as a 
self-inflicted crisis caused by a flawed deregulation plan. 
When administration officials suggested that state officials solve their own 
problems, Democrats responded that the message from Washington was "Bush to 
California: Drop dead." 
But more recently, the administration has sought to be more attentive to the 
energy shortage after California Republicans warned of a possible voter 
backlash in the 2002 midterm elections. 
Bush ordered federal facilities, including the sprawling military bases in 
the state, to reduce energy consumption by 10 percent. 
And he has directed the federal government to expedite permits for new power 
plants that the state desperately needs. 
But the president's long-term energy strategy unveiled this month did not 
address the state's short-term problems. 
And the administration has adamantly rejected Davis' pleas to have the 
federal government cap the price of wholesale electricity in the state. 
White House officials say price caps distort the market and would not solve 
the major problem facing California, which they argue is not generating 
enough electricity to meet demand. 
Furthermore, they contend, price caps would even harm the state in the long 
run. 
Nevertheless, Davis spokesman Steve Maviglio said the governor will use his 
meeting with Bush to once again request that the president approve a ceiling 
on electricity costs. 
"The governor wants to ensure there is some short-term price relief by the 
administration," said Maviglio. "I think the longer the president stays in 
California, he will hear at every meeting and at every turn about energy and 
price gougers. So, hopefully, he will be compelled to do something about it 
instead of being AWOL about it." 
White House spokesman Ari Fleischer disputed California Democrats' contention 
that the president has ignored the crisis. 
"The president's focus is going to be on solving problems," Fleischer said. 
"He is not interested in finger-pointing. And that's what the president has 
done on energy policy in this country, whether people agree or disagree with 
the specifics of his energy plan." 
However, even the president's long-term energy strategy, which emphasizes 
more oil drilling and nuclear power plants, may be in peril now that 
Democrats have regained control of the Senate following Vermont Sen. James 
Jeffords' defection last week from the GOP. 
Democrats already have said they are unlikely to approve some of Bush's more 
controversial proposals, such as drilling in the environmentally sensitive 
Arctic National Wildlife Refuge in Alaska. The scuttling of such oil-drilling 
plans is likely to be well- received in environmentally conscious California, 
said political expert Jeffe. 
She added that Jeffords' move also will benefit California because the 
state's two Democratic senators, Dianne Feinstein and Barbara Boxer, are 
likely to gain clout in the Senate. The senators have complained that the 
Bush administration has not consulted them on energy policy. 
Recently, the state's Democratic Attorney General Bill Lockyer sharpened his 
attacks on Enron's top executive, Ken Lay. Lockyer said his office would like 
to file civil and criminal charges against the energy supplier. 
According to a Wall Street Journal article Tuesday, Lockyer said, "I would 
love to personally escort Lay to an 8-by-10 cell that he would share with a 
tattooed dude who says, `Hi, my name is Spike, honey.' " 
Enron spokeswoman Karen Denne responded that Lockyer's comments do "not even 
dignify a response." 
But Denne said the scheduled meeting between Bush and Davis "is certainly a 
step in the right direction."

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


California; Metro Desk
INSIDE POLITICS
Los Angeles Volts, Quotes and Votes From the Elect Among Us
PATT MORRISON
TIMES STAFF WRITER

05/28/2001
Los Angeles Times
Home Edition
B-2
Copyright 2001 / The Times Mirror Company

