Message-ID: <22981892.1075860405119.JavaMail.evans@thyme>
Date: Fri, 23 Mar 2001 02:03:00 -0800 (PST)
From: miyung.buster@enron.com
To: ann.schmidt@enron.com, bryan.seyfried@enron.com, dcasse@whwg.com, 
	dg27@pacbell.net, elizabeth.linnell@enron.com, filuntz@aol.com, 
	james.steffes@enron.com, janet.butler@enron.com, 
	jeannie.mandelker@enron.com, jeff.dasovich@enron.com, 
	joe.hartsoe@enron.com, john.neslage@enron.com, 
	john.sherriff@enron.com, joseph.alamo@enron.com, 
	karen.denne@enron.com, lysa.akin@enron.com, 
	margaret.carson@enron.com, mark.palmer@enron.com, 
	mark.schroeder@enron.com, markus.fiala@enron.com, 
	mary.hain@enron.com, michael.brown@enron.com, mike.dahlke@enron.com, 
	mona.petrochko@enron.com, nicholas.o'day@enron.com, 
	paul.kaufman@enron.com, peggy.mahoney@enron.com, 
	peter.styles@enron.com, richard.shapiro@enron.com, 
	rob.bradley@enron.com, sandra.mccubbin@enron.com, 
	shelley.corman@enron.com, stella.chan@enron.com, 
	steven.kean@enron.com, susan.mara@enron.com, mike.roan@enron.com, 
	alex.parsons@enron.com, andrew.morrison@enron.com, lipsen@cisco.com, 
	janel.guerrero@enron.com, shirley.hudler@enron.com, 
	kathleen.sullivan@enron.com, tom.briggs@enron.com, 
	linda.robertson@enron.com, lora.sullivan@enron.com, 
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Subject: Energy Issues
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Please see the following articles:

AP Wires, Thurs 3/22: "Report: Power wholesalers overcharged California $5.=
5=20
billion"

Dow Jones Newswires, Thurs 3/22: "Reliant To Appeal Fed Judge Ruling To Sel=
l=20
Pwr To Calif"

Sac Bee, Thurs 3/22: "Federal judge orders major power wholesaler to sell t=
o=20
California"

San Jose Mercury News Thurs, 3/22: "State falling short on pacts that provi=
de=20
low-cost energy"

Contra Costa Times, Thurs 3/22: "Crisis saps state surplus"

Sac Bee. Fri, 3/23:  "Bill to pay small energy firms stalls"

Sac Bee, Fri., 3/23:  "House panel ends energy hearings -- will it step in?

Sac Bee, Fri, 3/23:  "Dan Walters: Crisis deepens: politicos panic"

San Diego Union, Fri., 3/23:  "Report says power wholesalers overcharged=20
state $6 billion"

San Diego Union, Fri, 3/23:  "Disappearing state surplus sparks alarm"

San Diego Union, Fri., 3/23:  "Outages darken economic outlook in state, so=
me=20
say"

San Diego Union, Fri., 3/23:  "Out-of-state generators question power=20
regulators' authority "

San Diego Union, Fri., 3/23:  "Allegheny Energy makes big California=20
connection"

LA Times, Fri, 3/23:  "Judge Frees Small Firm From Edison Contract "

SF Chron, Fri, 3/23:  "Lodi Defies Order for Blackouts=20
Utility tells PG&E to 'pay the bills' "

SF Chron, Fri, 3/23:  "Coming Down to the Wire=20
State legislators battle over alternative energy bills"

SF Chron, Fri, 3/23:  "Grid Operators Push to Prevent Overcharging=20
They say regulators must be aggressive to stop billing abuses"=20

Mercury News, Fri., 3/23:  "State's bill for energy could double this year"

Mercury News, Fri., 3/23:  "Plan for alternate power plants stalls"



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

Report: Power wholesalers overcharged California $5.5 billion=20
DON THOMPSON, Associated Press Writer
Thursday, March 22, 2001=20
,2001 Associated Press=20
(03-22) 11:41 PST SACRAMENTO, Calif. (AP) -- Electricity wholesalers have=
=20
overcharged California more than $5 billion since May by manipulating the=
=20
energy market, according to a report prepared for power grid managers.=20
The Independent System Operator will file the findings with federal=20
regulators and ask for a refund, ISO spokesman Patrick Dorinson said.=20
The state auditor also said Thursday that the state's 1996 deregulation law=
=20
encouraged both buyers and sellers of electricity to ``manipulate wholesale=
=20
prices to their advantage'' by underestimating supply and demand.=20
The auditor's report lays out what it calls ``a complex combination'' of=20
deficiencies and misjudgments it says led to the state's power problems.=20
According to the ISO report, five in-state power suppliers and 16 importers=
=20
frequently offered electricity at prices higher than it cost them to produc=
e=20
-- effectively withholding supplies -- or didn't bid at all when they were=
=20
able to generate power.=20
ISO Director of Market Analysis Anjali Sheffrin presented the findings at a=
=20
conference in Berkeley last week.=20
The companies have denied overcharging California and have said they expect=
=20
the Federal Energy Regulatory Commission will determine their prices were=
=20
justified.=20
The commission has recently stepped up scrutiny of power companies' behavio=
r=20
during California's power crisis, asking suppliers to justify $124 million =
in=20
sales during the first two months of the year or refund the money. Critics=
=20
claim thousands of additional questionable sales are not being challenged.=
=20
California has been spending about $45 million a day -- $4.2 billion since=
=20
January -- to purchase power for Pacific Gas and Electric Co. and Southern=
=20
California Edison. Both utilities, the state's largest, have been cut off b=
y=20
electricity wholesalers because their credit is almost worthless.=20
Edison and PG&E say they are nearly $14 billion in debt due to soaring=20
wholesale power costs. The state's deregulation law blocks them from=20
recovering the costs from customers.=20
State Controller Kathleen Connell said Wednesday that the state's=20
power-buying is gutting its budget surplus.=20
Since the state started making emergency power buys, the surplus has fallen=
=20
from $8.5 billion to about $3.2 billion, she said.=20
Connell ordered an audit of the power buys, saying Gov. Gray Davis is=20
withholding key financial information from her office and the Legislature.=
=20
She said she would refuse to transfer $5.6 billion into a ``rainy day fund'=
'=20
she said was set up to impress Wall Street as the state prepares to issue $=
10=20
billion in revenue bonds to cover its power buys.=20
Transferring the money would leave the state general fund $2.4 billion in=
=20
debt, Connell said.=20
Sandy Harrison, spokesman for the state Department of Finance, and Keely=20
Bosler, of the Legislative Analyst's Office, said such transfers are routin=
e=20
and required by law.=20
``The law says she has to do it. The law does not give her the power to=20
demand that kind of audit information,'' Harrison said.=20
Davis spokesman Steve Maviglio said the administration has released the=20
financial information it can without jeopardizing negotiations for long-ter=
m=20
power contracts with wholesalers.=20
Also Wednesday, a federal judge ordered a major wholesaler, Reliant Energy=
=20
Services, to continue selling power to California despite its fear that it=
=20
will not be paid.=20
The ISO buys power from companies like Reliant on behalf of utilities in=20
attempts to fend off rolling blackouts like those that hit the state this=
=20
week and during two days in January.=20
---------------------------------------------------------------------------=
---
---------------------------------
Reliant To Appeal Fed Judge Ruling To Sell Pwr To Calif

03/22/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- Reliant Energy Inc. (REI) said Thursday it will=
=20
immediately file with the 9th Circuit Court of Appeals in San Francisco in=
=20
response to a federal judge's ruling late Wednesday that the company contin=
ue=20
selling power to California regardless of whether it is paid.=20
U.S. District Court Judge Frank Damrell granted California's Independent=20
System Operator, which makes last minute power purchases in the spot market=
,=20
a preliminary injunction against Reliant, saying Californians were at risk =
of=20
irreparable harm if Reliant stopped selling power to the state.
The ISO, manager of the state's electricity grid, said the judge's ruling=
=20
will allow the agency to keep the lights on in California.=20
Reliant, which is owed more than $300 million from the state's cash-strappe=
d=20
utilities, supplies California with about 3,000 megawatts of electricity fr=
om=20
power plants it owns in the state.=20
Reliant spokesman Richard Wheatley said the state Department of Water=20
Resources, the agency that buys California's bulk power needs on behalf of=
=20
PG&E Corp. (PCG) unit Pacific Gas & Electric, Edison International (EIX) un=
it=20
Southern California Edison and Sempra Energy (SRE) unit San Diego Gas &=20
Electric, should back the ISO's last minute power purchases.=20
In a filing with the Securities and Commission, Reliant said it is owed $10=
8=20
million by the DWR for last minute power purchases the ISO made during the=
=20
six weeks prior to the agreement Reliant made with the DWR.=20
Damrell dismissed Reliant's claim, saying he does not have the authority to=
=20
force the DWR to pay for that power.=20
"We're going to immediately appeal Judge Damrell's order," Wheatley said.=
=20
"Clearly the judge understands the implications of his order. We are requir=
ed=20
to do business with creditworthy entities. Unfortuantely the judge did not=
=20
force the ISO to post a surety bond, which would allowed us to do business=
=20
with the ISO."=20
Gov. Gray Davis has said the state is not responsible for the last minute=
=20
power purchases the ISO makes, despite a law passed authorizing the DWR to=
=20
buy power on behalf of the utilities.=20
Wheatley added that the company will also seek relief on the issue at the=
=20
Federal Energy Regulatory Commission. Damrell's ruling remains in effect=20
until the Federal Energy Regulatory Commission rules on the matter.=20
Separately, Wheatley said a short-term power supply contract that Reliant=
=20
signed with the DWR expired Monday and the DWR has not renewed the contract=
.=20
A spokesman for the DWR would not comment on the issue.=20
-By Jason Leopold; Dow Jones Newswires; 323-658-3874;=20
jason.leopold@dowjones.com
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------------------
Federal judge orders major power wholesaler to sell to California

