Please see the following articles:

Sac Bee, Tues, 7/3: Details emerge in power contracts

Sac Bee, Tues, 7/3: Duke Energy claims it's been vindicated

Sac Bee, Tues, 7/3: Out-of-state generators pull plug over uncertainty on 
price controls

SD Union, Tues, 7/3: Duke energy agrees to refund money

SD Union, Tues, 7/3: State's grid issues stage 2 alert, triggering new price 
caps

SD Union, Tues, 7/3: Full airing of accords touches off new debate

SD Union, Mon, 7/2: Duke energy lashes back at charge of price rigging

LA Times, Tues, 7/3: Hidden Costs Revealed in Power Pacts

LA Times, Tues, 7/3: Davis Scraps Deal With Consultants

LA Times, Tues, 7/3: Generator Bows, Pledges to Cut Electricity Bill by $20 
Million

LA Times, Tues, 7/3: Power Sales Halted by New Pricing Curbs

SF Chron, Tues, 7/3: Scorching weather triggers Stage 2 alert, price caps

SF Chron, Tues, 7/3: Uncensored power pacts made public 
State controller says deals will burden general fund for years

SF Chron, Tues, 7/3: Corporate casualties 
PG&E executives are receiving bonuses, while some of its veteran employees 
have
been waiting months for their disability checks

SF Chron, Tues, 7/3: Developments in California's energy crisis

SF Chron, Tues, 7/3: Duke Energy slashes $20 million from California power 
bill

SF Chron, Tues, 7/3: Duke opens record books but keeps mum on prices

SF Chron, Tues, 7/3: Duke releases California energy records to counter 
accusations of price gouging

Mercury News, Tues, 7/3: Las Vegas hit by rolling blackouts 

OC Register, Tues, 7/3: Blackout hits Las Vegas as number 120 comes up

Individual.com (AP), Tues, 7/3: State One and Stage Two Emergencies Declared 
as Demand Soars;
California ISO Strongly Urges Conservation

Individual.com (AP), Tues, 7/3: Duke Energy Releases California ISO, Internal 
Records that
Confirm Appropriate Operation of South Bay Plant

Individual.com (AP), Tues, 7/3: Calpine's Sutter Energy Center Is Up and 
Running First New
Major Baseload Generator for California

Individual.com (AP), Tues, 7/3: Duke Energy Will Offset Receivables Above 
FERC Proxy Price

Individual.com (AP), Tues, 7/3: New York Power Producers Announce Five-Point 
Program to
Address State's Long and Short-Term Energy Needs IPPNY Plan Designed to 
Prevent
California-style Crisis in New York

NY Times, Tues, 7/3: Power Company Rebuts Accusations of Gouging

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Details emerge in power contracts 
By Carrie Peyton and Chris Bowman
Bee Staff Writers
(Published July 3, 2001) 
California's power bills for the next decade probably will exceed the 
forecasts of Gov. Gray Davis, the State Controller's Office said Monday as it 
released unedited versions of long-term contracts in a new jab at the 
governor. 
The electricity contracts, which Davis' office sought in court to keep 
secret, offer a glimpse into the rapid, high-stakes deals struck early in the 
state's power crisis and illustrate the way deregulation's unraveling could 
haunt California for years to come. 
Some show that builders of new power plants could recoup the entire cost of 
those plants in four years or less. Some show lucrative swaps for power, 
including one arranged the same day California was rocked by rolling 
blackouts. 
More than two dozen additional administrative contracts detail the price 
California is paying its consultants to seek a way out of the power mess, 
from tens of thousands for Davis' aides down to $51 an hour for copying and 
phone answering. 
The governor's office defended its estimates of the state's future power 
bill. 
The 41 long-term contracts, 27 consulting contracts, five short-term deals 
and stacks of receipts and invoices released Monday by state Controller 
Kathleen Connell may just be the start. 
Her office hopes to provide details about how much California has already 
paid individual power generators in the volatile short-term, or "spot," 
market. 
The deals include so many intricate pricing formulas that Connell said she 
couldn't immediately predict exactly how high California's hourly power costs 
would go. 
Walter Barnes, chief deputy controller of finance, said the contracts 
probably would be "well in excess" of the $69 a megawatt-hour that Davis once 
said would be California's average cost for contract power for the next 
decade. 
The contracts' prices range from $55 to $249 a megawatt-hour, and most are 
more than the $69, Connell said. 
The state Department of Water Resources, the state's power buying arm, later 
revised the $69 forecast to $70 a megawatt-hour through the end of 2010, with 
the higher priced power coming first. 
If anything, those figures could decline because natural gas, the fuel for 
most new power plants, is getting cheaper, DWR spokesman Oscar Hidalgo said, 
adding that his office sticks with its forecasts. 
"We're on pretty solid ground here," he said. 
As the statewide elected official who pays California's bills, Connell 
repeatedly has criticized the governor for his electricity spending, saying 
that she never believed the contracts should be kept secret. 
But Davis' office blasted her for giving out details that power generators 
and traders could use to learn the state's negotiating positions and buying 
practices and said the information could boost wholesale prices within days. 
"When they open their electric bill next time, every Californian can thank 
Kathleen Connell for higher electricity costs," Davis spokesman Steve 
Maviglio said. 
The long-term contracts were first released June 15 by the water resources 
department with power plant names, performance data, delivery points and 
other details blocked out under heavy black strokes. 
Analysts said that was the sort of data they could have used to calculate how 
much more than the production costs the state was going to be paying for the 
electricity purchased on behalf of three cash-strapped investor-owned 
utilities. 
As analysts began sizing up some of the specifics Monday, early reactions 
were wary. 
"This just shows when the state comes in and takes over the utility system, 
we're just going to be in deep from all sorts of expenses and inefficiencies 
that we were trying to get away from" with deregulation, said Arthur 
O'Donnell, who edits a trade newsletter, California Energy Markets. 
Bill Marcus, a power consultant who had analyzed the edited contracts for a 
consumer group, quickly read through the unedited versions muttering things 
such as "offensive" and "they got absolutely ripped here." 
In one swap that was negotiated on a day of rolling blackouts in March, the 
state agreed to send Powerex, the trading arm of British Columbia's 
government utility, 2
 times more electricity in the spring than Powerex 
would return in the summer. 
Although seasonal swaps are common, the 2
-to-1 ratio was a sign of "panic" 
and inexperience on the state's part, he said. 
The consultants who advise California on power deals were frenetic at the 
time, with one staffer at the Navigant consulting firm billing for hours 
worked that were the equivalent of 9.7 hours a day for 34 consecutive days. 
The power purchase terms disclosed Monday confirm many energy analysts' 
predictions that California consumers would be paying premium prices for 
years to cover the costs of the new plants coming on line. 
In several of the contracts, the state agreed to pay generators a 25 percent 
to 30 percent annual return on their plant construction costs, which could 
pay off the entire plant in four years or less. 
Before deregulation, utilities generally received 3 percent to 18 percent 
annual return on their capital investments over 30 years, said Marcus, a 
veteran energy analyst whose firm, JBS Energy Inc. of West Sacramento, 
represents ratepayer groups. 
"We're all going to have to pay more for power plants over the next 10 or 
more years because the generators are looking to pay off their plants in half 
the time," he said. 
"Beyond blackouts and price spikes, this will be the long-term legacy of 
deregulation," he said. "The private market needs a high rate of return on 
their investment." 
Several contracts were drafted in the late winter and early spring when 
California endured Stage 2 and Stage 3 energy alerts. 
The unmasked terms in some of those agreements reflect the state's 
desperation for megawatts amid fears of routine blackouts when temperatures 
and energy use began to rise in the summer. 
For example, the state agreed in a March 29 contract to pay Calpine $232 a 
megawatt-hour to supply 300 megawatts nonstop from July 1 through Sept. 30. 
But a more recent Calpine contract calls for about $59 a megawatt-hour, 
starting Oct. 1. 
Time made all the difference, said Jim Macias, a Calpine senior vice 
president. He said that last winter, Calpine couldn't guarantee that plants 
under construction in Sutter County and the East Bay would be on line by 
summer. So the company bought the power on the spot market for the state, 
Macias said. 
"Back in the winter, $232 was a good price for electricity this summer," he 
said. 
Calpine officials said that they made no money on the sale and even knocked 
15 percent off their price to maintain good relations with the state power 
buyers. 
The gesture more than paid off with the signing of the 10-year contract, said 
Kathleen Potter, Calpine spokeswoman. 
"It was a great transaction for us," Potter said. "We appreciate the 
business." 
Proponents of "free-market" energy buying have said that in the long-run, 
competitive forces would result in more-efficient, less-costly power 
generation. 
But the contracts show that pressed for more electricity this summer and 
fall, officials resorted to buying power from some of the least-efficient 
plants in the state, guaranteeing owners of these aging generators 10 more 
years of income. 

The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com.








Duke Energy claims it's been vindicated 
By Dale Kasler
Bee Staff Writer
(Published July 3, 2001) 
Rebutting allegations that it manipulated electricity output to maximize 
profits, a major power generator said Monday it's been vindicated by 
documents suggesting the plants were run at the direction of California's 
transmission-grid operator. 
But a state senator leading the investigation into alleged market 
manipulation said the generator, Duke Energy Corp., isn't necessarily off the 
hook. Sen. Joe Dunn said Duke must provide detailed data about its pricing 
practices if it wants exoneration -- something Duke won't yet do. 
Duke, rebutting allegations by three ex-workers that it adjusted production 
up and down during a time of extreme shortages, released confidential 
control-room records Monday indicating the production changes were ordered by 
the state Independent System Operator. The allegations focused on Duke's 
practices at two Chula Vista plants Jan. 16-18, when the state experienced 
its first wave of rolling blackouts. 
In some cases, the plants were "literally driven by the ISO" through a 
computerized system called automatic generation control, said Jeff Stokes, a 
Duke executive vice president. In other cases, Duke retained control of the 
plants but adjusted production levels in response to computer dispatches sent 
by the ISO, sometimes as often as every 10 minutes, Stokes said. 
"Duke Energy was not making the decisions to ramp the plant up and down," he 
said. "(The ISO was) ramping it up and down to meet the minute-by-minute 
changes in the grid." 
Duke released a memo from Tracy Bibb, the ISO's director of scheduling, to 
state officials confirming the accuracy of Duke's records and acknowledging 
that Duke was following the ISO's dispatch orders. 
The memo, along with the plant records, "clearly refute the allegations," 
Stokes said. 
Yet Dunn, D-Santa Ana, chairman of a Senate select committee probing 
wholesale power prices, said the Duke investigation will continue. 
The documents "seem to give (Duke) partial exoneration," Dunn said, but the 
generator still needs to disclose how much it charged the state. He also said 
there were times when Duke seemed to be acting on its own, and not in 
response to the ISO's directions, when it adjusted output from the plants. 
Asked about prices, Stokes declined to release detailed information but said 
Duke charged California roughly $1,200 a megawatt-hour for power from the two 
plants during the three January days cited by the ex-workers. The high prices 
mainly reflected a risk premium because of the shaky finances of California's 
electric utilities, he said. The state Department of Water Resources didn't 
step in as a creditworthy power purchaser until Jan. 19, the day after the 
three-day period that was the subject of the ex-workers' allegations. 
Stokes said Duke will disclose actual prices "at the appropriate time and in 
the appropriate setting." 
Stokes also disclosed that Duke agreed Monday to forgive almost $20 million 
that it says it's owed by California for power supplied in January and 
February. The reduction was ordered in March by the Federal Energy Regulatory 
Commission, which said Duke and other generators had overcharged the state. 
Even with the $20 million deducted, Duke says it has received just "pennies 
on the dollar" for power consumed by California's troubled utilities. 
On the other hand, the ISO has calculated that Duke overcharged California by 
about $804.7 million from May 2000 to February 2001, the latest data 
available. Only one other generator stands accused of overcharging more, 
according to a confidential ISO memo that surfaced recently: Williams Cos., 
at $860.9 million. 
With state officials claiming power generators have overcharged California by 
about $9 billion, the allegations by the ex-workers hit Duke like an unwanted 
jolt of electricity. 
In testimony before Dunn's committee June 22, three former employees of 
Duke's South Bay 1 and 2 plants in Chula Vista said the company manipulated 
supplies to drive up prices Jan. 16-18. 
Lt. Gov. Cruz Bustamente called their testimony the "smoking gun," while Gov. 
Gray Davis invited the trio to breakfast. 
Duke, already battered by the revelation that it charged the state a whopping 
$3,880 a megawatt-hour for power at a different plant in January, took out 
full-page advertisements in the state's major newspapers rebutting the 
ex-workers' charges. It then took the extraordinary step of releasing plant 
control-room logs to demonstrate that it was following orders. 
At the heart of the matter is the computerized "automated dispatch system" 
implemented by the ISO last summer to balance supply and demand more 
precisely. Before that, the ISO had to resort to phone calls to get 
generators to increase or decrease production. 
Gregg Fishman, an ISO spokesman, said the ISO will continue its analysis of 
market practices by all generators and doesn't consider the Duke matter 
closed. 

