Please see the following articles:

Sac Bee, Tues, 5/29:  Lodi just says no to powers that be: 
Four times since March, the city kept the lights on as other towns went dark

Sac Bee, Tues, 5/29: Dan Walters: Debt dilemmas plague energy executives, 
ordinary workers alike


SD Union (AP), Tues, 5/29: Governor's rescue plan garners no support,
a newspaper reports

SD Union, Tues, 5/29:  In power crisis, is there ray of light at end of murky 
tunnel?

SD Union, Mon, 5/28:  Bush, Davis on collision course

SD Union, Sun, 5/27:  Republicans fiddle while Californians burn

SD Union (AP), Sun, 5/27:  Energy executive seeks state GOP support  (Enron 
mentioned)

SD Union (AP), Sat, 5/26:  State demands FERC close loopholes     

SD Union, Sat, 5/26: Changes in Senate could offer state relief        (Enron 
mentioned)

SD Union, Sat, 5/26: Natural gas CEO denies deal was improper

LA Times, Tues, 5/29:  Kern County Basks in Role as State's Blackout-Buster

LA Times, Mon, 5/28:  Plan to Rescue Edison Stalls

LA Times, Mon, 5/28:  Bush Could Boost Green Power With Buying Power

LA Times, Sun, 5/27:  Suddenly, Dirty Old Coal Is the Fossil Fuel of the 
Future

LA Times, Sun, 5/27:  Power Firm Chief Lists Solutions for Crisis

LA Times, Sat, 5/26:  State Renews Demand for Power Price Relief

LA Times, Sat, 5/26:  El Paso CEO Admits Approving Subsidiaries' Natural Gas 
Deal

LA Times, Sat, 5/26:  Police Support 48-Hour Alerts for Blackouts

LA Times, Sat, 5/26:  Outdoor Lights Still Burning

LA Times, Sat, 5/26:  Businesses Hopeful on Blackout Warnings

LA Times, Tues, 5/29:  Power Crisis Has Mileage for Bush            
(Commentary)

SF Chron (AP), Tues, 5/29:  Bush announcing low-income aid, but no price caps
			
SF Chron, Tues, 5/29:  Bush facing Davis' heat over energy 
In first visit to state as president, he'll hear governor's plea for help

SF Chron, Tues, 5/29:   Bush's first visit not so welcome 

SF Chron (AP), Tues, 5/29:  Californians revert to clotheslines, fans as they 
gear up for blackouts 

SF Chron, Tues, 5/29:  Crisis no sweat to some offices 
Many offices keep cool in crisis 
Air conditioners blast in state's energy centers 

SF Chron (AP), Tues, 5/29:  Stakes are high for Davis meeting with Bush

SF Chron, Tues, 5/29:   State gives president tepid ratings 
Power crisis blamed for 42% approval

SF Chron (AP), Mon, 5/28:   Calif. pawn businesses boom as energy bills rise

SF Chron (AP), Mon, 5/28:  Californians brace for a summer of blackouts

SF Chron, Mon, 5/28:  New Nevada-California energy plan surfaces at last 
minute

Mercury News, Tues, 5/29:  Bush feeling weight of state's energy crisis

Mercury News, Tues, 5/29:  New energy moves by W.House before Bush-Davis meet

OC Register, Tues, 5/29:  California should try true deregulation   
(Commentary)

Energy Insight, Tues, 5/29:  Look for more wellhead-power plant deals 
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Lodi just says no to powers that be: Four times since March, the city kept 
the lights on as other towns went dark.
By Stuart Leavenworth
Bee Staff Writer 
(Published May 29, 2001)

LODI -- In this old farm town, where ferment is largely confined to wine 
bottles, leaders are staging a Boston Tea Party against California's energy 
crisis. 
Lodi, population 57,000, is refusing to participate in the rolling blackouts 
that have swept across California. Four times since March, Lodi's electric 
utility has snubbed the state's power managers and kept its lights on while 
others went dark. 
The rock band Creedence Clearwater Revival once derided Lodi as a 
conservative backwater, but now, this town is leading an unlikely revolt that 
is being picked up by others statewide. 
"Lodi has something of an independent streak," said Steve Mann, a former city 
councilman in Lodi and one of many residents who support the city's utility. 
"It doesn't make sense that we should participate in blackouts when we have 
done everything we can to make sure we can avoid that." 
So far, Lodi has the only utility in the state to openly defy an on-the-spot 
call for blackouts. They did so twice in March, then twice again this month. 
This week, however, Riverside's utility said it, too, would not participate 
in forced outages, and leaders of some other "munis" may follow suit. 
Worried about a political snowball, Gov. Gray Davis met with leaders of the 
munis last week, but refused to exempt them from further blackouts. If that 
happened, the state's power managers would be unable to spread blackouts to 
25 percent of the state's households, putting the brunt on other parts of the 
state. 
"I'm sympathetic," said David Freeman, the governor's top energy adviser and 
a former leader of municipal utilities in Sacramento and Los Angeles. But 
Freeman, speaking with uncharacteristic guardedness, said it may not be 
practical "to separate out utilities that are an integral part of the grid." 
The self-proclaimed "wine grape capital of the world," Lodi would seem an 
unlikely hotbed for dissent. Creedence Clearwater once bemoaned being "stuck 
in Lodi." Instead of being offended by the song, many residents are glad 
their town isn't inhabited by a bunch of long-haired rabble-rousers. 
Even so, Lodi likes to defy convention when it comes to protecting its own. 
Two years ago, the city started waging battle against big insurance companies 
that didn't want to pay to clean up toxic substances from local businesses 
that had trickled into water supplies. 
In recent years, Lodi has spent millions sprucing up its once-dilapidated 
downtown, which soon will be crowned by a new 12-screen cineplex. 
But the town's biggest source of pride is its taxpayer-owned utility, which 
started in the 1890s when two brothers, Ed and Fred Carey, launched a water 
and electric utility. In 1910, they sold it to the city of Lodi for $35,000. 
Now, the utility provides $4 million to the town's coffers every year, with a 
$30 million annual budget. 
Like many other municipal utilities in Northern California, Lodi has more 
power lined up than it needs, but is dependent on Pacific Gas and Electric 
Co. to deliver that power to its doorstep. 
As a result, "Lodi's relationship with PG&E has been tenuous throughout its 
history," said Mann. One point of contention is the interconnection agreement 
among PG&E, Lodi and the town's fellow members in the Northern California 
Power Agency. 
PG&E officials say the agreement requires Lodi to shed power during any power 
shortfall. But Lodi contends the pact obligates the utility to impose 
blackouts only during "physical emergencies," such as a wind storm that 
knocks out transformers. 
"We don't see any compelling reason why Lodi should have to participate in 
rolling blackouts," said Alan Vallow, director of the city's utility. "You 
want me to turn customers off when we have the capacity to keep them on? That 
doesn't work for me." 
During a statewide call for blackouts, PG&E conceivably could just switch off 
power for Lodi if the city's utility didn't heed the call voluntarily. But 
Vallow doubts PG&E would take such a step. "That would be pretty extreme," he 
said. 
An engineer who used to work for Los Angeles' utility, Vallow has become 
"something of a folk hero" because of his stance, said Mann. Vallow is 
especially popular with Lodi's canneries, which need reliable power in the 
summer to pack fruit before it rots in the field. And most Lodites "are 100 
percent behind Mr. Vallow," said Marie Saunders, a longtime local resident. 
On the other hand, Lodi's City Council hasn't officially endorsed Vallow's 
decision, giving it an out should PG&E or state officials seek revenge. 
"If we weren't supportive, we would let Alan know," said Alan Nakanishi, the 
mayor of Lodi. "On the other hand, if we do get retribution, we may say to 
Al, 'Hey, what is all this about?' " 
So far, PG&E hasn't threatened any action against Lodi, but experts say the 
town is venturing into murky legal territory. 
"It is a legal question that hasn't been resolved," said John Fistolera, 
legislative director of the Northern California Power Agency, a group of 
municipal utilities that includes Lodi. 
The Sacramento Municipal Utility District, which is not part of NCPA, also 
has taken a cautious approach. Earlier this year, at least one SMUD board 
member recommended the utility follow Lodi's example. But the idea was 
dropped amid fears that SMUD, being a bigger utility, could face a legal 
fight that PG&E wouldn't mount against little Lodi. 
"I really admire what Lodi has done," said Linda Davis, a SMUD board member. 
"But I don't want to end up in court, and I fear SMUD would end up in court." 
Instead of an open rebellion, SMUD has joined the Southern California town of 
Vernon and 13 other cities in appealing to the Federal Energy Regulatory 
Commission. They want FERC to exempt them from blackouts ordered by the 
state's grid manager, the Independent System Operator. 
ISO officials argue that "load shedding" from the municipal utilities is 
vital for maintaining balance on the grid during shortfalls. But SMUD and the 
other municipalities say they shouldn't be penalized for lining up power 
reserves that have eluded the state's big utilities, especially with the 
state facing dozens of blackouts this summer. 
"Like Vernon, SMUD has grave concerns over the prospect of sharply escalating 
the number and duration of blackout occurrences directed by the ISO on a 
grid-wise basis over the upcoming summer months," SMUD wrote to FERC. 
Last week, the Riverside City Council voted to stop participating in 
blackouts ordered by the ISO. Like Lodi, Riverside says its conservation 
programs should be taken into account in ISO's attempts to deal with power 
shortages. 
Vallow says Lodi has done everything it can to help the state. In January, 
the city complied with blackout orders, then purchased long-term contracts 
that gave it a 40 percent surplus in power reserves. 
To pay for those reserves, the utility increased customer rates by as much as 
15 percent. 
Since then, the city has sold excess power back to the state to help with 
shortages. But Vallow also has told the state that Lodi will not participate 
in further blackouts. 
Vallow calls it the "SET" program, which stands for "System, Electric supply 
and Team." 
"We've done everything the state should have done to avoid the crisis we are 
in now," said Vallow. "We are SET." 

The Bee's Stuart Leavenworth can be reached at (916) 321-1185 or 
sleavenworth@sacbee.com.




Dan Walters: Debt dilemmas plague energy executives, ordinary workers alike


(Published May 29, 2001) 
The Bible, in one of its many warnings to the faithful about incurring debt, 
makes this pithy observation: "The rich rule over the poor and the borrower 
is servant to the lender." 
Credit may have become the essential underpinning of a modern industrial 
society, from the billions of dollars in operational financing arranged by 
governments and corporations to the credit card transactions of everyday 
consumers, but our uneasiness about debt continues. 
California's two major utilities ran up more than $13 billion in debt to buy 
power at prices far higher than consumers were paying, until lenders cut off 
their credit. And the state government then stepped in and has incurred an 
additional $7.7 billion in debt -- with plans to nearly double its borrowing 
to over $13 billion -- to keep the lights burning. One utility has sought 
bankruptcy protection and another is on the verge; the state's heavy power 
purchase debts have undermined its credit rating and its ability to finance 
other spending. 
While the governor and state legislators ponder these multibillion-dollar 
questions of debt, they also must decide what to do, if anything, about the 
relatively tiny debts that poor Californians are incurring. The practices of 
so-called "payday lenders" and those making home-secured loans to the elderly 
and working poor are generating sharp conflicts in the Capitol. 
The "payday loan" business has mushroomed since being expressly authorized by 
1996 state legislation. Storefront businesses offering short-term loans at 
high interest rates have exploded from almost none to more than 3,000 in the 
state, often replacing pawnbrokers as lenders of last resort. 
Critics see the trade as legalized usury, in which cash-poor borrowers not 
only are tapped for very high interest rates -- as much as 900 percent per 
year -- and are forced, in effect, to roll over the loans week after week. 
Sen. Don Perata, D-Alameda, is carrying a measure that would tighten up 
payday loan practices, the latest in a long string of proposals that have 
died at the hands of fellow Democrats in legislative committees, thanks to 
the efforts of lenders and their lobbyists. Assemblyman Dario Frommer, D-Los 
Angeles, meanwhile, is carrying a measure that lenders back as a compromise, 
although it's been denounced by consumerists as a smoke screen. 
A similar battle is being waged over what critics describe as "predatory 
lending" by home loan subsidiaries of major banks. Consumer activists argue 
that the lenders are enticing low-income and/or elderly borrowers into 
pledging their homes for "subprime" loans -- even many who could qualify for 
more conventional, lower-cost mortgages. The borrowers, say critics, are 
paying higher interest rates and higher fees, are being saddled with unneeded 
mortgage life insurance and often are at risk of losing their homes to 
foreclosures. 
Sen. Joseph Dunn, D-Santa Ana, is carrying a consumer group-backed bill, 
pending in the Senate Banking Committee, but bankers have mounted a stiff 
opposition campaign and the fate of the bill is in doubt. Dunn and his 
supporters need five of the six Democrats on the committee to vote for the 
bill, and the heaviest lobbying attention is being focused on two uncommitted 
Democrats from conservative Central Valley districts -- Mike Machado of 
Linden and Jim Costa of Fresno. Last week, consumer activists staged a 
symbolic march on the Capitol to press their cause. 
The questions that surround both issues are similar: Should the state protect 
borrowers from agreeing to loans that carry high interest rates and other 
charges, as long as they are aware of the risks and costs they are incurring? 
Are those rates and fees justified by the higher costs, including higher 
default rates, that lenders experience in making loans to those of marginal 
creditworthiness? 
They are not dissimilar to the questions that are being raised about the huge 
debts that the utilities and the state -- institutions presumably operated by 
sophisticated executives -- have assumed. The blue-collar worker who takes 
out a high-cost payday loan to keep his own lights burning is not that much 
different from the governor. 

The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com
.












Governor's rescue plan garners no support, a newspaper reports 



ASSOCIATED PRESS 
May 28, 2001 
LOS ANGELES ) Leaders of both houses are against Gov. Gray Davis' plan to 
rescue Southern California Edison from bankruptcy, the Los Angeles Times 
reported Monday. 
Not only has the more than $3 billion plan failed to garner support but 
efforts by lawmakers to come up with an alternative are also falling by the 
wayside. 
The stakes are high, because restoring Edison to financial health and 
requiring Edison to temporarily sell power at lower prices are vital to 
Davis' plan to get the state out of the business of buying electricity. 

Nevertheless, leaders in the Legislature say the governor's approach has few 
backers. 
"I don't think the governor's (plan) has support in either party in either 
house," Assembly Speaker Bob Hertzberg, D-Sherman Oaks, told the Times. "The 
issue is whether we can come up with something else, and I think we can." 
Senate leader John Burton, D-San Francisco, has been critical of the deal 
Davis and Edison put together from the outset. He said it is certainly dead 
in the Legislature, but that a more far-reaching proposal may still emerge. 
"Hopefully, we will find a long-term solution" to the state's energy crisis, 
Burton said. The Edison deal alone "is not going to solve anything. It is not 
going to reduce rates, and it is not going to prevent blackouts," he said. 
In both the Assembly and Senate, most Democrats and Republicans are convinced 
there is no way for them to save Edison without appearing to sanction a huge 
bailout. Therefore, they want to get something of value in return from Edison 
) high-voltage transmission lines, hydroelectric power plants or guarantees 
that the utility will boost energy supplies ) but are sharply split on what 
is best. 
Democrats, who hold majorities in both houses, cannot agree on how to save 
the utility ) or whether it is even proper for the government to do so. Some 
believe that the state would be better off letting Edison file bankruptcy 
like Pacific Gas & Electric. 
Meanwhile, their efforts to forge a bipartisan solution with Republicans have 
are not going well. 
Despite the setbacks, Davis and many lawmakers still say some form of the 
Edison rescue plan will clear the Senate and Assembly this summer. But since 
Davis announced he had reached a deal with Edison executives to save the 
utility in April, nothing has been accomplished in the Legislature to 
implement it. 
The rescue deal Davis reached with Edison calls for the state to pay the 
utility $2.76 billion for its power transmission lines. It would allow the 
state to issue bonds to finance the purchase, and declares that Edison is to 
use the money to reduce its estimated $3.5 billion debt. 
The deal also would set aside a portion of ratepayers' monthly utility bills 
to pay off Edison's "undercollections," huge debts the utility incurred last 
year and early this year because it was not allowed by the state to pass on 
to consumers the full cost of wholesale power. 
In return, Edison would agree to sell the electricity it generates from its 
power plants at cost for the next decade, lowering the state's overall 
power-buying expenses. 
Lawmakers from both parties have called the deal overly generous and 
questioned the benefit to the public. 







In power crisis, is there ray of light at end of murky tunnel? 



By Ed Mendel 
May 28, 2001 
SACRAMENTO -- Is California, at long last, about to catch a break in the 
electricity crisis, or will the cost of power this summer short-circuit the 
state budget, forcing painful cuts? 
Among the doom and gloom of blackout preparations last week, there were a few 
faint flickers of hope. 
Some prices for summer power have dropped. State power buyers smoothly 
handled high loads during two hot days. A big generator, Mirant, unexpectedly 
agreed to provide 500 megawatts through the summer at a reasonable price. 
Davis administration officials are sticking with their forecast, derided by 
some as a "hope and expectation," that the average price the state will pay 
for non-contracted power will drop this summer. 
"It's very doable," said Ray Hart, head of the power purchasing unit in the 
state Department of Water Resources. 
The forecast by Davis consultants expects the average of $346 per megawatt 
hour paid by the state for non-contracted power in April through June to drop 
to $195 in July through September. 
But skeptics fear that as heat drives up the demand for power, the state will 
get a double whammy -- soaring spot-market prices because of a regional power 
shortage, and a series of disruptive and dangerous blackouts. 
The state, in what Vice President Dick Cheney calls a "harebrained scheme," 
began buying power for utility customers in January after a failed 
deregulation plan forced the utilities deep into debt. 
The Davis administration notified the Legislature last Wednesday that in 10 
days the state general fund will begin spending another $500 million 
increment for power, bringing the total since January to $7.7 billion. 
Now it's nervous time at the Capitol until the general fund is repaid by a 
bond issue of up to $13.4 billion, which is expected to be issued in late 
August and September and paid off by ratepayers over 15 years. 
What if there is a snag? Or spending on power soars? State Controller 
Kathleen Connell is predicting that the state will have to borrow more money 
than planned, perhaps an additional $4 billion. 
As for the flicker of hope, a reporter for a publication that tracks power 
said prices at the Palo Verde hub, which serves Southern California, have 
dropped significantly since April for deliveries in July through September. 
"My personal opinion is, they probably won't get back up to where they were 
during the highs," said Mike Wilczek of Platts Power Market Week. 
Another journalist who tracks power prices, Arthur O'Donnell, editor of 
California Energy Markets, sees no trend other than volatility. 
"It depends largely on what the weather is," O'Donnell said. "The expectation 
is that August is going to be the ugly month, and that is being reflected in 
the future prices." 
O'Donnell said he was encouraged that the state Department of Water 
Resources, which lined up some power purchases in advance, handled 
heat-driven high loads last Monday and Tuesday without declaring an 
emergency. 
"What it tells me is, DWR is learning its job," O'Donnell said. 
The state is counting on an ad campaign and "sticker shock" from rate 
increases to reduce power use this summer. And the amount of cheaper power 
obtained through contracts, now less than half the total, is expected to 
increase to about two-thirds in June through August. 
"I think this month is a harder month to get through than those months," said 
DWR's Hart. 
Ed Mendel is Capitol bureau chief for the Union-Tribune. 