Updated: March 21, 2001 - 8:23 p.m.=20
A federal judge issued a preliminary injunction Wednesday ordering a major=
=20
electricity wholesaler to continue selling to California despite its fear=
=20
that it will not get paid.=20
U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of=
=20
irreparable harm if Reliant Energy Services stopped selling power to the=20
Independent System Operator, which oversees the state's power grid. The ISO=
=20
buys last-minute power on behalf of utilities to fill gaps in supply to try=
=20
to fend off blackouts.=20
Damrell dismissed Reliant's attempt to force the state Department of Water=
=20
Resources to back the ISO's purchases for the state's two biggest utilities=
.=20
The state has been spending about $50 million a day on power for Pacific Ga=
s=20
and Electric Co. and Southern California Edison, both denied credit by=20
suppliers after amassing billions of dollars in debts.
The judge said he had no authority to force the DWR to pay for that power.=
=20
Gov. Gray Davis has said the state isn't responsible for purchasing the=20
costly last-minute power ISO buys for Edison and PG&E, despite a law=20
authorizing state power purchases on the utilities' behalf.=20
ISO attorney Charles Robinson said the ruling gives ISO operators "a tool t=
o=20
assist them in keeping the lights on in California."=20
"Had the decision gone the other way, one could expect other generators to=
=20
simply ignore emergency orders," Robinson said.=20
Damrell's preliminary injunction will remain in effect until the Federal=20
Energy Regulatory Commission rules on the matter.=20
Damrell denied the ISO's request for preliminary injunctions against three=
=20
other wholesalers, Dynegy, AES and Williams, who agreed to continue selling=
=20
to the ISO pending the FERC ruling.=20
Spokesmen for Reliant, Dynegy, AES and Williams were out of the office=20
Wednesday night and didn't immediately return calls from The Associated Pre=
ss=20
seeking comment on the ruling.=20
The ISO went to court in February after a federal emergency order requiring=
=20
the power sales expired. The judge then issued a temporary restraining orde=
r,=20
requiring the sales, but dropped it after the suppliers agreed to continue=
=20
sales to California, pending his Wednesday ruling.=20
The ISO said it would lose about 3,600 megawatts if the suppliers pulled ou=
t,=20
enough power for about 2.7 million households. One megawatt is enough for=
=20
roughly 750 homes.=20
Grid officials said Reliant's share alone is about 3,000 megawatts. Reliant=
=20
said the amount at issue actually is less than a fourth of that, because mo=
st=20
of the power is committed under long-term contracts.=20
Reliant, which provides about 9 percent of the state's power, worries it=20
won't get paid due to the financial troubles of PG&E and Edison.=20
PG&E and Edison say that together they have lost about $13 billion since Ju=
ne=20
due to soaring wholesale electricity costs that California's 1996=20
deregulation law bars them from passing onto customers.=20
At the same time, the state has faced a tight electricity supply, due in pa=
rt=20
to California power plant shutdowns for maintenance and to a tight=20
hydroelectric supply in the Pacific Northwest.=20
Managers of the state power grid imposed rolling blackouts across the state=
=20
Monday and Tuesday as supply fell short of demand. Wednesday, cooling=20
temperatures and the completion of repairs at several power plants allowed=
=20
the state to avoid blackouts.
State Controller Kathleen Connell said Wednesday that the energy crunch als=
o=20
imperils California's financial health.
Connell said the state's power-buying on behalf of Edison and PG&E is is=20
gutting its budget surplus. Since the state started making emergency power=
=20
buys in January, the surplus has fallen from $8.5 billion to about $3.2=20
billion, she said.=20
Connell ordered an audit of the state's power-buying, saying Davis is=20
withholding key financial information from her office and the Legislature.=
=20
She is refusing a request by Davis and the Legislature to transfer $5.6=20
billion into a "rainy day fund" she said was set up to impress Wall Street =
as=20
the state prepares to issue $10 billion in revenue bonds to cover its=20
power-buying.=20
Transferring the money would leave the state general fund $2.4 billion in=
=20
debt, Connell said.=20
Sandy Harrison, spokesman for the state Department of Finance, and Keely=20
Bosler of the Legislative Analyst's Office, said such transfers are routine=
=20
and required by law.=20
They put the state's budget surplus at $5.6 billion.=20
"The law says she has to do it. The law does not give her the power to dema=
nd=20
that kind of audit information," Harrison said.=20
He said the state's budget isn't in danger because it will be repaid with t=
he=20
$10 billion in long-term debt.=20
Wells Fargo & Co. chief economist Sung Won Sohn said he sees little progres=
s=20
in efforts to fix the state's power problems and end state electricity=20
purchases.=20
"If we're going to pour money into a bottomless pit, I would worry about th=
e=20
state's finances," he said. "At some point we're going to run out of money.=
"
The controller's criticism of fellow Democrat Davis won support from Assemb=
ly=20
Republicans and Secretary of State Bill Jones, a Republican considering=20
challenging Davis next year.=20
Jones said he wants to announce his own plan to solve the state's energy=20
woes, but can't unless Davis releases more financial details.=20
Davis spokesman Steve Maviglio dismissed the criticism.
"Political grandstanding doesn't generate one more kilowatt of energy for=
=20
California in this time of emergency," he said.=20
Maviglio said the administration has released the financial information it=
=20
can without jeopardizing negotiations for long-term power contracts with=20
wholesalers.=20
Also Wednesday, a report by Davis' chief power negotiator appears to show=
=20
that as much as 75 percent of the state's power purchases will have to be o=
n=20
the expensive short-term market this summer, said Sen. Debra Bowen, D-Marin=
a=20
del Rey, chairwoman of the Senate Energy Committee.=20
"The prices may be phenomenol," she said, particularly given predicted=20
hydroelectric shortages due to drought in the Pacific Northwest.=20
The report by David Freeman, who is negotiating the state's long-term power=
=20
contracts, shows California has finalized 19 contracts and has 25 agreement=
s=20
in principle. Freeman said DWR is continuing to negotiate other contracts.
Bowen said FERC should impose short-term price caps or let generators to=20
charge enough to make a reasonable profit "or we could be subject to enormo=
us=20
price-gouging this summer."=20

-- Associated Press
---------------------------------------------------------------------------=
---
-----------------------------------------------------------------
State falling short on pacts that provide low-cost energy=20
Published Thursday, March 22, 2001, in the San Jose Mercury News=20
BY CHRIS O'BRIEN AND JOHN WOOLFOLK=20