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com. 










Out-of-state generators pull plug over uncertainty on price controls
By Dale Kasler
Bee Staff Writer
(Published July 3, 2001) 
Confused by the federal government's new controls on electricity prices, 
generators withheld so much power from California on Monday that the state 
was nearly plunged into rolling blackouts, state officials said. 
The confusion began when the state's electric grid operators declared a Stage 
1 power alert in the early afternoon, triggering the price caps for the first 
time since they went into effect June 21. 
Out-of-state generators pulled about 1,500 megawatts of electricity off the 
table at midafternoon, enough to power about 1.1 million homes, because of 
uncertainty about how much they could charge under the new Federal Energy 
Regulatory Commission pricing system, said Oscar Hidalgo, spokesperson for 
the state Department of Water Resources. The department buys electricity for 
the state's financially distressed utilities. 
"They didn't understand what they were going to be paid; there was confusion 
over the FERC order," Hidalgo said. "We saw 1,500 megawatts disappear." 
The problem was exacerbated by a heat wave across the West, which forced 
California to compete with other states for scarce electricity, he said. 
Rolling blackouts hit southern Nevada. 
Most California officials credit the FERC system, which is based on a 
variable price cap, with reining in what had been a runaway wholesale power 
market. But power generators have complained that the price caps, by limiting 
profits, could discourage the production of critically needed electricity. 
And as Monday's episode suggested, even the uncertainty about where the cap 
will fall could lead to unexpected shortages. 
"That's the risk that you run (with price controls)," said Arthur O'Donnell, 
editor of the newsletter California Energy Markets. "People want any kind of 
certainty at all." 
Hidalgo said the state avoided blackouts only because of last-minute imports 
from the Bonne'ville Power Administration, the federal agency that markets 
government-produced hydroelectric power in the Pacific Northwest. The state 
went into a Stage 2 power alert, the next-to-last level before blackouts are 
ordered. The alert was canceled in late afternoon. 
The blackouts would have been the first in California since May 8. 
FERC imposed a round-the-clock ceiling on power throughout the West. The 
price fluctuates and is tied to the production costs of the least-efficient 
plant operating in California during a "power alert" declared by the 
Independent System Operator, which runs the state's power-transmission grid. 
When there's no alert, prices can't exceed 85 percent of the cap that was 
established during the latest alert. 
Until Monday, the maximum price held steady at about $101 a megawatt-hour in 
California. But when the ISO declared a Stage 1 power alert in early 
afternoon, signifying that reserve supplies had dwindled to less than 7 
percent of demand, confusion set in, Hidalgo and others said. 
Because of a steep drop in the price of natural gas, which fuels many 
California power plants, suppliers knew the cap would fall. But no one knew 
by how much until the price was posted by the ISO. 
The ceiling for California fell to about $77 at 3 p.m. but was back up to $98 
in two hours, according to the ISO. Those prices include the 10 percent 
premium that sellers can charge California because FERC said there's a credit 
risk in selling to the state. 
O'Donnell said it's likely suppliers will pull back from the market every 
time the ISO declares a power alert. 
In-state generators have to operate their plants if summoned by the ISO. But 
out-of-state suppliers can withhold supplies, and on Monday it was the 
out-of-staters that were pulling back, Hidalgo said. 

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com. 













Duke Energy agrees to refund money 






By Bill Ainsworth 
UNION-TRIBUNE STAFF WRITER 
July 3, 2001 
SACRAMENTO -- As hot summer weather triggered the first Stage 2 power alert 
yesterday in more than a month, Duke Energy agreed to refund money from an 
earlier extremely high price to comply with an order from federal regulators. 
While California was able to squeeze by with tight power supplies, southern 
Nevada was not so lucky and was forced to endure brief rolling blackouts 
during triple-digit heat. 
California's electricity grid manager, the Independent System Operator, had 
issued the last previous Stage 2 alert on May 31. 



The hot weather is expected to continue. "Conservation is going to play a key 
role in reducing demand," said Greg Fishman, spokesman for the ISO. 
California's electricity demand peaked at about 4 p.m. with 41,600 megawatts, 
with an available supply of 42,402 megawatts. A megawatt can power about 750 
homes. 
Meanwhile, Duke Energy announced that it would follow rather than fight an 
order from the Federal Energy Regulatory Commission to refund money from 
January when it charged a state record $3,880-per-megawatt hour. Duke was 
allowed to charge only $273 per megawatt-hour, according to FERC. 
The North Carolina-based company said that it would slash $20 million from 
California's power bill, including $2.1 million from February. 
Unlike the action for January, the February price cut was not ordered by the 
Federal Energy Regulatory Commission. 
"It's our way of creating a good working atmosphere to come up with some 
solutions," said Terry Francisco, a company spokesman. 
The money is a mere fraction of the $805 million that the ISO says the 
company overcharged California residents. 
In all, the ISO says power companies have overcharged California at least 
$8.9 billion. 
Company officials, meanwhile, continued to fight price-gouging charges 
leveled by former employees of Duke's Chula Vista plant. 
They held a news conference explaining in detail the actions it took from 
Jan. 16 through Jan. 18, a time when it charged the state the record price 
for power. 
Previously, the company had released a memo from the ISO saying that the 
Chula Vista plant was operating under the grid manager's instructions when it 
throttled up and down during that period. 
Jeff Stokes, executive vice president of Duke, would not detail the price the 
company charged during that time. But in addition to the $3,880 per megawatt 
hour, he said, Duke charged between 25 percent and 33 percent of that record 
price. That would make the other prices about $1,000 per megawatt hour. 
Yesterday, a megawatt hour sold for $92 on the spot market, and that's about 
three times the going price in the spring of 2000. 
Officials from the ISO say the amount of the bids the company offered is 
needed to determine whether Duke engaged in price gouging. 
A March report by the ISO accused generating companies of driving up prices 
in two ways: by withholding power and by bidding prices so high the state 
couldn't afford them. 
Gov. Gray Davis said, in a written statement, that Duke owes Californians an 
explanation. 
"Duke has a lot of explaining to do for charging Californians the outrageous 
price of $3,880 a megawatt hour," he said. 












State's grid issues Stage 2 alert, triggering new price caps 






By Don Thompson
ASSOCIATED PRESS 
July 2, 2001 
SACRAMENTO ) California's electric grid operator triggered price caps in 11 
Western states Monday when it issued an energy alert for the first time since 
federal regulators imposed the cost ceilings two weeks ago. 
Power deficiencies were expected to continue Tuesday from 10 a.m. until 
midnight, according to a statement from the California Independent System 
Operator. 
Unexpectedly high temperatures across much of California and the Southwest 
brought higher energy use that required the ISO to declare a Stage 2 alert, 
meaning electricity reserves fell below 5 percent. 
Unless an emergency happen, the ISO said rolling blackouts remained unlikely. 
Still, it asked consumers to conserve, especially during afternoon and early 
evening peak use periods. 
"Even if things are OK outside California, if there's a Stage 1 (or higher) 
in California they all get" the caps, said Mike Wilczek, a senior western 
power market reporter for Platts, the energy market information division of 
The McGraw-Hill Companies. 
The Federal Energy Regulatory Commission's June 19 order expanded price 
restrictions it imposed in April on wholesale electricity sales in California 
during peak demand periods when blackouts were threatened. 
The restrictions now cover power transactions 24 hours a day, seven days a 
week throughout 10 Western states along with in addition to California. It 
also closed several loopholes that allowed power generators to circumvent the 
April order. The price cap is pegged to the cost of production at the least 
efficient electricity generating plant in the region. 
ISO spokeswoman Stephanie McCorkle said the state won't know the baseline 
price until the energy alert ends, probably Tuesday. Electricity had been 
trading at nearly $92 per megawatt hour before the cap took effect, Wilczek 
said. 
"It's going to be an interesting week," said ISO spokesman Gregg Fishman. 
Temperatures were about 5 percent higher than forecast, and the state was 
using about 2,000 more megawatts than predicted, said McCorkle. That's enough 
electricity to power about 1.5 million homes. 
The Desert Southwest was seeing triple digit temperatures, meaning the region 
had less electricity to share. 
Imported electricity into California dropped from about 4,000 megawatts 
Sunday to about 3,300 megawatts Monday, she said. In addition, California 
lost about 1,500 megawatts when a plan went off-line in Southern California 
over the weekend. A megawatt is enough power for about 750 homes. 
The high temperatures were expected to continue through most of the week, but 
electricity use was expected to fall Wednesday for Independence Day. However, 
energy use could climb higher than normal on Thursday as office buildings 
were cooled after being shut down for the holiday, Fishman said. 
??

On the Net: Track the state's blackout warnings on the Web at 
www.caiso.com/SystemStatus.html. 












Full airing of accords touches off new debate 






Uncensored electricity contracts show some edge for both sides
By James P. Sweeney 
COPLEY NEWS SERVICE 
July 3, 2001 
SACRAMENTO -- Uncensored copies of long-term contracts that commit California 
to buy $43 billion worth of electricity suggest that both generators and the 
state may have cut better deals than previously disclosed. 
"Some of these prices are more favorable to the utilities than we could tell 
from the earlier contracts," said Roger Bohn, an energy specialist and 
associate professor at UCSD. "Then there are some provisions that look more 
favorable to the state ... at least in the short run." 
Bohn, who served on the market monitoring committee of the defunct state 
Power Exchange, reviewed several of the largest contracts, including that of 
Sempra, the parent of San Diego Gas & Electric. 
Under court order, Gov. Gray Davis' administration released the long-term 
contracts June 15. But significant sections of some, and snippets of others, 
had been omitted or blacked out to protect proprietary information and the 
state's bargaining position, administration officials said. 
Several news organizations, including The Copley Press, which publishes The 
San Diego Union-Tribune, sued seeking full disclosure. State Controller 
Kathleen Connell, who has openly feuded with fellow Democrat Davis, also had 
urged a public airing of the complex documents. 
A San Diego judge last week issued an opinion in favor of releasing the full 
contracts, but had not yet made her ruling final. 
Yesterday, Connell released unabridged versions of some 41 contracts, most of 
which stretch over the coming decade. At least one extends 20 years. 
Connell's move touched off another heated exchange with the governor's 
office. 
The controller said the state almost certainly has never before assumed such 
a massive financial obligation without prior public review. 
Connell and her top aides said the previously excised portions of the 
agreements show the governor saddled the state with huge electricity costs 
through the end of the decade. 
She also released short-term contract information which was of particular 
concern to the governor's office. Steve Maviglio, the governor's press 
secretary, criticized that decision, saying it would help power generators 
continue to manipulate the market. 
"Unfortunately, the controller is seeking political vengeance at the expense 
of the California ratepayer," Maviglio said. "She's uninformed and clueless 
about the impact of the long-term contracts on bringing down spot-market 
prices." 
Few others were weighing in on the debate yesterday. Most consumer advocates 
and other analysts were reserving judgment until they finished poring through 
the nearly 30 pounds of documents. 
But Walter Barnes, the controller's chief financial officer, said the 
contracts' average cost "probably will be well in excess" of the $69 per 
megawatt-hour claimed by the governor's chief negotiators. 
UCSD's Bohn called that conclusion "plausible," but said it will depend on 
the future price of natural gas, which no one can predict. Many power plants 
are fired with natural gas, the cost of which gyrated wildly over the past 
year. 
"Neither (Connell) nor the governor are saying what gas prices they assumed, 
so we don't really know what the $69 figure is based on," Bohn said. 
While generators may have bargained for higher rates than previously thought, 
the state secured what appear to be floating market rates with a cap in at 
least one major contract, the deal with Sempra, Bohn said. 
In that agreement, the state is "not locked into an arbitrarily high price 
for this summer. The way things are looking now, that may turn out to be a 
good deal for California," he said. 
While largely critical of the contracts, Connell appeared to confirm that 
many of the deals have a flexibility that could prove beneficial to 
ratepayers. 
She said her staff found an "interesting pattern" in the state's June power 
purchases. Given a choice between available long-term supplies and the spot 
market, the state's energy traders bought almost as often in the spot market. 
While entering into long-term contracts, the state's ability to continue 
buying some power on the spot market benefited consumers when prices on the 
market started to fall, according to Davis associates. 
S. David Freeman, the governor's chief energy adviser, said the long-term 
commitments drained some demand and restored some sanity to a spot market 
that had been rising to unheard-of prices. Since then, the Federal Energy 
Regulatory Commission also has imposed wholesale price controls in California 
and 10 other Western states. 
Freeman said the state negotiated the best deals it could starting in 
January, when it endured rolling blackouts and spot market prices averaging 
nearly $280 per megawatt-hour. 
Along with the contracts, Connell released details of power purchases to date 
under the long-term agreements. 
Contract power purchased so far appeared to average $173 per megawatt-hour. 
The administration, however, had warned the rates it negotiated were steeper 
at the front end. 
Connell said the contract prices range from $55 to $249 per megawatt-hour, 
with most exceeding the $69 average the administration has claimed. Perhaps 
more troubling, she said, is that many of the contracts contain clauses that 
could prevent purchase of the power at the lower prices. 
In addition, she said, "there is a great deal of negotiation that remains to 
be done on many of these contracts as market conditions evolve." 
"So the state does not have a firm commitment on price, other than a floor 
price on many of these contracts." 
The deals should guarantee nearly 600 million megawatt-hours for the state 
over the next decade. That is projected to cover about 45 percent of the 
amount of power the state's utilities cannot cover with their own plants. 
But the price of half the long-term commitments will fluctuate with the price 
of natural gas, and 70 percent of the power has been promised from power 
plants that have not yet been built. 