The Other Spike in Energy Rates Vivid political rhetoric is a moribund art, 
and California Atty. Gen. Bill Lockyer's effort to revive it with a humdinger 
of a quote has brought shocked, shocked responses. 
Lockyer, who is investigating possible manipulation of wholesale electricity 
prices by energy firms trading in California, told the Wall Street Journal, 
"I would love to personally escort [Enron Corp. chairman Kenneth] Lay to an 8 
[-by-] 10 cell that he could share with a tattooed dude who says, 'Hi, my 
name is Spike, honey.' "
A GOP group calling itself The Loyal Opposition noted primly that Lockyer's 
suggested act would expose the state to "civil and possibly criminal 
liability." 
And Gary Ackerman, executive director of a generators' and marketers' trade 
group called the Western Power Trading Forum, said state Controller Kathleen 
Connell rang him up to apologize for Lockyer. 
She called "to express her regrets over comments made by an elected official, 
a colleague of hers," Ackerman said. "She wanted to distance herself from 
those kinds of comments." (Top Democrats in the Capitol will tell you that 
the contrary-minded Connell has already been distancing herself from them for 
a long time.) 
Lockyer was a known phrasemaker back in his Legislature days. When Doris 
Allen--the Orange County Republican who was briefly the state's first woman 
Assembly speaker--was driven out by fellow Republicans for cutting a deal 
with Democrats to get the job, she characterized her enemies as 
"power-mongering men with small penises." That prompted Lockyer to declare, 
apropos of male legislators, "I guess that makes us the Congress of Vienna 
Sausages." 
Lockyer's office says with a sigh that "those focusing on the colorful 
language are missing the point--that we're not afraid of energy companies and 
we are serious about going after them for any wrongdoing." 
Putting Teeth in That Comb 
It's been the law for years, but who knows from his-and-her prices? In 1995, 
it became illegal for merchants to use gender alone to charge women more than 
men for the same services, from haircuts and dry cleaning to car repairs. 
Yet when Hannah-Beth Jackson, the Assembly Democrat representing parts of 
Ventura and Santa Barbara counties, went to her Santa Barbara dry cleaners, 
she found that she was being charged $1.25 each for her husband's shirts, and 
$3 each for her blouses of comparable fabric and style. The cleaner said the 
blouses were too petite for the presses and needed hand ironing. 
She was steamed, and when you get a legislator steamed, you feel the heat. 
Jackson has pushed through a bill putting bite in the 1995 law, and requiring 
that prices for such services be posted. 
She did, however, pass on more aggressive requirements, like forcing barbers 
to charge less to tend the sparse, see-through hair of older men than for the 
jungle-dense coiffures of younger men. Consider her husband's thinning 
thatch, she said: "That's precision work. They've got to make every hair 
count." 
Political Hustle Meets Real Muscle 
Give credit where credit is due: Some of his party's leaders rail against 
popular culture, but Dana Rohrabacher, the Republican congressman from 
Huntington Beach, has been a fearless practitioner. He hung out with Van 
Halen singer Sammy Hagar, and took up surfing (though he passed on a 
challenge by surfer Sally Alexander, his 82-year-old Democratic opponent, to 
a "surf-off" in 1996). He even got his chin liposuctioned a while back. 
Now he's bucking anti-Hollywood rhetoric by enlisting one star the GOP dotes 
on, so much so that his name was bruited about as governor material: Arnold 
Schwarzenegger. 
The Austrian-born actor is turning star power into $tar power at a 
$1,000-a-plate fund-raiser for Rohrabacher June 9 in Newport Beach. 
Rohrabacher met the actor through an ex-bodybuilder turned chiropractor who 
treated Rohrabacher's bad back, back when it was. 
For the congressman's money, Schwarzenegger is "not only a draw with the 
voters but with the financial supporters." And why would a man in a district 
as safe as his need to raise money? "We have redistricting coming up. It's 
always prudent to have some money in your bank account." 
Here Lies . . . 
There's no marker on the runway at LAX to commemorate President Bill 
Clinton's notorious $200 haircut, but Los Angeles' Rancho Park Golf Course 
now has a bronze plaque set in a boulder to memorialize Clinton's golf game 
there last August. 
The marker reads "President of the United States William Jefferson Clinton 
played golf at Rancho Park Golf Course August 12, 2000," and beneath it the 
names of three officials, one of whom was in the First Foursome--L.A. Mayor 
Richard Riordan. 
Clinton didn't turn in a scorecard, but his game was said to be "around 85." 
Former Clinton White House aide Ben Austin, now deputy mayor to Riordan, says 
that in spite of reports to the contrary, "presidents don't cheat at golf. 
Presidents' opponents cheat for them," a statement bolstered by former 
President George Bush, who marveled after he left the White House, "It's 
amazing how many people beat you at golf now that you're no longer 
president." 
The Thrilla on Capitol Hill-a 
Nancy Pelosi, the San Francisco Democrat, has spent some recent time of her 
14 years in Congress angling to get California back into the House 
leadership, with herself as majority whip, the person who keeps party members 
in line and counts noses before big votes. 
Alas for Pelosi, the GOP kept its majority in the November elections, and 
there was no room at the top. Even if there had been, fellow Demo Steny H. 
Hoyer of Maryland was already jockeying for the same job. 
But wait! The consolation prize of minority whip may be opening up. Michigan 
Rep. David E. Bonior might soon quit as whip to campaign if he decides to run 
for governor in 2002. 
Get cracking! 
Quick Hits 
The Legislature, which voted unanimously in 1996 to adopt energy 
deregulation, voted unanimously again last week--this time to adopt an 
official state tartan, that of the family of pioneering naturalist John Muir. 
. . . The chads will stay in Kern County for now, since the county found that 
buying new optical scanners would cost more than its entire annual elections 
budget. . . . For brevity, there's no beating the retirement memo of Ron 
Reina, longtime aide to San Diego County Sheriff Bill Kolender: "And to all, 
'Good Night.' " 
Word Perfect 
"He never really apologized. . . . Holding no one accountable only sanctions 
these kind of dirty tricks." 
Los Angeles County supervisor Gloria Molina, contesting just what constitutes 
an apology. After learning that his campaign used an imitation of Molina's 
voice and name to dis his mayoral primary opponent Antonio Villaraigosa, Rep. 
Xavier Becerra said in a long press release that he had telephoned both 
Villaraigosa and Molina and "offered an apology on behalf of my campaign." No 
way, said Molina; what she heard from Becerra was a "long-winded" narrative 
devoid of mea culpas. 
* 
Columnist Patt Morrison's e-mail address is patt.morrison@latimes.com. This 
week's contributors include Nick Anderson, Steve Chawkins, Jean O. Pasco, 
Nicholas Riccardi and Nancy Vogel.


