Please see the following articles:

Sac Bee, Tues, 6/5:  Ose electricity bill buffeted by political storms

Sac Bee, Tues, 6/5: Bush vs. price caps: Economists correct a faulty power 
lecture (Editorial)

SD Union, Tues, 6/5: A game of victims and villains

SD Union, Tues, 6/5: Idled plants coming back on line

SD Union, Mon, 6/4: Planned plant shutdowns easing, boosting state's power 
supply

SF Chron, Tues, 6/5: Chevron threatens to cut gas supply in state 

SF Chron, Tues, 6/5: PG&E creditors approve bonuses 
Utility must file reorganization plan by end of year, or CEO only gets 
$600,000 extra

SF Chron, Tues, 6/5: 56% favor limits on electricity prices, poll finds

SF Chron, Tues, 6/5: Developments in California's energy crisis

SF Chron, Tues, 6/5: PG&E sues to challenge reimbursement to state

Mercury News, Tues, 6/5: Critics say Calpine plan too generous  

Mercury News, Mon, 6/4:  PBS documentary shines light on energy crisis  
(Enron mentioned)

Mercury News, Tues, 6/5: California's big turnoff  (Editorial)

Mercury News, Tues, 6/5: FERC shirk  (Editorial)

OC Register, Tues, 6/5: Edison plugging shareholders into Capitol

OC Register, Tues, 6/5:  SDG&E to seek rate hike to cover $915 million tab

OC Regiser, Tues, 6/5:  Energy notebook
AES power plant repairs might not meet target date

Individual.com (Businesswire), Tues, 6/5:  GWF Signs Long-Term Contract to 
Provide 430 MW
of Power to California 

WSJ, Tues, 6/5:  Electricity prices (Chart)

NY Times, Tues, 6/5:  Surplus of Finger-Pointing In California Energy Crisis

LA Times, Tues, 6/5:  California PSEG Signs 10-Year Contract to Supply 
Electricity to State

LA Times, Tues, 6/5:  Panel OKs Subpoenas for Energy Companies Electricity : 
Special state Senate committee will demand pricing information in inquiry 
into whether
California has been gouged

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 Ose electricity bill buffeted by political storms 
By David Whitney
Bee Washington Bureau
(Published June 5, 2001) 
WASHINGTON -- Rep. Doug Ose's legislation to bring order to skyrocketing 
wholesale electricity prices is helping House Republicans rescue an emergency 
electricity bill, but it hasn't quelled Democrats' increasingly strident call 
for more extensive price controls. 
Utility sources, meanwhile, said the Sacramento Republican's legislation 
won't do enough to stop the rapid escalation in wholesale power rates in 
California and the West Coast. 
And Mark Cooper, director of research for the Consumer Federation of America, 
charged that the bill would lead to even higher power rates for most 
Californians. "Ose's bill simply legalizes the transfer of billions of 
dollars from California to Texas and Oklahoma," Cooper said. 
Ose, chairman of the House Government Reform Committee's energy policy panel, 
introduced his bill last month. The measure was promptly referred to the 
House Energy and Commerce Committee, whose Republican leaders saw it as a way 
out of a politically sticky mess. 
With Democrats demanding that federal regulators set wholesale rates based on 
generators' actual cost of producing power and the Bush administration 
opposing anything that looks like price caps, Ose's idea contained the seeds 
of compromise. 
Ose expanded on what the Federal Energy Regulatory Commission already had 
endorsed in a controversial "price mitigation" order for the California 
market that took effect last week. 
That order states that during a power emergency, the wholesale price on the 
spot market will be pegged to the cost of production at the highest-cost, 
least-efficient plant selling into the market at the time. 
Ose's bill defuses some of the Democratic criticism of that action by making 
the order apply at all times and throughout the 13-state Western region. 
"It is not a cap," Ose said. "It is market driven. It rewards those who are 
most efficient, and it rewards those who are most environmentally sensitive 
and responsible." 
House Energy and Commerce Committee leaders hope to use the bill this week as 
the framework to jump-start a package of emergency electricity provisions, 
including authorization of a $200 million fix of a critical Central 
California transmission line bottleneck. 
California Democrats, heartened by the leadership change in the Senate that 
strengthens Sen. Dianne Feinstein's hand on her price-control legislation, 
are working to derail the Ose compromise. 
"By allowing the least-efficient generator to set the price, this proposal 
creates a system that will encourage massive market manipulation, raising 
prices even further," they said in a statement. "This amendment will do 
nothing to help stop the economic bleeding." 

The Bee's David Whitney can be reached at (202) 383-0004 or 
dwhitney@mcclatchydc.com.


Bush vs. price caps: Economists correct a faulty power lecture


(Published June 5, 2001) 

In his recent commencement address at Yale University, President Bush saluted 
the C students in the graduating class: "I say you, too, can be president of 
the United States." But when he lectured California last week on the evils of 
electricity price controls, the joke seemed less funny. What America's most 
famous C student didn't learn in economics class is costing the state dearly. 
"Price caps do nothing to reduce demand, and they do nothing to increase 
supply," Bush said in his Los Angeles address, repeating a standard lesson 
out of introductory economics textbooks. Unfortunately, as 10 energy 
economists from universities around the nation made clear last week in an 
open letter on the state's electricity crisis, Bush must have missed the 
later chapters. 
The textbooks' admonitions against price controls apply to competitive 
markets. When competition breaks down, giving one or a few producers the 
ability to control prices, the textbooks are equally firm that regulation is 
needed to keep them from exploiting consumers. 
That's the situation confronting California -- and federal regulators. 
Electricity markets here long ago ceased to be competitive. Because of a 
flawed market structure and a temporary imbalance between supply and demand, 
generators learned last year that they had market power: By withholding 
supply at key times and places, they drove up the price of power beyond the 
level that would otherwise prevail in a competitive market. 
"We cannot expect a market to operate to benefit consumers ... if effective 
competition does not exist," the economists said in their letter. "In this 
case, cost-of-service prices are an obvious remedy." 
They noted that several useful proposals have been submitted to the Federal 
Energy Regulatory Commission (FERC) for temporary price restraints on 
wholesale prices. These would last only until new plants now being built come 
online to alleviate the shortage. 
Such restraints could meet the federal legal requirement that prices be "just 
and reasonable" without discouraging construction of new power plants or 
generation from existing plants, which is needed to keep the lights on this 
summer. In fact, as some economists have pointed out, the right kind of price 
controls could actually increase supply by removing any incentive for 
generators to withhold electricity to game the market. 
Bush's regulatory inaction is producing an unprecedented transfer of wealth 
from California households and businesses to the generating firms, a shift 
that endangers the health of the state's economy. Unless FERC or Congress 
steps in, that wealth transfer likely will yield a political backlash not 
only against electricity deregulation, but also against market-based policies 
in general. Even a C student should know enough history to understand that's 
not a risk an incumbent politician wants to court.