Bush, Davis on collision course 



President, Cheney firm: No price caps
By Toby Eckert 
COPLEY NEWS SERVICE 
May 27, 2001 
WASHINGTON -- When President Bush and Gov. Gray Davis meet this week to 
discuss California's power crisis, it will be a close-up clash of ideologies 
that until now have been playing out long distance. 
To Californians struggling with rolling blackouts and skyrocketing power 
bills, Bush's allegiance to free-market principles and his rejection of 
electricity price controls can seem baffling -- if not payback for the 
state's vote against him in the presidential election. 
Yet a look at the record shows that Bush and his energy czar, Vice President 
Dick Cheney, share an unshakable faith in open power markets shaped by 
conservative politics and their long association with an industry that has 
benefited greatly from deregulation.

It is a view fortified by energy company executives who enjoy easy access to 
top administration officials and counsel against measures like price 
controls. One company in particular, power marketer Enron Corp., appears to 
wield great influence with the White House on energy policy. 
Davis argues that because the deregulation plan adopted by the state in 1996 
turned out to be deeply flawed, a truly free market doesn't exist. Power 
marketers and generators now have enough leverage to charge, on average, more 
than $330 per megawatt-hour of electricity, 10 times what they were getting 
just a year ago. 
Temporary Western price controls -- based on the cost of producing the power 
and a hefty, built-in profit margin for the power sellers -- would provide a 
respite until the problems are fixed, Davis contends. A recent Field Poll 
shows that an overwhelming majority of Californians, Republican and Democrat, 
share that view. 
"It would be a grave mistake for the Bush administration to allow rigid 
ideology to stand in the way of doing what's best for our country," a 
frustrated Davis said recently. "Deregulation is not a religion." 
The White House flatly denies it is looking at the issue with ideological 
blinders on, or through an energy industry prism. Bush and other 
administration officials argue that price controls have a proven history of 
backfiring -- drying up energy supplies at the same time they encourage more 
consumption. 
"The president and this administration do not support price caps because they 
don't work," said White House spokeswoman Claire Buchan. 
The folly of price controls is an article of faith in the oil industry, which 
was long subjected to them. Both Bush and Cheney prospered in that industry. 
Bush founded an oil company in his native West Texas in 1977, shortly after 
graduating from business school. Arbusto Energy didn't find much oil, but 
Bush profited greatly in the boom-and-bust industry through mergers with 
bigger industry players. 
Before Bush plucked him out of the private sector, Cheney headed Halliburton 
Co., a leading oil-field services firm based in Dallas. 
"I think there's no doubt that their views have been shaped by their 
backgrounds in the industry and their broader ideological views about 
markets," said political analyst Stuart Rothenberg. 
Cheney in particular has expressed a visceral aversion to price controls. His 
experience helping to craft broad wage and price limits in the Nixon 
administration left an indelible mark. 
"The night the control regulations went to the Federal Register to be 
published, they were 14 pages long. I know, because I typed them," Cheney 
said recently. "When we got through a couple years later, we had a roomful of 
regulations." 
The price controls aggravated the oil shortage that plunged the nation into 
an energy crisis in the 1970s, Cheney argues. 
"You could control domestic oil prices, but you couldn't control the price of 
imports that were set by the international market. .?.?. A lot of companies 
shut down, quit producing domestically," he said. 
The new breed of power generators and marketers spawned by the nationwide 
move toward electricity deregulation are also, by and large, fierce opponents 
of price controls. Houston-based Enron in particular has positioned itself as 
a major player in the world of freewheeling power sales, including in 
California. 
Enron and its executives have been among Bush's biggest supporters throughout 
his political career and enjoy an unusually close relationship with the 
president. Company Chairman Kenneth Lay was one of the "Pioneers" who raised 
at least $100,000 for Bush during the presidential campaign. 
Enron's political action committee and its executives poured $113,800 into 
Bush's coffers and put a corporate jet at his disposal, according to the 
Center for Responsive Politics, which tracks political spending. 
Two top Bush administration officials -- economic adviser Lawrence Lindsey 
and U.S. Trade Representative Robert Zoellick -- once served on an Enron 
advisory board. 
As Cheney was crafting the administration's recently unveiled energy policy, 
Lay was one of the handful of people who got to meet with him. Lay presented 
a three-page, eight-point list of priorities for open power markets, 
including an admonition that the administration "should reject any attempt to 
re-regulate wholesale power markets" with price caps or other controls. 
Davis, by contrast, was invited to simply submit a one-page memo to the 
energy task force, his spokesman said. 
Lay also reportedly advised the Bush administration on appointments to the 
Federal Energy Regulatory Commission. The commission has the power to impose 
price controls, but has so far balked at Davis' proposal. 
Enron's clout with the administration has stoked the suspicions of critics. 
"It's Lay that drives the policy," said Craig McDonald, director of Texans 
for Public Justice, which tracks political spending in that state. 
Enron spokesman Mark Palmer dismissed such talk as "outrageous." 
"The Cheney task force met with dozens of trade groups, industry 
representatives, politicians, regulators," Palmer said. 
But in recent weeks, even the normally cautious Davis has highlighted the 
Texas ties of the energy companies that have profited from California's 
travails, saying at one point that the Bush administration was allowing the 
companies "to get away with murder." 
The White House says such allegations are just overheated rhetoric. 
"That's goofy. It doesn't even merit a response," Cheney said when asked 
about Davis' comments. "The president and I are making decisions and policy 
based on what we think makes sense for the country." 







Republicans fiddle while Californians burn 



By Bill Ainsworth 
UNION-TRIBUNE STAFF WRITER 
May 27, 2001 
CALIFORNIA'S POWER CRISIS 

SACRAMENTO -- Once upon a time, California Republicans faced a Democratic 
governor with ratings in the stratosphere, a Legislature dominated by his 
party and no popular issues to help improve their lowly status. 
Then the energy crisis hit. As power prices jumped, blackouts hit and the 
governor hesitated, the formerly unbeatable candidate and his party suddenly 
seemed vulnerable. 
Yet California Republicans are having trouble taking advantage of this 
seemingly golden political opportunity. As Davis struggles to extricate 
himself from the energy quagmire, GOP leaders are also flailing about, mired 
in contradiction, indecision and debate. 
Although most Californians blame the power generators for the crisis, the 
Republicans' reflexive support of big business makes them unwilling to 
criticize the out-of-state "entrepreneurs." Meanwhile, the party's lack of a 
strong leader or well-known gubernatorial candidate means that it doesn't 
have a loud voice in the Capitol. 
Republican consultant Dan Schnur, whose former boss, Gov. Pete Wilson, thrust 
deregulation upon the state, said Republican leaders made a mistake by not 
offering an alternative plan once the crisis hit. 
"Keeping their heads down did nothing but leave the playing field open to 
Gray Davis," he said. 
Republicans have recently sketched out some proposals, but these appear 
contradictory and politically dangerous. 
The party opposes Davis' creation of a state power authority, with some 
blasting it as "socialism." 
"America is built on a capitalist system -- not on socialization," said 
Assembly Republican Leader Dave Cox, R-Fair Oaks. "Socialism has failed 
throughout the rest of the world." 
Yet Assembly Republicans want to make it easier for San Diego County to 
create a publicly owned municipal utility district. 
Cox said local power isn't socialism because its board members are elected. 
The board of the state authority is composed of appointed and elected 
officials. 
Assemblyman Mark Wyland, R-Escondido, who is pushing a San Diego utility 
district, said he believes the difference is local control. 
"People want to control their own energy destiny," he said. "They don't have 
any control over a statewide bureaucracy." 
Davis chastised Republicans for putting ideology above pragmatism. 
"They're very quick to say we need more supply, but when you have a measure 
that would lead to more supply, they quickly retreat to their ideological 
point of view and refuse to be problem solvers," he said. 
Republicans also opposed the Democrats' plan to replenish the state treasury 
for the money it has spent on buying power by floating a $13.4 billion bond 
that would be repaid by ratepayers. They claimed that the bond was so large 
it was fiscally irresponsible. 
Yet the Assembly Republicans' alternative plan would have led to massive 
budget cuts. They wanted the state to give away about $5 billion it had to 
spend to buy electricity on the spot market -- and that money would have been 
a subsidy largely to business and large users of electricity. 
Democrats passed the bond plan anyway, but the Republicans' opposition 
delayed the sale until August. Davis charged the delay cost the state an 
extra $50 million to $150 million in bond charges. 
Republicans have also been hurt by their unwillingness to crack down on the 
mostly out-of-state generating companies and natural gas companies. 
According to last week's nonpartisan Field Poll, the vast majority of 
Californians believe that these companies are to blame for piling up enormous 
profits at California's expense. 
Davis and the Democratic leaders have proposed a windfall profits tax on 
generators. 
By contrast, Cox opposes the tax, worrying that it will hurt the business 
climate. Davis calls the power producers "price gougers," while Cox refers to 
them as "entrepreneurs trying to maximize profits." 
A recent Assembly investigation into California's high natural gas prices 
highlighted the GOP's reluctance to criticize energy companies. 
Assembly Democrats issued a report accusing a Texas natural gas company, El 
Paso Corp., of making a sweetheart deal with an affiliate that allowed it to 
manipulate the natural gas market. That deal, the report charged, contributed 
to soaring prices for California consumers and astronomical profits for the 
company. 
The key Republican committee member, Assemblyman John Campbell, R-Irvine, 
issued a dissenting report, attributing El Paso's profits to supply and 
demand. 
Assemblyman Juan Vargas, D-San Diego, said Republicans are backing the wrong 
side. 
"They're siding with Texas oil interests and Texas gas interests and that's 
going to get them in trouble," he said. 
Republicans may also suffer from association with President Bush, who is 
visiting California this week. The Republican president's close ties to the 
oil industry and refusal to back wholesale electricity price caps have made 
him unpopular with California voters, said Bruce Cain, a UC Berkeley 
political scientist whose view is backed by state polls. 
Bill Jones, the only announced Republican candidate for governor, commended 
Bush's energy plan -- even without price caps. 
Jones, secretary of state, released his plan so quietly some wondered whether 
he was trying to avoid publicity. Jones criticized Davis for "socializing the 
delivery" of power and called on the state to help its utilities by loaning 
them money. 
Despite their missteps, though, the Republicans still have time to develop a 
coherent alternative. The energy crisis isn't going away. 
"Most voters understand that the Democratic plan hasn't worked," said Schnur, 
"but at some point they'll want to see an alternative. The Republicans are 
starting to do that." 
Republicans can claim credit for urging Davis to act more quickly. Last 
summer when the price spikes hit San Diego and threatened to spread, they 
asked the governor to call a special session. He ignored their pleas. 
And Republicans voted against the January measure that got the state into the 
power buying business, a move that Democrats said was required to keep the 
lights on, but now threatens the state's fiscal health. 
Still, if the generators remain unpopular, the GOP could suffer. 
"The Republicans have an inability to distinguish between market manipulation 
and a well-functioning market," said Cain. "The perception that the party is 
tied to the big energy companies isn't helpful." 

ANALYSIS








Energy executive seeks state GOP support 



Politicians, celebs at secret meeting
ASSOCIATED PRESS 
May 27, 2001 
SAN FRANCISCO -- In a move to garner support from prominent California 
Republicans, a Texas energy executive attended a secret meeting to push for 
the preservation of the state's deregulated power market, a newspaper 
reported yesterday. 
Houston-based Enron Corp. Chairman Kenneth Lay met with well-known 
Republicans, including movie star Arnold Schwarzenegger, Los Angeles Mayor 
Richard Riordan and Michael Milken, who pleaded guilty to fraud charges in 
1990 as head of the Drexel Burnham Lambert investment banking firm, the San 
Francisco Chronicle reported. The 90-minute private meeting took place May 11 
at a Beverly Hills hotel. 
Schwarzenegger and Riordan have both been courted as Republican candidates 
for California governor. 
Enron distributed a four-page plan at the meeting calling for ratepayers to 
cover the billions in debt racked up by the state's public utilities and 
contending that state and federal investigations of price gouging are 
hindering the situation, the Chronicle reported after obtaining a copy of the 
paper. 
"Southern California Edison is very close to bankruptcy, and no one around 
the table wanted that to happen," Enron spokeswoman Karen Denne said 
yesterday. "There was considerable frustration that a solution is not being 
advanced at the legislative level." 
But Gov. Gray Davis' spokesman Steve Maviglio called the paper a "generator's 
wish list," saying it goes against the governor's policy on the energy 
crisis. 
"The governor is not calling off the dogs," Maviglio said yesterday. "To 
suggest that ratepayers should shoulder the entire burden of deregulation is 
totally the opposite of what the governor is calling for." 
Lay and Davis have disagreed about how California's power crisis should be 
handled, and Lay says his company is being used as a scapegoat. 
The meeting was hosted by Kevin Sharer of biotech giant Amgen. About a dozen 
people attended, including chief executives Ray Irani of Occidental Petroleum 
and Bruce Karatz of home builder Kaufman & Broad, Denne said. 
Lay, who is a friend of President Bush and one of his largest campaign 
contributors, has built the world's largest energy-trading company by buying 
electricity from generators and selling it to consumers. During the first 
quarter of this year, Enron's revenue increased 281 percent to $50.1 billion. 







State demands FERC close loopholes 



By Jennifer Coleman 
ASSOCIATED PRESS 
May 26, 2001 
SACRAMENTO -- California made new demands for tough federal electricity price 
caps yesterday and singled out two generators that it said should roll back 
rates immediately. 
The filings by several state agencies were in response to a Federal Energy 
Regulatory Commission order last month that offered limited price controls in 
exchange for concessions on control of the state's power grid. 
"FERC's pricing plan is laced with loopholes," Gov. Gray Davis said. "It's 
worse than too little, too late. It's simply a fig leaf that does nothing to 
address the impact of the energy crisis on California and our nation." 
The state's multiple filings also said that two generators, Williams and AES, 
have profited excessively by exercising market power. 
The Electricity Oversight Board, the Public Utilities Commission and the 
Independent System Operator asked FERC to require the generators to use 
cost-based rates, which limit company profits to a percentage above the costs 
to produce power. 
In order to escape charging cost-based rates, generators must prove to FERC 
that they don't have market power -- the ability to charge whatever price 
they want without consequence. 
The ISO, keeper of the state's power grid, said the two companies have 
exhibited that they have market power and the ability to charge market-based 
rates should be revoked. 
Aaron Thomas, spokesman for the Arlington, Va.-based AES, said the company 
has applied to have its ability to charge market-based rates renewed, and 
expects FERC to approve that request. 
"The governor, for six months now, has been calling for a form of cost-based 
rates from FERC, so I don't think anything has changed," said Thomas. 
Earlier this month, Tulsa-based Williams agreed to pay $8 million to settle 
charges with FERC that the company was purposely withholding electricity from 
California's power market. The company admitted no wrongdoing, and officials 
said a full hearing would have cleared the company. 
ISO attorney Charles Robinson said the agency is also considering similar 
requests for revocation of the market-power authority of three other 
generators -- Duke Energy, Reliant and Mirant. 
Sen. Joe Dunn, D-Garden Grove, chairman of the Senate subcommittee 
investigating the electricity wholesale market, said FERC has never adopted a 
definition of market power, leaving open the question of how they can 
determine if the generators don't have it. 
"That calls into question whether FERC must revoke market-based rate 
authority retroactively," Dunn said. "That may require a reimbursement of the 
difference between what would have been cost-based rates and what they've 
been charging." 
The FERC order in April establishes some price controls when the state's 
power reserves drop below 7.5 percent. That is scheduled to take effect 
Tuesday, unless the FERC orders otherwise over the holiday weekend, Robinson 
said. 
The state Assembly, in documents to be filed Tuesday, said those price 
controls should cover all hours -- not just during power emergencies. The 
Assembly's filing calls that order "arbitrary and capricious," and says the 
order does nothing to curtail unreasonable prices unless reserves drop. 
Earlier ISO studies have estimated that California was overcharged more than 
$6 billion in the last year. FERC has ordered refunds for a fraction of that 
-- $125 million -- saying it can only examine prices for power sold during 
Stage 3 emergencies, when reserves drop to below 1.5 percent. 
The Assembly's filing also will object to FERC's requirement that the state 
join a regional transmission organization in order to get price controls. 
Robinson, the ISO attorney, said the ISO would make a decision next week 
whether to file a plan to join an RTO. 
The state agencies also objected to a FERC plan to put a surcharge on energy 
rates to pay money owed to generators. 








Changes in Senate could offer state relief 



By Finlay Lewis and Toby Eckert 
COPLEY NEWS SERVICE 
May 26, 2001 
WASHINGTON -- After weeks of impasse, a plan to bring emergency relief to 
California's suffering electricity customers suddenly seems likely in the 
Senate because a sympathetic friend unexpectedly finds himself in a position 
to help. 
This dramatic reversal of fortune will occur when Sen. Jeff Bingaman, D-N.M., 
becomes chairman of the Senate Energy and Natural Resources Committee because 
of Vermont Sen. James Jeffords' defection from the GOP. 
Bingaman is expected to take control of the committee next week when Jeffords 
officially becomes a political independent and throws control of the chamber 
to the Democratic Party. Bingaman will replace Sen. Frank Murkowski, 
R-Alaska, a strong ally of the energy industry. 
Unlike Murkowski, Bingaman supports a bill championed by Sens. Dianne 
Feinstein, D-Calif., and Gordon Smith, R-Ore., to impose temporary restraints 
on wholesale power sales in the West. The bill is likely to command a 
majority if it comes to a vote in the committee. 
The price caps still face fierce resistance in the House and at the other end 
of Pennsylvania Avenue, where President Bush, armed with a veto pen, and Vice 
President Dick Cheney steadfastly resist movement toward any form of price 
controls. 
But because of a committee chairman's agenda-setting power, Bingaman's 
ascension would dramatically shift the prospects of the Feinstein bill and 
other energy issues in the Senate. 
Bush's proposal to open the Arctic National Wildlife Refuge to oil 
exploration already faced difficulty, but now opponents will have easier 
means to block it. And other environmentally contentious energy proposals 
could face tough scrutiny from Jeffords, who is expected to become chairman 
of the Senate's Environment and Public Works Committee. 
Still, the president will have the power to enact the bulk of his energy 
program because fewer than two dozen of his 105 proposals need congressional 
action. 
But the shift in the Senate allows Democrats to advance their own plan. At 
the top of the list are temporary price controls. 
"It's a priority for Sen. Bingaman," said Jude McCartin, a spokeswoman for 
the senator. "He would like to act quickly to meet the challenges." 
"Bingaman is from a Western state, unlike Murkowski," said Ashley Brown, 
executive director of an electricity-policy think tank at Harvard University. 
"His geographic outlook is going to be different. He is also going to be 
sensitive to Democratic senators from California. It's going to mean more to 
him than it meant to Murkowski." 
McCartin and aides to Feinstein were guardedly optimistic about the measure's 
prospects should the bill reach the Senate floor, where its bipartisan 
parentage will likely guarantee bipartisan backing. 
That does not mean Feinstein's bill is home-free. 
Bush and Cheney's opposition to price caps is rooted firmly in their belief 
that they would discourage investment in the energy industry, thereby 
resulting in even shorter power supplies and more California blackouts. 
In the House, a companion bill to the Feinstein-Smith measure is snarled in 
complex and inconclusive negotiations in the House Energy and Commerce 
Committee, and the House Republican leadership would be poised to bury any 
measure that might make it to the floor in defiance of Bush's wishes. 
But other factors may be bolstering prospects for action to ease the 
California crisis. 
McCartin pointed to the Senate's unanimous vote yesterday afternoon 
confirming two Bush nominees to posts on the Federal Energy Regulatory 
Commission as signaling a possibly more activist bureaucratic policy in 
dealing with the state's problems. 
The two new members of the nation's major regulatory authority over the power 
industry are Pat Wood III, the head of the Texas Utility Commission, and Nora 
Brownell, a Pennsylvania utility regulator. 
Bush reportedly plans to replace FERC Chairman Curtis Hebert with Wood. 
While observers say it is unlikely that Wood and Brownell would defy the 
White House, they note that the appointees have indicated they might take a 
more expansive view than most current FERC commissioners to bring relief to 
California. 
Once the Democrats take formal control of the Senate, probably about June 5, 
there could be other actions affecting California's power problems. 
Feinstein yesterday urged the likely chairman of the Senate Governmental 
Affairs Committee, Sen. Joseph Lieberman, D-Conn., to investigate whether 
energy companies are improperly influencing the FERC. 
She cited a report in yesterday's New York Times that Kenneth Lay, the head 
of Enron Corp., a Houston-based power marketing company, had offered to back 
Hebert in his effort to remain at the commission's helm if Hebert supported 
Enron's positions on electricity deregulation. 
Enron outpaced all other energy companies last year in contributing to GOP 
campaigns, while Lay has personally been one of Bush's most generous 
financial backers. 
"Since FERC has refused to fulfill its legally mandated function under the 
Federal Power Act to restore 'just and reasonable' electricity rates, we need 
to ask whether undue influence by the companies that FERC regulates has 
resulted in its failure to act," Feinstein wrote in a letter to Lieberman. 
Senate passage of the Feinstein-Smith bill would send the measure to the 
House, where some Republican House members from California face close 
re-election races next year. 
A Field Poll recently showed that 75 percent of state residents view the 
electricity situation as "very serious" and that 59 percent say it was caused 
by energy companies seeking to increase profits. 
Democratic strategists, citing those findings, say some California lawmakers 
visiting their districts over the Memorial Day recess may come under pressure 
to take strong action to restrain energy prices. 







