Message-ID: <12788573.1075860414573.JavaMail.evans@thyme> Date: Wed, 28 Mar 2001 02:22:00 -0800 (PST) From: miyung.buster@enron.com To: ann.schmidt@enron.com, bryan.seyfried@enron.com, dcasse@whwg.com, dg27@pacbell.net, elizabeth.linnell@enron.com, filuntz@aol.com, james.steffes@enron.com, janet.butler@enron.com, jeannie.mandelker@enron.com, jeff.dasovich@enron.com, joe.hartsoe@enron.com, john.neslage@enron.com, john.sherriff@enron.com, joseph.alamo@enron.com, karen.denne@enron.com, lysa.akin@enron.com, margaret.carson@enron.com, mark.palmer@enron.com, mark.schroeder@enron.com, markus.fiala@enron.com, mary.hain@enron.com, michael.brown@enron.com, mike.dahlke@enron.com, mona.petrochko@enron.com, nicholas.o'day@enron.com, peggy.mahoney@enron.com, peter.styles@enron.com, richard.shapiro@enron.com, rob.bradley@enron.com, sandra.mccubbin@enron.com, shelley.corman@enron.com, stella.chan@enron.com, steven.kean@enron.com, susan.mara@enron.com, mike.roan@enron.com, alex.parsons@enron.com, andrew.morrison@enron.com, lipsen@cisco.com, janel.guerrero@enron.com, shirley.hudler@enron.com, kathleen.sullivan@enron.com, tom.briggs@enron.com, linda.robertson@enron.com, lora.sullivan@enron.com, jennifer.thome@enron.com, jkradin@marathon-com.com, rlichtenstein@marathon-com.com, syamane@marathon-com.com, ken@kdscommunications.com, hgovenar@govadv.com, sgovenar@govadv.com, bhansen@lhom.com Subject: Energy Issues Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Miyung Buster X-To: Ann M Schmidt, Bryan Seyfried, dcasse@whwg.com, dg27@pacbell.net, Elizabeth Linnell, filuntz@aol.com, James D Steffes, Janet Butler, Jeannie Mandelker, Jeff Dasovich, Joe Hartsoe, John Neslage, John Sherriff, Joseph Alamo, Karen Denne, Lysa Akin, Margaret Carson, Mark Palmer, Mark Schroeder, Markus Fiala, Mary Hain, Michael R Brown, Mike Dahlke, Mona L Petrochko, Nicholas O'Day, Peggy Mahoney, Peter Styles, Richard Shapiro, Rob Bradley, Sandra McCubbin, Shelley Corman, Stella Chan, Steven J Kean, Susan J Mara, Mike Roan, Alex Parsons, Andrew Morrison, lipsen@cisco.com, Janel Guerrero, Shirley A Hudler, Kathleen Sullivan, Tom Briggs, Linda Robertson, Lora Sullivan, Jennifer Thome, jkradin@marathon-com.com, rlichtenstein@marathon-com.com, syamane@marathon-com.com, ken@kdscommunications.com, hgovenar@govadv.com, sgovenar@govadv.com, bhansen@lhom.com X-cc: X-bcc: X-Folder: \Mary_Hain_Aug2000_Jul2001\Notes Folders\Discussion threads X-Origin: Hain-M X-FileName: mary-hain.nsf Please see the following articles: Sac Bee, Wed, 3/28: "State backs rate hike: But increase still may not=20 resolve crisis" Sac Bee, Wed, 3/28: "Batten down: Electric storm brews " Sac Bee, Wed, 3/28: "Use more energy, pay higher rates " San Diego Union, Wed, 3/28: "Regulators prescribe biggest rate increase in= =20 state history" San Diego Union, Wed, 3/28: "City leaders in East County schedule forum on= =20 energy woes" San Diego Union, Wed, 3/28: "Developments in California's power crisis" San Diego Union, Wed, 3/28: "Congressman eyes nuclear vessels as source of= =20 power" San Diego Union, Wed, 3/28: "Bush calls California energy crisis 'ominous'= " San Diego Union, Wed, 3/28: "Rate hike means new political heat for=20 California governor" LA Times, Wed, 3/28: "PUC Approves Largest Electricity Rate Increase in=20 State's History" LA Times, Wed, 3/28: "With Energy Crisis Far From Over, Experts Say More= =20 Hikes Possible " LA Times, Wed, 3/28: "Davis Keeps His Distance From Utility Rate Hikes" LA Times, Wed, 3/28: "Federal Energy Agency Unlikely to Order Refunds" LA Times, Wed, 3/28: "A Painful Step" (Commentary) SF Chron, Wed, 3/28: "PUC Votes To Jack Up Power Rates=20 Tiered increases approved as protests disrupt meeting" SF Chron, Wed, 3/28: "Developments in California's power crisis" =20 SF Chron, Wed, 3/28: "Energy Nominees Would Give GOP Majority on Panel" SF Chron, Wed, 3/28: "Megawatt Foolish=20 Strike a Pose for Energy Conservation" SF Chron, Wed, 3/28: "New York mayor calls for cap on power prices "=20 SF Chron, Wed, 3/28: "Power regulators approve rate hikes of up to 46=20 percent " Mercury News, Tues, 3/27: "No explanation given after officials approve 27= =20 percent rate hike " Mercury News, Tues, 3/27: "Impact of increases will vary greatly" Orange County, Wed, 3/28: "PUC raises power rates" Orange County, Wed, 3/28: "Energy payments not enough, gas-using generator= s=20 say" Orange County, Wed, 3/28: "Bush to nominate 2 who favor free markets for= =20 energy panel" Orange County, Wed, 3/28: "Davis backs power rate hikes if 'necessary' " Orange County, Wed, 3/28: "Cheney says state's on its own" Orange County, Wed, 3/28: "Highest rate hike in state history raises=20 consumer anger" Orange County, Wed, 3/28: "Lighten up...it's just a California thing" Orange County, Wed, 3/28: "Conserve and Save" NY Times, Wed, 3/28: "RECORD RATE HIKE SET IN CALIFORNIA" Individual.com, Wed, 3/28: "Calif. Regulators Raise Power Rates " =20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------- State backs rate hike: But increase still may not resolve crisis By Carrie Peyton and Dale Kasler Bee Staff Writers (Published March 28, 2001)=20 SAN FRANCISCO - Brushing aside the shouts and hisses of outraged protesters= ,=20 state regulators approved a $4.8 billion-a-year utility rate hike Tuesday b= ut=20 couldn't guarantee that the increases will remedy California's electricity= =20 crisis.=20 With activists chanting "rate hikes no way" and utility executives branding= =20 the decision as inadequate, the Public Utilities Commission voted 5-0 to=20 raise rates about 30 percent for customers of Pacific Gas and Electric Co.= =20 and Southern California Edison. The rate hike took effect immediately but= =20 probably won't show up in customer bills until May.=20 But while PUC commissioners said they were taking a bold step, major holes= =20 remain in the state's patchwork effort to save the two beleaguered utilitie= s=20 and ensure reliable energy supplies during what promises to be a long, hot= =20 summer:=20 The higher rates won't pay off billions in old utility debts, leaving PG&E= =20 and Edison under the continued threat of a bankruptcy filing by power=20 generators, bondholders or other creditors.=20 The increases will likely curtail energy consumption, but it's unlikely the= =20 cutbacks will be enough to stave off rolling blackouts this summer. The PUC= =20 put off a crucial decision on how to allocate the rate hikes across custome= r=20 categories, and the final rate design could determine how much Californians= =20 will conserve.=20 The vote may not achieve one of its key goals: reviving the wind farms,=20 cogenerators and other=20 alternative-energy producers that provide more than 20 percent of=20 California's electricity. Hundreds have shut down in recent weeks because o= f=20 nonpayment by PG&E and Edison, contributing to rolling blackouts March 19 a= nd=20 20.