Mercury News=20

The state has signed low-cost contracts for just a third of the energy it=
=20
needs this year, raising the prospect that California could be forced to bu=
y=20
much of its electricity this summer on the expensive spot market.=20
A spokesman for Gov. Gray Davis conceded Wednesday that the state will be i=
n=20
trouble without more contracts, but insisted California will meet its needs=
=20
through conservation and additional long-term deals for cheap electricity.=
=20
The state, according to a report released Wednesday, has fallen far short o=
f=20
the governor's goal of filling almost all its electricity needs through suc=
h=20
deals. In fact, the state has lined up contracts for about half the amount=
=20
Davis had projected earlier this month.=20
If the state has to rely heavily on the volatile spot market, where the pri=
ce=20
of electricity this summer could reach five times the state's contract pric=
e,=20
pressure could mount to raise the cap on the electricity rates consumers pa=
y.=20
But Steven Maviglio, the governor's spokesman, said, ``The governor has sai=
d=20
he's committed to work this in the existing rate structure, so that's the=
=20
plan.''=20
In the report sent to state lawmakers, the state Department of Water=20
Resources indicated that it had secured just more than 20 million=20
megawatt-hours for this year, leaving it far short of the 60 million=20
megawatt-hours needed.=20
``This is just a progress report,'' Maviglio said. ``They did all this in=
=20
three weeks, which is pretty amazing when you think about it, and we have a=
=20
lot more to do.''=20
The state got into the power buying business in January, supplying it to th=
e=20
state's nearly bankrupt utilities.=20
The state negotiated long-term contracts with generators to supply that pow=
er=20
at a reduced rate. Based on the report, the state will pay an average of $6=
8=20
per megawatt-hour over the next 10 years -- significantly less than in=20
December when prices spiked higher than $300 per megawatt-hour but not as l=
ow=20
as the $55 Davis hoped to reach.=20
Most of this power, however, won't be delivered until 2004. From 2004 to=20
2006, the Department of Water Resources estimates, it has enough power unde=
r=20
contract. Until then, the amount falls short.=20
In 2001, it appears the state has about one-third of the power it needs. Th=
e=20
gap closes to about half in 2002 and two-thirds in 2003.=20
At a news conference in Los Angeles two weeks ago, Davis said the state wou=
ld=20
have to buy only 30 to 45 percent of the power it needs this summer on the=
=20
open market.=20
At the time, critics said with only two-thirds of the power under contract,=
 a=20
rate increase was almost inevitable. Even Davis' chief negotiator, S. David=
=20
Freeman, offered a bleak assessment for the summer, saying that all availab=
le=20
electricity has already been sold.=20
``We'll be subject to extremely high prices,'' said Frank Wolak, a Stanford=
=20
professor who sits on a market committee for the Independent System Operato=
r,=20
the agency that runs the state power grid.=20
Wolak said there are two main hopes for avoiding a price increase this=20
summer: Federal officials could cap the wholesale price, a step they've=20
resisted, or Californians can conserve an unprecedented amount of power.
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------------------
Crisis saps state surplus
POWER CRISIS=20
Controller moves to block a transfer of funds, saying the $8.5 billion=20
surplus has been cut more than half since January=20
By Mike Taugher
TIMES STAFF WRITER=20
The energy crisis has bled California's once-touted budget surplus by more=
=20
than half since taxpayers began buying electricity two months ago, leading =
a=20
top state finance official Wednesday to order an audit of the power purchas=
es=20
and block Gov. Gray Davis' plan to transfer funds into a reserve account.=
=20
A booming economy last year produced a budget surplus that totaled $8.5=20
billion in January. But that figure now stands at about $3.2 billion,=20
according to Controller Kathleen Connell.=20
"We started this year with a generous budget surplus," Connell said in a=20
statement announcing her decision to block what Davis administration=20
officials described as a routine transfer of surplus money. "The energy=20
crisis has taken much of that away, and this transfer on top of the=20
electricity purchases would put the fund at risk."=20
Meanwhile, the Davis administration released a report by David Freeman, the=
=20
governor's chief negotiator on power purchases, on the progress of executin=
g=20
long-term agreements meant to stabilize the power buys.=20
According to the report, only about 40 percent of the electricity needed fr=
om=20
the open market this year has been lined up. That means the state could be=
=20
forced to continue buying a substantial amount of power on the highly=20
expensive spot market and further drain its coffers.=20
And a key regulatory panel is scheduled next week to issue a ruling that=20
would determine how quickly state funds will be replenished when it decides=
=20
what portion of electric bill payments should be allocated to the state=20
treasury, a decision that could include a rate increase to fully repay=20
taxpayers without further crippling the state's two largest electric=20
utilities.=20
The Public Utilities Commission also will consider whether it will force th=
e=20
utilities to pay alternative energy producers, whose shutdowns this week=20
contributed to blackouts.=20
Connell's action underscores a growing nervousness over the sheer volume of=
=20
money that is being poured into energy buys, despite the fact that state=20
officials plan to replenish the treasury with up to $10 billion in loans th=
at=20
will be repaid by electricity consumers.=20
The state has committed to spending $4.2 billion to date to keep lights on=
=20
since taxpayers were forced in mid-January to take over electricity buys fr=
om=20
the financially crippled utilities, Pacific Gas & Electric Co. and Southern=
=20
California Edison. Tax money is going out at a clip of about $50 million a=
=20
day.=20
High prices already have brought PG&E and Edison to the brink of bankruptcy=
,=20
and now the state's surplus is at risk, according to Connell.=20
In addition to requesting an audit and announcing her intention to delay th=
e=20
transfer to the reserve account, Connell said she wanted the administration=
=20
to send her office more information about the electricity purchases.=20
Davis' representatives questioned Connell's authority in trying to block th=
e=20
funds transfer, which they called a routine accounting procedure, and accus=
ed=20
her of making political hay.=20
"It is not helpful to the taxpayers or ratepayers or the people who just wa=
nt=20
to keep the lights on, it isn't helpful to have the situation muddied like=
=20
this," said Sandy Harrison, a Finance Department spokesperson. "We're sorry=
=20
it came up in this manner."=20
Connell and the administration have butted heads in recent weeks. The=20
controller wants to post details of the state's electricity purchases on he=
r=20
Web site, a plan that have been delayed under pressure from Davis because o=
f=20
the governor's concerns that releasing those details will allow power=20
generators and traders to sell at higher prices.=20
Harrison said administration officials believe Connell lacks the authority=
=20
either to block the funds transfer to a reserve account or to audit the sta=
te=20
water resources department.=20
Two days of widespread blackouts this week show how vulnerable the power gr=
id=20
is to financial glitches. Although several factors combined to produce the=
=20
blackouts, state power officials say the outages could have been avoided if=
=20
the utilities were paying their bills to alternative energy producers.=20
Many of those producers, including clean-burning natural gas power plants,=
=20
wind, solar and geothermal energy developers, shut down enough production t=
o=20
spell the difference between grid reliability and blackouts Monday and=20
Tuesday.=20
Davis called the utilities' failure to pay bills to those producers, known =
as=20
qualifying facilities, "immoral." The QFs were either unable to buy gas fro=
m=20
their suppliers or were frustrated with the utilities' failure to pay them.=
=20
"The utilities hoarded billions of dollars since November without paying an=
y=20
money out," said Davis spokesman Steve Maviglio. "They've got the money --=
=20
we're pulling the trigger to make them pay it."=20
The utilities, however, say they are doing all they can to conserve enough=
=20
cash to continue operating. Together, they owe the QFs about $1.5 billion.=
=20
Next week, the PUC is scheduled to consider whether to force the utilities =
to=20
heed Davis' demand to pay the QFs, and it might also decide how much of=20
ratepayers' bill payments will be used to refund taxpayers for power buys.=
=20
PG&E says that under a formula proposed by the administration, the water=20
resources department would receive about 40 percent of the money collected=
=20
from ratepayers for power purchases.=20
The rest of that money, about $240 million, would have to be divided among=
=20
QFs, existing power contracts, operating PG&E's nuclear and hydroelectric=
=20
plants, and what hour-by-hour purchases the utility still must make on the=
=20
spot market, according to PG&E spokesman John Nelson.=20
"There isn't enough to do that," he said.=20
That is making it increasingly likely that electric bills will be hiked,=20
according to a growing chorus of officials and experts.=20
Unless rates are raised, Nelson said, the only entity that can absorb a lac=
k=20
of payment or a partial payment is the state treasury. Cutting off any othe=
rs=20
will lead to electricity becoming unavailable and more blackouts, he said.=
=20
"If they do it under existing rates -- given that the existing pool of mone=
y=20
is not enough -- who doesn't get paid or who gets a partial payment?" Nelso=
n=20
said. "What's the only entity left with wiggle room? The state."=20
Rate hikes are also a sticking point in negotiations to bail out the=20
utilities through purchase of their transmission lines and other assets,=20
Maviglio said.=20
"They want rate increases of significant magnitude, and we're not going=20
there," he said.=20
WE CAN TRIM STORY HERE IF NECESSARY, BUT KEEP TAGLINES AT BOTTOM=20
About one-third the electricity needed by the customers of California's thr=
ee=20
major utility companies is produced by the companies themselves, one-third=
=20
comes from alternative producers who use environmentally friendly technique=
s=20
and one-third is bought on the open market.=20
The state stepped in to buy the one-third needed from the open market after=
=20
the utility companies ran out of cash and credit in January to make the=20
purchases themselves.=20
But that electricity has proven to be enormously expensive, and Davis has=
=20
planned to lower those prices by committing to long-term purchases.=20
Freeman's report on the progress of those long-term purchases, dated March =
15=20
but released this week, said the state has finalized 19 contracts with seve=
n=20
suppliers and reached 25 additional agreements.=20
Mike Taugher covers the environment and energy. Reach him at 925-943-8324 o=
r=20
mtaugher@cctimes.com.=20
Staff writer Andrew LaMar contributed to this story.
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------------------
Bill to pay small energy firms stalls
By Kevin Yamamura, Dale Kasler and Jim Sanders
Bee Staff Writers
(Published March 23, 2001)=20
A quickly melded proposal that would assure payments for alternative energy=
=20
suppliers whose money woes contributed to power blackouts this week stalled=
=20
Thursday in a divided Legislature.=20
The state Senate passed the bill, AB 8x, but with Republicans balking, it w=
as=20
rejected in the Assembly along party lines. Assembly leaders said they may=
=20
try again today.=20
For most of Thursday, lawmakers scrutinized legislation they had overhauled=
=20
the night before to include Gov. Gray Davis' plan to force utilities to pay=
=20
solar, wind and small gas-fired suppliers. Such providers, called "qualifie=
d=20
facilities," or QFs, provide more than 20 percent of California's=20
electricity, and their shutdowns were partly to blame for rolling blackouts=
=20
Monday and Tuesday.=20
Under the Democratic governor's plan, the state Public Utilities Commission=
=20
would determine prices at which alternative generators may sell power, but=
=20
legislation is needed to authorize the PUC action.=20
Lawmakers faced time pressures Thursday. They wanted to pass the bill quick=
ly=20
so the PUC could act next week and legislators could embark Monday on an=20
annual three-day lobbying trip in Washington, D.C.=20
Assembly Speaker Robert Hertzberg, D-Sherman Oaks, said the Republicans'=20
rejection of AB 8x could jeopardize more than $4 billion the state has spen=
t=20
or allocated for electricity during the energy crisis.=20
Hertzberg said producers of alternative energy, which are owed more than $1=
=20
billion, have threatened to drag debt-ridden utilities into involuntary=20
bankruptcy if the Legislature failed to pass the measure.=20
"They said it, and I believe it," Hertzberg said. If such bankruptcies occu=
r,=20
he added, the state with its multibillion-dollar debt would become "just=20
another creditor in a pile of creditors."=20
But Assembly Republican leader Bill Campbell of Villa Park said the=20
finger-pointing is unfair. Passage of AB 8x would not necessarily prevent=
=20
bankruptcies, he said.=20
One alternative energy provider won a crucial court ruling Thursday that=20
staved off, at least for a while, threats by some creditors to haul one or=
=20
both big utilities into bankruptcy court for nonpayment of bills.=20
CalEnergy Co. Inc. won the right to sell its geothermal power, which was=20
contracted to Southern California Edison, on the open market. CalEnergy sai=
d=20
it is owed $45 million by Edison.=20
If the Imperial County judge hadn't ruled in CalEnergy's favor, the company=
=20
and seven other QFs "were fully prepared" to file an involuntary bankruptcy=
=20
petition against Edison this morning, said David Sokol, chief executive of=
=20
CalEnergy's parent, MidAmerican Energy Holdings Co. of Des Moines, Iowa.=20
"That is currently off the table."=20
An involuntary bankruptcy proceeding would take California's energy crisis=
=20
into uncharted territory, although a bankruptcy judge would have the leeway=
=20
to reject the filing.=20
Freed from its contract with Edison, CalEnergy will move to sell its=20
electricity "to people who will pay for it," Sokol said.=20
Besides calming the bankruptcy movement temporarily, the ruling also could=
=20
prompt other alternative energy providers -- hundreds of which have shut do=
wn=20
because of nonpayment by Edison and Pacific Gas and Electric Co. -- to foll=
ow=20
CalEnergy's example and find other buyers for their electricity, said Gary=
=20
Ackerman of the Western Power Trading Forum, an association of generators.=
=20
Assembly Republicans said they felt the Senate's decision to package three=
=20
important energy issues into a single bill was an attempt to ramrod=20
legislation through both houses.=20
"We have to stand and say no," Campbell said during floor debate.=20
Besides determining alternative generator payments, the bill would change a=
n=20
earlier law by capping the value of bonds the state may sell for power=20
purchases at $10 billion. It also would extend to large businesses an=20
existing rate cap in the San Diego Gas and Electric Co. service area.=20
And it would earmark a portion of rates paid by utility customers to fund t=
he=20
state's ongoing power purchases. Within a week, the state will have spent=
=20
$4.2 billion on power since January.=20
Without the bill, some legislators fear, Pacific Gas and Electric and=20
Southern California Edison would be reimbursed before the state.=20
"They have got (some) gall to go to the PUC and say they're going to go to=
=20
court to keep our money -- to keep our money to pay off their creditors,"=
=20
said Senate President Pro Tem John Burton, D-San Francisco.=20
Most of the bill's controversy, however, centered on how the PUC would trea=
t=20
gas-fired alternative generators.=20
The commission issued a revised draft decision Wednesday that would impose=
=20
prices for qualifying facilities at $79 a megawatt-hour for five-year=20
contracts or $69 a megawatt-hour for 10 years.=20
But those producers that use natural gas -- representing about two-thirds o=
f=20
the alternative energy providers in California -- spent Thursday arguing th=
at=20
Davis' plan to rescue them would all but guarantee that they would go out o=
f=20
business instead.=20
The plan -- ordering Edison and PG&E to pay them a fixed price for their=20
power -- would set rates well below the cost of natural gas, they said.=20
Democratic lawmakers tried to assure such producers that the PUC would set=
=20
prices that make business sense, even obtaining a letter to that effect fro=
m=20
Loretta Lynch, who heads the commission.=20
Davis has vowed to fine Edison and PG&E if they don't pay alternative=20
producers for future deliveries. But Sokol said his company isn't convinced=
=20
that Edison will pay.=20
Calling Edison a "confrontive, in-your-face, nasty organization," Sokol sai=
d=20
the utility was "sitting on $2 billion" and not paying its bills. Edison, i=
n=20
a Securities and Exchange Commission filing Thursday, said its debts outwei=
gh=20
its cash reserves by $722 million.=20
The Senate sent the Assembly two other bills that deal specifically with=20
supply and demand. The first, SB 5x, would spend about $1 billion on energy=
=20
conservation and low-income assistance programs. The other, SB 28x, would=
=20
streamline siting procedures for power plant construction.=20
In separate energy-related matters Thursday, the Assembly approved:=20
AB 21x, which would allow businesses, industries or other electrical=20
customers to negotiate private contracts with energy providers.=20
Nine energy bills designed to generate or save 665 megawatts of electricity=
=20
-- including 345 megawatts this summer. One megawatt is enough electricity =
to=20
light about 1,000 homes.=20
The state put power emergencies behind it, after dropping out of a Stage 1=
=20
alert late Wednesday. The California Independent System Operator, which=20
manages the state's power transmission grid, was predicting no further aler=
ts=20
this week. It expected cooling temperatures and a regular dropoff in=20
electricity use on Fridays to lessen demand, at the same time that more pow=
er=20
plants were returning to service.=20
Bee staff writer Carrie Peyton contributed to this report.=20
---------------------------------------------------------------------------=
---
-----------------------------------------
House panel ends energy hearings -- will it step in?
By David Whitney
Bee Washington Bureau
(Published March 23, 2001)=20
WASHINGTON -- A key House panel wrapped up a series of hearings on the=20
California electricity crisis Thursday and now will decide whether to come =
to=20
the state's aid with legislation.=20
But the panel's Texas chairman made clear that West Coast price controls=20
won't be on the table.=20
"Caps will not be in anything I am submitting," said Rep. Joe Barton,=20
chairman of the House Energy and Commerce Committee's energy and air qualit=
y=20
subcommittee.=20
Some form of federal controls to hold down escalating wholesale prices this=
=20
summer because of power shortages has been the most frequent appeal of=20
witnesses who testified before the panel during roughly 30 hours of hearing=
s=20
over five days.=20
Such controls have been sought by the governors of California, Oregon and=
=20
Washington. As power shortages are forecast for other regions, states like=
=20
New York also have appealed for temporary price controls to halt gouging.=
=20
But the Federal Energy Regulatory Commission, which is responsible for=20
enforcing reasonable wholesale rates under the Federal Power Act, has refus=
ed=20
to impose them, and the Bush administration is bolstering that decision by=
=20
opposing any legislation that would compel such action.=20
Barton, in a brief hallway interview, declined to say what other legislativ=
e=20
remedies he might propose to address the worsening California situation.=20
He said he expects to submit a list of ideas to the White House today, and=
=20
after receiving comment on it, sit down with other committee Republicans an=
d=20
Democrats next week to see if any legislation is in order.=20
"If we are going to do anything to help California or the West this summer,=
=20
we have to make it law within the next month or six weeks," Barton said.=20
Even the panel's senior Democrat, Virginia Rep. Rick Boucher, was urging a=
=20
"careful and deliberate approach" to the California crisis, which he said w=
as=20
largely of the state's own making.=20
There are steps Congress might take to provide some help to the West, such =
as=20
more money for conservation and relaxed federal regulation of air quality=
=20
standards. That would permit older, more polluting generators to operate=20
through a long, hot summer when electricity demand could exceed supply by=
=20
about 3,000 megawatts, roughly the amount needed to power 3 million homes.=
=20
But Alan Lloyd, chairman of the California Air Resources Board, said power=
=20
production already is being maximized without sacrificing air quality.=20
"Simply put, no essential electricity generation has been curtailed due to=
=20
air emission limitations," he said. "California's programs to protect publi=
c=20
health are not major factors in the electricity shortages experienced to=20
date."=20
The concern is that as shortages turn into more rolling blackouts, wholesal=
e=20
prices will jump even higher and steadily bleed the economies of California=
=20
and the West Coast.=20
William L. Massey, the lone member of the energy regulatory commission who=
=20
supports price controls, said at a Tuesday hearing that without them the We=
st=20
Coast faces economic catastrophe this summer.=20
It was evident from the comments of some Republicans that they think their=
=20
party could capitalize politically from a difficult summer.=20
"If they had a bad summer, it could show up in the polls," said Rep. Charli=
e=20
Norwood, R-Ga. "And sometimes that's not a bad idea."=20
One of the most dramatic exchanges during the weeklong hearings came Thursd=
ay=20
with S. David Freeman, the former general manager of the Sacramento Municip=
al=20
Utility District who now heads the Los Angeles Department of Water and Powe=
r.=20
He recently was named Gov. Gray Davis' chief negotiator with power generato=
rs=20
for long-term contracts to stabilize future deliveries.=20
"Don't feel sorry for California," Freeman said. "We're going to come out o=
f=20
this stronger than ever."=20
But Freeman said it will be a year or two before all the fixes are in place=
,=20
and in the meantime the region desperately needs Congress' help to force th=
e=20
FERC into controlling wholesale prices, which witnesses said are likely to=
=20
rise from $7 billion last year to as much as $70 billion or more this year.=
=20
"We recognize that the current administration and various legislators have=
=20
their own opinion as to the California situation," Freeman said. "But my=20
personal plea is that if the federal government is not going to help us, th=
e=20
least it should do is refrain from legislation that attempts to tell us wha=
t=20
to do."=20
Barton perked up at that idea.=20
"Leave California alone, huh?" Barton said. "That might be a good motto."=
=20
---------------------------------------------------------------------------=
---
---------------------
Dan Walters: Crisis deepens: politicos panic