A game of victims and villains 



Stereotypes cloud the complexity of energy issue
By Dana Wilkie 
COPLEY NEWS SERVICE 
June 5, 2001 
WASHINGTON -- When Gov. Gray Davis refers to those Texans taking Californians 
to the cleaners with electricity prices, the impression he apparently wants 
to leave is one of greedy and unscrupulous Republicans who probably look like 
oil baron J.R. Ewing. 
And when Bush administration officials sniff that Californians got themselves 
into this energy mess, they seem to be conjuring up the image of 
short-sighted, tree-hugging Democrats who care more about Alaskan caribou 
than about people. 
Even if Davis and Bush shook hands and appeared civil in California last 
Tuesday, the previous weeks of discord between the two left an indelible 
impression on the public, experts said -- one colored by stereotypes that 
easily strike a chord with voters but that also cloud the complexity of the 
energy issue. 
Those stereotypes pit the languid, Birkenstock-wearing Californian against 
the respectable Texas corporate man; the gluttonous executive against the 
rabid environmentalist; John Wayne against out-of-towners in black hats. Just 
as when many in this country maligned Arabs during the 1970s oil embargo, 
attempts to create victims and villains in the current energy crisis easily 
appeal to public emotion. 
Davis, a Democrat, recently invoked the image of hand-to-hand combat with a 
fearsome foreigner: "We are literally in a war with energy companies, many of 
which reside in Texas," Davis said after Bush, a Texan, released his energy 
plan. 
The image is straight from an old western. 
"Gray Davis is playing John Wayne against the guy with the black hat," said 
Mark Petracca, chairman of the political science department at the University 
of California Irvine. "You sound like a socialist if you demonize middle-aged 
white guys in suits who own capital. You sound like a cowboy with a white hat 
when you demonize oil barons." 
U.S. Sen. Barbara Boxer, another Democrat, plopped a black hat on Vice 
President Dick Cheney, architect of Bush's energy plan: "You have the vice 
president sounding like an oil man." 
Said Petracca: "Of all the possible images that one could pick, the oil baron 
is the easiest to manufacture. It has the deepest cultural resonance, because 
people have been exposed to this imagery on TV stations for years and years." 
Helping to bolster that image, of course, is the fact that both Bush and 
Cheney worked in companies involved with oil. 
While Bush professes no part in the blame game -- "He's not interested in 
finger-pointing," said White House press secretary Ari Fleischer -- Cheney 
raised the stereotype of the superficial, mollycoddled, air-headed 
Californian. On a national news program, he called California's electricity 
deregulation scheme "harebrained" and Davis' suggestion that Bush allowed 
price-gouging "goofy." 
"You have a war of two biases," said Jack Pitney, a government professor at 
Claremont McKenna College. "The bias of Texas as greedy and money-grubbing, 
and the bias of California as shallow and narcissistic." 
No matter how unrepresentative, these stereotypes are a way for the Davis and 
Bush administrations, and the national political parties, to convince voters 
whom to blame for the energy mess. That one of the parties should be a 
"culprit" is itself somewhat disingenuous, since the crisis has roots that 
run across Republican and Democratic administrations. 
Davis' once-stellar public approval ratings have withered, as Californians 
increasingly disapprove of how he has handled the crisis. Facing re- 
election next year and a considered a presidential prospect in 2004, the 
governor often reminds Californians that the crisis grew out of a Republican 
deregulation scheme, and that he is working around the clock to build new 
power plants. 
California Attorney General Bill Lockyer, also a Democrat, recently portrayed 
power-company executives as criminals: "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,' 
" Lockyer said. 
Meanwhile, national Democrats have aired a TV ad in the Long Beach district 
of GOP Rep. Stephen Horn that says the congressman teamed with Bush to oppose 
price caps that might have offered relief from summer blackouts. 
"It's a short-term effort by Davis to blame (others) for his difficulties, 
but it's also part of a longer-term national Democratic Party effort to make 
a case that the administration is rather friendly to the big-energy 
interests, and less friendly to conservationists," said Bruce Buchanan, a 
University of Texas expert on the presidency. 
If gasoline prices stay high, or if California's electricity problems spill 
over into other states, it may be Bush -- and Republicans running in next 
year's elections -- who land in trouble with the public. The GOP fears that 
voters may perceive Republicans as the monopolistic and environmentally 
unfriendly tools of oil companies. 
In the 1970s, politicians found an easy culprit for long lines at gas 
stations and high fuel prices: They preyed on stereotypes of Arabs. 
"All you had to do was show a bunch of Arab sheiks -- who already look to us 
sort of exotic -- meeting in some country that makes people think of 
international terrorism," said UC Irvine's Petracca. "Bingo -- you have some 
people to blame." 
Now, as then, the images have little to do with reality. 
Ben Paulos, who promotes alternative power with the Energy Foundation, said 
"it's a simplification" to paint the culprits in California's energy crisis 
as Texas oil companies. 
"These are international companies that own things all over the place," he 
said. 
In fact, most of the privately owned power generators in California are owned 
by companies that are not from Texas. 
And while conservationists get mileage out of associating these companies 
with J.R. Ewing -- the Larry Hagman character who ran an oil company on TV's 
"Dallas" -- "these (Texas) companies we're talking about are not oil 
companies," Petracca said. "They're energy companies, natural gas companies. 
But people lump it all together." 
Said Pitney: "When you're trying to get on (with news anchor) Dan Rather, 
detailed matters about energy policy just don't make the cut." 






Idled plants coming back on line 



By Don Thompson 
ASSOCIATED PRESS 
June 5, 2001 
SACRAMENTO -- California's electricity production should improve in the next 
few weeks weeks as more power plants come back on line after spring 
maintenance shutdowns, the state's grid operator said yesterday. 
That, coupled with conservation efforts detailed by state officials Sunday, 
could help during this summer's high temperatures, independent observers said 
-- but not enough to stave off blackouts. 
"We still find blackouts are inevitable," said Michael Zenker of Cambridge 
Energy Research Associates, an energy research and consulting organization. 
"There just isn't enough generation available." 

By the middle of this month, every existing plant is scheduled to be 
producing power. That contrasts with a historic high this spring when about a 
third of the state's power generation was unavailable due to scheduled or 
emergency shutdowns. 
The high number of shuttered plants prompted state officials to suggest power 
generators were deliberately withholding electricity to drive up prices, and 
Gov. Gray Davis ordered inspectors into plants to make sure generators 
weren't cheating. 
Generators objected, saying they have run their plants so hard since last 
year that routine maintenance was overdue, which caused more unplanned 
breakdowns. 
The Independent System Operator, which runs the power grid, says equipment 
breakdowns typically account for about 2,500 megawatts being off-line on any 
given day. Forced outages stripped the power grid of 2,673 megawatts 
yesterday. 
The power grid was short 4,144 megawatts due to planned shutdowns yesterday, 
beating the Independent System Operator's projections that 5,800 megawatts 
would be unavailable. That was down from 9,800 megawatts off-line for 
scheduled maintenance when the state narrowly avoided rolling blackouts 
Thursday. 
The ISO projects that in a week, about 3,000 megawatts should be down for 
maintenance, said ISO spokeswoman Stephanie McCorkle. "It looks like we're on 
target with our goal of getting the planned maintenance down to zero by 
mid-June." 
More generation, however, "doesn't mean consumers can cut back on their 
conservation, because at the same time more plants come on line, temperatures 
continue to rise," McCorkle said. By summer's peak in August and September, 
California can be using more than 45,000 megawatts. 
Californians cut their electricity use by 11 percent overall, and by about 10 
percent during peak demand hours last month compared to the same month last 
year, the California Energy Commission said Sunday. In addition, the Davis 
administration has signed more power contracts, and the price of that power 
is falling. 
"All that's good news. We're moving in the right direction," said Severin 
Borenstein, director of the University of California Berkeley's energy 
institute. However, "the amount of conservation we're going to need in the 
late summer is even greater than we have now. We've got a long stretch ahead 
of us." 







Planned plant shutdowns easing, boosting state's power supply 



By Don Thompson
ASSOCIATED PRESS 
June 4, 2001 
SACRAMENTO ) California's electricity production should improve in the coming 
weeks as more power plants come back on line after spring maintenance 
shutdowns, the state's grid operator said Monday. 
That, coupled with conservation efforts detailed by state officials Sunday, 
could help during this summer's high temperatures, independent observers said 
) but not enough to stave off blackouts. 
"We still find blackouts are inevitable," said Michael Zenker of Cambridge 
Energy Research Associates, an energy research and consulting organization. 
"There just isn't enough generation available." 
By mid-June, every existing plant is scheduled to be producing power. That 
contrasts with a historic high this spring when about a third of the state's 
power generation was unavailable due to scheduled or emergency shutdowns. 
The high number of shuttered plants prompted state officials to suggest power 
generators were deliberately withholding electricity to drive up prices, and 
Gov. Gray Davis to order inspectors into plants to make sure generators 
weren't cheating. 
Generators objected, saying they have run their plants so hard since last 
year that routine maintenance was overdue, which caused more unplanned 
breakdowns. 
Last Thursday, for instance, when California came within a hair of a seventh 
day of statewide blackouts, one of Duke Energy's 750-megawatt Moss Landing 
units began springing boiler leaks. 
"We almost lost it that day because we'd been putting off scheduled 
maintenance for so long," said company spokesman Tom Williams. "You can nurse 
those along for a while, but after a while they'll trip (off-line) and 
they'll do it during the peak of the summer." 
The Independent System Operator, which runs the power grid, says equipment 
breakdowns typically account for about 2,500 megawatts being off-line on any 
given day. Forced outages stripped the power grid of 2,673 megawatts Monday. 
The power grid was short 4,144 megawatts due to planned shutdowns Monday, 
beating the Independent System Operator's projections that 5,800 megawatts 
would be unavailable. That was down from 9,800 megawatts off-line for 
scheduled maintenance when the state narrowly avoided rolling blackouts 
Thursday. 
By comparison, California was expected to use about 31,000 megawatts of power 
during its afternoon peak period Monday, and top out at about 31,800 
megawatts Tuesday afternoon. The 4,144 megawatts unavailable due to planned 
shutdowns Monday would have powered about 3.1 million homes. 
The ISO projects that in a week, about 3,000 megawatts should be down for 
maintenance, said ISO spokeswoman Stephanie McCorkle. "It looks like we're on 
target with our goal of getting the planned maintenance down to zero by 
mid-June." 
More generation, however, "doesn't mean consumers can cut back on their 
conservation, because at the same time more plants come on line, temperatures 
continue to rise," McCorkle said. By summer's peak in August and September, 
California can be using more than 45,000 megawatts. 
Californians cut their electricity use by 11 percent overall, and by about 10 
percent during peak demand hours last month compared to the same month last 
year, the California Energy Commission said Sunday. In addition, the Davis 
administration said has signed more power contracts, and the price of that 
power is falling. 
"All that's good news. We're moving in the right direction," said Severin 
Borenstein, director of the University of California, Berkeley's energy 
institute. However, "the amount of conservation we're going to need in the 
late summer is even greater than we have now. We've got a long stretch ahead 
of us." 
Planned maintenance shutdowns this winter and spring helped prompt six days 
of rolling blackouts, said ISO spokesman Gregg Fishman. The ISO recently 
delayed installation of pollution control equipment at five plants until 
winter so those plants can operate through the hot summer months. 
"The idea is the plants go down mainly in the springtime, because usually 
there's the hydro(electricity) there to replace them," Fishman said. But not 
with this year's water and snowfall shortage: "We got squeezed a couple of 
times because of the hydro shortage either here (in California) or in the 
Northwest." 