Duke Energy lashes back at charge of price rigging 






By Bill Ainsworth
UNION-TRIBUNE STAFF WRITER 
July 2, 2001 
SACRAMENTO -- Duke Energy, which has been stung by allegations of price 
gouging at its Chula Vista plant, has begun fighting back by selectively 
releasing documents it says exonerate the company of trying to drive up 
prices by withholding electricity during a critical power shortage in 
January. 
Duke has released a memo from the state electricity grid manager saying the 
company was following state orders when it powered the plant up and down 
during three days in January. 
But the company has refused to release price information that a spokeswoman 
from the Independent System Operator, the grid manager, said was critical to 
fully understanding whether the company engaged in price gouging. 



The dispute is part of a larger battle between Gov. Gray Davis and the power 
generating companies that have made enormous profits from the California 
energy crisis. 
Last month, in a dramatic public hearing before a state Senate committee, 
three former workers at the Chula Vista plant accused Duke of turning 
electricity production up and down to manipulate prices, throwing away spare 
parts and prolonging plant outages. 
Duke, which is based in North Carolina, leases the plant from the San Diego 
Unified Port District. 
Duke officials called the allegations "baseless," saying plant workers 
weren't in a position to know why the plant was powered up and down. Duke 
spokesman Tom Williams acknowledged that the company never explained its 
actions to employees, saying it was none of their business. 
Duke said the plant was following orders from the ISO when it powered down on 
Jan. 16 during a Stage 3 alert, when electricity supplies were so low that 
rolling blackouts were threatened. 
Yesterday, the company released a memo from the grid manager confirming that 
from Jan. 16 through Jan. 18, the company followed ISO direction. "The units 
did follow the ISO dispatch orders," the memo said. 
But Duke refused to disclose how much it charged the state for electricity on 
those days, saying the information was confidential. 
The ISO, in a March report, accused Duke and other generating companies of 
manipulating the market by withholding power and by bidding prices higher 
than the state can afford. 
Stephanie McCorkle, spokeswoman for the ISO, said the pricing information is 
needed to get a complete picture of Duke's actions in January. She said the 
grid manager may have ordered the South Bay plant to power down because Duke 
was charging prices so high the state could not afford them. 
"The ISO frequently orders plants to ramp down because the plant owner is 
charging high prices. Output will certainly fluctuate if the price is so 
astronomical we can't afford it," she said. 
The ISO has the pricing information but is not allowed to release it without 
authorization from the power company. 
Duke spokesman Williams yesterday said the ISO memo shows that Duke reduced 
plant output to keep the electricity grid in balance -- that is, to make sure 
that supply was equal to demand. 
He said Duke charged high prices during those three days in January, 
including the record price of $3,880 per megawatt-hour, because it feared it 
would not be paid. 
"It's not a secret at this time that we had some high credit prices," he 
said. 
Michael Aguirre, a lawyer who is suing Duke and who helped get the ex-workers 
to testify to the Senate committee, chastised the company for not fully 
disclosing the prices. 
"They should have the courage that these workers had to come forward with all 
the information," he said. "They should make a full disclosure." 
The memo from the ISO does not address broader charges by the former 
employees that the company had been powering its plant up and down for the 
entire year to drive up the price of electricity. 
Glenn Johnson, a former mechanic at the South Bay plant, has said working 
turbines frequently were taken offline for "economic reasons." He and other 
plant workers say that meant the company was trying to drive prices higher. 
Williams yesterday said "economic reasons" meant the cost of running the 
extra turbines was so high the company could not recover the operating costs. 
"It's not to drive prices up, it's because you can't produce the power and 
make money," he said. 
Aguirre said he was skeptical that Duke could not make money operating close 
to capacity at a time when wholesale electricity prices were skyrocketing. 
Lt. Gov. Cruz Bustamante yesterday accused the company of trying to explain 
away its price gouging. "Duke should stop trying to manipulate the media the 
way it has California's energy market," he said. 
On Friday, Duke asked the ISO to release its memo to just two news 
organizations, the Los Angeles Times? and the Charlotte Observer? in North 
Carolina. But McCorkle refused, saying a document should be available to 
everybody or to nobody. 
The newspapers nevertheless obtained the document. Williams said the company 
selected those two news organizations because it had been working with them 
for weeks on the story. He said Duke plans to release the memo to the public 
at a news conference today. 
Davis wants nearly $9 billion in refunds from Duke and other companies that, 
under the state's flawed deregulated electricity system, acquired power 
plants from public utilities and raised wholesale rates dramatically. 
Duke Energy, which has been accused by state and federal regulators of 
overcharging California customers for its power, set a California record when 
it sought $3,880 per megawatt-hour in January. 
By comparison, during the first half of 2000, power sold for about $30 a 
megawatt-hour. 








Hidden Costs Revealed in Power Pacts 


By RICH CONNELL,ROBERT J. LOPEZ and JEFFREY L. RABIN, Times Staff Writers 

?????California consumers on Monday were given their first detailed glimpse 
of the unpredictable and potentially higher costs they'll face in the future 
under power-buying deals signed by Gov. Gray Davis' administration.
?????State Controller Kathleen Connell released previously secret elements of 
the state's long-term electricity contracts, along with a new warning that 
the price tag could exceed the administration's previous estimate of $43 
billion.
?????Technical vagaries in the pacts, Connell said, could leave state power 
bills open to wild fluctuations over the next decade. Even after weeks of 
analyzing the 41 agreements, she said, her office is still unable to say 
"what the [cost] ceiling could be."
?????Among other things, the controller said, most costs under the contracts 
are now running between $70 and $200 per megawatt-hour, and she predicted 
that costs over the next decade will be far higher than the $69 per hour 
suggested by Davis' aides.
?????More certain are the amounts the state is paying more than two dozen 
private consultants who have been drawn into the electricity crisis and whose 
contracts also were released Monday by the controller.
?????Some of those consultants--working on behalf of Davis or the state 
agency that has been purchasing power since January--are making tens of 
thousands of dollars each month.
?????Connell's release of the uncensored electricity contracts came one day 
after the California attorney general said Davis would not appeal a judicial 
order declaring them public records in their entirety. The court action in 
San Diego was filed by The Times and other news organizations.
?????Three weeks ago, after another ruling favorable to the media, the 
administration released the contracts, which will govern the cost of 
wholesale electricity for years to come. But key technical provisions were 
redacted from those documents.
?????Davis planned to release the contracts later this week, but the 
controller upstaged him Monday, offering her own spin on the deals and 
prompting the governor's office to shoot back.
?????His aides insisted Connell's warning of possibly higher costs was based 
on incomplete information. Her price figures, they said, were skewed toward 
purchases made earlier in the year, when electricity and natural gas prices 
were significantly higher.
?????"Unfortunately, the controller doesn't let the facts get in the way of a 
good story," said Davis spokesman Steve Maviglio, adding that the controller 
has been at odds with Davis since he endorsed her rival, Antonio 
Villaraigosa, in the Los Angeles mayor's race. "This is just a drive-by 
shooting where she does not have the full set of information."

?????Millions in Hidden Costs
?????Still, the contracts released Monday show for the first time the 
millions of dollars in hidden costs that are being shouldered by taxpayers.
?????At least one of the energy suppliers, Houston-based Dynegy Inc., 
negotiated terms that allow it to pass along to the state high-cost delivery 
charges for natural gas, experts said.
?????Robert Michaels, an energy consultant and professor of economics at Cal 
State Fullerton, said the Dynegy contract permits the firm to use the state's 
most costly benchmark of natural gas prices. 
?????Dynegy "has its choice of the highest [cost delivery] point," said 
Michaels, who once advised the company. Like Connell and others, Michaels 
said that even with the complete picture of the contracts, it is difficult to 
determine how much added cost ratepayers may face as the deals extend into 
the next decade.
?????Also, in just the first three months of the Dynegy contract, the state 
picked up about $10 million in pollution, start-up and other operational 
costs for the firm.
?????Likewise, a contract with San Diego-based Sempra Energy Resources, 
parent company of San Diego Gas & Electric, allows the company to choose 
where it delivers electricity into the state grid, Michaels said after an 
initial review of the agreement.
?????"It seems to offer a lot of flexibility for the supplier," said 
Michaels, who also has been a consultant for power suppliers. "It's not 
obvious what the state got out of this [deal]." 
?????The new details on fuel and emission costs underscored some critics' 
fears. "As you look at the devil in the details, it gets worse," said UC 
Irvine economist Peter Navarro.
?????He noted, for example, that Dynegy has been one of the power merchants 
labeled by Davis as "pirates."
?????But examining the company's complete contract Monday, Navarro said, it 
seemed as if the state was saying, "You pirate, take California's dowry."
?????Navarro and other critics note that power prices have fallen 
dramatically in recent weeks, well below those the state is paying under the 
long-term contracts.
?????A Times analysis of payments made so far under the contracts shows the 
average cost per megawatt-hour has been $173. Recent spot prices for peak 
power have been as low as $50 a megawatt-hour, according to surveys by Platts 
Energy Trader, an industry newsletter. By Monday, when an energy emergency 
was declared, the price had risen to about $92 a megawatt-hour.
?????Administration officials, including Davis' chief contract negotiator, S. 
David Freeman, have said the state had little negotiating leverage when many 
of the deals were struck early this year. 
?????"Early on, we were having a very difficult time gaining any advantage," 
said Oscar Hidalgo, spokesman for the state Department of Water Resources, 
which oversees power purchases. Still, Hidalgo and others in the 
administration contend the power deals will stabilize prices in the long 
term, and have tamed high spot prices this year.
?????"Now, we have gained the upper hand," Hidalgo said.

