Message-ID: <327046.1075860343569.JavaMail.evans@thyme>
Date: Wed, 28 Mar 2001 06:16:00 -0800 (PST)
From: lysa.akin@enron.com
To: miyung.buster@enron.com
Subject: Re: Energy Issues
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Mary Hain has resigned her position with Enron.  Please remove her from all=
=20
your mail lists.

Thank you.

Lysa Akin
Gov't Affairs - Sr. Admin. Ass't.



To: Ann M Schmidt/Corp/Enron@ENRON, Bryan Seyfried/LON/ECT@ECT,=20
dcasse@whwg.com, dg27@pacbell.net, Elizabeth Linnell/NA/Enron@Enron,=20
filuntz@aol.com, James D Steffes/NA/Enron@Enron, Janet=20
Butler/ET&S/Enron@ENRON, Jeannie Mandelker/HOU/ECT@ECT, Jeff=20
Dasovich/NA/Enron@Enron, Joe Hartsoe/Corp/Enron@ENRON, John=20
Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John Sherriff/LON/ECT@ECT,=20
Joseph Alamo/NA/Enron@Enron, Karen Denne/Corp/Enron@ENRON, Lysa=20
Akin/PDX/ECT@ECT, Margaret Carson/Corp/Enron@ENRON, Mark=20
Palmer/Corp/Enron@ENRON, Mark Schroeder/LON/ECT@ECT, Markus=20
Fiala/LON/ECT@ECT, Mary Hain/HOU/ECT@ECT, Michael R Brown/LON/ECT@ECT, Mike=
=20
Dahlke/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mona L Petrochko/NA/Enron@Enron=
,=20
Nicholas O'Day/AP/Enron@Enron, Peggy Mahoney/HOU/EES@EES, Peter=20
Styles/LON/ECT@ECT, Richard Shapiro/NA/Enron@Enron, Rob=20
Bradley/Corp/Enron@ENRON, Sandra McCubbin/NA/Enron@Enron, Shelley=20
Corman/ET&S/Enron@ENRON, Stella Chan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT,=
=20
Steven J Kean/NA/Enron@Enron, Susan J Mara/NA/Enron@Enron, Mike=20
Roan/ENRON@enronXgate, Alex Parsons/EU/Enron@Enron, Andrew=20
Morrison/LON/ECT@ECT, lipsen@cisco.com, Janel Guerrero/Corp/Enron@Enron,=20
Shirley A Hudler/HOU/ECT@ECT, Kathleen Sullivan/NA/Enron@ENRON, Tom=20
Briggs/NA/Enron@Enron, Linda Robertson/NA/Enron@ENRON, Lora=20
Sullivan/Corp/Enron@ENRON, Jennifer Thome/NA/Enron@Enron,=20
jkradin@marathon-com.com, rlichtenstein@marathon-com.com,=20
syamane@marathon-com.com, ken@kdscommunications.com, hgovenar@govadv.com,=
=20
sgovenar@govadv.com, bhansen@lhom.com
cc: =20
Subject: Energy Issues

Please see the following articles:

Sac Bee, Wed, 3/28:  "State backs rate hike: But increase still may not=20
resolve crisis"

Sac Bee, Wed, 3/28:  "Batten down: Electric storm brews "

Sac Bee, Wed, 3/28:  "Use more energy, pay higher rates "

San Diego Union, Wed, 3/28:  "Regulators prescribe biggest rate increase in=
=20
state history"

San Diego Union, Wed, 3/28:  "City leaders in East County schedule forum on=
=20
energy woes"

San Diego Union, Wed, 3/28:  "Developments in California's power crisis"

San Diego Union, Wed, 3/28:  "Congressman eyes nuclear vessels as source of=
=20
power"

San Diego Union, Wed, 3/28:  "Bush calls California energy crisis 'ominous'=
 "

San Diego Union, Wed, 3/28:  "Rate hike means new political heat for=20
California governor"

LA Times, Wed, 3/28:  "PUC Approves Largest Electricity Rate Increase in=20
State's History"

LA Times, Wed, 3/28:  "With Energy Crisis Far From Over, Experts Say More=
=20
Hikes Possible "

LA Times, Wed, 3/28:  "Davis Keeps His Distance From Utility Rate Hikes"

LA Times, Wed, 3/28:  "Federal Energy Agency Unlikely to Order Refunds"

LA Times, Wed, 3/28:  "A Painful Step"   (Commentary)

SF Chron, Wed, 3/28:  "PUC Votes To Jack Up Power Rates=20
Tiered increases approved as protests disrupt meeting"

SF Chron, Wed, 3/28:  "Developments in California's power crisis" =20

SF Chron, Wed, 3/28:  "Energy Nominees Would Give GOP Majority on Panel"

SF Chron, Wed, 3/28: "Megawatt Foolish=20
Strike a Pose for Energy Conservation"

SF Chron, Wed, 3/28:  "New York mayor calls for cap on power prices "=20

SF Chron, Wed, 3/28:  "Power regulators approve rate hikes of up to 46=20
percent "

Mercury News, Tues, 3/27:  "No explanation given after officials approve 27=
=20
percent rate hike "

Mercury News, Tues, 3/27:  "Impact of increases will vary greatly"

Orange County, Wed, 3/28:  "PUC raises power rates"

Orange County, Wed, 3/28:  "Energy payments not enough, gas-using generator=
s=20
say"
Orange County, Wed, 3/28:  "Bush to nominate 2 who favor free markets for=
=20
energy panel"

Orange County, Wed, 3/28:  "Davis backs power rate hikes if 'necessary' "

Orange County, Wed, 3/28:  "Cheney says state's on its own"

Orange County, Wed, 3/28:  "Highest rate hike in state history raises=20
consumer anger"

Orange County, Wed, 3/28:  "Lighten up...it's just a California thing"

Orange County, Wed, 3/28:  "Conserve and Save"

NY Times, Wed, 3/28:  "RECORD RATE HIKE SET IN CALIFORNIA"

Individual.com, Wed, 3/28:  "Calif. Regulators Raise Power Rates "

=20


---------------------------------------------------------------------------=
---
-----------------------------------------------------------

State backs rate hike: But increase still may not resolve crisis
By Carrie Peyton and Dale Kasler
Bee Staff Writers
(Published March 28, 2001)=20
SAN FRANCISCO - Brushing aside the shouts and hisses of outraged protesters=
,=20
state regulators approved a $4.8 billion-a-year utility rate hike Tuesday b=
ut=20
couldn't guarantee that the increases will remedy California's electricity=
=20
crisis.=20
With activists chanting "rate hikes no way" and utility executives branding=
=20
the decision as inadequate, the Public Utilities Commission voted 5-0 to=20
raise rates about 30 percent for customers of Pacific Gas and Electric Co.=
=20
and Southern California Edison. The rate hike took effect immediately but=
=20
probably won't show up in customer bills until May.=20
But while PUC commissioners said they were taking a bold step, major holes=
=20
remain in the state's patchwork effort to save the two beleaguered utilitie=
s=20
and ensure reliable energy supplies during what promises to be a long, hot=
=20
summer:=20
The higher rates won't pay off billions in old utility debts, leaving PG&E=
=20
and Edison under the continued threat of a bankruptcy filing by power=20
generators, bondholders or other creditors.=20
The increases will likely curtail energy consumption, but it's unlikely the=
=20
cutbacks will be enough to stave off rolling blackouts this summer. The PUC=
=20
put off a crucial decision on how to allocate the rate hikes across custome=
r=20
categories, and the final rate design could determine how much Californians=
=20
will conserve.=20
The vote may not achieve one of its key goals: reviving the wind farms,=20
cogenerators and other=20
alternative-energy producers that provide more than 20 percent of=20
California's electricity. Hundreds have shut down in recent weeks because o=
f=20
nonpayment by PG&E and Edison, contributing to rolling blackouts March 19 a=
nd=20
20.=20
After months of prodding, the PUC approved what may well be the largest=20
utility rate increase in California's history, saying it had no choice if i=
t=20
was to shore up utility finances and lessen the risk of blackouts. It raise=
d=20
rates just under 30 percent in addition to making permanent a 9 percent=20
surcharge approved in January.=20
The increased revenue will go to pay for the state Department of Water=20
Resources' power purchases on the utilities' behalf, and to=20
alternative-energy producers that supply a major chunk of the utilities'=20
power.=20
The PUC's move could make utility bankruptcies more palatable to state=20
officials because it ensures payment for future power supplies. "Now, if we=
=20
have a bankruptcy, a lot of bad things will probably happen, but there's le=
ss=20
risk to the general public of mass power disruptions," said state Sen. Debr=
a=20
Bowen, D-Marina del Rey, chairwoman of the Senate Energy Committee.=20
PG&E, arguing that the PUC didn't go nearly far enough, said it will demand=
=20
the panel reconsider.=20
"Today's =01( actions, while providing a welcome dose of realism in the ene=
rgy=20
policy debate, unfortunately do not resolve any of the key issues facing=20
California's policymakers," PG&E President Gordon Smith said.=20
Smith said the decision could worsen California's energy problems by forcin=
g=20
the utilities to pay the state Department of Water Resources, which is buyi=
ng=20
power on the utilities' behalf, ahead of other creditors.=20
An Edison vice president, Bruce Foster, said the rate increase "is a step i=
n=20
the right direction" but added, "Only time will tell if it's enough." The=
=20
company announced it will start making interest payments on defaulted bond=
=20
and bank debts.=20
Edison and PG&E both criticized the commission for sharply lowering the PUC=
's=20
estimates of the utilities' debts.=20
PUC commissioners acknowledged they have more work to do to resolve=20
California's energy mess - and some hinted that additional rate hikes may b=
e=20
in the offing.=20
"Have we gotten the number right? I don't know," said Commissioner Henry=20
Duque. But PUC President Loretta Lynch said the $4.8 billion will be enough=
=20
to pay California's ongoing power bills.=20
Meanwhile, Gov. Gray Davis repeated his opposition to rate hikes.=20
"We do not have all the appropriate financial numbers necessary to make a=
=20
decision," Davis said. "Until we do, I cannot support any rate increase. =
=01(=20
While I have opposed rate increases, if it becomes clear that a rate increa=
se=20
is absolutely necessary for the good of the state, I will support one that =
is=20
fair and do my duty to convince Californians of its necessity."=20
Yet most observers believe the PUC acted with Davis' approval - three of it=
s=20
members are Davis appointees - and last Friday his aides shared data with=
=20
business lobbyists indicating rates would rise substantially, said Jack=20
Stewart, president of the California Manufacturers & Technology Association=
.=20
Consumer advocates blasted rate increases as a surrender to the power=20
generators that control much of California's electricity.=20
Noting that the state's grid operator has accused the generators of=20
overcharging Californians by $6.2 billion, they urged the PUC to focus its=
=20
firepower on those "robber barons on steroids," as Berkeley activist Barbar=
a=20
George put it.=20
"It's like dealing with the mob," said Doug Heller of the Foundation for=20
Taxpayer and Consumer Rights. "Instead of breaking our fingers, they're goi=
ng=20
to turn the lights out again."=20
Jamming the PUC's auditorium to near capacity, activists said the state=20
should seize the generators' power plants. They razzed the commissioners wi=
th=20
taunts of "blood money!" and "it's a sham," prompting guards to escort some=
=20
protesters out.=20
PUC President Lynch partially agreed with the protesters, saying the=20
generators are "the real culprits in our energy crisis." But she said the=
=20
commission had to approve rate hikes.=20
The PUC ordered the utilities to help state officials fight the power=20
generators to refund some of their profits. Lynch said the rate hikes would=
=20
be refunded to customers if generators are forced to surrender money.=20
The higher rates will generate $2.51 billion in additional yearly revenue f=
or=20
Edison and $2.28 billion for PG&E, according to PUC estimates.=20
But with most of the money going to reimburse the state Department of Water=
=20
Resources for current and future power purchases, the PUC action doesn't=20
repay the billions the utilities owe to generators and other creditors.=20
"You still have $14 billion, maybe more, of costs that haven't been paid fo=
r,=20
and that's still a problem," said Gary Ackerman of the Western Power Tradin=
g=20
Forum, an association of power generators. "I don't believe creditors are=
=20
going to be infinitely patient."=20
The two utilities have defaulted on billions of debts and face a daily thre=
at=20
of bankruptcy.=20
"That's still an issue that ultimately has to be addressed," said Senior Vi=
ce=20
President John Stout of Reliant Energy Inc., a generator that's owed $370=
=20
million.=20
Davis is negotiating to buy the transmission grid from Edison, PG&E and San=
=20
Diego Gas & Electric Co. as a means of paying off the utilities' existing=
=20
debts. But Bowen, the Energy Committee chair, said she doubts the deal will=
=20
go through.=20
Beyond complaining the PUC didn't solve the existing-debt issue, the=20
utilities were dismayed by a change in PUC accounting that sharply lowers=
=20
estimates of their debts and could have major impacts on how much control=
=20
regulators keep over their operations for months to come. Even though rates=
=20
keep going up, a state ordered rate freeze remains technically in effect, a=
nd=20
that freeze gives regulators ammunition to argue that utilities can't pass=
=20
all their costs on to customers.=20
PG&E's Smith called it the "most egregious" commission action. Edison calle=
d=20
it "illegal."=20
The board voted to raise rates 3 cents a kilowatt-hour - and make permanent=
 a=20
1-cent increase approved in January. Documents from Lynch's office said rat=
es=20
would rise on average 29 percent, but Lynch later described it as 26 percen=
t.=20
The PUC put off a decision on how the higher rates will affect each custome=
r=20
category, other than to say it's leaning toward a system that will charge=
=20
more for electricity consumed above a certain threshold. The PUC estimated=
=20
that 45 percent of residential ratepayers - those who use less than that=20
threshold - will see no rise at all. Lynch proposed some businesses would s=
ee=20
rate hikes of as much as 87 percent.=20
"How much conservation will this get us? It will depend very much on how it=
's=20
designed," said Severin Borenstein of the University of California Energy=
=20
Institute.=20
The rate hikes won't affect customers of municipal utilities such as=20
Sacramento Municipal Utility District. SMUD is planning a 16 percent rate=
=20
hike.=20
The PUC vote may do little to help the hundreds of alternative-energy=20
producers known as "qualifying facilities," many of which have shut down fo=
r=20
nonpayment.=20
The PUC on Tuesday ordered PG&E and Edison to start paying these producers =
in=20
April, but some of the producers say the PUC's new pricing mechanism doesn'=
t=20
get them back on their feet financially. Many, following the lead of one=20
Imperial Valley producer, may choose to sever their contracts with the two=
=20
utilities and sell their power elsewhere, even out of state.=20
"This is not a solution," cogenerators' lawyer Jerry Bloom said of the PUC=
=20
vote. "It will drive additional (plants) off the system."=20
California can ill afford to lose suppliers. On Tuesday, the Independent=20
System Operator, which runs the power grid, declared a Stage 2 alert, meani=
ng=20
reserve supplies had dipped to less than 5 percent of demand.=20
And many experts believe California won't be able to avoid blackouts this=
=20
summer. The severe drought hitting the Pacific Northwest will deprive=20
California of a critical source of hydroelectricity.=20
Utility stocks, which shot up Monday in anticipation of the PUC's vote,=20
retreated slightly on Tuesday. PG&E Corp. shares dropped 44 cents to $13.20=
;=20
Edison International fell 39 cents to $14.16.=20
Bee staff writers Dan Smith, Emily Bazar and Kevin Yamamura, and Reuters ne=
ws=20
service contributed to this report.=20
---------------------------------------------------------------------------=
---
-----------------------------------------
Batten down: Electric storm brews=20
By Gilbert Chan and Andrew LePage
Bee Staff Writers
(Published March 28, 2001)=20
First higher gasoline prices hit Dust-Tex Service Inc. Then skyrocketing=20
natural gas bills socked the Sacramento industrial laundry service. Now a=
=20
third financial blow looms - higher electricity bills.=20
"It's become a real nightmare. It's pretty scary. You have to find money to=
=20
pay these bills," said Sylvia Compton, co-owner of the longtime family-owne=
d=20
south Sacramento business.=20
It could be worse for Compton, whose business is served by the Sacramento=
=20
Municipal Utility District. It will be for customers of Pacific Gas and=20
Electric Co., who face rate hikes averaging 30 percent in addition to a 9=
=20
percent rate increase already approved.=20
The California Public Utilities Commission gave PG&E and Southern Californi=
a=20
Edison permission to raise electric rates by $4.8 billion a year. How the=
=20
burden will fall on various customer groups hasn't been decided.=20
Although SMUD customers aren't affected by the PUC's decision to sharply=20
raise rates, they aren't likely to be immune. SMUD, also facing skyrocketin=
g=20
energy costs, is considering rate increases ranging from 13 percent to 25=
=20
percent.=20
For Dust-Tex and scores of other California companies, any rate hike would =
be=20
another unwelcome increase in the cost of doing business. It will hit at a=
=20
time the U.S. economy is slowing and employer costs such as health benefits=
=20
are soaring.=20
For consumers, it will mean a double blow, higher electricity bills at home=
=20
and higher prices for goods and services.=20
Raley's, the West Sacramento-based supermarket chain, for example, uses hug=
e=20
amounts of electricity not only for lights and refrigeration at its stores,=
=20
but also to cool food at its distribution centers. Given the thin profit=20
margins of the grocery business, it has little choice but to raise prices.=
=20
"We are doing all we can at Raley's to conserve energy. But as rates go up =
we=20
will have to pass those increases on to our customers in the cost of goods,=
"=20
said Michael Teel, Raley's president and chief executive officer.=20
The higher electric bills approved by the PUC - aimed at keeping the state'=
s=20
two biggest utilities from bankruptcy - mean California businesses and=20
consumers will have almost $5 billion less to spend each year on other=20
things.=20
While that amount represents a huge bite out of consumer spending, by itsel=
f,=20
it won't necessarily lead to a recession, said Brad Williams, senior=20
economist at the state Legislative Analyst's Office.=20
"What we're really talking about is less economic growth," Williams said.=
=20
"Some households will feel this, and it will pinch their budgets and affect=
=20
how much income they have for purchasing goods and services."=20
The state estimates that spending on electricity last year averaged between=
 2=20
and 3 percent of both business production costs and household budgets.=20
Some business owners and economists welcomed the boost in electricity rates=
,=20
saying in the long run, they will spur energy conservation efforts, boost=
=20
power generating capacity and prevent rolling blackouts and their devastati=
ng=20
effect on business productivity.=20
"It's much worse for us if we have these damn blackouts. We have 100=20
employees, and if there's a blackout they're all sitting around twiddling=
=20
their thumbs and I've still got to pay them," said Norm Rogers, president o=
f=20
Z-World Inc. in Davis, which designs and builds miniature special-purpose=
=20
computers.=20
Many economists and business experts believe rolling blackouts, not higher=
=20
electricity rates, are the biggest threat to the economy.=20
"It's better to have higher rates and secure power than lower rates and=20
blackouts," said Stephen Levy, senior economist at the Center for Continuin=
g=20
Study of the California Economy. The state can work through the higher powe=
r=20
costs - just as it did when gasoline and diesel prices soared last year, Le=
vy=20
said.=20
In reaction to the higher power rates, a small number of businesses may lea=
ve=20
California, expand out of state, or fail, though most will be able to weath=
er=20
the short run, said Robert Smiley, dean of the Graduate School of Managemen=
t=20
at the University of California, Davis.=20
Most firms will give the state just six to 18 months to solve the energy=20
crisis before "they'll start looking elsewhere," Smiley said.=20
David Molinaro, owner of Yolo Ice and Creamery Inc., a Woodland-based ice=
=20
cream, dairy and ice distributor, can't pick up and leave. He absorbed high=
er=20
diesel fuel costs for his 11 delivery trucks for six months before levying =
a=20
surcharge in January. There's just no way his company can eat the higher=20
electricity costs, he said.=20
"It's frustrating. People are thinking you are getting rich by raising=20
prices," Molinaro said.=20
Other businesses may have little choice but to swallow the higher utility=
=20
costs.=20
"We compete with global suppliers for almost every product. It's virtually=
=20
impossible for us to pass these costs on," said Jeff Boese of the Californi=
a=20
League of Food Processors. "If we don't get a handle on energy costs very=
=20
quickly I would suspect a significant number of food processors to leave th=
e=20
state."=20
In past months, the rocketing energy costs have forced companies to take=20
dramatic steps to shave expenses.=20
Dust-Tex, for example, has scrapped pay raises, raised prices 10 percent, c=
ut=20
hours for some workers, put a freeze on hiring and changed auto insurance=
=20
coverage for its truck fleet. At the same time, it invested $60,000 for a n=
ew=20
energy-efficient dryer.=20
California Family Health & Fitness, which has eight health clubs in the=20
capital region, has tabled plans for two additional gyms until it gets a=20
better handle on future energy costs, according to co-owner Larry Gury. But=
=20
Gury and his partner are looking at spending $150,000 to $200,000 at each o=
f=20
four gyms to install solar panels for heating the pools and running the=20
lights.=20
Some impacts might not be seen for some time. In the health care industry,=
=20
for example, the energy crisis has only added to existing financial=20
pressures, said Larry Levitt, vice president of the Henry J. Kaiser Family=
=20
Foundation.=20
Pressed by higher bills, some employers may opt to trim or eliminate health=
=20
benefits for workers, Levitt said.=20
Bee staff writer Lisa Rapaport contributed to this report.=20
---------------------------------------------------------------------------=
---
---------------------------------
Use more energy, pay higher rates=20
By Edie Lau
Bee Science Writer
(Published March 28, 2001)=20
For all the talk of electricity rates going up across the state, there's a=
=20
way every resident of California can avoid the price hit altogether: Just u=
se=20
electricity sparingly.=20
A rate increase approved by the state Public Utilities Commission on Tuesda=
y=20
does not affect households that use less than 130 percent of a baseline=20
amount of power.=20
Forty-five percent of households already stay within that limit, according =
to=20
PUC President Loretta Lynch. The proportion is slightly less in Pacific Gas=
=20
and Electric's territory - 42 percent, utility spokeswoman Jann Tabor said.=
=20
The baseline amount differs from region to region and from season to season=
.=20
The Sacramento Municipal Utility District is not affected by the PUC-approv=
ed=20
increase but is planning to raise rates this spring, as well. It, too,=20
proposes to protect the thriftiest customers by raising the price only of=
=20
kilowatt-hours used over baseline. District rate administrator Alan Wilcox=
=20
said roughly half of SMUD households consume only baseline amounts of power=
.=20
Everyone else has the opportunity to dodge rate increases by scaling back=
=20
their electricity use.=20
How difficult might that be? If you're accustomed to using a central air=20
conditioner all summer and unwilling to turn up the thermostat, it could be=
=20
difficult, by Wilcox's reckoning.=20
"If you're running an air-conditioning load in the Valley, you could probab=
ly=20
expect to get into that second tier (above baseline) a little bit," he said=
.=20
"There are a lot of people who do not use their air conditioning a lot or=
=20
have swamp coolers or just go without."=20
In SMUD territory, the baseline is 700 kilowatt-hours per month in summer,=
=20
and 620 kwh in winter for most customers. (Households that do not use gas a=
nd=20
are powered entirely by electricity get a higher baseline allowance.)=20
Wilcox said the baseline is based upon average consumption - at least, it w=
as=20
the average when the baseline was set in the early 1990s. Consumption has=
=20
crept up a bit since, to 752 kwh a month last year.=20
Under SMUD's rate-increase proposal, the summertime rate would remain at=20
8.058 cents per kilowatt-hour for the first 700 kwh. The price would rise b=
y=20
10 cents a kilowatt-hour for the next 300 kwh used, up to 1,000 kwh.=20
Big energy consumers would pay more than 16 cents for each kwh used over=20
1,000 kwh.=20
Bottom line: The biggest users pay the most.=20
Details of the rate increase approved by the PUC - which will affect PG&E=
=20
customers, as well as those served by Southern California Edison and San=20
Diego Gas & Electric - have yet to be worked out, but the rates are expecte=
d=20
to be structured in a similar tiered fashion.=20
Currently, PG&E customers year-around pay 11.4 cents per kilowatt-hour up t=
o=20
the baseline limit, and 13 cents for every kilowatt-hour over baseline. The=
=20
average baseline throughout the territory is between 300 and 400 kwh, Tabor=
=20
said; it varies from region to region to account for climate.=20
Tabor said the PG&E baseline amounts to between 50 percent and 60 percent o=
f=20
the average electricity use per household in a given territory. That=20
proportion, she said, was taken from a "Lifeline" program in effect from 19=
76=20
to 1984 that was meant to provide a minimum necessary quantity of electrici=
ty=20
and gas at a lower cost.=20
Tabor said 31 percent of PG&E's 4,017,000 residential customers use only=20
baseline amounts of electricity.=20
Bee staff writer Carrie Peyton contributed to this report.=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
----