=20 After months of prodding, the PUC approved what may well be the largest=20 utility rate increase in California's history, saying it had no choice if i= t=20 was to shore up utility finances and lessen the risk of blackouts. It raise= d=20 rates just under 30 percent in addition to making permanent a 9 percent=20 surcharge approved in January.=20 The increased revenue will go to pay for the state Department of Water=20 Resources' power purchases on the utilities' behalf, and to=20 alternative-energy producers that supply a major chunk of the utilities'=20 power.=20 The PUC's move could make utility bankruptcies more palatable to state=20 officials because it ensures payment for future power supplies. "Now, if we= =20 have a bankruptcy, a lot of bad things will probably happen, but there's le= ss=20 risk to the general public of mass power disruptions," said state Sen. Debr= a=20 Bowen, D-Marina del Rey, chairwoman of the Senate Energy Committee.=20 PG&E, arguing that the PUC didn't go nearly far enough, said it will demand= =20 the panel reconsider.=20 "Today's =01( actions, while providing a welcome dose of realism in the ene= rgy=20 policy debate, unfortunately do not resolve any of the key issues facing=20 California's policymakers," PG&E President Gordon Smith said.=20 Smith said the decision could worsen California's energy problems by forcin= g=20 the utilities to pay the state Department of Water Resources, which is buyi= ng=20 power on the utilities' behalf, ahead of other creditors.=20 An Edison vice president, Bruce Foster, said the rate increase "is a step i= n=20 the right direction" but added, "Only time will tell if it's enough." The= =20 company announced it will start making interest payments on defaulted bond= =20 and bank debts.=20 Edison and PG&E both criticized the commission for sharply lowering the PUC= 's=20 estimates of the utilities' debts.=20 PUC commissioners acknowledged they have more work to do to resolve=20 California's energy mess - and some hinted that additional rate hikes may b= e=20 in the offing.=20 "Have we gotten the number right? I don't know," said Commissioner Henry=20 Duque. But PUC President Loretta Lynch said the $4.8 billion will be enough= =20 to pay California's ongoing power bills.=20 Meanwhile, Gov. Gray Davis repeated his opposition to rate hikes.=20 "We do not have all the appropriate financial numbers necessary to make a= =20 decision," Davis said. "Until we do, I cannot support any rate increase. = =01(=20 While I have opposed rate increases, if it becomes clear that a rate increa= se=20 is absolutely necessary for the good of the state, I will support one that = is=20 fair and do my duty to convince Californians of its necessity."=20 Yet most observers believe the PUC acted with Davis' approval - three of it= s=20 members are Davis appointees - and last Friday his aides shared data with= =20 business lobbyists indicating rates would rise substantially, said Jack=20 Stewart, president of the California Manufacturers & Technology Association= .=20 Consumer advocates blasted rate increases as a surrender to the power=20 generators that control much of California's electricity.=20 Noting that the state's grid operator has accused the generators of=20 overcharging Californians by $6.2 billion, they urged the PUC to focus its= =20 firepower on those "robber barons on steroids," as Berkeley activist Barbar= a=20 George put it.=20 "It's like dealing with the mob," said Doug Heller of the Foundation for=20 Taxpayer and Consumer Rights. "Instead of breaking our fingers, they're goi= ng=20 to turn the lights out again."=20 Jamming the PUC's auditorium to near capacity, activists said the state=20 should seize the generators' power plants. They razzed the commissioners wi= th=20 taunts of "blood money!" and "it's a sham," prompting guards to escort some= =20 protesters out.=20 PUC President Lynch partially agreed with the protesters, saying the=20 generators are "the real culprits in our energy crisis." But she said the= =20 commission had to approve rate hikes.=20 The PUC ordered the utilities to help state officials fight the power=20 generators to refund some of their profits. Lynch said the rate hikes would= =20 be refunded to customers if generators are forced to surrender money.=20 The higher rates will generate $2.51 billion in additional yearly revenue f= or=20 Edison and $2.28 billion for PG&E, according to PUC estimates.=20 But with most of the money going to reimburse the state Department of Water= =20 Resources for current and future power purchases, the PUC action doesn't=20 repay the billions the utilities owe to generators and other creditors.=20 "You still have $14 billion, maybe more, of costs that haven't been paid fo= r,=20 and that's still a problem," said Gary Ackerman of the Western Power Tradin= g=20 Forum, an association of power generators. "I don't believe creditors are= =20 going to be infinitely patient."=20 The two utilities have defaulted on billions of debts and face a daily thre= at=20 of bankruptcy.=20 "That's still an issue that ultimately has to be addressed," said Senior Vi= ce=20 President John Stout of Reliant Energy Inc., a generator that's owed $370= =20 million.=20 Davis is negotiating to buy the transmission grid from Edison, PG&E and San= =20 Diego Gas & Electric Co. as a means of paying off the utilities' existing= =20 debts. But Bowen, the Energy Committee chair, said she doubts the deal will= =20 go through.=20 Beyond complaining the PUC didn't solve the existing-debt issue, the=20 utilities were dismayed by a change in PUC accounting that sharply lowers= =20 estimates of their debts and could have major impacts on how much control= =20 regulators keep over their operations for months to come. Even though rates= =20 keep going up, a state ordered rate freeze remains technically in effect, a= nd=20 that freeze gives regulators ammunition to argue that utilities can't pass= =20 all their costs on to customers.=20 PG&E's Smith called it the "most egregious" commission action. Edison calle= d=20 it "illegal."=20 The board voted to raise rates 3 cents a kilowatt-hour - and make permanent= a=20 1-cent increase approved in January. Documents from Lynch's office said rat= es=20 would rise on average 29 percent, but Lynch later described it as 26 percen= t.=20 The PUC put off a decision on how the higher rates will affect each custome= r=20 category, other than to say it's leaning toward a system that will charge= =20 more for electricity consumed above a certain threshold. The PUC estimated= =20 that 45 percent of residential ratepayers - those who use less than that=20 threshold - will see no rise at all. Lynch proposed some businesses would s= ee=20 rate hikes of as much as 87 percent.=20 "How much conservation will this get us? It will depend very much on how it= 's=20 designed," said Severin Borenstein of the University of California Energy= =20 Institute.=20 The rate hikes won't affect customers of municipal utilities such as=20 Sacramento Municipal Utility District. SMUD is planning a 16 percent rate= =20 hike.=20 The PUC vote may do little to help the hundreds of alternative-energy=20 producers known as "qualifying facilities," many of which have shut down fo= r=20 nonpayment.