?????A Big Payday for Consultants
?????Meanwhile, payments to outside consultants hired to assist the governor 
and the state Department of Water Resources in dealing with California's 
energy crisis reached nearly $2.8 million by late last month, according to 
the figures released Monday.
?????But those payments represent only a fraction of the total contracts the 
state has signed with a broad array of consultants to assist with the 
purchase of power and acquisition of transmission lines, to provide legal and 
technical advice, and to mount advertising campaigns and polish Davis' image.
?????The agreements include a $1.5-million multiyear contract with the 
Washington, D.C., law firm of Grammer, Kissel, Robbins, Skancke & Edwards, 
which specializes in energy and environmental law.
?????Attorney Elisa J. Grammer and other members of the firm will represent 
the state in proceedings before the Federal Energy Regulatory Commission and 
related court proceedings through the end of May 2004.
?????Another contract calls for the state to pay $1.1 million to two New York 
consulting firms--the Blackstone Group and Saber Partners--at the rate of 
$275,000 a month. The contract includes the services of Joseph Fichera, one 
of Davis' chief advisors on the energy crisis.
?????Blackstone/Saber could be paid an additional $14.58 million if the 
Legislature approves deals to buy electric transmission systems from the 
state's three private utilities--the financially rocky Southern California 
Edison, Pacific Gas & Electric, which has filed for bankruptcy, and San Diego 
Gas & Electric. Critics say the contract, in effect, provides a huge 
financial incentive for the consultants to boost the price the state will 
have to pay for the transmission system, which would result in higher fees 
for them.
?????Davis also drew criticism in late May when he hired two former White 
House strategists--Mark Fabiani and Chris Lehane--at $15,000 a month each. 
Both also did consulting work for Edison to help the utility win approval of 
a financial rescue package that Davis is pushing. Critics charged the two had 
a conflict of interest representing both the governor and the utility.
?????The governor announced late Friday that Fabiani no longer works for him 
and that Lehane would work for less money. Davis' statement said that Lehane 
would be paid $9,900 a month, roughly the same pay as the governor's last 
communications director, and he would not work for Edison while consulting 
for Davis.
?????Also released was the state's contract with the governor's energy 
conservation czar, Freeman. The former head of the Los Angeles Department of 
Water and Power is being paid $120,000 for six months' work from April 15 
through Oct. 15.
--- 
?????Times staff writers Nancy Rivera Brooks, Virginia Ellis, Davan Maharaj, 
Doug Smith, Nancy Vogel and Daryl Kelley contributed to this story.








Davis Scraps Deal With Consultants 
Media: One has left his position and the other will get a smaller fee. 

By DAN MORAIN, Times Staff Writer 

?????SACRAMENTO--Under continuing pressure for employing two well-known 
Democratic communications strategists on the public payroll, Gov. Gray Davis 
announced late Friday that he had scrapped their deal.
?????In a statement released at 7:42 p.m., Davis announced that he had 
dropped a controversial contract with high-priced communications consultants 
Mark Fabiani and Chris Lehane. Davis' statement said that Fabiani left state 
service altogether, and that Lehane would work for a lower fee.
?????A month ago, as his poll numbers fell, Davis retained Fabiani and Lehane 
for what was to be a six-month contract at a fee of $30,000 a month in 
taxpayer funds. Fabiani and Lehane also do consulting work for Southern 
California Edison, helping the troubled utility win approval of a rescue deal 
that Davis is pushing.
?????Critics of the proposed Davis-Edison deal quickly attacked the hiring, 
saying that Lehane and Fabiani had a conflict of interest.
?????Republican legislators contended that Fabiani and Lehane, who had worked 
in the Clinton White House defending the former president against a variety 
of scandals, are political operatives who should not have been paid out of 
taxpayer funds. Fabiani also is a well-known figure in Los Angeles, where he 
once worked for Mayor Tom Bradley, another Democrat.
?????A Republican anti-tax advocate sued to force Fabiani and Lehane to 
disclose their outside clients and recuse themselves from issues related to 
the electricity crisis, while Controller Kathleen Connell, a Democrat feuding 
with Davis, vowed to withhold their pay.
?????Davis had insisted Lehane and Fabiani are "worth every penny" they were 
paid, saying last month that they helped him shape his message that 
independent power generators are responsible for California's energy crisis.
?????Davis' statement also said Lehane would be paid $9,900 a month, roughly 
the same pay as Davis' previous communications director, and that hewould not 
work for Edison while consulting for Davis.









Generator Bows, Pledges to Cut Electricity Bill by $20 Million 
Power: Duke Energy had been accused by the state of price gouging. Gov. Davis 
insists that the company still has much to explain. 

By NANCY RIVERA BROOKS and RICH CONNELL, Times Staff Writers 

?????Caving to state and federal pressure, Duke Energy Corp. said Monday that 
it will reduce by $20 million the amount it claims it is owed for electricity 
sales in California.
?????The Charlotte, N.C., company is one of the state's largest power plant 
operators and, with other generators, has been flayed by politicians and 
regulators in recent months for alleged overcharges in the California market 
and for supposedly manipulating electricity supplies.
?????Duke also on Monday formally released internal documents of its own, as 
well as from the California Independent System Operator, showing that the 
agency was responsible for huge swings in production at a San Diego-area 
power plant that sparked accusations of price gouging.
?????In sworn testimony June 22 before a state Senate investigating panel, 
three former workers at Duke's Chula Vista plant offered internal operating 
logs for three days in January, saying they showed that the company throttled 
generators up and down "like a yo-yo" to boost prices during power 
emergencies.
?????The company denied the allegations, saying that the workers were not in 
a position to know that Cal-ISO, which operates most of the statewide power 
grid, was controlling the changes.
?????Duke has been "shocked and appalled by the accusations that have been 
leveled against our company," said Jeff Stokes, its executive vice president 
for Western gas and power. The letter from Cal-ISO acknowledging that it 
ordered the production gyrations in the course of maintaining grid 
reliability was reported Saturday by The Times.
?????Duke said the $20-million refund for January and February will come from 
a "credit premium" that it had placed on electricity sales because it feared 
it would never be paid by Southern California Edison and Pacific Gas & 
Electric, the utility companies then lurching toward bankruptcy. PG&E has 
since filed for bankruptcy-law protection, and Edison remains financially 
shaky.
?????The Federal Energy Regulatory Commission in June said Duke was entitled 
to no more than $273 per megawatt-hour of electricity in January and ordered 
the company to pay back everything it reaped above that price for the 
month--including an infamous charge of $3,880 per megawatt-hour, which a 
spokesman for Gov. Gray Davis called "obscene."
?????Davis said Monday that Duke still has much to explain.
?????"There's no doubt in my mind that there's been an effort by many of the 
power producers to 'game' the system," Davis said, after dedicating Calpine 
Corp.'s 540-megawatt Sutter Energy Center in Yuba City, the second of four 
major power plants to begin operation this summer.
?????So far, Duke executives said, the company has been paid less than 2 
cents on the dollar for the power it provided the state in January and 
February. The federal commission is holding a settlement conference to seek 
agreement on possible refunds owed California by power generators and 
marketers.
?????A Cal-ISO spokesman declined to comment on the Duke revelations, citing 
a gag order imposed by the administrative law judge overseeing the settlement 
conference.
?????Although Cal-ISO late Friday acknowledged that the ramping at the Chula 
Vista plant was in response to its orders, representatives of the grid 
agency, the governor's office and the special state Senate committee probing 
alleged power gouging warned Monday that Duke's activities at the plant are 
still being scrutinized.
?????The ramping activity ordered by Cal-ISO is only part of the picture, 
they say. Further investigation of pricing is underway.
?????State officials suggest, for example, that the grid operator may have 
ramped down generation at times to avoid paying unreasonably high prices. 
Duke Energy has refused to release details of the prices it charged for power 
on the days at the heart of the ex-employees' allegations, and did so again 
Monday in a conference call with reporters.
?????Under questioning Monday, Duke executive Stokes did indicate that the 
prices charged for the power associated with the January logs were in the 
range of $1,000 to $1,500 per megawatt-hour, enough electricity to serve 
about 750 California homes for an hour.
--- 
?????Times staff writer Eric Bailey in Yuba City contributed to this story.		










Power Sales Halted by New Pricing Curbs 
Electricity: Confused suppliers, unsure what they will be paid, refuse to 
sell to state, which asks FERC for a ruling but doesn't get it. 

By NANCY VOGEL, Times Staff Writer 

?????SACRAMENTO--Confusion over new federal price restrictions prompted 
several electricity sellers to back away from sales to California on Monday 
afternoon, pushing the state closer to blackouts, energy officials said.
?????The state lost sales that would have provided enough electricity to 
supply more than 1 million homes, said Ray Hart, deputy director of the 
California Department of Water Resources, which has been buying much of the 
state's electricity since January.
?????At least five companies producing or marketing power "are telling us 
that since they don't know what they're going to get paid, they're not going 
to take the risk, and so they're not going to sell the energy," Hart said.
?????The electricity sales fell through after power consumption soared in 
summer heat and grid operators were forced to declare a Stage 1 emergency, 
meaning reserves had dipped below 7%. It was the first such emergency since 
May 31.
?????Under a June 19 order by the Federal Energy Regulatory Commission 
intended to bring down wholesale electricity markets across the West, a power 
emergency in California triggers the setting of a new price limit that 
applies to power plant owners from Washington to Arizona. 
?????The new price is supposed to be based upon whatever it costs to run the 
most inefficient, expensive power plant selling electricity to California 
grid operators during the first full hour of a Stage 1 emergency.
?????But much uncertainty remains about exactly how and when the new price is 
supposed to be established under the commission's order, and that apparently 
drove away sellers, Hart said.
?????Shortly after the state issued the Stage 1 alert at 1:30 p.m., putting 
the old price limit of $90 per megawatt-hour in question, companies that had 
committed to provide the state electricity hour by hour Monday afternoon 
backed out, Hart said. The companies include TransAlta Energy Marketing of 
Oregon, Constellation Power of Baltimore and Sempra Energy Trading, a unit of 
the San Diego-based energy conglomerate.
?????Forced to dip even deeper into the state's power reserves and declare a 
Stage 2 emergency, water agency officials called the federal energy 
commission's hotline for clarification about what the new price should be and 
when it should take effect. They got no answer.
?????Hart said commission officials reached at home promised to try to 
clarify their order today. One outstanding question is what obligations power 
suppliers have to deliver electricity to California in an emergency.
?????Both buyers and sellers in the market agree that the new price, when it 
is set, will probably be lower than $90 per megawatt-hour because the price 
of natural gas, the main fuel in California power plants, has dropped lately.
?????Temperatures soared several degrees higher Monday than grid operators 
had anticipated. But they said they expected to avoid rolling blackouts in 
part because the Bonneville Power Administration in Portland, Ore., had 
agreed to provide several hundred megawatts of Pacific Northwest hydropower 
each hour in exchange for a return of electricity from California later this 
summer.
?????"Bonneville is giving us emergency power to get us through," Hart said. 