Natural gas CEO denies deal was improper 



By Joe Cantlupe 
COPLEY NEWS SERVICE 
May 26, 2001 
WASHINGTON -- The head of a Texas energy company that is accused of 
wrongfully driving up California's natural gas prices told a federal 
administrative law judge yesterday that he approved a deal between two 
subsidiaries, but denied that it was an improper, sweetheart arrangement. 
William Wise, the chief executive officer of El Paso Corp., said the 
Houston-based company has "stringent" rules that separate the operations of 
its pipeline subsidiary, El Paso Natural Gas, from its gas marketing 
division, El Paso Merchant Energy. 
"Functionally, that is the way they perform," said Wise of the corporate 
subsidiaries. "They can be very autonomous from each other and the parent 
company." 
Wise defended the corporation's practices in testimony before Curtis L. 
Wagner, Federal Energy Regulatory Commission administrative law judge. 
Wagner is examining allegations by California officials that El Paso and its 
divisions entered into improper business practices before the deal was 
struck. California officials charge that El Paso bolstered profits by 
withholding natural gas capacity, costing the state about $3.7 billion. El 
Paso officials deny the allegations. 
FERC's governing body has dismissed allegations of an improper relationship 
between the subsidiaries, but Wagner said he is still examining the issue 
before making recommendations to FERC. 
Wise was hastily summoned to testify yesterday, a day after Wagner sharply 
criticized the credibility of another top El Paso Corp. executive about 
Wise's involvement in discussions about the Merchant bid. 
In his testimony, Wise said he gave the OK, on Valentine's Day 2000, to allow 
Merchant Energy officials to bid on the natural gas capacity within the El 
Paso Natural Gas Co. pipeline. Wise said he was unaware of details about the 
bid. 
The El Paso Merchant Energy subsidiary eventually won the $38.5 million bid 
on the pipeline, which supplies about one-sixth of the natural gas that 
California imports from throughout the Southwest. The company earned more 
than $180 million in profits. 
If El Paso is found to have manipulated the power market, it could face 
hundreds of millions of dollars in penalties. 








Kern County Basks in Role as State's Blackout-Buster 
Electricity: Six new plants will bolster its status as energy center. 

By MITCHELL LANDSBERG, Times Staff Writer 

?????McKITTRICK, Calif.--You could think of this as California's own little 
slice of west Texas.
?????Here in the scruffy brown hills of western Kern County, oil rigs grow 
more easily than trees, pickups are more common than cars, and chicken fried 
steak is the most popular dish at Mike and Annie's McKittrick Hotel.




Tom Romesberg, general manager of La Paloma plant being built in Kern County, 
stands next to the unit's cooling tower.
AL SEIB / Los Angeles Times

?????The hotel--which no longer offers lodging, just food and drink, and 
plenty of it--is bustling these days with the roustabout energy of a Lone 
Star construction camp. Just down the road, a mammoth electrical power plant 
is rising out of the sagebrush, its generators housed in four boxy buildings 
the size of airplane hangars.
?????It is one of six new major gas-fired power plants expected to be built 
in Kern County over the next several years, an electrical construction boom 
unmatched anywhere in California. Kern, which already has a large surplus of 
electricity, is cementing its place as California's energy capital, assuming 
far more than its share of the burden in recharging the state's drained power 
supplies.
?????Over the next several years, the county will add nearly 5,000 megawatts 
of power to the statewide grid. That is more than California now imports, on 
average, from out-of-state suppliers. It's enough to supply about five 
counties the size of Kern, which fills the dusty southern rim of the San 
Joaquin Valley and has a population of 662,000.
?????In some parts of the state, a proposal to build a new power plant is a 
call to throw up the barricades. In recent months, intense community 
opposition has forced developers to pull back proposals to build major plants 
in South Gate and San Jose, although Gov. Gray Davis has tried to revive 
plans for the San Jose plant.
?????You don't hear a lot of not-in-my-backyard talk in Kern County.
?????"There should be power plants in everybody's backyard," said Paul Gipe, 
chairman of the Kern chapter of the Sierra Club, which did not oppose any of 
the new plants. "If people are concerned about having too many power plants, 
they should think twice when they flip on the light switch."
?????New, natural gas-fired power plants, Gipe reasoned, are relatively clean 
and will not add significantly to the county's serious air pollution 
problems. Ideally, he said, they will allow the state to close some older, 
dirtier plants that cause considerably more environmental damage.
?????If environmentalists don't oppose the plants, it's not too much of a 
leap to guess that some people might be positively thrilled about them.
?????Just try, for instance, asking somebody in Taft, an oil center south of 
McKittrick. "It's more money coming into Kern County--that's the way I look 
at it," said Pamela Dunlap, who runs a downtown thrift shop.

?????An Economy Rooted in the Oil Industry
?????She stood in the twilight outside her shop, on a street that embodies 
many of the most attractive attributes of small town Americana--with one 
small difference. Where some towns might have statues of their founders or 
war heroes in prominent public places, Taft has erected small oil rigs and 
other pieces of drilling machinery, a reminder of its economic roots.
?????That Kern County has stepped up as California's blackout-buster is, 
perhaps, not surprising.
?????To begin with, there's geography. Kern stands astride California's major 
north-south electrical transmission lines at precisely the spot at which they 
divide between the service areas of Pacific Gas & Electric, which serves 
Northern California, and Southern California Edison. That spot can be 
pinpointed as the Midway substation, a vast jungle of humming wires, 
transformers and circuit breakers that lies a short distance west of 
Interstate 5 in the town of Buttonwillow.
?????Already, massive new circuit-breakers--they look like Frankenstein 
helmets sprouting 5-foot-long sparkplugs--are being erected at Midway to 
handle the power from two major plants that will be revving up in the coming 
months: PG&E National Energy's La Paloma plant, the one near McKittrick; and 
Edison Mission Energy's Sunrise plant, just south of Taft.
?????The county is served by two major natural gas pipelines, which will be 
tapped to run the plants. In fact, Kern contains the state's largest known 
reservoirs of natural gas.
?????Another of Kern's geographic advantages?
?????"You look around, and you'll see there aren't a lot of people living 
around here," observed Stephen Whaley, who is overseeing construction of the 
Sunrise plant. In the surrounding hills, an orchard of oil rigs bobbed in the 
morning haze. Dirt roads cut crudely across the landscape, bisecting a 
crisscross of steam pipes, fuel lines and electrical wires.
?????"This area is all about oil," Whaley said. Casting a glance at the 
modular 560-megawatt plant rising behind him, he added with a wry smile, "You 
know, I guess you could look at this from the road, and you could make the 
argument that it improves the looks."
?????The Sunrise plant, a relatively simple single-cycle plant, is expected 
to fire up 320 megawatts of its total output by Aug. 1, a scant nine months 
after construction began. The other plants--more complex and efficient 
dual-cycle operations--will be opening over the next several years, assuming 
all receive final approval.
?????The lack of major opposition to the plants is, of course, another reason 
developers see Kern County as a good place to build. The county has long had 
a more intimate relationship with energy--oil, gas, electricity--than most 
places. To people here, the link between a natural gas well and a lightbulb, 
or an oil derrick and a gas pedal, is neither theoretical nor especially 
threatening. They're comfortable with energy.
?????Kern produces more crude oil than any other county in the United States 
outside Alaska. Property taxes from oil companies have helped build handsome 
new schools in Bakersfield, the county seat and largest city. The companies' 
big payrolls have helped populate elegant subdivisions with names that sound 
vaguely Houstonian: Seven Oaks, River Oaks, Landmark Estates.
?????Which brings us to the Texas connection.
?????It's hard to overlook it, in a county that runs on oil and cotton and 
boasts a country music scene to rival Austin's. Conversations in the finer 
Bakersfield restaurants are filled with references to trips to Texas, of 
colleagues in Midland and Odessa. A Bakersfield radio station was running a 
contest recently: The winners would be flown to a bull riding championship in 
Houston.
?????Until December 1999, American Airlines offered direct jet service 
between Bakersfield and Dallas. It stopped after Occidental Petroleum moved 
its headquarters from Bakersfield to Houston.
?????This is a county where President Bush received more support in the 
November election than he did in Texas, his home state. But then, Bush 
already had a Bakersfield connection: He lived there briefly as a child when 
his father, former President George Bush, worked in the Kern oil fields.
?????"You look at the topography around Bakersfield, and the county's morals 
and ethics--that predominantly conservative attitude that we have around 
here--and you look at the oil, and you could be in Midland," said John Allen, 
the general manager of Occidental of Elk Hills, which is developing a power 
plant in tandem with Sempra Energy of San Diego.
?????A lot of people in Kern County will tell you they don't mind being an 
energy farm for the state. It's a living, after all.
?????"It's good to be working at home," said Joe Ryan, a Bakersfield pipe 
welder who has spent years on the road seeking the heavy construction work 
that seemed to have vanished in his hometown. Now he's working at the La 
Paloma plant, a 1,048-megawatt behemoth that will come online in phases 
beginning in December.
?????About 800 people are at work on the plant, and several hundred more will 
be employed in the coming months. And after that plant is done, there will be 
others to build.
?????"This is a good job here, I tell you what," said Ryan, 47, who has been 
banking his overtime on six 10-hour days a week--sometimes more.

?????County Sees Itself as 'Part of the Solution'
?????But there are some signs of simmering resentment, especially among 
county leadership. After all, if every other county produced just half the 
electricity that Kern generates, California wouldn't have an energy crisis. 
And people in Kern County are getting hit with the same spring-loaded 
electricity bills, the same rolling blackouts as everybody else.
?????"I think the people of California are either going to be part of the 
solution or part of the problem," said Assemblyman Roy Ashburn 
(R-Bakersfield). "And in Kern County, we have a long history of being part of 
the solution, especially when it comes to energy issues."
?????Elsewhere in the state, Ashburn sees "a lot of arrogance--people who 
enjoy the benefits of a very high quality of life, enjoy the benefits of 
electric power for jobs and for their personal life, but with an exclusivity 
that it's someone else's problem to create that for them. We don't have that 
attitude in Kern County."

Copyright 2001 Los Angeles Times 








Plan to Rescue Edison Stalls 
Power: Few lawmakers back Davis in the deal he reached with the utility. 
Alternatives are being crafted, but legislators are wary of being blamed for 
new failures. Some see benefits in bankruptcy. 

By MIGUEL BUSTILLO and CARL INGRAM, Times Staff Writers 

?????SACRAMENTO--Despite months of negotiations, Gov. Gray Davis' plan to 
save Southern California Edison, one of California's biggest utilities, is 
effectively dead in the state Legislature, leaders of both houses now agree.
?????Not only has Davis failed to garner support for his more than $3-billion 
plan to keep the utility out of bankruptcy--in part by having the state 
purchase its transmission lines--but follow-up efforts by leading lawmakers 
to fashion an alternative are also falling flat. As a result, any alternative 
proposal to rescue Edison will probably have to be approved on a party-line 
vote by Democrats.
?????The reasons are complex, according to legislators working to close the 
Edison deal, but ultimately come down to simple politics, and are emblematic 
of what has been a plodding, partisan response in the state Capitol to the 
energy crisis.
?????The stakes are high, because restoring Edison to financial health and 
requiring the utility to temporarily sell power at lower prices are linchpins 
of Davis' plan to get the state out of the business of buying electricity.
?????Nevertheless, leaders in the Legislature say Davis' approach has few 
backers.
?????"I don't think the governor's [plan] has support in either party in 
either house," said Assembly Speaker Bob Hertzberg (D-Sherman Oaks). "The 
issue is whether we can come up with something else, and I think we can."
?????Senate leader John Burton (D-San Francisco), who has been critical of 
the deal Davis and Edison put together from the outset, said it is certainly 
dead in the Legislature, but that a more far-reaching proposal may still 
emerge.
?????"Hopefully, we will find a long-term solution" to the state's energy 
mess, Burton said. The Edison deal alone "is not going to solve anything. It 
is not going to reduce rates, and it is not going to prevent blackouts."
?????Since January, California has authorized more than $7 billion in 
taxpayer money to buy power for private utilities in order to avoid mass 
blackouts. It is a perilous fiscal situation that has drained the state 
budget and led to downgrades of the state's credit rating on Wall Street.
?????Lawmakers are wary of making an even greater blunder than they did in 
1996, when they unanimously approved what is now widely considered to be a 
botched scheme to deregulate electricity in California. In both the Assembly 
and Senate, most Democrats and Republicans are convinced there is no way for 
them to save Edison without appearing to sanction a huge bailout similar to 
the federal government's rescue of Chrysler in 1980--one with less financial 
reward for the state.
?????As a result, they all want to get something of value in return from 
Edison--high-voltage transmission lines, hydroelectric power plants or 
guarantees that the utility will boost energy supplies--but are sharply split 
on what is best.
?????A core element of all Edison rescue programs being considered is a 
proposal to use a chunk of customers' monthly electric bills to repay the 
utility's huge debt, a solution many election-conscious legislators find as 
appetizing as a suicide pill.

?????Consumer Activists Threaten Initiative
?????The deal only requires a majority vote, but without two-thirds approval 
it would be wide open to an initiative challenge--a prospect that frightens 
politicians. Consumer activists have already threatened to strike back with a 
referendum next year, when Davis and lawmakers will be seeking reelection.
?????Democrats, who hold majorities in both houses, cannot agree on how to 
save Edison--or whether it is even proper for government to do so. Some have 
grown convinced that California would be better off letting Edison follow 
Pacific Gas & Electric Co. into U.S. Bankruptcy Court. Indeed, after PG&E 
filed for protection from creditors in Bankruptcy Court last month, and 
massive blackouts failed to materialize, legislative momentum to save Edison 
from a similar fate all but vanished.
?????"The urgency of doing anything on behalf of Edison is gone," said Sen. 
Don Perata (D-Alameda).
?????Meanwhile, Democratic efforts to forge a bipartisan solution with 
Republicans have unraveled, and GOP lawmakers are now advancing their own 
plan. Legislative leaders realized early on that liberals and conservatives 
were unlikely to ever agree on details of a deal, so some Democrats and 
Republicans attempted to form a centrist coalition. But the parties have 
become increasingly distrustful of each other as the climate in Sacramento 
over who is to blame for California's power problems grows ever more partisan.
?????Sensing they were being frozen out of negotiations, Assembly Republicans 
rolled out a rival proposal last week that was focused on increasing power 
supplies in exchange for the rescue. Assembly Republican leader Dave Cox 
(R-Fair Oaks) said he had hoped to pursue a bipartisan solution, but, 
"Regrettably, it appears that [the Legislature] is not moving in that 
direction now."
?????The Republicans' decision surprised and angered members of the "Plan B 
Group," a loose-knit cadre of Democratic lawmakers that has been working with 
Republicans to hash out an alternative to Davis' proposal. Members of the 
group say they are close to unveiling a complex counterproposal that could 
garner greater support, but now fear that they may have to seek approval on a 
party-line basis.
?????Despite the setbacks, Davis and many lawmakers still say some form of 
the Edison rescue plan will clear the Senate and Assembly this summer. But 
since Davis announced he had reached a deal with Edison executives to save 
the utility in April, nothing has been accomplished in the Legislature to 
implement it.
?????The long delay is adding to the problem. Every day that passes increases 
the likelihood that one of Edison's numerous creditors will drag the 
debt-strapped utility into an involuntary bankruptcy.
?????The lack of progress also increases the chances that Edison, like PG&E, 
will lose patience with politicians in Sacramento and take itself into 
bankruptcy court.
?????Edison has ramped up its public relations efforts in recent weeks and 
has launched an aggressive multimedia campaign to pressure legislators into 
approving the deal, replete with firefighter testimonials on television and 
direct mail pitches to stockholders asking them to write their state 
representatives.
?????The rescue deal Davis reached with Edison calls for the state to pay the 
utility $2.76 billion for its network of high-voltage transmission lines. It 
would allow the state to issue bonds to finance the purchase, and declares 
that Edison is to use the money to pare down its debt, estimated at $3.5 
billion.
?????Most important, the deal would set aside a portion of ratepayers' 
monthly utility bills to pay off Edison's "undercollections," huge debts the 
utility incurred last year and early this year because it was not allowed by 
the state to pass on to consumers the full cost of wholesale power.
?????In return, Edison would agree to sell the electricity it generates from 
its power plants at cost for the next decade, lowering the state's overall 
power-buying expenses.
?????From the minute it was announced, however, lawmakers from both parties 
have called Davis' deal overly generous and questioned the benefit to the 
public.
?????Republicans, who have opposed the takeover from the outset, are 
supporting an alternative they call "Plan R." Like Davis' proposal, the 
Assembly GOP plan allows Edison to recover debts by siphoning a portion of 
electric rates, but requires in to bolster power supplies in return.
?????"This whole electricity crisis is a supply-demand imbalance," said 
Assemblyman Keith Richman (R-Northridge), one of the architects of the 
Republican plan. "We need to get to a point where there is a supply surplus."
?????In addition, the GOP plan calls for the electricity generators owed 
billions by Edison to "take a haircut," Capitol parlance for forgiving some 
of what they are owed. Davis and Burton have also called for the generators 
to accept a 30% reduction in outstanding payments, and the idea is part of 
the alternative Edison deal being pieced together by the Democrats' Plan B 
Group.
?????Assemblyman John Dutra (D-Fremont), one of the group's leaders, said its 
members have been meeting with consumer groups, Edison representatives and 
others, and believe they are close to satisfying the groups at odds over the 
rescue plan. But because of lingering differences with Republicans, Dutra 
said they may have to try passing partisan legislation.
?????"This is not a situation where we should be playing a political game," 
he said. "We have to find a solution, because the alternative for the state 
is social and economic chaos."
?????Assemblyman Bill Leonard (R-San Bernardino) said he was disappointed 
that what started out in January as a bipartisan effort to resolve energy 
issues had collapsed into a nasty partisan standoff. Leonard said he feared 
that the bipartisan spirit would not return.
?????"The reservoirs of goodwill are not full right now," Leonard said. 
"We're in a goodwill drought."