PHOTO: Former Recreation and Parks Commissioner Steve Soboroff and department 
General Manager Ellen Oppenheim unveil plaque marking President Clinton's 
game last summer at Rancho Park Golf Course.; ; PHOTOGRAPHER: RON CAMPISE / 
For The Times 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


A
Politics
2003 mayoral race casting a shadow
JOHN WILLIAMS
Staff

05/28/2001
Houston Chronicle
3 STAR
29
(Copyright 2001)

THE 2001 MAYORAL race has barely started. No television commercials have 
aired; no debates have blared. Incumbent Lee Brown has yet to formally 
announce. 
But already, some are laying groundwork for 2003.
Three prominent businessmen - Ned Holmes, Ken Lay and Marc J. Shapiro - are 
talking with politicos and others about running for mayor in two years. There 
are others, including developer Ed Wulfe, Brown's confidant. 
And while these powerhouse names provide colorful speculation about the 
political scene two years hence, they also cast long shadows on this year's 
landscape because each now prefers Brown to serve a final term. 
The concern atop the glittering towers of commerce is that Houston needs 
another businessman at the helm, someone with the can-do abilities of the 
past mayor, Bob Lanier. 
But not yet. 
The increasingly image-conscious business leadership does not want Houston 
portrayed nationally as the city that booted its first black mayor. It's 
important for the power elite, still mostly white, to be seen as coexisting 
with minorities. 
And there is political reality. It's hard to win citywide without support 
from a black community that tends to vote as a bloc and was a significant 
factor in electing four of the last five mayors. 
Supporting the term-limited Brown for his final two years could pay dividends 
later. 
Taking stock of their futures 
Working behind the scenes, Holmes, Lay and Shapiro are taking stock of their 
political futures. It is unlikely that they would would run against each 
other. But each wants to know where he stands and who might make the best 
candidate. 
Holmes already has taken a step. Though he chaired fund-raising for Rob 
Mosbacher, who lost to Brown in the 1997 runoff that put Brown in office, 
Holmes now raises money for the mayor. 
That allows Holmes to freeze money that might go to other candidates while 
earning political points from Brown's black supporters. 
Lay, the chairman of Enron Corp, is testing the water with various community 
leaders. While many view Lay, with his strong ties to the Bush White House, 
as being above local politics, there is a growing trend of business titans 
running for mayor. 
Shapiro is being quieter. As vice chairman of finance, risk management and 
administration for Manhattan Chase Bank, he lives in New York City, though he 
has a house in the enclave city of Hunters Creek inside west Houston. He 
would need to establish formal residency in Houston to run. 
None of the three cared to talk about 2003 ambitions, though Holmes joked, "I 
encourage the other two to run all the time." 
But their specter presents problems for Brown's two major opponents this year 
- City Councilmen Chris Bell and Orlando Sanchez. Besides the incumbent, they 
face a formidable shadow candidacy from one of the three. 
Success will require balance 
A subliminal message to voters, especially those in predominantly white west 
Houston, is to wait for two years. 
If Bell or Sanchez wins, defeating either could prove difficult after one 
term, when problems can still be blamed on the predecessor. 
For Brown, the challenge may be to convince these same voters he's doing his 
job well enough that they can afford to wait before replacing him. 
Everyone involved will be keeping a keen eye on the polls. 
Brown has maintained a strong, though not insurmountable, lead. But in recent 
weeks he's whirled in a vortex of bad news that could drain his lead. 
Should Brown's support drop this summer, it is not unimaginable that a 
business leader might jump in. Remember, Lanier didn't enter the race that 
eventually unseated Kathy Whitmire until August 1991. 
And in two years, it now seems likely that Houston's traditional white 
business establishment will offer up one of its own for mayor. 
In either case, political success will require a delicate balance of power, 
money and subtlety, lest the run appear as heavy-handed manipulation by lords 
of political largesse. 
It assumes that a white male can be the next mayor in a city where minority 
voting often controls at-large elections. And many voters might view such 
posturing as presumptuous.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


