Please see the following articles:

Sac Bee, Fri, 7/27: Hopes dim for a quick Edison deal 
SD Union, Fri, 7/27: Sempra's trading unit generates a windfall 
LA Times, Fri, 7/27: Smog Rules May Be Eased
LA Times, Fri, 7/27: Federal Caps Didn't Deter Higher Prices
SF Chron, Fri, 7/27: Calpine profits double on skyrocketing sales 
Escalating power prices inspire plant building program 
SF Chron, Fri, 7/27: Generators continue to set high electricity prices
SF Chron, Fri, 7/27: THE ENERGY CRUNCH 
Environmental suit against power plant 
Expansion called danger to slough 
OC Register, Fri, 7/27: Let's make a real deal with Edison  (Editorial)
LA Times, Fri, 7/27: California Sempra Continues Improved Results
LA Times, Fri, 7/27:  California Calpine Doubles Earnings, Beats Forecasts 
Energy: San Jose-based company credits higher electricity prices in 
California and sales from new plants
LA Times, Fri, 7/27:  Cap No Bar to Higher Prices Power: Cal-ISO study says 
suppliers continued to charge as much as five times more than the 
U.S.-imposed limits
WSJ, Fri, 7/27: Calpine Net Soars On Added Plants;
Sempra Profit Rises
------------------------------------------------------------------------------
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Hopes dim for a quick Edison deal 
By Kevin Yamamura
Bee Capitol Bureau
(Published July 27, 2001) 
The Assembly will not return this week to consider a plan to save 
California's second-largest utility from bankruptcy, all but ending hopes 
that legislation would reach Gov. Gray Davis by a mid-August deadline. 
A group of legislators and Davis staffers has worked this week on an 
agreement that would restore Southern California Edison's credit and relieve 
the state of having to purchase energy for the utility. 
Assembly leaders, who convened the group, set an ambitious schedule that 
would have led to a vote today had they reached consensus and been able to 
recall enough of the 80 Assembly members from summer recess destinations. 
But the newly formed plan, which would issue $2.9 billion in consumer-backed 
bonds in exchange for several Edison concessions, remains too rough for a 
vote, said Paul Hefner, a spokesman for Assembly Speaker Robert Hertzberg, 
D-Sherman Oaks. 
Hefner was quick to note that Hertzberg has the Assembly "on call" for the 
scheduled monthlong break and is prepared to ask members to return if a deal 
comes in the next three weeks. 
But staff and lawmakers said earlier that organizing a mass return after 
today would prove nearly impossible because Assembly members are expected to 
travel throughout the state and beyond. 
Davis set an Aug. 15 deadline in his original Edison deal and recently said 
he could call a special session forcing legislators to return if they do not 
authorize a plan by then. 
His spokesman, Steven Maviglio, said Thursday the governor is not ruling out 
that idea but is waiting to see what comes of further legislative 
discussions. 
"It's pretty clear that everyone's working pretty hard to form a consensus, 
but they're just not there," Maviglio said. "The governor is optimistic about 
the Aug. 15 date." 
Even so, Edison does not expect a solution by then. Company officials stated 
earlier this week that they would wait for a political deal at least until 
lawmakers return Aug. 20. 

The Bee's Kevin Yamamura can be reached at (916) 326-5542 or 
kyamamura@sacbee.com <mailto:kyamamura@sacbee.com>. 