Copyright 2001 Los Angeles Times 







WASHINGTON OUTLOOK
Bush Could Boost Green Power With Buying Power 


By RONALD BROWNSTEIN, Times Staff Writer 

?????Today, the south wall of the Energy Department's fortress-like 
Washington headquarters is a fitting symbol for an agency that itself has 
never quite established an identity: a 32,100-square-foot blank slab of 
concrete.
?????Shortly before leaving office, however, the Clinton administration 
awarded a Chicago architectural firm a contract to explore converting the 
wall into something quite different: a vast solar array that would provide 
much of the building's heat and power.
?????The firm--Solomon Cordwell Buenz & Associates--has produced a 
spectacular design of a graceful, canopy-like Sun Wall that utilizes both 
photovoltaic panels and hydronic systems, a liquid-filled vacuum tube that 
warms with the sun's rays and can heat the building in winter. Now the firm 
is working to estimate the cost of constructing its creation. "We think it 
would certainly draw attention to this whole new type of energy," says Martin 
Wolf, one of the designers. "Which would be quite timely given where we are 
as a nation."
?????The Sun Wall stands as a riveting symbol of Washington's potential to 
advance the development of renewable energy through a tool that's received 
almost no attention in the energy debate: the purchasing power of the federal 
government itself. Through all its departments and agencies, the federal 
government spends about $8 billion a year on energy--probably more than any 
other single consumer in the world. That buying power gives the government 
enormous leverage to speed the growth of renewable energy sources such as 
solar, wind, geothermal and biomass.
?????Today, all of these renewable sources (leaving aside hydropower) provide 
only 2% to 3% of the nation's electricity, mostly because they are too 
expensive to compete with conventional sources. Renewables are in the same 
Catch-22 as many new technologies: Because they are too expensive, they 
cannot attract the sales that their makers need to both generate economies of 
scale and invest in more advanced manufacturing techniques.
?????Government can break the logjam by providing a market that allows 
renewable manufacturers to advance up the learning curve and lower the price 
of their technologies to a level that makes them commercially competitive.
?????Washington has done precisely this before, most important with a product 
that has literally transformed modern life: the microchip at the heart of the 
computer revolution. The first microchips were much too expensive to attract 
commercial customers, but in the early 1960s, both NASA (using the chips for 
the Apollo space program) and the Defense Department (embedding the chips in 
nuclear weapons) provided a guaranteed market--buying the chips without 
regard to cost.
?????As author T.R. Reid recounted in "The Chip," his history of the 
microchip: "The government's willingness to buy chips in quantity at premium 
prices provided the money the semiconductor firms needed to hone their skills 
in designing and producing [the] circuits. . . . As experience taught ways to 
solve the most common production problems, the cost of making a chip began to 
fall."
?????Three years after the government first started buying, the cost fell far 
enough that the microchip attracted its first commercial customers. Its been 
a breakneck race to the future ever since.
?????An alliance of centrist House Democrats has sensibly proposed that 
Washington do the same for renewables. Earlier this month, the House New 
Democrat Coalition introduced legislation that would commit the federal 
government to purchasing a fixed percentage of its power from renewable 
sources; the bill also would provide grants and loans to encourage state 
governments and nonprofit organizations to also buy green. "Today, you can't 
generate the revenue to make these technologies more commercially viable," 
says Rep. Adam Smith (D-Wash.), one of the bill's principal authors. "The way 
to get around that is to use the market power of the federal government to 
help create a market."
?????With little attention, former President Clinton already committed the 
federal government to that course. In 1999, he signed an executive order 
mandating that Washington expand its use of renewable energy; later, his 
administration set a goal of obtaining 2.5% of its electricity from renewable 
sources by 2005, almost eight times more than today. Smith believes that goal 
is already too low, largely because renewables are becoming more competitive 
as conventional sources grow more expensive.
?????Even so, this initiative is already spurring new thinking. As part of 
the overall plan, the Clinton administration committed to installing 20,000 
solar systems on government facilities by 2010; by the time he left office, 
2,000 were already in place.
?????"It's out in the national parks, where instead of having to string power 
lines to remote buildings, they are putting up solar systems," says Dan 
Reicher, the assistant secretary for energy efficiency and renewable energy 
under Clinton. "There are several thousand units of naval housing in Hawaii 
that are now using solar. They are being used at the Coast Guard Station in 
Boston, a post office in Nantucket."
?????Another dramatic project is underway in Nevada. Shortly before Clinton 
left office, his administration signed an agreement with a private consortium 
to lease part of an old nuclear test site in the desert northwest of Las 
Vegas as a giant wind power facility that would be the nation's second 
largest. Eventually the site is expected to provide power for California and 
Nevada and the Energy Department itself from 500 wind turbines.
?????President Bush hasn't tipped his hand entirely on leveraging government 
buying power to boost renewables. Disturbingly, the national energy plan that 
Bush released earlier this month says not a word about the use of government 
procurement. But Jill Schroeder, an Energy Department spokeswoman, says the 
administration has indicated no intention to revoke the Clinton executive 
order--and the green power purchasing goal it includes.
?????As for the Sun Wall, Energy Department officials sound dubious--but they 
are reserving judgment until Wolf's firm completes its cost estimates. The 
cost could indeed be intimidating; even the Clinton team hadn't committed 
itself to construction. But such a strategic purchase can pay dividends for 
decades--a fact evident in the debt that everyone who uses a computer still 
owes to the critical investments NASA and the Defense Department made in 
another technology 40 years ago.
--- 
?????Ronald Brownstein's column appears every Monday. 
Copyright 2001 Los Angeles Times 







Suddenly, Dirty Old Coal Is the Fossil Fuel of the Future 
Energy: The power crisis--and Bush's plan to deal with it--has lifted the 
mining lobby and the industry it promotes. 

By GERALDINE BAUM, Times Staff Writer

?????WASHINGTON--The National Mining Assn. represents a fuel that many 
Americans think went out with Charles Dickens.
?????Just last week, a California congressman's aide asked an association 
lobbyist wide-eyed: "Do we still use coal in this country?"
?????The answer is yes--and lots of it. More than half of America's 
electricity is coal-fired, but polls show that most Americans don't know it.
?????Considered the voice of coal in Washington, the mining association has 
been denigrated by critics as a venal hired gun for an industry that doesn't 
give a whit about acid rain, global warming, black lung disease or slag heaps 
that scar the land. The industry was under siege in the final years of the 
Clinton administration, when Washington launched an aggressive effort to make 
owners of coal-fired power plants undertake expensive pollution control 
improvements.
?????"It was like waking up every morning with a six-chamber gun pointed at 
your head, and each chamber contained a lethal bullet," said Thomas Altmeyer, 
the association's top lobbyist.
?????Suddenly, it's a new day for coal in America. That much became clear to 
Altmeyer the other day as he found himself at the White House, where Vice 
President Dick Cheney personally briefed about 40 industry types on the Bush 
administration's new energy plan.
?????"It was really nice to hear it from him," says Altmeyer. 
?????A lot has changed in the short time since George W. Bush beat Al Gore in 
West Virginia (and lots of other places), and California's power crisis 
transformed dirty old coal into a fossil fuel of the future.
?????Now, when the mining association faxes position papers to the U.S. 
Environmental Protection Agency, they are read. Now, when its lobbyists call 
over to the U.S. Interior Department with suggestions for job candidates, 
they talk with old friends occupying key positions. Now, those at the top 
don't need to be told that coal supplies more than half of America's 
electricity: Bush comes from Texas, which uses more coal-fired power than any 
other state in the union; Cheney hails from Wyoming, the largest 
coal-producing state.
?????When the Bush-Cheney team took over, mining association employees were 
invited to serve on transition teams. The White House had not had a new 
occupant but two months before Bush reversed himself on carbon dioxide 
emissions, deciding to forgo new rules on a gas that scientists say 
contributes to global warming. Coal-fired power plants are a key source of 
the gas. 
?????Yet, like poor relatives who have finally been invited over for 
Christmas dinner, the coal people are not quite comfortable with their 
newfound popularity in Washington. When asked how it feels to go from class 
pariah to homecoming king, the best that Altmeyer and his boss, mining 
association President Jack Gerard, can come up with is that they're, well . . 
. pleased.
?????But their friends know better: The chief of staff to a Southern 
Republican senator said he saw the usually low-key, all-business Altmeyer at 
an inaugural party in January. "He was downright elated," said the aide, 
chuckling.
?????A coal-friendly Democratic senator slapped Altmeyer on the back at a 
fund-raiser recently and said, "Tom, I can't believe it, but we really have 
an opportunity to do something. All the liberal senators are running scared 
about this California energy crisis. Now they'll listen to us." The next day, 
Altmeyer shipped him a list of suggestions to share with his liberal 
colleagues.
?????"We're not going to waste this opportunity to educate people, no way," 
says Altmeyer. 
?????The association's president, Gerard, 42, a native of Idaho and a former 
consultant to the mining industry, is not ready to celebrate. He is new at 
his job: He took over the NMA shortly before Bush took over the White House, 
but he has been around mining long enough to remember other times when the 
industry was left for dead but rebounded with an energy crisis.
?????And so, he says, he is merely "cautiously optimistic."
?????"You might sense some excitement in the industry," he allows, "that we 
have a White House that recognizes the facts." He then rattles off a bunch: 
The U.S. has enough reserves in the ground to burn coal at its current rate 
for 250 years; since implementation of the 1970 Clean Air Act, coal use for 
electricity has tripled while emissions have dropped 30%.
?????"We play an important role in society and the White House knows it," 
Gerard says. "Does that make us gleeful? Not necessarily."
?????Perhaps it's because coal is still a hard sell to many people. 
?????Gerard is the speaker at a conference of 400 scientists interested in 
"carbon sequestration," a theoretical solution to coal's contribution to 
global warming. But he spends about half of his time attacking 
environmentalists and saying things like, "California represents a failed 
experiment in energy policy."
?????When a professor takes issue with his combative "tone," Gerard smiles 
pleasantly. He is not fazed. On the cab ride back to his office, he explains, 
"Look, the professor is looking for a technical paper. That's not what we do. 
I'm trying to talk about what is at stake and the future."
?????In recent years, the NMA has tried to refashion its industry's dark 
legacy and image. It spent less time calling scientific evidence against coal 
"bunk" and more time on the bandwagon to clean up three of the four main 
pollutants caused by its use. And now coal-related businesses are trying to 
act like winners. Besides backing Bush's $2-billion plan for more "clean 
coal" technology, they're spending $10 million of their own money on a 
campaign to buff up their image. 
?????More than image-building, however, the real work of the mining 
association these days is in the massive Capitol building and House and 
Senate offices. There is where the administration's energy plan will be 
fashioned into action; there is where the president's budget will buy the 
coal industry time to develop new anti-pollution technology; there is where 
they can get government to ease up.
?????Altmeyer is a tall, strapping fellow. But, although he was born in West 
Virginia, he wasn't born to its coal. His father was an undertaker.
?????After earning degrees in law and business, Altmeyer went to work for the 
late Democratic Sen. Jennings Randolph of West Virginia, and he got to know 
"lots of coal miners who were proud of what they're doing," he says. 
?????In the mid-1980s, he went with a trade association that evolved into the 
NMA. He has spent most of his career shepherding companies through 
anti-pollution legislation.
?????He can't quite abide the way coal is treated like a "black hat" in the 
media--even now. "You don't see banner headlines, 'U.S. has record coal 
production in the year 2000, and we did it in a way much more environmentally 
responsible.' "
?????Instead, he says, media reports emphasize renegade coal companies that 
break laws and exaggerated claims about climate change.
?????But coal has never been appealing to California, which uses very little 
coal-fired power because it's so dirty. California Resources Secretary Mary 
Nichols does not buy the coal lobby's Rodney Dangerfield act.
?????"They don't get no respect?" mocks Nichols, who ran the EPA's air and 
radiation department for President Clinton. "But they have over the years. 
We've spent billions trying to clean up coal. Nobody is suggesting we stop. 
But how much attention should it get as a fuel of the future? Not much, 
because under any scenario, the cost of cleaning up carbon emissions and the 
way it's mined is too high." 
?????Altmeyer is no fan of Nichols, either. It may be a new day, but the old 
battles remain fresh.
?????"It was like living in a banana republic with a dictator who made 
arbitrary decisions," he says of the Clinton years. He won't even speculate 
what the industry would be facing if Gore had been elected president. "I 
would have rather had Woody Allen in the White House."

Copyright 2001 Los Angeles Times 







Power Firm Chief Lists Solutions for Crisis 

By KURT STREETER, Times Staff Writer

????? A Texas business executive whose company has profited enormously from 
California's energy crisis says California needs more deregulation, not less.
?????Kenneth Lay, the head of Houston-based Enron Corp., handed out a 
four-page plan detailing his solution to California's energy crisis at a 
meeting with Los Angeles Mayor Richard Riordan and other state business and 
political leaders at a Beverly Hills hotel May 17.
?????The report details several ways to solve California's energy crisis.
?????"Get deregulation right in California," it reads. "California never 
deregulated. . . . There is more regulation than ever." 
?????Among the document's other points are calls for consumers to pay the 
billions of dollars in debt the state's public utilities have incurred, and 
an assertion that federal investigations into price gouging by private firms 
such as Enron are contributing to the problems. 
?????Lay also suggests increasing conservation efforts, partly through 
pricing that would cost consumers more for using electricity during peak 
times.
?????Reached for comment, Steve Maviglio, a spokesman for Gov. Gray Davis, 
called the paper a "generator's wish list," saying it goes against the 
governor's policy on the energy crisis.
?????"The governor is not calling off the dogs," Maviglio said Saturday. "To 
suggest that ratepayers should shoulder the entire burden of deregulation is 
totally the opposite of what the governor is calling for."
?????Lay, one of President Bush's biggest campaign contributors and a key 
advisor on the Bush energy plan, has built a powerful energy company by 
buying electricity from generators and then selling it. Enron reported 
first-quarter revenue of $50.1 billion, nearly a 281% increase over the same 
quarter last year. 
?????Lay met with Riordan and luminaries including actor Arnold 
Schwarzenegger and financier Michael Milken--plus about a dozen others--at 
the Peninsula Hotel.
?????Enron spokesman Mark Palmer said: "Our position is simple." California 
needs to "increase the supply of energy and decrease the demand."
---
?????Associated Press contributed to this story. 

Copyright 2001 Los Angeles Times 








State Renews Demand for Power Price Relief 
Energy: Officials ask FERC to reconsider ruling. Cheney reiterates opposition 
to caps. 

By NANCY VOGEL and DAN MORAIN, Times Staff Writers


?????SACRAMENTO--California officials launched a full-scale formal effort 
Friday to persuade the federal government to act more forcefully to push down 
wholesale electricity prices, saying that existing plans have "utterly 
failed."
?????At the same time, Vice President Dick Cheney strongly reiterated the 
Bush administration's opposition to any price caps. Price controls are "a 
mistake," he told a Washington audience. "It's not a solution; it's adding to 
the problem," he said. "There isn't anything that can be done short term to 
produce more kilowatts this summer."
?????State officials have repeatedly demanded price controls, only to be 
rebuffed, and Cheney's remarks illustrate the depth of the administration's 
opposition to the idea.
?????But the politics of the energy crisis have changed since the last time 
the Federal Energy Regulatory Commission rejected broad price caps. The 
Senate is about to move from Republican to Democratic control, giving 
opponents of the administration's energy policies a much more potent 
platform; the Senate has confirmed two new members to the five-member FERC; 
and the existing members of the commission have shown doubts about whether 
deregulation of energy prices is working.
?????Gov. Gray Davis described the state's actions--detailed in a set of 
filings delivered Friday to FERC--as a "full frontal attack" on what he terms 
the commission's industry-friendly policies.
?????"This agency has failed its duties miserably," he said. "It's time for 
FERC to wake [up] and take action on a crisis that threatens our nation's 
economy."
?????With the governor's backing, the California Public Utilities Commission, 
California Independent System Operator and Electricity Oversight Board said 
FERC's actions to date have failed "to extinguish the fire that is rapidly 
consuming California's economy." They petitioned the commission to reconsider 
its April 25 order to limit prices during power shortages in California.
?????A second petition asks the federal government to revoke the rights of 
Oklahoma-based Williams Cos. and Virginia-based AES Corp. to sell electricity 
at whatever price the market will bear.
?????The companies' right to do so was granted by FERC three years ago, when 
California opened its $28-billion electricity industry to competition, but 
that right has come up for renewal. State officials said they will similarly 
challenge other power sellers, arguing that it is illegal for FERC to allow 
the companies to sell at whatever price the market will bear when the market 
is obviously broken.
?????The state's filings and the evidence about wholesale prices they contain 
are sure to be fodder for Davis' scheduled meeting Tuesday with President 
Bush in Los Angeles.
?????California's petitions also come the day that Bush won Senate 
confirmation of his two appointees to FERC. With the current members split 2 
to 1 on last month's FERC order, the new commissioners--Pat Wood III of Texas 
and Nora Mead Brownell of Pennsylvania--would cast the deciding votes on 
California's request for a rehearing. In their confirmation hearings, both 
Wood and Brownell expressed support for more aggressive federal efforts to 
protect California consumers.
?????Since last June, after prices began to soar in California's partly 
deregulated electricity market, Davis has beseeched the federal agency to 
take swift action, including imposing price caps. The agency is charged by 
federal law with ensuring that prices for wholesale electricity are just and 
reasonable.
?????But its commissioners have declined to cap prices across the West's 
interconnected electrical transmission system. Instead, they have attempted 
to stabilize wholesale power costs through its April 25 order that would 
limit how much power sellers can earn whenever California's reserves have 
slipped to 7% or less, which triggers what is known as a Stage 1 emergency.
?????But some economists have concluded that California's market is so flawed 
that sellers are able to boost prices even when electricity demand is not 
particularly high, such as at night or on weekends.
?????State officials have also faulted the federal plan for exempting 
marketers--companies that trade electricity but do not generate it--from the 
limited price caps. Such a loophole, they say, would allow power producers to 
escape the caps by making arrangements with marketers--a process called 
"megawatt laundering."
?????"FERC's pricing plan is laced with loopholes," Davis said in a written 
statement. "It's simply a fig leaf that does nothing to address the impact of 
the energy crisis on California and our nation."
?????The state's filings homed in on wholesale electricity prices charged in 
April, when electricity usage was down compared with that of a year earlier. 
Prices averaged $370 per megawatt-hour last month, significantly higher than 
those of January and February. (That's enough to supply 750 typical homes for 
an hour.)
?????Officials with the California Independent System Operator, which manages 
three-quarters of the state's electricity transmission grid, said they 
measured greater manipulation of prices by power sellers in April than in any 
month since June 2000.
?????In 1999, the first full year of deregulation in California, wholesale 
electricity prices averaged $31 per megawatt-hour. By February of this year, 
the average price had risen more than 700%, to $258 per megawatt-hour, 
according to the state's filings.
?????Such prices have contributed to extraordinary profits for some 
companies, including Williams, the state noted in its filings.
?????Williams reported first-quarter profit of $484 million in 2001, compared 
with $77.8 million for the same period last year.
?????"Frankly," the state charges, "it does not and should not require 
detailed analysis by economists to recognize that the phenomenal transfer of 
wealth is the product of supplier exploitation of the current market 
situation."
?????Williams, which markets electricity produced by AES, was ordered April 
30 by FERC to refund $8 million in connection with allegations that power 
plants in Huntington Beach and Long Beach were improperly shut down to create 
scarcity that would boost prices.
?????The state filing asks FERC to set the prices Williams and AES can charge 
based on what it costs to produce the power.
?????Representatives of Williams could not be reached for comment late 
Friday, but AES spokesman Aaron Thomas said that stripping companies of the 
right to sell at whatever price the market bears would result in tremendous 
upheaval in California's power market.
?????In Washington, at a U.S. Chamber of Commerce energy conference, Cheney 
suggested that California officials were largely to blame for the state's 
energy problems. 
?????"They didn't address it soon enough," he said, referring to the power 
shortages. "They knew a year ago they had problems; they postponed taking 
action because all of the action was potentially unpleasant--[it] would have 
involved price increases, and so forth.
?????"The net result is, though, having postponed action and delayed, we're 
now in a situation where the prices [consumers pay] have to go up anyway; 
where, in effect, you're going to have blackouts this summer because even as 
we had this flawed regulatory scheme, we've had demand grow in California 
with the economy, but no increase in power because nobody built a new plant 
out there for 10 years. 
?????"Long term, the answer is build more power plants, and that's exactly 
what they're doing," Cheney added. "But they're not going to have enough new 
capacity online this summer to be able to avoid blackouts."
?????Soaring market prices since May 2000 have financially crippled Pacific 
Gas & Electric and Southern California Edison, the state's two biggest 
electricity utilities, which were forbidden by the state's deregulation plan 
to pass on their higher costs to customers.
?????By mid-January, the utilities were so close to bankruptcy that power 
sellers refused to deal with them for fear of not getting paid. The state 
stepped in to buy electricity on their behalf and has so far committed $7 
billion from the general fund for such spending.
?????Even if it can't persuade FERC to reconsider its plan, the state could, 
in effect, kill it outright.
?????Implementation of the plan is contingent upon the state submitting by 
June 1 a plan for joining a so-called regional transmission organization. 
FERC has made it a top priority to make the country's electricity system work 
more efficiently and smoothly by linking operations through such regional 
organizations.
?????State officials said Friday they will decide next week whether to submit 
such a plan to FERC. 