National Desk
THE NATION Bush Comes Calling to an Edgy California Politics: President hopes 
to make amends with Davis, voters. Outcome could color future ties.
RICHARD SIMON; DAN MORAIN
TIMES STAFF WRITERS

05/28/2001
Los Angeles Times
Home Edition
A-1
Copyright 2001 / The Times Mirror Company

WASHINGTON -- When President Bush arrives in California today for the first 
time since taking office, he will engage Gov. Gray Davis in a private 
discussion that could become the domestic equivalent of a peace summit. 
Davis plans to press his case for caps on wholesale electricity prices, 
something Bush insists would worsen the state's power crisis. Bush wants to 
show Californians that he cares about their plight, and he plans to highlight 
his administration's efforts to promote conservation.
As tends to be the case with summits, solutions are likely to be elusive, 
progress incremental. 
Bush's California tour begins Tuesday morning at Camp Pendleton, where he 
will tout his efforts to reduce electricity use at military bases. After 
that, he speaks to the Los Angeles World Affairs Council. On Wednesday, he 
visits Sequoia National Park. 
The Bush-Davis meeting, to be held sometime Tuesday in Los Angeles, will 
certainly address the state's electricity turmoil, and it comes amid an 
escalating war between Democrats and Republicans over national energy policy. 
But there's more at stake than price caps. Davis and his administration want 
other things from Washington, from increased federal aid to help fight an 
insect threatening the wine industry to an exemption from a rule that could 
increase gasoline prices in California. 
On a grander scale, the meeting could determine what kind of relationship the 
Republican president and Democratic governor will have from this point on, 
and what kind of support Davis can expect from the White House on other 
important state matters. 
Also in play are the images of both men. 
"Politically," said Democratic strategist Darry Sragow, "both the president 
and the governor have been wounded. Their goal is to get the crisis off their 
back. . . . Substantively, we have a real crisis, and it requires the 
involvement of the state and federal government." 
Davis was elected governor in a 1998 landslide. But he heads into his 2002 
reelection campaign with plummeting poll numbers. A Field Poll released last 
week showed only 42% of registered voters in California approve of the job 
he's doing as governor, while 49% disapprove--a sharp drop from January, when 
60% supported Davis' performance. 
Bush is faring badly in California too. A private poll taken earlier this 
month on behalf of Public Strategies, a consulting firm that represents 
independent power generators, showed that 71% of the state's likely voters 
thought the president should be doing more to solve the energy crisis; only 
23% thought he was doing enough. 
Sragow assumes that advisors to Davis and Bush are debating among themselves 
over whether it serves their interests best to emerge from the talks 
appearing to be allies, or adversaries. "The public dislikes conflict and 
wants the problem of rising prices and threatened blackouts solved," he said. 
However, as Bush and Davis were preparing for the meeting, their aides could 
not even agree on who requested it first. 
Karen Hughes, counselor to the president, said Bush would listen to Davis' 
argument in support of price controls. However, she said the president still 
felt strongly that price caps would discourage investment in new power 
plants. 
Hughes disputed suggestions that the administration has neglected the state, 
which Bush lost to Democrat Al Gore by more than 1 million votes. 
"He came up short in the vote on election day in California, but he will not 
let that deter him from doing what is right for California," she said. "He is 
the president of all of the people of the United States." 
Bush was thought by some political analysts to be reluctant to visit 
California until he had an energy proposal he could point to as a response to 
the state's problems. But White House officials say the president's travel 
agenda during his first four months in office has been designed around 
legislative geography: He spent most of his time on the road visiting states 
where senators might be persuaded to support his tax cut. 
Dan Bartlett, one of Bush's communications advisors, said the White House 
always has regarded California as an important destination for Bush, even if 
he will have visited 29 other states before he arrives here. The state "has 
difficult times ahead of it [and] it's important the president and federal 
government help them through these difficult times," Bartlett said. 
Still, meetings between presidents and governors, particularly ones of 
opposing parties, invariably become studies in one-upmanship. That's 
particularly true when the governor is seen as a future presidential 
candidate. 
When President Clinton came to California, the White House rarely if ever 
deigned to inform Republican Gov. Pete Wilson. On rare occasions when they 
would meet--generally at out-of-the-way airports--White House officials took 
pains to show who was in charge, by changing meeting locations at the last 