Sempra's trading unit generates a windfall  


\
objattph 
By Craig D. Rose  UNION-TRIBUNE STAFF WRITER  July 27, 2001  Sempra Energy, 
the parent company of SDG&E, reported a 25 percent surge in profit to $137 
million last quarter but said yesterday it lost money on the sale of 
electricity under a long-term contract to California.  On the other hand, 
Sempra said its largest source of profits was its energy trading unit, a 
middleman that earned $69 million during the quarter buying and selling 
energy produced by others.  The results underscore the transformation of 
relatively simple utility companies into diversified energy holding companies 
that have learned to profit in new ways from the deregulation of electricity 
and the turmoil in energy markets.  The surprising announcement -- that a 
company lost money selling power during California's run-up in electricity 
prices -- was explained by Sempra as an intentional consequence of the 
long-term contract it signed with the state to provide power.  Stephen Baum, 
chairman and chief executive officer of Sempra, said the company agreed to 
provide a steep discount to California during the summer months but would 
recoup the losses later in the 10-year deal.  California sought long-term 
electricity purchase contracts so it could reduce its purchases in daily and 
near-term power markets, where prices reached record levels.  Critics say 
Gov. Gray Davis rushed into long-term deals because of concerns about getting 
through next year's election. They also say the contracts will saddle 
customers with higher costs for years.  The governor has acknowledged that 
long-term contracts might cause consumers to pay relatively high prices for 
electricity in later years, but he maintains it is a fair price to pay for 
lowering prices that were devastating the state economy.  Michael Shames, 
executive director of the Utility Consumers' Action Network in San Diego, 
said the steep discount Sempra provided to the state on power this summer 
raised questions about the governor's proposal to help San Diego Gas & 
Electric Co. clear a debt of $750 million.  SDG&E says it is owed that money 
for power purchases on behalf of its customers.  In a media conference last 
month, Davis said the agreement would eliminate the threat of a possible 
balloon payment for consumers, who he said might have faced the so-called 
balancing account debt as early as next year.  Shames says the proposal, 
which took the form of a memorandum of understanding, or MOU, is costly for 
consumers and a bonanza for Sempra.  He said the relatively cheap power 
provided by Sempra this summer "makes the MOU sound like more of a hidden 
payback to Sempra than a real relief plan for local ratepayers."  Shames said 
he will release an analysis of the state's Sempra plan next week. The state 
Public Utilities Commission is expected to rule on the plan in August.  A 
Sempra spokesman said there is no connection between discount power and the 
tentative agreement to clear the $750 million debt. Doug Kline, the Sempra 
spokesman, said the power contract with the state was signed in early May and 
the agreement on the balancing account was reached in mid-June.  Sempra 
Energy Trading, meanwhile, said only 10 percent of its $69 million profit was 
earned from sales of energy in the western region, which includes California. 
The trading operation earned $40 million in profit during the comparable 
period last year.  California's Independent System Operator, which manages 
most of the state power grid, and other investigators have said trading and 
bidding strategies were tools used by energy companies to raise prices during 
the California power crisis.  Though Sempra earned money on trading, its 
wholesale power generating business lost $9 million during the quarter. Baum 
said the discounts on electricity provided the state were the prime cause of 
the loss for Sempra Energy Resources but added that a plant outage also 
contributed.  Sempra Energy Resources, which co-owns a generating plant near 
Las Vegas with Reliant Energy, earned $2 million during the second quarter 
last year.  Baum added that Sempra's long-term contract with the state -- 
under which it will provide up to 1,900 megawatts -- has allowed its 
wholesale business to pre-sell about half the power it expects to generate 
from the Nevada plant, which will be expanded, and three generating 
facilities it expects to build.  Profits at SDG&E slipped to $37 million 
during the quarter ended June 30, down from $40 million last year, according 
to Sempra. SDG&E, whose business is restricted to delivering gas and 
electricity, said it provided increased customer service during the crisis, 
which lowered profits.  Wall Street analysts generally applauded Sempra's 
results, noting that the company was ahead of its plan to generate at least a 
third of its profits from its newer businesses by 2003.  "They're really two 
years ahead of schedule for their non-utility businesses," said Brian 
Youngberg, an analyst with Edward Jones & Co.  Bud Leedom, a San Diego-based 
analyst with Wells Fargo Van Kasper, said Sempra's move into energy trading 
now seems shrewd. "We never dreamed they were setting themselves for a 
windfall like this," Leedom said.  Investors pushed Sempra shares up 17 cents 
yesterday, to close at $25.49 in trading on The New York Stock Exchange. 
Bloomberg news service contributed to this report. 






Smog Rules May Be Eased
Power plants: EPA proposes a sweeping change in how utilities' emissions are 
curbed, a flexible approach favored by the industry.
By GARY POLAKOVIC and ELIZABETH SHOGREN
Times Staff Writers

July 27 2001

WASHINGTON -- U.S. Environmental Protection Agency Administrator Christie 
Whitman proposed sweeping changes Thursday in the regulation of power plant 
pollution that would replace five of the government's toughest programs with 
a single, flexible approach favored by utilities.

Whitman outlined a plan for cleaning up major components of power plant smog 
that represents a significant departure from the EPA's traditional regulatory 
dictums. She called for a major expansion of pollution credit trading, which, 
up to now, has had varying success.

Under the new plan, the EPA would scrap some of the most stringent measures 
devised by the agency to deal with power plant emissions. One provision to be 
set aside aims to cut harmful mercury emissions; another is meant to reduce 
emissions from Midwestern power plants by 85%; another is designed to restore 
visibility at national parks.

Especially unpopular with industry, one measure, known as new source review, 
requires the installation of advanced pollution controls whenever power 
plants are expanded or modified. It too would be phased out.

"New source review is certainly one of those regulatory aspects that would no 
longer be necessary," Whitman told Sen. George Voinovich (R-Ohio) at the 
hearing by the Environment and Public Works Committee. "All of those 
[programs] could be aligned into one regulatory process" that she said would 
work better than existing rules.

Whitman's comments offer the first peek into the administration's plans for 
cleaning some of the dirtiest polluters left in the nation. Debate over the 
administration's clean-air approach has shifted to Congress as it considers 
whether to revise the national Clean Air Act.

The magnitude of the proposed revisions caught environmentalists by surprise 
but buoyed industry representatives who say existing controls are costly and 
inefficient.

"She has raised an appalling prospect of junking virtually every rule and 
strategy to deal with emissions of electric companies in return for some 
vague industry-sought plan for an emissions trading scheme," said Frank 
O'Donnell, executive director of the Clean Air Trust, an environmental 
advocacy group. "If they go forward with this, it means a wholesale fight 
over the Clean Air Act in Congress."

