Message-ID: <24010094.1075860454083.JavaMail.evans@thyme>
Date: Thu, 22 Mar 2001 02:04:00 -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, 
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	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, 
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	paul.kaufman@enron.com, peggy.mahoney@enron.com, 
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	janel.guerrero@enron.com, shirley.hudler@enron.com, 
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Subject: Energy Issues
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Please see the following articles:

Bay City News, Wed 3/21: "Blackouts Not Expected=20
Today"

Dow Jones Newswire, Wed 3/21: "Calif State Controller:General Fund Surplus =
Dn=20
To $3.2B"

CBS.MarketWatch.com, Wed 3/21: "Davis says regulators will act to pay QFs
Electricity providers insist they need to be paid"

Long Beach Press, Wed 3/21: "Rash power bill may need fix"

SF Chron, Wed 3/21: "PUC considers rewarding producers that sign long-term=
=20
contracts"

Sac Bee, Thurs, 3/22:  "State claims $5.5 billion overcharge: Refunds by=20
wholesale generators sought"

Sac Bee, Thurs, 3/22:  "Power solution eludes Davis: Lawmakers grow edgy as=
=20
crisis drags on"

Sac Bee, Thurs., 3/22:  " Legislators learn some details of power contracts=
"

San Diego Union, Thurs, 3/22:  "Federal judge orders major power wholesaler=
=20
to sell to California"

San Diego Union, Thurs., 3/22:  "Controller: State's power spending imperil=
s=20
its financial health"

San Diego Union, Wed, 3/21:  "Governor says utilities must pay in advance f=
or=20
some power"

LA Times, Thurs, 3/22:  "Energy Overcharge of $5.5 Billion Is Alleged"

LA Times, Thurs, 3/22:  "Power Strain Eases but Concerns Mount"
LA Times, Thurs, 3/22:  Graphics: Overcharges Alleged=20

San Fran Chron, Thurs, 3/22:  "Net Complex A Dilemma For San Jose=20
SERVER FARM: Plant would tax grid"

San Fran Chron, Thurs, 3/22:  "Contracts Won't Meet Summer Demands=20
DETAILS: 2004 before full impact felt"

Mercury News, Thurs, 3/22:  "California overcharged $5.5 bln for wholesale=
=20
power"

Orange Cty Register, Thurs, 3/22:  Commentary:  "If the Power Goes Off"

=20
Orange Cty Register, Thurs, 3/22:  Commentary:  "Socialized Electricity"

San Fran Chron, Thurs, 3/22:  "Bush's Energy Policy Will Backfire,=20
Feinstein Warns / She wants federal price controls now"

Dow Jones Newswires, Thurs, 3/22:  "Reliant Still In Power Pact Talks With=
=20
Calif. DWR"

Dow Jones Newswires, Thurs, 3/22:  "CPUC Must Address Rates In QF Repayment=
=20
Order - SoCal Ed"

Dow Jones Newswires, Thurs, 3/22:  "Calif Small Pwr Producers To Shut Plant=
s=20
If Rates Capped"

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

Blackouts Not Expected=20
Today

Bay City News=20

Following two consecutive days of rolling blackouts, California's power=20
picture looks much brighter today, but conservation is still needed.=20
The California Independent System Operator is urging consumers to continue=
=20
conservation measures during today's Stage One Electrical Emergency.=20
"The conservation efforts of Californians, particularly Tuesday evening, we=
re=20
significant and helped to reduce the duration and impact of yesterday's=20
blackouts,'' according to officials. "The California ISO asks customers to=
=20
continue their voluntary reductions during this time of tight supply."=20
More than 11,500 megawatts of in-state generation remain unavailable with=
=20
power plants completing repairs and needed maintenance. However, several=20
generating units returned to service today and the level of imported power=
=20
has increased, boosting the supply.=20
"The ISO is cautiously optimistic that customer outages will be avoided=20
today,'' according to officials.=20
Today's Stage One alert is in effect through midnight tonight.=20
Stage One Emergencies are declared when power reserves fall below 7 percent=
.=20
Stage Two kicks in when reserves fall below 5 percent. Stage Three is=20
initiated when reserves drop to below 1.5 percent.
---------------------------------------------------------------------------=
---
--------------------------------------------------------------------------

Calif State Controller:General Fund Surplus Dn To $3.2B


03/21/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- California State Controller Kathleen Connell=20
Wednesday said the state's general fund surplus has dropped to $3.2 billion=
=20
from $8.5 billion in January, mostly because of electricity purchases made =
by=20
the state's Department of Water Resources, a press release said.=20
Connell also denied Gov. Gray Davis' request to transfer an additional $5.6=
=20
billion from the general fund to the Special Fund for Economic Uncertaintie=
s,=20
the release said.
Connell noted that, given the rapid depletion of the general fund on power=
=20
purchases, the state would need to borrow $2.4 billion in order to tranfer=
=20
the $5.6 billion from the general fund to the special fund.=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 fund at risk," Connell said.=20

Connell called on Davis to ensure that the CDWR completes by the end of May=
=20
2001 the revenue bond sales that will be used to buy power and repay the=20
general fund.=20
She also asked that the CDWR notify her of all power purchases made and=20
contracts negotiated thus far and requested that she be told within 7 days =
of=20
any purchases and contracts negotiated in the future.=20
Connell also said she wanted to be told within 24 hours of any power buys=
=20
that exceed $55 million and asked that the Department of Finance be directe=
d=20
to prepare new general fund cash flow estimates for the next 30 and 60 days=
,=20
and for the end of the fiscal year.=20
The state's Department of Water Resources has been buying power since Janua=
ry=20
in lieu of Edison International (EIX) utility Southern California Edison an=
d=20
PG&E Corp (PCG) utility Pacific Gas and Electric Co, because suppliers=20
refused to sell to the nearly-bankrupt utilities.=20
-By Jessica Berthold; Dow Jones Newswires; 323-658-3872;=20
jessicaberthold@dowjones.com=20

Gov. Davis' office said, in response to Connell's comments, that the state=
=20
budget was solid and the economy remained strong.=20
"We will be getting the money back we've paid for energy and it should have=
=20
no significant effect on the state's finances from the Wall Street=20
perspective," said Davis press secretary Steve Maviglio.=20
-By Jessica Berthold; Dow Jones Newswires; 323-658-3872;=20
jessicaberthold@dowjones.com
---------------------------------------------------------------------------=
---
--------
Davis says regulators will act to pay QFs
Electricity providers insist they need to be paid
By Russ Britt, CBS.MarketWatch.com=20
Last Update: 9:45 PM ET Mar 20, 2001
LOS ANGELES (CBS.MW) - California Gov. Gray Davis said regulators will act=
=20
Tuesday on a plan to guarantee that independent power generators are paid.
Independent power producers provide about 30 percent of California's=20
electricity from a variety of sources including wind, solar and other=20
sources. Because many of the companies, known as Qualifying Facilities, or=
=20
QFs, haven't been paid they've begun to withhold power, contributing to=20
blackouts in the state Monday and Tuesday.=20
"We are anxious to pay the QFs because they're falling like flies," Davis=
=20
said at a news conference late Tuesday. "If they don't get paid, the lights=
=20
will go out."
Davis said the state's PUC order will require the state's nearly bankrupt=
=20
utilities to enter five-year contracts with the QFs at rates of 7.9 cents p=
er=20
kilowatt hour, or 10-year contracts for lower rates. The structure is simil=
ar=20
to rates Davis claims he was able to negotiate for long-term power contract=
s=20
from out-of-state generators.
---------------------------------------------------------------------------=
---
-------------------------------------
Rash power bill may need fix
By Will Shuck
From our Sacramento Bureau
SACRAMENTO Even as lawmakers lament the slow pace of solving California's=
=20
energy crisis, the cost of haste has cropped up in their first major act, a=
=20
multibillion dollar measure that put the state in the power-buying business=
.=20