Chevron threatens to cut gas supply in state 
Bernadette Tansey, Chronicle Staff Writer
Tuesday, June 5, 2001 
,2001 San Francisco Chronicle 
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/06/05/MN159275.DTL 
Chevron Corp. will reduce gasoline production at its two California 
refineries unless they are exempted from rolling blackouts, the company's 
chief executive warned Gov. Gray Davis. 
In a move that could raise California gas prices, Chevron's Richmond and El 
Segundo plants will scale back output and rely solely on the power provided 
by their own electrical generators, Chevron Chairman David O'Reilly said in a 
letter Friday obtained by The Chronicle. 
Chevron would not say how much less gas it would supply from its refineries, 
which have a combined capacity of 485,000 barrels per day. But a spokesman 
for the California Energy Commission said motorists could feel it at the 
pump. 
"Any reduction in production has an impact in the marketplace," said senior 
fuel specialist Gordon Schremp. "Prices are going to go up." 
Chevron's gasoline sales account for more than 18 percent of the California 
market, company spokesman Fred Gorell said. 
While other California refiners met yesterday's deadline to apply to state 
regulators for exemptions from temporary outages, O'Reilly said Chevron would 
not submit an application. 
To qualify for one of the exemptions being considered by the state Public 
Utilities Commission, Chevron would have had to assert that its vulnerability 
to blackouts would present "imminent danger to public health or safety" -- 
something O'Reilly said Chevron could not do. 
"Chevron will never operate its facilities in a manner that jeopardizes the 
health or safety of its employees or its neighbors," O'Reilly wrote. Unless 
the PUC or the Legislature shields Chevron from blackouts, it will rely on 
its cogeneration plants. 
Chevron set no time line for cutting production, but Gorell said the company 
is looking for state action "as soon as possible." 
Industry groups, backed by the California Energy Commission, have been 
pressing state officials to overturn a PUC decision that stripped refineries 
of a former exemption from blackouts. Legislation that would create a blanket 
exemption for refineries is stalled in the state Senate. 
Davis spokesman Steve Maviglio said the governor has not yet responded to 
Chevron's letter and has not taken a position on the refinery exemption law 
proposed by Assemblyman John Dutra, D-Fremont. 
Industry officials have warned that a refinery blacked out for just a few 
hours could take as much as a week to bring back online. 
State regulators could not be reached for comment on Chevron's letter. 
Gorell said O'Reilly's letter should not be read as saying that conditions at 
Chevron could be dangerous if the refineries suddenly lost power. At the 
Valero refinery in Benicia, however, spokesman Scott Folwarkow said his 
company did not hesitate to warn in its exemption application that sudden 
shutdowns can pose a risk. 
He said refineries were designed under the assumption that they would have a 
reliable supply of power. "If you start flipping the switch on and off, 
unpredictable things can happen," he said. 
E-mail Bernadette Tansey at btansey@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 4 




PG&E creditors approve bonuses 
Utility must file reorganization plan by end of year, or CEO only gets 
$600,000 extra David Lazarus, Chronicle Staff Writer
Tuesday, June 5, 2001 
,2001 San Francisco Chronicle 
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/06/05/MN159696.DTL 
PG&E's creditors have agreed to management's plan to shower top executives 
with $17.5 million in bonuses but balked at the bankrupt utility's initial 
demand that the cash come with no strings attached, The Chronicle has 
learned. 
Instead, the creditors say they forced Pacific Gas and Electric Co. to link 
the bonuses -- in some cases doubling the pay of senior managers -- to 
quickly filing a Chapter 11 reorganization plan, no later than January. 
However, PG&E spokesman Ron Low insisted yesterday that the utility had 
always intended for the bonuses to be tied to submitting a reorganization 
plan. 
"Our original proposal closely resembled what was filed with the court," he 
said. 
The bonuses are expected to figure prominently when PG&E's management holds a 
court-mandated meeting with creditors on Thursday in San Francisco. 
Bankruptcy Judge Dennis Montali, who has the final say on all compensation 
questions, is scheduled to issue a ruling June 18. 
Critics have slammed the utility's "management retention program" as an 
unwarranted payout to the same executive team responsible for steering PG&E 
into its worst-ever financial crisis. 
But the company insists that without extra incentives, corporate leaders 
would depart and thus slow PG&E's return to creditworthiness. 
"It's a question of efficiency," said Allan Marks, a lawyer representing the 
11 companies comprising the creditors' committee in PG&E's bankruptcy 
proceedings. 
"It's not a question of whether these people are good or bad managers," he 
said. "It's simply more efficient to keep these people in place." 
Marks said that when PG&E first proposed the bonuses last month, the 
creditors' committee quickly noted that the cash was a virtual handout to 
about 226 top executives. 
PG&E Chairman Robert Glynn and nearly two dozen other senior managers would 
receive 100 percent of their salaries to stay on, while hundreds of other 
employees would receive bonuses of between 25 and 75 percent of their 
salaries. 
After what Marks described as candid negotiations, he said PG&E had agreed to 
link the bonuses to a commitment that its reorganization plan be on the table 
by the beginning of 2002. 
"This is one way that we can assure efficiency in the process," he said. "Our 
goal is to make sure the company operates as quickly as possible." 
But PG&E's Low said that the creditors had actually requested only minor 
changes in wording and that the timing of a reorganization plan had never 
really been in dispute. 
A reorganization plan is the blueprint for a company's eventual recovery from 
bankruptcy. 
Glynn would receive a bonus of 100 percent of his $900,000 annual salary if 
PG&E's plan is submitted on time. If he misses the deadline, he would have to 
make do with just two-thirds of that amount. 
While there is no reason to believe that PG&E's managers would have dragged 
their heels without piles of extra cash, Marks said it was common in 
bankruptcy cases for corporate leaders to receive an incentive to remain in 
their jobs and seek a resolution to the company's difficulties. 
"We ended up with something that we think is fair," he said. 
The creditors' committee includes financial heavyweights Bank of America and 
Merrill Lynch, as well as power giants Enron Corp. and Dynegy Inc. The 
committee's actions set the tone for PG&E's dealings with its thousands of 
other creditors, who are owed more than $9 billion. 
Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights in 
Santa Monica, said that by accepting the bonus plan for PG&E's top brass, the 
creditors' committee had signaled that it would agree to almost anything that 
would help them recover outstanding costs. 
"The creditors are in this to get reimbursed fully," he said. "Their idea is 
to ultimately soak ratepayers for the entire cost of the bankruptcy." 
Marks said the creditors would seek nothing less than full payment of PG&E's 
obligations. "We're very firm on this," he said. 
Full payment will only come if the bankruptcy court sells off some of PG&E's 
assets, such as the utility's power lines or dams, or if consumers end up 
paying surcharges on their monthly bills. 
To date, PG&E has insisted that none of its assets are for sale. 
E-mail David Lazarus at dlazarus@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 4 




56% favor limits on electricity prices, poll finds 
Washington Post
Tuesday, June 5, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/05/M
N212214.DTL 
Washington -- Most respondents to a Washington Post-ABC News poll released 
yesterday agree with California Gov. Gray Davis that the federal government 
should set limits on the wholesale price of electricity, which President Bush 
has said he opposes amid the likelihood of rolling blackouts this summer in 
the largest state. 
Of those polled, 56 percent said they favored price limits, even though it 
was pointed out that such a measure could discourage development of new 
supplies. Forty percent said they opposed price caps, which Davis said he 
would seek in federal court after Bush ruled out the idea during a face-to- 
face meeting last week. 
Bush's energy plan, which he announced last month and has been promoting with 
a series of road trips, is weighted toward increasing production of oil, coal 
and natural gas, as well as nuclear power. Democrats contend the plan would 
benefit the energy industry without lowering prices for consumers. 
The poll of 1,004 adults was taken May 31 through Sunday and has an error 
margin of plus or minus 3 percentage points. 
,2001 San Francisco Chronicle ? Page?A - 4 