minute, for example, or making sure that the president's chair was taller 
than the governor's. 
Wilson's relationship with Clinton was more strained than Davis' is with 
Bush. The combative Wilson repeatedly sued the federal government on issues 
ranging from voter registration requirements to demands for reimbursements 
for costs associated with illegal immigration. 
"It is smart of the Bush White House to hold a meeting with Gov. Davis," said 
Sean Walsh, a former Wilson spokesman. "One need only look at Davis' 
background. If the president didn't come, Davis likely would show up on the 
street with a milk carton with George Bush's face plastered on the side." 
So far, Davis has not sued over the energy crisis, although Democratic 
leaders of the Legislature have gone to court to compel federal regulators to 
make sure interstate electricity rates are "just and reasonable." 
But the governor has been amping up his rhetoric. He has retained consultants 
Chris Lehane and Mark D. Fabiani, veteran operatives from the Clinton 
administration, under a contract that will pay them $30,000 a month. Both are 
known for their attack-oriented tactics. 
On Thursday, Davis called Bush "practical" and "well-intentioned." At the 
same time, he threatened to sue the administration if his meeting with the 
president fails to produce desired results. 
"Give us relief. Find a way to give us relief," Davis implored. And if the 
president continues to refuse to impose price caps? "We're going to court 
then. The law says we're entitled to relief, and it hasn't been coming. We 
have a whole bunch of contingency plans." 
Even if the meeting produces no tangible results, it will be an opportunity 
to "tone down the rhetoric," said Assembly Speaker Bob Hertzberg (D-Sherman 
Oaks). 
"You can't engage in a war with the president," the speaker added, because 
there are too many issues on which the state needs federal aid. 
But Bill Whalen, research fellow at Stanford University's Hoover Institution 
and a former Wilson aide, demurred. "You can't tell me that with the 
Clinton-Gore spin machine now running [Davis'] communications that we're 
going to see a kinder, gentler governor," he said. "The big question for the 
White House is: Will they tailor their agenda to conform to California, or 
conclude that California doesn't fit into the national mainstream as they see 
it?" 
Bush is visiting a state that has become ground zero in a 
Democratic-Republican battle for public opinion over energy. 
With Democrats hoping to use the energy issue to gain control of the House in 
the 2002 elections, House Democratic Leader Richard A. Gephardt of Missouri 
will be in Oakland on Tuesday and Torrance on Wednesday to turn up the heat 
on Republicans. On Friday, Democrats began running radio ads in five GOP 
lawmakers' districts in five states, assailing them and the administration 
for not doing more to bring down energy prices. 
Before the trip was announced, GOP lawmakers from California appealed to Bush 
to visit the state and counter Democratic criticism of the administration. 
The exchanges reached a new level of intensity when California's Democratic 
attorney general, Bill Lockyer, suggested in an interview published by the 
Wall Street Journal on Tuesday that Ken Lay, chairman of the Texas-based 
energy company Enron Corp. and a close friend of Bush, should be locked in a 
prison cell with a tattooed inmate named "Spike." 
One political analyst said that perhaps it was time for Sacramento and 
Washington to exchange ambassadors. 
Some observers see little downside to Davis' attacks--and the possibility of 
political gains for a governor whose popularity has declined significantly. 
"Which do you think Gray Davis cares more about--his dealings with Washington 
or his reelection chances?" Whalen asked. 
Because of its Democratic tilt, California was never going to be on the 
administration's "A list" for federal goodies, said one Washington lobbyist 
who works on California issues. 
Others, however, insist that the White House will not take actions designed 
only to punish California, no matter how estranged Bush and Davis become. 
"Bush is going to do what's right for California regardless of the governor's 
remarks," asserted Rep. George P. Radanovich (R-Mariposa). 
"Ultimately, the safety net for the state is the Republican delegation in 
Congress," said Marshall Wittmann, a senior fellow at the conservative Hudson 
Institute. "They have the vested interest in ensuring that California gets 
its fair share." 
Even if Bush and Davis emerge from their summit shaking hands, the public 
shouldn't assume they have become partners in peace. 
In fact, Davis may have more to gain by aligning himself with another 
Washington figure whose influence expanded dramatically last week when Sen. 
James M. Jeffords of Vermont quit the Republican Party, tipping control of 
the Senate to the Democrats. 
"Davis does have a new friend in Washington," Whalen said, "but it's Tom 
Daschle," the South Dakota Democrat who is about to become Senate majority 
leader. 
* 
Simon reported from Washington and Morain from Sacramento. Times staff writer 
James Gerstenzang in Washington contributed to this story.