AB1X, the highly touted bill that put California in the power-buying=20
business, may have been so rashly crafted that it will take another piece o=
f=20
legislation to fix it, an influential senator said Tuesday.=20
At issue is vague wording that makes it unclear when and to what extent=20
Southern California Edison and other utilities have to repay the state for=
=20
buying power.=20
State Sen. Debra Bowen, chairwoman of the Senate Energy, Utilities and=20
Communications Committee, said the bill apparently has left room for utilit=
y=20
lawyers to argue that their companies needn't repay the state until they ha=
ve=20
covered other costs.=20
But Bowen, a Redondo Beach Democrat who represents downtown and western Lon=
g=20
Beach, said "the legislative intent is crystal clear" that the state wanted=
=20
to be repaid directly for supplying about a third of the power utility=20
companies deliver to their customers.=20
"We need a cleanup bill" to set the matter straight, she said.=20
Although AB1X illustrates the flaws that come with speed, Bowen said, the=
=20
Legislature can't afford to delay.=20
"I think we are much too slow in our response," she said. "But that has to =
be=20
balanced against things we've done in a tearing hurry and then have had to=
=20
fix later."=20
No matter what the Legislature does in the coming weeks, she said, Californ=
ia=20
is in for a tough summer, and only determined conservation efforts will put=
=20
much of a dent in a precarious supply-demand equation.
---------------------------------------------------------------------------=
---
-------------------------------------------
PUC considers rewarding producers that sign long-term contracts=20
Greg Lucas, Lynda Gledhill, Chronicle Sacramento Bureau
Wednesday, March 21, 2001=20
,2001 San Francisco Chronicle=20
Sacramento -- Some cash-strapped producers of wind, solar and other=20
alternative forms of energy will get long-delayed financial relief under a=
=20
proposed order by state regulators, Gov. Gray Davis said yesterday evening.=
=20
A proposed order by the Public Utilities Commission is designed to reward=
=20
energy producers who sign long-term contracts with utilities at lower rates=
.=20
Alternative energy producers that voluntarily enter such contracts, which=
=20
would start on April 1, would be paid within 15 days, said Davis, who=20
requested the order. Those that do not would have to wait until the utiliti=
es=20
that buy their power return to solvency.=20
Davis blasted Pacific Gas & Electric Co. and Southern California Edison for=
=20
not paying the alternative generators -- know as qualified facilities, or=
=20
"QFs" -- even though the companies have been collecting money through rates=
.=20
"It is wrong and irresponsible of the utilities to pocket and withhold the=
=20
money designed to compensate the QFs," Davis said. "It's immoral and has to=
=20
stop."=20
Alternative producers -- ranging from massive co-generation facilities at o=
il=20
refineries to tiny biomass plants -- produce about a third of the state's=
=20
supply of electricity. But many are shutting down because utilities have no=
t=20
paid them since November.=20
The loss of some 3,000 megawatts from tapped-out alternative energy produce=
rs=20
contributed to the blackouts that snarled California yesterday and Monday,=
=20
according to the Independent System Operator, which manages the state's pow=
er=20
grid.=20
The PUC's proposed order -- which will be considered at the board's Tuesday=
=20
meeting -- offers the generators a choice of agreeing to a five-year contra=
ct=20
at $79 per megawatt or a 10-year deal at $69 per megawatt, Davis said.=20
The order does not address the more than $1 billion already owed to the mor=
e=20
than 600 alternative energy producers around the state. Davis said to favor=
=20
one creditor over another in past debt could bring on bankruptcy proceeding=
s=20
from other creditors.=20
The Legislature would also need to act to make the order work.=20
"It is critical to keep these facilities up and online," said Sen. Debra=20
Bowen, D-Marina del Ray, who estimates that Edison has $1.5 billion in cash=
=20
on hand, and PG&E $2.5 billion. "The utilities owe it to the people of the=
=20
state to pay them."=20
Edison said yesterday that it opposed any attempt to place alternative=20
producers ahead of their other creditors.=20
But Tom Higgins, a senior vice president for Edison International, which ow=
es=20
alternative producers some $835 million, said his company was talking to th=
e=20
governor's office about possible payment structures.=20
Alternative energy producers, particularly those that use high-priced natur=
al=20
gas to fire their generators, say that without an immediate infusion of cas=
h=20
they must close their plants.=20
"We've been obsessed with the health of the utilities and (have) forgotten=
=20
the health of everyone else," said V. John White, legislative director of t=
he=20
Clean Power Campaign, which lobbies for alternative energy producers.=20
CalEnergy Operating Corp., which operates eight geothermal plants in the=20
Imperial Valley producing 268 megawatt hours for Edison has sued the utilit=
y=20
asking to be paid and to be temporarily released from their contract with=
=20
Edison which has paid them nothing since November.=20
CalEnergy has a court hearing tomorrow on its Edison contract. Edison owes=
=20
the company $75 million, and the debt increases by $1 million a day.=20
"We've lived up to our end of the bargain but Edison hasn't. We're now not =
in=20
a position to make a property tax payment on April 10 and we're the largest=
=20
employer in the county," said Vince Signorotti, CalEnergy's property manage=
r.=20
Unlike Edison, PG&E is paying its creditors 15 cents on the dollar.=20
"We have offered over the past five days to prepay for future power not yet=
=20
delivered to keep as many of them operating as possible, but the state need=
s=20
to decide how its going to divvy up the limited money under the frozen=20
rates," said John Nelson, a PG&E spokesman.=20
The PUC's sudden attempt to recast the rates paid to alternative generators=
=20
comes after several months of inaction, partly a result of waiting for=20
legislative negotiations on the issue to conclude. Those negotiations=20
eventually failed to move forward.=20
---------------------------------------------------------------------------=
---
-------------------------------------
State claims $5.5 billion overcharge: Refunds by wholesale generators sough=
t
By Dale Kasler
Bee Staff Writer
(Published March 22, 2001)=20
In its boldest attempt yet to extract refunds from wholesale power=20
generators, the state's grid operator accused the generators Wednesday of=
=20
overcharging Californians by $5.5 billion for electricity since last May.=
=20
The state's Independent System Operator, which manages the state's=20
transmission grid, plans to tell a federal regulatory agency today that pow=
er=20
generators consistently took advantage of their stranglehold on the=20
California market to ratchet up prices.=20
The federal agency, the Federal Energy Regulatory Commission, recently=20
threatened to order generators to refund $134.8 million for overcharges,=20
mostly covering January and February. But those refunds amounted to just a=
=20
fraction of what the grid operator was seeking. The ISO, which has been=20
complaining about market abuses for several months, says FERC must do more.=
=20
"We're happy that (FERC) took this first step, but we think there's a long=
=20
way to go," said Anjali Sheffrin, the ISO's director of market analysis. "A=
s=20
far as I'm concerned, it's been too little, too late. ... The refunds they=
=20
have acted on (so far) have been minimal."=20
She said the report covers five major power suppliers and 16 other power=20
importers.=20
FERC Commissioner William L. Massey said it would be improper for him to=20
comment on a report that has not yet been filed. But when told of the $5.5=
=20
billion total, Massey told the Los Angeles Times: "That doesn't shock me in=
=20
any way."=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
However, most FERC critics are skeptical that the federal agency, which is =
a=20
strong believer in letting free markets run their course, would order a=20
refund anywhere near as large as $5.5 billion -- even though it has found=
=20
that California prices at times have been "unjust and unreasonable."=20
The big power generators, saying their charges were reasonable, are disputi=
ng=20
the $134.8 million refunds proposed so far and have vowed to fight the ISO'=
s=20
latest effort.=20
If the ISO were to prevail, the $5.5 billion in refunds could go a long way=
=20
toward remedying California's energy mess.=20
They could help restore the financial health of Pacific Gas and Electric Co=
.=20
and Southern California Edison, which have nearly been bankrupted by the=20
prices charged by the power generators. They also could ease the strain on=
=20
the state treasury, which is spending billions to purchase electricity for=
=20
Californians because PG&E and Edison can't.=20
Sheffrin said her department studied sales made by the power generators to=
=20
ISO, which makes last-minute power purchases to balance supply with demand,=
=20
and the California Power Exchange, the now-bankrupt entity where most of=20
California's wholesale electricity was bought and sold until December.=20
She said the study made "very generous" allowances for natural gas expenses=
,=20
costly air-pollution credits and other factors, including the scarcity of=
=20
electricity. The result was $5.5 billion worth of charges "in excess of=20
competitive costs," she said.=20
In many cases, the companies used their market clout to submit bids that we=
re=20
"way beyond their costs," she said.=20
"It was insufficient competition," Sheffrin said. "They got away with a lot=
."=20
She said the refund request isn't just a shot in the dark. FERC, she noted,=
=20
"has already found that prices in the California wholesale energy market ha=
ve=20
been unreasonable. We took it upon ourselves ... to show FERC how they got =
to=20
be so high."=20
FERC proposed refunds totaling $124 million for January and February sales,=
=20
declaring that generators' prices were too high.=20
In a separate case the federal agency, for the first time, accused two=20
generators last week of taking plants offline to force prices up.=20
---------------------------------------------------------------------------=
---
---------------------------------------

Power solution eludes Davis: Lawmakers grow edgy as crisis drags on=20
By Emily Bazar and Amy Chance
Bee Capitol Bureau
(Published March 22, 2001)=20
Gov. Gray Davis likes to compare the state's energy crisis to a complicated=
=20
"three-cornered" billiard shot.=20
But as California plunged into another round of power blackouts this week,=
=20
Davis has yet to line up the angle on an ultimate solution.=20
The state's short-term power bill is nearing $4.2 billion, and legislators=
=20
are balking at the administration's requests for additional money.=20
Getting even the least controversial pieces of the puzzle through the=20
Legislature is taking weeks longer than expected.=20
While the Democratic governor has insisted secrecy about details of his pow=
er=20
purchases is necessary to protect the state's bargaining position, other=20
state officials are complaining vigorously about the lack of information.=
=20
And critical deals the governor hoped to reach with energy suppliers and=20
utility companies are proving difficult to close.=20
"I think we all got lulled into a little complacency a few weeks ago. All=
=20
these things seemed to be going along, and the governor was making all thes=
e=20
warm and fuzzy comments," said Assemblyman John Campbell, R-Irvine.=20
"But it only takes one deal to go sideways and we're all blacked out," he=
=20
added. "The governor is running around basically saying, 'Trust me.' I'm no=
t=20
sure he's deserving of the trust at this point."=20
Davis and his aides insist they are working around the clock on plans to=20
boost power generation, encourage conservation and reach an agreement with=
=20
utilities that will keep them out of bankruptcy.=20
The utility plan, they say, is the equivalent of a large corporate merger=
=20
that simply can't be accomplished overnight. Davis notes that earlier=20
deregulation efforts might have benefitted from a little more time.=20
Although the state has reached a broad "agreement in principle" with Southe=
rn=20
California Edison to obtain its power transmission lines in exchange for he=
lp=20
paying off its debts, a final, detailed deal has not been reached. The=20
initial agreement with Edison was announced Feb. 23.=20
And the governor has yet to achieve a tentative agreement with Pacific Gas=
=20
and Electric Co., which is driving a harder bargain over price and other=20
elements of a potential rescue plan.=20
Joseph Fichera, one of several consultants receiving more than $11 million=
=20
from the administration for advice on the energy crisis, said many people=
=20
don't realize the complexity of the deal they're brokering.=20
In their bid to achieve a public takeover of the investor-owned utilities'=
=20
transmission lines, he said, negotiators have to pore over thousands of=20
documents related to the transmission lines alone.=20
"We are doing what is normal in a transaction of this magnitude, which is=
=20
investigate, document, circulate, redocument, agree, move forward," said=20
Fichera, an investment banker with Saber Partners in New York City. "The=20
governor has put a 'I want this yesterday' fire" under his negotiating team=
.=20
The negotiator, however, declined to say when he expects final agreements t=
o=20
be reached with the companies.=20
"It could be days, it could be weeks," he said.=20
There were signs, meanwhile, of trouble brewing on another front: the giant=
=20
bond sale the state must make to repay the money it has spent so far on=20
electricity and to finance future long-term contracts for energy.=20
State Treasurer Phil Angelides said Wednesday the utilities are appealing a=
=20
ruling by the state Public Utilities Commission that essentially ensures th=
e=20
state will be repaid, a move that he said threatens to delay the sale=20
indefinitely.=20
"If the utilities have decided to adopt a scorched earth policy until they=
=20
get what they need and want, then it will be a significant problem,"=20
Angelides said.=20
PG&E spokesman Ron Low said the governor is simply placing too many demands=
=20
on a rate structure that doesn't compensate the utilities for their current=
=20
costs.=20
"Political rhetoric is not going to change the math," he said.=20
In the Legislature, lawmakers are growing grumpier. Most were taken by=20
surprise Monday when blackouts were ordered across the state, weeks before=
=20
summer temperatures were expected to set in and strain the power system.=20
"I'm more worried than ever," said Assemblyman Bill Leonard, R-San=20
Bernardino. "A lot of the elements we thought we had a handle on in January=
=20
are unraveling."=20
A deal the governor said had been worked out weeks ago between the state an=
d=20
more than 600 small alternative energy suppliers collapsed last week.=20
The alternative generators have not been paid by the utilities for months,=
=20
and state leaders attempted to bargain down the price utilities pay those=
=20
generators for power.=20
But administration officials complained privately that lawmakers instead=20
sweetened the pot for the suppliers to the point that the measure no longer=
=20
helped solve the overall financial situation pushing the utilities toward=
=20
bankruptcy. Under a proposal announced Tuesday by Davis, the Legislature=20
would authorize the PUC to require the utilities to pay the alternative=20
suppliers at prices more closely resembling the original deal.=20
But the governor ran into immediate opposition, as some suppliers said said=
=20
he would not pay them enough to cover their fuel costs.=20
"We would go from not being paid, to losing money," said Hal Dittmer of=20
Wellhead Electric, a Sacramento-based supplier that has been shut down for=
=20
more than a month. "Almost everybody who burns natural gas is going to shut=
=20
down. (Davis) got it wrong."=20
Democrats outside the Davis administration, meanwhile, are complaining abou=
t=20
the amount of money the state Department of Water Resources is spending on=
=20
expensive, last-minute power purchases. Within a week, $4.2 billion will ha=
ve=20
been committed.=20
State Sen. Steve Peace, D-El Cajon, chairman of the joint Legislative Budge=
t=20
Committee, is warning the Davis administration that he will block additiona=
l=20
funds for last-minute purchases of power until the PUC makes progress=20
recovering money that already has been spent. He intends to hold a hearing =
on=20
the issue this morning.=20
On Wednesday, state Controller Kathleen Connell told Davis she will refuse =
to=20
make a routine budget transfer he had requested, saying she is concerned th=
at=20
there is "no outside check and balance" on the money the administration is=
=20
spending to buy electricity on the spot market.=20
As the statewide elected official who pays the state's bills, Connell said=
=20
she has yet to receive information from the Department of Water Resources=
=20
about how much it is spending.=20
"We really need an accounting as to the total amount of liability they have=
=20
accumulated," she said. "I understand they're in an emergency situation ...=
=20
but it begins to imperil the state's ability to manage its cash flow."=20
Meanwhile, a bill to provide $1 billion for conservation programs, aimed at=
=20
reducing power needs this summer, also has languished for several weeks in=
=20
the state Senate. While Davis has focused his attention elsewhere, Republic=
an=20
lawmakers have opposed the measure as too expensive. Democrats argue that=
=20
each two-week delay prevents the state from saving as much energy as one=20
"peaker" plant will produce this summer. Peaker plants are designed to help=
=20
meet the peaks of electricity demand.=20
"I'm the eternal optimist, but we have to keep working on all fronts," said=
=20
Sen. Byron Sher, D-Palo Alto, who hopes to take his energy conservation bil=
l=20
up for a vote in the Senate again today. "It's a formidable challenge."=20
Bee staff writer Dale Kasler contributed to this report.=20
---------------------------------------------------------------------------=
---
-------------------------------------------
Legislators learn some details of power contracts
By John Hill
Bee Capitol Bureau
(Published March 22, 2001)=20
The veil of secrecy surrounding the state's electricity contracts lifted=20
Wednesday -- a little.=20
Gov. Gray Davis gave state legislators a report laying out some of the=20
details of long-term contracts designed to help the state pull out of its=
=20
energy crisis. But the report left legislators and others clamoring for mor=
e.=20
"The information raises more questions," said Assemblyman George Runner,=20
R-Lancaster. "I liken it to watching a parade through a knothole in a fence=
.=20
You get to look at one float, but you're not sure about what's coming up an=
d=20
what you've missed."=20
Davis had previously disclosed that the state had signed or was close to=20
signing 40 long-term contracts, at an average price over 10 years of $69 pe=
r=20
megawatt-hour.=20
The contracts are part of the state's strategy for trying to avoid a fiscal=
=20
shellacking in the energy spot market while making sure there's enough=20
electricity to avoid more blackouts.=20
Davis also previously disclosed that the contracts were for an average of=
=20
about 9,000 megawatts a year, and that the total cost exceeded $40 billion.=
=20
But Davis has resisted telling more, saying the state would jeopardize its=
=20
ability to get the best prices if electricity generators knew what their=20
counterparts were getting.=20
On Wednesday, the governor's office released a March 15 report from S. Davi=
d=20
Freeman, general manager of the Los Angeles Department of Water and Power, =
to=20
the state Department of Water Resources. The state agency has been given th=
e=20
responsibility of making power purchases, and Freeman was brought in to lea=
d=20
the negotiations.=20
As of March 15, the state had signed 19 contracts with seven suppliers for=
=20
periods ranging from 14 months to 20 years, with many for three or five=20
years, the report says. Some of the contracts are for electricity to meet t=
he=20
state's everyday power demand, while others are only for times of peak use,=
=20
such as hot summer days.=20
The state had "agreements in principle" for an additional 25 contracts.=20
Runner said he has been told that two of these contracts have since been=20
finalized.=20
The amount of power provided reaches a peak in 2004 of more than 10,000=20
megawatts. As the long-term contracts start to expire around then, the stat=
e=20
is hoping that demand can be met with new contracts or spot purchases at=20
prices expected to be much cheaper.=20
The report says nine more long-term contracts were under discussion.=20
Some of the contracts are with power generators, while others are with=20
marketers who may get the power from a number of sources.=20
In some cases, the state may supply the natural gas used to generate the=20
electricity, or power costs may be pegged to the going rate for the fuel.=
=20
Some suppliers can cancel if the state fails to sell bonds by a certain dat=
e=20
to cover power costs or fails to maintain an investment grade credit rating=
.=20
Some depend on the construction of power plants, but Freeman said they were=
=20
firm commitments.=20
"We were pretty careful not to put a hope and a dream in the portfolio," he=
=20
said.=20
More contracts will have to be signed to meet summer demand, and these=20
agreements will probably be more expensive, the report says.=20
One item not in Freeman's report was a secret deal to relieve several major=
=20
generators from having to pay for polluting the air beyond allowable limits=
.=20
The long-term power contracts include language that would have the state pa=
y=20
the costs of "pollution credits" that allow power plants to exceed their=20
permitted levels of smog-forming pollutants, the governor's office confirme=
d=20
Wednesday. Spokesman Steve Maviglio said that several generators are being=
=20
relieved from having to pay those costs.=20
V. John White, a Sierra Club lobbyist close to the negotiations, said Dyneg=
y=20
Inc., which has power plants in El Segundo, Encina and Long Beach, is one o=
f=20
them. Dynegy officials did not return calls to The Bee on Wednesday.=20
Freeman said that generators were demanding hefty premiums for having to de=
al=20
with air quality regulators in the summer and he figured it would be cheape=
r=20
just to pay for the pollution credits.=20
In other energy-related developments:=20
With more power plants back online, grid operators dropped down to a Stage =
1=20
electricity alert. The state Independent System Operator was expecting=20
supplies to gradually increase over the next few days.=20
The state Public Utilities Commission issued a revised draft decision that=
=20
would impose the prices outlined Tuesday by Davis for power produced by=20
alternative energy companies -- $79 a megawatt-hour for five-year contracts=
=20
or $69 a megawatt-hour for 10 years. The proposal is scheduled for a PUC vo=
te=20
March 27.=20
A federal judge ruled that one of the nation's major electricity generators=
=20
must continue supplying California with emergency power.=20
In imposing an injunction on Reliant Energy Services Inc., U.S. District=20
Judge Frank C. Damrell Jr. noted the "rolling blackouts (that have) darkene=
d=20
the California landscape" and said the loss of Reliant's production "poses =
an=20
imminent threat."=20
Bee staff writers Carrie Peyton, Chris Bowman and Denny Walsh contributed t=
o=20
this report.=20
---------------------------------------------------------------------------=
---
----------------------------------------