Developments in California's energy crisis 

Tuesday, June 5, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/05/state1
022EDT0151.DTL 
(06-05) 00:03 PDT (AP) -- 
Developments in California's energy crisis: 
TUESDAY:
* A leading advocacy group for the poor tells state leaders to use the 
economic power of the state's huge pension funds to leverage power companies. 
The Pacific Institute for Community Organization says the two pension funds 
own at least $1.2 billion in stocks and bonds in most of the firms that sell 
electricity to California. 
MONDAY:
* A special Senate committee investigating whether out-of-state power 
companies are illegally profiteering the state's power crisis gets permission 
from the Senate Rules Committee to subpoena documents from the companies 
detailing bidding, pricing and other aspects of their electricity sales to 
the state. The committee plans to subpoena Mirant, Dynegy, Williams, AES, 
Duke, Enron, NRG and Reliant, and could also issue subpoenas to the Los 
Angeles Department of Water and Power and the state Department of Water 
Resources to access details of their power selling and buying processes, 
respectively. 
* The state's grid operator says California's electricity production should 
improve in the coming weeks as more power plants come back on line after 
spring maintenance shutdowns. That, coupled with conservation efforts, could 
help during this summer's high temperatures, independent observers say -- but 
not enough to stave off blackouts. 
* The state's expanded Low Income Home Energy Assistance Program (LIHEAP) 
program begins with $120 million in state money. It is aimed at helping 
working poor households, senior citizens, disabled persons, migrant seasonal 
farm workers, limited-English-speaking persons and households with very young 
children whose incomes fall at or below 250 percent of the federal poverty 
level. 
That includes households with four members having an annual gross income of 
$44,125 or less; three-member households earning $36,575 or less; two-member 
families earning $29,025 or less; and individuals earning under $21,475. 
Further information is available at www.csd.ca.gov or at 1-800-433-4327 
(HEAP). 
* Ten schools in three Southern California districts cut their electricity 
waste up to 18 percent through the Alliance to Save Energy's Green Schools 
Program. Together, the schools saved more than $51,000 over about eight 
months by changing their usage habits, according to Southern California 
Edison, which sponsored the program. More information is available at 
www.ase.org/greenschools. 
* Critics tell the San Jose Mercury News that the federal agency overseeing 
California's electricity market needs to add resources and become more 
aggressive in watching for energy price gouging, issuing subpoenas for 
company documents if necessary. The Federal Energy Regulatory Commission has 
been accused of backing off investigations after energy generators have 
resisted, prompting some FERC officials to say their own system is flawed. 
* The FERC issues a statement saying it won't act on a request from small 
power generators to block a March 27 decision from the state Public Utilities 
Commission that has lowered the price they can charge for electricity. FERC 
says it won't step in because the matter is still pending at the PUC. 
* No power alerts Monday as electricity reserves stay above 7 percent. 
* Shares of Edison International closed at $10.58, down 42 cents. PG&E Corp. 
closed at $11.40, down 25 cents. Sempra Energy, the parent company of San 
Diego Gas & Electric, closes at $27.34, up 20 cents. 
WHAT'S NEXT:
* Davis' representatives continue negotiating with Sempra, the parent company 
of San Diego Gas and Electric Co., to buy the utility's transmission lines. 
* In federal bankruptcy court Tuesday, Pacific Gas and Electric will ask U.S. 
Bankruptcy Judge Dennis Montali to stop the manager of the state's power grid 
from buying electricity for utility or charging it for any electricity bought 
after the utility filed for bankruptcy on April 6. 
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight 
supply worsened by scarce hydroelectric power in the Northwest and 
maintenance at aging California power plants are all factors in California's 
electricity crisis. 
Edison and PG&E say they've lost nearly $14 billion since June to high 
wholesale prices the state's electricity deregulation law bars them from 
passing on to consumers. PG&E, saying it hasn't received the help it needs 
from regulators or state lawmakers, filed for federal bankruptcy protection 
April 6. 
Electricity and natural gas suppliers, scared off by the two companies' poor 
credit ratings, are refusing to sell to them, leading the state in January to 
start buying power for the utilities' nearly 9 million residential and 
business customers. The state is also buying power for a third investor-owned 
utility, San Diego Gas & Electric, which is in better financial shape than 
much larger Edison and PG&E but also struggling with high wholesale power 
costs. 
The Public Utilities Commission has approved average rate increases of 37 
percent for the heaviest residential customers and 38 percent for commercial 
customers, and hikes of up to 49 percent for industrial customers and 15 
percent or 20 percent for agricultural customers to help finance the state's 
multibillion-dollar power buys. 
,2001 Associated Press ? 




PG&E sues to challenge reimbursement to state 
Greg Lucas, Sacramento Bureau Chief
Tuesday, June 5, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/05/M
N52029.DTL 
Sacramento -- Saying it is being shortchanged, Pacific Gas and Electric Co. 
filed suit yesterday challenging the amount of money California will get from 
consumers as reimbursement for buying electricity. 
The suit filed with the state appellate court in San Francisco claims that 
the California Public Utilities Commission is giving the state too big a 
share of the monthly revenue collected from consumers -- all at PG&E's 
expense. 
The suit by PG&E was expected. If the utility wins, it could make it harder 
and longer for the state to recoup its power purchases. 
The state stepped in to purchase wholesale electricity for the utilities 
after their credit soured as power costs skyrocketed. The state has spent 
more than $7 billion so far with reimbursement expected from consumers. 
Earlier, Southern California Edison filed a similar legal challenge. 
At issue is the amount of money the utilities receive from consumers and the 
amount given to the state to cover electricity purchases. 
PG&E contends that the PUC's calculation puts the utility $2.2 billion in the 
hole because state regulators underestimated the cost of running the nuclear 
power plant at Diablo Canyon and the cost of contracts with alternative 
energy producers, like solar and wind generators. 
The utility wants its share of consumer revenue increased, leaving less for 
the state. 
Under a bill lawmakers passed in January, it was the calculation of how much 
of consumer money was needed to reimburse the state for energy purchases that 
would dictate how many bonds the state could sell to repay itself. 
The limit on bond sales was four times that calculation, totaling about $13 
billion. 
But both utilities challenged the PUC's initial decision, saying it was too 
generous to the state. 
Fearing legal action from the utilities, lawmakers passed a second bill in 
May that delinked the authorization to sell up to $13.4 billion in bonds from 
the calculation of how much consumer money the utilities receive. 
That bill allows the bond sale to happen as early as Aug. 14. 
As a result, yesterday the Davis administration and State Treasurer Phil 
Angelides said the utilities' move did not affect the bond sale, scheduled 
for late summer. 
"This doesn't create chaos, it just means we can't sell the bond until the 
middle of August," said Joseph Fichera, CEO of Saber Partners and one of Gov. 
Gray Davis' energy advisers. 
Had the utilities not appealed, the PUC's ruling would have allowed the bond 
sale to occur sooner, Fichera said. 
In its initial ruling in March, the PUC said its allocation of ratepayer 
money would send $1.8 billion to help pay off the state's bond sale. 
Fichera said a utility court victory could potentially lead to more rate 
increases to cover the lost income to the state but added he was "not 
certain." 
E-mail Greg Lucas at glucas@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 5 







Critics say Calpine plan too generous 
Posted at 10:35 p.m. PDT Monday, June 4, 2001 
BY MIKE ZAPLER 