Copyright 2001 Los Angeles Times 







El Paso CEO Admits Approving Subsidiaries' Natural Gas Deal 

By RICARDO ALONSO-ZALDIVAR, Times Staff Writer


?????WASHINGTON--The chief executive of a Texas energy company testified 
Friday that he approved a controversial deal between two subsidiaries that 
critics allege contributed to Southern California's soaring natural gas 
prices.
?????However, El Paso Corp. Chief Executive William A. Wise said he did not 
decree that El Paso Merchant Energy Group, which sells natural gas, enter 
into the $38.5-million deal with El Paso Natural Gas Co., which owns a major 
pipeline system. He also said he was unfamiliar with the details of 
Merchant's bid for about one-third of the pipeline system's capacity.
?????"What I don't do is micromanage," Wise said under questioning by Judge 
Curtis L. Wagner Jr. in a trial-like hearing before the Federal Energy 
Regulatory Commission. "I agreed we should go forward and bid on this 
capacity . . . but I didn't direct them to bid or not to bid for it."
?????Describing his role in a meeting at which the plan was presented to him, 
Wise said, "I had no part in preparing for the meeting--I just showed up."
?????Wagner will now have to determine if Wise's role violated FERC rules on 
arm's-length relationships within the same corporate family, essentially 
circumventing federal policies to prevent pipeline companies from exercising 
monopolistic power.
?????The California Public Utilities Commission has alleged that El Paso 
Merchant took advantage of the contract to withhold space on the pipeline, 
creating an artificial shortage that led to a price spike that raised 
California's total energy costs by an estimated $3.7 billion.
?????El Paso counters that high prices are due to increased demand from power 
plants that burn natural gas, unusual weather and other factors--not market 
manipulation. They dismiss the $3.7-billion estimate.
?????Separately Friday, the Senate unanimously confirmed President Bush's 
nominations of Patrick Wood III and Nora Brownell to fill two empty seats on 
FERC's five-member governing board. Wood, who heads the Texas Public Utility 
Commission, is widely expected to be named the next FERC chairman. The new 
board members are expected to bring a more activist style to the agency, 
which functions like a national utility commission.
?????Also Friday, FERC issued a late-afternoon order clarifying technical 
details of its plan to keep California electricity prices in check during 
power emergencies this summer. The order addresses such issues as how to 
compute a price for natural gas.
?????The El Paso case represents the closest yet to a trial of allegations 
that energy companies are manipulating the California market. Wagner, who is 
FERC's chief judge, will render an initial decision to the agency's governing 
board, which has the power to order the return of ill-gotten profits.
?????Attorneys for the plaintiffs said Wise's testimony was important because 
it suggests an effort by a single corporate entity to use its subsidiaries in 
an end-run around FERC's system of checks and balances against monopoly power.
?????"It shows it was a coordinated strategy at the highest levels of El Paso 
Corp.," said Frank Lindh, a lawyer representing Pacific Gas & Electric, which 
is one of the plaintiffs.
?????During his cross-examination, Lindh sought to emphasize that, as a 
former executive of the pipeline company, Wise was intimately familiar with 
the workings of the industry and with federal curbs on monopoly power.

Copyright 2001 Los Angeles Times 








Police Support 48-Hour Alerts for Blackouts 
Crisis: Law enforcement officials downplay crime fears, saying notice of 
power outages will make their jobs easier. 

By MITCHELL LANDSBERG, Times Staff Writer


?????Earlier this year, when widespread blackouts first began to roll their 
way across California, electric utility officials explained why they couldn't 
give the public more than a few minutes' warning before pulling the plug.
?????Advance notice, they explained, would give the upper hand to criminals, 
who could plan their day around out-of-service burglar alarms.
?????That was then.
?????This is now: On Friday, law enforcement officials throughout Southern 
California hailed a decision by Gov. Gray Davis to create an early-warning 
system that would give the public increasingly specific alerts during the 48 
hours leading up to a blackout.
?????"It's a huge improvement," Los Angeles County Sheriff Lee Baca said at a 
news conference, where he was joined by senior officials of the California 
Highway Patrol and the Los Angeles Police Department, among other agencies. 
The governor announced his plan Thursday.
?????The governor's plan was also endorsed by 35 police chiefs from 
throughout Los Angeles County. The chiefs held their annual meeting Friday in 
Palm Springs.
?????Since the blackouts began, "one of the No. 1 issues has been the lack of 
notification," said Pasadena Police Chief Bernard Melekian, who is president 
of the county police chiefs association.
?????What gives? What has changed since January, when officials from Southern 
California Edison insisted that they couldn't give more than five or 10 
minutes' warning?
?????Richard Rosenblum, a senior vice president for Edison, said the utility 
had canvassed law enforcement officials earlier this year. "The general view 
at that time--and it certainly was not unanimous--was that for public safety 
reasons, it would be better not to release that information."
?????Since then, he said, "there's been a good deal more thinking . . . and 
that view has changed."
?????Melekian (whose city is served by its own utility, not Edison) said he'd 
heard that explanation before.
?????"I remember, when they were saying that, I had trouble finding anybody 
who had been canvassed," he said. "I certainly wasn't. Somebody may have 
been."
?????Were police worried about looting and burglaries in a blackout?
?????"We never were worried about that," Melekian said. With blackouts 
lasting only about an hour in any one place and always occurring during 
daylight, "we haven't seen any crime issues emerge and we don't anticipate 
any."
?????Baca said he did have concerns, but they were erased Monday, when Davis 
led a delegation of California officials to Chicago, where they met with 
Mayor Richard Daley and top public safety officials to compare notes on the 
threat of crime during blackouts. Chicago has a plan in place for dealing 
with electricity outages by determining in advance which intersections and 
other public places should receive the most attention.
?????The Chicago officials told the Californians that public safety isn't 
jeopardized as long as law enforcement officials send forces to critically 
affected areas, Baca said.
?????"All of us were extremely relieved that . . . our fears about crime 
increasing by advance notice are just totally unfounded," the sheriff said.
?????Baca said his department would be developing a plan for deploying 
deputies when blackouts strike. Other agencies said they were doing the same.
?????"We may contact businesses such as banks and jewelry stores, or any type 
of businesses that the criminal type may target," said Lt. Clyde Stuart of 
the Huntington Beach Police Department.
?????Ventura County Sheriff Bob Brooks said he had been dreading this 
summer's looming blackouts, but the 48-hour warning will make his job easier. 
During the past few rounds of rolling outages, Brooks said he was notified 
just a few minutes before the power was yanked.
?????"There really wasn't time to do anything except shut our computers 
down," he said.
?????Earlier this month, he met with several other sheriffs throughout the 
state to talk about how to cope with the power outages. "That was our No. 1 
priority--being able to have adequate time to mobilize," he said. "It was a 
good move on the part of the governor."
---
?????Times staff writers Anna Gorman in Ventura and Thuy-Doan Le in Orange 
County contributed to this story.

Copyright 2001 Los Angeles Times 







Outdoor Lights Still Burning 
Energy: Despite threat of fines, few retailers are following order to cut 
usage in off hours. 

By SARAH HALE, Times Staff Writer


?????It was almost midnight on auto row in Glendale recently, and although 
the car lots had been closed for nearly three hours, the lights still burned 
brightly at Glendale Dodge, Guy Schmidt Cadillac and other dealerships along 
Brand Boulevard.
?????California regulators ordered retailers March 15 to cut their outdoor 
lighting in half during off hours, but so far it appears there is widespread 
disregard or ignorance of the plan, retailers acknowledge. Many auto dealers, 
grocery stores and restaurants still keep the lights burning after hours.
?????Although the state order threatens retailers with fines of as much as 
$1,000 for disregarding the measure, no citations have been issued, according 
to state officials tracking the program. Police say they are paying little 
attention to the issue.
?????Despite that, Sheryl Tankersley of the Governor's Office of Emergency 
Services said she believes the program is working--even though she concedes 
there are no energy-use figures or other statistics to prove it. She also 
acknowledged that the state is at the mercy of local police to enforce the 
measure, who say they are more interested in fighting violent crime than 
conservation scofflaws.
?????"It is our belief that the program is working," Tankersley said. "We 
assume businesses are complying. However, without law enforcement assistance, 
the order is difficult to moderate."
?????The energy conservation order by Gov. Gray Davis applies to all 
California businesses, regardless of location or whether they are served by 
municipal utilities with power to spare.
?????In interviews, many business owners, including one of the Glendale car 
dealers whose lights were on after closing time, said they are complying with 
the law.
?????"Someone must have forgot [to turn off the lights]," said Myron 
Grombacher, general manager of Glendale Dodge. "Or maybe the cleaning crew 
turned on the lights."
?????Some retailers say they've killed lights to save on energy bills, not 
for fear of being fined. Others say they were unaware of the rule or haven't 
complied due to security concerns. The order applies only to "unnecessary" 
lighting, exempting lighting needed to protect workers, the public or 
property.
?????"We understand the importance of turning off the lights, but we can't 
afford to black out the lot," said Bill Jaros, with Guy Schmidt Cadillac. 
"Theft is a problem and that's just as costly."
?????Glendale isn't alone--bright lights can be seen after midnight at car 
dealerships throughout the area, including lots in Van Nuys and Thousand 
Oaks. After-hours lights also were spotted this week at a Smart & Final in 
Venice, a lamp store in Studio City and a Goodyear Tires store in Westwood, 
where the manager said the lights stay on till 3 a.m.
?????"We are obligated to the corporate office to keep our lights on," said 
the tire store manager, who would not give his name. "We do what they tell 
us. I didn't even know a fine could be issued."
?????In San Francisco's Union Square, retailers and restaurants also keep 
their windows lit long after closing time, according to area merchants.
?????"If stores are cutting back, I haven't noticed. The heart of Union 
Square looks the same. Everything is bright, everything is on," said Brandon 
Koehl, manager of the Williams-Sonoma housewares store near Union Square.
?????The light-reduction order, signed by Davis on Feb. 1, called on "all 
California retail establishments" to "substantially reduce maximum outdoor 
lighting capability during nonbusiness hours." In a directive one week later, 
the governor's office defined substantial as a 50% reduction in electrical 
power consumed--allowing retailers to meet the rule by either turning off 
lights or cutting the wattage.
?????Law enforcement honchos, including Los Angeles County Sheriff Lee Baca, 
promised to enforce the measure at a Feb. 1 news conference with Davis. Since 
then, police have expressed confusion about the 50% rule and whether cities 
such as Glendale and Los Angeles that have been spared from blackouts must 
comply.
?????Los Angeles County Sheriff's Deputy David Cervantes said his agency is 
focused on street crime, not store lights.
?????"We aren't issuing citations," Cervantes said, although he said that 
deputies have issued a few warnings to businesses that appeared to be in 
violation.
?????Glendale Police spokesman Sgt. Rick Young said the late-night bright 
lights at the Brand Boulevard car dealerships aren't his problem. "We don't 
believe this is a police matter," Young said. "What do police officers know 
about monitoring energy use?"
?????(This week, after calls to Glendale city officials and car dealers, more 
lights appeared to be off along Brand Boulevard after hours.)
?????Norman Williams of the state Technology, Trade and Commerce Agency, 
which was asked by Davis to help implement the order, said he was 
disappointed to learn that police departments have been reluctant to devote 
resources to the issue.
?????"We need them to help us," Williams said.
?????Richard Giss, a retail analyst with Deloitte & Touche in Los Angeles, 
said many store managers may be unaware of the rules or are unable to easily 
curtail power usage.
?????"Most retailers aren't scofflaws," Giss said. "Some may face issues that 
aren't apparent on the surface. . . . There isn't always a switch that turns 
off all the lights. It's not that easy."
?????Bob Israel, co-owner of Hungry Al's Bar-B-Que in West Covina, said the 
$1,000 fine didn't scare him into trimming his energy use. His monthly $500 
to $600 utility bills were a bigger threat. Israel raised his food prices and 
began to limit employee hours, but the high energy costs still were too much.
?????He said he can't afford to turn on the restaurant's air conditioning 
this summer, when he expects his bill to approach $1,000. And the illuminated 
sign in front of Hungry Al's now goes off at 11 p.m. instead of staying on 
all night. "We've always left our outdoor lights on. We want people to see 
us. It just wasn't feasible anymore. The governor has nothing to do with it."
?????The bottom line also influenced Edwards Cinemas' energy conservation 
efforts, which have been implemented at the company's 55 California locations 
since last summer. Illuminated theater displays and marquees go off when the 
last show begins, rather than when it ends, saving the company about two 
hours of energy use. Kevin Frabotta, vice president of theater operations, 
said the company has focused on long-term methods as well, including 
electrical rewiring and using of more cost-efficient bulbs.
?????"It's an expensive transition," he said. "But we'll save money in the 
long haul."
?????Other local businesses have used the governor's order as a marketing 
tool, pushing the sale of energy-efficient products such as motion detectors, 
ceiling fans, weather stripping and improved windows. Home Depot, which 
unveiled a hefty conservation plan in January, said it is important for 
customers to see conservation products in action.
?????After rolling blackouts started sweeping the state, sales and interest 
in these items increased, said Chuck Sifuentes, company spokesman. Home Depot 
added a special section to its catalog devoted to energy-related tips and 
merchandise.
?????"It's important to lead by example," Sifuentes said. "If we cut back, 
the customers will cut back. They'll want to buy our products."

Copyright 2001 Los Angeles Times 







Businesses Hopeful on Blackout Warnings 
Power: But some leaders worry that early outage notification won't be 
accurate. 

By MARLA DICKERSON, Times Staff Writer


?????Frustrated at being left in the dark about rolling blackouts, California 
business leaders expressed optimism Friday that a proposed early warning 
system will help minimize the economic damage of power outages on the state's 
industries.
?????Gov. Gray Davis ordered state officials Thursday to begin warning 
residents and businesses of likely power outages up to two days in advance 
when power supplies appear scarce. Given the fluid nature of the state's 
electricity grid, which can see its supplies swing from abundant to 
inadequate in a matter of minutes, some of those predictions could prove 
about as useful as a weather report six months in advance.
?????But business advocates say any information is better than no information 
when it comes to avoiding outages.
?????"Businesspeople are accustomed to assessing risk," said Jack Stewart, 
president of the California Manufacturers and Technology Assn. "We need to 
give them the best available information, as far ahead as possible, and let 
them make their own decisions."
?????Under Davis' order, blackouts will be issued under a three-tiered system 
beginning with a forecast 48 hours in advance of a projected electricity 
shortfall.
?????General geographic areas to be blacked out will be identified in 
warnings issued 24 hours before likely outages. Precise locations will be 
announced an hour before the power is cut.
?????Details are still being worked out, but the idea is to use data such as 
weather patterns and scheduled power plant shutdowns to make the longer-range 
projections. Information about communities and specific block numbers to be 
interrupted will be provided closer to the projected outages, as real-time 
usage and supply information becomes available to the grid operator.
?????Plans call for notifying electricity customers through a variety of 
means, including the news media, the California Independent System Operator 
(Cal-ISO), utility Web sites and a proactive system being developed by 
Cal-ISO to phone, page, fax or e-mail individual power users. Agency 
officials say they plan to implement the governor's order by June 15.
?????Business interests have been beating the drum for early warning since 
the first rolling blackouts walloped companies last summer. Though residents 
might find it inconvenient to have their dishwashers turned off, a sudden 
outage can wreak havoc on a company if an assembly line freezes or a computer 
system crashes.
?????The stakes are enormous. A Silicon Valley business group estimated that 
a single blackout last June resulted in losses of $100 million for that 
region's companies because of forfeited sales, squandered productivity, 
wasted wages and ruined products.
?????A study released this month by a California business consortium 
estimated that a projected 30-plus days of summer blackouts could cost state 
businesses $21.8 billion, reduce household income by $4.5 billion and result 
in 135,000 lost jobs.
?????Julie Puentes, a spokeswoman for the Orange County Business Council, 
said the governor's plan is consistent with what businesses have been 
demanding. "If they can do this, companies will be able to use the backup 
generation that they've paid hundreds of thousands of dollars for," she said. 
"They will be able to prevent chaos for their workers, and they'll be able to 
maintain their business operations, which benefits the California economy."
?????The president of Aluminum Precision Products in Santa Ana, which has 
four manufacturing plants in Orange County, was equally enthusiastic.
?????"You have no idea what help [the warnings] would be," Philip S. Keeler 
said. "In our particular case, because of the heavy equipment, this could be 
the difference between life and death, and I'm very serious. It will help 
tremendously."
?????Others are skeptical.
?????James Swartwout, chief executive of Torrance-based Summa Industries, 
said he's not counting on the system to protect his molded plastics 
manufacturing company.
?????"How can they say with certainty that a blackout will occur?" Swartwout 
asked. "It's my understanding that they have no real way of knowing until the 
very last minute. Eventually, we'll get two or three warnings a week. I can't 
promise we won't start to ignore them."
?????Indeed, while early warning sounds good in theory, implementing it is 
another story. The utilities long resisted such a system because they often 
get only a few minutes' notice from Cal-ISO, which in turn often isn't able 
to project a shortfall with absolute certainty until it is almost upon them.
?????One of the big concerns with early warning is that it simply won't be 
accurate. Cal-ISO board member Mike Florio, a consumer advocate, said he 
worries about crying wolf.
?????"After the third or fourth or 10th time," Florio said, "people start to 
say, 'They're always calling these things, and nothing ever happens.' "
?????But board member Carl Guardino, who also is head of the Silicon Valley 
Manufacturing Group, sees that as a strength rather than a weakness of the 
program.
?????He said early warning will prompt businesses to redouble their 
conservation efforts, which could help stave off many of the projected 
blackouts.
?????"That's not crying wolf; that's popping the champagne," Guardino said. 
"Preventing blackouts from happening in the first place is precisely what we 
want."
---
?????Times staff writers Sarah Hale, Leslie Earnest and Nancy Vogel 
contributed to this report.