After the hearing, Whitman stressed that the overall goal is to clean the air 
more efficiently than current rules do. Although the administration has not 
yet released a so-called multipollutant cleanup strategy, Whitman contended 
that collapsing several regulations into one far-reaching approach would be 
easier for regulators and industry to manage.

"What we're looking for is targets under this legislation that significantly 
clean up the air beyond what our current regulatory, statutory requirements 
would do," Whitman said. She added that new source review, for example, 
"could potentially be no longer necessary if you have the right kind of 
targets set in a multi-emissions bill. We have to wait and see where the 
targets are set."

Utilities have lobbied Vice President Dick Cheney's energy task force to 
prevent the EPA from aggressively enforcing the new source review regulation. 
Industry and administration officials say the provision is onerous and 
prevents plant upgrades, although EPA officials say it is a key tool for 
forcing dirty, old plants to cut emissions by up to 95%.

During the Clinton administration, federal officials charged that 32 
coal-fired power plants in several Southern and Midwestern states ignored a 
requirement that companies install advanced emission controls when their 
plants were upgraded. The government reached settlement with three utilities, 
but a provision in the Bush administration's energy plan stalled those 
enforcement actions pending a review of power plant controls.

C. Boyden Gray, attorney for the Electric Reliability Coordinating Council 
and former White House counsel for the first President Bush in the 1980s, 
praised the administration's proposal. He said major utility companies he 
represents, including Southern Co., Duke Energy Co. and the Tennessee Valley 
Authority, could clean up with greater flexibility and less cost under the 
plan outlined by Whitman.

"To put everything in a market-incentives basis is a great step. It would be 
a real breakthrough and a plus for the business community," Gray said.

For example, Gray said EPA has four separate measures to control nitrogen 
oxides from power plant combustion, including programs to cut acid rain, 
ozone and haze. Another program scheduled to take effect in May 2004 requires 
power plants in 19 states to cut summer emissions by 1 million tons annually. 
He said those programs can be confusing and costly and could easily be 
replaced by a credit-trading program run largely by power companies.

Under the program being considered by the Bush administration, an emission 
limit could be established at hundreds of power plants followed by annual 
reductions in mercury, a toxic metal, as well as smog-forming nitrogen and 
sulfur oxides.

However, a provision to reduce carbon dioxide, a gas implicated in global 
warming, was dropped under industry pressure.

Power companies that reduce beyond their limits could sell emission credits, 
which represent a pound of pollution, to companies that exceed their limits.

Although industry and free-market advocates favor such programs, they are not 
without controversy. The record of market-driven programs is mixed. On the 
one hand, the nation's acid rain program uses marketable permits and is 
widely credited with cutting sulfur oxides at less cost. On the other hand, 
the world's first market-driven program to tackle urban smog has not worked 
in Los Angeles, where nearly 400 power companies and manufacturers failed to 
achieve significant cleanup for the nearly eight years the program has been 
in effect.

Further, many environmental groups are wary of market-driven programs because 
by design they preclude active government intervention. Critics say such 
programs could potentially limit public review of power plant operations, 
allow emissions to concentrate in poor communities and slow efforts to cut 
haze in national parks downwind from plants that elect to buy pollution 
credits instead of cleaning up.

The Bush administration's power plant strategy was aired before the Senate 
Environment and Public Works Committee, which is chaired by Sen. James M. 
Jeffords (I-Vt.), whose dramatic departure from the GOP threw control of the 
Senate to the Democrats. Jeffords is proposing legislation, different from 
the administration's approach, that would control four power plant 
pollutants, including the greenhouse gas carbon dioxide, an approach rejected 
by the Bush administration.

Prospects appear to be increasing that Congress will pass one or more 
measures designed to reduce carbon dioxide emissions, a belated response to 
this week's decision by more than 180 countries to deal with the problem 
without the involvement of the United States.

Indeed, in recent weeks several members in the GOP-led House and Democratic 
Senate have voted on bills with the intention of disassociating themselves 
from President Bush's environmental policies before the next election.

Among the votes, the House struck down a provision supported by the Bush 
administration that could hinder progress on global climate change policy.

The Senate banned new coal mining and oil and gas drilling in national 
monuments. Other recent rebuffs included rejections of administration 
initiatives on such issues as the Endangered Species Act, hard-rock mining 
regulations and offshore drilling for oil and gas. 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







Federal Caps Didn't Deter Higher Prices
Power: Cal-ISO study says suppliers continued to charge as much as five times 
more than the imposed limits.
By NANCY VOGEL
TIMES STAFF WRITER

July 27 2001

SACRAMENTO -- After federal regulators limited wholesale electricity prices 
last month, big private sellers of power in California continued to ask as 
much as five times more for electricity than the federal cap, according to a 
confidential study by state grid operators.

The analysis by the California Independent System Operator covers only the 
first week after the caps were imposed June 20. Cal-ISO has submitted the 
data to federal regulators for potential investigation. The report is a 
summary of what Cal-ISO calls possible anti-competitive behavior by Duke 
Energy, Williams Cos., Mirant Corp., Reliant Energy and Dynegy Corp.