Mercury News 


In what would be a highly unusual break for a local business, San Jose 
officials are proposing to rewrite city law and spend tens of millions in 
taxpayer funds to ease construction of Calpine's controversial power plant in 
Coyote Valley. 
The provisions highlight just how far the city has come on Calpine's proposed 
600-megawatt Metcalf Energy Center. Just months ago, city leaders stood in 
solid opposition to the $400 million project, threatening lawsuits and other 
tactics to block it. Now, those same officials appear ready to go to 
extraordinary lengths to make Metcalf happen. 
Part of an agreement reached last week by Mayor Ron Gonzales and the company 
would require the city to pay $50 million upfront to extend a recycled-water 
pipeline needed to cool the power plant. Calpine will reimburse San Jose for 
just $10 million of that cost, far less than the city had sought, and will 
make its payments over 30 years. 
Another clause would allow Calpine, which reported an increase in 
first-quarter profits of more than 400 percent, to spread over 10 years a 
$3.9 million sewer connection fee. That would be a first for the city. 
Typically those levies are collected upfront; the city council would have to 
amend a law that set a five-year limit on sewer connection payments. 
``I'm not comfortable with that,'' said Councilman and Metcalf opponent 
Forrest Williams, whose District 2 would be home to Metcalf. ``They're a very 
profitable company .?.?. they should pay the connection fee.'' 
Councilwoman Pat Dando said the overall agreement, set to be considered by 
the council this afternoon, is probably the best the city could do under the 
circumstances. But she added: ``I believe Calpine's payment should be the 
same as other businesses that develop in San Jose.'' 
The money for the pipeline would come from a fund to expand and increase the 
reliability of the entire recycled-water system. Projects the city had 
planned to build sooner would have to be delayed, but the water pollution 
control plant would not raise rates to pay for the Metcalf extension, 
environmental services director Carl Mosher said. 
Company at advantage 
The criticized provisions are part of a larger package settled on after 
roughly five weeks of negotiations. The talks occurred in a political 
atmosphere that heavily favored the power company: Gov. Gray Davis endorsed 
Metcalf in April, and the California Energy Commission is widely expected 
this month to override the city's November denial of the plant. 
Mayor Ron Gonzales and Calpine executives defended the deal, saying its 
unusual terms were tailored to a unique project. 
Metcalf, they said, would become the city's biggest customer of recycled 
water, consuming an average of 3 million gallons daily -- or nearly one-third 
of the current total usage -- to cool the plant. That would help the city 
achieve its goal of reducing freshwater usage and diverting more water from 
the San Francisco Bay for ecological reasons. 
And the city would receive other concessions from Calpine, supporters say, 
including two extra air-monitoring stations and $6.5 million mostly for parks 
and open space. 
``The energy crisis requires us to do business differently than we have in 
the past,'' Gonzales said. ``When you take the entire package it's a win-win 
for the city.'' 
Critics, while acknowledging that Calpine had a commanding position at the 
bargaining table, say the city still is giving up too much. They questioned 
why Calpine is paying only $10 million -- one-fifth of the total cost -- to 
extend the water pipeline, when Metcalf will be its sole customer, at least 
in the near future. 
The city entered negotiations with Calpine wanting the company to cover the 
entire $50 million cost of the pipeline extension, a senior city official 
said. Others involved in the negotiations say that was never officially 
broached by the city, although Calpine development manager Ken Abreu 
acknowledged that ``obviously the city would have been happy for us to pay 
for as much of the pipeline as possible.'' 
That's what the city should be demanding, said Issa Ajlouny, a resident of 
the Santa Teresa neighborhood adjacent to Metcalf and leading opponent of the 
plant. 
``This agreement is giving away millions of dollars of our money,'' he said. 
``The city should be outraged.'' 
Early last year, according to city officials and transcripts of a California 
Energy Commission hearing, the city and Calpine had an understanding that the 
power company would pay at least $25 million to $30 million for the 
recycled-water line if the power plant were built. If San Jose decided to 
construct a larger pipeline to serve more customers, the city would make up 
the difference. 
Deal fell apart 
But that informal arrangement fell apart when Metcalf emerged as a major 
political battle. Gonzales came out against the plant in June 2000, and the 
council went on to vote against it in November. 
By the time the negotiations began, Calpine didn't really need the city's 
help. All indications were that the California Energy Commission would 
override the city and approve the plant anyway. 
What emerged from the talks was a $10 million payment, spread over 30 years, 
from Calpine for the recycled-water line. Company officials say that 20 
percent is roughly the same share of the pipeline capacity Metcalf would use. 
The other 80 percent has yet to be allocated, but officials said they hope to 
sign up other recycled-water users, such as golf courses. 
``Our perspective is we're doing what's fair,'' Calpine's Abreu said. 
As the agreement heads to the council this afternoon, some neighborhood 
activists are accusing the council of trying to suppress public debate. 
Often, controversial neighborhood issues are heard at evening sessions to 
give working residents a chance to be heard. 
``This certainly creates an appearance that they're trying to stifle public 
input,'' said Elizabeth Cord of the Santa Teresa Citizen Action Group. She 
said consideration should be delayed until the next evening council meeting 
June 18 to give residents time to review the document. 
But Gonzales said he's not inclined to defer the item. He said today's 
meeting is already filled with difficult land-use decisions. 
``We have already heard from the neighborhood,'' he said. ``It was their 
concerns we negotiated.'' 


Contact Mike Zapler at mzapler@sjmercury.com or at (408) 275-0140. 











PBS documentary shines light on energy crisis 
LOS ANGELES (AP) -- As California's energy crisis casts a widening shadow, 
PBS' ``Frontline'' helps illuminate the issue with a high-wattage 
documentary. 
``Blackout'' is both a comprehensive report and a warning: California's power 
deregulation woes represent a national problem not destined for a quick or 
painless solution. 
The hourlong film, with reporting by ``Frontline'' correspondent Lowell 
Bergman done in conjunction with The New York Times, airs 10 p.m. EDT Tuesday 
on PBS stations (check local listings). 
If you're a consumer frustrated by price hikes or concerned about what might 
happen in your state, ``Blackout'' should be considered required viewing. 
Major players, ranging from power company chiefs to consumer advocates to 
Vice President Dick Cheney, make their case on energy policy. 
Gov. Gray Davis and others grappling with California's flawed new system, 
which has inspired many states to put their own deregulation efforts on hold, 
are interviewed. 
``Blackout'' also touches on alleged machinations involving the Federal 
Energy Regulatory Commission that could affect how much, if at all, the 
federal government will weigh in on power prices, and renews questions about 
corporate influence on the Bush administration. 
What ultimately emerges is a classic debate, framed in 2001 political 
realities, over whether an unfettered market is invariably the best approach 
or whether capitalism sometimes must bend to regulation. 
Bergman is adamant about the importance of understanding a power industry 
that has undergone massive change. 
``We've launched ourselves into a great economic and social experiment in the 
free market with a commodity that 65 years ago the country decided to put 
under heavy regulation because it was so vital,'' he said in an interview. 
``We've gone into this experiment without having a full national debate about 
what the consequences could be,'' Bergman said. ``It may all work out, but 
it's clear that we're at least in a transition period where a lot of people 
are going to pay the price.'' 
In New York, for instance, blackouts are a possibility this summer and rate 
hikes of up to 40 percent a likelihood, Bergman said. 
There are those striking it rich in this bold new world. ``Blackout'' opens 
on Houston's ``energy alley,'' home to new-breed power companies including 
what the documentary calls the 800-pound gorilla, Enron Corp. 
Enron, which has drawn attention because of chairman Kenneth Lay's close ties 
to President Bush, generates profits by serving as middleman between 
electricity makers and consumers. 
The world's largest energy trader, Enron sees from $2.5 billion to $3 billion 
in purchases and sales a day, according to its chief executive officer, Jeff 
Skilling. 
``We are doing the right thing,'' Skilling tells ``Blackout.'' ``We are 
working to create open, competitive, fair markets. ... We are the good guys. 
We are on the side of angels.'' 
If that's true, Bergman says in the film, the good guys have been winning: 
The past year saw a ``vast transfer'' of wealth from energy consumers to 
power sellers and traders like Enron. 
They are taking advantage of the end of an era: the federal regulatory system 
implemented by President Franklin D. Roosevelt in the 1930s to limit abuses 
by utility monopolies. 
In the 1980s, ``Blackout'' tells us, free-market proponents began pushing for 
an end to regulation. In 1992, a federal law was passed that allowed for 
states to deregulate electricity. 
There was broad but not unanimous support for such change. 
``It's OK for the price of fur coats to go up and down. ... It's not OK for 
the oxygen of life in this high-energy civilization,'' David Freeman, the 
former Los Angeles Department of Water and Power head and now state energy 
czar, tells ``Blackout.'' 
Mark Cooper, director of research at the Consumer Federation of America, who 
notes there have already been price spikes in electricity in the Midwest and 
New England, says the outcome speaks for itself. 
``How do we go from $40 a megawatt for capacity in a regulated system to 
$1,000 in a deregulated system, and you're telling me I'm better off?'' 
Cooper asks in the documentary. 
Enron's Lay weighs in on the other side. 
``I've yet to see any system in the world ... that over time does a better 
job of setting prices and allocating supplies than a competitive market,'' 
Lay says in ``Blackout.'' 
He has a key philosophical ally in the Bush administration, which says 
increased supply and not federal intervention is the logical answer. 
``We're doing everything we can to help California on a short-term basis,'' 
Cheney says. ``There's not a lot you can do. You can't manufacture kilowatts 
in the West Wing of the White House.'' 
Bergman, the former ''60 Minutes'' producer who was portrayed in the movie 
``The Insider,'' believes there is one certainty about the power crisis: The 
media generally has given it short shrift. 
``Unfortunately this story has been covered, particularly on television, in 
much the same way a car crash is covered. You never learn whether the car was 
safe or the highway was safe. You just see the blood and guts.'' 
``Nobody's spent the air time to explain to people how this all happened and 
why this may be coming to a neighborhood near you.''
















California's big turnoff 
Published Tuesday, June 5, 2001, in the San Jose Mercury News 
IF you ask us, we will cut back. 
California's residents and businesses used 11 percent less electricity in May 
2001 than they did in May 2000. 
Keeping up this level of conservation throughout the summer won't necessarily 
insulate the state from blackouts, but it's a big deal all the same. State 
power officials have said May and June could be the most difficult months 
this year. Additional power is expected to come on line later in the summer. 
The most important time to cut back is at the peak of demand, usually hot 
afternoons, when blackouts are most likely and the cost of buying electricity 
can shoot up stupefyingly. 
With Californians having cut peak usage by 10.4 percent, the price for the 
power that the state is buying on the daily market is coming down. 
June marks the beginning of the state's 20/20 rebate plan, under which 
customers who reduce their use at least 20 percent from last year will get a 
20 percent rebate. It also marks the introduction of new, higher rates for 
businesses and for many households. 
All the more reason for Californians to keep up the good work.