Regulators prescribe biggest rate increase in state history=20



Davis calls ruling for PG&E, Edison premature; consumer groups push for=20
seizure of plants
By Ed Mendel=20
UNION-TRIBUNE STAFF WRITER=20
March 28, 2001=20
SAN FRANCISCO -- State regulators yesterday approved the biggest rate=20
increase in California history for the customers of Pacific Gas and Electri=
c=20
and Southern California Edison, but Gov. Gray Davis said the increase is=20
premature.=20
The governor, appearing to soften his long-standing opposition, said he wou=
ld=20
support a rate increase only if financial information shows that a rate=20
increase is "necessary for the good of the state."=20
The Public Utilities Commission, controlled by Davis appointees, voted 5-0=
=20
for an immediate rate increase. A statement from Davis, who usually demands=
=20
that appointees reflect his policy, did not say whether he would ask the PU=
C=20
or the Legislature for a rollback if he concludes the increase is unneeded.=
=20








Developments in California's power crisis=20
Congressman eyes nuclear vessels as source of power=20
Bush calls California energy crisis 'ominous'=20
Rate hike means new political heat for California governor=20
?=20



"He can ask," said Steve Maviglio, Davis' press secretary. "That is one of=
=20
many options. But now we are waiting for the numbers to plug in the data an=
d=20
see if a rate increase is necessary."=20
The PUC has not yet acted on the request of San Diego Gas and Electric for =
a=20
rate increase. SDG&E has a debt of $681 million but has been paying all of=
=20
its bills, unlike PG&E and Edison. Those companies say they have debt of $1=
3=20
billion.=20
SDG&E is in a different situation because its rates were capped by=20
legislation in September that guarantees payment of its debt, allowing the=
=20
utility to borrow. The bills of SDG&E customers soared last summer when the=
=20
utility became the first to be deregulated.=20
"Since the PUC has approved rate hikes for Edison and PG&E, we would hope=
=20
they give an expedited review to our request for an increase of 2.3 cents p=
er=20
kilowatt hour," said Ed Van Herik, a SDG&E spokesman.=20
Consumer groups warned that out-of-state generators, who have been ordered =
by=20
FERC to make some rebates for overcharging, will make even more money under=
=20
the rate increase. Some are urging Davis to seize California power plants=
=20
owned by the generators.=20
"These people are war criminals," said Mike Florio, an attorney for The=20
Utility Reform Network in San Francisco.=20
The PUC meeting, which occurred on a day when the state was hit by a Stage =
2=20
alert because of reduced imports from the Northwest, was interrupted by=20
shouts from demonstrators who want a state-owned power system. They chanted=
,=20
"Public power now, we won't pay" and "Rate hikes no way, make the energy=20
companies pay."=20
Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa=20
Monica, which is threatening to put a public power initiative on the ballot=
=20
next year, said some attorneys think the abrupt rate increase can be=20
challenged in court.=20
Assemblyman Rod Pacheco, R-Riverside, announced that he will introduce=20
legislation to repeal the rate increase. He said a decision should be made=
=20
not by appointees but by elected officials who are accountable to the publi=
c.=20
Democratic legislative leaders, who have large majorities in both houses,=
=20
said Monday that they have reluctantly concluded a rate increase is=20
necessary. Davis is scheduled to meet with Assembly Democrats this afternoo=
n.=20
The rate increase approved for PG&E and Edison yesterday is 3 cents per=20
kilowatt hour. The PUC president, Loretta Lynch, said media reports of the=
=20
increase amounting to a 40 percent rise are inaccurate.=20
Lynch said the increase in the monthly bills of ratepayers would be about 2=
6=20
percent if applied across the board. She bases her figure on the total bill=
=20
that includes electricity, transmission, distribution and other costs.=20
The media's characterization of the rate increase as 40 percent is based on=
=20
only the cost of electricity, not the total bill. The electricity costs=20
before the increase were 7.2 cents per kilowatt hour for Edison and 6.7 cen=
ts=20
for PG&E. SDG&E's rate is 6.5 cents.=20
Lynch proposed the rate increase after a report issued last week showed tha=
t=20
the state, which was forced to begin buying power for the utilities in=20
mid-January, will have to spend more than expected. A state plan to lower=
=20
costs through long-term contracts will fall short this summer.=20
The state has been spending about $1.5 billion a month to buy power. The PU=
C=20
also voted unanimously yesterday to give the state a share of the monthly=
=20
bill collected by utilities, which will be used to finance a bond of $10=20
billion or more to repay the state general fund for the power purchases.=20
The state was jolted last week by rolling blackouts that few expected befor=
e=20
summer, when heat drives up the demand for electricity. A number of small=
=20
generators that provide a quarter of the state's power are not operating=20
because they have not been paid by utilities.=20
The PUC voted yesterday to order Edison and PG&E to begin paying the small=
=20
generators under a new formula that links their payments to the price of=20
natural gas at the Oregon border, rather than at the Southern California=20
border with Arizona. Prices at the Arizona border have been 50 percent=20
higher.=20
David Fogarty of the Western States Petroleum Association, which represents=
=20
50 small generators, said many of the small plants in Southern California=
=20
will have to continue to buy their natural gas at the higher price on the=
=20
Arizona border.=20
"Many of them will find it uneconomic to continue to operate," Fogarty=20
warned.=20
Edison has not paid the small generators in the federal "qualifying=20
facilities" program since November. PG&E has been paying them only about 15=
=20
percent.=20
The PUC did not order the utilities to pay off the $1.5 billion they owe to=
=20
the small generators. Jan Smutny-Jones of the Independent Energy Producers=
=20
said some of the small generators will not be able to buy gas until they ca=
n=20
pay their debts.=20
Many of the small generators produce power from "renewable" sources such as=
=20
solar, wind, geothermal and biomass. But most of the small generators use=
=20
natural gas turbines that also produce heat for commercial purposes.=20
Whether Lynch acted on her own when she proposed the increase or was prompt=
ed=20
by the Davis administration is a topic of speculation. Davis aides told=20
reporters during a background briefing yesterday that they did not learn of=
=20
Lynch's proposal until Sunday night.=20
They said the governor was briefed Monday morning and that he did not urge=
=20
his PUC appointees to delay the increase. An Edison official said the utili=
ty=20
received the proposal late Monday morning and had little time to prepare fo=
r=20
a hasty PUC hearing on the increase that afternoon.=20
The two commissioners appointed by former Gov. Pete Wilson, Richard Bilas a=
nd=20
Henry Duque, said they have been urging a rate increase. But both complaine=
d=20
of the short notice and the lack of time to study the complex proposals=20
approved yesterday.=20
Davis aides said they do not understand how Lynch arrived at an increase of=
 3=20
cents per kilowatt hour. The governor is waiting for estimates of state pow=
er=20
purchases this summer, available generation, the effect of conservation, th=
e=20
potential for federally ordered refunds from generators, and other data=20
before he makes a rate decision.=20
The Davis appointees on the commission, Geoffrey Brown and Carl Wood, prais=
ed=20
Lynch for showing courageous leadership.=20
The increase approved yesterday, which utility spokesmen said was the large=
st=20
in their history, comes on top of a 9 percent residential increase for Edis=
on=20
and PG&E imposed in January and a scheduled 10 percent increase next March,=
=20
when a "rate reduction" paid for by a $6 billion bond expires.=20
Lynch said the rate increase approved yesterday takes effect immediately bu=
t=20
will not show up on customer bills until May or later. The PUC is working o=
n=20
a plan to design the increase to encourage conservation, giving the biggest=
=20
increases to those that use the most electricity.=20
About 45 percent of the utilities' residential customers will have no=20
increase because of legislation exempting households that use 130 percent o=
r=20
less of the "baseline," a minimum amount of electricity use that varies wit=
h=20
climate zones around the state.=20
-----------------------------------------------------------------


City leaders in East County schedule forum on energy woes=20




UNION-TRIBUNE=20
March 28, 2001=20
Members of the four East County city councils will hold a workshop tomorrow=
=20
to talk about ways to deal with the energy crisis.=20
The meeting is scheduled to begin at 7 p.m. at the La Mesa Community Center=
,=20
4975 Memorial Drive, La Mesa.=20
Council members from La Mesa, Santee, El Cajon and Lemon Grove will discuss=
=20
energy-saving policies and ordinances they could enact.=20
Cities might look at having energy-efficient traffic lights installed or=20
requiring new houses to use alternative energy sources, said La Mesa Mayor=
=20
Art Madrid.=20
"It's acknowledging that we have a problem and coming up with a solution,"=
=20
Madrid said.=20
Kurt Kammerer of the San Diego Regional Energy Office is scheduled to give =
a=20
presentation to the group. Members of the audience will have an opportunity=
=20
to make comments.=20
------------------------------------------------------------------


Developments in California's power crisis=20




ASSOCIATED PRESS=20
March 28, 2001=20
Here is a look at developments in California's electricity crisis:=20
WEDNESDAY:=20
=01) The state remains free of power alerts in the early morning as power=
=20
reserves stay above 7 percent.=20
=01) The Assembly resumes hearings on California's high natural gas prices.=
=20
=01) The Assembly is expected to try again to pass a bill that would let th=
e=20
state Public Utilities Commission order Southern California Edison Co. and=
=20
Pacific Gas & Electric Co. to pay alternative-energy plants.=20
TUESDAY:=20
=01) The PUC votes unanimously to approve electricity rate hikes of up to 4=
6=20
percent for customers of California's two largest utilities. The board vote=
s=20
5-0 to increase rates immediately for PG&E and Edison despite yells from=20
protesters. The increases are the largest in California history.=20
=01) Stock in both utilities suffer slight losses after expectations of the=
 rate=20
hikes Monday caused shares in PG&E Corp. to surge 29 percent and Edison=20
International's stock to gain 30 percent. Edison International closed down =
39=20
cents at $14.16 a share. PG&E Holding Corp., parent of Pacific Gas &=20
Electric, closed down 55 cents at $13.20.=20
=01) In a Tuesday afternoon conference call, Southern California Edison say=
s it=20
will begin paying interest to its bondholders after weeks of failure to pay=
.=20
Company authorities say they have not heard whether the news will boost the=
ir=20
credit rating and do not specify a dollar amount for monthly interest=20
payments.=20
=01) The Los Angeles Department of Water and Power, which is not attached t=
o the=20
state power grid and is not affected by deregulation, issues a statement=20
Tuesday assuring that customer rates "will continue to remain stable."=20
=01) Standard & Poors retains California's cautionary credit rating despite=
=20
state regulators' decision to raise electricity rates. The state has been o=
n=20
a credit watch "with negative implications" since it began spending $45=20
million a day to buy electricity for customers of two nearly bankrupt=20
utilities. The crediw watch will remain in effect despite a rate increase=
=20
state regulators approved Tuesday.=20
=01) President Bush says the electricity price caps sought by California's =
Gray=20
Davis and other Western governors would worsen the region's energy crisis=
=20
instead of helping cure it. In a speech to the Kalamazoo Chamber of Commerc=
e,=20
Bush says price controls helped cause the gasoline crisis of the 1970s, and=
=20
he won't make the same mistake.=20
=01) Joseph Fichera, the governor's chief negotiator on the purchase of=20
transmission lines, says he is exchanging drafts of proposed agreements wit=
h=20
Edison officials but won't say how soon a final agreement may be reached. H=
e=20
says negotiations are continuing with PG&E and San Diego Gas & Electric.=20
=01) State agencies announce a March 29 workshop in Ontario for developers =
who=20
hope to build peaking power plants in time for this summer. The event is=20
similar to one held two weeks ago in Sacramento. Peaking plants are used fo=
r=20
short periods when power supplies run low.=20
=01) California's Independent System Operator declares a Stage 2 alert when=
=20
electricity reserves were approaching only 5 percent of available power. IS=
O=20
spokeswoman Stephanie McCorkle says the alert was triggered when 1,000=20
megawatts was unexpectedly lost from the Pacific Northwest. WHAT'S NEXT:=20
=01) The Davis administration continues negotiations with Edison, PG&E and =
San=20
Diego Gas & Electric Co. over state acquisition of their transmission lines=
.
THE PROBLEM:=20
High demand, high wholesale energy costs, transmission glitches and a tight=
=20
supply worsened by scarce hydroelectric power in the Northwest and=20
maintenance at aging California power plants are all factors in California'=
s=20
electricity crisis.=20
Edison and PG&E say they've lost nearly $14 billion since June to high=20
wholesale prices that the state's electricity deregulation law bars them fr=
om=20
passing onto ratepayers, and are close to bankruptcy.=20
Electricity and natural gas suppliers, scared off by the two companies' poo=
r=20
credit ratings, are refusing to sell to them, leading the state in January =
to=20
start buying power for the utilities' nearly 9 million residential and=20
business customers.=20
------------------------------------------------------------------