=20 The PUC on Tuesday ordered PG&E and Edison to start paying these producers = in=20 April, but some of the producers say the PUC's new pricing mechanism doesn'= t=20 get them back on their feet financially. Many, following the lead of one=20 Imperial Valley producer, may choose to sever their contracts with the two= =20 utilities and sell their power elsewhere, even out of state.=20 "This is not a solution," cogenerators' lawyer Jerry Bloom said of the PUC= =20 vote. "It will drive additional (plants) off the system."=20 California can ill afford to lose suppliers. On Tuesday, the Independent=20 System Operator, which runs the power grid, declared a Stage 2 alert, meani= ng=20 reserve supplies had dipped to less than 5 percent of demand.=20 And many experts believe California won't be able to avoid blackouts this= =20 summer. The severe drought hitting the Pacific Northwest will deprive=20 California of a critical source of hydroelectricity.=20 Utility stocks, which shot up Monday in anticipation of the PUC's vote,=20 retreated slightly on Tuesday. PG&E Corp. shares dropped 44 cents to $13.20= ;=20 Edison International fell 39 cents to $14.16.=20 Bee staff writers Dan Smith, Emily Bazar and Kevin Yamamura, and Reuters ne= ws=20 service contributed to this report.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- Batten down: Electric storm brews=20 By Gilbert Chan and Andrew LePage Bee Staff Writers (Published March 28, 2001)=20 First higher gasoline prices hit Dust-Tex Service Inc. Then skyrocketing=20 natural gas bills socked the Sacramento industrial laundry service. Now a= =20 third financial blow looms - higher electricity bills.=20 "It's become a real nightmare. It's pretty scary. You have to find money to= =20 pay these bills," said Sylvia Compton, co-owner of the longtime family-owne= d=20 south Sacramento business.=20 It could be worse for Compton, whose business is served by the Sacramento= =20 Municipal Utility District. It will be for customers of Pacific Gas and=20 Electric Co., who face rate hikes averaging 30 percent in addition to a 9= =20 percent rate increase already approved.=20 The California Public Utilities Commission gave PG&E and Southern Californi= a=20 Edison permission to raise electric rates by $4.8 billion a year. How the= =20 burden will fall on various customer groups hasn't been decided.=20 Although SMUD customers aren't affected by the PUC's decision to sharply=20 raise rates, they aren't likely to be immune. SMUD, also facing skyrocketin= g=20 energy costs, is considering rate increases ranging from 13 percent to 25= =20 percent.=20 For Dust-Tex and scores of other California companies, any rate hike would = be=20 another unwelcome increase in the cost of doing business. It will hit at a= =20 time the U.S. economy is slowing and employer costs such as health benefits= =20 are soaring.=20 For consumers, it will mean a double blow, higher electricity bills at home= =20 and higher prices for goods and services.=20 Raley's, the West Sacramento-based supermarket chain, for example, uses hug= e=20 amounts of electricity not only for lights and refrigeration at its stores,= =20 but also to cool food at its distribution centers. Given the thin profit=20 margins of the grocery business, it has little choice but to raise prices.= =20 "We are doing all we can at Raley's to conserve energy. But as rates go up = we=20 will have to pass those increases on to our customers in the cost of goods,= "=20 said Michael Teel, Raley's president and chief executive officer.=20 The higher electric bills approved by the PUC - aimed at keeping the state'= s=20 two biggest utilities from bankruptcy - mean California businesses and=20 consumers will have almost $5 billion less to spend each year on other=20 things.=20 While that amount represents a huge bite out of consumer spending, by itsel= f,=20 it won't necessarily lead to a recession, said Brad Williams, senior=20 economist at the state Legislative Analyst's Office.=20 "What we're really talking about is less economic growth," Williams said.= =20 "Some households will feel this, and it will pinch their budgets and affect= =20 how much income they have for purchasing goods and services."=20 The state estimates that spending on electricity last year averaged between= 2=20 and 3 percent of both business production costs and household budgets.=20 Some business owners and economists welcomed the boost in electricity rates= ,=20 saying in the long run, they will spur energy conservation efforts, boost= =20 power generating capacity and prevent rolling blackouts and their devastati= ng=20 effect on business productivity.=20 "It's much worse for us if we have these damn blackouts. We have 100=20 employees, and if there's a blackout they're all sitting around twiddling= =20 their thumbs and I've still got to pay them," said Norm Rogers, president o= f=20 Z-World Inc. in Davis, which designs and builds miniature special-purpose= =20 computers.=20 Many economists and business experts believe rolling blackouts, not higher= =20 electricity rates, are the biggest threat to the economy.=20 "It's better to have higher rates and secure power than lower rates and=20 blackouts," said Stephen Levy, senior economist at the Center for Continuin= g=20 Study of the California Economy. The state can work through the higher powe= r=20 costs - just as it did when gasoline and diesel prices soared last year, Le= vy=20 said.=20 In reaction to the higher power rates, a small number of businesses may lea= ve=20 California, expand out of state, or fail, though most will be able to weath= er=20 the short run, said Robert Smiley, dean of the Graduate School of Managemen= t=20 at the University of California, Davis.=20 Most firms will give the state just six to 18 months to solve the energy=20 crisis before "they'll start looking elsewhere," Smiley said.=20 David Molinaro, owner of Yolo Ice and Creamery Inc., a Woodland-based ice= =20 cream, dairy and ice distributor, can't pick up and leave. He absorbed high= er=20 diesel fuel costs for his 11 delivery trucks for six months before levying = a=20 surcharge in January. There's just no way his company can eat the higher=20 electricity costs, he said.=20 "It's frustrating. People are thinking you are getting rich by raising=20 prices," Molinaro said.=20 Other businesses may have little choice but to swallow the higher utility= =20 costs.=20 "We compete with global suppliers for almost every product. It's virtually= =20 impossible for us to pass these costs on," said Jeff Boese of the Californi= a=20 League of Food Processors. "If we don't get a handle on energy costs very= =20 quickly I would suspect a significant number of food processors to leave th= e=20 state."=20 In past months, the rocketing energy costs have forced companies to take=20 dramatic steps to shave expenses.