Federal judge orders major power wholesaler to sell to California=20




By Don Thompson
ASSOCIATED PRESS=20
March 21, 2001=20
SACRAMENTO =01) A federal judge issued a preliminary injunction Wednesday=
=20
ordering a major electricity wholesaler to continue selling to California=
=20
despite its fear 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.=20








Controller: State's power spending imperils its financial health=20
Governor says utilities must pay in advance for some power=20
?=20



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
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.=20
State Controller Kathleen Connell said Wednesday that the energy crunch als=
o=20
imperils California's financial health.=20
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.=
"=20
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.=20
"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

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

Controller: State's power spending imperils its financial health=20



By Don Thompson
ASSOCIATED PRESS=20
March 21, 2001=20
SACRAMENTO =01) California's power-buying on behalf of two strapped utiliti=
es is=20
gutting its budget surplus and putting the state at financial risk, the sta=
te=20
controller said Wednesday.=20
The surplus dropped from $8.5 billion in January, when the state began buyi=
ng=20
electricity for Pacific Gas and Electric Co. and Southern California Edison=
,=20
to $3.2 billion now, Kathleen Connell estimates.=20
Connell ordered an audit of the state's power-buying, saying Gov. Gray Davi=
s=20
is withholding key financial information from her office and the Legislatur=
e.=20
Wednesday marked the first time in three days the state avoided rolling=20
blackouts. Power grid officials credited cooling temperatures and the=20
completion of repairs at several power plants.=20
Connell said the energy crunch now imperils the state's budget as well as i=
ts=20
electric grid.=20
California has been spending about $45 million a day =01) $4.2 billion so f=
ar =01)=20
to buy power for Edison and PG&E, both denied credit by electricity=20
wholesalers.=20
The two utilities, California's largest, say they are nearly $14 billion in=
=20
debt due to soaring wholesale power costs the state's deregulation law bloc=
ks=20
them from recovering from customers.=20
Meanwhile, the state has faced high natural gas costs and a tight power=20
supply driven in part by power plant repairs in California and scarce=20
hydroelectric power in the Pacific Northwest.=20
Standard & Poor's has put the state on a credit watch due to its power=20
purchases and chastised Davis, the Legislature and state regulators for not=
=20
taking more aggressive steps to assure the utilities can pay their bills.=
=20
On Wednesday, Connell said she is refusing a request by Davis and the=20
Legislature to transfer $5.6 billion into a "rainy day fund" she said was s=
et=20
up to impress Wall Street as the state prepares to issue $10 billion in=20
revenue bonds to cover its 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
Connell said the scope of the proposed transfer is unprecedented and amount=
s=20
to a "shell game" that disguises the power purchases' impact on the state=
=20
budget.=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.=
"=20
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. He said his=
=20
plan may involve giving the utilities low-interest loans with their=20
transmission lines held as collateral.=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
Maviglio said the administration has released the financial information it=
=20
can without jeopardizing negotiations for long-term power contracts with=20
wholesalers.=20
---------------------------------------------------------------------------=
---
---------------------------------------------

Governor says utilities must pay in advance for some power=20



By Jennifer Coleman
ASSOCIATED PRESS=20
March 21, 2001=20
SACRAMENTO =01) The state's two largest utilities will be ordered to pay=20
environmentally friendly power generators in advance, a move Gov. Gray Davi=
s=20
hopes will bring a quick end to the power blackouts that darkened Californi=
a=20
this week.=20
The statewide blackouts that stretched from San Diego to Oregon on Monday a=
nd=20
Tuesday were caused in part by the failure of Southern California Edison an=
d=20
Pacific Gas and Electric Co. to pay millions of dollars they owe "qualifyin=
g=20
facilities" or QFs, Davis said.=20
Such suppliers use cogeneration =01) steam from manufacturing plus natural =
gas =01)=20
or solar, wind and other renewable energy to generate electricity. This wee=
k=20
California lost about half the power those generators normally provide.=20