Congressman eyes nuclear vessels as source of power=20



By Toby Eckert=20
COPLEY NEWS SERVICE=20
March 28, 2001=20
WASHINGTON -- As California braces for more blackouts this summer, a key=20
House Republican has floated a plan that includes mobilizing a federal=20
disaster agency, waiving some environmental regulations and exploring wheth=
er=20
nuclear reactors aboard Navy ships could be connected to the power grid.=20
Several Democrats immediately attacked the plan for not including electrici=
ty=20
price controls sought by Gov. Gray Davis and other California officials. Th=
ey=20
also charged that it would undermine clean air laws.=20
The 17-point plan was drafted by Rep. Joe Barton, R-Texas, chairman of the=
=20
House Commerce Committee's energy and air quality subcommittee. Copies were=
=20
obtained by Copley News Service.=20
Samantha Jordan, a spokeswoman for Barton, confirmed that he had circulated=
=20
some proposals for responding to the Western power crisis among subcommitte=
e=20
members late last week. Some of the ideas were deleted before the list was=
=20
forwarded to the White House, Jordan added, but she would not say which one=
s.=20
Barton has presided over several hearings on the power crunch and has said=
=20
that he is "more than prepared" to draft legislation to help California. A=
=20
White House task force, headed by Vice President Dick Cheney, is also=20
developing a national energy policy.=20
President Bush has repeatedly stated his opposition to caps on wholesale=20
power prices. He has called for a concerted effort to increase energy=20
production.=20
The list of ideas Barton sent to subcommittee members was aimed at boosting=
=20
power generation and transmission in the West, increasing conservation and=
=20
preparing for blackouts.=20
Some of the production and transmission measures called for quickly expandi=
ng=20
a crucial power conduit in the Central Valley known as Path 15, using feder=
al=20
funds for all or part of the project; allowing small power generators to se=
ll=20
electricity to buyers other than the state's cash-strapped utilities; and=
=20
establishing standards for allowing businesses with on-site electricity=20
generation to send surplus supplies to the power grid.=20
Other steps, sure to be unpopular with environmentalists, could be taken if=
 a=20
state declares an "electricity emergency." In addition to the idea of=20
harnessing the energy from nuclear-powered Navy ships and submarines, they=
=20
include temporarily waiving nitrogen oxide emission limits at power plants,=
=20
allowing the construction of generating plants on federal and Indian lands,=
=20
restarting mothballed nuclear reactors and delaying for a year a plan to=20
divert water in California's Trinity River from power generation to=20
environmental restoration.=20
On the conservation side, Barton proposed allowing states to lengthen=20
daylight savings time and requiring federal facilities to reduce energy use=
=20
by 10 percent.=20
Finally, the Federal Emergency Management Agency would be directed to open =
an=20
office in California, conduct an educational campaign to prepare the public=
=20
for blackouts and have a plan ready to provide assistance during power=20
outages.=20
Barton has been skeptical of the idea of having the federal government limi=
t=20
the cost of wholesale power in the West and did not include that among his=
=20
proposals. Instead, he said the Federal Energy Regulatory Commission should=
=20
investigate whether wholesale prices are "unjust and unreasonable" -- a=20
finding FERC already has made once.=20
That drew the criticism of four California Democrats -- Reps. Henry Waxman =
of=20
Los Angeles, Anna Eshoo of Atherton, Jane Harman of Torrance and Lois Capps=
=20
of Santa Barbara -- who sit on the House Commerce Committee. They sent a=20
letter to Barton on Friday spelling out their objections.=20
"He's left off the 10-ton gorilla solution, which is directing the FERC to=
=20
.?.?. impose a reasonable cap on the price of wholesale electricity," Harma=
n=20
said.=20
The Democrats also said that Barton's proposals would "undermine the Clean=
=20
Air Act" and that there is "widespread agreement among those directly=20
involved in California's electricity system that clean air rules are not=20
responsible for electricity shortages."=20
-----------------------------------------------------------------


Bush calls California energy crisis 'ominous'=20




But he foresees no quick relief, opposes controls
By George E. Condon Jr.=20
COPLEY NEWS SERVICE=20
March 28, 2001=20
KALAMAZOO, Mich. -- President Bush yesterday made his most extensive remark=
s=20
yet on the energy crisis in California, calling the situation "ominous" and=
=20
proclaiming that "the time to act is now."=20
Despite that pledge, though, he held out little hope of any speedy relief f=
or=20
the hard-hit state. He also restated his opposition to energy price control=
s.=20
The president, who has previously addressed the energy crunch only in answe=
rs=20
to reporters' questions, used a "state of the economy" speech to a business=
=20
group at Western Michigan University to elaborate on his still-evolving=20
energy policy.=20
He broke no new ground in his remarks, but seemed to be reacting to West=20
Coast criticism that the federal government should be more aggressive in=20
finding a solution to the rolling blackouts plaguing the nation's most=20
populous state.=20
"The energy problem wasn't created overnight and we won't solve the problem=
=20
overnight," he said. "But we will at least start down the right road so tha=
t=20
the shortages we face today will not recur year after year."=20
He said a task force headed by Vice President Dick Cheney will come up with=
 a=20
long-term strategy, but he ruled out any move by his administration that=20
would remedy the crisis quickly.=20
"We'll not solve the energy problem by running the energy market from out o=
f=20
Washington, D.C.," he said. "We will solve the energy problem by freeing th=
e=20
creativity of the American people to find new sources of energy and to=20
develop the new technologies that use energy better, more efficiently and=
=20
more cleanly."=20
He singled out for criticism any call that Washington cap energy prices.=20
"This administration does not, and will not, support energy price controls,=
"=20
he said to applause from the business-oriented audience. "Price controls do=
=20
not increase supply, and they do not encourage conservation. Price controls=
=20
contributed to the gas lines of the 1970s. And the United States will not=
=20
repeat the mistake again."=20
He portrayed the energy crisis as a clear threat to his hopes of revitalizi=
ng=20
the national economy.=20
And he signaled that he understands Californians are facing hardships.=20
"The lights are dimming in California. Consumers and businesses in Californ=
ia=20
are paying sharply higher energy bills. And as we compare our future energy=
=20
needs to the currently projected domestic energy supply, we see an ominous=
=20
growing gap," he said.=20
He said the blame for the problem belongs to previous decision-makers.=20
"Our people are paying a high price for years of neglect. And the time to a=
ct=20
is now," he said.=20
Meanwhile, Bush said he would nominate utility regulators from Texas and=20
Pennsylvania to fill vacancies at the Federal Energy Regulatory Commission,=
=20
or FERC, the agency that has played a pivotal role in the California crisis=
.=20
However, Bush stopped short of replacing the chairman of the commission,=20
Curtis Hebert, who has drawn fire from Gov. Gray Davis and other California=
=20
officials for his outspoken faith in open power markets and staunch=20
opposition to federal controls on the soaring price of wholesale power sold=
=20
in the West.=20
There was widespread speculation that Hebert, a Republican, was on his way=
=20
out as chairman.=20
A White House spokeswoman would not say whether Bush has ruled out naming=
=20
another commissioner to the top job at a later date.=20
Bush nominated Patrick Henry Wood III and Nora Mead Brownell to round out t=
he=20
five-member commission.=20
Wood is chairman of the Texas Public Utility Commission and was an adviser =
to=20
Bush on energy issues during the presidential transition. Many observers ha=
d=20
expected Bush to name him chairman of FERC.=20
Brownell is a member of the Pennsylvania Public Utility Commission.=20
Both nominees, who face Senate confirmation, were praised by power industry=
=20
officials and consumer groups. They have helped steer deregulation plans in=
=20
their states that are thought to be on sounder footing than California's=20
failed experiment.
------------------------------------------------------------------


Rate hike means new political heat for California governor=20




By Alexa Haussler
ASSOCIATED PRESS=20
March 28, 2001=20
SACRAMENTO =01) Rolling blackouts and a record increase in electricity rate=
s are=20
putting the political squeeze on Gov. Gray Davis just as he prepares for hi=
s=20
re-election campaign.=20
The Democratic governor took a hit Tuesday when the Public Utilities=20
Commission =01) three of its five members appointed by Davis =01) approved =
the very=20
rate hikes he has repeatedly said would not be needed.=20
The power crunch is just the weakness political foes are looking for; it=20
could leave everyone from business owners to consumers looking for someone =
to=20
blame at the polls next year.=20
"He's the face of the problem right now and so he is going to be the target=
,"=20
said Nancy Snow, a political scientist at the University of California, Los=
=20
Angeles.=20
Davis already has been criticized as having a leadership style that is a=20
"little bit too much in the mushy, middle-of-the-road area," Snow said.=20
"That's something that he is going to have to overcome in order to=20
politically survive this crisis."=20
California Republicans blame the first-term governor for four widespread=20
power outages this year that they call "Gray-outs." His first major=20
challenger in 2002, GOP Secretary of State Bill Jones, is making energy a=
=20
campaign centerpiece.=20
A top state financial official and fellow Democrat, Controller Kathleen=20
Connell, says Davis' decision to buy power for Southern California Edison a=
nd=20
Pacific Gas and Electric is putting the state in financial danger.=20
And Democratic lawmakers are privately grumbling about Davis' handling of t=
he=20
crisis as consumer groups threaten a revolt on the 2002 ballot. With up to =
25=20
million Californians affected by the rate hikes, consumer activists hope to=
=20
attract millions of rebels to the polls.=20
The PUC voted unanimously to immediately raise rates up to 46 percent for=
=20
Edison and PG&E customers, saying that would reduce power use this summer a=
nd=20
help keep the cash-starved utilities in business.=20
The increases =01) which come on top of already-approved hikes of 9 to 15=
=20
percent and a 10 percent increase planned next year =01) are the biggest in=
=20
state history.=20
Davis issued a written statement Tuesday easing his ardent opposition to a=
=20
rate hike.=20
"While I have opposed rate increases, if it becomes clear that a rate=20
increase is absolutely necessary for the good of the state, I will support=
=20
one that is fair and do my duty to convince Californians of its necessity,"=
=20
Davis said.=20
Davis' aides are frantically trying to deflect criticism surrounding the=20
increase and assure voters the governor is working to build more power plan=
ts=20
and boost conservation to avert blackouts during the hot summer months.=20
Davis spokesman Steve Maviglio said the governor opposes a rate increase bu=
t=20
has no power to order the PUC to maintain current rates.=20
"They are an independent body, they can do what they want," Maviglio said.=
=20
He insisted the governor wasn't informed of PUC Chairwoman Loretta Lynch's=
=20
plan to announce a rate increase Monday, declaring to reporters: "It's not =
a=20
story =01) it's the truth."=20
Still, some Republicans and Democrats have said the governor has been=20
inconsistent about his pull with the commission.=20
He announced last week at a dinner with state labor leaders that he had=20
directed the PUC to order utilities to start paying overdue bills to=20
facilities that produce renewable energy.=20
In addition, Davis administration officials informed several key Assembly=
=20
members Friday that the state's power-buying for Edison and PG&E could cost=
=20
far more than the $10 billion lawmakers and Davis estimated when they=20
approved legislation authorizing the power purchases, making a rate increas=
e=20
of 50 percent or more necessary.=20
"He is fully dedicated to solving this thing, he doesn't just want to lay i=
t=20
on the lap of a ratepayer or a taxpayer, and he's trying to come up with wa=
ys=20
to do that," Maviglio said.=20
The national attention the power problems draw is raising Davis' name=20
recognition around the country =01) for better or worse =01) as he consider=
s=20
whether to make a presidential run in 2004.=20
Davis has been making the rounds on the national TV news and Sunday morning=
=20
talk shows to explain to the nation why the lights have been going out in=
=20
California.=20
He has attempted to shield himself by continually commenting that he=20
inherited the energy problems; then-Republican Gov. Pete Wilson signed the=
=20
1996 utility deregulation bill largely blamed for the crisis, and Californi=
a=20
went years with no new power plants, Davis says.=20
Republicans turn the criticism back at him. The state GOP has already run=
=20
radio ads criticizing Davis' handling of the power problems and are launchi=
ng=20
an all-out effort to blame him for the rate increases.=20
"It's a colossal failure of mismanagement on the part of the governor's PUC=
,"=20
said Assemblyman Keith Richman, R-Northridge.=20
But even with the energy crisis, Republicans have their work cut out for th=
em=20
in 2002.=20
The state GOP =01) long shackled by infighting between moderates and=20
conservatives =01) is in the minority in the Legislature, holds just one=20
statewide office, Jones', and must come up with millions to match the nearl=
y=20
$26 million Davis had raised nearly two years before the election.=20
And polls have shown residents growing increasingly frustrated with the=20
energy crisis, but not blaming Davis. Those surveys were taken before=20
Tuesday's rate hike and before California was hit last week with rolling=20
blackouts from San Diego to the Oregon border.=20
The governor's political campaign isn't taking any chances, moving quickly =
to=20
bite back at critics.=20
Garry South, Davis' chief political adviser, issued a statement Tuesday=20
saying Jones has failed to put forth his own solution.=20
"Put your megawatts where your mouth is," South said.=20
------------------------------------------------------------------
PUC Approves Largest Electricity Rate Increase in State's History=20

Regulation: Some customers will pay up to 46% more. Commissioners, facing=
=20
strong opposition before their unanimous vote, say they are trying to avert=
=20
blackouts. Critics say move won't solve the crisis.=20

By NANCY VOGEL and TIM REITERMAN, Times Staff Writers=20





PUC President Loretta Lynch and Commissioner Richard Bilas show strain of t=
he=20
meeting at which the panel announced a rate hike. "We maintain the=20
responsibility to keep the lights on," Lynch said
ROBERT DURELL / Los Angeles Times





?????SAN FRANCISCO--With protesters jeering their disapproval, besieged=20
utility regulators Tuesday adopted the largest electricity rate hike in the=
=20
state's history and defended the action as the only way to keep the lights =
on=20
for millions of customers.
?????The California Public Utilities Commission unanimously approved an=20
increase of 3 cents per kilowatt-hour. That will boost rates by as much as=
=20
42% for some Southern California Edison customers and up to 46% for some=20
served by Pacific Gas & Electric Co.
?????The rate increase, which will cost customers nearly $5 billion a year,=
=20
takes effect immediately but will not show up on utility bills until at lea=
st=20
May.
?????The rate hike is the most far-reaching and politically volatile action=
=20
the state has taken thus far to ease an 11-month-old power crisis that has=
=20
nearly bankrupted the two largest utilities and triggered blackouts. But=20
critics say it does not solve the fundamental problem of runaway wholesale=
=20
electricity prices.
?????"The PUC has done all it can do to fight wholesale energy prices that=
=20
are unjust and unreasonable," said commission President Loretta Lynch. "We=
=20
maintain the responsibility to keep the lights on. . . . I believe that=20
adding another 3 cents will comprehensively address the need for revenues."
?????The commission took steps to have utilities begin paying the state=20
Department of Water Resources for the nearly $3 billion in power it has=20
purchased for them since mid-January.
?????The PUC also ordered utilities to start paying for future power from=
=20
alternative energy producers who are starved for cash and struggling to=20
operate. The blackouts last Monday and Tuesday were precipitated in part by=
=20
loss of power from such companies.
?????But it was the rate increase proposal that packed the auditorium at PU=
C=20
headquarters. And the drama of the vote--and the vocal opposition--spurred=
=20
each of the five commissioners to forcefully defend the unpopular action.
?????"These are extraordinary moments in California's history," declared=20
Commissioner Geoffrey Brown, a recent appointee of Gov. Gray Davis. "And=20
extraordinary moments require extraordinary courage. Loretta Lynch has take=
n=20
a lot of bad hits. But it was she who stepped up to the role of leader in=
=20
California."

?????Rate Increase Lacked Support
?????Lynch proposed the rate increase, even though an administrative law=20
judge at the PUC concluded that an increase was unnecessary and the PUC's o=
wn=20
consumer protection arm, the Office of Ratepayer Advocates, opposed it. She=
=20
also did not have the public support of Davis, who appointed her and two=20
other commissioners.
?????Davis has distanced himself from the PUC's action, saying the commissi=
on=20
was acting independently and that he remains unconvinced that a rate increa=
se=20
is necessary.
?????Commissioners Henry Duque and Richard Bilas--who were appointed by=20
Republican Gov. Pete Wilson--called the rate hikes long overdue.
?????"Unless ratepayers want to face substantial rolling blackouts this=20
summer, we have to start paying our power bills," Duque said. "It cannot be=
=20
done with the current rates."
?????Saying "there is just no blood left in the turnip," Bilas warned that=
=20
"absent an immediate rate increase, the utilities will be in Bankruptcy=20
Court."
?????Before the vote, sign-carrying protesters chanted, "Rate hikes, no way=
,=20
make the energy companies pay." And the commission heard a parade of=20
witnesses, most opposing the rate increase. Some called on the state to use=
=20
eminent domain to seize power plants, as Davis said he might do as a last=
=20
resort.
?????Doug Heller, of the Foundation for Taxpayer and Consumer Rights in San=
ta=20
Monica, told the commission, "Go to these power pirates and tell them the=
=20
state treasury is not their money orchard."
?????Barbara George, of Women's Energy Matters, said, "We should give the=
=20
generators 24 hours to sign their plants over to the state and leave." Geor=
ge=20
was one of several people ejected for repeatedly disrupting the meeting.
?????At a hearing Monday, representatives of agriculture and manufacturing=
=20
industries warned that the increase would hurt their members and the=20
California economy.
?????The rate hike is the state's largest, according to the Office of=20
Ratepayer Advocates, which researched the issue.
?????Because the electricity rate is just one of many charges on a monthly=
=20
utility bill, the overall effect will be about a 28% increase in monthly=20
bills, said PUC staff.
?????Before the PUC action, homeowners and renters in Edison territory paid=
=20
7.2 cents per kilowatt-hour for electricity and another 5.3 cents per=20
kilowatt-hour for other services. The new rate, totaling 15.5 cents per=20
kilowatt-hour, boosts the overall bill by about 24%. The increase is about=
=20
26% for PG&E residential customers. But under Lynch's proposal, those=20
increases would not be applied equally.
?????To encourage conservation, she seeks a tiered system that would charge=
=20
miserly consumers of energy no more than current rates but would impose the=
=20
new higher rates on bigger users.
?????The proposal aims the rate increase at those customers who use 30% or=
=20
more beyond a so-called baseline amount, which is about half of the average=
=20
residential use per month and varies by region.
?????Exactly who will pay the higher electricity rate will be determined by=
=20
the PUC in hearings over the next month. Under Lynch's proposal, nearly hal=
f=20
of all residential customers would be spared rate increases.