=20 Dust-Tex, for example, has scrapped pay raises, raised prices 10 percent, c= ut=20 hours for some workers, put a freeze on hiring and changed auto insurance= =20 coverage for its truck fleet. At the same time, it invested $60,000 for a n= ew=20 energy-efficient dryer.=20 California Family Health & Fitness, which has eight health clubs in the=20 capital region, has tabled plans for two additional gyms until it gets a=20 better handle on future energy costs, according to co-owner Larry Gury. But= =20 Gury and his partner are looking at spending $150,000 to $200,000 at each o= f=20 four gyms to install solar panels for heating the pools and running the=20 lights.=20 Some impacts might not be seen for some time. In the health care industry,= =20 for example, the energy crisis has only added to existing financial=20 pressures, said Larry Levitt, vice president of the Henry J. Kaiser Family= =20 Foundation.=20 Pressed by higher bills, some employers may opt to trim or eliminate health= =20 benefits for workers, Levitt said.=20 Bee staff writer Lisa Rapaport contributed to this report.=20 ---------------------------------------------------------------------------= --- --------------------------------- Use more energy, pay higher rates=20 By Edie Lau Bee Science Writer (Published March 28, 2001)=20 For all the talk of electricity rates going up across the state, there's a= =20 way every resident of California can avoid the price hit altogether: Just u= se=20 electricity sparingly.=20 A rate increase approved by the state Public Utilities Commission on Tuesda= y=20 does not affect households that use less than 130 percent of a baseline=20 amount of power.=20 Forty-five percent of households already stay within that limit, according = to=20 PUC President Loretta Lynch. The proportion is slightly less in Pacific Gas= =20 and Electric's territory - 42 percent, utility spokeswoman Jann Tabor said.= =20 The baseline amount differs from region to region and from season to season= .=20 The Sacramento Municipal Utility District is not affected by the PUC-approv= ed=20 increase but is planning to raise rates this spring, as well. It, too,=20 proposes to protect the thriftiest customers by raising the price only of= =20 kilowatt-hours used over baseline. District rate administrator Alan Wilcox= =20 said roughly half of SMUD households consume only baseline amounts of power= .=20 Everyone else has the opportunity to dodge rate increases by scaling back= =20 their electricity use.=20 How difficult might that be? If you're accustomed to using a central air=20 conditioner all summer and unwilling to turn up the thermostat, it could be= =20 difficult, by Wilcox's reckoning.=20 "If you're running an air-conditioning load in the Valley, you could probab= ly=20 expect to get into that second tier (above baseline) a little bit," he said= .=20 "There are a lot of people who do not use their air conditioning a lot or= =20 have swamp coolers or just go without."=20 In SMUD territory, the baseline is 700 kilowatt-hours per month in summer,= =20 and 620 kwh in winter for most customers. (Households that do not use gas a= nd=20 are powered entirely by electricity get a higher baseline allowance.)=20 Wilcox said the baseline is based upon average consumption - at least, it w= as=20 the average when the baseline was set in the early 1990s. Consumption has= =20 crept up a bit since, to 752 kwh a month last year.=20 Under SMUD's rate-increase proposal, the summertime rate would remain at=20 8.058 cents per kilowatt-hour for the first 700 kwh. The price would rise b= y=20 10 cents a kilowatt-hour for the next 300 kwh used, up to 1,000 kwh.=20 Big energy consumers would pay more than 16 cents for each kwh used over=20 1,000 kwh.=20 Bottom line: The biggest users pay the most.=20 Details of the rate increase approved by the PUC - which will affect PG&E= =20 customers, as well as those served by Southern California Edison and San=20 Diego Gas & Electric - have yet to be worked out, but the rates are expecte= d=20 to be structured in a similar tiered fashion.=20 Currently, PG&E customers year-around pay 11.4 cents per kilowatt-hour up t= o=20 the baseline limit, and 13 cents for every kilowatt-hour over baseline. The= =20 average baseline throughout the territory is between 300 and 400 kwh, Tabor= =20 said; it varies from region to region to account for climate.=20 Tabor said the PG&E baseline amounts to between 50 percent and 60 percent o= f=20 the average electricity use per household in a given territory. That=20 proportion, she said, was taken from a "Lifeline" program in effect from 19= 76=20 to 1984 that was meant to provide a minimum necessary quantity of electrici= ty=20 and gas at a lower cost.=20 Tabor said 31 percent of PG&E's 4,017,000 residential customers use only=20 baseline amounts of electricity.=20 Bee staff writer Carrie Peyton contributed to this report.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ---- Regulators prescribe biggest rate increase in state history=20 Davis calls ruling for PG&E, Edison premature; consumer groups push for=20 seizure of plants By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 March 28, 2001=20 SAN FRANCISCO -- State regulators yesterday approved the biggest rate=20 increase in California history for the customers of Pacific Gas and Electri= c=20 and Southern California Edison, but Gov. Gray Davis said the increase is=20 premature.=20 The governor, appearing to soften his long-standing opposition, said he wou= ld=20 support a rate increase only if financial information shows that a rate=20 increase is "necessary for the good of the state."=20 The Public Utilities Commission, controlled by Davis appointees, voted 5-0= =20 for an immediate rate increase. A statement from Davis, who usually demands= =20 that appointees reflect his policy, did not say whether he would ask the PU= C=20 or the Legislature for a rollback if he concludes the increase is unneeded.= =20 Developments in California's power crisis=20 Congressman eyes nuclear vessels as source of power=20 Bush calls California energy crisis 'ominous'=20 Rate hike means new political heat for California governor=20 ?=20 "He can ask," said Steve Maviglio, Davis' press secretary. "That is one of= =20 many options. But now we are waiting for the numbers to plug in the data an= d=20 see if a rate increase is necessary."=20 The PUC has not yet acted on the request of San Diego Gas and Electric for = a=20 rate increase. SDG&E has a debt of $681 million but has been paying all of= =20 its bills, unlike PG&E and Edison. Those companies say they have debt of $1= 3=20 billion.=20 SDG&E is in a different situation because its rates were capped by=20 legislation in September that guarantees payment of its debt, allowing the= =20 utility to borrow. The bills of SDG&E customers soared last summer when the= =20 utility became the first to be deregulated.=20 "Since the PUC has approved rate hikes for Edison and PG&E, we would hope= =20 they give an expedited review to our request for an increase of 2.3 cents p= er=20 kilowatt hour," said Ed Van Herik, a SDG&E spokesman.