(Published March 23, 2001)=20
That choking sound you hear is California's political class shifting into=
=20
near-panic mode as it realizes that the energy crisis is on the verge of=20
becoming a full-scale meltdown, with utilities forced into bankruptcy and=
=20
consumers hammered by severe and prolonged power blackouts and soaring=20
electricity bills.=20
The Legislature, which had been content to allow Gov. Gray Davis to handle=
=20
the crisis on his own, suddenly came to life Thursday, jolted by this week'=
s=20
unexpected rolling blackouts and threats by creditors to force the utilitie=
s=20
into bankruptcy court. Lawmakers quickly fashioned a basketful of legislati=
on=20
aimed -- or so they hope -- at increasing power supplies, promoting=20
conservation and relieving the financial pressure on utilities and=20
electricity generators. But it may be too little, too late -- and Davis and=
=20
other politicians are already pointing fingers of blame, aware that a=20
political price will be paid if the apocalypse strikes.=20
While Davis chants his mantra that he inherited a fatally flawed utility=20
deregulation scheme from predecessor Pete Wilson, Republicans are blaming=
=20
Davis for moving too slowly after the crisis first surfaced last summer, an=
d=20
even some of Davis' fellow Democrats are distancing themselves from the=20
governor.=20
"Deregulation was a product of a Republican governor, a Republican author a=
nd=20
a Republican PUC (Public Utilities Commission) that was unduly impatient,"=
=20
Davis said at one point this week as the Capitol buzzed with private=20
negotiations and public posturing.=20
A day later, however, state Controller Kathleen Connell, a Democrat, issued=
 a=20
warning that Davis' power purchases, running at $50 million a day, had=20
already drawn down state budget reserves by nearly two-thirds, and she=20
refused to authorize additional transfers. It was a direct shot by Connell =
at=20
Davis, an old rival, and came just a day after the governor had endorsed a=
=20
Connell foe, Antonio Villaraigosa, in the duel for mayor of Los Angeles.=20
Other Democrats didn't join Connell's direct challenge to Davis, but there=
=20
is, nevertheless, a growing concern among Democratic legislators that the=
=20
power purchases are costing many billions of dollars more than the governor=
=20
had projected and could place the state budget in jeopardy. They're nervous=
=20
because Davis has refused to reveal, even to legislators, exactly how much=
=20
power the state is buying each day and how much it is paying.=20
From the few details that have been disclosed, it's clear that the state is=
=20
spending about $1.5 billion a month, which would wipe out the state's=20
reserves by midsummer. It's also becoming increasingly clear that Davis=20
probably can't make good on his promise to avoid major consumer rate=20
increases, unless the state is willing to plunge deeply and semi-permanentl=
y=20
into debt to underwrite wholesale costs, or unless federal authorities orde=
r=20
huge refunds from power suppliers.=20
Rates in areas served by private utilities have risen only slightly while t=
he=20
costs, first to utilities and later to the state, soared. Data from the=20
administration and utilities, when collated, indicate that the state is in=
=20
line to collect just 20 cents for every dollar it's spending on power=20
purchases, and the gap will increase as summer heat drives up demand.=20
Privately, some economists say that private utility rates will have to rise=
=20
33 percent to 50 percent to cover costs of current power supplies, plus=20
utilities' past debts to generators and the state's purchase of the=20
utilities' transmission system, if that deal is made final.=20
"It's ultimately going to break down, and the ratepayer is going to pay for=
=20
it one way or the other," Republican Sen. Jim Battin said during one of=20
Thursday's many committee hearings on utility legislation. No one disagreed=
=20
with him.=20
DAN WALTERS' column appears daily, except Saturday. Mail: P.O. Box 15779,=
=20
Sacramento, CA 95852; phone (916) 321-1195; fax: (781) 846-8350
E-mail: dwalters@sacbee.com
Recent columns: http://www.capitolalert.com/voices/index_walters.html=20
---------------------------------------------------------------------------=
---
------------------------------------------

Report says power wholesalers overcharged state $6 billion=20



By Don Thompson
ASSOCIATED PRESS=20
March 22, 2001=20
SACRAMENTO =01) Electricity wholesalers have overcharged California more th=
an=20
$6.2 billion by manipulating the energy market, according to a report by an=
=20
economist working for power grid managers.=20
The Independent System Operator planned to file the findings with federal=
=20
regulators Thursday, and ask for a refund, said ISO spokesman Patrick=20
Dorinson.=20
In a related development, the state auditor said Thursday that the state's=
=20
1996 deregulation law encouraged both buyers and sellers of electricity to=
=20
"manipulate wholesale prices to their advantage" by underestimating both=20
supply and demand.=20








Disappearing state surplus sparks alarm=20
Outages darken economic outlook in state, some say=20
Out-of-state generators question power regulators' authority=20
Allegheny Energy makes big California connection=20
Enron stock slides despite earnings reassurance=20
California's electricity crisis at-a-glance=20
?=20



The auditor's report lays out what it calls "a complex combination" of=20
deficiencies and misjudgments it says led to the state's power problems.=20
The ISO's filing came a day after the state controller complained that a=20
relentless energy crisis is jeopardizing California's financial future.=20
Since May, the companies manipulated the market by bidding at excessive=20
prices, effectively withholding supplies or by not bidding at all when they=
=20
had generation capability available, according to the ISO study.=20
ISO Director of Market Analysis Anjali Sheffrin presented the findings at a=
n=20
energy conference at the University of California, Berkeley, last week.=20
The companies have denied overcharging California and have said they expect=
=20
the Federal Energy Regulatory Commission will determine their prices were=
=20
justified.=20
In a burst of activity after weeks of delay, both houses of the Legislature=
=20
approved bills Thursday designed to ease the energy crisis.=20
The state Senate approved measures to encourage energy conservation and spe=
ed=20
up power plant construction.=20
Topping that, the Assembly sent the Senate 14 energy-related bills, includi=
ng=20
$455 million in loans and grants to encourage energy efficiency and=20
conservation and alternative energy projects by this summer.=20
One of the Assembly bills would require new energy plants approved by the=
=20
state to sell their power within California before they offer it to other=
=20
states.=20
"The (California) Energy Commission says for every day we delay this bill=
=20
there are 20 megawatts that could be saved that we're not saving," said sta=
te=20
Sen. Byron Sher, D-Stanford, as senators voted 28-10 to send his conservati=
on=20
measure to the Assembly.=20
Senators also approved another Sher bill speeding up the siting of power=20
plants. It went to the Assembly on a 37-1 vote.=20
Meanwhile, a federal judge issued a preliminary injunction Wednesday orderi=
ng=20
one of the companies named in the ISO filing, Reliant Energy Services, to=
=20
continue selling to California despite its fear that it will not be paid.=
=20
U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of=
=20
irreparable harm if Reliant stopped selling power to the ISO, which buys at=
=20
the last minute on behalf of utilities to bolster supplies and try to fend=
=20
off blackouts.=20
Such blackouts struck the state twice this week, shutting off power to=20
hundreds of thousands of people from San Diego to Oregon, snarling traffic=
=20
and shutting down businesses.=20
The state remained free of any power alerts Thursday morning, as power=20
reserves stayed above 7 percent.=20
Damrell dismissed Reliant's attempt to force the state Department of Water=
=20
Resources to back the ISO's purchases for the state's two biggest utilities=
,=20
Southern California Edison and Pacific Gas and Electric Co.=20
The judge said he had no authority to force the DWR to pay for that power.=
=20
The utilities have been denied credit after amassing billions of dollars in=
=20
debt paying high prices for power that the state's energy deregulation law=
=20
prevents them from passing on to consumers.=20
Gov. Gray Davis has said the state isn't responsible for purchasing the=20
costly last-minute power the ISO buys for Edison and PG&E, despite a law=20
authorizing state power purchases on the utilities' behalf.=20
ISO attorney Charles Robinson said the ruling gives ISO operators "a tool t=
o=20
assist them in keeping the lights on in California."=20
"Had the decision gone the other way, one could expect other generators to=
=20
simply ignore emergency orders," Robinson said.=20
Damrell's preliminary injunction will remain in effect until the Federal=20
Energy Regulatory Commission rules on the matter.=20
In another development Wednesday, state Controller Kathleen Connell=20
complained that the energy crunch is imperiling California's financial=20
health.=20
Connell said the state's power buying on behalf of Edison and PG&E is gutti=
ng=20
its budget surplus. Since the state started making emergency power buys in=
=20
January, the surplus has fallen from $8.5 billion to about $3.2 billion, sh=
e=20
said.=20
Connell ordered an audit of the state's power buying, saying Davis is=20
withholding key financial information from her office and the Legislature.=
=20
She is also refusing a request by Davis and the Legislature to transfer $5.=
6=20
billion into a "rainy day fund" she said was set up to impress Wall Street =
as=20
the state prepares to issue $10 billion in revenue bonds to cover its power=
=20
buying.=20
Transferring the money would leave the state general fund $2.4 billion in=
=20
debt, Connell said.=20
Sandy Harrison, spokesman for the state Department of Finance, and Keely=20
Bosler of the Legislative Analyst's Office, said such transfers are routine=
=20
and required by law.=20
They put the state's budget surplus at $5.6 billion.=20
Davis spokesman Steve Maviglio dismissed the criticism.=20
"Political grandstanding doesn't generate one more kilowatt of energy for=
=20
California in this time of emergency," he said.=20
Connell is a candidate for mayor of Los Angeles in next month's election.=
=20
The ISO study, meanwhile, covered five major in-state power suppliers =01)=
=20
Reliant, Dynegy, Williams/AES, Duke Energy and Mirant, as well as 16 power=
=20
importers. All deliver power to customers of Edison, PG&E and San Diego Gas=
 &=20
Electric Co., the state's three largest investor-owned utilities.=20
"All overcharged, but some excessively and some by moderate amounts," said=
=20
ISO's Sheffrin.=20
According to the report, the overcharging took place beginning last May, wh=
en=20
the energy crisis began, and continued through last month.=20
During that time, according to the report, energy suppliers commonly offere=
d=20
their electricity at twice the amount it cost them to produce.=20
FERC member William L. Massey said he wasn't shocked to hear the amount=20
overcharged added up to more than $5 billion.=20
"Prices over the past 10 months in California have greatly exceeded the=20
federal standards of just and reasonable prices, and I think they have=20
exceeded the standards by possibly billions of dollars," he said.=20
Chuck Griffin, spokesman for Atlanta-based Mirant said the company would=20
justify their charges to FERC officials.=20
"I think we're missing sometimes just how basic the problem is in Californi=
a.=20
Supply and demand are out of whack and some basic rules of economics kick i=
n=20
when that happens," he said.=20
---------------------------------------------------------------------------=
---
-------------