Copyright 2001 Los Angeles Times 








Power Crisis Has Mileage for Bush 
By ROBERT SCHEER


?????The Bush administration is pulling a fast one on energy, and we will all 
pay dearly for decades to come. By panicking the public with oil industry 
propaganda of an energy shortage, the Bushies are building support for the 
most reckless energy policy since the days before the environmentalist 
movement, when blackened skies and lungs represented the vision of progress. 
?????To make things worse, to head off objections to their plans to plunder 
virgin lands and obliterate conservation measures, they have thrown in as a 
palliative the old oxymoron of "clean" nuclear power. 
?????Of course there is nothing clean about nuclear waste, which can never be 
rendered safe. 
?????The public may temporarily accept new nuclear power plants, as long as 
one is not built anywhere near their neighborhood and the radioactive 
byproduct is shipped to another part of the country. 
?????But trust me, while these things may be better designed today, the 
insurance companies are no dummies for still refusing to insure nuclear power 
plants. It is wildly irresponsible for the Bush administration to now insist 
that U.S. taxpayers underwrite these inherently dangerous ventures. 
?????Does anyone even remember Three Mile Island? Or, more disastrously, 
Chernobyl? I was the first foreign print journalist admitted to the Chernobyl 
plant after the explosion. Even a year after the fact, and with the benefit 
of the best of Western scientific advice, it was still a scene of chaos. 
Nuclear power is like that--unpredictable, unstable and ultimately as 
dangerous as it gets. 
?????The entire Chernobyl operation is now buried in a concrete-covered 
grave, but the huge area under the radioactive plume emitted from the plant 
is a permanent cancer breeding ground, as is the sediment in the area's main 
rivers and throughout much of its farm land. I traveled from Moscow to 
Chernobyl by train in the company of top U.S. and Soviet experts, but even 
they seemed to feel lost and frightened as they donned white coats and Geiger 
counters to tour Chernobyl. Nuclear power is just too risky a gamble to push 
because of a phony energy crisis. 
?????The desperation in the White House is palpable, but it is not over an 
"energy crisis," which Bush's buddies and campaign contributors manipulated 
in the Western electricity market. 
?????No, the fear of the Bush people, even before Jim Jeffords' defection, 
was that their political power would be short-lived and that they had best 
move as fast as possible on their pet projects, beginning with increasing the 
profits of GOP energy company contributors. 
?????Why else the panic? There is no sudden energy crisis. Known world 
reserves of fossil fuel are greater than ever, alternative energy sources are 
booming, and conservation measures work. If the Federal Energy Regulatory 
Commission would do its legally required duty of capping wholesale prices to 
prevent gouging, there would not be an electricity crisis in California or 
elsewhere. 
?????The FERC has not done its job. Clearly, as the New York Times reported 
last week, energy wholesalers are in cahoots with the Bush administration to 
use the FERC as their personal marketing tool to drive up their already 
obscene profits. 
?????Finally, there is simply no reason to rape America in pursuit of 
something called "energy self-sufficiency." If the vast reservoirs of natural 
energy resources--resources that are sitting under land controlled by regimes 
around the world that we've propped up at enormous military cost for half a 
century--are not available to be sold to us at a fair price, why continue to 
prop up these regimes? What did President Bush's Dad, with his buddies Dick 
Cheney and Colin Powell, achieve in preserving Saudi Arabia and Kuwait if 
those degenerate monarchs they saved in the Gulf War will not now trade 
fairly in the one commodity of value that they hold? 
?????We must make our quid pro quo clear: We will pay for a huge military to 
keep these sheikdoms and other energy-rich regimes in power only if they 
guarantee fair oil and natural gas prices for our retail consumers. 
?????Make that deal and the energy "crisis" is history. 
- - -

Robert Scheer Writes a Syndicated Column







Bush announcing low-income aid, but no price caps 
SCOTT LINDLAW, Associated Press Writer
Tuesday, May 29, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/29/nation
al0755EDT0488.DTL 
(05-29) 04:55 PDT LOS ANGELES (AP) -- 
President Bush traveled across the country to deliver news Gov. Gray Davis 
doesn't want to hear: He won't force down soaring electricity prices that 
have cost California nearly $8 billion since January. 
The Republican president and the embattled Democratic governor arranged a 
20-meeting Tuesday to talk about California's energy crisis, but there was no 
indication they would break their stalemate. 
Bush opposes price limits on wholesale electricity that utilities buy, 
arguing they do nothing to address supply-and-demand issues at the heart of 
the crisis. 
Davis contends federal energy regulators are ignoring their mandate to ensure 
"just and fair" electricity prices. 
With no sign of a break in the deadlock, each side maneuvered for maximum 
advantage from Bush's first full day in California as president. 
Davis, in an interview Tuesday on ABC's "Good Morning America," defended his 
record on licensing more power plants. 
"We've licensed 15 plants. Ten are under construction, four will be online 
this summer, four next summer, and by the end of 2003 we will have built our 
way out of this problem. But between now and then, we are getting gouged 
unbelievably," Davis said. 
The Bush administration timed positive energy announcements to coincide with 
the president's visit. 
At the Marine Corps base at Camp Pendleton, Bush was announcing the expansion 
of a program that provides federal money to help low-income residents pay for 
power. 
Bush was proposing $150 million, in addition to $300 million already budgeted 
for a component of the Low Income Home Energy Assistance Program, to provide 
special help to cash-strapped residents of California and certain Midwest 
areas such as Chicago, a senior administration aide said. 
Bush was also reminding state residents of his order that military facilities 
in the state cut peak-hour usage by 10 percent. 
To alleviate an electricity bottleneck on a crucial south-north transmission 
path, the Department of Energy announced that the Western Area Power 
Authority will try to raise money from a variety of private and public 
entities to finance a crucial additional lines. 
"The Bush administration is taking a leadership role in addressing a 
long-neglected problem in California's electricity transmission system," said 
Energy Secretary Spencer Abraham. "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." 
Davis had a letter for Bush from top economists who maintain price caps are 
justified and necessary. 
Aides to the governor expressed amazement that Bush would travel all the way 
to California with no major announcement in hand, and predicted Davis would 
respond with "polite rage." 
Mindful of the national stage he commanded, Davis planned a news conference 
to air his grievances. And he convened a panel of families he said have been 
victimized by the energy crisis in the same hotel where Bush was staying. 
Davis wants Bush to pressure the Federal Energy Regulatory Commission to 
impose stiff price caps. 
Tuesday, limited caps ordered last month by FERC go into effect in 
California, but only when electricity reserves fall below 7.5 percent in the 
state -- a step Davis called inadequate. 
Protesters planned demonstrations in Los Angeles and at Camp Pendleton, in 
San Diego County. 
Bush also arranged a speech on energy and trade to the Los Angeles World 
Affairs Council and planned to president over a closed-door energy 
round-table discussion. 
,2001 Associated Press ? 



Bush facing Davis' heat over energy 
In first visit to state as president, he'll hear governor's plea for help 
Carla Marinucci, Lynda Gledhill, Chronicle Political Writers
Tuesday, May 29, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/M
N205743.DTL 
President Bush wasn't on California soil for more than five minutes yesterday 
when he was drawn into his first debate on the state's power crunch. 
Rep. Brad Sherman, a Democrat from Thousand Oaks who met Air Force One on the 
tarmac at Los Angeles International Airport along with a group of high school 
students, wasted no time button-holing the president for what appeared to be 
an animated conversation. 
"I brought up . . . the idea that after his meeting with our governor, I 
hoped he would be in favor of wholesale regulation (of energy prices)," 
Sherman said later. "He disagreed with me." 
Sherman -- who two weeks ago suggested that the headline to the president's 
national energy policy should be "Bush to California: Drop Dead" -- didn't 
seem optimistic yesterday about Bush's 48-hour visit to the state. "I think 
that the president's policies show either a lack of understanding of what's 
really going on in California, or a lack of concern," he said. 
That vignette underscored some of the challenges facing Bush, who arrived in 
California as protesters geared up and Democratic Gov. Gray Davis prepared to 
press him for federal action on the state's power troubles. 
Besides Sherman, Bush was greeted by a crowd of cheering Republicans, 
including Secretary of State Bill Jones and Los Angeles Mayor Richard 
Riordan, the former a declared GOP candidate for governor in 2002, the latter 
a rumored one. 
But today, Bush will sit down with the present governor, who lately has been 
blistering in his criticism of the president. 
"The last time I looked, California was still part of the United States of 
America," Davis told reporters this weekend. "We have contributed 
disproportionately to the economic growth of this country. There's no reason 
why a president should not respond to a legitimate request from the chief 
executive of the largest state in the union." 
In his first visit to California since just before the election, Bush plans 
to emphasize the energy crisis -- but will focus on it through the lens of 
his own energy plan. 
ENERGY SECRETARY ACTS
Just hours before the president landed, Energy Secretary Spencer Abraham 
ordered a speedup in planning to relieve a notoriously overloaded electricity 
transmission line in California. 
Abraham's holiday action was timed to provide a bit of positive news for Bush 
to announce in California. He ordered the Western Area Power Administration, 
a 15-state marketing arm of the Energy Department, to complete planning and 
seek outside financing to reduce the transmission bottleneck on California's 
Path 15, which connects the northern and southern parts of the state. 
This morning, Bush will visit the Marine Corps base at Camp Pendleton, near 
San Diego, to underscore his conservation order for a 10 percent cut in 
energy usage in federal buildings and military facilities. 
In Los Angeles, he will deliver a wide-ranging talk before the World Affairs 
Council and lead a discussion among business leaders about technological 
advances in energy conservation. 
Then, he will head to Fresno and Sequoia National Park to press his 
initiative to improve national parks. Along the way, protesters have vowed to 
provide a vocal commentary on Bush's energy and environmental policies. 
But the real drama of the trip will no doubt be the sit-down between Bush and 
Davis today. The governor pushed for a lengthy, open meeting with Bush that 
would include testimony from officials and consumers affected by the energy 
crisis. Bush's camp announced Friday the meeting would be 20 to 30 minutes -- 
in private. 
Davis plans to outline steps the state has taken to alleviate the energy 
crisis, and what it wants the federal government to do -- including 
implementing price caps on the wholesale cost of energy, cost-based pricing, 
and the possibility of ordering refunds. 
DAVIS THREATENING SUIT
The governor has said he will consider suing the Federal Energy Regulatory 
Commission -- the agency charged with overseeing energy prices -- if it does 
not impose temporary price caps. 
And the state Legislature has already filed a suit, saying the commission has 
failed to stop what it has determined are "unjust and unreasonable prices." 
With California's energy woes worsening and a summer of rolling blackouts 
predicted, the Bush-Davis session holds potentially deep political pitfalls 
for both leaders, both of whom are suffering in state polls as a result of 
their handling of the energy crisis. 
Bush needs to demonstrate his concern for California, a state that gave a 
12-point margin of victory to Al Gore in the presidential election. 
But even as Bush adviser Karen Hughes told state reporters this week that the 
president had arrived to show he cares, Vice President Dick Cheney again 
chastised state officials for delaying their response to the energy crisis 
"because all of the action was potentially unpleasant." 
And Cheney signaled that the administration would resist long-term price 
caps, saying, "We think that's a mistake." 
Such talk drew fire from Davis' senior political adviser, Garry South, who 
charged that Cheney's words demonstrated insensitivity to California's 
troubles and only underscored the perception of an "all-oil, all-the-time 
ticket." 
Davis, whose campaign for re-election next year will depend on his handling 
of the crisis, has stepped up his criticism of Bush and profit-hungry energy 
firms, particularly those from Texas, in recent weeks. 
And yesterday, signaling no letup, Davis' supporters made an unusual holiday 
conference call to again press his case for federal action. They argued that 
without immediate intervention from the Bush administration, the economy of 
California -- and potentially the entire nation -- was at risk. 
'THIS ENORMOUS SHOCK' 
"We have this enormous shock in prices that needs to be addressed and not 
ignored," said Joseph Fichero, head of Sabre Partners and a consultant to 
Davis. 
Alan Blinder, a Princeton economist and former vice chairman of the Federal 
Reserve, warned that energy woes in California alone would "take almost a 
half a percent of the gross domestic product off of the national economy." 
Blinder and others argue that short-term relief -- for about 6 to 12 months 
-- is necessary while new power plants are being built. 
"Most times and most places, I agree price caps are not the long-run 
solution, but they can be part of a short-term solution," Blinder said. 
"There really is a case for temporary price caps to shield consumers and the 
California and national economy from the full force of the energy shock." 
Limited new price caps approved by the Federal Energy Regulatory Commission 
on the sale of wholesale electricity begin today in California. But the 
temporary caps, which go into effect when the electricity reserves dip below 
7. 5 percent, have been lambasted by Davis as ineffective and inadequate. 
Political analysts say Bush's resistence on the issue could cost him in 
California -- and elsewhere. 
"(California) is probably an area where he is criticized more than any other 
region in the country," said Mark DiCamillo, director of the statewide Field 
Poll. "Californians are looking to Bush for some relief -- and to the extent 
they don't get it, Bush may be in some jeopardy here." 
Chronicle news services contributed to this report. / E-mail the writers at 
cmarinucci@sfchronicle.com and lgledhill@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 1 



Bush's first visit not so welcome 
Medea Benjamin
Tuesday, May 29, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/E
D10936.DTL 
THIS WEEK, President Bush is making his first visit to California at a time 
when consumers have been socked with hefty electric rate increases, and $70 
million is being drained from our state budget each day as we buy wholesale 
energy at outrageous prices. 
If Bush were serious about helping Californians, he would immediately tell 
the Federal Energy Regulatory Commission, FERC, to do its job. FERC's legal 
mandate is to ensure that wholesale electricity prices are "just and 
reasonable." But current wholesale prices are not just and reasonable, and 
they are completely divorced from costs. 
FERC has been ideologically fixated on the free market while ignoring the 
reality that companies controlling California's energy supply are 
manipulating the market to make obscenely high profits at our expense. 
During the past several months, the news media have unveiled how generators 
are turning power plants on and off as often as several times an hour; taking 
plants off line for "unscheduled maintenance," and simply refusing to sell 
California power. Investigators have determined that these energy companies 
have deliberately gouged consumers to the tune of billions of dollars. 
State Senate figures show that profits of these energy companies rose more 
500 percent between 1999 and 2000. 
If President Bush wanted FERC to control wholesale prices through a system of 
cost-plus pricing, it would happen overnight. 
When it comes to long-term solutions, Bush's energy policy dangerously 
promotes a continued reliance on polluting fossil fuels and a resurgence of 
unsafe nuclear energy. Bush pays lip service to smart, sustainable solutions 
such as solar, wind and other sources of renewable energy, and to energy 
savings derived from conservation and improved efficiency. 
Technologies proven to be dirty, dangerous and expensive will get the lion's 
share of taxpayer subsidies, while the 2002 federal budget slashes funding 
for solar research by more than 50 percent, with major cuts in funding for 
geothermal, hydrogen and biomass technology, and fuel cell research. 
If the Bush administration were to make sustainable energy sources a 
priority, technologies such as wind, solar and some types of biomass could 
solve our long-term energy needs. While such a policy is anathema to oil, 
coal and utility industry leaders, it is central to any forward-looking 
energy strategy. 
The sensible responses to the energy crisis are clear: Control prices now and 
rely on renewable energy and conservation in the future. 
It is up to us to let the president know he can't kowtow to the energy 
industry interests. Hopefully, he'll respond to the angry Californians he 
will hear this week. 
Medea Benjamin is founding director of Global Exchange, a San Francisco 
corporate accountability organization. 
,2001 San Francisco Chronicle ? Page?A - 19 



Californians revert to clotheslines, fans as they gear up for blackouts 
MARGIE MASON, Associated Press Writer
Tuesday, May 29, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/29/nation
al0338EDT0451.DTL 
(05-29) 00:38 PDT OAKLAND, Calif. (AP) -- 
Paul Goettlich's condo in the Oakland hills features vaulted ceilings and 
skylights, a sweeping view of San Francisco's bay and state-of-the-art 
appliances. 
But with the power crisis in full tilt, his dryer sits unused while he hangs 
clothes, sheets and towels on a wooden rack in the garage. 
"Maybe somebody doesn't want to see somebody else's underwear or bras hanging 
out," Goettlich says. "But, hey, that's life." 
As the state gears up for rolling blackouts and hefty energy bills this 
summer, many Californians are changing their habits. The result: surging 
sales of everything from low-energy light bulbs to fans to evaporative 
coolers that blow misty air. 
The Orchard Supply Hardware store a few miles down the road from Goettlich's 
condo is having a hard time keeping clotheslines and retractable drying racks 
in stock. 
At The Home Depot store in Colma, about 10 miles south of San Francisco, 
energy-efficient compact fluorescent light bulbs are hot sellers, along with 
a $40 device called a Power Planner that's said to cut energy use by 
appliances like refrigerators. 
At the Wal-Mart in the Southern California suburb of Brea, customers are 
buying blackout supplies along with fans and low-energy light bulbs. 
Flashlights, camping lanterns and oil lamps are popular, according to manager 
Rebecca Smith. 
"We've quadrupled our fan sales this year, and it's not even summer," Smith 
said. "It doesn't seem to matter what kind. People are buying all of them." 
The rolling blackouts are proving a retail bonanza for some out-of-state 
companies, like St. Louis-based Emerson, which is selling twice as many 
ceiling fans in California than in any other state. 
"They're energy efficient and use less electricity than a 100-watt bulb," 
explains Emerson spokesman Walt Sharp. "They can make a room feel about seven 
degrees cooler without air conditioning by circulating the air. They can save 
up to 40 percent when used with air conditioning." 
Industrial-sized floor fans -- used in manufacturing areas and large 
warehouses -- also are a hot commodity in California, he said. 
At Walnut-based Lights of America, sales of energy-efficient compact 
fluorescent bulbs have increased 700 percent since last year. And with state 
rebates and incentives for consumers to switch to the new bulbs, sales are 
expected to continue soaring, said Brian Halliwell, vice president of 
marketing sales. 
Most bulbs average from $6 to $10, with 50-watt compact fluorescent bulbs 
providing the same amount of light as 300-watt halogens, Halliwell said. 
Shopping the light bulb display at The Home Depot in Colma, Linda Shintaku 
said she's exploring all her options for conserving energy this summer. 
"We lowered the thermostat, and we're trying not to turn lights on in rooms 
we're not in," Shintaku said. "I try to wash clothes at night during low-peak 
hours." 
Energy experts note that homeowners can make the biggest dent in their power 
bills by switching to more efficient models of major appliances. 
But despite the advice and an array of rebate programs, Home Depot manager 
Benefield says consumers aren't yet flocking to replace energy-sucking 
appliances like refrigerators and dishwashers. People who are in the market 
for big appliances ask about the government's Energy Star ratings, which 
bring rebates of up to $75, he noted. 
The new vogue for conservation has some ecology-conscious Californians 
shaking their heads. Berkeley resident Leona Benten has been hanging her 
clothes outside to dry long before the power crisis came along and she's 
hoping the energy crisis will push others to change their habits and their 
attitudes. 
"It takes like two minutes," Benten said. "I think that people have succumbed 
to incredible amounts of advertisements, and if it's mechanized, it's 
better." 