Copyright 2001 Los Angeles Times 









Scorching weather triggers Stage 2 alert, price caps 
Jim Herron Zamora, Chronicle Staff Writer
Tuesday, July 3, 2001 
,2001 San Francisco Chronicle 
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/03/MN225511.DTL 
Driven by yesterday's sizzling temperatures, California's Independent System 
Operator issued this summer's first Stage 2 energy alert. 
ISO officials remained uncertain last night whether the state's energy 
reserves today and tomorrow would drop again to dangerous levels as 
temperatures continue to hit triple digits in many locations. 
That's because energy demand may be less than expected if people get a jump 
on Independence Day and take off from work early. 
"It's going to be an interesting week," said ISO spokesman Gregg Fishman. 
National Weather Service forecaster Steve Anderson agreed. "In the warmest 
areas people will really want to use their air conditioners," he said. "It's 
going to be a long, hot week." 
Yesterday, Livermore reached a record high of 106 degrees, while Hollister 
hit a record 101. Other inland parts of the Bay Area were hot as well, while 
San Francisco peaked at a comparatively comfortable 80 degrees. 
The three-hour Stage 2 alert declared yesterday was the first time a 
California power shortage triggered price caps for 11 other Western states. 
Under federal rules adopted June 19, wholesale price ceilings that go into 
effect when power reserves in California drop under 5 percent (a Stage 2 
emergency) were extended to Arizona, Colorado, Idaho, Montana, Nevada, New 
Mexico, Oregon, Utah, Washington and Wyoming. 
The caps are designed to prevent energy suppliers from exploiting shortages 
by spiking wholesale prices during threatened blackouts. The restrictions, 
which cover all power transactions in the 11 states, are pegged to the cost 
of production at the least efficient electricity generating plant in the 
region. 
It's not yet clear how the caps will change prices, according to the ISO. 
Electricity had been trading at nearly $92 per megawatt hour before the cap 
took effect. 
Triple digit temperatures throughout the desert and mountain regions mean 
that many of those states have less energy to export. 
The energy crisis was felt the most yesterday in Nevada, where soaring 
temperatures triggered rolling power blackouts yesterday in the southern part 
of the state. But power woes did not dim the lights on the Las Vegas strip, 
where temperatures were as high as 120 degrees. Virtually all major casinos 
and hotels there have backup generators. 
California's Stage 2 alert came the same day that Gov. Gray Davis threw the 
switch to open the 540-megawatt Sutter Energy Center Project in Sutter 
County, the largest power plant licensed by the state to open since the 
California Energy Commission began permitting plants in 1976. Last week, the 
state's first new major power plant since 1988 -- the 320-megawatt Sunrise 
Power Plant -- opened in Kern County. 
Chronicle wire services contributed to this report. 
E-mail Jim Zamora at jzamora@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 3 




Uncensored power pacts made public 
State controller says deals will burden general fund for years 
Carolyn Said, Christian Berthelsen, David Parrish, Chronicle Staff Writers
Tuesday, July 3, 2001 
,2001 San Francisco Chronicle 
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/07/03/MN109919.DTL 
State Controller Kathleen Connell yesterday released uncensored versions of 
California's energy contracts, including short-term contracts that Gov. Gray 
Davis had hoped to keep under wraps for three months. 
Connell said the contracts for $43 billion worth of power were negotiated at 
the worst possible times, for higher prices and longer periods than are 
necessary. But Davis' office countered that Connell was grandstanding and 
that her release of short-term contracts would hurt the state in its 
negotiations with power generators. 
Connell said the contracts showed California paying more than the $69 a 
megawatt hour Davis had stated. Ranging from $44 to $249 per megawatt hour, 
most are between $100 and $200 a megawatt hour, she said, adding that 
variables prevented calculating an exact average. 
But Steve Maviglio, Davis' spokesman, said Connell had selectively mixed in 
some higher-priced short-term contracts "to misrepresent facts about the 
price we negotiated." 
Although a fellow Democrat, Connell has long had a contentious relationship 
with Davis. In an interview yesterday, she said the deals Davis made could 
mean the general fund would be in debt for years to come. She added that it 
appeared the administration would run out of money to buy electricity by 
December. 
Davis is "indebting future generations of Californians to ease the potential 
pain a portion of people might feel over the summer of 2001," she said. 
A judge ordered the contracts to be released two weeks ago, but Davis' office 
blacked out many vital elements, such as where power would be generated and 
transmitted. The judge last week ordered Davis to release that redacted 
material, which the governor's office said he had planned to do this Thursday 
- - omitting the short-term contracts. Instead, Connell released the material 
yesterday. 
Among other new revelations: 
-- Consultants. The state signed agreements for more than $15 million to 
consultants for help in negotiating the contracts, legal advice and other 
services, some for months or years into the future. To date, the state has 
paid out nearly $2.8 million on those contracts, including $30,000 to S. 
David Freeman, the former head of the Los Angeles Department of Water and 
Power, whom Gov. Gray Davis retained as an energy adviser in April. 
The largest of the 27 consulting agreements was for up to $6.2 million with 
Electric Power Group LLC of Pasadena for help in negotiating the long-term 
contracts with the power providers. The firm is headed by several former 
executives with Southern California Edison. 
"There are a number of consulting contracts that appear questionable," 
Connell said. Citing one example, Connell said she had refused to pay the 
contract of Mark Fabiani and Chris Lehane, two political image consultants 
retained by Davis, because the firm was also representing Southern California 
Edison. 
Maviglio said: "The governor makes no apologies for hiring the best talent to 
fight the arsenal of generators. They have several floors of skyscrapers in 
Houston armed with the best talent money can buy." 
-- LADWP. Los Angeles' municipal utility, the Los Angeles Department of Water 
and Power, sold the state $57.8 million worth of power in March and April. 
LADWP charged the state between $213.50 to $174.60 per megawatt-hour of 
electricity, a price that included a 15 percent premium. 
LADWP was not profiteering, said Eric Pharp, director of public affairs for 
the municipal utility. "I don't think most people would think that is 
excessive," Pharp said. "Fifteen percent is what people felt was a reasonable 
return." The 15 percent markup was decided on last December by Freeman, then 
LADWP's director, and approved by the LADWP board. 
"What if LADWP found itself short of power, would it expect to get that power 
from the state at a reasonable cost?" asked Severin Borenstein, head of the 
University of California Energy Institute. "If they expect backstop help from 
the state if they ever get in trouble, now's the time to step forward on that 
basis." 
-- Price. Bill Marcus, principal economist with JBS Energy, a Sacramento 
consulting firm that represents consumer and environmental groups in utility 
issues, said the new material showed the state had paid huge amounts for 
short- term power, more than twice as much as recent federal price caps. 
He also questioned whether California had acted in a panic to buy too much 
power. "The system is not going to have enough flexibility built into it, 
come three to four years from now if we keep signing contracts," he said. 
"I'd like them to stop and take a breath, see if there are ways to change the 
worst contracts, rather than running hell-bent for election as fast as they 
can, trying to sign these things." 
Maviglio said the contracts represented a "balanced portfolio" of purchases; 
provided California with a reliable price for electricity; and had helped 
drive down spot market prices. "Instead of being vulnerable to the whims of 
the market, we know exactly how much we'll be paying," he said. 
E-mail Carolyn Said at csaid@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 3 





Developments in California's energy crisis 
The Associated Press
Tuesday, July 3, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/03/state1
037EDT0155.DTL 
(07-03) 07:37 PDT (AP) -- 
Developments in California's energy crisis: 
TUESDAY:
* No power alerts Tuesday as electricity reserves stay above 7 percent. 
MONDAY:
* California's electric grid operator triggers price caps in 11 Western 
states when it issues an energy alert for the first time since federal 
regulators imposed the cost ceilings two weeks ago. High heat led to higher 
energy use that required the Independent System Operator to declare a Stage 2 
alert for about three hours when reserves fell below 5 percent. It maintained 
a Stage 1 alert into the evening, meaning reserves were below 7 percent. 
* State Controller Kathleen Connell releases unedited versions of $43 billion 
worth of long-term energy contracts with 18 power generators, the subject of 
a court fight between Democratic Gov. Gray Davis, Republican legislators, and 
news organizations. 
Connell also releases documents showing the state has paid $402.6 million 
toward the long-term energy contracts. The state also paid various energy 
consultants $2.8 million. Those contracts include payments to several 
industry officials who have been negotiating the state's long-term power 
contracts, such as David Freeman, the governor's chief energy adviser. 
* Davis opens the 540-megawatt Sutter Energy Center Project in Sutter County, 
the largest power plant licensed by the state to operate since the California 
Energy Commission began permitting plants in 1976. 
* Electricity supplier Duke Energy unveiled operations logs Monday to fight 
accusations that it manipulated turbine output to boost prices in California 
during January. State grid operators already have acknowledged that they, not 
the company, were the ones in charge during the three days in question. But 
Duke declined to specify on the bigger question of how much it charged during 
that period. 
* The 800 employees of Allan Hancock College in Santa Maria over the next 
month will take three-day weekends to eliminate Friday use of air 
conditioning. 
* Vallejo city officials are planning what they say will be the nation's 
largest solar "micro-utility." The California Energy Commission has given 
Vallejo a $2.5 million grant to build a 1 megawatt solar farm in partnership 
with BP Solar. The project, which will provide enough power for about 750 
homes, is expected to be finished by the end of the year. 
* Shares of Sempra Energy, parent company of San Diego Gas & Electric Co., 
close up 26 cents at $27.60. Shares of Pacific Gas and Electric Corp. close 
up $1.30 at $12.50. Shares of Edison International close at $11.64, up 49 
cents. 
WHAT'S NEXT:
* The Senate Judiciary Committee plans to continue its debate at a hearing 
Thursday over Davis' proposal to aid financially strapped Southern California 
Edison. 
* After waiting a few extra days at the request of the Legislature, state 
power regulators are set to decide Tuesday whether California ratepayers can 
shop around for their electricity or whether they must buy it from their 
traditional utility. 
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight 
supply worsened by scarce hydroelectric power in the Northwest and 
maintenance at aging California power plants are all factors in California's 
electricity crisis. 
Southern California Edison and Pacific Gas and Electric say they've lost 
nearly $14 billion since June 2000 to high wholesale prices the state's 
electricity deregulation law bars them from passing on to consumers. PG&E, 
saying it hasn't received the help it needs from regulators or state 
lawmakers, filed for federal bankruptcy protection April 6. Electricity and 
natural gas suppliers, scared off by the companies' poor credit ratings, are 
refusing to sell to them, leading the state in January to start buying power 
for the utilities' nearly 9 million residential and business customers. The 
state is also buying power for a third investor-owned utility, San Diego Gas 
& Electric, which is in better financial shape than much larger Edison and 
PG&E but also struggling with high wholesale power costs. 
The Public Utilities Commission has approved average rate increases of 37 
percent for the heaviest residential customers and 38 percent for commercial 
customers, and hikes of up to 49 percent for industrial customers and 15 
percent or 20 percent for agricultural customers to help finance the state's 
multibillion-dollar power buys. 
Track the state's blackout warnings on the Web at 
www.caiso.com/SystemStatus.html. 
,2001 Associated Press ? 





Duke Energy slashes $20 million from California power bill 
MARK SHERMAN, Associated Press Writer
Tuesday, July 3, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/03/state0
328EDT0110.DTL 
(07-03) 00:28 PDT (AP) -- 
With BC-CA--Power-Duke Plants, Bjt
WASHINGTON (AP) -- Duke Energy, accused of price-gouging during the energy 
crunch, has slashed $20 million from California's power bill. 
The Charlotte, N.C.-based company on Monday became the first wholesaler to 
cut its charges for electricity sold to the state during January and 
February. 
The Federal Energy Regulatory Commission has identified $124 million in 
potential overcharges for the first two months of the year. But it singled 
out Duke for criticism in a June 19 order extending price controls in 
California. Regulators said the company had overcharged California by 
millions of dollars by selling its electricity at rates as high as $3,880 per 
megawatt-hour. The commission said it was entitled to charge only $273 per 
megawatt-hour. 
Duke said it was abiding by the commission's order even though it contests 
the gouging accusations. 
"It's our way to say, let's get beyond that," Duke spokesman Terry Francisco 
said. "Let's try to come up with a long-term solution." 
Officials of the California Independent System Operator, which manages most 
of the state's electricity grid, had no comment on Duke's action. 
Power providers and users continue closed-door talks on an overall settlement 
of overcharges in California and the rest of the West. The state contends 
that Duke owes it $805 million for overcharges and that, in all, wholesalers 
should refund a total $8.9 billion. 
"The question of refunds is on the table back in Washington. It would be 
premature to comment specifically on Duke's announcement," ISO spokeswoman 
Stephanie McCorkle said. 
Duke says it has yet to be paid for much of the power it provided California 
in January and February. 
,2001 Associated Press ? 