FERC shirk 
Published Tuesday, June 5, 2001, in the San Jose Mercury News 
THE introduction of a free market in electricity is not cause for federal 
energy regulators to start working half days. Instead, their jobs could well 
become harder and more vital. 
As of now, the Federal Energy Regulatory Commission does not seem up to the 
task. 
In a pair of stories Sunday and Monday, Mercury News reporters Eric Nalder 
and Mark Gladstone described how FERC is unprepared to undertake the 
extensive data-gathering and sophisticated number-crunching necessary to 
detect market manipulation in the complicated wholesale electricity market. 
Market manipulation, or gaming, encompasses many activities that are entirely 
legal. But a market easily gamed is one that does not provide electricity at 
the best prices to consumers. It is a market in need of reform. 
Moreover, it is one that does not conform to federal law requiring 
electricity prices to be ``just and reasonable,'' which FERC is supposed to 
enforce. 
Economists inside and outside FERC say the agency lacks the staff and the 
attitude to be a vigorous supervisor of the market. 
This is not entirely surprising. FERC is hardly the electricity industry's 
only player, public or private, to be caught unprepared by the way a 
restructured market evolved in California and other states. 
FERC's investigation of price spikes in California early last summer 
demonstrated its shortcomings. Its report correctly fingered the usual 
suspects of weather, rising demand, stagnant supply and a badly constructed 
market. It failed to decide whether power producers had taken advantage of 
the circumstances to push prices skyward. 
The economist who directed the probe found it weak in analysis and in 
aggressiveness. FERC, for instance, is reluctant to use its subpoena 
authority to compel power generators to turn over records. 
The deficiencies must be remedied. A free market in electricity should not be 
an unsupervised market, just as the free market for stocks is not 
unsupervised. The Securities and Exchange Commission aggressively enforces 
rules for accounting, stock sales, disclosure of information. It doesn't 
hesitate to issue subpoenas. 
Only FERC can monitor the wholesale market in electricity. 
If only it would do it.















Edison plugging shareholders into Capitol 
A telephone lobbying effort for Davis' bailout has earned the wrath of 
legislators. 
June 5, 2001 
By HANH KIM QUACH
The Orange County Register 
SACRAMENTO - Southern California Edison has launched an aggressive lobbying 
campaign in which it telephones its shareholders, describes the dire 
consequences for them if the utility goes bankrupt, and then transfers the 
call directly to the Capitol so they can personally implore lawmakers to vote 
for a controversial financial bailout plan. 
The members of the Senate and Assembly and their staffers say that often the 
shareholders - many of whom appear to be senior citizens - are confused, and 
scared at the prospect of their investments in the utility being permanently 
degraded or wiped out. 
The tactic has raised the ire of legislators in both parties, although the 
cash-strapped utility says it is simply practicing honest, effective 
lobbying. 
"The fact that they're targeting them is distressing because it brings a 
threatening situation to their lives," said Assemblywoman Pat Bates, R-Laguna 
Niguel. "You have a very vulnerable population and I think it's extremely 
insensitive.'' 
But Edison International's vice president of public affairs, Brian Bennett, 
said keeping shareholders informed and asking for their help is part of the 
company's obligation to them. 
Calling shareholders, many of whom happen to be older, is part of a very 
above-board $3 million campaign that includes letters, financial reports and 
television commercials to tell them about what's happening in Sacramento, he 
said. The thrust of the message is that if the Legislature continues to try 
to craft its own plan, rather than quickly endorse one that Gov. Gray Davis 
and Edison favor, the utility could be forced into bankruptcy by its 
creditors. 
"We would feel less inclined to spend money if the Legislature would act 
faster. Then, we wouldn't have to run to commercials and remind the public we 
are in dire straits,'' Bennett said. "Legislators need to hear from their 
constituents back home, particularly the retirees because of the drop in 
stock income.'' 
The lobbying effort comes at a critical juncture. The Davis-Edison plan calls 
for the state's taxpayers to come to Edison's rescue by purchasing the 
company's transmission lines for $2.7 billion, thus providing it with enough 
money to hold off creditors who threaten to push the utility into bankruptcy. 
Meanwhile, the legislative leadership has been looking at several versions of 
that same plan. The latest would force the state's 3,600 largest businesses - 
those that pushed for deregulation - to pay for most of the bailout. 
Lawmakers don't think the Edison lobbying campaign is that effective. 
Often, the callers don't know that the Davis-Edison plan would have the state 
buy the transmission lines. And once they do, they often change their minds, 
lawmakers said. 
The last thing many shareholders want is for the state to be in charge of 
transporting electricity, particularly after many believe it bungled the 
deregulation of the market in the first place. 
But Bennett said it's unfair for lawmakers to assume the callers are not 
well-informed. 
"Our shareholders are average people. But if you're a shareholder and you've 
seen the dramatic decline of the company, do you think they don't know what 
they're talking about or feeling?'' he said. 
Three Orange County shareholders contacted by Edison representatives said 
they did not mind being asked to lobby for the bailout bill. However, one 
said he did not know some of its key points and the another said he didn't 
realize it was Edison who had called him. 
Roberto Chica of Laguna Niguel didn't know the state would acquire 
transmission lines for $2.7 billion - and is against it. 
"The state should own nothing. They don't have any business in any of this,'' 
said Chica, 59, who owns 1,000 shares of Edison. At one point, he said, his 
stock was worth $30,000 - three times what it is now. 
Even though Chica doesn't agree fully with the deal, he agrees with Edison's 
larger goal: avoiding bankruptcy. 
"It's a mess. You rely on this investment for the long term and the 
politicians screw it up and you get scared,'' Chica said. 
San Clemente's Fred Beck, 74, said he didn't know who called him, but he 
agreed to be patched through to a Bates aide, to whom he expressed his anger 
about the energy crisis in general. 
Beck said he bought his stock in 1993 for the dividends it would pay out 
during retirement. He paid about $23 a share; they now trade around $10. 


















SDG&E to seek rate hike to cover $915 million tab 
That amount was needed to pay another agency for electricity. 
June 5, 2001 
By ANNE C. MULKERN
The Orange County Register 
The power company that serves 100,000 south Orange County residents wants to 
hike electricity rates to pay back the state for power purchases. 
San Diego Gas & Electric Co. proposes raising rates in a five-tiered plan 
similar to one approved in May for Southern California Edison customers. 
The utility needs to collect $915 million to pay the Department of Water 
Resources, which is buying power for cash-strapped utilities. 
The hike would be greatest for those using the most power. 
Low-income customers and those using 130 percent or less of their baseline 
allocation would not see any rate hike. Baseline is the amount of power 
considered necessary for essential uses. About 60 percent of customers 
wouldn't pay higher rates, said SDG&E spokesman Ed van Herick. 
Customers who use the most - 300 percent of their baseline or more - would 
pay 26.67 cents per kilowatt hour for that extra power, more than twice the 
lowest rate. 
State regulators will vote on the proposal June 28 and, if approved, it would 
take effect July 1. The proposed increase is in addition to another hike 
SDG&E applied for earlier this year. Regulators will vote on that hike this 
summer. 
Consumer activist Michael Shames, of the Utility Consumers Action Network, 
expressed concern that DWR's need for additional funds could lead to a rate 
increase without consideration for what is fair and reasonable. 
"There is no apparent check on DWR's appetite," Shames said. "The law is not 
clear as to whether (regulators) review DWR's purchases for reasonableness, 
whether they are legitimate and justified. Absent that, there's a clear 
unbalance." 
The Public Utilities Commission will hold hearings to take comments on the 
plan. The Orange County hearing will begin at 1 p.m. June 12 at the Country 
Inn Hotel, 35 Via Pico Plaza, San Clemente. 
Register staff writer Mary Ann Milbourn contibuted to this report. 


