Crisis no sweat to some offices 
Many offices keep cool in crisis 
Air conditioners blast in state's energy centers 
Steve Rubenstein, Chronicle Staff Writer
Tuesday, May 29, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/M
N208422.DTL 

Some very cool places to be during the dog days of spring and summer turn out 
to be the places with their fingers on California's air conditioning switch. 
If only the entire state could cram itself into the cavernous control room in 
Folsom of the Independent Systems Operator, where the air is a comfortable 69 
degrees and receptionists wear sweaters at high noon -- when it's upwards of 
90 degrees outside. 
Or the Pacific Gas and Electric Co. lobby in downtown San Francisco, where 
the air is an even chillier 65 degrees, which admittedly isn't much of a 
bounty, considering it's usually that cool outside anyway. 
Other cool places to be are the state Capitol, where legislators who 
promulgate energy edicts hang out, and the headquarters of the state Public 
Utilities Commission, where bureaucrats who promulgate energy edicts hang 
out. 
Armed with a high-tech digital thermometer, The Chronicle made the rounds of 
the energy crisis poohbahs, to make sure they are practicing what they are 
preaching. 
Some were, some weren't. Those that weren't blamed it all on that most 
familiar of modern scapegoats, the computer. 
Computers must be kept cool -- in the 60s for big mainframes and a bit more 
for the smaller units most folks use, though some can go into the 80s without 
hiccuping. So generally, people who work alongside the computers get to keep 
cool, by association, although it's the computer that counts. 
The ISO headquarters, located in an industrial park 20 miles east of 
Sacramento, is a delightfully cool and comfortable place when the outside 
temperature soars into the 90s and 100s. 
The reception area, the only room accessible to the outraged public, is a 
fairly stiff 76 degrees -- only two degrees cooler than the 78 degrees 
recommended by President Bush and the federal energy crisis czars and 
czarinas. 
But take a step past the lobby security doors and the temperature plummets. 
In the main hallway, the temperature is 73 degrees. And in the control room, 
where two dozen engineers and technicians sit at consoles and monitor the 
flow of California electricity on a giant diagram of state power lines so 
they can order blackouts for everyone else -- the temperature is 69 degrees. 
NO SWEATING AT ISO
Some managers do not take off their sports coats and jackets. 
"We want these people to be comfortable," explained Tony Capasso, facilities 
manager for the ISO complex. "We don't want these people sweating bullets in 
the middle of a crisis." 
Inside the state Capitol, where legislators and the governor preach 
compliance with federal guidelines calling for 78-degree thermostats, the 
temperature dips into the high 60s. The coolest spots are the press briefing 
room and the treasurer's old office. 
GOVERNOR'S OFFICE
The governor's suite is in the mid-70s, apparently because folks are often 
coming by with thermometers and it wouldn't do not to set an example. Press 
secretary Steve Maviglio said Governor Gray Davis is a practice-what-he- 
preaches kind of guy who keeps corridors dark, shades drawn, air conditioners 
idle. His personal secretary works in short sleeves, with a cheap plastic fan 
humming nearby. 
"It's so dark in the hall that we're always bumping into things," said one 
aide. 
Even so, the temperature in the governor's suite of offices is three degrees 
cooler than the 78 degrees recommended by President Bush -- not the first 
time the two men have failed to agree. 
THE LEGISLATURE
The Assembly chamber is 71 degrees while the Senate chamber -- with 40 fewer 
legislators spewing forth -- is 73 degrees. But the Senate chamber has a 
southern exposure, one Capitol guide explained. 
"Hot air from the people sitting inside has nothing to do with it," he said. 
In San Francisco, the temperature inside cavernous City Hall dips in spots to 
the mid-60s. College student Jasmine Westbrook, who dropped by with her art 
class on a project to sketch the interior of the building, was doing her 
sketching while wearing a windbreaker to keep warm. 
"I want to stay comfortable," she said. "It think it's supposed to be hotter 
in here, isn't it?" 
The mayor's office, at 73 degrees, was eight degrees warmer than another 
office down the hall, even without the mayor sitting in it. 
63 AT THE PUC 
At the headquarters of the state Public Utilities Commission, which is 
supposed to be keeping an eye on the self-declared bankruptcy of the utility 
that mails out the bills, the lobby temperature is 63 degrees. 
Chief engineer David Omosheyin, eyeing The Chronicle's thermometer nervously, 
insisted the 63-degree reading was caused by the lobby's proximity to the 
front door, where the outside temperature at the moment was in the low 60s. 
He invited the thermometer to visit the upper floors, where the temperature 
was 70. 
As for San Francisco's federal buildings: Bush would probably not frown. 
His orders appeared to be followed during The Chronicle's visits, so much so 
that it was actually hotter inside than out. Though that wouldn't be hard, 
considering it was in the low 60s outside. And the places measured happened 
to be courtrooms and tax offices, where the body heat from anxiety alone 
could probably melt the paint some days. 
San Franciscans, Omosheyin said, are losing their perspective when it comes 
to things like electricity, energy alerts and rolling blackouts. In his 
native country of Nigeria, he said, the electricity runs sporadically, if at 
all. 
"There the power can go off for a week," he said. "The world goes on. Here, 
people take a lot of things for granted, and electricity is one of them." 
As for the offices of the places that report on such matters, they fared 
about the same. 
The Walnut Creek bureau of The Chronicle, where the sun sizzles into the 90s 
with regularity in the summer, is kept at 67 degrees because of all the 
computers. The main newsroom of The Chronicle is kept at 71 degrees, because 
of all the computers. But the reception room was 71 degrees, too, and there 
aren't any computers there, not a one. 

E-mail Steve Rubenstein at srubenstein@sfchronicle.com. 
Some offices keeping their cool
Place                                  Inside     Outside
                                    temperature  temperature
Control Room, California Independent                
Systems Operator (Folsom)                  69       90
Governor's office, Capitol (Sacramento)    75       94
Press briefing room, Capitol (Sacramento)  68       94
Caltrans headquarters (Sacramento)         70       94
Chronicle bureau newsroom (Walnut Creek)   67       90
Mayor's Office, San Francisco City Hall    73       63
Calif. Public Utilities Commission lobby                
(San Francisco)                            63       63
State Building (San Francisco)             69       63
Courtroom, 19th floor, Federal Building                 
(San Francisco)                            70       63 
Lobby, Pacific Gas and Electric                 
headquarters (San Francisco)               65       65
IRS office, Federal Building 
(San Francisco)                            69       63
Main newsroom,                 
San Francisco Chronicle (San Francisco)    71       64


,2001 San Francisco Chronicle ? Page?A - 1 



Stakes are high for Davis meeting with Bush 
GARY GENTILE, AP Business Writer
Tuesday, May 29, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/29/state0
731EDT0136.DTL 
(05-29) 04:31 PDT LOS ANGELES (AP) -- 
With California facing a summer of outages, Gov. Gray Davis was to meet 
President Bush to press for a federal cap on energy prices. 
But Davis wasn't expected to win any concessions during the 20-minute Tuesday 
meeting where he's expected to point to Texas energy makers. 
Davis has appeared on national news programs attacking Bush for opposing 
price controls on wholesale electricity, and suggesting the president has 
ignored price-gouging by Texas-based electricity generators. 
"The president did not create this problem, but he is uniquely situated to 
solve it," Davis said Monday. "What I'm going to ask him to do, with all 
respect, is to enforce federal law. The money that leaves this state goes 
directly to energy companies in Texas and the Southwest." 
If Bush refuses to administer price controls as expected, Davis can use that 
as ammunition in his sparring with the administration. 
Bush has blamed California officials for the state's power woes and said 
price controls won't solve shortages. Instead, they said, Bush plans to 
stress his efforts to conserve energy in federal buildings and will bring one 
or two new initiatives to the table. 
One of them commits the federal government to helping organize a consortium 
to build more power lines for the state. 
Energy Secretary Spencer Abraham directed the Western Area Power 
Administration, a federal agency, to take the first steps to clear the way 
for building more transmission capacity between southern and northern 
California. That would help relieve a transmission bottleneck in the central 
part of the state. 
While this will not help this summer, Abraham said in a statement the line 
improvements, when completed, "will help avert the same types of problems 
from recurring year after year." 
The stakes of the meeting are high for both politicians. 
Davis, who has been mentioned as a Democratic challenger to Bush in 2004, 
wants federal help to solve an energy crunch that threatens rolling outages 
this summer and has cost state taxpayers nearly $8 million since January -- 
the price of buying power for two cash-starved private utilities. And his 
plan to rescue one of those companies reportedly is faltering. 
Leaders of both the state Senate and Assembly oppose a $3 billion-plus plan 
to bail out Southern California Edison by buying its power lines, the Los 
Angeles Times reported Monday. 
Bush, meanwhile, needs to mend fences in vote-heavy California. The 
Republican president lost badly here in November, and polls show most 
Californians dislike his handling of their energy crisis. 
Bush's Tuesday agenda was heavy on energy issues. At the Marine Corps base at 
Camp Pendleton, near San Diego, Bush was to highlight his order that federal 
agencies and installations cut back energy use. Then it was on to Los Angeles 
to discuss his energy plan in a speech to the Los Angeles World Affairs 
Council. 
Bush was confronted by the issue virtually as he stepped off the plane Monday 
in Los Angeles. Rep. Brad Sherman, D-Los Angeles, escorted the Academic 
Decathlon national championship team from El Camino Real High School in 
Woodland Hills to meet Bush. He told the president California needs 
regulation of electric generators. 
"The president seems to believe just by instinct that rate regulation reduces 
supply and also by instinct that all those in the energy industry are fair 
people who are not trying to game the system," Sherman said. "Anyone who 
studies the facts in California knows that power is being withheld in order 
to drive up the price." 
,2001 Associated Press ? 



State gives president tepid ratings 
Power crisis blamed for 42% approval 
Carla Marinucci, Chronicle Political Writer
Tuesday, May 29, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/M
N56632.DTL 

As President Bush arrives in California for his first trip in seven months, 
many state residents give the former Texas governor lackluster approval 
ratings - underscoring how even the nation's leader may be feeling the 
effects of the worsening energy crunch, a new Field Poll shows. 
The poll of 1,015 Californians, taken from May 11 to May 20, shows that 42 
percent approve of Bush's job performance to date, with 40 percent 
disapproving, a nearly even split. Eighteen percent of those surveyed offer 
no views of Bush's performance, the poll showed. 
A Field Poll last week showed that on energy issues specifically, more than 
half of Californians viewed the president's job performance as "poor" or 
"very poor," compared with 38 percent who gave Democratic Gov. Gray Davis the 
same rating. 
"This should be a time when Bush is enjoying his honeymoon period," said Mark 
DiCamillo, director of the Field Poll, who pronounced the president's ratings 
"very mixed." 
"If you compare Bush's 42 percent approval ratings in California, it's about 
12 points behind the national (ratings)," said DiCamillo. "He's not doing as 
well as he should here, and one of the reasons is the energy crisis." 
In the Field Poll's first measure for Bush since his election, "what stands 
out is the absence of any real honeymoon." 
". . . It's highly partisan," DiCamillo said. 
CHENEY LOOKS RATHER POSITIVE
Vice President Dick Cheney fares better, with 47 percent of Californians 
viewing him in a positive light and 25 percent disapproving. 
Much of the difference in the ratings comes because voters are not as likely 
to hold the second-in-command responsible for their energy woes, DiCamillo 
said. 
"Whenever there's a problem with the federal government, you're going to 
focus your anger and attention at the guy at the top of the heap," he said. 
"Bush will be held responsible for his administration." 
DAVIS' SHARP DECLINE
The Field Poll reported last week that as the energy crisis has ramped up, 
the governor's overall approval ratings have fallen statewide. Today, 49 
percent disapprove of his job performance and 42 percent approve -- a sharp 
decline from the favorable approval ratings he held in January. 
But the new poll shows that the public's views of the Legislature has dropped 
dramatically in recent months as concerns about the energy crisis have 
multiplied. Just 39 percent of Californians have a positive view of the 
Legislature's job performance today, while 42 percent have a negative view. 
That's a stark contrast to January, when residents approved of the job the 
Legislature was doing by more than a 2-to-1 ratio, 52 percent to 25 percent. 
While state and local political leaders appear to bear the brunt of the 
public's negative feelings regarding the recent energy crisis, Californians 
continue to give strong approval ratings to their two U.S. senators and to 
members of Congress, the poll showed. 
Californians hold favorable views of Sen. Dianne Feinstein, who was re- 
elected in November. By 54 percent to 27 percent, they like the job she is 
doing, the latest poll showed. 
"She has always had good job ratings" among voters, said DiCamillo, "and this 
is just an affirmation of that." 
Sen. Barbara Boxer also continues to get high ratings, with 49 percent 
approving of her performance and 28 percent disapproving. And Californians 
gave a generally favorable rating to their congressional representatives, 
with 53 percent approving and 35 percent disapproving. 
PARTY LINE SPLITS
Among the other findings of the new Field Poll: 
-- Views about Bush's job performance are split along party lines, with 
Democrats, by a more than 3-to-1 ratio, holding a negative view of him, and 
Republicans, by a 6-to-1 ratio, seeing him in a positive light. Independent 
voters gave him positive ratings, 39 percent approving of his job 
performance, 31 percent disapproving and 30 percent holding no view. 
-- Cheney had equally partisan approval ratings, although he received much 
stronger ratings from his own party and independents. Forty percent of 
Democrats disapproved of him, compared with 30 percent who approved. But 
Republicans approved of him by a 10-to-1 ratio. Independents, by a 2-to-1 
ratio, liked what he has done in office. 
-- Congressional Democrats get particularly strong ratings from state voters. 
Fifty-three percent of Californians approve of their job performance, while 
just 33 percent disapprove. Republicans in Congress get a less favorable 41 
percent approval, 46 percent disapproval rating, the poll showed. 
The Field Poll carries a margin of error of plus or minus 3.2 percentage 
points. 

E-mail Carla Marinucci at cmarinucci@sfchronicle.com. 
Field Poll / Job approval ratings

 -- Job approval of George W. Bush as president

                     Approve  Disapprove  No opinion
Statewide              42%       40%         18% 
Democrats              18%       63%         19% 
Republicans            76%       12%         12%
Others/non-partisans   39%       31%         30%
.
 -- Trend of job approval of Dianne Feinstein as senator
                     Approve  Disapprove  No opinion
Men                    49%       35%         16%
Women                  60%       19%         21%
Democrats              73%       12%         15%
Republicans            33%       50%         17%
Others/Non-partisans   44%       21%         35%
.
 -- Trend of job approval of Barbara Boxer as senator
                     Approve  Disapprove  No opinion
Men                    45%       36%         19%
Women                  53%       20%         27%
Democrats              67%       12%         21%
Republicans            29%       53%         18%
Others/Non-partisans   37%       19%         44%

   The poll was conducted May 11-20, 2001. Results are from a telephone 
survey 
of 1,015 California adults, including 504 self-described Democrats, 390 self-
described Republicans and 121 others. The margin of error is 3.2 percentage 
points.
   Source: Field Institute
   Chronicle Graphic


,2001 San Francisco Chronicle ? Page?A - 1 



Calif. pawn businesses boom as energy bills rise 

Monday, May 28, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/28/nation
al1807EDT0593.DTL 
(05-28) 15:07 PDT SAN FRANCISCO (AP) -- 
Rising energy bills have some Californians pawning their valuables to pay for 
power. 
When an employee at an Oakland pawnshop asked N'Kechia Jackson last week how 
much she wanted for a gold necklace, Jackson had a specific amount in mind. 
"I need $113.86," she said. "That's how much my PG&E bill is." 
Jackson, who got $125 for the chain, said her monthly energy bill from 
Pacific Gas and Electric Co. is like a credit card balance that never 
shrinks. 
Bay Area pawnshop owners say similar scenes are becoming common as laid off 
dot-com workers and single mothers hock items like jewelry and laptop 
computers to pay rising power bills. 
"That's the number one reason people have been coming in to pawn right now," 
said Bill Rager, assistant manager of Best Collateral Pawnbrokers in Oakland. 
"Basically, it's high-dollar items -- chains, watches, bracelets, engagement 
rings, wedding rings." 
Pawnshops do not require credit checks, and they offer fast cash. They also 
allow people up to four months to repay a loan before their items are sold. 
Interest rates range from 5 percent to 20 percent. 
"The sad thing about it is that I'd say 60 percent will lose their property 
because they can't afford to get it out," Rager said. 
Another woman entered Rager's shop minutes after Jackson pawned her jewelry. 
The woman, who gave her name only as Sophia, used her children's Nintendo 
game set as collateral for a $65 loan. 
The woman said she had scrambled since February to pay a $700 PG&E bill, and 
now had no money to cover her $100 phone bill. 
"When they come home and see their Nintendo gone, they'll be upset," she 
said. "But my kids are understanding." 
,2001 Associated Press ? 