?????Tiered Rates to Encourage Saving
?????Energy experts say tiered rates would encourage conservation, but they=
=20
disagree about how much.
?????Davis energy advisor S. David Freeman, general manager of the Los=20
Angeles Department of Water and Power, said utilities have long used tiered=
=20
rates when charging low-income customers. "So this is not brand new. It's=
=20
just a more aggressive use of it," he said.
?????UC Irvine economist Peter Navarro said he doubted that tiered rates=20
would do much to stave off blackouts. The greatest conservation gains come=
=20
from investment in efficient appliances, he said, and that's why tiered rat=
es=20
are "no magic bullet."
?????The increase will not show up in utility bills until May at the=20
earliest, said Paul Clanon, chief of the PUC's energy division.
?????The higher charges for electricity consumed between now and whenever t=
he=20
new rate structure is incorporated in monthly bills will be calculated=20
retroactively and charged to future bills, Clanon said.
?????Utility executives and consumer advocates all threw up their hands at=
=20
the question of whether the rate hike will be enough.
?????"Have we gotten the number right?" Duque said. "I don't know. I hope w=
e=20
have. But this is a step in the right direction, and we'll return any money=
=20
not used to buy power."
?????Bruce Foster, a Southern California Edison vice president, also said t=
he=20
rate increase is a step in the right direction. "Only time will tell," he=
=20
said, "if it is sufficient to meet the need."
?????In a statement, PG&E welcomed the PUC action as a "dose of realism," b=
ut=20
said the commission left unresolved a host of issues, including how much=20
money the utility will have to pay for power that the state purchases for=
=20
PG&E customers.
?????The PUC estimates that the increase will bring in an additional $4.8=
=20
billion annually from the 24 million people served by Edison and PG&E.
?????But that amount doesn't go far in today's California wholesale=20
electricity market.
?????The state and utilities spent $5.2 billion in January buying=20
electricity. The state, through the Department of Water Resources, has spen=
t=20
nearly $3 billion in taxpayer money to buy electricity on behalf of the=20
utilities since Jan. 19 because power generators refused to sell to the=20
cash-strapped utilities.
?????Money utilities collect from their customers, even with the new rate=
=20
hike, is expected to cover a wide array of expenses, including payments on=
=20
$10 billion or more in revenue bonds that the state hopes to sell this spri=
ng=20
to cover the state's cost of buying power.
?????"The numbers don't add up," said Jason Zeller, an attorney with the=20
Office of Ratepayer Advocates. "Massive [additional rate] increases are my=
=20
concern. We are sticking a finger in the dike unless wholesale prices come=
=20
down."
---=20
?????Times staff writer Mitchell Landsberg in Los Angeles contributed to th=
is=20
story.
--------------------------------------------------------------------------
With Energy Crisis Far From Over, Experts Say More Hikes Possible=20

Power: PUC action leaves questions unanswered, such as how to handle=20
utilities' debts, whether to buy grid.=20

By JENIFER WARREN and MIGUEL BUSTILLO, Times Staff Writers=20

?????As painful as Tuesday's electricity rate increase will be for some=20
consumers, power experts across the ideological spectrum say California is=
=20
not yet close to being free of the energy crisis that has engulfed it and=
=20
threatened its economy.
?????Because of that, still more rate hikes are possible, they say.
?????Consumer advocates, power company officials, legislators and regulator=
s=20
disagree widely on the causes of and cures for the state's problems. But th=
ey=20
agree that California's energy woes are dizzyingly complex. And the rate hi=
ke=20
makes nary a dent in many dimensions of the problem.
?????"Is it over? Heavens no!" said Assemblywoman Jackie Goldberg (D-Los=20
Angeles), who heads a state Assembly panel investigating summertime power=
=20
supply issues. "It's a necessary step, but we're certainly not out of the=
=20
woods yet."
?????The increase, along with another important action Tuesday by the PUC,=
=20
did resolve two major issues--how the state will continue to buy electricit=
y=20
that the financially shaky utility companies cannot purchase and how=20
electricity consumers will repay California's treasury for those purchases.
?????But the commission left unresolved a host of other questions: what to =
do=20
with the roughly $14 billion in debt the state's two biggest utility=20
companies racked up in recent months buying expensive power; whether the=20
state will buy the electricity transmission grid those utilities own; where=
=20
to find about $1.5 billion the utilities owe to producers of alternative=20
energy, many of whom have not been paid in months; and how to wrap up=20
negotiations to sign long-term contracts with generators to supply power in=
=20
years to come.
?????Said PUC President Loretta Lynch: "Until we can get wholesale prices=
=20
under control and get folks to conserve, we're going to be in this pickle f=
or=20
a while."
?????Resolving the issue of repaying the treasury for power purchases was=
=20
crucial because the state is spending $45 million to $55 million a day to b=
uy=20
electricity. To cover those costs, the state is supposed to float bonds,=20
which would be repaid from electricity bills. But without the higher rates,=
=20
officials feared there would be no way to cover the bond payments. And=20
without the bonds, all state taxpayers--and not just customers of the priva=
te=20
utilities--would be on the hook for the debt.
?????In addition to raising rates, the PUC on Tuesday approved a formula th=
at=20
will determine the size of the bond issue, expected to be the largest of it=
s=20
kind in U.S. history.
?????The formula allows for $12 billion in bonds. The state's three major=
=20
private utilities, Southern California Edison, Pacific Gas & Electric and S=
an=20
Diego Gas & Electric, will have to determine how much power the state is=20
buying for them--the figure is roughly 30%--and use a proportionate amount =
of=20
the money they collect from customers to pay the state back.
?????A $12-billion bond issue is significantly larger than earlier estimate=
s=20
that pegged it at $10 billion. But even the larger number is far less than=
=20
some believe will eventually be needed to cover the cost of power the state=
=20
is buying.
?????Unless prices are stabilized, state Treasurer Phil Angelides and other=
s=20
have warned, further bond issues may be needed. Those, in turn, could requi=
re=20
more rate increases.
?????"It's possible that, with the rate increase and if we do a good job wi=
th=20
conservation, it's possible that [the bonds] may be less," said state Sen.=
=20
Debra Bowen (D-Marina del Ray). "It's also possible that, given the situati=
on=20
this summer, where we have not been able to secure anything close to our=20
power needs . . . we could be paying significantly more."
?????The rate increase, which kicks in only for customers who use=20
significantly more power than a "baseline" amount, is intended to ease the=
=20
situation by inducing conservation and thereby cutting demand--forcing=20
"energy hogs" to switch off spa pumps or pay the price, as Lynch put it.
?????But no one can predict how the "hogs" will respond or whether the rate=
=20
hike--plus conservation incentives moving through the Legislature and the=
=20
completion of several new power plants this summer--will be enough to spare=
=20
the state from forced outages.
?????Tuesday did little to fuel optimism. Despite temperatures far milder=
=20
than on a typical summer day, another Stage 2 energy alert was declared by=
=20
the state's Independent System Operator after imports dropped sharply. The=
=20
state avoided blackouts, "but it was really close," a Cal-ISO spokeswoman=
=20
said.
?????Some state forecasts have California squeaking through the hot months=
=20
with no outages, but private forecasters see at least 20 hours of blackouts=
.=20
And Reliant Energy, one of the power plant owners, predicts 1,100 hours of=
=20
blackouts in the state this year.
?????Beyond the problems of supply, the state has still not resolved the=20
question of the utilities' debt. Edison and PG&E say they've lost nearly $1=
4=20
billion since June because they have had to pay high wholesale power prices=
=20
that the state's deregulation law bars them from passing on to ratepayers.
?????Although the PUC estimates that the rate increase will generate an=20
additional $4.8 billion in revenue annually, most of that will go to paying=
=20
off bonds and other expenses. None is earmarked to relieve the utilities'=
=20
debt.
?????"When you do the math, the amount of money just doesn't get you very=
=20
far," said Assemblyman Fred Keeley (D-Boulder Creek).
?????That is where buying the transmission lines is supposed to enter the=
=20
picture. Gov. Gray Davis wants the state to pay $7 billion for the lines.=
=20
PG&E and Edison could then use the infusion of cash to pay off their bills=
=20
and become credit-worthy once more.
?????But negotiations over sale of the transmission grid seem to have bogge=
d=20
down. Meanwhile, support for the deal in the Legislature appears to be=20
slipping. Republicans have long been opposed, but now support among Democra=
ts=20
is waning.
?????Keeley, a critic of the transmission purchase all along, believes that=
=20
the state should instead buy the utilities' hydro-electric generators,=20
contending that they would bring in revenue from the power generated at the=
=20
dams.
?????"We're just going to sink dough into that [transmission system]," Keel=
ey=20
said, adding that the grid needs an estimated $1 billion in repairs. The=20
hydro system, by contrast, would be a revenue-producing asset that could he=
lp=20
lower rates, he said.
?????A related question--still unresolved--is the fate of the state's nearl=
y=20
700 producers of alternative and renewable energy, which supply more than a=
=20
quarter of the electricity used by California consumers. In a separate acti=
on=20
Tuesday, the PUC ordered utilities to begin paying the producers--whose=20
megawatts are desperately needed and who, in many instances, have not been=
=20
paid since November.
?????On Tuesday, the small producers delivered a little more than half of=
=20
their usual supplies to the utilities--a trend that has dragged on for=20
several weeks and last week helped nudge the state into blackouts.
?????Producers welcomed the PUC's order that they start getting paid. But,=
=20
they said, the move failed to address back payments, estimated at $1.5=20
billion, owed by Edison and PG&E.
?????"Generators find it more predictable and less risky to operate in Thir=
d=20
World countries than they do in the state of California," griped Marty Quin=
n,=20
executive vice president and chief operating officer of Ridgewood Power LLC=
,=20
which owns three small gas-fired generators.
?????Any move to resolve that issue, of course, would increase the debt owe=
d=20
by the utilities.
?????On another front, state negotiators are finding it difficult to seal=
=20
long-term electricity contracts at rates more favorable than those on the=
=20
volatile spot market.
?????So far, only 22 contracts have been signed, in part because generators=
=20
are reluctant to commit to lower prices while they're still owed billions o=
f=20
dollars by the near-bankrupt utilities. Experts say the power secured by th=
e=20
current contracts will supply less than half of what the state will need th=
is=20
summer.
?????Despite all the unsettled questions, at least one utility analyst, Dan=
=20
Ford of the Lehman Bros. investment firm, said the PUC's actions should=20
remove the immediate threat of utility bankruptcy and begin to lift the=20
"California cloud" over electricity generators.
?????But in a sign that the energy crisis is still causing concern on Wall=
=20
Street, Standard & Poor's said it would continue to carry a cautionary cred=
it=20
rating for the state.
?????The rating agency, which placed California on a "credit watch" after t=
he=20
state government began spending millions to purchase electricity, said in a=
=20
news release that it was not clear whether the rate hike would be enough.
?????Hovering in the background, meanwhile, is the threat of a ballot=20
initiative that could unravel whatever solutions state officials ultimately=
=20
craft. Leaders of the Foundation for Taxpayer and Consumer Rights have vowe=
d=20
that any utility "bailout" would likely trigger a "voter revolt."
?????"The rate increase certainly makes an initiative more likely," the=20
foundation's lobbyist, Doug Heller, said Tuesday. If Gov. Davis does not=20
protect the public from "profiteers," Heller said, his group is ready to pu=
sh=20
forward with an initiative in 2002.
---=20
?????Times staff writers Virginia Ellis, Dan Morain, Tim Reiterman, Nancy=
=20
Rivera-Brooks, Julie Tamaki, Nancy Vogel and Rone Tempest contributed to th=
is=20
story.=20
--------------------------------------------------------------------------
NEWS ANALYSIS
Davis Keeps His Distance From Utility Rate Hikes=20

By DAN MORAIN, Times Staff Writer=20

?????SACRAMENTO--Gov. Gray Davis, convinced that he can't win votes by=20
delivering bad news, avoided the task of telling Californians what virtuall=
y=20
all experts have been saying for months--that electricity bills are going u=
p.
?????Indeed, on Tuesday, the Democratic governor quickly moved to distance=
=20
himself from a rate hike of as much as 46% that was approved by the=20
California Public Utilities Commission, led by his appointee Loretta Lynch.
?????That and other recent moves have thrown Davis' credibility into=20
question--even in his own Democratic Party.
?????"If you're the governor," said political consultant Darry Sragow, "you=
=20
don't want to take the blame for a massive rate increase that is not going =
to=20
sit well with a lot of voters. You want to be in a position where you can=
=20
say, 'I didn't have a choice; my back was against the wall.' "
?????Davis describes his view of the situation as "optimistic." He has call=
ed=20
it an "energy challenge," not a crisis, even as the state's two largest=20
utilities border on bankruptcy, and the state experienced blackouts a week=
=20
ago, in mid-March, when electricity use was 50% less than it will be in the=
=20
summer, when demand is highest.
?????Davis and his aides say the governor is fully engaged in the problem,=
=20
understands its many dimensions and is working long hours to solve it. But=
=20
the crisis wears on, and an increasing number of lawmakers, including fello=
w=20
Democrats, are alarmed.
?????"It's an energy crisis, not an energy challenge," said Senate Energy=
=20
Committee Chairwoman Debra Bowen (D-Marina del Rey), who began warning of a=
=20
coming energy shortage 13 months ago.
?????"This is a major crisis," Sen. Don Perata (D-Alameda) said, "and it=20
would appear he is overwhelmed by it."
?????"If you don't face reality," said Sen. John Vasconcellos (D-Santa=20
Clara), "you can't possibly improve it. His posture has been baffling. I=20
lament what is going on. This is my beloved state, and we're in serious=20
peril, and it scares me."
?????Many academics, utility executives, Wall Street analysts and legislato=
rs=20
concluded weeks and months ago that rate hikes were necessary, given the=20
soaring wholesale price of electricity. Even Davis has acknowledged that a=
=20
rate hike might solve the situation.
?????"Believe me," Davis said Feb. 16, "if I wanted to raise rates, I could=
=20
have solved this problem in 20 minutes."
?????But in a reaction that added to lawmakers' bewilderment, Davis said in=
 a=20
statement Tuesday that the PUC action was "premature because we do not have=
=20
all the appropriate finance numbers necessary to make a decision."
?????"Until we do," the statement continued, "I cannot support any rate=20
increase."
?????In taking steps to raise rates, Lynch may well end up taking substanti=
al=20
flak for her governor.
?????"Recent polls show the PUC is very unpopular in this state," Sragow=20
said. "Gray Davis is still popular. Voters clearly don't see a connection=
=20
between the governor and the PUC."
?????Davis' aides say the governor didn't talk to Lynch before she acted.=
=20
Lynch, a frequent visitor to the Capitol, was in Sacramento late last week=
=20
and again Tuesday. She may not have spoken to Davis, but she did make other=
=20
top administration officials aware of her plans.
?????Lynch could have decided to act on her own. The state Constitution giv=
es=20
the commission authority to raise utility rates. But the governor is well=
=20
known as a micro-manager, involved in the most minute details of state=20
governance. Davis repeatedly has said he expects all his appointees to "thi=
nk=20
like I think," and not to act on their own.
?????As recently as last week, Davis directed that the PUC take specific=20
actions to help ensure that alternative energy producers get paid.
?????Davis has said the Legislature's job is to implement his vision. He ha=
s=20
said judges he appoints who later break from him on major issues should=20
resign. His appointees "should not be free agents."
?????So he strained his credibility by saying he was unaware that Lynch wou=
ld=20
move to raise rates Tuesday, particularly given events that occurred late=
=20
last week.
?????On Friday, Davis Finance Director Tim Gage and Susan Kennedy, one of h=
is=20
top aides, met with Assembly leaders behind closed doors. At the meeting, a=
=20
participant warned that rates might have to rise 50% to 100%.
?????Also Friday, a top aide to Davis told The Times that Davis' staff was=
=20
convinced that a rate hike was necessary, even as Davis continued to public=
ly=20
oppose it. On Sunday, a top Davis aide referred reporters to Lynch, who=20
confirmed that she would move to raise rates Tuesday.
?????Two months ago, Harry Snyder of Consumers Union was defending Davis.=
=20
Now, Snyder, who has worked with Davis on various issues for decades, is,=
=20
like many others, raising questions about the governor's credibility, his=
=20
penchant for secrecy and his competence.
?????"Something is wrong," Snyder said. "Either he is over his depth, or it=
=20
is hubris, or it is the great river in Egypt, 'Denial.' "
?????Here are some of the governor's statements and actions, since called=
=20
into question:
?????* Davis held a news conference Feb. 23 to say he had reached an=20
agreement on a rescue plan with Southern California Edison that included a=
=20
deal to buy its massive transmission system for $2.76 billion. A final=20
package, he said, would be announced within a week, not only with Edison bu=
t=20
with San Diego Gas and Electric.
?????A month later, a top utility executive described the talks as=20
"dreadfully slow." Negotiations over a similar deal with Pacific Gas &=20
Electric, which he said back in February would be completed by now, are eve=
n=20
further behind.
?????* Davis has refused to release details about contracts he signed with=
=20
independent generators to buy power. He said, however, that the contracts=
=20
accounted for 6,000 to 7,000 megawatts of electricity this summer, a=20
significant amount that would help protect the state from having to buy muc=
h=20
of its power on the far more costly spot market.
?????Last week, when he released some scant details in a report on the=20
contracts, experts who read it concluded that California would be forced to=
=20
buy half or more of its electricity on the expensive spot market.
?????* Davis brushed aside reporters' questions last week about the blackou=
ts=20
that rolled across the state. He remained cloistered as the outages continu=
ed=20
for a second day, emerging only after they ended to announce a plan to ensu=
re=20
that alternative energy producers would be paid. A week after he called on=
=20
lawmakers to quickly approve a bill that would help get them paid, the=20
legislation remains stalled.
?????"It is inept at all levels and doesn't encourage any confidence that h=
e=20
can handle it," Snyder said. "Moreover, it doesn't encourage us that he is=
=20
going to tell the truth."
?????The energy crisis is perilous for Davis' reelection effort next year.=
=20
But the governor's strategy of being unremittingly optimistic and going to=
=20
great lengths to maintain his opposition to rate hikes, could be to his=20
benefit when he faces voters.
?????"Ethically," said UC Berkeley political scientist Bruce Cain, "not bei=
ng=20
forthcoming is worse. Politically, the more he can obfuscate, the more like=
ly=20
it is some people will buy the obfuscation. . . . The reason we see=20
obfuscation is that obfuscation works."
?????Not all politicians follow that maxim.
?????Davis' predecessor, Republican Gov. Pete Wilson, held a news conferenc=
e=20
in 1991, as California plunged into a recession, to announce that he was=20
pushing for what became the largest tax increase in state history, calling =
it=20
necessary to help erase a $14-billion deficit. Top advisors had urged him t=
o=20
leave the delivery of such bad news to others.
?????"Any time you deliver bad news to voters you're taking a risk," said D=
an=20
Schnur, who was Wilson's spokesman. "But it is a much bigger risk to allow =
a=20
situation to fester, without preparing voters for decisions that have to be=
=20
made.
?????"Nobody likes pain," Schnur said. "But they are much more willing to=
=20
tolerate it if they understand why it is necessary."
--------------------------------------------------------------------------

Federal Energy Agency Unlikely to Order Refunds=20

Power: Regulatory panel says much of the overcharge alleged by Cal-ISO is=
=20
beyond its jurisdiction, and questions whether the rest is "excessive."=20

By MEGAN GARVEY and RICHARD SIMON, Times Staff Writers=20

?????WASHINGTON--What are the chances that federal regulators will order=20
electricity wholesalers to refund $6.3 billion in alleged overcharges?
?????Zero.
?????Officials of the Federal Energy Regulatory Commission have=20
already made clear that nearly $3 billion--almost half the total that=20
California's grid operator said last week was excessive--is off the table=
=20
because a statute of limitations puts alleged overcharges that took place=
=20
before Oct. 2 beyond their reach.=20
?????As for the rest, lawyers familiar with the agency and industry observe=
rs=20
note that FERC has consistently hesitated to use its full legal authority t=
o=20
enforce "fair and reasonable" rates because of difficulty in defining that=
=20
phrase. Some within FERC question how much of the "excessive" rates=20
documented by the California Independent System Operator fall beyond FERC's=
=20
jurisdiction--for example, rates charged by municipal power suppliers that=
=20
are not regulated by the federal agency.
?????So far, FERC has ordered electricity wholesalers to justify or refund=
=20
only $124 million in alleged overcharges--just 5% of the amount that the=20
Cal-ISO has identified. That sum deals only with rates charged in January a=
nd=20
February 2001 during Stage 3 alerts--periods when electricity reserves fall=
=20
below 1.5%.
?????FERC's approach to the alleged California overcharges will probably no=
t=20
become any more aggressive as a result of the two new members it will soon=
=20
have. President Bush has picked two state utility regulators to fill=20
vacancies on the five-member commission, the White House announced Tuesday.
?????The president plans to nominate Pat Wood III, chairman of the Texas=20
Utility Commission and a Bush ally, and Nora Mead Brownell, a member of the=
=20
Pennsylvania Public Utility Commission, to the FERC governing board.
?????Administration officials have indicated that Wood, 38, would assume th=
e=20
FERC chairmanship, a position now held by Curt Hebert Jr., a staunch advoca=
te=20
of energy deregulation.

?????Shake-Up at FERC Was Expected
?????The shake-up has been expected because of continuing complaints that=
=20
FERC has not been aggressive enough in dealing with high energy prices and=
=20
electricity shortages in California and elsewhere in the West. Hebert in=20
particular has angered California officials with his opposition to price=20
controls on wholesale electricity sales.
?????Although the administration wants to appear sympathetic to California'=
s=20
plight, replacing Hebert has been a problem because he is a protege of Sena=
te=20
Majority Leader Trent Lott (R-Miss.).
?????Cal-ISO officials--who pointed out that their $6.3-billion figure was=
=20
part of a study calling for stronger market controls, not for refunds--may=
=20
still formally ask FERC to augment the refund order for January and Februar=
y.=20
FERC ordered wholesalers to justify $124 million worth of charges shortly=
=20
after Cal-ISO asked for $550 million in refunds for December and January.
?????FERC's refund process reflects the ambiguities facing federal regulato=
rs=20
who oversee an electricity market that was designed to follow the law of=20
supply and demand. At stake may be the final bill for electricity used to=
=20
date in California as well as future rates.
?????And the debate over the role refunds should play in addressing=20
skyrocketing wholesale electricity prices underscores diverging philosophie=
s=20
of what went wrong in the California market and how to fix it. What role=20
should the government--specifically FERC, an agency with a mandate to ensur=
e=20
"fair and reasonable" rates--play?
?????"The whole notion that there's such a thing as a just price is kind of=
=20
an anachronism from New Deal days," said Pietro Nivola, a Brookings Institu=
te=20
scholar who studies regulatory politics. "Especially as we move closer to=
=20
some form of deregulation, we've come to understand that the price is what=
=20
the traffic will bear. In this case, utilities simply have to be able to ge=
t=20
higher rates at the retail end."
?????But others say FERC has failed to assert its authority, allowing the=
=20
wholesalers to operate with impunity.
?????"The message FERC has sent so far is, as long as you leave 10 cents of=
=20
every dollar in the bank we won't pull the alarm," said Mark Cooper, direct=
or=20
of research for the Consumer Federation of America.
?????Some on Capitol Hill say a massive refund order by FERC--while highly=
=20
unlikely--would go a long way toward reining in wholesale prices. But FERC=
=20
officials and many economists say that view is myopic and may do more harm=
=20
than good, potentially discouraging new suppliers from entering a market=20
already too tight. The memory of the 1970s oil crisis and a prevalent view=
=20
among economists that government intervention made matters worse has inform=
ed=20
the views of some longtime government officials and observers.