Disappearing state surplus sparks alarm=20



Controller puts hold on transfer of $5.6 billion to reserve funds
By Karen Kucher and Ed Mendel=20
UNION-TRIBUNE STAFF WRITERS=20
March 22, 2001=20
The state's general fund surplus has dropped to $3.2 billion from $8.5=20
billion since January largely because California's power purchases are=20
devouring the money, state controller Kathleen Connell said yesterday.=20
Connell said she wants to see more documentation about state power spending=
=20
before approving the transfer of $5.6 billion from the general fund to a=20
special reserve fund requested by Gov. Gray Davis.=20
Connell said the state would have to borrow $2.4 billion to cover the=20
transfer.=20








Report says power wholesalers overcharged California $5.5 billion=20
Outages darken economic outlook in state, some say=20
Out-of-state generators question power regulators' authority=20
Allegheny Energy makes big California connection=20
Enron stock slides despite earnings reassurance=20
California's electricity crisis at-a-glance=20
?=20



"We started this year with a generous budget surplus. The energy crisis has=
=20
taken much of that away, and this transfer on top of the electricity=20
purchases would put the (general) fund at risk," Connell said in a statemen=
t.=20
Her action came on a day when state power supplies improved. After two days=
=20
of forced outages this week, no rolling blackouts were ordered yesterday.=
=20
Several power plants came back on line and imports from the Pacific Northwe=
st=20
provided enough electricity to meet demand yesterday, said Stephanie=20
McCorkle, a spokeswoman with the California Independent System Operator,=20
which manages most of the state's power grid.=20
"Gradually more (electricity) generation comes on every day," McCorkle said=
.=20
"By Monday, we should see somewhere around 2,200 megawatts back in service=
=20
that was not on this Monday. That's if no other generation falls off."=20
Meanwhile, Connell's move took some by surprise.=20
A spokesman for the state Department of Finance said Connell is denying a=
=20
routine transfer that is required by law. "It was just a routine accounting=
=20
measure that we didn't anticipate becoming controversial," Sandy Harrison=
=20
said.=20
Connell announced the denial of the transfer a day after Davis endorsed one=
=20
of her opponents, former Assembly Speaker Antonio Villaraigosa, in the race=
=20
for Los Angeles mayor.=20
Connell, who monitors California's cash flow, said she was "deeply concerne=
d=20
about putting the state's general fund in a deficit situation in light of t=
he=20
energy crisis."=20
About two months ago, the state began spending about $50 million a day to b=
uy=20
power after Pacific Gas and Electric and Southern California Edison nearly=
=20
went bankrupt. It is also purchasing power for customers of San Diego Gas a=
nd=20
Electric.=20
The Davis administration said earlier this week it soon will begin spending=
=20
an additional $500 million on power purchases, bringing the total to $4.2=
=20
billion.=20
As that staggering sum continues to grow, the state won a court battle with=
=20
an electricity supplier yesterday. A federal judge in Sacramento sided with=
=20
the state and ordered the wholesaler to continue selling to California=20
despite its fear that it will not get paid.=20
Judge Frank C. Damrell Jr. said Californians were at risk of irreparable ha=
rm=20
if Reliant Energy Services stopped selling power to the Independent System=
=20
Operator. The ISO acquires last-minute power on behalf of utilities to fill=
=20
gaps in supply to try to fend off blackouts.=20
Damrell dismissed Reliant's attempt to force the state Department of Water=
=20
Resources to back the ISO's purchases for the state's two biggest utilities=
.=20
The judge said he had no authority to force the DWR to pay for the power.=
=20
Davis has said the state isn't responsible for purchasing the costly=20
last-minute power the ISO buys for Edison and PG&E, despite a law authorizi=
ng=20
state power purchases on the utilities' behalf.=20
Meanwhile, those who manage the power grid say the forecast for power=20
supplies this week looks good, although conditions can change quickly.=20
ISO managers continue to stress the importance of conservation. Utility=20
customers across the state conserved about 900 megawatts of power Tuesday,=
=20
which kept blackouts from being ordered that night.=20
As the power crisis worsened this week, ISO managers wished aloud that they=
=20
still could rely on business customers to shut down in exchange for lower=
=20
energy rates.=20
Such "interruptible" customers saved as much as 2,100 megawatts last spring=
,=20
a figure that dropped to about 1,700 last summer and 1,400 at the end of th=
e=20
year. But in January, the state Public Utilities Commission told utilities=
=20
they could no longer impose fines on business customers who refuse to shut=
=20
down when asked.=20
ISO managers realize the program was harming businesses with frequent=20
interruptions of service -- but they still miss having that option, McCorkl=
e=20
said.=20
"It would have made an enormous difference, but at the same time we=20
understand the impact it was having on businesses," McCorkle said.
---------------------------------------------------------------------------=
---
--------------

Outages darken economic outlook in state, some say=20



By Dean Calbreath?
UNION-TRIBUNE STAFF WRITER=20
March 22, 2001=20
Until this week, the San Diego Regional Chamber of Commerce was predicting=
=20
that the county was well-insulated from the growing threat of economic=20
recession.=20
But that was before the lights went out in the chamber's downtown=20
headquarters Monday.=20
Working by window light in his darkened office, chamber economist Kelly=20
Cunningham rapidly erased his previous projections for 3.5 percent growth f=
or=20
San Diego County. Cunningham now feels the local economy could fall into a=
=20
recession thanks to its shaky supply of energy.=20








Report says power wholesalers overcharged California $5.5 billion=20
Disappearing state surplus sparks alarm=20
Out-of-state generators question power regulators' authority=20
Allegheny Energy makes big California connection=20
Enron stock slides despite earnings reassurance=20
California's electricity crisis at-a-glance=20
?=20



"Blackouts are very disruptive to the economy," Cunningham said. "A busines=
s=20
can absorb rising energy prices by cutting costs or raising its own prices.=
=20
But an energy shutoff is much less predictable. It cuts into productivity."=
=20
Those sentiments are being echoed throughout California, as business leader=
s=20
and economists worry that rolling blackouts will darken the state's=20
previously glowing economy.=20
At the University of California Los Angeles, for instance, leading financia=
l=20
theorists will meet April 4 to discuss the question "Can California grow in=
=20
the dark?" Although the topic was chosen before the recent string of power=
=20
outages, the blackouts have given the issue new urgency.=20
"These blackouts are not just a single episode," said UCLA economist Tom=20
Lieser. "They are a bridge to what will happen this summer. If we don't fal=
l=20
into a recession in the second half of the year, we will fall pretty close.=
"=20
Tapan Munroe, an economist formerly with Pacific Gas and Electric, this wee=
k=20
crossed out his projection for 2 percent statewide growth. After blackouts=
=20
rolled toward his consulting offices in the Bay Area city of Moraga, Munroe=
=20
decided the state will be lucky if it manages zero growth.=20
"I'm a pretty optimistic guy by nature, but this has been sobering," Munroe=
=20
said. "On Tuesday, one restaurant alone in San Francisco lost $20,000.=20
Multiply that by all of the businesses that lost power in the state and=20
you've got a serious problem."=20
Two days of blackouts in San Diego County have hurt businesses large and=20
small. Among the industries under threat is the local biotechnology sector,=
=20
which requires a steady supply of electricity to power areas of laboratorie=
s=20
that must remain temperature-controlled and sterile.=20
Continued blackouts "could have a huge impact, not only in dollars, but=20
multiple millions of dollars," said Tom Oster, vice president of operations=
=20
for BioCom, the leading trade organization for the more than 200 biotechs i=
n=20
San Diego County.=20
Idun Pharmaceuticals, a biotech near La Jolla Village Drive that has 67=20
employees, had its power cut for about 40 minutes Tuesday. Though the compa=
ny=20
has a back-up generator, some segments of its laboratories and lab equipmen=
t=20
were not supported by it. Chemists also had to turn off some sensitive lab=
=20
equipment to avoid the possibility of a damaging power surge once the=20
blackout was over.=20
"We're not in a position as a small company to back up the whole facility,"=
=20
said Steven Mento, Idun's chief executive. "We haven't done a survey yet to=
=20
determine whether we had losses, either in experiments or equipment damaged=
=20
-- but we're hoping because the blackout was so short that damage will be=
=20
minimal."=20
Mento said rolling blackouts, coupled with continuing high energy costs,=20
could cripple many small biotechs -- and even take a bite out of bigger, mo=
re=20
established companies.=20
"We generate new compounds in controlled environments on a daily basis, and=
=20
when power goes off you can lose samples because of contamination and other=
=20
issues," Mento said. "We are fortunate that our losses would be in having t=
o=20
repeat an experiment -- but this could be really critical for companies wit=
h=20
drug manufacturing and issues of quality control."=20
The wireless firms along Sorrento Valley have not been immune from blackout=
s.=20
The lights went out at Qualcomm early this week, although executives declin=
ed=20
to comment about the impact.=20
No blackouts hit the big shipbuilding operations on the waterfront this wee=
k.=20
But the National Steel and Shipbuilding Co. -- one of San Diego's largest=
=20
employers -- already experienced a voluntary loss of power this year, its=
=20
first since World War II. Since the shipyard does not have its own power=20
supply, NASSCO executives fear the effect of unplanned outages.=20
"Our average payroll totals half a million dollars a day," said NASSCO=20
spokesman Jim Scott. "When you have a day's work disrupted, that can be=20
pretty serious. We're currently in discussions about the possibility of=20
buying from independent power suppliers, or setting up a power plant of our=
=20
own."=20
Small businesses, which constitute the bulk of employment in San Diego=20
County, were hurt by disruptions as well -- costing them vital revenue at a=
=20
time when their power bills have skyrocketed.=20
At Fantastic Sam's, a hair salon in Chula Vista, Angelica Alcala estimated=
=20
that business dropped 60 percent when the blackouts hit Tuesday. Among othe=
r=20
things, Alcala had to alter her planned haircuts because she was relying on=
=20
scissors instead of electric clippers.=20
At the Family Fun Center in El Cajon, the management gave vouchers or refun=
ds=20
to the 15 or so video-game players who were in the midst of killing aliens =
or=20
fighting ninja warriors as the power went down.=20
Papa John's Pizza estimates that it may have lost several thousand dollars =
in=20
business after six stores were blacked out Monday and four others lost powe=
r=20
Tuesday. Brian Mills, who runs 23 Papa John's stores in the county, said hi=
s=20
main concern was shutting down the computers so they would not be damaged b=
y=20
a power surge when the electricity was restored.=20
Paul Ecke III, a member of the West Coast advisory panel for the Federal=20
Reserve, said the potential impact of the energy crisis "is worse than any=
=20
downturn in the stock market."=20
Ecke, who runs the Paul Ecke Ranch flower operation in Encinitas, said the=
=20
crisis could be particularly harmful for the state's agricultural sector,=
=20
since farmers need electricity to pump water and natural gas to heat=20
greenhouses.=20
"What I'm really worried about is the energy thing is going to cast a shado=
w=20
on California," he said. "If you're a business person thinking about moving=
=20
to California right now, you're probably not going to do it because you're=
=20
not sure you're going to have your lights on this summer."=20
Besides the disruption to businesses, the energy crisis is also hurting the=
=20
pocketbooks of hourly workers who have been sent home during the crisis.=20
Under state law, employers are free to send hourly workers home without pay=
=20
during such emergencies, although salaried workers must still be paid.=20
Susan Kemp, an attorney with the California Chamber of Commerce, said there=
=20
are ways of minimizing the impact on hourly workers.=20
"You have to look at what time it is when the blackout occurs and how long=
=20
you think it's going to last," Kemp said. "If it's around a meal time, you=
=20
might send the workers out for a longer meal period if you think it's going=
=20
to be an hour or hour and a half delay."=20
But the potential for losing wages doesn't sit well with the hourly workers=
.=20
"When you get sent home early and lose your wages, you have even less money=
=20
to pay your inflated energy bills," said an hourly worker who was sent home=
=20
during Monday's blackout.=20
---------------------------------------------------------------------------=
---
----------