Controller: State's power spending imperils its financial health=20
?=20



Several of them said they hadn't been paid by Edison and PG&E in weeks and=
=20
can't afford to keep operating their plants.=20
Davis accused the utilities of taking in money from customers while failing=
=20
to pay the QFs. The state has been spending about $45 million a day since=
=20
January to buy power for customers of Edison and PG&E, which are so=20
credit-poor that suppliers refuse to sell to them.=20
"It's wrong and irresponsible of the utilities to pocket this money and not=
=20
pay the generators," the governor said at a Capitol news conference Tuesday=
=20
evening. "They've acted irresponsibly and immorally and it has to stop."=20
PG&E called the governor's statements "inappropriate and unjustified," addi=
ng=20
that it was negotiating a payment plan with the QFs. Edison said it is inte=
nt=20
on paying creditors and working with the California Public Utilities=20
Commission to pay QFs for future power sales.=20
Controller Kathleen Connell warned Wednesday that the state's $2=20
billion-a-month power purchases are jeopardizing California's budget.=20
The state's budget surplus dropped from $8.5 billion in January, when the=
=20
power purchases began, to $3.2 billion now, Connell estimates. She blamed=
=20
Davis for withholding key financial information, and ordered an audit of th=
e=20
state's power spending starting next week.=20
She blocked a request by the Legislature and Davis administration to transf=
er=20
$5.6 billion from the state's general fund into a special "rainy day" fund,=
=20
saying that would have left the general fund $2.4 billion in debt.=20
The Legislative Analyst's Office said such transfers are routine; Connell=
=20
agreed, but said the size of the transfer is unprecedented.=20
"We started this year with a generous budget surplus," Connell said. "The=
=20
energy 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, keepers of the state's power grid were optimistic California wou=
ld=20
get through Wednesday without another day of rolling blackouts. Two plants=
=20
down for repairs returned to service.=20
Several power plants that were taken down for repairs are also expected com=
e=20
online by the end of the week, reducing the likelihood of blackouts, said J=
im=20
Detmers, ISO vice president.=20
Power may flow to homes and businesses, but it could soon cost consumers=20
more, said Assemblyman Fred Keeley, one of the Legislature's leaders on=20
energy issues.=20
"I think it's intellectually appropriate and honest to tell people as soon =
as=20
it's apparent" that a rate increase is warranted, the Boulder Creek Democra=
t=20
said Tuesday, indicating that time had come.=20
He estimated that the state Public Utilities Commission may soon have to=20
raise rates by about 15 percent to cover the state's costs and its utilitie=
s'=20
bills.=20
"My sense is that people will appreciate having some certainty and being ab=
le=20
to plan for it," he said. "They don't have to like it but I think they'll=
=20
appreciate it."=20
Davis said he is confident the utilities and the state can pay their bills=
=20
without further rate increases for Edison and PG&E customers.=20
In the meantime, the Independent System Operator, keeper of the grid, is=20
counting on continued conservation by residents and businesses to avoid mor=
e=20
blackouts. Conservation accounted for about 300 megawatts in savings during=
=20
Tuesday's peak usage, enough to power 300,000 homes.=20
Roughly a half-million homes and businesses were affected by Tuesday's=20
blackouts, which snarled traffic and plunged schools and businesses into=20
darkness across the state.=20
The outages began at 9:30 a.m. and continued in 90-minute waves until about=
 2=20
p.m., when the ISO lifted its blackout order. They were blamed for at least=
=20
one serious traffic accident.=20
Two cars collided at an intersection in the Los Angeles suburb of South El=
=20
Monte where the traffic lights were out. Two people were seriously hurt, sa=
id=20
California Highway Patrol Officer Nick Vite.=20
In San Francisco's Chinatown, souvenir shops normally bustling with visitor=
s=20
were forced to shut down. Nearby, irritated customers waited for a bank to=
=20
reopen.=20
The blackouts, like Monday's, were caused by a combination of problems,=20
including unseasonably warm weather, reduced electricity imports from the=
=20
Pacific Northwest and numerous power plants being shut down for repairs.=20
Adding to those troubles, the state lost about 3,100 megawatts from the QF=
=20
plants.=20
Senate Energy Committee Chairwoman Debra Bowen, D-Marina del Rey, estimated=
=20
Tuesday that Edison has amassed more than $1 billion and PG&E more than $2=
=20
billion that they have not paid to generators.=20
Davis said the PUC planned to issue an order next week directing the=20
utilities to pre-pay their future QF bills.=20
PG&E said its prepayments hinge on an upcoming PUC decision on whether the=
=20
utility's rates are sufficient to pay its bills and cover the state's power=
=20
purchases on its behalf, which amount to $4.2 billion since early January.=
=20
Edison and PG&E say they have lost more than $13 billion since last June to=
=20
climbing wholesale electricity prices, which the state's 1996 deregulation=
=20
law prevents them from passing on to ratepayers.=20
---------------------------------------------------------------------------=
---
-----------------------------------------

Energy Overcharge of $5.5 Billion Is Alleged=20

Power: Money should be refunded to taxpayers and utilities, the state grid=
=20
operator says, citing evidence of market manipulation. Suppliers deny the=
=20
accusation.=20

By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers=20

?????Wholesale electricity suppliers overcharged California by about $5.5=
=20
billion between May and last month, and that money should be refunded to th=
e=20
state's taxpayers and financially strapped utilities, the state power grid=
=20
operator said Wednesday.
?????Generators engaged in market manipulation and consistent patterns of=
=20
bidding far above costs in the deregulated energy market, the California=20
Independent System Operator found in a study of pricing data. The findings=
=20
support the widespread belief that these suppliers reaped massive additiona=
l=20
revenue by manipulating the market.
?????Spokesmen for the companies denied the accusation.
?????The study, prepared for a filing with federal regulators today, is=20
central to Cal-ISO's efforts to seek reimbursement for what it considers=20
excessive charges by electricity suppliers during the state's energy crisis=
.
?????"This might be the first time we told them the total impact and=20
magnitude [of the overcharging]," said Anjali Sheffrin, Cal-ISO's director =
of=20
market analysis. "We think the entire amount deserves consideration for=20
refunds."
?????Using confidential bidding data on tens of thousands of electricity=20
sales, Cal-ISO found that five companies that together supply about 30% of=
=20
the power delivered to customers of the state's investor-owned utilities=20
engaged in two types of behavior that tended to push up prices:
?????* They effectively withheld supplies by bidding at excessive prices,=
=20
even though they could have made some money selling more electricity.
?????* Less frequently, they had power generation available but did not bid=
=20
at all.
?????The study concluded that energy suppliers commonly offered their=20
electricity at twice their cost. For example, Sheffrin said, the average=20
markup in August was 100% during peak hours.
?????A spokeswoman at the Federal Energy Regulatory Commission, which=20
oversees wholesale electricity pricing across the country, declined to=20
comment Wednesday, saying, "This is part of an ongoing proceeding."
?????FERC member William L. Massey, who has considered previous commission=
=20
actions on refunds to be inadequate, said it would be improper for him to=
=20
comment on a report that has not yet been filed. But when told of the=20
$5.5-billion total, Massey said: "That doesn't shock me in any way."
?????"Prices over the past 10 months in California have greatly exceeded th=
e=20
federal standards of just and reasonable prices, and I think they have=20
exceeded the standards by possibly billions of dollars," he said.
?????Cal-ISO, which oversees grid operations and an emergency energy market=
,=20
previously detailed $550 million in alleged overcharges for December and=20
January and asked FERC for refunds. But the commission has proposed refunds=
=20
of only a tiny fraction of that amount.
?????The study covered five major in-state power suppliers--Reliant Energy,=
=20
Dynegy, Williams/AES, Duke Energy and Mirant, formerly Southern Energy--plu=
s=20
16 power importers, all of which deliver power to customers of Pacific Gas =
&=20
Electric Co., Southern California Edison and San Diego Gas & Electric Co.
?????"All [21] overcharged, but some excessively and some by moderate=20
amounts," Sheffrin said.
?????Cal-ISO's public filing will quantify the alleged overcharging by each=
=20
company, but the companies will be identified only by a number. The code wi=
ll=20
be provided to FERC, Sheffrin said, and Cal-ISO lawyers will determine how=
=20
much information about the companies will be made public.

?????State, U.S. Investigations
?????California electricity markets and the companies that buy and sell pow=
er=20
in the state have been the subject of several investigations by state and=
=20
federal authorities since wholesale electricity prices first skyrocketed in=
=20
May.
?????Electricity suppliers have repeatedly denied manipulating the Californ=
ia=20
market in any way, whether through above-cost bidding in spot markets or=20
through physical withholding of electricity to drive up prices.
?????Reliant Energy is cooperating with FERC's requests for more data and i=
s=20
confident the commission will conclude that prices charged by Reliant were=
=20
justified, said Joe Bob Perkins, president of the Houston-based company.
?????Perkins also bitterly disputed charges that Reliant has shut down unit=
s=20
so that it can earn bigger profits on the power sold by the remaining plant=
s.=20
These charges have been leveled against all of the power-plant owners in th=
e=20
state.
?????Reliant Vice President John Stout said Cal-ISO's calculations typicall=
y=20
don't include such fixed costs as salaries, taxes and the interest on bonds=
=20
they sold to finance their power plants, which they acquired under terms of=
=20
the state's landmark 1996 deregulation law.
?????In addition, he said, many high-priced power days have resulted from=
=20
buyers bidding against each other for scarce supplies rather than sellers=
=20
charging excessive amounts--like a house price being driven far above the=
=20
listing price in a hot real estate market.
?????Williams Energy Services, a trading company that markets most of the=
=20
power produced by plants owned by AES, also says it will be exonerated by=
=20
FERC once the commission examines documentation being submitted, said Paula=
=20
Hill-Collins, spokeswoman for the Tulsa, Okla., company.
?????"FERC has the obligation to investigate when these accusations are=20
made," Hill-Collins said. "This is just a process of justification, not=20
necessarily proof of guilt."
?????Williams/AES was recently ordered by FERC to prove that it did not tak=
e=20
generating units out of service last year to drive up electricity prices, o=
r=20
refund $10.8 million to California utilities.
?????During the period studied, suppliers sold electricity in the Californi=
a=20
Power Exchange to Southern California Edison, PG&E and San Diego Gas &=20
Electric Co. and in a backup market for last-minute electricity operated by=
=20
Cal-ISO. But sky-high prices plunged Edison and PG&E deeply into debt, and=
=20
most suppliers stopped selling to them in January, forcing the state=20
Department of Water Resources to step in as the primary electricity buyer f=
or=20
the three big utilities' 27 million customers.
?????The Cal-ISO study, first summarized at an energy conference last week =
at=20
UC Berkeley but not otherwise publicized, concluded that the companies=20
exercised so-called market power to pump up electricity prices.
?????Severin Borenstein, director of the Energy Institute at Berkeley, said=
=20
Cal-ISO's study is consistent with his research examining pricing practices=
=20
in 2000.
?????"We found several billion dollars . . . in departures from competitive=
=20
pricing," he said. "When the market was tight this summer, they were able t=
o=20
push up prices, and they did."
?????The early warning signs of electricity price spikes, the study found,=
=20
appeared in May after two years of relatively stable prices of $30 to $40 p=
er=20
megawatt-hour under deregulation. Prices went up during the summer, dipped =
in=20
September and October with lower demand, then took off in November and=20
December as weather turned cold and the price of natural gas, which is used=
=20
to generate much of the state's electricity, reached record levels.
?????"There were plant outages, and demand and supply became close," Sheffr=
in=20
said. "Whatever price they bid had to be taken, and market power asserted=
=20
itself."
?????Cal-ISO found that $3 billion of the alleged overcharges occurred=20
between May and November.
?????On Friday, federal regulators ordered six wholesale power suppliers to=
=20
refund $55 million to California if they cannot justify prices charged in=
=20
February. The refund was limited to power sold that month in excess of $430=
=20
per megawatt-hour during Stage 3 power alerts, when supplies are so tight=
=20
that rolling blackouts are threatened. (One megawatt-hour is enough=20
electricity to supply 750 typical homes for an hour.)
?????The previous week, FERC ordered 13 suppliers to justify or refund $69=
=20
million for power sold in January at prices above $273 per megawatt-hour.
?????Massey opposed the potential refunds as too low because they were=20
limited to hours in which a Stage 3 power emergency was in place and becaus=
e=20
the benchmark price set for each month was too high--combining to exempt mo=
re=20
than 70,000 transactions from scrutiny.
?????"We're still looking for our lost wallet under the lamppost, which is=
=20
Stage 3 alerts," said Massey, one of three commissioners on the five-member=
=20
board (two seats are vacant).
?????Generators "have been given the free and clear," he said.
?????"These tinkling little refunds they have come out with recently are=20
almost a joke," said Cal-ISO board member Mike Florio, senior attorney at t=
he=20
Utility Reform Network.