Energy notebook 
AES power plant repairs might not meet target date. 
June 5, 2001 
From staff and news service reports 
HUNTINGTON BEACH - AES Corp.'s Huntington Beach power plant is struggling to 
get two of its generating units online by a June 17 target, but might be 
delayed by a few days. 
The two units, which generate 430 megawatts of electricity, were taken 
offline in April for a turbine overhaul and installation of catalytic 
converters to reduce smog emissions. But power plant workers found more 
damage than expected to the turbines, and parts to repair the equipment are 
hard to find. 
"We're still shooting for the deadline," said Ed Blackford, the plant's 
president, referring to units 1 and 2. The plant's units 3 and 4, which have 
been shut down for several years, are being retooled and are expected to be 
online by mid-August. 
State says Edison rescue deadline goes past Friday 
ROSEMEAD - California power regulators don't have to act on Gov. Gray Davis' 
rescue plan for Southern California Edison by Friday, as provided in the 
agreement, a state energy official said. 
That statement by California Public Utilities Commissioner Carl Woods 
surprised Edison's investors and officials. Under Davis' "memorandum of 
understanding" with Edison, the regulators had 60 days to act on six elements 
of the rescue. That deadline is Friday. 
PUC officials think it would be "acceptable" for the agency to act by August, 
Wood said. If the PUC doesn't meet the Friday deadline, the utility's 
creditors may decide the agreement will die and file to put it into 
bankruptcy. 
San Onofre Unit 3 back in full operation over weekend 
SAN CLEMENTE - Workers at the San Onofre Nuclear Generating Plant 
successfully brought Unit 3 into full operation over the weekend, providing 
an additional 1,120 megawatts of electricity. 
Operators began to bring the unit online gradually beginning Friday. Ray 
Golden, Southern California Edison spokesman, said it became fully 
operational Sunday. 
The unit had been closed since Jan. 2, first for refueling then after a fire 
Feb. 3 forced repair of the turbines. Combined with Unit 2, the plant now 
provides 2,240 megawatts - enough to power 1.68 million homes. 
Unit 1 is in the process of being decommissioned. 
9,000 blackout-exemption applications flood the PUC 
SAN FRANCISCO - The state Public Utilities Commission had received more than 
9,000 applications from businesses seeking exemptions from blackouts by the 5 
p.m. deadline Monday. 
The commission is expected to make a final decision by Aug. 2 on who will get 
the relatively few additional exemptions available. To get an exemption, a 
company must show that there would be a threat to public health and safety if 
it were to lose power. 
Power production expected to improve in weeks ahead 
SACRAMENTO - California's electricity production should improve in the coming 
weeks as more power plants come back online after spring maintenance 
shutdowns, the state's grid operator said Monday. 
That, coupled with conservation efforts detailed by state officials Sunday, 
could help during the summer, independent observers said - but not enough to 
stave off blackouts. By mid-June, every existing plant is scheduled to be 
producing power in some or all units. 
Federal regulator says California's ills a priority 
WASHINGTON - New federal energy regulator Patrick Henry Wood III says 
California's electricity crisis is a national emergency requiring a federal 
solution. 
Only a month ago, Vice President Dick Cheney opposed further federal action 
to help California with chronic power blackouts and price shocks this summer. 
But Wood, the outgoing chairman of the Texas Public Utility Commission, said 
fixing California's electricity market was his top priority in his new job 
with the Federal Energy Regulatory Commission. 
Register staff writers Kate Berry and Mary Ann Milbourn and Bloomberg News, 
Knight Ridder Newspapers and the Associated Press contributed to this report.







GWF Signs Long-Term Contract to Provide 430 MW of Power to California 







June 5, 2001 







PITTSBURG, Calif.--(BUSINESS WIRE)--June 4, 2001 via NewsEdge Corporation - 
California-based GWF Energy LLC has signed a 10-year contract with the 
California Department of Water Resources (CDWR) to provide up to 430 
megawatts of electricity to California. 
According to the contract, initial energy deliveries are planned to begin in 
September 2001, when GWF's 90 megawatt Hanford Energy Park Peaker plant goes 
on line. The Hanford project, which was permitted under Governor Davis' 
Executive Order to expedite peaker plant permitting, was approved by the 
California Energy Commission on May 10. GWF also expects to build and operate 
two additional plants in California by 2002 -- in Kings and San Joaquin 
counties. 
"GWF and its employees appreciate the opportunity to work with CDWR in 
providing much-needed electricity supply along North Path 15," said Duane 
Nelsen, President of GWF Energy LLC. "All of the agencies involved in this 
process have been working around the clock to expedite the construction of 
this facility -- so California can get the additional energy it needs. We're 
proud to be part of the solution." 
GWF began operations in the 1980s and currently owns and/or operates seven 
small power generating facilities in Central and Northern California -- 
generating more than 1,000,000 megawatt hours of electricity annually for 
Pacific Gas & Electric. GWF is owned by a partnership of PSEG Global located 
in Parsippany, New Jersey; and Harbert Cogen located in Birmingham, Alabama. 
CONTACT: GWF Power Systems | Kelli Norton, 916/447-8186















Electricity Prices (Chart) 
? 
06/05/2001 
The Wall Street Journal 
Page A1 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
  The Mirant National Power Index, a demand-weighted average price for
peak-period electricity in the continental U.S., in dollars per
megawatt-hour; daily close












Business/Financial Desk; Section A 
Surplus of Finger-Pointing In California Energy Crisis 
By RICHARD A. OPPEL Jr. 
? 
06/05/2001 
The New York Times 
Page 1, Column 1 
c. 2001 New York Times Company 
Natural gas prices have plunged in the last few months -- everywhere, that 
is, but Southern California. While gas in New York costs about $4 per 
thousand cubic feet, gas delivered to Southern California still costs more 
than $11 wholesale. 
That such numbers demand an explanation was about the only thing President 
Bush and Gov. Gray Davis could agree on when they met in Los Angeles a few 
days ago to discuss California's energy crisis. Mr. Bush assigned Patrick H. 
Wood III, a fellow Texan confirmed last month as a member of the Federal 
Energy Regulatory Commission, to investigate. 
To many experts, the woes of California's natural gas market are as profound 
as those of its electricity market: the state is short on pipelines, and the 
rules of the gas market, critics say, encourage sellers and traders -- 
including the biggest local gas utility -- to drive prices higher. 
At peak times, half of California's electricity is generated by gas-fired 
power plants, a higher proportion than in most parts of the country. And 
because 85 percent of the gas consumed in California comes from outside the 
state, the shortage of pipelines both into California and within the state 
has become a big handicap in fueling those plants. The strain has become 
especially acute as drought in the Pacific Northwest has curtailed imports of 
hydropower and gas-fired power plants have worked overtime to meet the 
demands of a booming state economy. 
Vice President Dick Cheney's energy policy report last month proposed 
initiatives to speed approval and construction of new pipelines, noting that 
New England and other regions faced capacity squeezes, too. The report says 
that the United States needs 38,000 miles of new gas transmission pipelines, 
almost a 20 percent increase. 
In the meantime, some industry executives and public officials take the 
argument one step further than the Bush administration, contending that 
today's shortage of capacity has made it possible for energy companies, 
intent on maximizing profits, to manipulate prices. 
''It really strains credulity to say this is a functioning market,'' said 
Representative Joe Barton, Republican of Texas, who as chairman of the House 
energy subcommittee has been leaning on the Federal Energy Regulatory 
Commission to scrutinize the California gas market. ''Reasonable people could 
conclude people have gamed the system.'' 
In one significant case, California utility regulators and Southern 
California Edison, one of the state's struggling electric utilities, have 
accused the El Paso Corporation of using its control of a major pipeline into 
the state to inflate prices artificially. El Paso officials deny wrongdoing 
and accuse California officials of making the company a scapegoat for the 
state's failure to build more pipelines. A judge at the federal energy 
commission is hearing the case in Washington. 
But fingers are pointing in other directions, too. 
For example, the Southern California Gas Company, the state's largest gas 
utility, has reaped huge profits buying and selling gas in the last year -- 
activity encouraged by state regulations intended to lower gas prices for 
consumers. But some gas marketers and electricity generators contend that the 
trading has contributed to price spikes, by tying up valuable pipeline space 
during peak times with gas shipments driven by financial deals, not power 
demands. 
At the same time, Edison says that Southern California Gas failed to put 
enough gas into storage last fall for residential and small-business 
customers. If so, that would have driven the gas company back into the market 
in the winter, when demand from power plant operators was high, helping push 
gas -- and hence electricity -- prices yet higher, Edison complains. 
Between them, El Paso and Southern California Gas were responsible for $3.7 
billion in excess prices for energy in the last year, Edison contends. 
Southern California Gas, a unit of Sempra Energy, denies that its trading has 
harmed the market. Rather, its executives note that electricity generators 
and industrial gas consumers -- which under state rules are responsible for 
managing their own gas supplies -- put very little gas into storage last 
year. By one estimate, large gas consumers in Southern California had only 11 
percent as much gas in storage at the end of November as they did at the same 
time during the prior two years. 
Another problem may emerge this summer, according to William L. Massey, a 
member of the federal energy commission. Mr. Massey said new commission rules 
intended to limit electricity price spikes in California will almost 
certainly prompt energy-trading companies -- which deal in both gas and 
electricity -- to manipulate gas prices. That is because the rules allow 
electricity generators to charge more if gas prices move higher. 
Similarly, growing attention is being paid to the role played by financial 
trading tied to the price of electricity and natural gas. Industry critics 
question whether huge trading volumes in these financial derivatives gives 
energy marketing companies the incentive to manipulate prices in tight 
markets. 
Federal regulators ''don't seem to understand that firms are really trying to 
make as much money as they can,'' said Severin Borenstein, director of the 
University of California Energy Institute, a research organization on the 
Berkeley campus. ''That's what they do for a living.'' 
Fixing the problem is simple, Mr. Borenstein said. ''If you build more 
capacity,'' he said, ''you reduce both the scarcity issue and you reduce the 
ability of people who currently own capacity to exercise market power.'' 
Regardless of whether companies are manipulating prices, the California 
natural gas market is fattening bottom lines. In the El Paso case, testimony 
has shown that pipeline capacity acquired by the company's marketing 
affiliate in March 2000 for $38.5 million produced profits of almost $900 
million over the next 13 months. 
El Paso said its share of those profits was $184 million, the rest going to 
other companies with which it entered into hedging transactions intended to 
limit El Paso's exposure if gas prices fell. About half of those transactions 
were with the biggest energy trader, the Enron Corporation, according to 
people present at briefings El Paso officials have given to California 
officials. 
An Enron spokesman, Mark Palmer, said it was possible that Enron took the 
other side of the trades, but he said that Enron would have resold the 
pipeline capacity almost immediately, thus profiting little from the rise of 
gas prices in California. 
Federal regulators, concerned that the high gas prices in California may not 
be legitimate, have proposed requiring companies selling gas in the state to 
disclose extensive data about their transactions. They are also considering 
whether to reimpose price caps on short-term sales of pipeline capacity that 
were eliminated early last year. 
Further, regulators are scrutinizing the so-called gray market in which 
energy marketers bundle gas and transmission capacity and sell it to large 
customers, like electricity generators, for one price. Federal regulators 
have oversight responsibility for the interstate portion of gas shipments, 
but they have not looked closely at these bundled transactions, Mr. Massey 
said. 
''The whole thing has fallen through the cracks,'' he said. 
Nearly all of California's gas comes from the Southwest, the Rocky Mountain 
states and Canada through a few huge, highly pressurized pipelines. In 
California, the gas is shunted onto intrastate pipelines that deliver it to 
consumers and to underground storage fields for later use. 
Those pipelines are now largely running full, and their capacity is about 300 
million cubic feet a day less than what interstate pipelines can deliver. The 
difference is the amount of gas it takes to continuously fuel a 1,300 
megawatt power plant -- enough to light more than a million homes. 
''It's not resources, it's straws -- the straws needed to suck this gas where 
it needs to go,'' said Thom Kelly, assistant executive director of the 
California Energy Commission. ''If the straws are full, that's a problem.'' 
Operators of interstate pipelines have proposed new construction that could 
double delivery to the state. Indeed, odd as it seems now, some in the 
industry worry that California could be ''overpiped'' later this decade, just 
as it was in the mid-1990's. 
Likewise, Southern California Gas plans only limited expansion of its 
in-state pipelines, partly because it expects demand to fall as hydroelectric 
power supplies return to normal levels and older, less efficient gas-fired 
power plants are phased out. 
But the gas company's intentions are regarded with skepticism by others in 
the industry. Some executives contend that Southern California Gas has 
damaged the marketplace through its enthusiastic embrace of a state program 
that allows it to split with customers the profits from buying, selling and 
lending gas. 
A coalition of power generators, including Reliant Energy, the Williams 
Companies and the Los Angeles Department of Water and Power, has complained 
to state officials that the program ''creates perverse incentives'' for the 
gas company. The generators say it results in extra demand for pipeline space 
when capacity already is at a premium, making prices more volatile. 
The consequences of the gas company's low storage inventories were evident in 
early December, according to John Stout, a senior Reliant executive. He 
recalled listening in on a conference call as a Southern California Gas 
official talked about injecting gas into storage. ''I was floored,'' Mr. 
Stout said. ''Prices were sky high, and they were putting more upward 
pressure on prices.'' 
Lee M. Stewart, president of energy transportation services for Southern 
California Gas, called the criticism ''bogus.'' The utility's storage and 
trading practices have neither hurt the market nor curtailed gas sales to 
customers, he said. 
''To say gas prices drive electricity prices is a falsehood,'' Mr. Stewart 
added. 
But to many regulators, it is clear that gas prices play an increasingly 
important role in electricity prices. 
Problems in the California natural gas markets ''haven't been given the 
prominence they deserve for the detrimental role they are playing in high 
electricity prices,'' said Linda K. Breathitt, another member of the federal 
energy commission. ''Natural gas prices have been the stepchild of this 
California crisis.'' 
This article is part of a joint reporting project with the PBS series 
''Frontline,'' which will broadcast a documentary about California's energy 
crisis tonight. 