Out-of-state generators question power regulators' authority=20



By Karen Gaudette
ASSOCIATED PRESS=20
March 22, 2001=20
SAN FRANCISCO =01) At least three major out-of-state electricity generators=
 are=20
challenging the authority of the California Public Utilities Commission to=
=20
investigate whether they deliberately reduced power supplies to drive up=20
prices.=20
The PUC has asked for power plant maintenance records as it tries to=20
determine whether Duke Energy, Dynegy Inc., Mirant Corp. and other=20
wholesalers have manipulated the energy market at California's expense.=20
At issue is who ultimately controls oversight of in-state plants that provi=
de=20
most of California's electricity. The plants, once owned by the state's=20
largest utilities, were sold off as part of the state's 1996 attempt at=20
deregulation.=20








Report says power wholesalers overcharged California $5.5 billion=20
Disappearing state surplus sparks alarm=20
Outages darken economic outlook in state, some say=20
Allegheny Energy makes big California connection=20
Enron stock slides despite earnings reassurance=20
California's electricity crisis at-a-glance=20
?=20



PUC President Loretta Lynch said the public deserves to know whether=20
generators have unnecessarily taken plants off-line to create artificial=20
shortages, forcing the utilities and now state bureaucrats to buy much high=
er=20
priced power on the spot energy market.=20
"What I do know is we have historically high levels of outages across the=
=20
board," Lynch told The Associated Press. "Dynegy and Duke have been fightin=
g=20
the PUC in the PUC's quest to obtain documents about these outages."=20
The PUC has the authority to regulate facilities within its borders, she=20
added. "It doesn't matter where the headquarters of the company is."=20
Duke, based in North Carolina, says it does matter =01) and that since it a=
nd=20
other wholesalers aren't headquartered in California, the PUC can't require=
=20
it to turn over the maintenance records.=20
"We have not given them proprietary information because they do not regulat=
e=20
us," said Duke's spokesman, Tom Williams.=20
Dynegy did not return calls for comment Wednesday.=20
The PUC also faces a new challenge in the legislature. A bill sponsored by=
=20
Assemblywoman Carole Migden, D-San Francisco, which would have granted the=
=20
PUC greater inspection authority over out-of-state generators, was amended=
=20
this month to grant the authority to Independent System Operator instead.=
=20
The ISO has managed the delivery of energy through most of the state's powe=
r=20
grid but historically has done little regulating and has had no policing=20
authority.=20
This board, created during the state's 1996 attempt at deregulation, was=20
redesigned in January. Now it has a five-member board appointed by Davis,=
=20
replacing a 26-member ISO board composed of utility executives, marketers,=
=20
power plant owners and others.=20
The latest version of Migden's bill requires wholesalers to report monthly =
to=20
the ISO about any plants that are off-line or working at reduced capacity,=
=20
and gives the ISO power to audit these reports.=20
But because the ISO board historically has made key decisions behind closed=
=20
doors and is exempt from certain open-government regulations, government=20
watchdogs are outraged by the switch.=20
"The PUC's been no friend of ratepayers, but at least under the constitutio=
n=20
and state law they're required to conduct their process in the open and the=
=20
public can intervene," said Harvey Rosenfield of the Foundation for Taxpaye=
r=20
and Consumer Rights.=20
Davis ordered last month that the ISO take the lead among state agencies to=
=20
ensure adequate energy supplies. Alan LoFaso, an aide to Migden, said the=
=20
amendment follows Davis' lead.=20
Both LoFaso and the governor's spokesman, Steve Maviglio, downplayed the=20
change. "I don't know if we have a preference" as to which state agency get=
s=20
the authority to continue the probe, Maviglio said.=20
The challenge by Duke Energy, Houston-based Dynegy Inc. and Mirant Corp. of=
=20
Atlanta came in filings March 12 asking for a rehearing of the PUC's Februa=
ry=20
resolution reasserting its legal authority to "examine the books, accounts,=
=20
memoranda, contracts and records" of generators selling energy to utilities=
=20
already subject to PUC regulation.=20
Those utilities include Pacific Gas and Electric Co. and Southern Californi=
a=20
Edison Co., which have been nearly bankrupted buying power from wholesalers=
,=20
as well as the financially troubled San Diego Gas and Electric
---------------------------------------------------------------------------=
--

Allegheny Energy makes big California connection=20



ASSOCIATED PRESS=20
March 22, 2001=20
HAGERSTOWN, Md. =01) Allegheny Energy Inc. said Thursday it has agreed to s=
ell=20
$4.5 billion worth of power to California's electricity-purchasing agency=
=20
over the next 10 years.=20
The company said the contract call for Allegheny to provide up to 1,000=20
megawatts that the Hagerstown-based company has secured from western=20
generating plants through its new energy trading division, Allegheny Energy=
=20
Global Markets =01) formerly Merrill Lynch Global Energy Markets.=20
"This is a win-win for both the state of California and Allegheny Energy. I=
t=20
provides a long-term source of fixed-price energy and should help to=20
stabilize prices in California," said Michael P. Morrell, president of the=
=20
Allegheny Energy Supply division.=20
---------------------------------------------------------------------------=
---
-----------