Duke opens record books but keeps mum on prices 
LESLIE GORNSTEIN, AP Business Writer
Tuesday, July 3, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/03/financ
ial0329EDT0111.DTL 
(07-03) 00:29 PDT (AP) -- 
With BC-Power Refunds, Bjt
LOS ANGELES (AP) -- Duke Energy released operating logs to counter 
accusations it reduced output at a Southern California generating plant to 
boost prices. 
Former workers have told state investigators that two of four turbines at the 
South Bay plant in Chula Vista were shut down on Jan. 16, 17 and 18 -- all 
days when California had Stage 3 power shortages. 
The Charlotte, N.C.-based firm on Monday released detailed power production 
logs for the three days. During most of that time, the logs show, units One 
and Two were either supplying all their power to the California market or 
providing what's known as ancillary services. 
That's when a plant is paid not to produce, but to stand by in case of 
emergency, or if the state's grid is already at capacity. 
There were also several hours when the turbines were either refueling or 
performing mandatory tests of new environmental equipment, Stokes said. 
The rest of time, Duke had offered bids for power or services but had been 
turned down, Stokes said. 
The California Independent System Operator, which oversees most of the 
state's electricity grid, has acknowledged that it, not the company, was 
controlling the turbines at the time. 
"Duke was responding to their requests," said Jeff Stokes, executive vice 
president of Duke's western gas and power operations. 
"We are shocked and appalled by the accusations that have been leveled 
against our company, particularly in a forum in which we were denied an 
opportunity to respond," Stokes said in a conference call and Webcast. 
The Federal Energy Regulatory Commission last month found the company had 
overcharged California by millions earlier this year when it was charging 
$3,880 a megawatt-hour for electricity. The commission found that Duke was 
entitled to charge only $273 per megawatt-hour. 
But Stokes said Duke's prices during those three days were somewhere around 
25 percent of the $3,880 figure. 
He would not be more specific. 
State officials were not impressed. 
Duke is drawing conclusions from partial information, said Sen. Joe Dunn, 
D-Santa Ana, chairman of the Senate Committee to Investigate Price 
Manipulation. 
Releasing selected documents presents "nowhere near the complete picture," 
Dunn said. 
He has asked the system operator to analyze whether the Duke logs and its own 
logs indicate any patterns that suggest price manipulation, but "we don't 
have the complete information even yet." 
If that ISO information exonerates Duke, Dunn said he will make that clear as 
well. 
,2001 Associated Press ? 





Duke releases California energy records to counter accusations of price 
gouging LESLIE GORNSTEIN, AP Business Writer
Tuesday, July 3, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/03/nation
al0548EDT0468.DTL 
(07-03) 02:48 PDT LOS ANGELES (AP) -- 
Duke Energy has released operating logs to counter accusations by former 
workers that it reduced output to boost prices during California's energy 
crisis. 
Ex-employees told state investigators two of four turbines at Duke's southern 
California plant were shut down for three days in January during Stage 3 
power alerts, which can lead to rolling blackouts. 
The records show that during most of that time, units One and Two at the 
South Bay plant in Chula Vista were either supplying all their power to the 
California market or providing what are called ancillary services. 
That's when a plant is paid not to produce, but to stand by in case of 
emergency, or if the state's grid is already at capacity. 
California's Independent System Operator, which manages most of the state's 
power grid, has acknowledged that it, not Duke, was controlling the turbines 
at the time. 
"Duke was responding to their requests," Jeff Stokes, executive vice 
president of Duke's western gas and power operations, said Monday. 
Stokes added that Duke's prices during those three days were somewhere around 
25 percent of the $3,880 figure noted by the Federal Energy Regulatory 
Commission when it singled out Duke for criticism in a June 19 order 
extending price controls in California. 
State officials were not impressed with Duke's operating logs. 
Sen. Joe Dunn, chairman of the Senate Committee to Investigate Price 
Manipulation, said Duke was releasing selected documents that presented 
"nowhere near the complete picture." 
Dunn asked the ISO to analyze whether the Duke logs and its own logs indicate 
any patterns that suggest price manipulation. 
Duke, based in Charlotte, N.C., also on Monday slashed $20 million from 
California's power bill, becoming the first wholesaler to cut its charges for 
electricity sold to the state during January and February. 
FERC has accused Duke of overcharging the state millions of dollars by 
selling electricity at rates as high as $3,880 per megawatt-hour when it was 
only entitled to charge $273 per megawatt-hour. 
Duke contested the gouging accusations but said it would abide by the 
commission's order. 
"It's our way to say, let's get beyond that," Duke spokesman Terry Francisco 
said. "Let's try to come up with a long-term solution." 
The ISO had no comment on Duke's $20 million move. 
Meanwhile, California's electric grid operator issued an energy alert Monday 
for the first time since FERC imposed the cost ceilings, triggering price 
caps in 11 Western states. 
Unexpectedly high temperatures brought higher energy use that required the 
ISO to declare a Stage 2 alert for about three hours, meaning electricity 
reserves fell below 5 percent. The ISO maintained a Stage 1 alert into the 
evening, meaning reserves were below 7 percent. 
California wasn't the only state wallowing in power woes Monday. Triple-digit 
temperatures triggered rolling blackouts across southern Nevada for the first 
time in the state's history. 
By the afternoon, Nevada Power's 1.2 million customers had cranked up air 
conditioners enough to demand a record 3,924 megawatts of power, forcing the 
utility to cut about 100 megawatts, or enough electricity for roughly 75,000 
homes. 
"About 10,000 customers were affected for about an hour," said Paul Heagen, 
spokesman for Nevada Power Co. "Today was a wake-up call." 
Nevada Power asked its major power users, including the neon-lit resorts on 
the Las Vegas Strip, for voluntary reductions at about 3 p.m. 
Casinos switch to backup generators and took conservation measures that went 
mostly unnoticed by guests. 
The utility also imposed rolling blackouts until it could purchase power on 
the open market, Heagen said. 
,2001 Associated Press ? 








Las Vegas hit by rolling blackouts 
Posted at 7:02 a.m. PDT Tuesday, July 3, 2001 
BY JOHN WOOLFOLK, STEVE JOHNSON AND MIKE ZAPLER 

Mercury News 


LAS VEGAS, Nev. -- In one of the clearest signs yet that the power crisis is 
not just California's problem, rolling blackouts swept through Las Vegas on 
Monday afternoon in the city famed for its dazzling casino lights, the first 
forced outages to hit Nevada. 
Energy experts said the blackouts were the first in the West outside of 
California since the energy crisis began. Until now, said Frank Wolak, a 
Stanford University economist and power grid analyst, ``California has been 
rather unique in that regard.'' 
With a Western heat waving baking Las Vegas, Nevada Power Co. cut electricity 
beginning at 4:10 p.m. for 45 minutes to about 10,000 customers. Temperatures 
hit 114 degrees at the airport and were reported as high as 120 degrees on 
the strip, pushing power demand for air conditioning to record levels. 
Ironically, California avoided rolling blackouts Monday despite triple-digit 
temperatures that pushed the state for the first time in more than a month 
into a Stage 2 emergency, the second-highest level of alert. Despite 
forecasts of high temperatures this week, state power officials expect to 
squeak by without blackouts. 
Nevada, which backed off its electricity deregulation plan in light of 
California's troubles, had expected tight supplies this summer, and had 
called upon casinos and other big businesses to conserve. 
But Monday's forced outages came as a shock to the desert gambling resort. 
``This was a surprise,'' said Nevada Power spokeswoman Susan Boswell. 
Along the Strip, the outages passed largely unnoticed even as hundreds of 
thousands of gamblers and visitors poured in for the Fourth of July holiday 
week. Casinos, shopping malls and other public gathering places are exempt 
from rolling blackouts in Nevada, Boswell said. 
But the casinos did voluntarily cut back their power use, saving a total of 
50 megawatts and sparing the rest of the city from more extensive blackouts. 
The Aladdin and Bellagio casinos shut off their fountains. Caesars Palace and 
the Las Vegas Hilton cut back on air conditioning in ``non-essential areas,'' 
such as in ballrooms that were not being used. Others dimmed their marquees. 
Because the outages hit during the day, the famous lights weren't an issue. 
``The casinos did a great job curtailing, which really helped,'' said Nevada 
Power spokesman Paul Heagen. 
Affected customers were mostly homes and businesses on the northwestern end 
of town in the newer suburban Summerlin area, Boswell said. One resident of 
northwest Las Vegas, Louise Ruskamp, arrived home Monday afternoon to find 
her digital clocks and VCR flashing. 
``I think a lot of people are going to be scared we're having the same 
problems as in California,'' Ruskamp said. ``If you look at the big elderly 
population we have in the city, we'd be having a lot of casualties. You can't 
survive in Las Vegas without air conditioning.'' 
Chuck Umnuss, an elderly resident who lives in Summerlin but wasn't hit by 
the blackouts, was still confounded by the news. 
``Not more than a month ago everyone was saying there wouldn't be any 
problems, that it was a California problem, and here it happens. It's 
amazing,'' Umnuss said. ``The people I've talked to are nervous.'' 
The governor's office reported no health problems as a result of the brief 
blackouts. But the outages came with little warning. Nevada Power declared a 
``yellow alert,'' similar to California's Stage 2, just minutes before 
calling a ``red alert,'' which signals rolling blackouts, Boswell said. 
Power officials blamed shortages on the high temperatures as well as power 
plant breakdowns that limited both local supplies and imports. 
``This was not a Nevada situation,'' Heagen said. ``The whole West and 
Southwest was in a heat wave. There just wasn't enough power to go around.'' 
The unexpected shutdown of two generators at a Mojave power plant that serves 
California left 1,500 megawatts unavailable Monday. California saw its 
imports drop as neighboring states held on to their power. Nevada lost a 
350-megawatt generator. 
A bit of luck prevented further outages. A power plant went on line Monday in 
Yuba City, and in Nevada several long-term power contracts went into effect. 
Nevada officials did not blame California's power troubles for Monday's 
outages but noted that the Golden State has stressed the entire Western grid. 
``Was today's problem a result specifically from California? No,'' said 
Marybell Batjer, chief of staff to Nevada Gov. Kenny Guinn. ``In the larger 
picture, California's energy situation has put the entire Western grid into a 
situation that's a daily concern for all of us.'' 
At least five temperature records were set Monday in Nevada, including 122 
degrees in Bullhead, in northwestern Nevada, said Steve Anderson, a National 
Weather Service forecaster. Temperatures reached 106 in parts of Utah and 116 
in Arizona. 
Record highs in California included 106 in Livermore and 101 in Hollister. 
The previous records had been 104 in Livermore and 97 in Hollister, both set 
in 1960. 
These kinds of hot temperatures ``usually occur more in August,'' Anderson 
said. ``Temperatures will be about the same or actually even hotter 
throughout the week, across the same area.''









Blackout hits Las Vegas as number 120 comes up 
And California calls its first power alert since May as the mercury soars. 
July 3, 2001 
From staff and news service reports 
Las Vegas suffered its first rolling blackout ever Monday as soaring 
temperatures and churning air conditioners outstripped the local utility's 
ability to provide electricity. 
Nevada Power Co. cut about 100 megawatts, or enough electricity for 75,000 
homes, for about an hour. 
Scattered outages were reported around the Las Vegas area, where temperatures 
reached 120 degrees. Earlier, the utility asked its major power users, 
including the neon-lit resorts on the Las Vegas Strip, for voluntary 
reductions. Casinos instituted conservation measures largely not noticeable 
by guests. 
Meanwhile, in California, high temperatures led the Independent System 
Operator to declare an emergency alert for the first time since May 31. 
A Stage 1 alert was called at 1:35 p.m. as reserves fell below 7 percent of 
demand. The alert was upgraded to a Stage 2 at 2:40 p.m., meaning reserves 
fell below 5 percent. 
The alert didn't trigger new wholesale price limits under a system recently 
ordered by the Federal Energy Regulatory Commission. Under the FERC rules, a 
Stage 1 alert must be in effect for a full clock hour (i.e., 2 to 3 p.m.) to 
reset the caps, said Stephanie McCorkle, a spokeswoman for the ISO. Since the 
Stage 1 was upgraded to Stage 2 before a clock hour passed, that condition 
was not met, she said. The cap, designed to prevent price spikes, remains at 
$92 a megawatt-hour.