?????Refunds Called 'Inferior Remedy'
?????A clear sign of FERC's reluctance to call for refunds came late last=
=20
year, when the commission issued its initial proposition for remedies for t=
he=20
California price increases. FERC officials said at the time, "Refunds may b=
e=20
an inferior remedy from a market perspective and not the fundamental soluti=
on=20
to any problems occurring in California markets."
?????The decision by FERC to scrutinize electricity charges only during Sta=
ge=20
3 alerts in January and February was harshly criticized earlier this month =
by=20
some lawmakers and utility company officials. They complained that the narr=
ow=20
focus eliminated tens of millions of dollars in charges some observers=20
believed were outrageous.
?????But even the $124 million questioned by FERC has been defended by the=
=20
wholesale companies. In briefs filed with the agency last week, they said=
=20
rates exceeding $430 per megawatt-hour--compared with a pre-crisis average =
of=20
$30 per megawatt-hour--were justified by the increased credit risk=20
wholesalers took in selling to near-bankrupt utilities that have billions o=
f=20
dollars in outstanding debts.
?????Duke Energy, which FERC has said overcharged California by $20 million=
,=20
signaled some room for compromise in its compliance filing.=20
?????"We would be willing to forgo collection of credit premiums for these=
=20
months provided we were paid the FERC clearing price," company president Ji=
m=20
Donnell said this week. "If we are not assured payment, the credit premiums=
=20
are obviously appropriate, and we would reserve our right to collect the=20
entire amount of the bids that are subject to the FERC order."
?????Both of Bush's Republican nominees to the commission are expected to w=
in=20
Senate confirmation. But they can expect a grilling from Sen. Dianne=20
Feinstein (D-Calif.), who has accused power suppliers of price-gouging and=
=20
FERC of doing little to stop it.=20
?????"Certainly, my vote would be dependent on whether they're going to be=
=20
responsive to the present situation," Feinstein said Tuesday, grousing that=
=20
the administration has been "recalcitrant to the point of arrogance."
?????Feinstein met Tuesday with Vice President Dick Cheney, head of a White=
=20
House energy task force, but she described the meeting as "disappointing."=
=20
Feinstein also sent a letter to Bush asking to meet with him on the=20
California crisis, and adding a hand-written note: "The West needs your hel=
p."
?????A spokesman for Gov. Gray Davis said he hoped the new commissioners=20
would have a "more sympathetic ear" for the concerns of the Western states.
?????But word of the nominations came as Bush reiterated his opposition to=
=20
price controls. "Price controls contributed to the gas lines of the 1970s,=
=20
and the United States will not repeat the mistake again," he said in a spee=
ch=20
in Kalamazoo, Mich.
?????The nominees drew praise from the Electric Power Supply Assn. The grou=
p=20
expressed confidence that they would be "strong proponents of completing th=
e=20
much-needed transition to truly competitive and vibrant power markets all=
=20
across the country."
?????Neither Wood nor Brownell could be reached for comment. Wood said in a=
=20
statement: "On our best day as regulators, we cannot deliver benefits to=20
customers as well as a functional market can. But the market must work righ=
t=20
first."
---------------------------------------------------------------------------=
---
-----------------------------------------------

Wednesday, March 28, 2001=20
A Painful Step=20
Electricity rate increase may help, but Gov. Davis is yet to offer an=20
understandable plan to end the crisis.=20

?????By approving a whopping rate hike for big power users, the state Publi=
c=20
Utilities Commission finally has recognized the grim reality of the=20
electricity market in California, even if Gov. Gray Davis has not.=20
Electricity costs more these days, even aside from the piratical rates=20
charged by big generating companies at times during this emergency.=20
?????The increase, while probably necessary, will not by itself solve the=
=20
crisis or prevent rolling blackouts this summer. The two biggest private=20
utilities, Southern California Edison and Pacific Gas & Electric, still are=
=20
saddled with as much as $13 billion in debt for past power purchases. State=
=20
government still is shelling out some $50 million in daily power purchases=
=20
and has committed as much as $40 billion to future power contracts. Davis=
=20
continues to negotiate a takeover of the utilities' share of the state powe=
r=20
transmission grid in exchange for paying off some of the utilities' debts.=
=20
?????Despite all the hand-wringing and arm-waving, nothing that state=20
government has done since January has provided any significant new power=20
generation or conservation. Consumers are right to wonder what happened to =
a=20
promised statewide conservation campaign. After first ducking the power=20
problem, Davis launched a flurry of initiatives early in the year, most of=
=20
them still works in progress. But he still has not given the people an=20
understandable, coherent plan for getting out of this fix. Worse, he refuse=
s=20
even to say how much the state is spending on power even as he plunges=20
Sacramento into the power business for decades into the future.=20
?????The irony of Tuesday's rate increase is that the state might have dodg=
ed=20
much of the mess if it had raised rates three months ago. But Davis, seekin=
g=20
reelection next year, insisted that the crisis be solved "within the existi=
ng=20
rate structure." Late last week he attended a political fund-raiser at a Pa=
lm=20
Springs golf club while his staff was being briefed on the need for higher=
=20
rates, literally distancing himself from the act.=20
?????The rate increase, which will be drafted over the next 30 days, affect=
s=20
customers of Edison and PG&E but not residents of Los Angeles or other citi=
es=20
with full municipal power systems. The stated intent is that bigger users,=
=20
particularly businesses, will pay higher rates and be encouraged to save=20
major amounts of power during the summer. Under one scenario, nearly half o=
f=20
households--low and medium users--would pay no more than they do now. The=
=20
boost is also intended to compensate taxpayers for the state's daily power=
=20
purchases, although there is no assurance yet that the new rates will meet=
=20
the full cost. The increase should be structured to give ratepayers some=20
relief if lawsuits against power generators' exorbitant pricing are=20
successful in winning refunds.=20
?????Those skeptical ratepayers who believe that the crisis is just a big=
=20
rip-off by the utilities and the energy companies will consider the increas=
e=20
more of the same. You can't blame them, considering the lack of straight ta=
lk=20
from the governor, including his dodging of the rate issue.=20
?????However, most state experts, including Davis' own utilities=20
commissioners, say the rate increase is a critical first step in solving=20
California's power problems. If Davis has a plan to fix the problem some=20
other way, he should present it in detail to the people of California now.=
=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
---------------------------------
PUC Votes To Jack Up Power Rates=20
Tiered increases approved as protests disrupt meeting=20
David Lazarus, Chronicle Staff Writer
Wednesday, March 28, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/28/M
N231034.DTL=20
The bill finally came due for California's experiment with electricity=20
deregulation as consumers were hit yesterday with the largest rate increase=
=20
in state history, an average 40 percent jump in monthly power costs.=20
The immediate rate hike was unanimously approved by the Public Utilities=20
Commission during a rowdy meeting that was repeatedly interrupted by chanti=
ng=20
and jeers from protesters.=20
Highway Patrol officers were directed by PUC President Loretta Lynch to=20
remove several demonstrators from the packed San Francisco auditorium.=20
"These are extraordinary moments in California's history, and extraordinary=
=20
moments demand extraordinary courage," PUC member Geoffrey Brown said befor=
e=20
the rate increase was passed.=20
The commissioners approved a new 30 percent increase and made permanent a=
=20
"temporary" 10 percent increase adopted in January. This will allow the=20
state's two largest utilities to charge customers an extra $4.8 billion a=
=20
year.=20
PUC members said higher rates will help overcome the wide disparity between=
=20
skyrocketing costs charged by power companies for electricity and the=20
relatively low amount paid by consumers under California's 1996 deregulatio=
n=20
law.=20
However, consumers' bills will not go up until a "tiered" rate system can b=
e=20
introduced, requiring those who use more power to pay higher fees. That=20
system is expected to be in place by May.=20
Gov. Gray Davis, who has tried to distance himself from the PUC's move sinc=
e=20
it was unveiled Monday, said in a statement yesterday that the rate increas=
e=20
was "premature" and that he did not support the decision.=20
"While I have opposed rate increases, if it becomes clear that a rate=20
increase is absolutely necessary for the good of the state, I will support=
=20
one that is fair and do my duty to convince Californians of its necessity,"=
=20
he said.=20
Several PUC members acknowledged that such a huge rate increase might not=
=20
have been necessary had the commission acted sooner to remedy California's=
=20
power woes.=20
"We should have done this in January," Brown said, "but we didn't have enou=
gh=20
information."=20
"This rate increase is long overdue," said Richard Bilas, who also sits on=
=20
the commission. "We are finally transfusing some blood."=20
CONSUMERS PROTEST
If so, the donor -- ratepayers -- did not go willingly to the operating=20
theater. A number of citizens rose to speak at yesterday's meeting, and not=
=20
one was in favor of higher power rates.=20
"This is being shoved down the people's throats," said Dorothy Diez, an=20
elderly San Francisco resident. "Why don't they put the bills where they=20
belong and not on my back?"=20
She and others called on state officials to take a harder line with out-of-=
=20
state power generators, which have reaped windfall profits by charging sky-=
=20
high wholesale prices for their electricity.=20
Consumer groups urged the PUC to support special taxes on the generators'=
=20
earnings or even seizure of the companies' California power plants.=20
"Your actions are reprehensible," Ross Mirkarimi, a public-power supporter,=
=20
told the commission. "Do not do Gov. Davis' dirty work."=20
The governor did not attend yesterday's meeting, but his presence nonethele=
ss=20
loomed large over the proceedings.=20
Consumer advocates derided Davis' claims this week that he played no role i=
n=20
the decision to raise rates. They noted that the governor's appointees hold=
 a=20
majority on the PUC and worked closely with Davis on a variety of past=20
issues.=20
Davis' staff was briefed on the rate hike before the PUC publicized its=20
decision.=20
'DAVIS CONTROLS PUC'=20
"Gov. Davis controls the PUC," said Doug Heller, assistant organizing=20
director of the Foundation for Taxpayer and Consumer Rights. "He is=20
responsible for the rate hike. We are paying more because of the failure of=
=20
his leadership."=20
"It seems absurd that Gov. Davis is saying his own agency is acting without=
=20
his consent," said Susannah Churchill, head of energy policy for the=20
California Public Interest Research Group. "He's just looking for political=
=20
cover."=20
The PUC decision was made on a day when California's grid operators declare=
d=20
a Stage 2 alert, the first in a week, indicating that power reserves had=20
dropped below 5 percent.=20
When tiered rates are implemented, customers of Pacific Gas and Electric Co=
.=20
will see rates go up between 9 percent for "medium" power users and 36=20
percent for "heavy" users.=20
Those who can keep power consumption to within 130 percent of pre-=20
established limits will see no increase beyond the 10 percent rate hike=20
adopted in January.=20
Customers of Southern California Edison will see rates increase between 8 a=
nd=20
27 percent.=20
Bruce Foster, an Edison vice president, called the rate increase "a step in=
=20
the right direction," but said further increases may be needed to defray=20
soaring power costs this summer.=20
PG&E spokesman Ron Low said the San Francisco utility needs to study the=20
PUC's decision more closely before determining whether a 40 percent rate hi=
ke=20
will be sufficient.=20
"The PUC has done all it can," said Lynch, the PUC president. "We have foug=
ht=20
back hard in every venue possible against unjust energy prices."=20
NO FEDERAL HELP
In the end, though, she said state regulators were forced to admit that no=
=20
help would be forthcoming from federal authorities in capping wholesale pow=
er=20
rates, and that generators would continue exploiting California's chronic=
=20
electricity shortage.=20
"We maintain a responsibility to keep the lights on," Lynch said.=20
Along the same lines, the PUC approved a requirement that PG&E and Edison=
=20
repay the state Department of Water Resources for about $4 billion in power=
=20
purchases made on the cash-strapped utilities' behalf.=20
The commission also passed a motion forcing PG&E and Edison to pay smaller=
=20
power generators for their output. Half of all such generators were shut do=
wn=20
during last week's blackouts because they had not been paid by the utilitie=
s.=20
However, the PUC is only requiring that utilities pay for future electricit=
y=20
purchases, and did not address the millions of dollars in payments still ow=
ed=20
the power companies.=20
Ann MacLeod, executive director of the California Cogeneration Council, an=
=20
association of smaller generators, said that by avoiding the question of ba=
ck=20
debt, the PUC's move will do nothing to restore plants to operation.=20
"These generators will not come back online as a result of this decision,"=
=20
she said. "In fact, a greater number likely will have to drop offline."=20
Protesters chanting, "Hell no, we won't pay," urged consumers after the PUC=
=20
meeting to not include the higher fees in upcoming bills.=20
"This is just the beginning," said Medea Benjamin, who was among the=20
demonstrators evicted from the earlier proceedings. "Rates will go up and u=
p=20
and up."=20
What's Next=20
The McCain-Feingold campaign finance reform bill faces several more tests,=
=20
among them:=20
- An amendment by Sen. Fred Thompson, R-Tenn., that would double the=20
contributions that donors may make to candidates, PACs and some other=20
organizations. A vote is expected today.=20
- Sen. Mitch McConnell, the measure's chief foe, refused yesterday to agree=
=20
to allow a final vote on the legislation tomorrow. McConnell, R-Ky., left=
=20
open the possibility of using parliamentary maneuvers to block a final vote=
.=20
Chronicle News Services=20

THE ENERGY CRUNCH
Low to Medium Users=20
(up to 130% of baseline)=20
0%=20
Medium Users=20
(130% to 200% of baseline)=20
9%=20
Heavy Users=20
(more than 200% of baseline)=20
36%=20