"In a truly competitive market we would expect these suppliers to bid very 
close to their actual operating cost," said Greg Cook, senior policy analyst 
with Cal-ISO's Department of Market Analysis. The state did not necessarily 
purchase any power at the high prices being demanded. Instead, the 
significance of the bids is that they show how California could find itself 
paying exorbitant prices for electricity again if hot weather returns and 
conservation slackens, said Frank Wolak, a Stanford University economist who 
studies the California electricity market.

"The bottom line is that the generators are putting out these bids in 
expectation of high demand," he said. "If weather all of a sudden gets really 
hot from Southern to Northern California, the bids submitted by generators 
could be very costly to California."

Cal-ISO calculated the cost of production for each company based on the 
efficiency of its power plants and estimates of what each paid for natural 
gas to fuel the plants.

The average cost for the five was $105 per megawatt-hour, which closely 
matches the federal price limit in California, which now stands at $101 per 
megawatt-hour. According to the power bidding procedures, companies that bid 
at or below their cost of production often still get paid a higher price, 
allowing them to make a substantial profit.

On average, four of the five companies submitted bids either slightly below 
or slightly above their cost of production. But with the exception of 
Atlanta-based Mirant, each company at times submitted bids that were 
substantially higher. Houston-based Reliant, for example, bid as much as $540 
per megawatt-hour, more than five times its estimated cost. Overall, 
Reliant's average bid was close to costs, according to the analysis.

Cal-ISO identified companies by code in its report. Sources familiar with the 
study identified the companies for The Times.

The Cal-ISO report singled out "Supplier 5," identified by sources as 
Charlotte, N.C.-based Duke Energy, saying the company "continues to bid 
significantly in excess of its operating costs."

Duke owns two large power plants on the central coast. It marked up its bids 
an average of 88% beyond its cost to produce electricity, according to the 
analysis. For example, it cost Duke $85 to $121 to generate a megawatt-hour 
of electricity in the time period studied, the report shows, but the company 
offered to sell a megawatt-hour from $149 to $195.

Duke spokesman Tom Williams on Thursday said, "The use of the data in some 
cases doesn't appear to add up and in all cases appears to be selective and 
could easily be misunderstood." Duke sells nearly the entire output of its 
power plants under long-term contracts, and not on the spot market, which the 
Cal-ISO report studied, he noted.

Reliant spokesman Richard Wheatley said, "We're looking at the data, and we 
question whether or not it is correct."

A combination of cool weather, heavy conservation, the start-up of new power 
plants and recently signed long-term power contracts that guarantee supplies 
have eased the state's electricity crisis in recent weeks.

Market prices that as recently as May averaged $271 per megawatt-hour have 
dropped to less than $100 per megawatt-hour.

The more abundant power supplies have freed grid operators to ignore 
higher-priced bids. But they will have to consider paying such prices to 
avoid blackouts if supplies tighten, Wolak said.

Such a scenario would test the effectiveness of the Federal Energy Regulatory 
Commission order issued June 19, he said.

The bids of the five companies analyzed were offers of sales to Cal-ISO, a 
Folsom-based agency that manages the electrical transmission grid serving 75% 
of California. Cal-ISO buys power on short notice to smooth the flow on the 
state's electrical freeway and avert blackouts.

As California's fledgling market began to go haywire last fall, Cal-ISO 
workers struggled to purchase as much as 30% of the state's power demand with 
just hours to spare. Since then, the market has stabilized, and Cal-ISO's 
purchases now amount to roughly 5% of the electricity California consumes.

RELATED STORY

Power profits: Power plant operator Calpine said its quarterly profit more 
than doubled. C2 
Copyright 2001, Los Angeles Times <http://www.latimes.com> 







Calpine profits double on skyrocketing sales 
Escalating power prices inspire plant building program 
Carolyn Said, Chronicle Staff Writer <mailto:csaid@sfchronicle.com>
Friday, July 27, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/27/
BU234287.DTL>
Fueled by high electricity prices, power generator Calpine Corp. reported 
strong second-quarter results yesterday. 
Calpine of San Jose said profit for the quarter ended June 30 almost doubled 
to $107.7 million (32 cents per share) from $59.5 million (20 cents) during 
the year-ago quarter. Revenue almost quadrupled to $1.61 billion from $417.2 
million a year ago. 
Excluding charges related to the acquisition of Canada's Encal Energy, 
Calpine's net income was $132.2 million (39 cents), well above the 31 cents 
per share predicted by analysts, according to Thomson Financial/First Call. 
Calpine is on an ambitious path to expand its roster of generating plants. By 
the end of 2005, it expects to have 75,000 megawatts in operation in the 
United States, including 12,000 megawatts in California. A megawatt is about 
enough power for 1,000 homes. 
The company, which generates 2,428 megawatts in California, this summer 
opened the state's first two major power plants in a decade. The new plants 
in Yuba City (Sutter County) and Pittsburg generate 547 and 555 megawatts, 
respectively. 
Combined with a new plant in Arizona that sells power to California, 
Calpine's new facilities helped the state stave off threatened blackouts this 
summer, Chief Executive Officer Peter Cartwright said. 
Calpine is building the 847-megawatt Delta Energy Center in Pittsburg, 
scheduled to open in May, and a 750-megawatt plant in Kern County, due in 
June 2003. 
It is also awaiting an August decision by the California Energy Commission on 
its proposed 600-megawatt Metcalf Energy Center in San Jose. 
"California is a very good market for us," said Bill Highlander, a Calpine 
spokesman. "The pricing in California has benefited Calpine." 
However, he said, the company was not one of the traders that focused on 
making top dollar in California's volatile spot market, because its business 
model concentrated on selling electricity through long-term contracts. 
During the past few months, Calpine signed 10-year and 20-year contracts with 
the state for as much as 2,500 megawatts, at prices ranging from $58.60 to 
$73 per megawatt hour. 
With most of its plants fired by natural gas, Calpine wants to control about 
a quarter of the gas it uses, Highlander said. Its April purchase of Encal 
Energy for $1.77 billion more than doubled its gas reserves, to about 1. 7 
trillion cubic feet equivalent, according to Hoover's Online. 
Calpine's stock closed up $1.08 at $36.89 yesterday. 
E-mail Carolyn Said at csaid@sfchronicle.com <mailto:csaid@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page B - 1 