?????Resisting Price Caps
?????Cal-ISO contends that the last 10 months have proved that generators c=
an=20
no longer be allowed to receive electricity prices that are dictated by wha=
t=20
the market will bear.
?????"FERC granted market-based rate authority on each of these suppliers'=
=20
own showing that they could not manipulate prices, yet their actions have=
=20
shown the contrary," Sheffrin said. "We feel FERC needs to look at the=20
premise of allowing these generators to continue selling at market-based=20
rates."
?????The commission is responsible for ensuring just and reasonable=20
electricity rates. Although it has called California's power market=20
dysfunctional and vulnerable to manipulation, the agency has resisted setti=
ng=20
firm price caps sought by California's congressional delegation.
?????Chairman Curt L. Hebert Jr. strongly opposes caps, while Massey wants =
to=20
use caps across the West as a "temporary timeout."
?????Energy Secretary Spencer Abraham, in a New York news conference=20
Wednesday, reiterated his opposition to electricity price caps as a way to=
=20
cope with California's energy crisis.
?????"If we put price caps in place, there will be more blackouts, and=20
they'll be worse," Abraham said.
?????Cal-ISO is filing its market study as part of its comments on FERC sta=
ff=20
recommendations on ways to thwart market manipulation. FERC's proposal=20
includes strict coordination of power plant outages by Cal-ISO with reporti=
ng=20
of suspicious closures to FERC, and generator-by-generator bid caps tied to=
=20
costs.
---=20
?????Reiterman reported from San Francisco, Rivera Brooks from Los Angeles.=
=20
Times staff writer Thomas S. Mulligan in New York contributed to this story=
.
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-------------------------------------

Power Strain Eases but Concerns Mount=20

Energy: Officials say summer prices will be high, and a state report shows=
=20
that contracts with generators are far short of goals.=20

By DAN MORAIN and JENIFER WARREN, Times Staff Writers=20

?????SACRAMENTO--California's fragile electricity system stabilized=20
Wednesday, but a Davis administration report suggested troubles ahead becau=
se=20
the state could be forced to buy most of its power for the coming summer on=
=20
the costly and volatile spot market.
?????After two days of statewide blackouts, power plants that had been shut=
=20
down were cranked up. Unseasonable heat tapered off. The operators of the=
=20
statewide power grid relaxed their state of emergency.
?????But plenty of ominous signs remained. Many small producers remained sh=
ut=20
down, skeptical about Gov. Gray Davis' plan for utilities to pay them.
?????State Controller Kathleen Connell issued a sharp warning about the hig=
h=20
cost of the state's foray into the power business and announced that she wi=
ll=20
block an administration request that she transfer $5.6 billion into an=20
account that could be tapped to pay for state purchases of electricity.
?????And a report from the administration summarizing contracts between Dav=
is=20
and independent power generators showed that the state has signed contracts=
=20
for only 2,247 megawatts of electricity, significantly less than the 6,000 =
to=20
7,000 megawatts previously claimed.
?????While there are agreements in principle for the full amount, the repor=
t=20
notes that generators can back out of the contracts for a variety of reason=
s,=20
including the state's failure to sell bonds to finance power purchased by=
=20
July 1. The Legislature has approved plans to sell $10 billion in bonds, bu=
t=20
none have yet been issued.
?????"We are exposed enormously this summer," Senate Energy Committee=20
chairwoman Debra Bowen (D-Marina del Rey) said after looking at the report.=
=20
"We owe the people the truth about how difficult this summer is going to be=
.=20
We don't have a power fairy."
?????Perhaps most significant, the report suggests that the contracts fall=
=20
significantly short of Davis' stated goal of buying no more than 5% of the=
=20
state's summer needs on the spot electricity market, where prices can be ma=
ny=20
times those of long-term contracts.
?????After reading the report, Frank Wolak, a Stanford University economist=
=20
who studies the California electricity market, said the numbers suggested=
=20
that the state's long-term contracts will cover less than half of what the=
=20
state will need this summer.
?????"We're definitely short this summer, next summer and the summer of=20
2003," he said.
?????California was forced to start buying electricity in December--at a co=
st=20
of $50 million a day--because producers refused to sell to Southern=20
California Edison and Pacific Gas & Electric. The two utilities amassed=20
billions of dollars in debt when prices for wholesale power soared on the=
=20
spot market.
?????Vikram Budhraja, a consultant retained by Davis to negotiate deals wit=
h=20
generators, said the report represents a "work in progress." He said the=20
state may yet sign new contracts.
?????However, Wolak said the contract figures confirm what he and others ha=
ve=20
been dreading: that summer is going to be rife with rolling blackouts unles=
s=20
serious steps to cut demand are taken immediately.
?????Wolak and other experts say large industrial customers must be switche=
d=20
to real-time meters and pricing to persuade them to use the bulk of their=
=20
energy at times of low demand.
?????The head of the Energy Foundation, a San Francisco-based nonprofit tha=
t=20
promotes sustainable sources of power, made the same proposal to Davis on=
=20
Wednesday.
?????"The government need not ask customers to swelter in the dark this=20
summer," foundation President Hal Harvey argued in a letter.
?????He also proposed a crash campaign to boost sales of efficient applianc=
es=20
and lightbulbs. He said the state needs to take over the utilities' contrac=
ts=20
with alternative energy providers to ensure they stay in business, and sign=
=20
new contracts for 1,500 megawatts of new wind power--the cheapest, fastest=
=20
and cleanest source of new supply.
?????Davis had proposed a formula Tuesday to force private utilities to pay=
=20
the alternative producers, some of which have not been paid since November.=
=20
But some of them warned Wednesday that Davis' plan offers them little=20
incentive to turn on their generators.
?????Alternative energy producers supply more than a quarter of the=20
electricity consumed in California.
?????Many producers generate electricity from wind, sun and geothermal=20
sources. But most of them generate power using natural gas--and the cost of=
=20
natural gas has been soaring. Several natural gas users said Davis' plan,=
=20
which caps rates, won't cover their fuel costs.
?????Davis assumes that the price of natural gas will fall. But small=20
generators say they don't have sufficient purchasing power or sophisticatio=
n=20
to gamble on future prices.
?????The Public Utilities Commission is expected to approve Davis' proposal=
=20
next week. It offers producers two choices: 7.9 cents a kilowatt-hour if th=
ey=20
agree to supply power for five years, or 6.9 cents a kilowatt-hour over 10=
=20
years.
?????"The price of natural gas is higher than that," said Marty Quinn,=20
executive vice president and chief operating officer of Ridgewood Power LLC=
,=20
which owns three natural gas-fired co-generation plants. "If we operate,=20
we'll lose money."
?????Ridgewood is not operating, having been cut off by gas suppliers. The=
=20
company sued PG&E last month seeking overdue payments and release from its=
=20
contracts with the utility.
?????A hearing is scheduled in El Centro today in another lawsuit filed by =
a=20
small energy producer, an Imperial Valley geothermal producer that sued=20
Edison for refusing to let it break its contract and sell on the open marke=
t.=20
CalEnergy says Edison owes it about $140 million for energy sold since=20
November.
?????A company spokesman, Jay Lawrence, said CalEnergy was going ahead with=
=20
its suit despite Davis' proposal. "We've had promises before," he said.
?????In other developments:
?????* A federal judge in Sacramento on Wednesday ordered Reliant Energy of=
=20
Houston, a major producer, to continue selling power to California during=
=20
emergencies, despite the company's argument that it may not be fully=20
reimbursed. The order will remain in effect for 60 days or until the U.S.=
=20
Federal Energy Regulatory Commission decides a related case.
?????* Connell said the state budget surplus has shrunk to $3.2 billion=20
because the state has spent roughly $2.8 billion on electricity. She=20
criticized the administration for withholding basic information about state=
=20
finances, and said she will begin an audit on Monday of the Department of=
=20
Water Resources, which is responsible for purchasing power.
?????Davis' aides said Connell took her action because the Democratic=20
governor endorsed one of Connell's foes this week in the race for Los Angel=
es=20
mayor, former Assembly Speaker Antonio Villaraigosa. A Connell aide scoffed=
=20
at the notion.
?????* Sen. Dianne Feinstein (D-Calif.) said she "never has had a response"=
=20
from President Bush after writing him last month for an appointment to=20
discuss the California energy crisis.
?????In a wide-ranging lunch talk with reporters in Washington, she deplore=
d=20
the fact that "huge, huge profits are being made" in the California crisis,=
=20
and said "an appropriate federal role" would be to guarantee a reliable=20
source of power until the state can get nine new generators online.
---=20
?????Times staff writers Mitchell Landsberg in Los Angeles and Robert L.=20
Jackson in Washington contributed to this report.
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
------------------------