=20 Consumer groups warned that out-of-state generators, who have been ordered = by=20 FERC to make some rebates for overcharging, will make even more money under= =20 the rate increase. Some are urging Davis to seize California power plants= =20 owned by the generators.=20 "These people are war criminals," said Mike Florio, an attorney for The=20 Utility Reform Network in San Francisco.=20 The PUC meeting, which occurred on a day when the state was hit by a Stage = 2=20 alert because of reduced imports from the Northwest, was interrupted by=20 shouts from demonstrators who want a state-owned power system. They chanted= ,=20 "Public power now, we won't pay" and "Rate hikes no way, make the energy=20 companies pay."=20 Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa=20 Monica, which is threatening to put a public power initiative on the ballot= =20 next year, said some attorneys think the abrupt rate increase can be=20 challenged in court.=20 Assemblyman Rod Pacheco, R-Riverside, announced that he will introduce=20 legislation to repeal the rate increase. He said a decision should be made= =20 not by appointees but by elected officials who are accountable to the publi= c.=20 Democratic legislative leaders, who have large majorities in both houses,= =20 said Monday that they have reluctantly concluded a rate increase is=20 necessary. Davis is scheduled to meet with Assembly Democrats this afternoo= n.=20 The rate increase approved for PG&E and Edison yesterday is 3 cents per=20 kilowatt hour. The PUC president, Loretta Lynch, said media reports of the= =20 increase amounting to a 40 percent rise are inaccurate.=20 Lynch said the increase in the monthly bills of ratepayers would be about 2= 6=20 percent if applied across the board. She bases her figure on the total bill= =20 that includes electricity, transmission, distribution and other costs.=20 The media's characterization of the rate increase as 40 percent is based on= =20 only the cost of electricity, not the total bill. The electricity costs=20 before the increase were 7.2 cents per kilowatt hour for Edison and 6.7 cen= ts=20 for PG&E. SDG&E's rate is 6.5 cents.=20 Lynch proposed the rate increase after a report issued last week showed tha= t=20 the state, which was forced to begin buying power for the utilities in=20 mid-January, will have to spend more than expected. A state plan to lower= =20 costs through long-term contracts will fall short this summer.=20 The state has been spending about $1.5 billion a month to buy power. The PU= C=20 also voted unanimously yesterday to give the state a share of the monthly= =20 bill collected by utilities, which will be used to finance a bond of $10=20 billion or more to repay the state general fund for the power purchases.=20 The state was jolted last week by rolling blackouts that few expected befor= e=20 summer, when heat drives up the demand for electricity. A number of small= =20 generators that provide a quarter of the state's power are not operating=20 because they have not been paid by utilities.=20 The PUC voted yesterday to order Edison and PG&E to begin paying the small= =20 generators under a new formula that links their payments to the price of=20 natural gas at the Oregon border, rather than at the Southern California=20 border with Arizona. Prices at the Arizona border have been 50 percent=20 higher.=20 David Fogarty of the Western States Petroleum Association, which represents= =20 50 small generators, said many of the small plants in Southern California= =20 will have to continue to buy their natural gas at the higher price on the= =20 Arizona border.=20 "Many of them will find it uneconomic to continue to operate," Fogarty=20 warned.=20 Edison has not paid the small generators in the federal "qualifying=20 facilities" program since November. PG&E has been paying them only about 15= =20 percent.=20 The PUC did not order the utilities to pay off the $1.5 billion they owe to= =20 the small generators. Jan Smutny-Jones of the Independent Energy Producers= =20 said some of the small generators will not be able to buy gas until they ca= n=20 pay their debts.=20 Many of the small generators produce power from "renewable" sources such as= =20 solar, wind, geothermal and biomass. But most of the small generators use= =20 natural gas turbines that also produce heat for commercial purposes.=20 Whether Lynch acted on her own when she proposed the increase or was prompt= ed=20 by the Davis administration is a topic of speculation. Davis aides told=20 reporters during a background briefing yesterday that they did not learn of= =20 Lynch's proposal until Sunday night.=20 They said the governor was briefed Monday morning and that he did not urge= =20 his PUC appointees to delay the increase. An Edison official said the utili= ty=20 received the proposal late Monday morning and had little time to prepare fo= r=20 a hasty PUC hearing on the increase that afternoon.=20 The two commissioners appointed by former Gov. Pete Wilson, Richard Bilas a= nd=20 Henry Duque, said they have been urging a rate increase. But both complaine= d=20 of the short notice and the lack of time to study the complex proposals=20 approved yesterday.=20 Davis aides said they do not understand how Lynch arrived at an increase of= 3=20 cents per kilowatt hour. The governor is waiting for estimates of state pow= er=20 purchases this summer, available generation, the effect of conservation, th= e=20 potential for federally ordered refunds from generators, and other data=20 before he makes a rate decision.=20 The Davis appointees on the commission, Geoffrey Brown and Carl Wood, prais= ed=20 Lynch for showing courageous leadership.=20 The increase approved yesterday, which utility spokesmen said was the large= st=20 in their history, comes on top of a 9 percent residential increase for Edis= on=20 and PG&E imposed in January and a scheduled 10 percent increase next March,= =20 when a "rate reduction" paid for by a $6 billion bond expires.=20 Lynch said the rate increase approved yesterday takes effect immediately bu= t=20 will not show up on customer bills until May or later. The PUC is working o= n=20 a plan to design the increase to encourage conservation, giving the biggest= =20 increases to those that use the most electricity.=20 About 45 percent of the utilities' residential customers will have no=20 increase because of legislation exempting households that use 130 percent o= r=20 less of the "baseline," a minimum amount of electricity use that varies wit= h=20 climate zones around the state.=20 ----------------------------------------------------------------- City leaders in East County schedule forum on energy woes=20 UNION-TRIBUNE=20 March 28, 2001=20 Members of the four East County city councils will hold a workshop tomorrow= =20 to talk about ways to deal with the energy crisis.=20 The meeting is scheduled to begin at 7 p.m. at the La Mesa Community Center= ,=20 4975 Memorial Drive, La Mesa.=20 Council members from La Mesa, Santee, El Cajon and Lemon Grove will discuss= =20 energy-saving policies and ordinances they could enact.