Stage One and Stage Two Emergencies Declared as Demand Soars; California ISO 
Strongly Urges Conservation 		
		





July 3, 2001 




FOLSOM, Calif.--(BUSINESS WIRE)--July 2, 2001 via NewsEdge Corporation - 
The California Independent System Operator (California ISO) issued a Stage 
One Emergency at 1:35 p.m. today, July 2, 2001, and a stage two emergency at 
2:40 p.m. as operating reserves dipped below five percent. The state's 
appetite for power is 2,000 megawatts over forecasts due to temperatures that 
are 5 to 6 degrees hotter than meteorologists predicted. Because the heat 
wave is regional in nature, levels of imported power have decreased as other 
states, especially those in the southwest, also cope with high demand for 
power. In addition, 1,500 megawatts of imported power was also reduced when a 
two-unit power plant that serves Southern California tripped offline over the 
weekend. 
The expected peak demand on the transmission system is expected to reach 
about 40,000 megawatts around 4:00 p.m. today. Consumers can help reduce the 
strain on the power grid by conserving electricity today, especially during 
the peak afternoon hours. The California ISO requests that customers 
voluntarily reduce their use of electricity to prevent more severe 
curtailment measures. -0- *T Powerful Habits at Home: 
-- Set your thermostat at 78-80 degrees when home, 85 or off 
when away. 
-- Avoid using appliances during the peak usage period 8:00 
a.m. to 8:00 p.m. 
-- Turn off your pool pump and avoid outdoor watering during 
peak periods. Powerful Habits at Work: 
-- Turn off computer monitor when you are away from your desk 
-- Turn off half the overhead lighting. 
-- Set the thermostat at 78-80 *T 
Today's Stage One and Two declarations, expected to be in effect until 6:00 
p.m., enables the California ISO to access emergency resources to help 
maintain operating reserves. A Stage Two is declared when reserves drop below 
five percent. At this level, large commercial customers that have signed up 
to voluntarily curtail power during high demand days will be asked to do so. 
If an operating reserve shortfall of less than one-and-a-half percent is 
unavoidable, Stage Three is initiated. Involuntary curtailments of service to 
customers including "rotating blackouts" are possible during this emergency 
declaration. The California ISO's Electrical Emergency Plan (EEP) is part of 
the state's enhanced reliability standards enacted by landmark legislation 
Assembly Bill 1890 that led to the restructuring of California's electricity 
industry. 
The California ISO is charged with managing the flow of electricity along the 
long-distance, high-voltage power lines that make up the bulk of California's 
transmission system. The not-for-profit public-benefit corporation assumed 
the responsibility in March 1998, when California opened its energy markets 
to competition and the state's investor-owned utilities turned their private 
transmission power lines over to the California ISO to manage. The mission of 
the California ISO is to safeguard the reliable delivery of electricity, 
facilitate markets and ensure equal access to a 25,526 circuit mile "electron 
highway." 
Conservation tips and continuous system condition updates are available on 
the web at www.caiso.com and the California Flex Your Power website is at 
www.flexyourpower.ca.gov 
Other helpful contacts: -0- *T 
Pacific Gas and Electric 415/973-5930 
Southern California Edison 626/302-2255 
San Diego Gas and Electric 877/866-2066 *T 
CONTACT: California ISO, Folsom | Stephanie McCorkle, 888/516-NEWS









Duke Energy Releases California ISO, Internal Records That Confirm 
Appropriate Operation of South Bay Plant 		
		





July 3, 2001 




SALT LAKE CITY, July 2 /PRNewswire/ via NewsEdge Corporation - 
Duke Energy (NYSE: DUK) today released previously confidential records that 
demonstrate changes in power output at its South Bay power plant near San 
Diego were directed by the California Independent System Operator (ISO), 
which operates the state's power grid. 
Records from the ISO's Automatic Dispatch System demonstrate that Duke Energy 
Trading and Marketing (DETM) received instructions from the ISO for 
increasing and decreasing the power output from the South Bay plant. Those 
instructions were relayed by DETM to operators in the plant control room. 
DETM is the California ISO certified scheduler for the Duke Energy plants. 
The records graphically refute allegations made by three former San Diego Gas 
& Electric (SDG&E) employees that reductions in output at South Bay during 
the period January 16-18, 2001, were made at Duke Energy's own direction. 
"The records released today are clear proof that the units were made fully 
available and followed the direction of the ISO," said Jeff Stokes, Duke 
Energy's executive vice president, western natural gas and power for Duke 
Energy North America. "Duke Energy has been in the business of generating 
electricity for nearly a century. We are proud that our California plants 
produced 50 percent more electricity in 2000 than in 1999 and achieved 
reliability records that exceeded national standards." 
In a media webcast today, Stokes reviewed the plant logs for the three days 
in question and the corresponding ISO automatic dispatch logs to demonstrate 
the plant was following the direction of the state agency. He also reviewed 
DETM logs that demonstrated that the full capacity of both units was offered 
to the ISO on the days in question. 
Stokes noted that the ISO relies on natural gas plants like South Bay to help 
balance supply and demand on the electrical grid -- essential for system 
reliability. For that reason, the logs show frequent changes in power levels 
as the ISO worked to keep supply and demand in balance. 
In order to be able to call on a plant for grid balancing, the ISO purchases 
what are known as "ancillary services" from generators. Purchasing ancillary 
services essentially puts the generating capacity on hold, allowing the ISO 
to call upon it as needed to meet increases or decreases in demand. 
Stokes displayed charts from the three days in question that showed the 
portion of the power from the South Bay units that was purchased by the ISO 
as ancillary services or that was offered and not purchased, as well as the 
actual generation from the plant. 
"It is important to understand that the reliability of California's power 
supply depends not only on adequate energy flows, but on the ability of the 
grid operator to keep supply and demand perfectly balanced. Duke Energy has 
deep expertise in grid operations and knows that having ancillary services at 
their disposal is critical to ISO's mission of keeping the power on," Stokes 
said. 
A replay of Stokes' webcast with the charts may be seen in the News Center at 
www.duke-energy.com. 
Duke Energy, a diversified multinational energy company, creates value for 
customers and shareholders through an integrated network of energy assets and 
expertise. Duke Energy manages a dynamic portfolio of natural gas and 
electric supply, delivery and trading businesses -- generating revenues of 
more than $49 billion in 2000. Duke Energy, headquartered in Charlotte, N.C., 
is a Fortune 100 company traded on the New York Stock Exchange under the 
symbol DUK. More information about the company is available on the Internet 
at: www.duke-energy.com. 
To see the June 28, 2001 memo from the California ISO, go to the Duke Energy 
Web site at: 
www.duke-energy.com/decorp/content/newscenter/newsreleases/2001/jul/ISO.pdf 
Or, from the Duke Energy Web site, click here to go directly to the 
California ISO statement: 
Statement from California ISO: 
MAKE YOUR OPINION COUNT - Click Here 
http://tbutton.prnewswire.com/prn/11690X54568509 
SOURCE Duke Energy 
CONTACT: Tom Williams, 805-595-4270, or pager, 877-364-5170, or Jennifer 
Hillings Epstein, 704-382-1221, or 24-Hour, 704-382-8333, both of Duke Energy 
Company News On-Call: http://www.prnewswire.com/comp/257451.html or fax, 
800-758-5804, ext. 257451 
Web site: http://www.duke-energy.com (DUK) 











Calpine's Sutter Energy Center Is Up and Running First New Major Baseload 
Generator for California 		
		





July 3, 2001 




First New Major Baseload Generator for California 
SAN JOSE, Calif., July 2 /PRNewswire/ -- In a milestone for California, San 
Jose-based Calpine Corporation [NYSE: CPN] announced operation of its Sutter 
Energy Center, located near Yuba City. Sutter is the first major 
combined-cycle facility built in California in over a decade. This new highly 
efficient facility is providing 540 megawatts of affordable electricity to 
California on a 24 hours a day, seven days a week availability. 
Governor Gray Davis and Calpine CEO Peter Cartwright will hold a press 
conference Monday afternoon to note the importance of the Sutter Energy 
Center in alleviating the shortage of generation in California and the 
support of the local community, the construction and trades people, and 
numerous groups that helped make the project a reality. 
Cartwright said, "Sutter is the first of eleven announced modern, highly 
efficient energy centers Calpine is building in the State. As a California 
company, we are committed to providing affordable, reliable electricity, and 
we're pleased to announce a second Calpine project, the Los Medanos Energy 
Center, will begin operations later this month. Three more Calpine projects 
are under construction, and our California initiative will yield 12,000 
megawatts of needed electricity by the end of 2005." 
Calpine's vision to invest in new power for California preceded the current 
energy crisis. With development efforts beginning in 1996, the Sutter Energy 
Center is the first facility to be licensed by the California Energy 
Commission since the restructuring of the State's electric utility market. 
After approval in the spring of 1999, Calpine began construction in June. 
Building costs are estimated to be approximately $350 million. More than 500 
construction and trade personnel worked on the project over a 2-year span. 
During the past several months, the project scheduled two ten-hour shifts, 
six days a week to get the plant operating as soon as possible in light of 
the energy crisis. 
The Sutter Energy Center is located just south of Yuba City in Sutter County 
near Sacramento and is operated by a 25-member staff of highly trained 
personnel. 
As with all of Calpine's modern baseload facilities, Sutter uses 
combined-cycle design with natural gas-fired turbines in combination with a 
steam turbine. Best available control technologies ensure that emissions are 
low. Environmental protection and project safety are always emphasized. 
Based in San Jose, Calif., Calpine Corporation is dedicated to providing 
customers with reliable and competitively priced electricity. Calpine is 
focused on clean, efficient, natural gas-fired generation and is the world's 
largest producer of renewable geothermal energy. Calpine has launched the 
largest power development program in North America. To date, the company has 
approximately 32,800 megawatts of base load capacity and 7,200 megawatts of 
peaking capacity in operation, under construction and in announced 
development in 29 states and Canada. The company was founded in 1984 and is 
publicly traded on the New York Stock Exchange under the symbol CPN. For more 
information about Calpine, visit its Website at www.calpine.com. 
This news release discusses certain matters that may be considered 
"forward-looking" statements within the meaning of Section 27A of the 
Securities Act of 1933, as amended, and Section 21E of the Securities 
Exchange Act of 1934, as amended, including statements regarding the intent, 
belief or current expectations of Calpine Corporation ("the Company") and its 
management. Prospective investors are cautioned that any such forward-looking 
statements are not guarantees of future performance and involve a number of 
risks and uncertainties that could materially affect actual results such as, 
but not limited to, (i) changes in government regulations, including pending 
changes in California, and anticipated deregulation of the electric energy 
industry, (ii) commercial operations of new plants that may be delayed or 
prevented because of various development and construction risks, such as a 
failure to obtain financing and the necessary permits to operate or the 
failure of third-party contractors to perform their contractual obligations, 
(iii) cost estimates are preliminary and actual cost may be higher than 
estimated, (iv) the assurance that the Company will develop additional 
plants, (v) a competitor's development of a lower-cost generating gas-fired 
power plant, and (vi) the risks associated with marketing and selling power 
from power plants in the newly competitive energy market. Prospective 
investors are also cautioned that the California energy environment remains 
uncertain. The Company's management is working closely with a number of 
parties to resolve the current uncertainty, while protecting the Company's 
interests. Management believes that a final resolution will not have a 
material adverse impact on the Company. Prospective investors are also 
referred to the other risks identified from time to time in the Company's 
reports and registration statements filed with the Securities and Exchange 
Commission. 
MAKE YOUR OPINION COUNT - Click Here 
http://tbutton.prnewswire.com/prn/11690X05763853 
SOURCE Calpine Corporation 
CONTACT: Media Relations, Katherine Potter, 408-995-5115, ext. 1168, or 
Investor Relations, Rick Barraza, 408-995-5115, ext. 1125, both of Calpine 
Corporation 
Web site: http://www.calpine.com (CPN) 