---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
------------------------
Net Complex A Dilemma For San Jose=20
SERVER FARM: Plant would tax grid=20
David Lazarus, Chronicle Staff Writer
Thursday, March 22, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/22/M
N236772.DTL=20
San Jose, while trying to block construction of a new power plant, is set t=
o=20
approve a vast computer complex that could overwhelm California's already=
=20
strained power grid.=20
City officials gave preliminary approval last week to what would be the=20
world's largest "server farm." The sprawling facility to handle Internet=20
traffic would drain about 150 megawatts of power from the state electricity=
=20
grid.=20
If granted final authorization on April 3, the $1.2 billion project would a=
dd=20
the equivalent of about 150,000 homes to California's power system, which w=
as=20
hit this week by rolling blackouts as demand for juice outstripped availabl=
e=20
supply.=20
The server-farm issue highlights a vexing dilemma for the state.=20
On the one hand, Gov. Gray Davis is calling for widespread conservation to=
=20
help California overcome its current troubles. On the other, no one wants t=
o=20
curtail growth of the high-tech industry, which is an engine for economic=
=20
vitality.=20
"San Jose will make a lot of money from this project," said Craig Breon,=20
executive director of the Santa Clara Valley Audubon Society. "But to not=
=20
help the state out of its energy situation, there's a fair amount of=20
hypocrisy going on."=20
The server farm would be owned by U.S. DataPort, a San Jose data-management=
=20
firm. As planned, it would occupy 10 buildings on more than 170 acres in th=
e=20
city's Alviso area.=20
Total projected energy use would be 180 megawatts. About 30 megawatts would=
=20
be generated by a small on-site facility, and the rest would have to be=20
provided by Pacific Gas and Electric Co.=20
"We're confident that the DataPort project will be approved because it's ve=
ry=20
important to San Jose and to the local economy," said San Jose Mayor Ron=20
Gonzales.=20
But PG&E already is saying that its power cupboard is bare. The utility "do=
es=20
not have sufficient existing electric infrastructure" to meet U.S. DataPort=
's=20
needs, it said in a recent letter to San Jose officials.=20
John Mogannam, U.S. DataPort's senior vice president of operations, counter=
ed=20
that it could take as long as five years for the server farm to grow big=20
enough to require the full 150 megawatts from the state grid.=20
"Hopefully, by then the whole energy crisis will pass by, and we won't have=
 a=20
problem," he said.=20
Mogannam stressed the positive aspects of the project, such as its ability =
to=20
handle about 15 percent of global Internet traffic, the 700 jobs it would=
=20
create, and the $70 million over 10 years it would generate for San Jose in=
=20
property and utility taxes.=20
"That's why the city likes it," he said.=20
Indeed, San Jose officials are so enamored with such developments that they=
=20
have all but turned a deaf ear to warnings that the server farm will=20
exacerbate California's already dire power shortage.=20
Andrew Crabtree, the city's senior planner, said the planning commission ha=
d=20
barely touched the question of energy supply when it approved the server fa=
rm=20
last week.=20
"It wasn't incumbent on the commission to solve the state's energy-supply=
=20
problems," he said.=20
Rather, San Jose city planners focused on the environmental ramifications o=
f=20
the proposed facility, including air pollution from diesel generators and t=
he=20
impact on nearby wildlife.=20
How it would affect dozens of burrowing owls in the area was a key topic of=
=20
discussion.=20
"We all recognized that there's a power shortage," Crabtree said. "But we=
=20
couldn't do anything about that with this project."=20
Except to make things tougher, of course.=20
Server farms run 24 hours a day, seven days a week. They are an aspect of t=
he=20
high-tech boom that was never foreseen by energy experts, and which are now=
 a=20
major contributor to California's surging electricity demand.=20
A server farm essentially is a large building filled with computers. Each=
=20
computer handles the Web site or Internet traffic for hundreds of corporate=
=20
clients that do not have the technical resources to look after such things=
=20
in- house.=20
Most server farms consume between 10 and 60 megawatts of power. At 180=20
megawatts, the U.S. DataPort facility is billed as the most extensive data=
=20
center on the planet.=20
"There won't be another this size anywhere in the world," said Mogannam, th=
e=20
company's senior vice president. "This will be the biggest."=20
With such a vast scale, however, comes additional concerns. For example, al=
l=20
that hardware will generate huge amounts of heat, requiring powerful air=20
conditioners running around the clock to keep things cool.=20
Patrick Dorinson, a spokesman for the Independent System Operator, which=20
oversees California's electricity network, said server farms had "a big=20
impact" on the state's tight energy supply.=20
"We have an economy that's increasingly based on delivery of information," =
he=20
observed. "We certainly need to make sure we're building adequate generatio=
n=20
and transmission to get it there."=20
As it stands, no major power plants have been built in California for the=
=20
past 12 years, while dozens of server farms have sprung up throughout the=
=20
state.=20
The Yankee Group, a Boston consulting firm, estimates that the amount of=20
space taken up by server farms nationwide rose to 9 million square feet fro=
m=20
1999 to 2000.=20
By 2003, it expects that figure to increase to 25 million square feet, or=
=20
enough room for more than a hundred 10-story office buildings.=20
San Francisco may be the exception. Supervisor Sophie Maxwell proposed=20
interim zoning controls last week that would require server farms to receiv=
e=20
special permission from City Hall to operate.=20
San Jose, for its part, has no such reservations. It does, however, draw th=
e=20
line at big, fat power plants in the backyard of the city's leading corpora=
te=20
citizen.=20
Gonzales is spearheading opposition to a proposed 600-megawatt generating=
=20
facility in Coyote Valley because of its proximity to a residential area at=
=20
the site of a planned Cisco Systems office complex.=20
"There's plenty of opportunities to generate power in the city," he said.=
=20
"This project is just in the wrong site."=20
The matter is now in the hands of the California Energy Commission, which i=
s=20
expected to issue a ruling by May.=20
Cisco, critics say, twisted the mayor's arm to fight the plant because it d=
id=20
not want a generating facility in its neighborhood. The area will be home t=
o=20
thousands of well-heeled tech workers.=20
"It's politics," said Breon at the Audubon Society. "City officials are=20
making political decisions rather than good planning decisions."=20
Ted Smith, executive director of the Silicon Valley Toxics Coalition, a=20
grassroots organization, is calling for a moratorium on construction of all=
=20
new server farms in the South Bay until sufficient power can be found to ke=
ep=20
them running.=20
"Until they figure out how to build these things without draining the=20
electricity grid even dryer it is, they shouldn't build them," he said.=20
"The Internet industry is creating unintended consequences that will really=
=20
screw up our future," Smith added. "They are so busy focusing on next=20
quarter's profits that they don't stop and think about the consequences." .=
=20
.=20
SOME FAST FACTS ABOUT 'SERVER FARMS'
.=20
-- What are they? "Server farms" are facilities dedicated exclusively to=20
housing powerful computers for Internet use.=20
-- Who uses them? Companies and individuals pay server farms to maintain=20
their Web sites, handle Net traffic and store vast amounts of data --=20
functions that otherwise would require extensive hardware and technical=20
support.=20
-- Why do they use them? As Internet use explodes, server farms play an=20
increasingly vital role in managing data and keeping information moving.=20
-- What's the problem? Server farms drain considerable amounts of electrici=
ty=20
to keep running.=20
E-mail David Lazarus at dlazarus@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 1=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------
Contracts Won't Meet Summer Demands=20
DETAILS: 2004 before full impact felt=20
Lynda Gledhill, Chronicle Sacramento Bureau
Thursday, March 22, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03=
/22/M
N230640.DTL=20

Sacramento -- Long-term power contracts negotiated by the state won't cover=
=20
California's entire demand for electricity until 2004, according to newly=
=20
released details about the agreements.=20
The information suggests that California might have to scrounge for=20
electricity on the high-priced spot market for a couple more years even as =
it=20
continues to push conservation efforts and construction of more generating=
=20
plants.=20
Details of the agreements released by Gov. Gray Davis' administration show=
=20
that the contracts will provide for just over a third of the state's demand=
=20
for power this year. Energy secured by the contracts will grow to meet the=
=20
expected demand in three years.=20
Short-term purchases of power have at least temporarily depleted the state'=
s=20
budget surplus and have raised the possibility of sharp rate increases=20
sometime in the future for electricity customers.=20
Davis administration officials are banking on the hope that conservation=20
efforts and increased generating capacity will cover the shortfall along wi=
th=20
purchases of electricity on the spot market.=20
"We're facing an extreme challenge still this summer," said Severin=20
Borenstein, head of the University of California at Berkeley Energy=20
Institute. "Signing contracts doesn't create more electricity."=20
The information released did not include the names of companies that the=20
state has signed contracts with or the purchase prices.=20
The sketchy details did not satisfy frustrated lawmakers, who said many=20
questions remain, especially how much the state will end up paying under th=
e=20
terms of the contracts.=20
"The fundamental question is how much is it costing the state of California=
=20
to keep the lights on," said Assemblyman Tony Strickland, R-Thousand Oaks.=
=20
"What we really need is total disclosure."=20
The state started buying power in January, after generators began refusing =
to=20
provide electricity to the state's investor-owned utilities. Pacific Gas an=
d=20
Electric Co. and Southern California Edison say they have more than $13=20
billion in past debt.=20
The state has been spending $49 million a day on power purchases since Jan.=
=20
17, according to documents obtained by The Chronicle last week.=20
Those documents said the average price of the contracts across 10 years is=
=20
$69 per megawatt hour, including summer peak. The five-year average price i=
s=20
$79 per megawatt hour.=20
According to one chart provided by the governor's office yesterday, the=20
long-term contracts will fall about 35 million megawatt hours short in 2002=
.=20
Based on the average price per megawatt hour the state has been paying sinc=
e=20
January, that could end up costing between $6.6 billion and $13 billion.=20
The law creating the state purchasing authority allowed purchases up to $10=
=20
billion and extends until 2003.=20
The governor's office said 21 contracts have been signed and another 23=20
agreements that have been reached but not yet signed.=20
Several generators have said that they will not sign contracts with the sta=
te=20
until the back debt by the utilities has been taken care of.=20
"We have some real potential problems," said Senate President Pro Tem John=
=20
Burton, D-San Francisco.=20
Strickland and several media outlets, including The Chronicle, have filed=
=20
public information requests to get more information about the prices of the=
=20
contracts from the administration.=20
Releasing the information would jeopardize the negotiations for future=20
contracts, said Steve Maviglio, Davis' spokesman.=20
Lawmakers, also frustrated by the lack of information given out by the Davi=
s=20
administration, were not given notice that the information was coming, and=
=20
many said it was lost in their mail pile.=20
The cover letter was on Los Angeles Department of Water and Power letterhea=
d,=20
not that of the administration. The letter was written by S. David Freeman,=
=20
head of the Los Angeles system who was on leave for the month of February t=
o=20
help the state negotiate the contracts.=20
Assemblyman George Runner, R-Lancaster, said the "ambiguity of the=20
information raises more questions than it answers."=20
"It's like watching a parade through a peephole," he said. "He's showing us=
=20
another float, but I don't know what the parade looks like."=20
Blaming the state's purchases of electricity, Controller Kathleen Connell=
=20
said yesterday that the state's cash on hand had fallen from $8.5 billion i=
n=20
January to $3.2 billion. Connell ordered an audit of the state's power=20
buying.=20
Connell said she would block a transfer sought by the Davis administration =
of=20
$5.6 billion from the general fund to the state's emergency reserve account=
,=20
claiming it would lead to a ''serious cash flow crisis."=20
The transfer, however, is not related to the energy crisis. The sum=20
represents a routine rollover of unspent money from the previous fiscal yea=
r.=20
State law requires that money to be sent to a special reserve account for=
=20
emergencies.=20
Davis officials acknowledged that $3.7 billion in energy purchases have had=
=20
an impact on state coffers, but they say the state will be repaid once bond=
s=20
are issued in the coming weeks. They also said the state typically has its=
=20
lowest cash reserves at this time of year. That changes in mid-April when a=
=20
flood of income tax revenue pours in.=20
"The transfer has nothing to do with energy purchases," said Sandy Harrison=
,=20
a spokesman for the Department of Finance.=20
"It's not helpful to ratepayers, taxpayers and people who want their lights=
=20
to stay on to have the issue muddied with this sort of inaccurate innuendo,=
"=20
Harrison said.=20
In other developments yesterday:=20
-- After two days of statewide rolling blackouts, power grid managers avoid=
ed=20
outages. Demand was lower because of cooler temperatures around the state a=
nd=20
supply increased as several power plants completed repairs.=20
-- A federal judge in Sacramento ordered a major power generator to continu=
e=20
supplying power to California. Reliant Energy Services Inc. had insisted th=
at=20
it should not be forced to sell to debt-heavy utilities unless the state=20
guaranteed the bills.=20
Chronicle staff writer Greg Lucas contributed to this story. / E-mail Lynda=
=20
Gledhill at lgledhill@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 1=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-----------------




California overcharged $5.5 bln for wholesale power=20
SACRAMENTO, Calif. (AP) -- Electricity wholesalers overcharged California=
=20
$5.5 billion over the past 10 months, according to a report by managers of=
=20
the state's power grid.=20
The five companies, among other things, frequently offered electricity at=
=20
prices double what it cost them to produce, concludes the California=20
Independent System Operator study, which was published Thursday in the Los=
=20
Angeles Times.=20
``All overcharged, but some excessively and some by moderate amounts,'' sai=
d=20
Anjali Sheffrin, the ISO's director of market analysis.=20
The Times said the ISO planned to file the study with federal regulators=20
Thursday and are demanding that the money be paid back.=20
The companies denied the allegations, adding they expect the Federal Energy=
=20
Regulatory Commission will determine their prices were justified.=20
The commission has recently stepped up its scrutiny of power companies'=20
behavior during California's power crisis, asking suppliers to justify $124=
=20
million in sales during the first two months of the year or refund the mone=
y.=20
Critics claim thousands of additional questionable sales are not being=20
challenged.=20
The ISO study alleges the wholesalers manipulated the market by bidding at=
=20
excessive prices, effectively withholding supplies, or by not bidding at al=
l=20
when they had generation capability available.=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
State Controller Kathleen Connell said Wednesday that the state's=20
power-buying is gutting its budget surplus. Since the state started making=
=20
emergency power buys, the surplus has fallen from $8.5 billion to about $3.=
2=20
billion, she said.=20
A federal judge issued a preliminary injunction Wednesday ordering a major=
=20
electricity wholesaler, Reliant Energy Services, to continue selling to=20
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 it=
=20
at the last minute on behalf of utilities to bolster supplies and try to fe=
nd=20
off rolling blackouts.=20
Such blackouts hit the state twice this week. On Wednesday, cooling=20
temperatures and the completion of repairs at several power plants allowed=
=20
the state to avoid blackouts.=20
Standard & Poor's has put the state on a credit watch due to its power=20
purchases and chastised Gov. Gray Davis, the Legislature and state regulato=
rs=20
for not taking more aggressive steps to make sure the utilities can pay the=
ir=20
bills.=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
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 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. Transferring the money=20
would leave the state general fund $2.4 billion in debt, Connell said.=20
She called the scope of the proposed transfer unprecedented and said it=20
amounted to a ``shell game'' that disguises the power purchases' effect on=
=20
the state budget.=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. 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=20
demand that kind of audit information,'' Harrison said.=20
Harrison said the state's budget isn't in danger because it will be repaid=
=20
with the revenue bonds.=20
Connell's criticism of Davis, a fellow Democrat, won support from Assembly=
=20
Republicans and Secretary of State Bill Jones, a Republican who may challen=
ge=20
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.=20
``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.