Photo: This Redondo Beach, Calif., power plant, owned by the AES Corporation, 
uses natural gas, as do almost half of the state's electric plants. About 85 
percent of the gas consumed in California comes from outside the state. 
(Agence France-Presse)(pg. C12) Chart/Map: ''A Vital Network Under Pressure'' 
Though California is crisscrossed by natural gas pipelines, capacity is 
limited, magnifying the state's energy woes. Half of California's electricity 
is generated by gas-fired power plants, and the shortage of highly 
pressurized pipelines both into California and within the state has become a 
big handicap in fueling those plants. (Source: California Energy 
Commission)(pg. C12) 








Business; Financial Desk 
California PSEG Signs 10-Year Contract to Supply Electricity to State
? 
06/05/2001 
Los Angeles Times 
Home Edition 
Page C-2 
Copyright 2001 / The Times Mirror Company 
A California unit of Public Service Enterprise Group agreed to sell up to 430 
megawatts of electricity to the state's Department of Water Resources under a 
10-year contract, the company said Monday. 
GWF Energy said power deliveries are expected to begin in September when its 
90-megawatt "peaker" plant goes online in Hanford in California 's Central 
Valley. 
The company owns or operates seven small power units in the state and plans 
to build two more in the Central Valley. A peaker unit typically generates 
less than 300 megawatts of electricity --enough for about 300,000 homes--and 
runs during the hours of the highest demand for energy. 
The value of the contract with the water agency was not disclosed. 
Gov. Gray Davis ordered the agency to step in as California 's principal 
electricity buyer in January after PG&E Corp.'s Pacific Gas & Electric unit 
and Edison International's Southern California Edison subsidiary amassed 
about $14 billion in power purchase costs that they could not pass to 
customers under the state's flawed deregulation law. 
PSEG shares rose 29 cents to close at $51.34 on the New York Stock Exchange. 







California ; Metro Desk 
Panel OKs Subpoenas for Energy Companies Electricity : Special state Senate 
committee will demand pricing information in inquiry into whether California 
has been gouged.
CARL INGRAM; MIGUEL BUSTILLO
? 
06/05/2001 
Los Angeles Times 
Home Edition 
Page B-1 
Copyright 2001 / The Times Mirror Company 
SACRAMENTO -- The Senate Rules Committee agreed Monday to issue subpoenas to 
eight out-of-state power generating companies demanding documents on pricing, 
bidding and other aspects of electricity sales in the state. 
Sen. Joe Dunn (D-Santa Ana), chairman of the special Senate committee that is 
investigating whether power wholesalers are illegally profiteering from 
California 's energy crisis, said he expects the companies to resist. That 
would set the stage for a court fight, he said. 
In addition to subpoenas aimed at the private generating companies, the 
committee also put the Los Angeles Department of Water and Power on notice 
that unless it voluntarily provides information on its power sales to the 
state, the data will be subpoenaed as well. And the panel threatened to 
subpoena records of the state Department of Water Resources unless it turns 
over information on how it has spent more than $7 billion to keep electricity 
flowing in California . 
Under Senate regulations, Dunn's panel needed approval of the Rules Committee 
to issue the subpoenas. 
Industry executives deny that they have broken any laws in selling 
electricity at premium prices to California 's financially strapped utilities 
and the state water department. 
The subpoenas will be issued to Reliant Energy, which Gov. Gray Davis has 
publicly accused of price gouging, Dynegy Energy Services Inc., Williams 
Energy, Enron Corp., NRG Energy Inc., Duke Energy, Mirant Inc., and AES Corp. 
Dunn said executives of the generators seemed cooperative when the 
investigation was launched two months ago. Since then, he said, they have 
raised barriers, including demands that the confidentiality of their 
documents be protected. 
The demand for information from the Los Angeles DWP and the state's water 
resources department were pushed by Sen. Ross Johnson (R-Irvine), vice 
chairman of the rules panel. 
"Why are we not attempting to subpoena the Los Angeles Department of Water 
and Power? There certainly have been suggestions that they have profited," 
Johnson said, referring to reports from the California Independent System 
Operator about large profits that DWP made by selling power to the rest of 
the state. 
Reflecting the views of many lawmakers, Johnson said the Legislature also 
needs information on power purchases that the state water department makes 
from wholesalers and the bidding strategies used to make the bids. 
Davis has refused to make details of the purchases public. He contends that 
if generators knew how much the state was spending on power, they might raise 
their prices. Several news organizations and a legislator are suing to make 
the information public. 
Senate President Pro Tem John Burton (D-San Francisco), chairman of the Rules 
Committee, opposed issuing subpoenas to the city and state departments, at 
least temporarily, leading to the agreement for a one-week delay before 
subpoenas would be issued to the agencies. 
The big energy companies also took a hit Monday from a leading advocacy group 
for the poor. 
The Pacific Institute for Community Organization, a coalition of faith-based 
groups that has pressed for California to cover more of the millions of 
working citizens without any health insurance, voiced concern that the energy 
crisis is hitting the poor hardest. 
The group, which scheduled a Capitol rally today, plans to urge political 
leaders to use the economic power of the state's huge pension funds to 
leverage the companies. 
The two pension funds own at least $1.2 billion in stocks and bonds in most 
of the major firms involved in the state energy crisis, from Enron of Texas 
to Duke of North Carolina, the advocates said. 
"They could bring the voice of stockholders into the debate, as a major 
stockholder, and take a more enlightened view of what is happening to 
California ," said activist Jim Keddy. "We really have no voice inside those 
companies right now."