Duke Energy Will Offset Receivables Above FERC Proxy Price 		
		





July 3, 2001 




CHARLOTTE, N.C., July 2 /PRNewswire/ via NewsEdge Corporation - 
Duke Energy (NYSE: DUK) announced today that it will offset its receivables 
due from the California Independent System Operator (ISO) and the California 
Power Exchange (PX) for electricity it sold the two entities in January and 
February 2001 by about $20 million. The company will make the appropriate 
filing with the Federal Energy Regulatory Commission (FERC) today. 
Duke Energy's prices for electricity sold during March, April and May do not 
require offsets based on the criteria used by FERC to determine the need for 
offsets or refunds during these months. 
In its June 19 order, FERC required Duke Energy to offset any invoiced 
amounts above the proxy price it set for electricity in January, which was 
$273 per megawatt-hour. Based on the ISO data FERC used to develop its order, 
Duke Energy's invoiced amounts above that price totaled $17.8 million for the 
month. 
Duke Energy also announced it would take the additional step of offsetting 
approximately $2.1 million for prices it invoiced above the FERC established 
$430 per megawatt-hour proxy price in February. 
Duke Energy will provide the ISO and PX with revised invoices to reflect the 
offsets. Even with the adjusted billings, Duke Energy has only been paid for 
a small fraction of the power it sold to the ISO and the PX for the 
California spot market during January and February. 
"We are continuing to work diligently with other parties for rational, 
long-term solutions to the flawed restructuring of the California electric 
power markets," Jim Donnell, president and chief executive officer for Duke 
Energy North America. "We look forward to the resolution of the many 
outstanding issues and final settlement of the debts owed electricity 
suppliers so we may all totally focus on providing a reliable supply of 
electricity for California's consumers." 
Duke Energy operates approximately 5 percent of California's electricity 
capacity from four power plants with a generating capability of 3,351 
megawatts. For additional information about Duke Energy's California 
operations and the California electricity crisis, please visit our Web site 
at www.duke-energy.com/california. 
Duke Energy, a diversified multinational energy company, creates value for 
customers and shareholders through an integrated network of energy assets and 
expertise. Duke Energy manages a dynamic portfolio of natural gas and 
electric supply, delivery and trading businesses -- generating revenues of 
more than $49 billion in 2000. Duke Energy, headquartered in Charlotte, N.C., 
is a Fortune 100 company traded on the New York Stock Exchange under the 
symbol DUK. More information about the company is available on the Internet 
at: www.duke-energy.com. 
CONTACT: Terry Francisco 
Office: 704/373-6680 
24-Hour: 704/382-8333 
MAKE YOUR OPINION COUNT - Click Here 
http://tbutton.prnewswire.com/prn/11690X37089297 
SOURCE Duke Energy 
CONTACT: Terry Francisco of Duke Energy, 704-373-6680, or 24-Hour, 
704-382-8333 
Company News On-Call: http://www.prnewswire.com/comp/257451.html or fax, 
800-758-5804, ext. 257451 
Web site: http://www.duke-energy.com/California 
Web site: http://www.duke-energy.com (DUK) 









New York Power Producers Announce Five-Point Program to Address State's Long 
and Short-Term Energy Needs IPPNY Plan Designed to Prevent California-style 
Crisis in New York 		
		





July 3, 2001 




IPPNY Plan Designed to Prevent California-style Crisis in New York 
ALBANY, N.Y., July 2 /PRNewswire/ -- The Independent Power Producers of New 
York, Inc. (IPPNY) today unveiled its Energy Solutions Program (ESP); a 
five-point action plan to address the long-and short-term energy needs of New 
York. 
Designed to avoid a California-style energy crisis, IPPNY's ESP addresses the 
supply and transmission issues facing New York. It calls for - 
-- Increasing energy conservation, 
-- Encouraging utilities to enter into contracts to protect consumers 
against short-term price volatility, 
-- Accelerating the siting process for new, cleaner, diverse power 
sources, 
-- Fostering an efficient, multi-state energy marketplace, and 
-- Upgrading the state's power transmission system. 
"New York is at a crossroads: We can either go down the same road as 
California, leading to high energy prices and debilitating shortages, or we 
can follow the examples of other regional energy markets so that we continue 
to enjoy reliable energy at competitive prices," said IPPNY Executive 
Director Gavin J. Donohue. "As we move into the hot, humid days of July and 
August, when the air conditioners are humming and power demand skyrockets, 
the time is right to highlight the need to solve the potential energy 
shortages and volatile energy prices that face New York consumers." 
Mr. Donohue said that while a California-like emergency is unlikely to hit 
New York this summer, the state will experience energy shortfalls and 
resulting price increases in the near future unless the government, power 
suppliers and consumers begin to take steps now to address known problems. In 
developing its plan, IPPNY examined the experiences of other states along 
with those of various metropolitan markets in New York since the state began 
to restructure its power market in 1996. 
"We were struck by the contrast between California and states like 
Pennsylvania, where customers enjoy adequate supply and prices 4.5% below the 
national average," said Mr. Donohue. "We based the IPPNY ESP on proven 
results." 
IPPNY's five-point program calls for - 
1. Conservation. Energy conservation, particularly by commercial and 
industrial consumers, can help reduce New York's power needs in the 
short term, as well as help with long-term supplies. The New York 
Energy Research and Development Authority's "Energy Smart" program -- 
which provides energy efficiency information, conducts research and 
development on energy efficiency, and provides incentives to consumers 
to purchase energy efficient products -- is a good start. Conservation 
would be further encouraged if all energy users were able to readily 
see how the cost of electricity differs throughout each day. An easy 
start would be a tiered system of rates with higher costs for power in 
mid-day -- when power is at peak consumer demand -- than the morning. 
2. Encouraging New York's utilities to enter into contracts and use 
financial risk-management techniques to protect consumers against 
short-term price volatility. In a competitive energy market, prices -- 
particularly in a daily spot market -- rise and fall based on supply 
and demand. Utilities can insulate their customers from abrupt and 
sharp price changes by relying less on daily spot markets to set their 
customers' prices and instead enter into a rational blend of contracts 
with power suppliers to stabilize prices. Several New York utilities 
already employ these tools to protect customers from price spikes; all 
New York utilities should do the same. 
3. Getting new, cleaner, diverse power sources on line. The New York 
Independent System Operator (NYISO), the non-profit entity that manages 
the state's power supply, says that the state needs 8,600 megawatts of 
new generating capacity by 2005 to meet growing demand. New York 
hasn't put a major new power plant on line since 1995. 
New power plants are cleaner and more efficient and New York's 
rigorous permitting process guarantees environmental protections. At 
the same time, we must maintain our existing base of generation, 
powered by a diverse mix of fuel types to prevent over reliance on one 
fuel. 
New York's ever increasing demand for power dictates that the time 
is now to get new, cleaner, more efficient plants up and running. 
4. Creating a seamless, multi-state energy market. Current administrative 
and regulatory differences between New York, New England and the mid- 
Atlantic states prevent power from flowing smoothly among them when 
truly needed. As a result, consumers are losing out on the 
opportunities for lower costs, better environmental performance, and 
higher reliability. The ISOs for each of these bordering regions, 
together with the state and federal governments, should expedite 
ongoing efforts to eliminate such differences and foster the creation 
of a unified northeast market. The recent agreement between the NYISO 
and ISO New England on sharing operating reserves is an example of how 
this cooperation can work. 
5. Upgrading transmission lines so power can efficiently flow from where 
it is produced to where it is needed. New York's energy transmission 
system is antiquated, inefficient and insufficient to meet the state's 
rising demand. For example, the inability to transmit power from 
western New York to the eastern part of the state as well as inadequate 
power interconnects with the mid-Atlantic and New England regions 
inflates prices in the east and New York City. State policymakers need 
to quickly determine how to build and pay for an improved transmission 
system that will make it cheaper, easier and more efficient to move 
power around the state. 
"These five steps, if instituted by utilities and state and federal agencies, 
would go a long way towards ensuring that New York's lights stay on and power 
prices are reasonable and stable," Mr. Donohue said. 
The Independent Power Producers of New York, Inc. (IPPNY) is a trade 
association representing more than 100 companies involved in the development 
of generation, marketing and sale of electric power and natural gas in New 
York State. Utilizing cutting-edge technologies and fuel types such as 
Cogeneration, Hydro, Coal, Landfill Waste, Resource Recovery and Biomass, 
IPPNY members produce approximately 70 percent of New York State's electric 
power. 
Contact: 
Gavin J. Donohue, 
Executive Director 
(518) 436-3749 
MAKE YOUR OPINION COUNT - Click Here 
http://tbutton.prnewswire.com/prn/11690X63324797 
SOURCE Independent Power Producers of New York, Inc. 
CONTACT: Gavin J. Donohue, Executive Director of IPPNY, 518-436-3749 











National Desk; Section A 
Power Company Rebuts Accusations of Gouging
By JAMES STERNGOLD
? 
07/03/2001 
The New York Times 
Page 10, Column 5 
c. 2001 New York Times Company 
LOS ANGELES, July 2 -- Duke Energy, one of California 's larger electricity 
generators, and state officials today rebutted charges by three former Duke 
employees that the company had manipulated output to drive up prices, saying 
the shifts had been ordered by a state-controlled agency. And the agency, the 
California Independent System Operator, agreed. 
Stephanie McCorkle, a spokeswoman for the semi-independent agency, which is 
empowered to manage the state's power grid, said it largely controlled how 
much power was being produced by the Duke Energy plant. She added that the 
agency had not offered this information at the time the former employees 
testified in the State Senate because it had not been asked. 
In the Senate hearings on June 22, the three former plant workers said the 
company had ramped output up and down, manipulated maintenance schedules and 
even thrown away some spare parts at a plant in suburban San Diego County in 
an apparent effort to drive prices higher in January when supplies were 
tight. 
The hearing was another theater in the war of words between the state and the 
electricity generators, as each has accused the other of causing the energy 
crisis. 
The state, particularly Gov. Gray Davis, has accused the generators of 
gouging the state on the wholesale power market. Gov. Davis recently demanded 
about $9 billion in refunds from the generators, including Duke, while the 
companies have asserted that the state fell victim to market shortages 
created by its own policies. 
Some top state officials had called the testimony by the three former Duke 
Energy employees -- two plant mechanics and a control room technician -- the 
first ''smoking gun,'' proving market manipulation. 
''In my opinion, there was price manipulation,'' Glenn Johnson, a certified 
power plant mechanic, said of Duke's actions at the San Diego plant. Duke 
supplies about 5 percent of California 's electricity from four plants in 
California . 
But today Duke Energy sought to demonstrate that the state itself had caused 
the fluctuations at its plants and that the people who testified were simply 
unaware of the company's overall commitments to the market. 
The company offered a highly detailed presentation, saying that the rise and 
fall in output had been ordered by the agency. 
Jeff Stokes, an executive vice president of Duke Energy, which has its 
headquarters in Charlotte, N.C., offered copies of handwritten logs from the 
plant and other documents to show that the workers saw only a partial picture 
of the operation of the plants and so were unaware that at various times the 
agency had deliberately set aside some of the output capacity as a reserve. 
Mr. Stokes explained that at times the plants are actually put at the 
disposal of the agency, which increases or decreases output to maintain 
balance in the overall electrical grid. At other times, the agency keeps some 
operating capacity off-line as a reserve, so it can meet sudden increases in 
demand, he explained. 
Mr. Stokes said the bottom line was that during those critical days in 
January covered by the testimony in the State Senate, the plant, which has 
four operating units, was effectively at the state's disposal. 
''The full available output was offered at all times,'' Mr. Stokes said. 
Ms. McCorkle, the spokeswoman for the agency, said of the presentation, ''I 
thought it was a very accurate description.'' She added that at times the 
agency had not bought all the output from the plant because Duke was asking 
too much for the power, not because it was being withheld from the market. 
Still, some remained skeptical. Governor Davis, who switched on a brand new 
power plant in Sutter County today, said through his spokesman that he was 
not convinced. Earlier, Mr. Davis had invited the three former plant workers 
to breakfast and had offered a tribute to their integrity. 
''There are still a lot more questions out there,'' said Steve Maviglio, the 
governor's spokesman. 
Mr. Maviglio said that even if Duke had refuted the charges the most 
important issue outstanding was how much the power generators should refund 
to the state for overcharges. 
There have been numerous investigations by federal and state agencies of the 
wholesale prices charged this year, and several have found what they have 
described as convincing evidence of overcharging. But no definitive orders 
have been handed down and a host of investigations are continuing. 
Indeed, for an industry that was supposedly deregulated several years ago, 
the utilities and power generators are now subject to the most intensive 
regulatory scrutiny perhaps in their history. 
In fact, California triggered price limits in 11 Western states today by 
issuing a power alert. It was the first time the limits went into effect 
since they were imposed by federal regulators two weeks ago. 


Photo: Gov. Gray Davis of California presided yesterday as a power plant went 
on line in Sutter County. (Associated Press)