Californians brace for a summer of blackouts 
GARY GENTILE, Associated Press Writer
Monday, May 28, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/28/nation
al0501EDT0456.DTL 
(05-28) 02:01 PDT LOS ANGELES (AP) -- 
While most people celebrate Memorial Day, Jan and Ralph Vazquez will 
celebrate their own independence day -- energy independence. 
Worried about a summer of rolling blackouts and fed up with rising utility 
bills, the couple installed a $33,000 solar system in their four-bedroom home 
in San Rafael a few weeks ago. It can store enough energy in batteries to 
power their refrigerator and other appliances for up to six hours if there is 
a blackout. 
"I think there is a little bit of fear and concern about to what extent would 
we be subject to blackouts and how much energy is going to cost us," Jan 
Vazquez said. "The simple solution is to be independent, or as much so as 
possible." 
The Vazquezes are among millions of Californians facing an uncertain summer, 
wondering how they will cope with what is expected to be several months of 
rolling blackouts. 
The prospect of daily power outages as the temperature rises and air 
conditioning use peaks has left many people apprehensive, from parents of 
newborns who need warm bottles to people who require electric-powered medical 
devices in their homes to office workers worried about getting stuck in an 
elevator. 
California already has endured six days of rolling blackouts this year, each 
lasting about an hour and hitting different parts of the state. Estimates 
vary about what lies ahead. 
One industry-sponsored watchdog group, the North American Electric 
Reliability Council, predicted California would face an average of 20 hours a 
week of rolling blackouts. 
Responding to complaints following the earlier outages, state power officials 
this month plan to begin issuing weather advisory-style warnings 24 hours 
before an expected blackout. 
Chicago, faced with a deteriorated electrical system after years of neglect 
and severe weather, adopted a blackout plan in 1999 that is being studied as 
a model by California officials. 
Today, for example, Chicago police officers carry portable stop signs to 
darkened intersections moments after a blackout hits. 
"There's no just excuse for trapping people in elevators," said Bill Abolt, 
Chicago's commissioner of environment. "There's no excuse for shutting off 
power to an intersection with no notification to police and fire in advance." 
Across the country, reduced hydroelectric production due to the Pacific 
Northwest drought, an aging transmission system, rising costs for the natural 
gas that fires many power plants and increasing demand for electricity is 
expected to produce shortages and higher prices in the Northwest, New England 
and other regions. 
The stakes are high in California. It has the world's sixth largest economy 
and is home to bellwether high tech companies such as Intel and Cisco 
Systems. 
For some retailers, the impact is minimal. Clerks can switch from an 
electric-powered cash register to battery-powered calculators. Some companies 
can fire portable generators to power their phone system with minimal 
disruption. 
The California Manufacturing and Technology Association recently estimated a 
summer of blackouts could cost the state $21 billion and 136,000 jobs as 
manufacturers curtail production and retail stores suffer a slowdown. 
The Bay Area Economic Forum has estimated that rolling blackouts could cost 
as much as $15 billion and 15,000 jobs. 
A summer of rolling blackouts also will test the emotional mettle of 
Californians, who normally rally when faced with such natural disasters as 
earthquakes and wildfires. 
"It's going to be an interesting natural experiment," said Mihaly 
Csikszentmihalyi, Davidson professor of management at Claremont Graduate 
University. 
"When there is a natural calamity, people often respond really positively. 
This is different in the sense it is not a natural calamity and you can blame 
politicians and gougers for it. It could turn into resentment against those 
in power and those who should be supplying the power." 
California's plight already has become comic fodder. 
From David Letterman to radio talk shows, the state has been the butt of 
power-related jokes. On a recent episode of the game show "The Weakest Link," 
which is taped in Los Angeles, the acerbic host asked which player was having 
a "rolling mental blackout." 
Jan Vazquez, however, suggests that California has the chance to go from 
punch line to role model. 
"California has the opportunity to be a leader again," Vazquez said, urging 
more state investment in alternative energy rather than sinking billions more 
into buying power at inflated prices. 
"If there were more homeowners like us and more businesses that were 
generating their own electrical power, I think we would avoid blackouts 
completely -- maybe not by this summer, but by next summer," she said. 
,2001 Associated Press ? 



New Nevada-California energy plan surfaces at last minute 
BRENDAN RILEY, Associated Press Writer
Monday, May 28, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/28/state2
242EDT0228.DTL 
(05-28) 19:42 PDT CARSON CITY, Nev. (AP) -- 
An 11th-hour proposal to help ease Nevada's budget problems and provide more 
electrical power to neighboring California was outlined Monday by a key state 
lawmaker. 
Assembly Ways and Means Chairman Morse Arberry, D-Las Vegas, said his plan, 
to be introduced Tuesday, would allow power plants to be built along the 
Nevada-California border, on land that would be owned by this state. 
"It could produce millions of dollars for the state," said Arberry, adding 
that he has asked researchers to determine the exact dollar benefit to Nevada 
to help get the proposal passed in the final week of the 2001 session. 
Under the proposal, the state would negotiate with the federal Bureau of Land 
Management to acquire BLM land on the border of the two states, especially in 
the southern Nevada desert region. 
The state then could accept bids from companies that wanted to build 
power-generating plants, and take the bid that would be the best deal for the 
state, he said. 
The benefit to the power plant builders would be a site as close to a prime 
market -- energy-starved California -- but located in industry-friendly 
Nevada, which already has moved to speed up paperwork involved in power plant 
approvals. 
Arberry said he wasn't approached by energy company lobbyists to introduce 
the idea. Instead, he said, "I was just talking to an old guy at the 
barbershop, and he suggested it. I don't know if he even realized what he was 
saying." 
As part of a broad effort to ensure Nevada has enough energy, Gov. Kenny 
Guinn already has worked with local government officials, especially in 
southern Nevada, to speed up power plant permit processes. 
Legislative efforts include SB362, which lets various local and state 
agencies act simultaneously on permits for power plants, transmission lines 
and other related facilities. 
Various power companies have come up with plans for Nevada plants that would 
supply more than 10,000 megawatts of energy by 2004. 
Those proposals are among plans that would add more than 76,000 megawatts of 
power in the Northwest, Southwest, Rocky Mountain and California-Mexico 
regions, according to the California Energy Commission. 
,2001 Associated Press ? 






New energy moves by W.House before Bush-Davis meet 
Posted at 6:39 a.m. PDT Tuesday, May 29, 2001 
BY RANDALL MIKKELSEN 
WASHINGTON (Reuters) - On the eve of a showdown meeting on California's power 
crisis between California Gov. Gray Davis and President Bush, the Bush 
administration Monday moved to help ease the crisis. 
Energy Secretary Spencer Abraham unveiled plans to boost extra transmission 
capacity in California, which he said would be a ``big step'' in easing 
rolling power blackouts. 
Abraham ordered the Western Area Power Administration -- an Energy Department 
arm responsible for marketing electricity from federal water projects in 15 
Western states -- to wrap up planning for building extra transmission 
capacity. 
The move came as Bush headed to California for his first presidential visit, 
and a critical meeting on Tuesday in Los Angeles with the Democratic 
governor. 
Davis will ask Bush to impose wholesale electricity price controls and order 
refunds for overcharged consumers, aides said, but the White House on Monday 
reiterated Bush's position that such steps would be counterproductive. 
Davis spokesman Steven Maviglio said the steps announced by Abraham were not 
new and were not the kind of help California needed to meet its immediate 
crisis. ``That's been kicked around for a while,'' he said. 
Davis said last week he was prepared to ``go to court'' if Bush failed to 
act. ``The law says we're entitled to relief and it hasn't been coming,'' 
Davis said. 
White House spokeswoman Claire Buchan said that while Bush had ``worked very 
hard'' to help California, through measures such as ordering the Defense 
Department to reduce its energy use by 10 percent in California and easing 
rules for using backup power generators, price controls ``make the problem 
worse.'' 
TRANSMISSION BOTTLENECK 
At issue in Abraham's order is so-called Path 15, an 84-mile stretch of power 
lines with insufficient capacity to carry the necessary load between southern 
California and the northern part of the state, especially during peak hours. 
Abraham told WAPA to determine whether outsiders were interested in financing 
and co-owning a new transmission line. ''The level of interest will be a 
factor in the decision to build the line later this year,'' the Energy 
Department said in a statement. 
The statement did not make clear whether the federal government would go 
ahead with the project in the absence of outside financing, nor did it give 
cost details. 
It said WAPA, which manages nearly 17,000 miles of transmission lines, would 
prepare the necessary environmental and feasibility studies and review 
easement and land acquisition issues. 
LEADERSHIP ROLE 
``The Bush administration is taking a leadership role in addressing a 
long-neglected problem in California's electricity transmission system,'' 
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. 
``Removing the so-called Path 15 bottleneck is a big step in the right 
direction,'' he said. 
The Energy Department said a new line could transmit across the state an 
additional 1,500 megawatts of electricity, enough to power 1.5 million homes. 
Planning for additional transmission in the Path 15 area was started in the 
mid-1980s. 
California's energy crisis is rooted in a flawed 1996 deregulation plan that 
allowed wholesale power prices to soar while capping retail rates. 
The result has brought rolling blackouts, spotty power supplies and put 
intense pressure on Davis to come up with ways to solve a worsening energy 
crunch that has also drained billions of dollars from state coffers. 
It has also energized potential opposition to Davis's expected 2002 
reelection bid. Bush has encouraged Los Angeles Mayor Richard Riordan to 
challenge Davis.













Tuesday, May 29, 2001 






California should try true deregulation 
Moving toward a government monopoly is the wrong prescription




EDWARD R. MULLER 
Mr. Muller is the former president and CEO of Edison Mission Energy, a 
power-producing firm owned by Edison International and headquartered in 
Irvine. This was co-authored by S. Linn Williams, former senior vice 
president of Edison Mission Energy. 

Capitalism won the Cold War because of better economics: Consumers make 
better decisions than politicians, central planners or monopolists. That 
lesson seems to have been learned better by those who lost the war than by 
those who won it.
The failure to absorb the lesson is nowhere clearer than in the efforts to 
deregulate utilities. Deregulation, we are being told, has failed. The lights 
are going out in California, and now politicians, governments, consumer 
groups and the utilities themselves are rushing to hang out signs that read 
"Capitalism doesn't work here." 
Principles matter, so let's start with some: The objective of government is 
to provide a framework for a better life for its people, and monopolies are a 
bad framework. They are inefficient, and when they include the government, 
whether as owner or comprehensive regulator, they are both inefficient and 
dogmatic because politics enters the equation. We pay for that inefficiency 
through higher taxes or higher prices.
We must, of course, keep the lights on to maintain our standard of living. 
Does that mean that we just have to put up with the inefficiencies of 
government-supported monopolies as a necessary evil to assure that important 
services are available? We do not. The problem has not been too little 
regulation, but too much. California is an excellent example. 
What has gone wrong? The finger pointing has been great sport, but the core 
of the problem is just the law of supply and demand. California flat ran 
short of power. Many have wanted to build new power plants in California, but 
the regulatory hurdles have been insurmountable. In recent times, the 
utilities themselves said that California didn't need more power plants and 
fought to stop the construction of new plants by others. The marketplace 
didn't fail; regulation failed. 
And California's vaunted "deregulation" was in reality just a botched 
substitution of one form of regulation for another. When you deregulate a 
monopoly marketplace, you want all buyers and sellers to be subject to market 
forces. What California called "deregulation" didn't come close. First, the 
state and the utilities agreed on fixed retail prices for five years.
As a result, consumers used electricity without knowing what it really cost 
to produce. Second, the state and the utilities agreed that the utilities 
would buy wholesale power through a system subject to market forces. As a 
result, the cost of power bought by the utilities fluctuated even though the 
price they could charge was fixed.
The utilities thought the retail prices were fixed high enough to more than 
cover what they expected power to cost them. For two years they were correct 
and bought power for much less than the fixed prices they charged their 
customers, but last year the cost of power soared way above the fixed prices. 
This wasn't deregulation, just another form of regulation. There were no 
principles, just political expediency. 
It didn't take long for economic reality to assert itself and the jury-rigged 
structure came tumbling down. Blackouts, high prices and insolvent utilities 
are not a failure of the marketplace; the marketplace never got a chance. Now 
we are at a fork in the road. Should we go back to the regulation of the past 
or forward to full deregulation? 
It's not fair to say that deregulation has failed. After all, we haven't 
tried it yet. We should return to first principles: Deregulate properly by 
making all aspects of the system subject to market forces. True deregulation 
would include: 
* Reducing the regulatory burdens on building new power plants.
* Eliminating fixed prices. 
* Making sure that there are enough players in the market to make it 
competitive. 
* Having shareholders, not customers, be responsible for the financial 
effects of business decisions. 
Prices will vary with supply and demand and may rise at the outset until 
supply is added, but over time a deregulated market will give customers the 
lowest prices. The talk of a retreat to the regulation of the past is in part 
a result of our failure to articulate why capitalism won the Cold War and 
competition makes the world a better place. 
The tendencies of politicians to intervene, and of businessmen to ask 
government to exempt their particular business from the marketplace, or some 
of its effects, remain strong. Ironically, prosperous times reinforce those 
tendencies by masking their effects on the rest of us. Whether in good times 
or in bad, the public interest is a David to the Goliath of politicians, 
bureaucrats and businessmen who see governmental protection as safer for 
themselves than the hurly burly of competition.
Capitalism, like democracy, is imperfect, but both are far preferable to the 
alternatives. Our laws and regulations should provide the structure for a 
marketplace where consumers vote many times a day, not a discredited and 
dictatorial system in which only politicians and monopolists get to vote. 












By Rick Stouffer
rstouffer@ftenergy.com
Power generators and traders are finally realizing that the phrase "build it 
and they will come" wasn't written with power plants and natural gas fuel in 
mind.

You can build all the new capacity you want*but if you don't have the natural 
gas to fuel the turbines, all you have is a brand-new, very expensive white 
elephant. 

With roughly 90% of the 155,000 MW to 200,000 MW of announced capacity to 
come on-line within the next few years firing with natural gas, executives 
are beginning to add two and two together and really getting four. 

Back to the future with a twist
Translation: The really smart power producers/traders are now locking in 
proven natural gas reserves*insuring that when supply gets tight, they can 
reach into the ground and pull out more fuel*their fuel. 

For some players, it's back to the future, a return to the days when the same 
company owned the fuel, the generation, and the transmission*but with a 21st 
century twist. Today, the various factions are unregulated. 

"What goes around comes around in this business," said Edward Tirello Jr., 
managing director and senior power strategist-investment banking at Deutsche 
Banc Alex. Brown. "The utilities used to own the various fuel sources, coal, 
natural gas, and now they are getting back into it." 

"Oil and natural gas firms are rebundling, reintegrating, but in an 
unregulated sense," said John Olson, an energy analyst in Houston with 
Sanders Morris Harris. 

Can't burn paper in a turbine
With volatility as much a part of deregulation as mergers and acquisitions, 
no power producer wants to be caught with its assets unproductive, i.e. with 
a shiny, new combined-cycle plant and no gas to fuel it. 

"You can't put paper in a pipeline; you can't burn paper in a turbine," said 
Donato Eassey, head of natural gas analysis for Merrill Lynch in Houston, 
Texas. 

"There are developing some real physical concerns for getting natural gas, 
and we will see some reneging on deals*even with contracts." 

Olson has done the mathematics concerning the spike in demand related to new 
plants*and the numbers don't work. 

"To feed all the plants expected to come on-line in the next few years would 
take an additional 13 billion cubic feet per day (Bcfd), and we are producing 
52 Bcfd," according to Olson. "Gas production has only been growing at a rate 
of 0.4 Bcfd over the last 10 years*and well productivity has been down the 
last two years. We've simply been replacing our natural declines." 

Control what's there
To put it in the vernacular: If enough gas isn't going to be there, you 
better control what you can. Thus, Calpine Corp. in February announced a deal 
to acquire for $1.2 billion in stock and assumed debt the Calgary, Alberta, 
Canada-based exploration and production (E&P) firm Encal Energy Ltd. 


No power producer wants to be caught with a shiny, new combined-cycle plant 
and no gas to fuel it. 

The deal gave Calpine a solid foothold in satisfying part of its seemingly 
insatiable need for natural gas fuel, as it marches toward 70,000 MW of 
capacity within the next three years. With Encal, San Jose, Calif.-based 
Calpine's proven and probable reserves jumped to 1.7 trillion cubic feet 
(Tcf), with a daily production capacity of 390 million cubic feet equivalent 
(MMcfe). 

Earlier this month, Williams Cos. pushed oil behemoth Royal Dutch/Shell Group 
out of the way and snared independent E&P player Barrett Resources Corp. for 
$1.5 billion in cash, stock and assumed debt. 

Williams' offer was music to Barrett shareholders' ears: At $73 per share, 
the price was some 60% above Barrett's stock price the day before Shell's 
unsolicited bid became a hostile offer in March. 

Two weeks ago, another independent E&P player took the money and ran. San 
Francisco-based HS Resources agreed to $66 a share*a 24% premium*$1.7 billion 
in cash, stock and assumed debt from Kerr-McGee Corp. Not bad for a stock 
trading around $20 a year ago*and around $5 a share in early 1999. 

As was the case with Calpine's swallowing of Encal, Williams and Kerr-McGee 
were thinking one thing when they bid the roof off: natural gas reserves. 
Williams' proven reserves, including Barrett, more than doubled to 3.3 
trillion cubic feet equivalent (Tcfe), while average daily production jumped 
to 555 MMcfe. 

Kerr-McGee gains via the HS Resources deal 1.3 Tcfe, about a 77% increase, 
while daily production will climb 45%.

"Williams looked at Barrett using wellhead-to-power plant economics," 
according to Stuart Wagner, a principal in the Denver office of investment 
banking firm Petrie Parkman. "It was looking at long-lived, low-risk 
reserves." 

More deals a no-brainer
Generators today cannot take the chance natural gas will not be available 
when that 500-MW or 1,000-MW plant is set to be primed. 

"If you are building the plants and you don't have the gas, you are down the 
tubes," Merrill Lynch's Eassey said. "If you are down a day in this market, 
you're sunk. And buying gas in the ground is cheaper than buying it on the 
market."

"The firms already have a market for their power, now they are locking in 
margins," said Phillip Pace, an energy analyst in Houston with Credit Suisse 
First Boston. "It depends on how short you want to be. One hundred percent 
short*you don't want to be." 

Thus, there will be more plays made for sister firms to Barrett and HS 
Resources, industry watchers believe. The acquisition of independent E&P 
players is heating up. 

"Will we see more deals? That's a no-brainer," said Merrill's Eassey. "You 
think Equitable (Pittsburgh, Pa.-based Equitable Resources Inc., the largest 
holder of gas in the Appalachian region) is trading around $80 a share on its 
fundamental valuation? That's not fundamentals*that's takeout." 

National Fuel is another takeout target, said Eassey. Another analyst, who 
requested anonymity, believes Mitchell Energy & Development Corp., Louis 
Dreyfus Natural Gas and Burlington Resources are choice targets. Petrie 
Parkman's Wagner sees Mitchell and Western Gas Resources Inc. as takeout 
material.


Olson calls Mitchell his "dream" acquisition. The 55-year-old firm, founded 
by 81-year-old wildcatter George Mitchell, may be the choicest plum still to 
be picked. Mitchell put his firm on the block last year but has yet to hear 
numbers he likes. 

"Gas production at Mitchell is up 25% this year, and is projected at 20% 
through 2003," Olson said. "It's finding very rich gas in the Barnett 
Formation in North Texas, but even if you're finding it at 70 cents per Mcf 
(thousand cubic feet), if you can sell it for $4 to $5 per Mcf, that works." 

Proven gas reserves are in the 1.5 Tcf range, with daily production of 
roughly 340 MMcfd. Mitchell's stock price has more than doubled in the last 
year, closing May 23 at $56.55. 

A crowded field of acquirers
With potential acquisitions awaiting, which companies are the promising 
acquirers? Merrill's Eassey likes Reliant Energy, Aquila, possibly Mirant, 
even Calpine and Williams, which he believes remain natural gas-short if they 
stay on their capacity growth plans. Sanders Morris' Olson believes Duke 
Energy clearly is looking for more natural gas, even with its access to 
product via Duke Energy Field Services. 

Credit Suisse's Pace said the field of potential acquirers could be crowded*
including every firm yet to be successful in acquiring reserves. That 
includes Royal Dutch/Shell. 

"Phillips already has stated it wants to be the largest coal-bed methane 
player in the U.S.," Petrie Parkman's Wagner said. "Duke, Dynegy, Entergy and 
AES will also have to step up." 

"The pressure is there definitely to act," Pace said. "I would be very 
surprised if nothing else happened this summer."