=20 Cities might look at having energy-efficient traffic lights installed or=20 requiring new houses to use alternative energy sources, said La Mesa Mayor= =20 Art Madrid.=20 "It's acknowledging that we have a problem and coming up with a solution,"= =20 Madrid said.=20 Kurt Kammerer of the San Diego Regional Energy Office is scheduled to give = a=20 presentation to the group. Members of the audience will have an opportunity= =20 to make comments.=20 ------------------------------------------------------------------ Developments in California's power crisis=20 ASSOCIATED PRESS=20 March 28, 2001=20 Here is a look at developments in California's electricity crisis:=20 WEDNESDAY:=20 =01) The state remains free of power alerts in the early morning as power= =20 reserves stay above 7 percent.=20 =01) The Assembly resumes hearings on California's high natural gas prices.= =20 =01) The Assembly is expected to try again to pass a bill that would let th= e=20 state Public Utilities Commission order Southern California Edison Co. and= =20 Pacific Gas & Electric Co. to pay alternative-energy plants.=20 TUESDAY:=20 =01) The PUC votes unanimously to approve electricity rate hikes of up to 4= 6=20 percent for customers of California's two largest utilities. The board vote= s=20 5-0 to increase rates immediately for PG&E and Edison despite yells from=20 protesters. The increases are the largest in California history.=20 =01) Stock in both utilities suffer slight losses after expectations of the= rate=20 hikes Monday caused shares in PG&E Corp. to surge 29 percent and Edison=20 International's stock to gain 30 percent. Edison International closed down = 39=20 cents at $14.16 a share. PG&E Holding Corp., parent of Pacific Gas &=20 Electric, closed down 55 cents at $13.20.=20 =01) In a Tuesday afternoon conference call, Southern California Edison say= s it=20 will begin paying interest to its bondholders after weeks of failure to pay= .=20 Company authorities say they have not heard whether the news will boost the= ir=20 credit rating and do not specify a dollar amount for monthly interest=20 payments.=20 =01) The Los Angeles Department of Water and Power, which is not attached t= o the=20 state power grid and is not affected by deregulation, issues a statement=20 Tuesday assuring that customer rates "will continue to remain stable."=20 =01) Standard & Poors retains California's cautionary credit rating despite= =20 state regulators' decision to raise electricity rates. The state has been o= n=20 a credit watch "with negative implications" since it began spending $45=20 million a day to buy electricity for customers of two nearly bankrupt=20 utilities. The crediw watch will remain in effect despite a rate increase= =20 state regulators approved Tuesday.=20 =01) President Bush says the electricity price caps sought by California's = Gray=20 Davis and other Western governors would worsen the region's energy crisis= =20 instead of helping cure it. In a speech to the Kalamazoo Chamber of Commerc= e,=20 Bush says price controls helped cause the gasoline crisis of the 1970s, and= =20 he won't make the same mistake.=20 =01) Joseph Fichera, the governor's chief negotiator on the purchase of=20 transmission lines, says he is exchanging drafts of proposed agreements wit= h=20 Edison officials but won't say how soon a final agreement may be reached. H= e=20 says negotiations are continuing with PG&E and San Diego Gas & Electric.=20 =01) State agencies announce a March 29 workshop in Ontario for developers = who=20 hope to build peaking power plants in time for this summer. The event is=20 similar to one held two weeks ago in Sacramento. Peaking plants are used fo= r=20 short periods when power supplies run low.=20 =01) California's Independent System Operator declares a Stage 2 alert when= =20 electricity reserves were approaching only 5 percent of available power. IS= O=20 spokeswoman Stephanie McCorkle says the alert was triggered when 1,000=20 megawatts was unexpectedly lost from the Pacific Northwest. WHAT'S NEXT:=20 =01) The Davis administration continues negotiations with Edison, PG&E and = San=20 Diego Gas & Electric Co. over state acquisition of their transmission lines= . THE PROBLEM:=20 High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices that the state's electricity deregulation law bars them fr= om=20 passing onto ratepayers, and are close to bankruptcy.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers.=20 ------------------------------------------------------------------ Congressman eyes nuclear vessels as source of power=20 By Toby Eckert=20 COPLEY NEWS SERVICE=20 March 28, 2001=20 WASHINGTON -- As California braces for more blackouts this summer, a key=20 House Republican has floated a plan that includes mobilizing a federal=20 disaster agency, waiving some environmental regulations and exploring wheth= er=20 nuclear reactors aboard Navy ships could be connected to the power grid.=20 Several Democrats immediately attacked the plan for not including electrici= ty=20 price controls sought by Gov. Gray Davis and other California officials. Th= ey=20 also charged that it would undermine clean air laws.=20 The 17-point plan was drafted by Rep. Joe Barton, R-Texas, chairman of the= =20 House Commerce Committee's energy and air quality subcommittee. Copies were= =20 obtained by Copley News Service.=20 Samantha Jordan, a spokeswoman for Barton, confirmed that he had circulated= =20 some proposals for responding to the Western power crisis among subcommitte= e=20 members late last week. Some of the ideas were deleted before the list was= =20 forwarded to the White House, Jordan added, but she would not say which one= s.=20 Barton has presided over several hearings on the power crunch and has said= =20 that he is "more than prepared" to draft legislation to help California. A= =20 White House task force, headed by Vice President Dick Cheney, is also=20 developing a national energy policy.=20 President Bush has repeatedly stated his opposition to caps on wholesale=20 power prices. He has called for a concerted effort to increase energy=20 production.=20 The list of ideas Barton sent to subcommittee members was aimed at boosting= =20 power generation and transmission in the West, increasing conservation and= =20 preparing for blackouts.=20 Some of the production and transmission measures called for quickly expandi= ng=20 a crucial power conduit in the Central Valley known as Path 15, using feder= al=20 funds for all or part of the project; allowing small power generators to se= ll=20 electricity to buyers other than the state's cash-strapped utilities; and= =20 establishing standards for allowing businesses with on-site electricity=20 generation to send surplus supplies to the power grid.