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







If the power goes off=20
Thursday, March 22, 2001=20
For most of us, rolling power blackouts are a nuisance. For some people, it=
=20
could mean life or death.=20
"In Laguna Hills, cancer patient Ruben Marquez said the blackout interrupte=
d=20
and prolonged his dialysis treatment. He was unharmed," the Register report=
ed=20
on Monday's blackouts, which hit about 1.2 million Californians, including=
=20
100,000 Orange County homes and businesses.=20
What can people do to prevent disaster?=20
"They and their families should have a backup plan," Rebecca Long,=20
spokesperson for the Orange County Red Cross, told us.=20
"The Red Cross recommends in general that you plan for this as you would fo=
r=20
any disaster, making sure you have battery-operated radios and flashlights.=
=20
We do not recommend candles for an emergency," because of the fire hazard.=
=20
She recommended a Web site: www.prepare.org
People with special health needs, such as electric-powered respirators and=
=20
oxygen machines, also should register with the power company.
"There's a whole classification" for such persons with health needs, Southe=
rn=20
California Edison spokesperson Clara Potes-Fellow told us.
"The list is for us to alert them that the power could be discontinued. The=
y=20
arrange to have power through other means, batteries or generators. We=20
recommend that they have a battery backup of eight hours. Therefore, if the=
=20
rotating outages are one hour, they will have plenty."
Even though the power company has such people's names, she said, "we don't=
=20
inform them in advance because we have just minutes from when the Independe=
nt=20
System Operator," which directs where the electrons go, orders Edison to=20
implement a power outage on the grid Edison owns. "By the time it took to=
=20
call people, the outage would be over."
What's the problem at the ISO? "We notify as best we can," Pat Dorinson, IS=
O=20
director of communications, told us.=20
"The object is to keep the lights on. Sometimes it's just a moment's notice=
"=20
before a blackout. "It makes [giving more notice] pretty difficult. We're=
=20
looking into ways to make the system better."=20
In the meantime, citizens will have to keep taking precautions.
We can't help noting that free market pricing, instead of politically-drive=
n=20
prices, would much more likely make electricity available, albeit at higher=
=20
prices.=20
We would expect, too, there would be hardship allowances, donations and=20
level-pay plans to accommodate various types of needs.




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





Socialized electricity=20
Thursday, March 22, 2001=20
Government control of state power won't add one watt for consumers' use




TOM MCCLINTOCK
Sen. McClintock, R-Thousand Oaks, represents the 19th state Senate District=
=20
in the state Legislature.=20

In a city where bad ideas never die, Sacramento is once again host to a=20
variety of plans for the government takeover of California's power system.=
=20
The private sector, it is said, has done such a terrible job of providing=
=20
electricity that government must now step in to save the day. Thus, the=20
Legislature is awash in proposals to spend billions of dollars of public=20
money to acquire existing power facilities. Fifteen billion dollars has=20
already been authorized for this purpose, and an additional $10 billion is=
=20
pending in the Senate.=20
Meanwhile, Gov. Davis is losing about a $1.5 billion a month day-trading in=
=20
the electricity market. The irony is that after the expenditure of as much =
as=20
$25 billion for "public power,'' not a single inch will have been added to=
=20
the transmission lines, nor a single watt to the generating capacity of=20
California.
The root of California's crisis is a catastrophic shortage of electricity. =
In=20
a shortage, prices rise or blackouts occur. To reduce prices and avoid=20
blackouts, the only permanent solution is to increase the supply. Merely=20
changing the ownership of existing facilities leaves Californians with=20
exactly the same shortage, only billions of dollars the poorer for it.=20
Government takeover advocates argue that at least a government power=20
authority will protect consumers against price gouging and poor management.=
=20
Unfortunately, government power authorities don't insulate against price=20
gouging. The biggest price gouger in this entire crisis has been the Los=20
Angeles Department of Water and Power, which was generating electricity for=
=20
$51 per megawatt hour and selling it back to California ratepayers for as=
=20
much as $1,400.=20
Nor does a government takeover assure better management. Just a few years=
=20
ago, the LADWP was buried in $7 billion in debt. The Sacramento Municipal=
=20
Utilities District was a managerial laughing stock, having squandered=20
hundreds of millions of dollars for a nuclear plant it barely used.
"Say what you will,'' the government takeover advocates reply, "when push=
=20
came to shove, the municipal utility districts of California are in great=
=20
shape, while the private utilities are a basket case.'' But one needs to lo=
ok=20
at the reason. Ever since the state reorganized the electricity market in=
=20
1996, the municipal utility districts were allowed to trade in a free marke=
t,=20
while the private utilities were forced to buy power exclusively in a=20
Soviet-style power exchange where the highest bid during an hour set all=20
prices.
The municipal utilities were able to retain their generators. Government=20
forced the private utilities to sell theirs. The municipal utilities were=
=20
able to enter into long-term contracts. Government prevented the private=20
utilities from doing the same thing. The municipal utilities were able to=
=20
negotiate the lowest prices available for power. Government forced the=20
private utilities to pay the outlandish prices on the government's power=20
exchange. The municipal utilities were allowed to adjust their rates to=20
reflect the actual cost of power to consumers. Government forced the privat=
e=20
utilities to sell at astronomical losses.
The final argument is simply an ideological one: that power is just too=20
important to be left in private hands. Really? Food is a great deal more=20
important and private hands have kept this nation well fed for centuries.=
=20
Picturing the Department of Motor Vehicles running the local supermarket=20
should sober even the most euphoric of the government takeover advocates.
California's Independent System Operator is predicting a 6,000-megawatt=20
shortfall this summer. When there is no electricity on the transmission=20
lines, it really won't matter who owns them. During the hottest hours of th=
e=20
hottest days of the year, when as many as 6 million homes are without=20
electricity, it may begin to dawn on most people that socialism doesn't wor=
k=20
any better in California than it did in the Soviet Union.

---------------------------------------------------------------------------=
---
---------------------------------------------------------------------------=
---
-------
NEWS=20
Bush's Energy Policy Will Backfire, Feinstein Warns / She wants federal pri=
ce=20
controls now
Carolyn Lochhead

03/22/2001=20
The San Francisco Chronicle=20
FINAL=20
Page A.3=20
(Copyright 2001)=20
Sen. Dianne Feinstein, D-Calif., warned yesterday that when blackouts=20
intensify in California this summer, the pressure will intensify on the Bus=
h=20
administration to explain why it rejected price controls on wholesale=20
electricity.=20
"If by this summer California is, as anticipated, facing these blackouts, a=
nd=20
the federal government won't help, I don't think the American people are=20
going to be very pleased," Feinstein told California reporters.=20
Asked if help means the cost-based price controls Feinstein is pushing, she=
=20
said, "Right now, yes."=20
Feinstein said California Democrats will begin to escalate their criticism =
of=20
the administration, predicting that support will build among Western senato=
rs=20
for her legislation to impose price caps on wholesale electricity in exchan=
ge=20
for lifting the rate cap on California consumers.=20
If it passes, she said, "the administration is really going to have to face=
=20
whether they're going to help or not help."=20
Feinstein said House Democrats from the West Coast also told her they expec=
t=20
that White House inaction on price caps would help them gain seats in 2002.=
=20
But she refused to speculate on the political fallout from the energy crisi=
s=20
against Democrats in California .=20
Feinstein characterized Energy Secretary Spencer Abraham's adamant argument=
s=20
against price controls as "recalcitrant," saying his statement to a Senate=
=20
committee last week "essentially said California 's on its own."=20
She speculated that because " California is dominantly Democratic, even=20
somebody like me that works across party lines is beginning to wonder if th=
is=20
isn't an unnecessarily barbed stick at California ."=20
White House spokesman Ken Lisaius disputed the charge, saying the Bush=20
administration is doing all it can, but can't control that demand is=20
outstripping supply.=20
"The federal government cannot prevent blackouts, but can only help at the=
=20
margins in situations like this," Lisaius said. "The only thing that can=20
prevent blackouts is reduced demand, increased supply and good weather."=20
Abraham has twice in the last week argued strongly against price controls,=
=20
including the cost-based ones Feinstein advocates, saying they could increa=
se=20
blackouts by discouraging power sales into the Western electricity grid.=20
He also said many power providers, including the federal Bonneville Power=
=20
Administration in the home district of Sen. Gordon Smith, the Oregon=20
Republican co-sponsoring Feinstein's bill, would be exempt from federal pri=
ce=20
caps. Feinstein disputed that, but Smith's office agreed.=20
Abraham argued that price controls would not work in part because roughly=
=20
half the Western electricity market would be exempt, including federal powe=
r=20
marketing authorities such as Bonneville, rural electric cooperatives and=
=20
municipal utilities such as the Los Angeles Department of Water and Power.=
=20
On another front, House Republicans omitted from their budget projected=20
revenues from opening part of the Arctic National Wildlife Refuge to oil an=
d=20
gas exploration.=20
A Budget Committee spokeswoman said Chairman Jim Nussle, R-Iowa, determined=
=20
that the $1 billion in revenues from the wildlife refuge the Bush=20
administration included in its budget were not needed and that there was "n=
o=20
reason to put in something that controversial, that some of our members don=
't=20
even like, when you don't have to."=20
But Rep. Gary Miller, R-Diamond Bar (Los Angeles County) said House=20
Republicans "are not backing off at all" from opening the wildlife refuge t=
o=20
drilling. "Our goal is to get it passed in the House," he said, saying the=
=20
Budget Committee omitted the revenue projections because the drilling has n=
ot=20
yet been approved.=20


PHOTO; Caption: Sen. Dianne Feinstein wants to cap wholesale electricity=20
costs and end caps on con- sumer rates.=20
---------------------------------------------------------------------------=
---
------
Reliant Still In Power Pact Talks With Calif. DWR=20
By Christina Cheddar