Judge Frees Small Firm From Edison Contract=20

By KEN ELLINGWOOD and DAN MORAIN, Times Staff Writers=20

?????EL CENTRO--California's balance of electrical power shifted slightly=
=20
Thursday when an Imperial County judge temporarily freed a small geothermal=
=20
energy producer from its contract with Southern California Edison, allowing=
=20
it to sell power on the open market.
?????The ruling by Superior Court Judge Donal B. Donnelly could lead to a=
=20
mass exodus by hundreds of small energy producers that have been selling=20
power to the state's financially troubled utilities for months without=20
getting paid.
?????At the same time, it may have staved off plans by a group of the small=
=20
generators to send Edison into involuntary bankruptcy as early as today.
?????In Sacramento, energy legislation pushed by Gov. Gray Davis passed in=
=20
the state Senate but foundered in the Assembly. The measure was intended to=
=20
ensure that the state gets repaid for the electricity that it has been buyi=
ng=20
on behalf of Edison and Pacific Gas & Electric, which say they lack the cas=
h=20
and credit to purchase power. The bill also was supposed to guarantee that=
=20
the small, alternative energy producers--which together provide nearly a=20
third of the state's power--get paid. But Assembly Republicans opposed it,=
=20
saying it hadn't been given sufficient scrutiny.
?????The impact of the small producers was made clear in Imperial County,=
=20
where Edison's failure to pay CalEnergy, the county's biggest property=20
taxpayer, had outsize implications. CalEnergy had put county officials on=
=20
notice that it was about to miss a $3.8-million property tax payment. The=
=20
uncertainty had prompted the tiny Calipatria Unified School District to=20
postpone a bond issue for badly needed school repairs.
?????Among CalEnergy Chairman David Sokol's first acts after the judge's=20
ruling Thursday was to promise Imperial County Supervisor Wally J. Leimgrub=
er=20
that the company would pay its property taxes on time.
?????"That is great news," Leimgruber said.
?????Within hours of its court victory, CalEnergy had stopped transmitting=
=20
geothermal power to Edison and begun selling it to El Paso Energy, a=20
marketing company that purchased the energy at prevailing rates and resold =
it=20
on the spot market.
?????Some of the more than 700 other small energy producers in the state sa=
id=20
they were considering similar action against Edison and Pacific Gas &=20
Electric.
?????"We absolutely need the right to sell to third parties," said Dean=20
Vanech, president of Delta Power, a New Jersey company that owns five small=
=20
gas-fired plants in California and is owed tens of millions of dollars by=
=20
Edison.
?????Sokol praised the Imperial County judge and said his company simply=20
wanted the authority to sell its power "to a credit-worthy company that, in=
=20
fact, pays for the power."
?????An Edison spokesman said the company was disappointed with the ruling,=
=20
but sympathized with CalEnergy and other small producers because=20
"California's power crisis has placed [them] in financial distress, just as=
=20
it has placed utilities in financial distress."
?????Edison expressed concern that the ruling would prompt CalEnergy and=20
other small producers to sell their power out of state. Sokol said CalEnerg=
y=20
had specifically told El Paso Energy that it hoped its power would remain i=
n=20
California, "but if someone wants to pay a higher price out of state, we=20
can't stop them."
?????Sokol said that Edison still owes CalEnergy $140 million and that the=
=20
company--along with seven other small producers--had been prepared to file =
a=20
petition in federal bankruptcy court in Los Angeles today forcing the utili=
ty=20
into involuntary bankruptcy. He said his company no longer intends to do so=
,=20
and he believed--but wasn't certain--that the other companies would shelve=
=20
their plans.
?????Edison filed papers Thursday with the federal Securities and Exchange=
=20
Commission showing that it owed $840 million to various small electricity=
=20
producers, many of which rely on renewable energy sources such as geotherma=
l=20
steam, solar energy or wind.
?????The alternative energy producers--and utilities--strenuously objected =
to=20
the legislation considered in Sacramento on Thursday. The bill, spelling ou=
t=20
how the utilities are to pay the state and the small producers, passed the=
=20
Senate on a 27-9 vote, the exact two-thirds margin required. But it stalled=
=20
in the Assembly on a 46-23 party-line vote, well short of two-thirds.
?????"When I was a citizen back in Lancaster, I heard these stories about=
=20
pieces of legislation that were cooked up late at night, that . . . were cu=
t=20
and pasted together and were rammed through by the Legislature," Assemblyma=
n=20
George Runner (R-Lancaster) said. "That's exactly what we have before us."
?????The alternative electricity generators, including oil companies, warne=
d=20
that they would lose money under the Davis proposal, while representatives =
of=20
Edison and PG&E, which have amassed billions in debt in the worsening energ=
y=20
crisis, said the legislation would push them deeper into the hole.
?????"There isn't enough money," Edison attorney Ann Cohn testified at a=20
Senate hearing on the bill Thursday. "It is a very simple question: Dollars=
=20
going out cannot be greater than dollars coming in."
?????The bill, AB 8X, combined several proposals. First, it sought to clari=
fy=20
earlier legislation by spelling out that Edison and PG&E must pay the state=
=20
all money collected from consumers for electricity that the state has been=
=20
buying.
?????Additionally, the bill would turn over to the California Public=20
Utilities Commission the thorny issue of how much to pay alternative energy=
=20
producers for their electricity.
?????Wind, solar and geothermal producers might agree to the prices offered=
=20
by the administration. But most of the alternative energy producers,=20
including Chevron and British Petroleum, use natural gas to generate=20
electricity through "cogeneration," a process of creating steam for both=20
electric generation and heat. With natural gas prices high, they contend,=
=20
they would lose money at the prices Davis is offering.
---=20
?????Ellingwood reported from El Centro, Morain from Sacramento. Times staf=
f=20
writers Mitchell Landsberg in Los Angeles and Jenifer Warren, Nancy Vogel a=
nd=20
Carl Ingram in Sacramento contributed to this story.
---------------------------------------------------------------------------=
---
-------------------
Lodi Defies Order for Blackouts=20
Utility tells PG&E to 'pay the bills'=20
Alan Gathright, Chronicle Staff Writer
Friday, March 23, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/23/M
N171303.DTL=20
Let history show that the rebellion against rolling blackouts started when=
=20
the Central Valley town of Lodi defied PG&E and refused to unplug its=20
customers this week.=20
Like several cities that own their own utilities, Lodi saw the energy crunc=
h=20
looming last fall and spent millions for long-term power contracts in an=20
attempt to avoid blackouts.=20
Now, Lodi and a Northern California municipal utility cooperative that=20
includes Palo Alto, Santa Clara and Alameda are telling Pacific Gas and=20
Electric Co. that it's unfair to force their customers to endure blackouts=
=20
triggered by the near-bankrupt utility's failure to pay its debts.=20
"The problem is not paying bills, so pay the bills," said Alan Vallow,=20
director of the utility serving Lodi's 58,000 residents. "I won't arbitrari=
ly=20
screw my customers . . . so 5,000 PG&E customers can turn on their lights=
=20
somewhere else."=20
When PG&E relayed an order from state power regulators Monday and Tuesday f=
or=20
Lodi to black out some of its customers, a strategy intended to keep the=20
West's power grid from collapsing, Lodi said no.=20
So far, other cities in the Northern California Power Agency say they will=
=20
continue to participate in rotating outages.=20
But in a letter last Friday to PG&E, members of the agency and four other=
=20
utility districts, including Sacramento's, warned they didn't believe long-=
=20
standing agreements that allow them to use PG&E transmission lines to conne=
ct=20
to the grid obliged them to endure rolling blackouts because of "PG&E's=20
failure to pay its power obligations."=20
They say the agreements require them to reduce power demand only in respons=
e=20
to natural disasters or malfunctions damaging power lines or plants.=20
The agencies asked for a meeting with PG&E President Gordon Smith before=20
anticipated summer blackouts hit, "to develop a more rational program for=
=20
allocation of risks associated with (power demand) load shedding before you=
=20
call on us to participate in load shedding again."=20
REFUSING TO SHARE BURDEN
PG&E officials accused Lodi of selfishly refusing to share the burden of th=
e=20
statewide energy crisis.=20
"It is regrettable that after reaping the benefits of the (power grid)=20
interconnection contract for many years, Lodi is suddenly unwilling to bear=
=20
their share of the burden of the statewide energy crisis," said PG&E=20
spokesman Ron Low. "When cities like Lodi do not follow the (state=20
Independent System Operator's) order to curtail power, it hurts all of=20
California and jeopardizes the entire power grid."=20
Low also disagreed with accusations that this week's blackouts were trigger=
ed=20
by PG&E's failure to pay its bills, noting that the ISO stated that 12,000=
=20
megawatts of power were offline because of plant maintenance.=20
But ISO spokeswoman Lisa Szot confirmed assertions by the municipal utiliti=
es=20
that power generators had kept an additional 3,000 megawatts offline becaus=
e=20
they feared PG&E couldn't pay.=20
Lodi's Vallow said he was legally obliged to serve city customers. Lodi=20
residents are facing rate increases of as much as 15 percent under a power=
=20
contract that the city secured in hopes of avoiding blackouts. The contract=
=20
required Lodi to pay a $10 million premium above its typical $23 million=20
annual energy bill.=20
'THAT'S NOT FAIR'=20
"I've been hearing (PG&E say), 'Gee, that's not fair. Where's the equity if=
=20
everybody is doing rolling blackouts and you're not?' " Vallow said. "Well,=
 I=20
put my customers at financial risk to the tune of $10 million. And if they'=
re=20
not going to get to use that power they paid for, then by God, give us that=
=20
money back."=20
Vallow said he was willing to sell PG&E some of Lodi's power surplus, knowi=
ng=20
Lodi might not be paid.=20
"But I'm not willing to turn off 5,000 customers, so 5,000 customers=20
somewhere else can turn their lights on," Vallow said. "The objective here,=
=20
people, is to keep as many lights on as possible."=20
Other city-owned utilities, while annoyed with the rolling blackouts, aren'=
t=20
going as far as Lodi.=20
WEATHERING BLACKOUTS
"I certainly understand the frustrations of utilities like Lodi and actuall=
y=20
share those frustrations in many cases," said John Roukema, assistant=20
director of Santa Clara's utility.=20
But he stressed that his agency had been able to weather blackouts without=
=20
hurting residents or small business, because 17 major industrial power user=
s=20
had agreed to curtail demand during energy alerts.=20
"The prudent thing to do at this time is to continue to do our share and=20
participate in rolling blackouts, because a single problem could cause a=20
catastrophic failure in the statewide system," Roukema said.=20
In Alameda, residents endured blackouts this week despite the fact that cit=
y=20
has secured reliable power supplies, said Matt McCabe, spokesman for Alamed=
a=20
Power & Telecom.=20
"It was in the best of interests of Alamedans to maintain the stability and=
=20
integrity of the grid," he said. "Now, if it becomes evident that the syste=
m=20
is being jeopardized for financial reasons, then we should not have to=20
subject Alamedans to rolling blackouts."=20
In Palo Alto, which also had blackouts this week, utility officials told th=
e=20
City Council they were expecting a 30 to 40 percent rate hike this spring t=
o=20
pay new contracts guaranteeing a stable power supply, said Councilman Bern=
=20
Beecham. The city hopes to avoid giving customers the double whammy of rate=
=20
boosts and more blackouts with a program that gets industrial users to cut=
=20
demand voluntarily during alerts.=20
"When there's not enough generating capacity in the state to protect the=20
integrity of the grid, that is in fact everybody's problem," Beecham said,=
=20
but that doesn't mean Palo Alto is willing to endure blackouts to prop up=
=20
PG&E's ailing finances.=20
"We need to have some very frank discussions with PG&E about mutual=20
obligations," Beecham said.=20
Energy Tips=20
With Californians facing electricity and natural gas shortages, PG&E has=20
several tips to help conserve both:=20
-- Set the furnace thermostat at 68 degrees or lower, health permitting.=20
-- Wash only full loads in a dishwasher. If operating instructions allow,=
=20
turn dishwasher off before the drying cycle and let dishes dry naturally.=
=20
-- Use low-wattage or fluorescent lights.=20
-- Fix defective plumbing and dripping faucets, which waste water and=20
increase the gas or electric bill for heating the water.=20
-- Plug gaps around pipes, ducts, fans and vents that go through walls,=20
ceilings and floors.=20
-- Keep furnaces clean, and clean or replace the filter regularly.=20
-- Turn heaters down when using a fireplace, and close the damper when not=
=20
using the fireplace.=20
-- On sunny days, open drapes on windows facing south and let the sun shine=
=20
in. At night, close the drapes to retain indoor heat.=20
Source: www.pge.com=20
E-mail Alan Gathright at agathright@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 1=20
---------------------------------------------------------------------------=
---
--------------------------------------------------------------------
Coming Down to the Wire=20
State legislators battle over alternative energy bills=20
Greg Lucas, Robert Salladay, Chronicle Sacramento Bureau
Friday, March 23, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/23/M
N113351.DTL=20
Sacramento -- After several weeks of slow to no progress in attacking the=
=20
state's energy mess, the Legislature erupted yesterday into a frenzy of=20
energy activity.=20
The sudden action on a series of energy bills -- including one to let=20
businesses buy power directly from generators -- stemmed initially from the=
=20
fear of bad publicity lawmakers might receive for a planned three-day junke=
t=20
next week to Washington, D.C.=20
When a key bill bogged down in the Assembly late yesterday, Speaker Bob=20
Hertzberg, D-Sherman Oaks, announced the trip was canceled.=20
Another reason for the flurry of action was recognition that time is runnin=
g=20
out.=20
Several alternative energy producers -- like wind farms and biomass plants =
-=20
- said they were one day away from forcing the state's two biggest utilitie=
s=20
into bankruptcy because they were owed more than $1 billion.=20
The Legislature's action and a court ruling that could free alternative=20
producers from unpaid contracts.=20
"This is triage, members of the Senate," said Sen. Jim Costa, D-Fresno. "Th=
is=20
is crisis activity we're engaged in."=20
The Senate approved a bill aimed at helping state regulators get cash to so=
me=20
alternative energy producers. Most of them have been paid little or nothing=
=20
since November by the utilities they sell electricity to.=20
Senators passed a bill to help the Public Utilities Commission order=20
utilities to pay solar, wind and other alternative energy producers who sig=
n=20
lower-priced contracts with the utilities.=20
The bill failed in the Assembly because of GOP opposition, fanned in part b=
y=20
price concerns by the oil industry, a major co-generation producer. The=20
Assembly is set to meet again today to try again pass the bill, which the P=
UC=20
needs to issue its final order.=20
The PUC's proposed order offers the first hint of financial relief for=20
hundreds of alternative energy producers, known as ''qualified facilities" =
in=20
the energy industry, who have been paid just pennies on the dollar by cash-=
=20
strapped Pacific Gas & Electric and Southern California Edison.=20
Lack of payments has caused many alternative generators to shutter their=20
operations.=20
The PUC's proposal, which will be considered at the commission's meeting=20
Tuesday, offers generators a choice of agreeing to a five-year contract at=
=20
$79 per megawatt or a 10-year deal at $69 per megawatt, Davis said. The goi=
ng=20
rate now is about $150 a megawatt hour.=20
The order does not address money already owed to the more than 600=20
alternative energy producers.=20
Under the order, utilities would have to pay any generator who signed the n=
ew=20
contracts within two weeks.=20
But PG&E said it might not be able to afford do that.=20
Operators of co-generation facilities say the contracts contemplated by the=
=20
PUC don't cover their cost of producing energy because the sale price no=20
longer would be pegged to the the price of natural gas.=20
In a significant court decision affecting generators, one geothermal energy=
=20
supplier in Imperial County won a lawsuit yesterday against Edison allowing=
=20
the company to escape a contract requiring it to sell electricity to the=20
utility.=20
A superior court judge said CalEnergy, operator of the geothermal plant,=20
could suspend deliveries to Edison and sell the 268 megawatt hours it=20
generated on the open market.=20
CalEnergy is owed $75 million by the utility.=20
The court victory may ease mounting pressure from some qualified facilities=
,=20
including CalEnergy, to drive one or both of the utilities into involuntary=
=20
bankruptcy.=20
The Assembly and Senate, meanwhile, rushed through a series of bills aimed =
at=20
increasing energy conservation, and rushing the building of new power plant=
s.=20
Most significant for bigger residential and commercial utility customers is=
 a=20
measure passed by the Assembly to allow energy customers to buy power=20
directly from generators.=20
That right was eliminated in January when the state began buying power for=
=20
the cash-strapped utilities.=20
The bill approved unanimously yesterday would impose a yet to be determined=
=20
exit fee on customers who leave the power grid to help cover the state's=20
financial exposure.=20
Tell Us What You Think=20
Can you save 20 percent on your energy use? Gov. Gray Davis' administration=
=20
is offering rebates for Californians who save on power starting in June, an=
d=20
if you've got a strategy for conserving, The Chronicle wants to hear it.=20
We'll be writing about the hardest-working energy savers in a future story.=
=20
To get involved, write to the Energy Desk, San Francisco Chronicle, 901=20
Mission St., San Francisco, CA 94103; or e-mail energysaver@sfchronicle.com=
.=20
E-mail the reporters at glucas@sfchronicle.com and bsalladay@sfchronicle.co=
m.=20
,2001 San Francisco Chronicle ? Page?A - 14=20
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State's bill for energy could double this year=20
Posted at 9:34 p.m. PST Thursday, March 22, 2001=20
BY=20
STEVE=20
JOHNSON=20
AND=20
JOHN=20
Warning that California is imperiled by the prices it is paying for=20
electricity, a report Thursday said the state's annual power tab could wind=
=20
up being 10 times what it was two years ago.=20
At the current rate of spending, the report estimated that the total=20
electricity bill in California this year could hit $70 billion, which is mo=
re=20
than twice what it was last year and about 10 times what was paid in 1999 a=
nd=20
1998.=20
``The California electricity market has gone from being `dysfunctional' to=
=20
precipitating a crisis,'' according to the report from the Independent Syst=
em=20
Operator.=20
It added that the price being charged ``threatens any semblance of just and=
=20
reasonable consumer rates, the financial viability of California's=20
investor-owned utilities, the financial stability of California, of its=20
neighboring states and of the nation.''=20
While power suppliers denied any wrongdoing, the report said the state=20
appears to have been hit with ``excess'' charges totaling $6.87 billion sin=
ce=20
May, based on an assessment of the typical operating costs of power plant=
=20
owners. Out of that total, $6.2 billion appeared to be excessive charges=20
during times when power was not in particularly short supply, the agency=20
said.=20
The cost of power has become a growing concern now that the state has stepp=
ed=20
in to buy it on behalf of Pacific Gas & Electric Co. and Southern Californi=
a=20
Edison, which claim to be so strapped for cash that they are on the verge o=
f=20
bankruptcy.=20
In making public the report, which was sent to the Federal Energy Regulator=
y=20
Commission, officials at the Independent System Operator were careful not t=
o=20
accuse any power companies of price gouging. While the prices appeared to b=
e=20
unreasonable, they said, the state needs to learn more about the specific=
=20
operating costs of power plant operators before they could determine whethe=
r=20
California was cheated.=20
The officials said they were considering asking the federal agency, which=
=20
oversees power wholesalers, to order the suppliers to make refunds. In the=
=20
past two weeks, the federal agency has warned a number of suppliers that th=
ey=20
may have to refund $135 million in apparent overcharges during January and=
=20
February.=20
But many experts question whether the federal agency is serious about=20
demanding such refunds, so California officials also are reviewing the=20
possibility of suing the suppliers or seeking criminal charges against some=
=20
of them. ``We're working very closely with a number of agencies to review t=
he=20
information we currently have to determine what remedies may be available,'=
'=20
said Charles Robinson, the Independent System Operator's general counsel.=
=20
The report's suspicions were partly bolstered by another study made public=
=20
Thursday by the state auditor. It said California's market structure=20
encouraged bidding gamesmanship by both utilities and power sellers ``in an=
=20
effort to manipulate wholesale prices to their advantage.'' But it stopped=
=20
short of accusing power generators of profiting illegally.=20
``There's clearly some evidence of market abuse,'' said state Auditor Elain=
e=20
Howle. Even so, she added, ``that's not to say it's anything illegal. We=20
hired consultants, they looked at some of the bidding, and they weren't=20
comfortable going that far.''=20
Although no power companies were named in either report, officials with=20
several suppliers insisted they have done nothing wrong.=20
``We've conducted our business legally and ethically,'' said Richard=20
Wheatley, spokesman for Reliant Energy, which runs five major California=20
power plants. ``The ISO report appears to be nothing more than just another=
=20
attempt to put blame at someone else's doorstep, when there's been very=20
little action out of Sacramento to resolve the problems in the California=
=20
marketplace.''=20
Duke Energy spokesman Jeremy Dreier said the company, which runs plants in=
=20
Moss Landing and Morro Bay, sold most of its power last year and this year =
in=20
relatively low-cost, long-term contracts, and was among the first to offer=
=20
such deals to the state. He added that Duke increased production from its=
=20
aging plants to meet surging demand.=20
``The fact that we were among the first to bring long-term contracts to the=
=20
table speaks volumes about how we're trying to serve this market,'' Dreier=
=20
said.=20
John Sousa of Dynegy Inc., which co-owns three major California plants, add=
ed=20
that ``given the market conditions, the rates we charged were just and=20
reasonable.''=20
---------------------------------------------------------------------------=
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-------------------------------------------------