=20 Other steps, sure to be unpopular with environmentalists, could be taken if= a=20 state declares an "electricity emergency." In addition to the idea of=20 harnessing the energy from nuclear-powered Navy ships and submarines, they= =20 include temporarily waiving nitrogen oxide emission limits at power plants,= =20 allowing the construction of generating plants on federal and Indian lands,= =20 restarting mothballed nuclear reactors and delaying for a year a plan to=20 divert water in California's Trinity River from power generation to=20 environmental restoration.=20 On the conservation side, Barton proposed allowing states to lengthen=20 daylight savings time and requiring federal facilities to reduce energy use= =20 by 10 percent.=20 Finally, the Federal Emergency Management Agency would be directed to open = an=20 office in California, conduct an educational campaign to prepare the public= =20 for blackouts and have a plan ready to provide assistance during power=20 outages.=20 Barton has been skeptical of the idea of having the federal government limi= t=20 the cost of wholesale power in the West and did not include that among his= =20 proposals. Instead, he said the Federal Energy Regulatory Commission should= =20 investigate whether wholesale prices are "unjust and unreasonable" -- a=20 finding FERC already has made once.=20 That drew the criticism of four California Democrats -- Reps. Henry Waxman = of=20 Los Angeles, Anna Eshoo of Atherton, Jane Harman of Torrance and Lois Capps= =20 of Santa Barbara -- who sit on the House Commerce Committee. They sent a=20 letter to Barton on Friday spelling out their objections.=20 "He's left off the 10-ton gorilla solution, which is directing the FERC to= =20 .?.?. impose a reasonable cap on the price of wholesale electricity," Harma= n=20 said.=20 The Democrats also said that Barton's proposals would "undermine the Clean= =20 Air Act" and that there is "widespread agreement among those directly=20 involved in California's electricity system that clean air rules are not=20 responsible for electricity shortages."=20 ----------------------------------------------------------------- Bush calls California energy crisis 'ominous'=20 But he foresees no quick relief, opposes controls By George E. Condon Jr.=20 COPLEY NEWS SERVICE=20 March 28, 2001=20 KALAMAZOO, Mich. -- President Bush yesterday made his most extensive remark= s=20 yet on the energy crisis in California, calling the situation "ominous" and= =20 proclaiming that "the time to act is now."=20 Despite that pledge, though, he held out little hope of any speedy relief f= or=20 the hard-hit state. He also restated his opposition to energy price control= s.=20 The president, who has previously addressed the energy crunch only in answe= rs=20 to reporters' questions, used a "state of the economy" speech to a business= =20 group at Western Michigan University to elaborate on his still-evolving=20 energy policy.=20 He broke no new ground in his remarks, but seemed to be reacting to West=20 Coast criticism that the federal government should be more aggressive in=20 finding a solution to the rolling blackouts plaguing the nation's most=20 populous state.=20 "The energy problem wasn't created overnight and we won't solve the problem= =20 overnight," he said. "But we will at least start down the right road so tha= t=20 the shortages we face today will not recur year after year."=20 He said a task force headed by Vice President Dick Cheney will come up with= a=20 long-term strategy, but he ruled out any move by his administration that=20 would remedy the crisis quickly.=20 "We'll not solve the energy problem by running the energy market from out o= f=20 Washington, D.C.," he said. "We will solve the energy problem by freeing th= e=20 creativity of the American people to find new sources of energy and to=20 develop the new technologies that use energy better, more efficiently and= =20 more cleanly."=20 He singled out for criticism any call that Washington cap energy prices.=20 "This administration does not, and will not, support energy price controls,= "=20 he said to applause from the business-oriented audience. "Price controls do= =20 not increase supply, and they do not encourage conservation. Price controls= =20 contributed to the gas lines of the 1970s. And the United States will not= =20 repeat the mistake again."=20 He portrayed the energy crisis as a clear threat to his hopes of revitalizi= ng=20 the national economy.=20 And he signaled that he understands Californians are facing hardships.=20 "The lights are dimming in California. Consumers and businesses in Californ= ia=20 are paying sharply higher energy bills. And as we compare our future energy= =20 needs to the currently projected domestic energy supply, we see an ominous= =20 growing gap," he said.=20 He said the blame for the problem belongs to previous decision-makers.=20 "Our people are paying a high price for years of neglect. And the time to a= ct=20 is now," he said.=20 Meanwhile, Bush said he would nominate utility regulators from Texas and=20 Pennsylvania to fill vacancies at the Federal Energy Regulatory Commission,= =20 or FERC, the agency that has played a pivotal role in the California crisis= .=20 However, Bush stopped short of replacing the chairman of the commission,=20 Curtis Hebert, who has drawn fire from Gov. Gray Davis and other California= =20 officials for his outspoken faith in open power markets and staunch=20 opposition to federal controls on the soaring price of wholesale power sold= =20 in the West.=20 There was widespread speculation that Hebert, a Republican, was on his way= =20 out as chairman.=20 A White House spokeswoman would not say whether Bush has ruled out naming= =20 another commissioner to the top job at a later date.=20 Bush nominated Patrick Henry Wood III and Nora Mead Brownell to round out t= he=20 five-member commission.=20 Wood is chairman of the Texas Public Utility Commission and was an adviser = to=20 Bush on energy issues during the presidential transition. Many observers ha= d=20 expected Bush to name him chairman of FERC.=20 Brownell is a member of the Pennsylvania Public Utility Commission.=20 Both nominees, who face Senate confirmation, were praised by power industry= =20 officials and consumer groups. They have helped steer deregulation plans in= =20 their states that are thought to be on sounder footing than California's=20 failed experiment. ------------------------------------------------------------------ Rate hike means new political heat for California governor=20 By Alexa Haussler ASSOCIATED PRESS=20 March 28, 2001=20 SACRAMENTO =01) Rolling blackouts and a record increase in electricity rate= s are=20 putting the political squeeze on Gov. Gray Davis just as he prepares for hi= s=20 re-election campaign.=20 The Democratic governor took a hit Tuesday when the Public Utilities=20 Commission =01) three of its five members appointed by Davis =01) approved = the very=20 rate hikes he has repeatedly said would not be needed.=20 The power crunch is just the weakness political foes are looking for; it=20 could leave everyone from business owners to consumers looking for someone = to=20 blame at the polls next year.