PHOTO: President Bush is visiting a state that has become ground zero in a 
Democratic-Republican battle for public opinion over energy.; ; PHOTOGRAPHER: 
Reuters 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


California; Opinion Desk
Commentary It Takes 2 to Tangle Our Energy Future
PETER NAVARRO
Peter Navarro is a business professor at UC Irvine's Graduate School of 
Management. E-mail: pnavarro@uci.edu

05/28/2001
Los Angeles Times
Home Edition
B-13
Copyright 2001 / The Times Mirror Company

If political heat were light, California wouldn't have any more rolling 
blackouts. Unfortunately, Gov. Gray Davis and President Bush are fighting to 
a draw, leaving California and the broader national economy caught in the 
bickering middle. 
As Davis correctly argues, Bush could end California's crisis tomorrow by 
imposing firm and reasonable price controls on the Western region's wholesale 
electricity market. Bush says that such price controls would discourage new 
power plant construction and make our problems worse.
Let's take Bush's argument first: A small handful of large energy companies 
are manipulating the market from Seattle to San Diego--and laughing all the 
way to the bank. These energy conglomerates--Dynergy, Reliant, Enron, 
Williams and others--produce power for as little as a nickel or a dime per 
kilowatt hour and sell it into the Western states for prices spiking as high 
as a dollar during rolling blackouts. 
The result is not only the transfer of tens of billions of dollars of wealth 
from consumers and businesses to the energy companies, it is also a massive 
energy price shock that now threatens to pull the entire West Coast, and 
eventually the rest of the country, into a recession. 
Bush could easily short-circuit this recessionary shock by imposing a firm, 
regionwide price cap of 15 to 20 cents. This would end the profiteering and 
still provide ample incentives for generators to supply power and build 
additional power plants. Moreover, a regionwide price cap, as opposed to a 
California-specific one, would prevent generators from playing one state 
against another. 
This does not mean, however, that Davis is doing any better for California 
than Bush. Nothing illustrates Davis' incompetence better than his botching 
of the state's transmission grid purchase. 
This option had a dual purpose: provide cash to the near-bankrupt utilities 
to pay off creditors and get the system working again, and wrestle back 
jurisdiction over the wholesale electricity market from intransigent federal 
regulators. 
Davis failed miserably in closing that deal, with disastrous consequences: 
California remains dependent on the feds; Pacific Gas & Electric is in a 
bankruptcy court, and Southern California Edison continues to hover on the 
brink of receivership. 
Worst of all, the aborted transmission grid deal has left the utilities 
without adequate funds to pay off the state's small generators, and many are 
no longer willing or able to produce. This is perhaps the most important but 
least understood aspect of the current crisis. About 700 small generators 
provide roughly a fourth of the state's power. Davis' bungling has led to the 
loss of more than 3,000 megawatts of that supply. 
That means that when the lights go out and wholesale prices skyrocket, it is 
not necessarily because of a physical shortage of electricity but because of 
an artificially induced financial shortage. 
In hindsight, it is clear that Davis' worst mistake was not seizing the 
plants of the merchant generators who were ripping off California months ago. 
These generators bought the plants from the state's utilities after 
deregulation for a mere $3.2 billion. Since then, they have used the plants 
to "game" the market by withholding supply. Partly through such scurrilous 
methods, the generators have stuck Californians with an electricity bill that 
may eventually reach $100 billion. 
Adding insult to injury, Davis is now using taxpayer money on several 
high-priced "spin doctors" and the Democratic Party is using millions on a 
media campaign to redirect the public's anger toward the Bush administration 
and the Republicans. 
Let's give the public credit: It understands that it takes two politicians 
and two political parties to do the blackout tango.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.