Generators continue to set high electricity prices 

Friday, July 27, 2001 
,2001 Associated Press 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/27/state
0359EDT0121.DTL>
(07-27) 00:59 PDT LOS ANGELES (AP) -- 
Power wholesalers continued to demand higher prices for energy despite 
federal regulation that capped electricity rates, according to a confidential 
report by the California Independent System Operator. 
In one case, an energy company charged as much as five times more for 
electricity than the federal cap, which were imposed June 20. State grid 
operators have given the study to federal regulators for a possible 
investigation, the Los Angeles Times reported Friday. 
Five companies were identified by code in the report and sources familiar 
with the study named the wholesalers for the Times. They include Duke Energy, 
Dynegy Corp., Mirant Corp., Reliant Corp., and Williams Cos. 
The average price charged by the five power companies was $105 per 
megawatt-hour, which closely matches the federal price limit in California 
set at $101 per megawatt-hour. 
Four of the five companies submitted bids either just below or just above 
their cost of production. Houston-based Reliant, however, asked as much as 
$540 per megawatt-hour in some cases. Overall, the company's average bid was 
close to costs, the report said. 
The state wasn't required to purchase power at the rates set by wholesalers 
but the bids reflect a potential repeat of charging exorbitant electricity 
prices if temperatures soar and conservation dwindles, said Frank Wolak, a 
Stanford University economist who studies the California electricity market. 
"The bottom line is that the generators are putting out these bids in 
expectation of high demand," he said. "If weather all of a sudden gets really 
hot from Southern to Northern California, the bids submitted by generators 
could be very costly to California." 
The Cal-ISO report singled out Duke Energy, noting it "continues to bid 
significantly in excess of its operating costs." The report shows the 
company's cost to produce electricity was between $85 and $121 but it offered 
to sell a megawatt-hour from $149 to $195. 
Cal-ISO calculated the cost of production for each company based on the 
efficiency of its power plants and estimates what each paid for natural gas 
to fuel the plants. 
"The use of the data in some cases doesn't appear to add up and in all cases 
appears to be selective and could easily be misunderstood," said Duke 
spokesman Tom Williams. 
,2001 Associated Press 