UNDERSTANDING YOUR BILL
1. Total Electric Charges: The electric usage multiplied by the rate in=20
dollars and cents.=20
2. Legislated 10% Reduction: 10 percent reduction, financed with bond sale,=
=20
mandated by state law that set deregulation in motion. Remains in effect=20
until no later than March 31, 2002.=20
3. Net charges: The cost of electricity service after 10 percent reduction.=
=20
Breakdown of electric charges=20
4. Electric Energy Charge: Average cost of buying electricity during billin=
g=20
period.=20
5. Transmission: Cost of moving electricity from plants to distribution=20
centers.=20
6. Distribution: Cost of moving electricity from distribution centers to=20
homes.=20
7. Public Purpose Programs: Funds benefit programs such as affordable servi=
ce=20
for low-income families and conservation programs.=20
8. Nuclear Decommissioning: Fee to restore plant sites to original conditio=
n=20
once shut down.=20
9. Competition Transition Charge: Originally built into rates as a charge=
=20
above the cost of providing power. Called "headroom," it was essentially an=
=20
extra fee to pay back utilities for their investments in power plants. At t=
he=20
moment, it's a negative number because the cost of buying power on the=20
wholesale market is so much higher than the rate customers can be charged b=
y=20
law.=20
10. Trust Transfer Amount: Fee to pay off bonds that financed 10 percent ra=
te=20
reduction.=20
Baseline Information Box=20
11. Baseline Quantities: The maximum amount of usage that can be billed at=
=20
the regular rate; varies by season, climate zone and heat source.=20
12. Baseline Usage: Amount of electricity usage up to baseline quantity=20
level, billed at regular rate.=20
13. Over Baseline Usage: Amount of electricity used above baseline=20
quantities, at a higher rate.=20
HOW THINGS WOULD CHANGE
The primary areas in which a customer bill would change under the new syste=
m=20
would be:=20
1. The creation of a new line item in the Baseline Information box for=20
electricity used 130 percent above the baseline. The line would reflect how=
=20
much was used at that level and the rate for that usage.=20
2. A higher dollar amount in the Electric Energy Charge line item reflectin=
g=20
the increase cost from the rate hike. .=20
SOURCE: PG&E Web site; interviews.=20
E-mail David Lazarus at dlazarus@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 1=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------
Developments in California's power crisis=20
The Associated Press
Wednesday, March 28, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/03/28/s=
tate0
859EST0138.DTL=20
, , -- (03-28) 05:59 PST Here is a look at developments in California's=20
electricity crisis:<=20
WEDNESDAY:< ?-- The state remains free of power alerts in the early morning=
 as power ?reserves stay above 7 percent. ?-- The Assembly resumes hearings=
 on California's high natural gas prices. ?-- The Assembly is expected to t=
ry again to pass a bill that would let the ?state Public Utilities Commissi=
on order Southern California Edison Co. and ?Pacific Gas & Electric Co. to =
pay alternative-energy plants. ?TUESDAY:<=20
-- The PUC votes unanimously to approve electricity rate hikes of up to 46=
=20
percent for customers of California's two largest utilities. The board vote=
s=20
5-0 to increase rates immediately for PG&E and Edison despite yells from=20
protesters. The increases are the largest in California history.=20
-- Stock in both utilities suffer slight losses after expectations of the=
=20
rate hikes Monday caused shares in PG&E Corp. to surge 29 percent and Ediso=
n=20
International's stock to gain 30 percent. Edison International closed down =
39=20
cents at $14.16 a share. PG&E Holding Corp., parent of Pacific Gas &=20
Electric, closed down 55 cents at $13.20.=20
-- In a Tuesday afternoon conference call, Southern California Edison says =
it=20
will begin paying interest to its bondholders after weeks of failure to pay=
.=20
Company authorities say they have not heard whether the news will boost the=
ir=20
credit rating and do not specify a dollar amount for monthly interest=20
payments.=20
-- The Los Angeles Department of Water and Power, which is not attached to=
=20
the state power grid and is not affected by deregulation, issues a statemen=
t=20
Tuesday assuring that customer rates ``will continue to remain stable.''=20
-- Standard & Poors retains California's cautionary credit rating despite=
=20
state regulators' decision to raise electricity rates. The state has been o=
n=20
a credit watch ``with negative implications'' since it began spending $45=
=20
million a day to buy electricity for customers of two nearly bankrupt=20
utilities. The crediw watch will remain in effect despite a rate increase=
=20
state regulators approved Tuesday.=20
-- President Bush says the electricity price caps sought by California's Gr=
ay=20
Davis and other Western governors would worsen the region's energy crisis=
=20
instead of helping cure it. In a speech to the Kalamazoo Chamber of Commerc=
e,=20
Bush says price controls helped cause the gasoline crisis of the 1970s, and=
=20
he won't make the same mistake.=20
-- Joseph Fichera, the governor's chief negotiator on the purchase of=20
transmission lines, says he is exchanging drafts of proposed agreements wit=
h=20
Edison officials but won't say how soon a final agreement may be reached. H=
e=20
says negotiations are continuing with PG&E and San Diego Gas & Electric.=20
-- State agencies announce a March 29 workshop in Ontario for developers wh=
o=20
hope to build peaking power plants in time for this summer. The event is=20
similar to one held two weeks ago in Sacramento. Peaking plants are used fo=
r=20
short periods when power supplies run low.=20
-- California's Independent System Operator declares a Stage 2 alert when=
=20
electricity reserves were approaching only 5 percent of available power. IS=
O=20
spokeswoman Stephanie McCorkle says the alert was triggered when 1,000=20
megawatts was unexpectedly lost from the Pacific Northwest. WHAT'S NEXT:< ?=
-- The Davis administration continues negotiations with Edison, PG&E and Sa=
n ?Diego Gas & Electric Co. over state acquisition of their transmission li=
nes.< ?THE PROBLEM:<=20
High demand, high wholesale energy costs, transmission glitches and a tight=
=20
supply worsened by scarce hydroelectric power in the Northwest and=20
maintenance at aging California power plants are all factors in California'=
s=20
electricity crisis.=20
Edison and PG&E say they've lost nearly $14 billion since June to high=20
wholesale prices that the state's electricity deregulation law bars them fr=
om=20
passing onto ratepayers, and are close to bankruptcy.=20
Electricity and natural gas suppliers, scared off by the two companies' poo=
r=20
credit ratings, are refusing to sell to them, leading the state in January =
to=20
start buying power for the utilities' nearly 9 million residential and=20
business customers.=20
,2001 Associated Press ?=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------
Energy Nominees Would Give GOP Majority on Panel=20
Carolyn Lochhead, Chronicle Washington Bureau
Wednesday, March 28, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/28/M
N139149.DTL=20
Washington -- President Bush nominated two new commissioners to the nation'=
s=20
top energy regulatory body yesterday, retaining the current chairman who ha=
s=20
criticized California's handling of its energy crisis.=20
Bush tapped a fellow Texan, Patrick Henry Wood III, chairman of the Texas=
=20
Public Utilities Commission, and Nora Mead Brownell, a Pennsylvania public=
=20
utility commissioner, to fill two vacancies on the five-member Federal Ener=
gy=20
Regulatory Commission.=20
The appointments would give Republicans a 3-to-2 majority on FERC, as the=
=20
commission is known, and probably solidify the agency's opposition to=20
imposing wholesale energy price caps sought by California Gov. Gray Davis a=
nd=20
Sen. Dianne Feinstein, both Democrats.=20
Both nominations require Senate confirmation, and Feinstein indicated=20
yesterday that she might oppose the nominations.=20
"I would hope they would come in and talk with me," she said. "Certainly my=
=20
vote would be dependent on whether they would be responsive to the present=
=20
situation. Up to this point, the administration has been recalcitrant to th=
e=20
point of arrogance. If that is the case with these new appointees as well,=
=20
they won't have my vote."=20
FERC regulates wholesale power markets and interstate natural gas pipelines=
.=20
Curt Hebert, named chairman by Bush earlier this year, will remain in his=
=20
post. Although Hebert's outspoken free-market views are in sync with the=20
administration's, there had been speculation that Bush would tap Wood for t=
he=20
top job. Some thought Bush might want a familiar ally to head an agency tha=
t=20
used to be a regulatory backwater but now is among the most politically=20
sensitive spots in the administration.=20
Wood has overseen electric utility deregulation in Texas, which is schedule=
d=20
to open its market to competition Jan. 1, 2002, but based on a model that=
=20
differs significantly from California's scheme. Texas has attracted ample n=
ew=20
power generation since 1995, and is experimenting with partial retail=20
competition for commercial users.=20
Brownell helped oversee Pennsylvania's electricity deregulation, which is=
=20
cited as a successful contrast to California's experiment.=20
FERC has come under heavy political fire from California Democrats for not=
=20
cracking down hard enough on alleged price gouging of California utilities =
by=20
out-of-state energy producers.=20
Hebert has been sharply critical of California's response to its electricit=
y=20
mess, once describing Davis' plan to take over the utilities' transmission=
=20
lines as "nationalization." He is adamantly opposed to price controls and=
=20
enjoys the strong backing of fellow Mississippian and Senate Majority Leade=
r=20
Trent Lott, who pressured the White House to keep him.=20
Hebert and Energy Secretary Spencer Abraham have voiced strong opposition t=
o=20
price controls on wholesale electricity, arguing that would worsen=20
California's blackouts by discouraging electricity sales from outside the=
=20
state.=20
Vice President Dick Cheney, who met informally with about 10 senators in hi=
s=20
Senate office yesterday, also restated the administration's opposition to=
=20
price caps, telling Feinstein price controls would not work and citing thei=
r=20
failure in the Nixon administration.=20
Feinstein, who has said she equates helping California with the willingness=
=20
to impose federal price caps, called Cheney's response "very disappointing.=
"=20
"There was really no overture," Feinstein said. "There was very little=20
willingness to help. Not even an offer of help. It is truly amazing to me,=
=20
because this crisis is not going to be confined to California. . . . What w=
e=20
really need is a period of price stability . . . and they keep going back t=
o=20
Nixon and price controls and saying they don't work. We all know that, but=
=20
what we are seeking is an interim period of stability until we can increase=
=20
supply."=20
Tell Us What You Think -- Can you save 20 percent on your energy usage? Gov=
.=20
Gray Davis' administration is offering rebates to Californians who save on=
=20
power starting in June, and if you've got a strategy for conserving, The=20
Chronicle wants to hear it. We'll be writing about the hardest-working ener=
gy=20
savers in a future story. To get involved, write to the Energy Desk, San=20
Francisco Chronicle, 901 Mission St., San Francisco, CA 94103; or send e-ma=
il=20
to energysaver@sfchronicle.com.=20
E-mail Carolyn Lochhead at clochhead@sfchronicle.com=20
,2001 San Francisco Chronicle ? Page?A - 13=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------
Megawatt Foolish=20
Strike a Pose for Energy Conservation=20
Arrol Gellner
Wednesday, March 28, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/28/H
O179614.DTL=20
"Spare at the spigot," admonishes an old proverb, "and let out the bunghole=
."=20
That rather tidily sums up America's haphazard attitude toward energy=20
conservation. We gladly rally to trim our energy use by a few percent,=20
whether at home, at work or in our cars, but we ultimately feel little=20
urgency to change the overwhelming wastefulness of our built environment.=
=20
During the past two decades, we've done plenty of "sparing at the spigot,"=
=20
and that can only be applauded.=20
We've passed minimal building energy standards such as California's Title 2=
4=20
but then wiped out much of the savings by building the sort of needlessly=
=20
bloated, energy-guzzling homes that now sprawl across acre after acre of on=
ce=20
pastoral landscape.=20
We've enacted minimum standards for gas mileage -- excepting SUVs, but you=
=20
don't drive one of those, do you? -- yet we've made little headway in curbi=
ng=20
our reliance on the automobile itself.=20
How did we get into this jam? A fair share of the blame for our disastrous=
=20
land-use policies belongs at the feet of the very people who insisted they=
=20
knew better: the postwar city planners.=20
They've left us our current legacy of hyperorganized zoning ordinances that=
=20
encourage -- in fact practically mandate -- urban sprawl. These in turn hav=
e=20
produced a national reliance upon the automobile that has only increased.=
=20
ON THE ROAD AGAIN, AND AGAIN
Flying in the face of all we've learned about the environment during the pa=
st=20
decades, the year 2000 set the all-time record for U.S. automobile sales,=
=20
with some 17.4 million cars and trucks sold.=20
And no wonder Americans remain auto-centered. Too many planners and state=
=20
transportation departments still consider freeway expansion programs the=20
solution to our mass transportation woes, even though it's been demonstrate=
d=20
time and again that bigger highways merely invite more traffic instead of=
=20
reducing it.=20
We consumers are to blame as well, for buying into the idea that a=20
snowballing trend of consumption is the very embodiment of success. We're=
=20
hooked on big houses; but because housing prices are so high in the Bay Are=
a,=20
we're willing to move out to less populated areas so we can afford them.=20
We willingly drive an hour or even two to get to work -- a commute that wou=
ld=20
have been considered perfectly absurd even 20 years ago. Pretty soon, of=20
course, the new community is as choked with cars and asphalt as the old one=
.=20
The real pity is that we've recognized the folly of these trends for decade=
s,=20
and we've done next to nothing to even protest them, let alone change them.=
=20
PLANNING FOR THE PAST
And thanks to the hidebound attitudes of so many civic planning departments=
,=20
little of substance has changed in our land use policy since the 1950s: Our=
=20
hyperorganized zoning ordinances still jealously guard the outdated postwar=
=20
ideal of the single-family home surrounded by largely useless strips of=20
"setback" land, and continue to frown on more intelligent arrangements such=
=20
as zero-lot-line construction, courtyard homes and mixed commercial and=20
residential planning.=20
By all means, save all the energy you can. But while any move toward=20
conservation is commendable, it's America's fundamental building practices=
=20
that really need changing, not the position of the light switch in your=20
hallway.=20
Arrol Gellner is an Emeryville architect who also teaches at Chabot College=
,=20
Las Positas College and the Building Education Center. Write to him at=20
home@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?WB - 1=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------
New York mayor calls for cap on power prices=20

Wednesday, March 28, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/03/28/n=
ation
al0701EST0506.DTL=20
(03-28) 04:01 PST NEW YORK (AP) -- Mayor Rudolph Giuliani is urging federal=
=20
regulators to set price controls on wholesale power producers to protect=20
consumers from rate hikes this summer.=20
In a speech Tuesday to Wall Street and utility executives, Giuliani said a=
=20
surge in electricity prices last summer and an imminent shortage of power=
=20
supplies demand government intervention. Electricity bills rose an average =
43=20
percent for New Yorkers last July.=20
``The double-digit price increases that New Yorkers had to pay last summer=
=20
are just unacceptable,'' Giuliani said.=20
Giuliani said the move toward deregulation in the early 1990s was done=20
hastily and needs to be adjusted. Until more power plants are constructed, =
a=20
temporary price cap would protect consumers, he said.=20
A spokesman for KeySpan, a major New York-area energy producer, said such=
=20
price caps would likely discourage the construction of new power plants.=20
In California, deregulation, power plant maintenance and scarce=20
hydroelectricity have been blamed for an extended power crisis that has led=
=20
to rolling blackouts four times this year. On Tuesday, California regulator=
s=20
approved rate increases of up to 46 percent for customers of that state's t=
wo=20
largest utilities.=20
,2001 Associated Press ?=20
---------------------------------------------------------------------------=
---
---------------------------------
Power regulators approve rate hikes of up to 46 percent=20
KAREN GAUDETTE, Associated Press Writer
Wednesday, March 28, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/03/28/s=
tate0
302EST0101.DTL=20
(03-28) 05:53 PST SAN FRANCISCO (AP) -- Sam Sahouria owns a small downtown=
=20
grocery and deli, a few blocks from the offices of the state Public Utiliti=
es=20
Commission. He now fears a decision by the PUC could force him to lose the=
=20
store he has run for the past 15 years.=20
Amid the jeers of protesters yelling ``Hell, no, we won't pay,'' the PUC=20
voted unanimously Tuesday to approve electricity rate hikes of up to 46=20
percent for customers of California's two largest utilities.=20
The increases for Pacific Gas and Electric Co. and Southern California Edis=
on=20
Co., which take effect immediately, are the largest in California history.=
=20
``It's terrible, we will probably go out of business,'' Sahouria said. ``It=
's=20
very simple -- we cannot afford any rate increases.''=20
PUC commissioners, who voted 5-0 for the rate hikes, said they were necessa=
ry=20
to head off blackouts this summer and to keep the cash-starved utilities fr=
om=20
going under.=20
However, the PUC simultaneously ordered the nearly bankrupt utilities to pa=
y=20
the state for billions of dollars of electricity it has bought on behalf of=
=20
their customers, and to pay producers of renewable energy for future=20
electricity deliveries.=20
``The PUC has done all it can,'' commission president Loretta Lynch said.=
=20
``We have fought back hard in every venue possible against these unjust=20
energy prices.''=20
Not all PG&E and Edison customers will face higher bills. The PUC said it=
=20
would create a tiered system that will protect low-income customers and=20
penalize those customers who use the most electricity.=20
Ratepayers have labeled the plan a ``rip-off'' that could hit as many as 10=
=20
million homes and businesses fighting to stay cool amid rolling blackouts a=
nd=20
spiraling energy costs. The rate hikes could effect as many as 25 million=
=20
Californians.=20
The increase is on top of a 9 percent to 15 percent rate hike the PUC=20
approved in January and made permanent Tuesday. An additional 10 percent=20
increase already is scheduled for next year.=20
``Our bills have gone from $26 to $70 for a stinking studio apartment and w=
e=20
don't have a heater, we use the oven to heat up the studio,'' said Belinda=
=20
Lazzerini, 40, who serves fruit smoothies at Jitters & Shakes in downtown S=
an=20
Francisco. ``The laundromat has gone up from $1.50 to $3, so now we will ha=
ve=20
to clean our clothes by hand and dry them in the basement. It's crazy.''=20
Though utilities still cannot set their own rates for electricity because o=
f=20
a rate freeze mandated by the state's 1996 attempt at deregulation, the PUC=
=20
has the authority to increase rates. The rate freeze must end by March 2002=
.=20
The PUC meeting was disrupted at least five times by screaming protesters.=
=20
Before the meeting, a group led by former Green Party senatorial candidate=
=20
Medea Benjamin stood in the PUC chambers with yellow signs saying ``We Won'=
t=20
Pay.''=20
``We don't need increases in our bills, we need increases in law enforcemen=
t=20
so our governor can protect us from these modern-day robber barons,'' said=
=20
Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa=20
Monica.=20
Meanwhile, the state remained free of power alerts Wednesday morning as pow=
er=20
reserves stayed above 7 percent.=20
---------------------------------------------------------------------------=
---
---------------------------------




No explanation given after officials approve 27 percent rate hike=20
Posted at 10:00 p.m. PST Tuesday, March 27, 2001=20
BY STEVE JOHNSON=20

Mercury News=20


After months of waiting for the state's elected leaders to act, California'=
s=20
Public Utilities Commission on Tuesday unanimously approved the largest=20
electricity rate increase in at least two decades, and offered no assurance=
s=20
that more hikes won't be needed soon.=20
The 3-cent per kilowatt-hour increase would boost average rates for all=20
customers by 27 percent, although the precise residential and business rate=
s=20
have yet to be determined. It is effective immediately and will show up on=
=20
bills in May.=20
The commission's vote in San Francisco played out against an odd political=
=20
backdrop: Gov. Gray Davis, who appointed three of its five members, said he=
=20
wasn't consulted about the planned rate hike and that he does not favor it.=
=20
But Davis, after learning Sunday night about the plan, apparently did not=
=20
seek to block the commission's action. Instead, he issued a statement=20
immediately after the vote that called it ``premature because we do not hav=
e=20
all the appropriate financial numbers necessary to make a decision. Until w=
e=20
do, I cannot support any rate increase.''=20
The commission, however, said it had no alternative but to raise rates,=20
considering that the state in recent weeks has been forced to spend billion=
s=20
in taxpayer funds on power because its cash-strapped utilities are no longe=
r=20
credit-worthy.=20
But even some commissioners were uneasy. Davis' most recent appointee on th=
e=20
commission, Geoffrey Brown, acknowledged during the Tuesday meeting that ``=
we=20
as commissioners had very little time to review this.''=20
In fact, an administrative law judge -- using much the same evidence that w=
as=20
included in the decision to raise rates -- had concluded recently that no=
=20
such increase was justified.=20
The commission did not explain how it arrived at the increase of 3 cents pe=
r=20
kilowatt-hour. Previously, officials with Pacific Gas & Electric Co. and=20
Southern California Edison had only sought a 2-cent per kilowatt-hour=20
increase.=20
Experts pointed to a number of unanswered questions that make it uncertain=
=20
whether a 3-cent hike will bring in sufficient revenue to cover the enormou=
s=20
cost the state has incurred since it began buying power.=20
The state still doesn't know how much its effort to bail out PG&E and Ediso=
n=20
-- which involves a state purchase of the utilities' high-voltage lines --=
=20
will cost. It's also unclear how much the state might wind up spending on t=
he=20
expensive electricity spot market this summer, and whether an additional ra=
te=20
increase would be needed to cover that.=20
``Have we got the number right?'' asked Commissioner Henry Duque, in=20
reference to the 3-cent increase. ``I don't know. But I hope we have.''=20
Roderick Wright, D-Los Angeles, who chairs the Assembly Utilities Committee=
,=20
told the commission that he opposed the idea of approving any rate hike now=
,=20
until the state has a better idea of the total amount that consumers=20
ultimately will have to bear.=20
By establishing a 3-cent increase now, ``we'll be back in a short time,=20
potentially doing it again,'' he said. ``To be nickeled and dimed to death =
as=20
we're doing here, I don't think that does anybody any good.''=20
Signs of confusion=20
Utility officials sounded similarly unimpressed and confused.=20
``While providing a welcome dose of realism,'' PG&E president Gordon Smith=
=20
said in a prepared statement, the rate hike and other actions taken by the=
=20
commission Tuesday ``do not offer a comprehensive solution, fail to resolve=
=20
the uncertainty of the crisis and may even create more instability.''=20
Among PG&E's major concerns is whether the utilities will be compensated fo=
r=20
their debts -- which they claim total about $13 billion -- and whether PG&E=
=20
or the state will be responsible for the cost of power purchased on the spo=
t=20
market.=20
Bruce Foster, an Edison vice president, offered a similar lukewarm=20
endorsement of the increase. ``I'm not saying that it will do it,'' he said=
,=20
acknowledging the possibility of more increases down the road, but he calle=
d=20
the hike ``a step in the right direction.''=20
Rate hike vs. bankruptcy=20
Commissioner Richard Bilas said he feared that if the utilities were forced=
=20
into bankruptcy, the judge overseeing such a case could order much bigger=
=20
rate hikes to stabilize the companies' finances.=20
``A rate increase designed by this commission is far better than one design=
ed=20
by a bankruptcy judge,'' Bilas said, adding that he also was concerned abou=
t=20
how the state appeared to be buying electricity ``like a drunken sailor.''=
=20
But others reacted angrily to the commission's decision. Several protesters=
=20
hoisted signs at the meeting that read, ``we won't pay'' and chanted, ``rat=
e=20
hikes go away, make the energy companies pay.'' Police later escorted them=
=20
out of the meeting after commission President Loretta Lynch became annoyed =
at=20
their noisy interruptions.=20
Instead of raising rates, they and other consumer advocates urged Davis to=
=20
use the state's power of eminent domain to take over the power plants=20
operated by companies accused of gouging the public.=20
``The governor should start seizing plants until these crooks start playing=
=20
by the rules of society,'' said Mike Florio, senior attorney with The Utili=
ty=20
Reform Network in San Francisco. ``They're economic war criminals.''=20
Officials in Davis' office said Tuesday that they intend to review the=20
commission's action and decide over the next few weeks whether to support i=
t=20
or seek changes. But to some people, the governor's claim of ignorance abou=
t=20
the commission's plan -- and his seeming inability to do anything to stop t=
he=20
rate hike from being approved -- severely strained credulity.=20
``Give me a break,'' said Sen. John Vasconcellos, D-San Jose. ``Who appoint=
ed=20
them and who's been giving orders all along?''=20
Davis did say for the first time Tuesday that he might be willing to consid=
er=20
having consumers pay more for electricity. ``If it becomes clear that a rat=
e=20
increase is absolutely necessary for the good of the state,'' he said, ``I=
=20
will support one that is fair.''=20


Dion Nissenbaum and Hallye Jordan contributed to this report.