Plan for alternate power plants stalls=20
Posted at 10:03 p.m. PST Thursday, March 22, 2001=20
BY DION NISSENBAUM AND JENNIFER BJORHUS=20

Mercury News=20


SACRAMENTO -- The state's prospects for plugging a critical electricity gap=
=20
dimmed Thursday when the state Assembly rejected a rescue plan for=20
alternative power companies and a state judge ruled that one such firm coul=
d=20
stop selling energy in California.=20
Both actions threaten the plan Gov. Gray Davis announced just Tuesday to ke=
ep=20
these companies running and stave off more blackouts. With the state's=20
troubled utilities failing to pay for their electricity, many alternative=
=20
energy plants have been shutting down.=20
The dual blows came on a day when tempers flared in the Capitol as lawmaker=
s=20
jarred by back-to-back blackouts launched bipartisan attacks on Pacific Gas=
 &=20
Electric Co. and Southern California Edison, which aren't paying wind, sola=
r,=20
biomass, geothermal and small gas-fired plants for their electricity.=20
After Republicans shot down the measure meant to keep alternative energy=20
companies in business, Assembly Speaker Robert Hertzberg, D-Van Nuys, warne=
d=20
that the restless companies might act on their threat to force the utilitie=
s=20
into bankruptcy.=20
``They said it, and I understood them to mean it,'' he said.=20
The failure overshadowed a burst of action in Sacramento where lawmakers=20
approved a host of other measures. The Senate approved two key bills: one=
=20
that would spend more than $1 billion to encourage Californians to conserve=
=20
energy and one that would make it easier to build power plants. The Assembl=
y=20
approved 14 incremental bills.=20
Six votes short=20
But the Assembly fell six votes short of passing a hastily prepared bill=20
meant to help prop up the nearly 700 alternative energy companies, many of=
=20
which are now idle.=20
Those closings sapped California of energy this week and helped cause two=
=20
days of rolling blackouts -- the first since January.=20
In response, Davis and lawmakers cobbled together a plan to set new, lower=
=20
rates for alternative power and to fine the utilities if they refuse to pay=
=20
these companies, which supply up to a third of the state's power.=20
But Republicans refused to back the measure and said it contained too many=
=20
complex parts that needed more time to analyze.=20
``Everyone in this room knows that this piece of legislation has not had a=
=20
good look,'' said Assemblyman George Runner, R-Lancaster.=20
Assemblyman Fred Keeley, D-Santa Cruz, castigated the Republicans and=20
implored them to accept an imperfect solution.=20
``Ladies and gentlemen: Welcome to the NFL,'' he said. ``Welcome to the wor=
ld=20
where large, complex issues don't have a simple solution.''=20
Approval is needed before state regulators at the Public Utilities Commissi=
on=20
can vote on the fine points of the plan. That was supposed to happen Tuesda=
y.=20
Much of the criticism focused on concerns raised by power plants that use=
=20
natural gas to produce energy. Administrators from those plants said the=20
Davis price caps would make it impossible for them to break even.=20
The derailment came hours after the measure narrowly won approval in the=20
state Senate.=20
Hertzberg plans to search for a compromise today and canceled plans for the=
=20
Assembly's annual trip to Washington.=20
Thursday's actions were highlighted by angry attacks on the utilities by=20
frustrated lawmakers.=20
``I hope they do go bankrupt,'' shouted Senate President pro tem John Burto=
n,=20
D-San Francisco, during a debate on the energy crisis. ``Let them go belly=
=20
up. I don't care any more.''=20
Legal decision adds twist=20
The legislative failure was compounded by a legal decision in Southern=20
California that further complicated the picture.=20
A Superior Court judge in Imperial County cleared the way for CalEnergy=20
Operating Corp. to break its contract with Edison and sell its 268 megawatt=
s=20
of power on the open market. The judge concluded that Edison had breached i=
ts=20
contract by failing to pay CalEnergy since November.=20
That ruling could pave the way for hundreds of others to follow suit and=20
drain off power California needs to prevent blackouts.=20
``It's not good,'' said V. John White, director of the Center for Energy=20
Efficiency and Renewable Technologies. ``This is potentially going to chang=
e=20
the dynamics of the situation, and probably not for the better.''=20
Jan Smutny-Jones, executive director of the Independent Energy Producers=20
Association, said it was unclear whether other companies would sue.=20
``I think this is a very significant development,'' he said. ``We're sort o=
f=20
at a period where the industry's reaching the end of the rope.''=20
The ruling did have one silver lining: CalEnergy Chairman David Sokol said=
=20
his company and seven others had planned to force Edison into bankruptcy if=
=20
they lost in court.=20
But he also warned, ``You stick a sharp stick in enough people's eyes, and=
=20
they get pretty tired of it.''=20
The situation with generators supplying PG&E isn't as dire since the compan=
y=20
has been making partial payments.=20
Kent Burton, senior vice president for Covanta Energy Corp. in New Jersey,=
=20
said, ``They've tried to be responsive.''=20


Mercury News Staff Writer Mark Gladstone contributed to this report. Contac=
t=20
Dion Nissenbaum at dnissenbaum@sjmercury.com or (916) 441-4603 or Jennifer=
=20
Bjorhus at jbjorhus@sjmercury.com or (408) 920-5660.