THE ENERGY CRUNCH 
Environmental suit against power plant 
Expansion called danger to slough 
Christian Berthelsen, Scott Winokur, Chronicle Staff Writers 
<mailto:cberthelsen@sfchronicle.com>
Friday, July 27, 2001 
,2001 San Francisco Chronicle </chronicle/info/copyright> 
URL: 
<http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/27/
MN236840.DTL>
An environmental group filed suit yesterday to overturn a permit granted to 
Duke Energy Co. to expand a major power plant south of Santa Cruz. 
Saying the permit was illegally awarded, the suit warns that the resulting 
project will damage the ecologically important Elkorn Slough. 
Voices of the Wetlands accuses the board that awarded the permit of violating 
federal law by not requiring Duke to use the best possible technology to 
minimize impacts on the environment around the Moss Landing power plant. 
If plans to expand the plant proceed without change, the group said, it would 
kill off critical organisms at the bottom of the food chain. 
The suit, filed in Monterey County against the California State Water 
Resources Control Board and the regional board that serves the central coast, 
seeks a court order to return the case to the regional water district so that 
more environmentally sensitive cooling technology can be ordered for use at 
the plant. 
State officials said yesterday that the issues raised in the suit were 
considered and rejected during the initial permit approval process last year, 
and again during the appeal process this year. 
The case comes amid enormous pressure on state officials, in light of 
California's energy crisis, to rapidly accelerate power plant approvals and 
expand the amount of power generation available. 
Against this backdrop, the state water board on June 21 essentially rejected 
environmental groups' appeal that had sought to overturn the district board's 
decision approving the Moss Landing expansion permit. 
On another front, board members of the California Energy Commission took 
testimony earlier this week on a proposal to curtail public review of plant 
project proposals, with one board member, Robert A. Laurie, acknowledging in 
an interview that he believed "in some cases" it posed one of the most time- 
consuming aspects of project approval. A recommendation is expected within 
the next month. 
Duke, of Charlotte, N.C., bought the Moss Landing plant from Pacific Gas & 
Electric Co. in 1998, when the Northern California utility sold off many of 
its facilities to prepare for deregulation of the energy market. 
The plant was built in 1950 using a cooling system technology that sucks 
water out of the Elkorn Slough and Monterey Bay to cool generating turbines 
before spitting the water out into the Pacific Ocean. 
The group says wildlife conditions and sea otter population have improved 
markedly since PG&E mothballed many of the generating units at Moss Landing 
in 1995. 
But Duke now is proposing to resurrect parts of the cooling system in a major 
expansion that will make Moss Landing the state's largest power plant after 
its completion next summer. 
With an output of 2,538 megawatts, the plant when completed is expected to 
account for 30 percent of all new electricity generated in California next 
year, serving about 2.5 million households in the Monterey, Santa Cruz and 
southern Santa Clara County areas, including San Jose. 
Regional water quality board officials declined comment yesterday, citing the 
pending litigation. But in public documents filed yesterday, water officials 
said cooling alternatives had been considered and rejected. The documents did 
not elaborate on why they were not mandated. 
Duke had acknowledged during the process that more ecologically sensitive 
technologies were available, but at prohibitive costs of $20 million to $50 
million more. 
Deborah Sivas, an attorney for the Earthjustice Environmental Law Clinic, 
which filed the suit on behalf of Voices of the Wetlands, considered the best 
technology alternatives mandatory, not optional. She said the board had not 
considered alternative approaches in reaching its conclusions. 
E-mail the writers at swinokur@sfchronicle.com 
<mailto:swinokur@sfchronicle.com> and cberthelsen@sfchronicle.com 
<mailto:cberthelsen@sfchronicle.com>. 
,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 3 








Let's make a real deal with Edison 
July 27, 2001 
By JONATHAN LANSNER
The Orange County Register 
When any government official tries to play business executive, it's time to 
get nervous. Take the Edison bail out as evidence. 
At its essence, the deal works like this: Taxpayers give the utility a big 
pile of cash; the state gets some old, rickety transmission lines in return. 
Don't be fooled: The power bounty is basically a political ploy. 
The state doesn't need to control electric distribution. What politicos need 
is a face-saving trade as evidence that this is a business deal - not a 
government handout. The state probably should just write the check and eat 
its losses. But if bureaucrats wanted real remuneration from this bail out, 
California would eye some juicy Edison assets. 
As a public service, I'll list a few. Now, for argument's sake, I won't 
differentiate between the utility and its parent company, Edison 
International. Hey, lawyers built those walls between the two. Let 'em figure 
out how to take 'em down. 
For starters, you'd figure an energy-strapped state would like some regional 
power plants, no? Like the San Onofre facility. However, it might be 
laughable to see Sacramento-types defending their future handling of the 
local nuclear plant. 
OK, if that's a tad too dicey for the state, how about a coal-fired plant in 
Nevada? Heck, Edison had a buyer at half a billion bucks before the state 
oddly quashed that deal. Maybe the state could grab it from Edison -- then 
flip it to pay off electricity-related debts. 
Of course, buying one of the out-of-town power plants that Edison's sister 
company in Irvine has acquired might be educational for Sacramento. Owning a 
plant in Illinois or Pennsylvania or possibly New Zealand might show state 
honchos how easy - or not - it is to rig supply and prices. 
Alternatively, the state could demand a small entity called Edison Capital. 
Basically, it's a bank. One specialty: the politically correct field of 
affordable-housing lending. A good fit for bureaucrats. 
Speaking of money, there's the Edison pension plan. Governments are really 
good at running retirement benefits. Heck, California already has a huge one. 
There's got to be some economies of scale - real cash savings - in merging 
the Edison plan with some state pension fund. 
Do note that Edison's plan might be overfunded by about $400 million. You can 
bet, though, that the state would never have the nerve to play 1980s 
corporate raider: profiting by grabbing some of a company's overfunded 
retirement kitty. 
Finally, there's Edison International Field in Anaheim. Stadium naming-rights 
contracts must have some value since corporations always seem to fight over 
these promotional gimmicks. (The utility's parent company paid $50 million in 
1997 for two decades of "free" publicity.) 
Imagine the buzz the state could get out of the huge sign age on a nationally 
renowned stadium. Plus, maybe the Angels could be good corporate citizens and 
tie into this deal. 
It's possible they'd allow a slight change in the team name to better 
emphasize the state's role in the ballpark. So, how does "California Angels" 
sound to you? 