---------------------------------------------------------------------------=
---
--------------------------------------------------




Impact of increases will vary greatly=20
Posted at 9:44 p.m. PST Tuesday, March 27, 2001=20
BY JOHN WOOLFOLK=20

Mercury News=20


The rate increases approved Tuesday will hit Californians in very different=
=20
ways: The heaviest users of electricity will probably pay the most, and=20
nearly half of residential users will likely see no increase at all.=20
Although the details aren't yet final, state regulators say they intend to=
=20
fashion a ``tiered structure'' to implement the higher rates. Here's how th=
e=20
proposal will affect your bill:=20
When do the higher rates kick in?=20
Regulators consider the increase effective immediately but say it won't=20
appear on bills until May. While regulators agreed that rates will rise, th=
ey=20
still have to approve a structure for how customers will share the cost.=20
Hearings are expected next month. Once the structure is approved, regulator=
s=20
say, utilities can apply it retroactively to Tuesday's rate approval.=20
Do the new rates affect all Californians?=20
No. The Public Utilities Commission, which approved the rate increase, has=
=20
authority over only investor-owned utilities: Pacific Gas & Electric Co.,=
=20
Southern California Edison and San Diego Gas & Electric, which together ser=
ve=20
about 10 million homes and businesses. The increase affects PG&E and Edison=
,=20
but not San Diego. Municipal utilities, including Santa Clara, Palo Alto,=
=20
Alameda, Sacramento and Los Angeles are governed independently and exempt.=
=20
How will the new rates work?=20
Regulators are planning a tiered rate structure in which large commercial a=
nd=20
power-guzzling residential customers pay a greater share. Residential=20
customers would pay more according to how much they exceed their ``baseline=
''=20
amount.=20
What is the baseline?=20
The baseline is considered the average household usage. It was established=
=20
years ago to encourage conservation by charging a higher rate for electrici=
ty=20
usage over that amount.=20
Does everybody have the same baseline?=20
No. Customers are assigned different baselines to account for variations in=
=20
electricity needs caused by regional climate, household type and season.=20
How many baselines are there?=20
PG&E residential customers in the San Francisco Bay Area are divided among=
=20
three climatic baseline territories: the coastal areas including San=20
Francisco and the Peninsula, the East Bay and South Bay, and the Santa Cruz=
=20
Mountains.=20
Within those territories, there are separate baselines for single-family=20
homes and multifamily apartment complexes, as well as for homes with only=
=20
electric appliances instead of both gas and electric.=20
In addition, baseline rates are adjusted for summer and winter usage. Summe=
r=20
rates begin May 1, and winter rates begin Nov. 1.=20
How do I find out my baseline?=20
Your electric bill shows the baseline amount in kilowatt-hours and the rate=
=20
you are billed for that amount. It also shows how much power you used over=
=20
the baseline and the rate you were billed for it.=20
How does the baseline affect my bill?=20
Customers already pay about 14 percent more for power they use over their=
=20
baseline. Under the proposed tiered rates, PG&E customers who use no more=
=20
than 130 percent of their baseline amount wouldn't pay any more than they d=
o=20
now. PG&E customers who use up to twice their baseline would see an average=
 9=20
percent increase in monthly bills. Those who use more than twice their=20
baseline would see an average increase of 36 percent. Edison customers woul=
d=20
have similar rates. Almost half of the utilities' customers don't exceed 13=
0=20
percent of their baseline.=20
Why am I hearing different reports about the size of the rate increase?=20
The increase can be calculated many ways. The commission approved an increa=
se=20
of 3 cents a kilowatt-hour, three times the 1-cent surcharge approved in=20
January, which was made permanent Tuesday. Because the 1-cent increase=20
averaged 10 percent, some have said that, plus the 3 cents, amounts to a=20
40-percent increase.=20
Others have added 3 cents to the amount the utilities charge just for=20
electricity, which for PG&E is now 6.4 cents, and come up with a 47-percent=
=20
increase.=20
Because total rates include transmission and maintenance surcharges, others=
=20
have added 3 cents to the average total rate of 11.14 cents for all=20
customers, a 27-percent increase. Under the tiered proposal, the average=20
residential rate would rise 20.8 percent from 12.46 cents to 15.05 cents.=
=20
But average bills for residents' bills would increase up to 36 percent,=20
depending on electricity use.=20
Can my business avoid the rate hike by saving energy?=20
The proposed tiered rate structure based on the baseline use doesn't apply =
to=20
commercial and industrial businesses. In fact, the proposal calls for a=20
proportionately greater increase for businesses, which pay lower rates than=
=20
residential customers. Commercial customers would see a 22.6-percent=20
increase. Industrial customers, generally over 500 kilowatt-hours a month,=
=20
would see a 41-percent increase.=20
But businesses can still get a discount on summer bills by saving power. Go=
v.=20
Gray Davis this month ordered 20-percent rebates for all customers who redu=
ce=20
electricity usage 20 percent over last year between June and September.=20
Residential and small commercial rebates will be based on 20 percent=20
reduction of total consumption, while commercial and industrial rebates wil=
l=20
be based on 20 percent reduction of peak load.=20
If I qualify for assistance in paying my bills now, will I have to pay more=
?=20
Possibly. The proposal calls for exempting customers in the California=20
Alternative Rates for Energy program, and expanding eligibility from 150=20
percent to 175 percent of federal poverty guidelines. But commissioners=20
aren't ruling out tiered rates for those customers to encourage them to sav=
e=20
electricity.=20


Contact John Woolfolk at (408) 278-3410 or at jwoolfolk@sjmercury.com=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------------------------






PUC raises power rates=20
Edison customers could see monthly bills go up by 27%. The agency plans to=
=20
build a tiered system costing more for heavy users.=20
March 28, 2001=20
From Register staff=20
and news service reports=20







Dorothy Kascak, 82, of Cypress holds her dog, Baron. Kascak needs oxygen fu=
ll=20
time. She's afraid power rate hikes will make air conditioning too costly
Photo: Bruce Chambers / The Register
?
?

SAN FRANCISCO Amid the jeers of protesters yelling "Hell no, we won't pay,"=
=20
the state Public Utilities Commission voted unanimously Tuesday to approve=
=20
electricity rate increases of as high as 36 percent for customers of=20
California's two largest power utilities.=20
The rate increases for Pacific Gas & Electric Co. and Southern California=
=20
Edison Co., which take effect immediately, are the largest in California=20
history, totaling $4.8 billion a year.=20
PUC commissioners said the increases were necessary to head off blackouts=
=20
this summer and to keep the cash-starved utilities from going under.=20
The PUC simultaneously ordered the utilities to pay the state for billions =
of=20
dollars of electricity it has bought on behalf of their customers, and to p=
ay=20
producers of renewable energy for future supplies.=20
Commission President Loretta Lynch said the PUC had tried to avoid rate=20
increases but saw no other option.=20
The commission voted to boost rates by 3 cents a kilowatt-hour. PG&E rates=
=20
would rise by as much as 36 percent and Edison rates by as much as 27=20
percent.=20
Not all PG&E and Edison customers will face higher bills.=20
The PUC said it would create a tiered system that will protect customers wh=
o=20
don't use much electricity and penalize those who use more.=20
Dorothy Kascak, 82, of Cypress is on 24-hour oxygen supplied by a machine i=
n=20
her home that runs on electricity.=20
Her bill is already $135 a month despite the fact that she gets a reduction=
=20
for being on life support.=20
"They say we're going to have to go without air conditioning in the summer,=
"=20
she said.=20
"I can't live without air conditioning. I have a bad heart, bad lungs and I=
'm=20
a diabetic."
---------------------------------------------------------------------------=
---
------------------------------------------






Energy payments not enough, gas-using generators say=20
March 28, 2001=20
By HANH KIM QUACH
The Orange County Register=20
Natural-gas-dependent alternative generators say that even if the major=20
utilities begin paying them for energy, it won't be enough cash.=20
State regulators at the Public Utilities Commission on Tuesday ordered=20
Southern California Edison and Pacific Gas & Electric to start paying=20
alternative-energy producers $79 per megawatt-hour. But alternative=20
generators that use natural gas say that's at least $20 below what it costs=
=20
to produce the energy.=20
"On the short run, we can't generate,'' said David Lloyd of NRG Energy Inc.=
,=20
which this month shut down its 260- megawatt plant in the Bay area that sel=
ls=20
steam to the C&H sugar factory next door. "It just costs so much for=20
electricity.''=20
Alternative generators have been paid little, or nothing, the past four=20
months and are now collectively owed more than $1 billion by the utilities.=
=20
The situation has prompted many of the small generators to scale back or sh=
ut=20
down their plants, resulting in a 2,900-megawatt loss to California - enoug=
h=20
to power 2.9 million homes. That was a factor in blackouts last week and th=
e=20
state's Stage 2 energy alert Tuesday.=20
There are two classes of alternative generators: renewables, which use sola=
r,=20
wind or clean-burning technologies to produce energy, and co-generators,=20
which use natural gas to produce energy but share the heat output with a=20
manufacturer. Renewables, which make up half of the 10,000 alternative-ener=
gy=20
megawatts, say they're likely to continue producing but would like to be pa=
id=20
what they've been owed the past four months.=20
PUC spokeswoman Kyle Devine said $79 per megawatt-hour should work for=20
generators if the natural gas is transported through an Oregon pipeline - a=
=20
cheaper route - rather than through a pipeline from the Southwest.=20
But a gas proposal that Ken Ross of Delta Energy Co. in Santa Ana received=
=20
Tuesday showed the transportation price to be just as expensive.=20
---------------------------------------------------------------------------=
---
---------------






Bush to nominate 2 who favor free markets for energy panel=20
March 28, 2001=20
By DENA BUNIS
The Orange County Register=20
WASHINGTON President George W. Bush will nominate two new federal energy=20
regulators whose history indicates that, like him, they favor free markets=
=20
and don't favor price controls.=20
Bush said Tuesday that he will ask the Senate to confirm Patrick Wood,=20
chairman of the Texas Public Utility Commission, and Nora Mead Brownell, a=
=20
commissioner with the Pennsylvania PUC, to the five-member Federal Energy=
=20
Regulatory Commission.=20
Both Republican nominees have presided over the deregulation of their state=
's=20
energy markets, so far with more success than California.=20
Sen. Dianne Feinstein, D-Calif., who sits on the Energy and Natural Resourc=
es=20
Committee, which will hold hearings on the FERC appointees, issued an early=
=20
warning.=20
"Certainly my vote would be dependent on whether they would be responsive t=
o=20
the present situation,'' Feinstein said. "Up to this point, the=20
administration has been recalcitrant to the point of arrogance. If that is=
=20
the case with these new appointees as well, they won't have my vote."=20
However, neither is expected to have trouble getting confirmation.=20
Wood, PUC chairman since 1995, has said Texas' deregulation climate is=20
different from California's.=20
Unlike California, the Texas deregulation encourages long-term contracts.=
=20
Texas has more power reserves and it's easier to get a permit to build a=20
plant there.=20
Brownell has been on the Pennsylvania PUC since 1997.=20
Pennsylvania's market also differs greatly from California's in several way=
s.=20
The state is a net exporter of power while California is an importer, and=
=20
Pennsylvania's deregulation plan did not force utilities to sell their=20
plants.=20
---------------------------------------------------------------------------=
---
----------------------------------------------






Davis backs power rate hikes if 'necessary'=20
He says PUC approval of hikes Tuesday is 'premature.' S&P is unsure how=20
conservation will affect revenue.=20
March 28, 2001=20
By JOHN HOWARD
The Orange County Register=20
SACRAMENTO Gov. Gray Davis shifted his position opposing electricity rate=
=20
hikes, saying he would support them "if it becomes clear it is absolutely=
=20
necessary for the good of the state."=20
The governor's statement Tuesday came just hours after the Public Utilities=
=20
Commission, a panel controlled by Davis' appointees, endorsed a plan to rai=
se=20
monthly bills by as much 36 percent. The increase eventually would be tied =
to=20
a flexible rating plan in which light users will pay a little more, medium=
=20
users (those who conserve energy) will pay moderately more, and heavy users=
=20
will pay a lot more. Details of the plan are not yet set.=20
Davis called the PUC's decision "premature," saying scant information was=
=20
available to justify increases.=20
"While I have opposed rate increases, if it becomes clear a rate increase i=
s=20
absolutely necessary for the good of the state, I will support one that is=
=20
fair and do my duty to convince Californians of its necessity," Davis said.=
=20
Boosting electricity rates to help resolve California's energy crisis is=20
likely to increase the state's $10 billion revenue bond sale to $12 billion=
=20
or more, entailing more interest charges and a longer payback.=20
Standard and Poor's, the Wall Street credit-rating agency, called the ratin=
g=20
plan "a complicated formula that will only increase rates on heavy users of=
=20
electricity."=20
"It is unclear exactly how many users will be affected, and whether revenue=
s=20
will slip under the rate-raising formula as consumers respond by conserving=
=20
electricity," S&P said.=20
Also unclear is how the money from increased rates would be divided. The=20
state, which has been buying power on behalf of the utilities, says it has=
=20
first rights to the money. The utilities have challenged that.=20
California hopes to borrow $10 billion by selling revenue bonds in May to=
=20
cover its costs of purchasing emergency electricity since December. Through=
=20
April 7, those costs are expected to total $4.2 billion.=20
The bond money also will be used to pay for power under long-term contracts=
,=20
which is much cheaper than power bought just before it is used.=20
Critics have questioned whether $10 billion will be sufficient. PUC Preside=
nt=20
Loretta Lynch said the increased rates would support at least a $12 billion=
=20
bond sale. Davis spokesman Steve Maviglio and Joseph Fichera, a Davis fisca=
l=20
adviser, declined to discuss a specific amount.=20
---------------------------------------------------------------------------=
---
--------------------------------------






Cheney says state's on its own=20
March 28, 2001=20
By DENA BUNIS
The Orange County Register=20
WASHINGTON Sen. Dianne Feinstein says Vice President Dick Cheney on Tuesday=
=20
offered no hope of federal help for California's electricity crisis, and sh=
e=20
is once again appealing to the president to meet with her.=20
"It was very disappointing,'' Feinstein said in an interview after a=20
45-minute meeting Cheney had with a group of 10 senators. "I practically=20
begged for a period of reliability and stability so we could get through th=
e=20
summer, and I didn't get any feeling back that there was going to be any=20
help.''=20
Cheney insisted, Feinstein said, that California has to "straighten itself=
=20
out'' and was not moved by the fact that the Public Utility Commission was=
=20
poised to increase rates nearly 40 percent.=20
After the meeting, Feinstein sent President George W. Bush a two-page lette=
r.=20
"Your administration has not yet offered any constructive solution to this=
=20
problem,'' she wrote. "If the federal government continues to ignore the=20
situation, the result may very well be economic disaster for millions of=20
small businesses and residents.''=20
Feinstein wrote a final plea that Bush meet with her and Sen. Gordon Smith,=
=20
R-Ore., who is co-sponsoring a bill authorizing short-term regional price=
=20
caps.=20
Bush on Tuesday reiterated his position against price caps in a speech in=
=20
Michigan.=20
Feinstein has heard little sympathy for her state from colleagues, who have=
=20
repeatedly said Californians have not felt any real pain. Rep. Jennifer Dun=
n,=20
R-Wash., recently complained that Californians were turning on their hot tu=
bs=20
without worrying about paying higher costs.=20
Feinstein said such criticism is exaggerated. But she said she hopes the ra=
te=20
increase approved by the PUC will show critics the state "is doing the righ=
t=20
thing.''=20
Sen. Barbara Boxer, D-Calif., who said she was not invited to meet with=20
Cheney, said she was concerned that the rate increase would be "making=20
consumers bear the brunt" of the electricity crisis.=20
Before a rate increase is considered, Boxer said, the PUC should make sure=
=20
average residential consumers and small businesses are protected and take=
=20
whatever legal action is available against "those generating companies who=
=20
colluded and unlawfully manipulated prices.=20
"We should get something in return, some assets," Boxer added, also calling=
=20
on the utilities to contribute some of the money they diverted to their=20
parent companies.=20
---------------------------------------------------------------------------=
---
------------------------------------------







Highest rate hike in state history raises consumer anger=20
O.C. residents and businesses resent 'energy hog' label.=20
March 28, 2001=20
By KATE BERRY
The Orange County Register=20
Helen Lewis, a Villa Park homemaker, believes the rate hike unfairly target=
s=20
families with children.=20
Dorothy Kascak, an 82-year-old Cypress resident who uses an oxygen machine=
=20
24-hours a day, is furious at being called an "energy hog.''=20
And Vic Peterson, a homebuilder in Corona del Mar, has angry words for Gov.=
=20
Gray Davis for allowing the energy crisis to escalate, potentially=20
endangering the economy.=20
Throughout Orange County, residents and businesses responded angrily to the=
=20
approval Tuesday of a 3-cent-a-kilowatt-hour rate increase by the Californi=
a=20
Public Utilities Commission.=20
"There are a lot of handicapped citizens that are on fixed incomes,'' said=
=20
Kascak, who has been on an oxygen machine for eight years. "If they raise o=
ur=20
rates 40 percent, what am I going to do?''=20
Though oxygen users typically receive a discount on their electricity rates=
,=20
they will be subject to the rate increase like everyone else, said Bruce=20
Foster, vice president of regulatory affairs at Southern California Edison.=
=20
Many businesses are concerned that higher power costs could push California=
=20
and the nation into a recession.=20
"It's upsetting,'' said Peterson, who owns Peterson Construction & Design=
=20
Inc. "Less money coming into California means less people purchasing. Who a=
re=20
we going to sell homes to?''=20
At Panama Joe's Hair Design in Irvine, owner Joe Gayle said he has no choic=
e=20
but to pay the higher rates. He's got hair dryers, electric hair clippers,=
=20
lights, a refrigerator, a microwave and computer to run a nine-station hair=
=20
salon.=20
Last month Gayle's bill was $234. A year ago it was $183. Now he expects it=
=20
to top $300 a month.=20
"They jack it up because they know there is nothing we can do," he said.=20
Then there's the effect on families, especially those who live in large=20
houses.=20
The PUC will debate in the next month how to implement a tiered-rate plan,=
=20
with large users paying the highest rates. A plan proposed Monday by PUC=20
President Loretta Lynch targets what she called "energy hogs" by increasing=
=20
rates on usage over 130 percent of a consumer's minimum "baseline"=20
allocation, which varies by neighborhood.=20
For Lewis, the Villa Park homemaker, conservation will barely put a dent in=
=20
her electric bill. The 4,300-square-foot house she shares with her husband=
=20
and three children has a monthly baseline of 267 kilowatt-hours, while the=
=20
family's energy consumption routinely runs from 1,200 to 1,500=20
kilowatts-hours.=20
"It's not as if we're leaving the lights on,'' said Lewis. "But they are=20
taking people that have houses and have washers and dryers, and penalizing=
=20
them. Families will be hit very hard.''=20
Register staff writer Elizabeth Aguilera contributed to this report.=20



---------------------------------------------------------------------------=
---
-----------------------------------------








Lighten up ... it's just a California thing=20
Outside the state, there is almost a smug satisfaction in our energy=20
failures. But most here remain optimistic.=20
March 28, 2001=20
By TERI SFORZA
The Orange County Register=20







Beckie Boyden of Irvine Orthopedics and Physical Medicine tends to her=20
receptionist duties by candlelight during a recent rolling blackout
Photo: Bruce Chambers / The Register
?
?