03/22/2001=20
Dow Jones News Service=20
(Copyright (c) 2001, Dow Jones & Company, Inc.)=20
Of DOW JONES NEWSWIRES=20
=20
  (This report was originally published late Wednesday.)=20
  =20
NEW YORK -(Dow Jones)- Reliant Energy Inc. (REI) remains in discussions wit=
h=20
the California Department of Water Resources to sign long-term power=20
contracts.=20
However, issues regarding the creditworthiness of the agency remain, said J=
oe=20
Bob Perkins, president of Reliant's Wholesale Division.=20
"We want to be part of the solution," Perkins said. At the same time, Relia=
nt=20
is trying to protect itself from incurring additional unpaid accounts=20
receivable, he said.=20
The DWR has been buying power on behalf of California 's financially troubl=
ed=20
utilities. However, Reliant has yet to sign a formal agreement with the=20
agency because Reliant is concerned it won't be paid.=20
During a conference call Wednesday, Perkins said he couldn't comment on a=
=20
lawsuit between Reliant and the California Independent System Operator=20
because he didn't know how it was progressing.=20
Further court action on the case is expected Wednesday.=20
The lawsuit stems from Reliant's desire not to be required to sell power to=
=20
California if the state won't guarantee payment. The Houston energy company=
=20
is concerned that it won't be paid for power being bought by the ISO on=20
behalf of Edison International's (EIX) Southern California Edison unit and=
=20
PG&E Corp.'s (PCG) Pacific Gas & Electric Co. unit.=20
To date, Reliant is owed "some $370 million" from unpaid power sales to the=
=20
utilities.=20
Much of Perkins' presentation centered on how the power crisis in Californi=
a=20
emerged.=20
Using data from research firm Cambridge Energy Research Associates, the=20
company discussed the imbalance between California 's power demand and its=
=20
power supply.=20
Looking ahead to the summer, it isn't a question of whether rolling blackou=
ts=20
will occur, but "how many and how severe," Perkins said.=20
Low hydroelectric availability, loss of imported power, warm weather, deman=
d=20
growth and plant outages could lead to a worst-case scenario in California =
,=20
he said, adding that some estimates predict California could experience 1,1=
00=20
hours of power outages this summer.=20
The skyrocketing power prices in the region are a reflection of the power=
=20
market's imbalance, he said.=20
Reliant submitted only "economically sound" bids for power, Perkins said. H=
e=20
expects the company can document why it charged the prices it did as requir=
ed=20
by regulators.=20
"We have been very rigorous and very disciplined in what we have submitted,=
"=20
Perkins said.=20
He added that retail customer price increases are one way of sending a sign=
al=20
to consumers to lower consumption. He cited studies that show a 20% retail=
=20
price increase could reduce consumption by 2,000 megawatts. A megawatt is=
=20
enough power to serve roughly 1,000 homes.=20
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166;=20
christina.cheddar@dowjones.com=20
---------------------------------------------------------------------------=
---
------
CPUC Must Address Rates In QF Repayment Order - SoCal Ed

03/22/2001=20
Dow Jones Energy Service=20
(Copyright (c) 2001, Dow Jones & Company, Inc.)=20
(This article was originally published Wednesday)=20
  =20
LOS ANGELES -(Dow Jones)- Any order from the California Public Utilities=20
Commission requiring utilities to pay small, independent generators going=
=20
forward must determine how that could be done within the existing rate=20
structure, a spokesman for Edison International (EIX) utility Southern=20
California Edison said Wednesday.=20
The utility was responding to a PUC proposed decision that would require=20
utilities to pay small generators, called qualifying facilities, $79 a=20
megawatt hour within 15 days of electricity delivery. The decision will be=
=20
voted March 27 by the CPUC.=20
"We're still reviewing (the decision) and should have more to say in a day =
or=20
two. To the extent that the commission orders us to pay going forward of=20
course we will. But it needs to address how we will pay the QFs," a SoCal=
=20
Edison spokesman said.=20
SoCal Edison and PG&E Corp. (PCG) unit Pacific Gas & Electric Co. are=20
struggling under nearly $13 billion in uncollected power costs due to an=20
inability to pass high wholesale power costs to customers under a rate=20
freeze.=20
Gov. Gray Davis Tuesday blasted the utilities for not having paid their QF=
=20
bills in full since December. Pacific Gas & Electric Co. has made some=20
partial payments to QFs, but SoCal Edison has paid nothing. Together, they=
=20
owe the QFs about $1 billion, but the order doesn't address that debt.=20
An Edison executive said, in reaction to the governor's sharp comments, tha=
t=20
the company simply doesn't have the money to pay creditors.=20
"The root problem here is there just isn't enough money in the current rate=
=20
base to pay our bills," said Edison Senior Vice President of Public Affairs=
=20
Bob Foster. "We understand the financial distress (the QFs) face; we are=20
facing financial distress ourselves."=20
The proposed PUC order would also require the state's investor-owned=20
utilities to offer the small generators five- and 10-year contracts for pow=
er=20
for $79/MWh and $69/MWh, respectively.=20
The QFs "may be able to live with" the PUC proposal, but the five- and=20
10-year contract prices may be inadequate if natural gas prices at one of t=
he=20
California borders are high, said Jan Smutny-Jones, president of the=20
Independent Energy Producers Association. Natural gas prices into Californi=
a=20
are currently higher than anywhere in the country.=20
But some say the proposed decision may not be enough to prevent the QFs fro=
m=20
filing involuntary bankruptcy proceedings against the utilities for the mon=
ey=20
they are still owed.=20
"There's still a lot of skepticism. To say our position has changed based o=
n=20
the CPUC decision or the governor's announcement is not accurate. A lot sti=
ll=20
has to happen," said Jay Lawrence, a spokesman for a renewable creditors=20
committee.=20
-By Jessica Berthold, Dow Jones Newswires; 323-658-3872;=20
jessica.berthold@dowjones.com=20
---------------------------------------------------------------------------=
---
------
Calif Small Pwr Producers To Shut Plants If Rates Capped
By Jason Leopold

03/22/2001=20
Dow Jones Energy Service=20
(Copyright (c) 2001, Dow Jones & Company, Inc.)=20
Of DOW JONES NEWSWIRES=20
=20
(This article was originally published earlier Thursday.)=20
  =20
LOS ANGELES -(Dow Jones)- Many of California 's independent power producers=
=20
late Wednesday threatened to take their small power plants offline this wee=
k=20
if state lawmakers pass legislation that would cap the rates the generators=
=20
charge for electricity they sell directly to the state's three investor-own=
ed=20
utilities.=20
At issue is a bill that would repeal a section of the state's Public=20
Utilities Code, which links the 688 so-called qualifying facilities'=20
electricity rates to the monthly border price of natural gas.=20
Lawmakers, however, are poised to pass the legislation.=20
State regulators are then expected to approve a measure that would=20
restructure the fluctuating rates the QFs charge PG&E Corp. (PCG) unit=20
Pacific Gas & Electric , Edison International (EIX) unit Southern Californi=
a=20
Edison, and Sempra Energy (SRE) unit San Diego Gas & Electric from $170 a=
=20
megawatt-hour to $69-$79/MWh, regardless of the price of natural gas.=20
Whereas each of the 688 QF contracts differed, largely because natural gas=
=20
prices are higher in Southern California than Northern California , the sta=
te=20
wants the QFs to sign a general contract with the utilities.=20
The cogeneration facilities, which produce about 5,400 megawatts of=20
electricity in the state, said the rates are too low and they won't sign ne=
w=20
supply contracts with the utilities.=20
"For $79/MWh, natural gas would have to be $6 per million British thermal=
=20
unit at the Southern California border," said Tom Lu, executive director of=
=20
Carson-based Watson Cogeneration Company, the state's largest QF, generatin=
g=20
340 MW. "Our current gas price at the border is $12.50."=20
Other gas-fired QFs said the state could face another round of rolling=20
blackouts if lawmakers and state regulators pass the legislation, which is=
=20
expected to be heard on the Senate floor Thursday, and allow it to be=20
implemented by Public Utilities Commission next week.=20
Lu, whose company is half-owned by BP Amoco PLC (BP) and is owed $100 milli=
on=20
by SoCal Ed, said the proposals by the PUC and the Legislature "will only=
=20
make things worse."=20
David Fogarty, spokesman for Western States Petroleum Association, whose=20
members supply California with more than 2,000 MW, said the utilities need =
to=20
pay the QFs more than $1 billion for electricity that was already produced.=
=20
=20
  State Loses 3,000 MW QF Output Due Of Financial Reasons=20
  =20
The QFs represent about one-third, or 9,700 MW, of the state's total power=
=20
supply. Roughly 5,400 MW are produced by natural gas-fired facilities. The=
=20
rest is generated by wind, solar power and biomass.=20
About 3,000 MW of gas-fired and renewable QF generation is offline in=20
California because the power plant owners haven't been paid hundreds of=20
millions of dollars from cash-strapped utilities SoCal Ed and PG&E for near=
ly=20
four months.=20
Several small power plant owners owed money by SoCal Ed have threatened to=
=20
drag the utility into involuntary bankruptcy if the utility continues to=20
default on payments and fails to agree to supply contracts at higher rates.=
=20
The defaults have left many of the renewable and gas-fired QFs unable to=20
operate their power plants because they can't afford to pay for the natural=
=20
gas to run their units. Others continue to produce electricity under their=
=20
contracts with the state's utilities but aren't being paid even on a forwar=
d=20
basis.=20
The California Independent System Operator, keeper of the state's electrici=
ty=20
grid, said the loss of the QF generation was the primary reason rolling=20
blackouts swept through the state Monday and Tuesday.=20
Gov. Gray Davis, recognizing the potential disaster if additional QFs took=
=20
their units offline, held marathon meetings with key lawmakers Monday and=
=20
Tuesday to try and hammer out an agreement that would get the QFs paid on a=
=20
forward basis and set rates of $79/MWh and $69/MWh for five and 10 year=20
contracts. He also said he would direct the PUC to order the utilities to p=
ay=20
the QFs for power they sell going forward.=20
"After next week the QF problem will be behind us," Davis said Tuesday. "We=
=20
want to get the QFs paid...the QFs are dropping like flies...and when that=
=20
happens the lights go out."=20
But this just makes the problem worse, said Assemblyman Dean Florez,=20
D-Shafter, a member of the Assembly energy committee.=20
"I don't know how we are going to keep the lights on," Florez said in an=20
interview. "Many of these congenerators are in my district. They said if th=
e=20
legislation doesn't change they are going offline. This compounds the issue=
=20
of rolling blackouts, especially now when we need every megawatt."=20
Davis, who didn't meet with people representing the QFs, said he was handin=
g=20
the QF issue to the PUC because lawmakers failed to pass legislation that=
=20
would have set a five-year price for natural gas and allow the QFs to sign=
=20
individual contracts with the utilities. In addition, SOCal Ed opposed the=
=20
legislation, saying the rates should be below $50/MWh.=20
Some renewable power producers said they aren't vehemently opposed to the n=
ew=20
rate structure because it guarantees them a higher rate than what was=20
originally proposed.=20
=20
        QFs Want Third Party Supply Contracts=20
  =20
John Wood, who represents the SoCal Ed Gas Fired Creditors Committee, one o=
f=20
a handful of groups that have formed since January to explore options on=20
getting paid by the utilities, said his group of gas-fired QF creditors wan=
t=20
to be released from their supply contracts and sell to third parties.=20
"Under our plan, we would be permitted to sell electricity to third parties=
=20
(including the state Department of Water Resources) until a resolution to t=
he=20
crisis can be accomplished," wood said.=20
Hal Dittmer, president of Sacramento-based Wellhead Electric in Sacramento,=
=20
which is owed $8 million by PG&E, has 85 MW of gas-fired generation units=
=20
offline.=20
Under the state's plan, Dittmer said he risks going out of business.=20
"I can't buy natural gas for what I would be paid under this decision," he=
=20
said. "The state needs to quit kidding themselves that they don't need to=
=20
raise electricity rates. All of this is being driven by an artificial=20
construct that California can avoid raising rates."=20
  =20
-By Jason Leopold, Dow Jones Newswires; 323-658-3874;=20
jason.leopold@dowjones.com=20