Business; Financial Desk 
California Sempra Continues Improved Results
NANCY RIVERA BROOKS

07/27/2001 
Los Angeles Times 
Home Edition 
Page C-2 
Copyright 2001 / The Times Mirror Company 
Sempra Energy on Thursday reported another quarter of higher earnings and 
revenue, a sharp contrast to California 's bigger and beleaguered 
investor-owned utilities. 
Although California 's electricity crisis has pushed Southern California 
Edison and Pacific Gas & Electricity into insolvency--and PG&E into U.S. 
Bankruptcy Court--the parent of San Diego Gas & Electric and Southern 
California Gas continues to post improved results on the strength of its 
non-utility businesses. 
Net income for the period ended June 30 rose 25% to $137 million, or 66 cents 
a share, up $25 million, or 55 cents, earned a year ago, the San Diego-based 
utility holding company said. Revenue jumped 40% to $2.1 billion. Pretax 
operating income rose 24% to $291 million. 
Sempra's earnings came in just ahead of the 65-cent average estimate of 
analysts surveyed by First Call/Thomson Financial. 
"Our strong second-quarter performance is primarily the result of our efforts 
to accelerate growth through new businesses," Stephen L. Baum, Sempra's 
chairman, chief executive and president, told analysts in a conference call. 
Sempra is in a vastly different position than Edison International and PG&E 
Corp. because its electric utility arm was able to avoid the deep financial 
woes afflicting their respective Southern California Edison and Pacific Gas & 
Electric utilities. 
SDG&E was first to sell its power plants two years ago and thus was freed 
from a rate freeze. That in turn allowed the utility to pass along to 
customers the soaring costs of electricity beginning last summer. The state 
Legislature eventually rolled back and capped the rates for SDG&E customers, 
but promised the utility it would be allowed to recover those losses. 
Edison and PG&E, however, continued to accumulate staggering debts because 
their retail rate freezes remained in place. 
In contrast, Sempra is solvent, with $1.5 billion in cash and $1 billion in 
available credit, Baum said. 
The performance of its utilities was lackluster, with Southern California Gas 
earning $47 million, unchanged from the second quarter of 2000, and SDG&E 
earning $37 million, down from $40 million in the year-ago period. But 
Sempra's unregulated businesses--including energy trading, power plant 
construction and operation, international electricity operations and energy 
services--turned in an overall strong performance, contributing 39% of the 
parent company's earnings. 
Sempra's trading unit provided most of that profit, contributing $69 million 
to second-quarter net income compared with $40 million in the same quarter 
last year. 
Sempra's stock gained 17 cents to close at $25.49 on the New York Stock 
Exchange. 








Business; Financial Desk 
California Calpine Doubles Earnings, Beats Forecasts Energy: San Jose-based 
company credits higher electricity prices in California and sales from new 
plants.

07/27/2001 
Los Angeles Times 
Home Edition 
Page C-2 
Copyright 2001 / The Times Mirror Company 
Calpine Corp., one of the biggest U.S. power-plant builders, said Thursday 
that second-quarter earnings more than doubled, beating estimates, because of 
higher electricity prices in California and sales from new plants. 
Profit from operations rose to $132.2 million, or 39 cents a share, from net 
income of $59.5 million, or 20 cents, a year earlier. Revenue almost 
quadrupled to $1.61 billion. 
San Jose-based Calpine opened plants in the U.S. with a combined capacity of 
1,545 megawatts--enough to light 1.5 million average homes--and benefited 
from existing plants in California . Calpine has insulated itself from rising 
fuel costs by buying natural-gas fields to supply its plants. 
"Given the strategy they have chosen, they're following through quite well," 
said Andre Meade, an analyst at Commerzbank Capital Markets Co. "They are 
growing from a small base and adding a lot of plants, so we'd expect high 
growth." 
Profit topped the 31-cent average estimate of analysts surveyed by First 
Call/Thomson Financial. Calpine said it expects to earn $2 a share this year. 
The average First Call forecast was $1.92, with a range of $1.80 to $2.04. 
Calpine's shares rose $1.08, or 3%, to close at $36.89 on the New York Stock 
Exchange. 
The shares had fallen 21% this year amid concern that generators might have 
to give back some of the profit they made selling power in California during 
the last year. In addition, cooler-than-normal weather and conservation 
efforts recently reduced power prices in the state. 
Calpine runs or is building natural gas plants in 29 U.S. states and Canada 
that produce more than 30,000 megawatts of power. The company plans to more 
than double capacity to 70,000 megawatts by the end of 2005. 
Calpine this month opened the $350-million Sutter plant, California 's first 
major generator in more than a decade. The company is building 11 plants to 
run during times of peak demand in the state and getting permits for four 
more, James Macias, who oversees Calpine's West Coast power plants, said in a 
conference call with analysts and investors. 
Separately, Arlington, Va.-based AES Corp., a power producer that supplies 
California and operates in 27 countries, said second-quarter profit fell 20% 
because of losses tied to currency fluctuations and the sale of a U.S. 
electricity retailer. 
Net income fell to $112 million, or 21 cents a share, from $140 million, or 
28 cents, a year earlier. Sales rose 26% to $2.21 billion. 