California. Global trendsetter. High-tech nexus. Crucible for creativity.=
=20
The Golden State is raw fiscal muscle, with an economy bigger than China's=
=20
and twice the size of Canada's. But alas. California can't keep the lights=
=20
on.=20
"It's amazing to think that we have the world's seventh-largest economy - a=
nd=20
a Third World power system," said Fred Smoller, chairman of the=20
political-science department at Chapman University. "It's certainly a blow =
to=20
our collective ego."=20
Rolling blackouts finally hit Orange County last week. Workers were plunged=
=20
into darkness. Children studied by candlelight. Cars crawled through lawles=
s=20
intersections. Elevators halted between floors, libraries checked out books=
=20
by hand, and portable generators were rushed to sewer-lift stations to keep=
=20
raw sewage from spilling into the ocean.=20
Outsiders scoff. Californians are a gaggle of goofy tree-huggers guilty of=
=20
"mass myopia" and "willful energy abnegation," charged Charles Krauthammer,=
=20
columnist for the New York Daily News.=20
"Californians refuse to acknowledge that in the real world, their desire fo=
r=20
one good (an unsullied environment) might actually conflict with another=20
desire (hot water in their Jacuzzis)."=20
Sensing weakness, other states are pouncing.=20
Glow-in-the-dark mouse pads saying "Michigan. We never leave you in the dar=
k"=20
are landing in the mailboxes of California CEOs. Alongside flashlights=20
boasting "The lights are always on in Tennessee." And nine-volt batteries,=
=20
courtesy of the Greater Raleigh (N.C.) Chamber of Commerce ("In the dark=20
about where to grow your business?").=20
"Our CEO got the flashlight pitch," said David Sonksen, executive vice=20
president and chief financial officer of Microsemi Corp. in Santa Ana. "But=
=20
he threw it away. It would take 10 years of exorbitant power costs to even=
=20
make a dent in the costs associated with moving."=20
Clever ambulance chasing, Orange County Business Council Vice President Bil=
l=20
Carney calls it. And while some companies say they'll think seriously about=
=20
expanding, it doesn't seem like anyone intends to leave.=20
"California has it all over everywhere else. Sorry!" said Lisa Green, a vic=
e=20
president for Entridia Corp. "The power thing is a little bit of a pain, bu=
t=20
not that much of a pain."=20
"I'll take sweltering on a summer day over a Michigan winter any time," sai=
d=20
Laer Pearce, a public relations consultant in Laguna Hills.=20
Which is not to dismiss the seriousness of the crisis. "I'm concerned about=
=20
what it means for our economy," said Naomi Vine, director of the Orange=20
County Museum of Art, whose offices went dark without warning one day last=
=20
week. "If businesses can't be productive, what does that mean for the year=
=20
ahead?"=20
"It's really scary," said Pearce, who held his breath as the lights went ou=
t=20
in buildings across the street last week. "This is one that, when they were=
=20
studying California's infrastructure, nobody even predicted. What's going t=
o=20
happen with the sewers and roads and airports and everything else?"=20
Indeed, the crisis may be exposing the weak spots in California's go-go=20
economy.=20
One concern is that production shifted this year from California to more=20
energy-reliable areas might never return, Carney said. And if, even for the=
=20
short term, California businesses are perceived as being unreliable supplie=
rs=20
because they have unreliable power, the effects could be lasting, he said.=
=20
Others worry about the effect of outages on people themselves. As a culture=
,=20
we've becoming utterly dependent upon electricity to work, to play, to=20
communicate. "Everything we do is electric," said Pearce. "We just couldn't=
=20
go back to knocking it out on a manual typewriter anymore."=20
And it's starting to sink in that things will get worse before they get=20
better, said Al Milo, director at the Fullerton Public Library, which lost=
=20
power briefly last week.=20
But things will get better, the stubborn optimists say.=20
"This is a great thing that's happening," said Gerran Brown of Brown Coloni=
al=20
Mortuary in Santa Ana. "Energy prices may go up temporarily, but people wil=
l=20
learn to turn lights off and not drive gas-guzzling SUVs, and eventually=20
we'll have a truly free market where the consumer will win."=20
California will emerge from this darkness stronger than ever, with new=20
technologies, a new conservation ethic and a new emphasis on alternative,=
=20
renewable forms of energy. "It's a new opportunity for us to be an=20
international leader," Carney said.=20
Carney was hosting two Korean businessmen last week when there was a great,=
=20
sudden click and lights went out at the Business Council's office. "They to=
ld=20
me politely, to make me feel better I'm sure, that they have blackouts in=
=20
Korea, too," Carney said.=20
---------------------------------------------------------------------------=
---
----------------------------------------







Conserve and save=20
A proposed tiered-billing format is designed to spare low power users from=
=20
the rate increases. Baseline is the bottom line.=20
March 28, 2001=20
By ANNE C. MULKERN
and KATE BERRY
The Orange County Register=20
The state's power crisis hit your wallet Tuesday when state regulators hike=
d=20
electricity rates as much as 36 percent.=20
Your bill could be headed up as a result. Here are answers to some of your=
=20
questions about the rate hike:=20
Q: How much more will I pay?=20
A: Details of the plan haven't been finalized. But the idea is to create a=
=20
three-level rate structure. Those who use more electricity will pay the=20
highest rates and those who conserve will save.=20
Consumers who use less than l30 percent of their baseline power allocation=
=20
will escape any increase. (We explain baseline below.)=20
The rate increase will be distributed across the two higher tiers. The Publ=
ic=20
Utilities Commission over the next 30 days will come up with a plan to=20
determine exact rates for the two higher levels, as well as for different=
=20
types of customers, such as residential and small business.=20
Q: So what is baseline?=20
A: Baseline is the portion of your usage considered necessary for essential=
s.=20
To encourage conservation, it's set below the amount most people use.=20
The percentage of Edison customers who use less than 130 percent of baselin=
e=20
is roughly 48 percent in winter months and 45 percent in the summer.=20
Because baseline is set based on the average household's use, it means a=20
single person living in an apartment can have the same baseline as a=20
homeowner with four children.=20
Baseline varies depending on where you live. Warmer areas get higher=20
baselines. There are different baselines for the summer and winter. People=
=20
who use medical equipment in their homes can get higher baseline allocation=
s.=20
All-electric homes get higher baselines.=20
Q: What's the reason for this rate hike? Are they really doing this to get=
=20
people to conserve?=20
A: Conservation is a side benefit. The primary motivation is money.=20
The state has already shelled out $3 billion buying power in the last three=
=20
months for customers of the near-insolvent utilities.=20
The state plans to issue bonds, which will be paid for by consumers, to cov=
er=20
the power purchases. But Wall Street bankers must have proof of a steady=20
revenue stream - a rate increase - to convince them the bonds can be repaid=
.=20
However, people inevitably will conserve if they are paying more for their=
=20
power, so the plan will also help reduce demand.=20
Q: I'm already conserving. How can I cut my bill further?=20
A: It's nitty-gritty time. Replace your incandescent light bulbs with=20
fluorescent bulbs. Clean those coils at the back of your refrigerator. Turn=
=20
your air conditioner down or off. Reduce the amount of time you use your po=
ol=20
pump.=20
Many items in your house use electricity when they are plugged in, even if=
=20
they're not in use. You can cut consumption by unplugging your television,=
=20
computer, coffeepot, toaster and blow dryer.=20
Q. When will I pay the increase?=20
A: The rate hike takes effect immediately. But it could take Southern=20
California Edison a month to 45 days to implement it, so you could face=20
retroactive charges on a follow-up bill.=20
Q. I live in south Orange County and buy electricity from San Diego Gas &=
=20
Electric Co. Does this plan affect me?=20
A: No. SDG&E has applied for a rate increase, but state regulators have not=
=20
yet voted on that request.=20
Q. I'm outraged. We didn't ask for deregulation and now we're paying more.=
=20
How can I protest?=20
A: Call or write you state lawmakers and the governor. You can also join on=
e=20
of the consumer groups fighting the rate hike, such as the Foundation for=
=20
Taxpayer and Consumer Rights. It is at (310) 392-0522. The Utility Reform=
=20
Network is at (415) 929-8876.=20
---------------------------------------------------------------------------=
---
-----------------------------------




National Desk; Section A=20
RECORD RATE HIKE SET IN CALIFORNIA=20
By EVELYN NIEVES=20
?=20
03/28/2001=20
The New York Times=20
Page 1, Column 1=20
c. 2001 New York Times Company=20
SAN FRANCISCO, March 27 -- California's power regulators approved the large=
st=20
utility rate increases in state history today in an effort to avert more=20
rolling blackouts and keep the state's principal electricity producers from=
=20
collapsing in bankruptcy.=20
Despite Gov. Gray Davis's repeated statements that no new rate increases=20
would be needed to keep the state's two largest utilities solvent, the Stat=
e=20
Public Utilities Commission said today that it had no choice but to raise=
=20
rates by up to 46 percent for customers of the two utilities to avoid a=20
greater catastrophe if the companies went bankrupt.=20
''We have fought back hard in every venue possible against these unjust=20
energy prices,'' said Loretta Lynch, the commission president and a Davis=
=20
appointee, who had proposed the increases on Monday.=20
Ms. Lynch said that under a tiered rate system that would be hammered out=
=20
within the next 30 days, heavy power users would face the greatest increase=
s=20
while light users would face little or no increases. Customers will see the=
=20
rate increases in their May utility bills.=20
Perhaps 45 percent of consumers under this system -- including the poorest=
=20
residents, who would be exempt -- will face no increase at all, Ms. Lynch=
=20
said. Heavy users will face increases of about 36 percent, she said.=20
Coupled with the average 10 percent temporary rate increase in January that=
=20
the commission made permanent today, those consumers will pay 46 percent mo=
re=20
for utilities than they did in December.=20
But even people who use small amounts of power and do not see their rates=
=20
increase could feel the impact if commercial power customers, from small=20
businesses to megastores, pass on their higher electricity costs through=20
price increases.=20
Before the rate increases, power costs in California were slightly higher=
=20
than the national average, but lower than the prices paid in New York and=
=20
other Northeastern States. Residential electricity users already pay an=20
average of about $65 a month, state officials say. In addition, under a=20
previous commission decision, rates will go up an additional 10 percent nex=
t=20
year.=20
The commission, which approved the rate increase 5 to 0, also voted to=20
require that the two large utilities, the Pacific Gas and Electric Company=
=20
and Southern California Edison, reimburse the state's Department of Water=
=20
Resources $4 billion spent on their behalf and begin paying alternative=20
energy generators, which account for more than a quarter of the state's dai=
ly=20
energy needs. The two utilities have not paid their bills for months, sayin=
g=20
they are nearly bankrupt because under deregulation of the power industry,=
=20
wholesalers have been allowed to float prices while retail rates were cappe=
d.=20
The Department of Water Resources has spent $45 million a day since January=
=20
buying power on the utilities' behalf. Small alternative energy producers h=
ad=20
not been paid at all for months, with dire consequences. For two days last=
=20
week, the state's power managers were forced to order rolling blackouts=20
across parts of the state, in part because the small energy producers shut=
=20
down half their capacity because they had not been paid.=20
The rate increases will make the payoff more feasible, Ms. Lynch said, whil=
e=20
encouraging energy conservation. But a representative of the state's=20
alternative-energy generators, known as qualifying facilities, complained=
=20
that the commission did nothing to address the roughly $1.5 billion the=20
utilities owed producers.=20
''I'm not sure what our options are at this point if the state wants the=20
qualified facilities to be a part of the solution,'' said David Fogarty, a=
=20
spokesman for the Western States Petroleum Association and alternative-ener=
gy=20
co-generators, representing about 50 alternative-energy producers in=20
California.=20
For those on all sides, the commission seemed to raise as many questions as=
=20
it answered. Consumer advocates, who interrupted the hearing five times,=20
questioned why the commission had decided on the vote so abruptly, with onl=
y=20
24-hour notice to the public. Spokesmen for each of the utility companies=
=20
said they had no idea what the rate increases would mean to the average=20
customer until the tiered system was determined. They also said they did no=
t=20
know whether these new rates would mean the end of rolling blackouts.=20
''They may know something that I don't know,'' said Bruce Foster, vice=20
president of regulatory affairs at Southern California Edison, speaking of=
=20
the commission's vote outside the hearing room.=20
Mr. Foster also complained that the commission's directive to begin paying=
=20
bills to the state and the alternative energy producers -- or face a penalt=
y=20
equal to the amount owed -- might be illegal and said that the company woul=
d=20
look into appealing it.=20
Ron Low, a spokesman for Pacific Gas and Electric, also complained that the=
=20
commission's actions seemed rushed and lacked specifics.=20
The rate increase will generate about $2.5 billion a year for Pacific Gas a=
nd=20
Electric, unit of PG&E and $2.3 billion for Southern California Edison, a=
=20
unit of Edison International. While those revenues will help the utilities=
=20
buy power on the wholesale market in the future, the commission made no=20
provision for paying off about $13 billion in debt accumulated by the=20
utilities as a result of past wholesale costs. That issue would be left to=
=20
the governor and state legislators.=20
The commission heard public comment before the vote, but did not answer=20
questions afterward. Consumer advocates were furious, many blaming Governor=
=20
Davis.=20
The governor today issued a statement calling the commission's move=20
premature. ''From the beginning, I've said that my main goal was to solve=
=20
this problem while protecting the consumer from undue rate hikes,'' Mr. Dav=
is=20
said. ''The P.U.C.'s action today was premature because we do not have all=
=20
the appropriate financial numbers necessary to make a decision.''=20
Mr. Davis's statement seemed to reflect the awareness he and his aides feel=
=20
about the potential political backlash from big rate increases. Even as oth=
er=20
politicians warned that such increases would be necessary, Mr. Davis has=20
vowed to avoid them. On Monday he insisted that he had not spoken to any=20
members of the commission about the rate increase proposal and that he had =
no=20
control over its actions.=20
But Mr. Davis appointed three of the body's five members, and since taking=
=20
office two years ago he has been emphatic in saying that he expects his=20
appointees to state boards and commissions to reflect his policies.=20
He also did not hesitate to complain that he could not control the previous=
=20
members of the commission, because they were Republican appointees, and his=
=20
aides acknowledged that top gubernatorial advisers had consulted with Ms.=
=20
Lynch and approved her plans.=20
Politicians in both parties said Mr. Davis was trying to shift blame for an=
y=20
rate increase to the commission while claiming that increases were approved=
=20
over his objections. They predicted that that effort could backfire by maki=
ng=20
Mr. Davis look both timorous and calculating.=20

Chart: ''THE COST -- The Price of Power'' Average cost per kilowatt-hour fo=
r=20
residential customers for 2000. Chart shows costs for following states:=20
Connecticut ... Maine ... Massachusetts ... Rhode Island ... Vermont ... Ne=
w=20
Jersey ... New York ... Pennsylvania ... Illinois ... Indiana ... Michigan=
=20
... Ohio ... Wisconsin ... Iowa ... Kansas ... Minnesota ... Missouri ...=
=20
Nebraska ... South Dakota ... Delaware ... D.C. ... Georgia ... Maryland ..=
.=20
North Carolina ... South Carolina ... Virginia ... West Virginia ... Alabam=
a=20
... Kentucky ... Mississippi ... Tennessee ... Arkansas ... Louisiana ...=
=20
Oklahoma ... Texas ... Arizona ... Colorado ... Idaho ... Montana ... Nevad=
a=20
... New Mexico ... Utah ... California ... Oregon ... Washington ... Alaska=
=20
... Hawaii ... Wyoming ... Florida ... New Hampshire ... North Dakota=20
(Source: U.S. Department of Energy) (pg. A14)=20

---------------------------------------------------------------------------=
---
----------------------------------------





Calif. Regulators Raise Power Rates


By KAREN GAUDETTE
Associated Press Writer
SAN FRANCISCO (AP) _ As protesters jeered ``Hell, no, we won't pay!''=20
California regulators approved electricity rate increases of up to 46 perce=
nt=20
Tuesday to head off blackouts this summer and keep the state's two biggest=
=20
utilities from going under.=20
The increases _ approved 5-0 by the Public Utilities Commission _ are the=
=20
biggest in California history and take effect immediately for the 25 millio=
n=20
people served by Pacific Gas and Electric Co. and Southern California Ediso=
n=20
Co.=20
``The PUC has done all it can,'' commission president Loretta Lynch said.=
=20
``We have fought back hard in every venue possible against these unjust=20
energy prices.''=20
The PUC also ordered the utilities to pay the state for billions of dollars=
=20
of electricity it has bought on behalf of their customers. Just how much=20
wasn't known; the state has not disclosed how much it has spent on various=
=20
long- and short-term power contracts.=20
For the rate increase, the commission said it will create a tiered system=
=20
that will protect poor people and penalize customers who use the most=20
electricity.=20
Lynch proposed the higher rates as a way to force ``electricity hogs'' to=
=20
conserve and to help keep SoCal Edison and PG&E solvent.=20
The plan is also seen as a way to protect California's budget surplus, whic=
h=20
is being drained of $40 million to $50 million a day as the state buys powe=
r=20
for the cash-strapped utilities. Since the crisis began, more than $4.2=20
billion in taxpayer money has been spent to keep the lights on.=20
SoCal Edison and PG&E say they have lost more than $13 billion since last=
=20
summer because of high wholesale electricity prices and because California'=
s=20
1996 deregulation law prevents the utilities from passing those costs on to=
=20
their customers.=20
Both have urged the PUC to raise rates. Following the PUC meeting, SoCal=20
Edison said it will begin paying interest to bondholders after weeks of=20
missing payments.=20
The rate increase will be on top of the 9 percent to 15 percent hike approv=
ed=20
by the PUC in January, and a 10 percent increase already scheduled for next=
=20
year.=20
Ratepayers and consumer groups branded the latest plan a rip-off.=20
``We are being held hostage by a handful of energy companies that, under=20
deregulation, got control of our electricity supply,'' said Harvey=20
Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in=
=20
Santa Monica. ``Until our elected officials start acting to protect us, we=
=20
are going to be at their mercy, at the mercy of this ripoff.''=20
Democratic Gov. Gray Davis has said that he opposes rate increases but that=
=20
he has no power over the PUC. However, three of the PUC members are his=20
appointees. And his aides have told lawmakers that rates have to rise.=20
Residents already pay about $65 per month for electricity _ 7.2 cents per=
=20
kilowatt hour to SoCal Edison and 6.5 cents per kwh to PG&E.=20
The latest rate hike would mean a 42 percent increase for SoCal Edison=20
customers and 46 percent for PG&E customers for electricity alone. Since th=
e=20
rates are bundled with other fees, the average price of a kilowatt hour is=
=20
closer to 12.5 cents for SoCal Edison customers and 10.5 cents for PG&E=20
customers.=20
Spokesmen for both utilities said it is impossible to calculate how much th=
e=20
plan will cost customers because the effects of the tiered system are not=
=20
known.=20
The PUC meeting was disrupted at least five times by screaming protesters,=
=20
and dismay over the plan was seen elsewhere.=20
Sam Sahouria, owner of the Fox Plaza Grocery and Deli in San Francisco, sai=
d=20
rate hikes could be too much for his family-run store to bear. ``It's=20
terrible. We will probably go out of business,'' he said.=20
Belinda Lazzerini, 40, who serves fruit smoothies at Jitters & Shakes in Sa=
n=20
Francisco, said her electric bills have jumped to $70 for her studio=20
apartment.=20
``The Laundromat has gone up from $1.50 to $3, so now we will have to clean=
=20
our clothes by hand and dry them in the basement,'' she said. ``It's crazy.=
''=20
The state has pledged to issue at least $10 billion in revenue bonds to buy=
=20
power for SoCal Edison and PG&E _ bonds that would be repaid by the=20
utilities' customers. However, state officials have told lawmakers that sta=
te=20
efforts to help the utilities could hit $23 billion by 2003.=20
California's Independent System Operator declared a Stage 2 alert Tuesday a=
s=20
electricity reserves dropped to about 5 percent.=20
The alert follows two days of statewide rolling blackouts last week and two=
=20
others in January. ISO spokeswoman Stephanie McCorkle said many power plant=
s=20
that use alternative sources of energy remained down, in part because haven=
't=20
been paid by the utilities.=20
=20