California ; Metro Desk 
Cap No Bar to Higher Prices Power: Cal-ISO study says suppliers continued to 
charge as much as five times more than the U.S.-imposed limits.
NANCY VOGEL

07/27/2001 
Los Angeles Times 
Ventura County Edition 
Page B-1 
Copyright 2001 / The Times Mirror Company 
SACRAMENTO -- After federal regulators limited wholesale electricity prices 
last month, big private sellers of power in California continued to ask as 
much as five times more for electricity than the federal cap, according to a 
confidential study by state grid operators. 
The analysis by the California Independent System Operator covers only the 
first week after the caps were imposed June 20. Cal-ISO has submitted the 
data to federal regulators for potential investigation. The report is a 
summary of what Cal-ISO calls possible anti-competitive behavior by Duke 
Energy, Williams Cos., Mirant Corp., Reliant Energy and Dynegy Corp. 
"In a truly competitive market we would expect these suppliers to bid very 
close to their actual operating cost," said Greg Cook, senior policy analyst 
with Cal-ISO's Department of Market Analysis. 
The state did not necessarily purchase any power at the high prices being 
demanded. Instead, the significance of the bids is that they show how 
California could find itself paying exorbitant prices for electricity again 
if hot weather returns and conservation slackens, said Frank Wolak, a 
Stanford University economist who studies the California electricity market. 
"The bottom line is that the generators are putting out these bids in 
expectation of high demand," he said. "If weather all of a sudden gets really 
hot from Southern to Northern California , the bids submitted by generators 
could be very costly to California ." 
Cal-ISO calculated the cost of production for each company based on the 
efficiency of its power plants and estimates of what each paid for natural 
gas to fuel the plants. 
The average cost for the five was $105 per megawatt-hour, which closely 
matches the federal price limit in California , which now stands at $101 per 
megawatt-hour. According to the power bidding procedures, companies that bid 
at or below their cost of production often still get paid a higher price, 
allowing them to make a substantial profit. 
On average, four of the five companies submitted bids either slightly below 
or slightly above their cost of production. But with the exception of 
Atlanta-based Mirant, each company at times submitted bids that were 
substantially higher. Houston-based Reliant, for example, bid as much as $540 
per megawatt-hour, more than five times its estimated cost. Overall, 
Reliant's average bid was close to costs, according to the analysis. 
Cal-ISO identified companies by code in its report. Sources familiar with the 
study identified the companies for The Times. 
The Cal-ISO report singled out "Supplier 5," identified by sources as 
Charlotte, N.C.-based Duke Energy, saying the company "continues to bid 
significantly in excess of its operating costs." 
Duke owns two large power plants on the central coast. It marked up its bids 
an average of 88% beyond its cost to produce electricity , according to the 
analysis. For example, it cost Duke $85 to $121 to generate a megawatt-hour 
of electricity in the time period studied, the report shows, but the 
company's bids ranged from $149 to $195 per megawatt-hour. 
Duke spokesman Tom Williams on Thursday said, "The use of the data in some 
cases doesn't appear to add up and in all cases appears to be selective and 
could easily be misunderstood." Duke sells nearly the entire output of its 
power plants under long-term contracts, and not on the spot market, which the 
Cal-ISO report studied, he noted. 










Calpine Net Soars
On Added Plants;
Sempra Profit Rises
By Rebecca Smith

07/27/2001 
The Wall Street Journal 
Page B4 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
Calpine Corp. reported net income nearly doubled in the second quarter, 
reflecting the independent power producer's aggressive plant-building 
program. Meanwhile, the parent of a San Diego utility said profit rose 25%. 
Calpine, of San Jose, Calif., said net was $107.7 million, or 32 cents a 
share, up from $59.5 million, or 20 cents a share, a year earlier. The latest 
results, which were in line with analysts' expectations, included a special 
charge of seven cents a share related to Calpine's purchase of Encal Energy 
Ltd., a natural-gas company. Revenue grew even more strongly, soaring to 
$1.61 billion from $417.2 million. 
Separately, Sempra Energy, parent of electric utility San Diego Gas & 
Electric, reported profit rose to $137 million from $110 million a year 
earlier. Revenue jumped 40% to $2.1 billion from $1.5 billion. Sempra 
Chairman Steve Baum attributed the growth, which stands in marked contrast to 
the financial woes of California 's other electric-utility-owning energy 
companies, to Sempra's unregulated operations. 
Calpine's profit increased despite paying substantially more for natural gas 
to fuel its plants. It spent an average of $4.80 per million British Thermal 
Units for natural gas, up from $3.31 a year before. At the same time, 
Calpine's revenue per megawatt hour of electricity sold also rose, to $71.03 
in the latest period from $64.80 a year earlier. 
At Sempra, Mr. Baum said profit from Sempra's biggest utility unit, San Diego 
Gas & Electric, fell 7.5% to $37 million from $40 million. Results were flat 
at its gas-distribution company, Southern California Gas Co. Sempra Energy 
Trading was the big profit center, generating half its total profit, or $69 
million, compared with $40 million a year earlier. 
Mr. Baum said Sempra's stock, which trades at a low price/earnings multiple 
of 10, still is being "affected negatively by the California situation." He 
also said the company made less money in spot-power markets than in prior 
quarters but nevertheless intends to invest $2 billion in new power plants. 
In 4 p.m. New York Stock Exchange composite trading, Calpine shares rose 
$1.08 to $36.89, while Sempra climbed 17 cents to $25.49.