=20 "He's the face of the problem right now and so he is going to be the target= ,"=20 said Nancy Snow, a political scientist at the University of California, Los= =20 Angeles.=20 Davis already has been criticized as having a leadership style that is a=20 "little bit too much in the mushy, middle-of-the-road area," Snow said.=20 "That's something that he is going to have to overcome in order to=20 politically survive this crisis."=20 California Republicans blame the first-term governor for four widespread=20 power outages this year that they call "Gray-outs." His first major=20 challenger in 2002, GOP Secretary of State Bill Jones, is making energy a= =20 campaign centerpiece.=20 A top state financial official and fellow Democrat, Controller Kathleen=20 Connell, says Davis' decision to buy power for Southern California Edison a= nd=20 Pacific Gas and Electric is putting the state in financial danger.=20 And Democratic lawmakers are privately grumbling about Davis' handling of t= he=20 crisis as consumer groups threaten a revolt on the 2002 ballot. With up to = 25=20 million Californians affected by the rate hikes, consumer activists hope to= =20 attract millions of rebels to the polls.=20 The PUC voted unanimously to immediately raise rates up to 46 percent for= =20 Edison and PG&E customers, saying that would reduce power use this summer a= nd=20 help keep the cash-starved utilities in business.=20 The increases =01) which come on top of already-approved hikes of 9 to 15= =20 percent and a 10 percent increase planned next year =01) are the biggest in= =20 state history.=20 Davis issued a written statement Tuesday easing his ardent opposition to a= =20 rate hike.=20 "While I have opposed rate increases, if it becomes clear that a rate=20 increase is absolutely necessary for the good of the state, I will support= =20 one that is fair and do my duty to convince Californians of its necessity,"= =20 Davis said.=20 Davis' aides are frantically trying to deflect criticism surrounding the=20 increase and assure voters the governor is working to build more power plan= ts=20 and boost conservation to avert blackouts during the hot summer months.=20 Davis spokesman Steve Maviglio said the governor opposes a rate increase bu= t=20 has no power to order the PUC to maintain current rates.=20 "They are an independent body, they can do what they want," Maviglio said.= =20 He insisted the governor wasn't informed of PUC Chairwoman Loretta Lynch's= =20 plan to announce a rate increase Monday, declaring to reporters: "It's not = a=20 story =01) it's the truth."=20 Still, some Republicans and Democrats have said the governor has been=20 inconsistent about his pull with the commission.=20 He announced last week at a dinner with state labor leaders that he had=20 directed the PUC to order utilities to start paying overdue bills to=20 facilities that produce renewable energy.=20 In addition, Davis administration officials informed several key Assembly= =20 members Friday that the state's power-buying for Edison and PG&E could cost= =20 far more than the $10 billion lawmakers and Davis estimated when they=20 approved legislation authorizing the power purchases, making a rate increas= e=20 of 50 percent or more necessary.=20 "He is fully dedicated to solving this thing, he doesn't just want to lay i= t=20 on the lap of a ratepayer or a taxpayer, and he's trying to come up with wa= ys=20 to do that," Maviglio said.=20 The national attention the power problems draw is raising Davis' name=20 recognition around the country =01) for better or worse =01) as he consider= s=20 whether to make a presidential run in 2004.=20 Davis has been making the rounds on the national TV news and Sunday morning= =20 talk shows to explain to the nation why the lights have been going out in= =20 California.=20 He has attempted to shield himself by continually commenting that he=20 inherited the energy problems; then-Republican Gov. Pete Wilson signed the= =20 1996 utility deregulation bill largely blamed for the crisis, and Californi= a=20 went years with no new power plants, Davis says.=20 Republicans turn the criticism back at him. The state GOP has already run= =20 radio ads criticizing Davis' handling of the power problems and are launchi= ng=20 an all-out effort to blame him for the rate increases.=20 "It's a colossal failure of mismanagement on the part of the governor's PUC= ,"=20 said Assemblyman Keith Richman, R-Northridge.=20 But even with the energy crisis, Republicans have their work cut out for th= em=20 in 2002.=20 The state GOP =01) long shackled by infighting between moderates and=20 conservatives =01) is in the minority in the Legislature, holds just one=20 statewide office, Jones', and must come up with millions to match the nearl= y=20 $26 million Davis had raised nearly two years before the election.=20 And polls have shown residents growing increasingly frustrated with the=20 energy crisis, but not blaming Davis. Those surveys were taken before=20 Tuesday's rate hike and before California was hit last week with rolling=20 blackouts from San Diego to the Oregon border.=20 The governor's political campaign isn't taking any chances, moving quickly = to=20 bite back at critics.=20 Garry South, Davis' chief political adviser, issued a statement Tuesday=20 saying Jones has failed to put forth his own solution.=20 "Put your megawatts where your mouth is," South said.=20 ------------------------------------------------------------------ PUC Approves Largest Electricity Rate Increase in State's History=20 Regulation: Some customers will pay up to 46% more. Commissioners, facing= =20 strong opposition before their unanimous vote, say they are trying to avert= =20 blackouts. Critics say move won't solve the crisis.=20 By NANCY VOGEL and TIM REITERMAN, Times Staff Writers=20 PUC President Loretta Lynch and Commissioner Richard Bilas show strain of t= he=20 meeting at which the panel announced a rate hike. "We maintain the=20 responsibility to keep the lights on," Lynch said ROBERT DURELL / Los Angeles Times ?????SAN FRANCISCO--With protesters jeering their disapproval, besieged=20 utility regulators Tuesday adopted the largest electricity rate hike in the= =20 state's history and defended the action as the only way to keep the lights = on=20 for millions of customers. ?????The California Public Utilities Commission unanimously approved an=20 increase of 3 cents per kilowatt-hour. That will boost rates by as much as= =20 42% for some Southern California Edison customers and up to 46% for some=20 served by Pacific Gas & Electric Co. ?????The rate increase, which will cost customers nearly $5 billion a year,= =20 takes effect immediately but will not show up on utility bills until at lea= st=20 May. ?????The rate hike is the most far-reaching and politically volatile action= =20 the state has taken thus far to ease an 11-month-old power crisis that has= =20 nearly bankrupted the two largest utilities and triggered blackouts. But=20 critics say it does not solve the fundamental problem of runaway wholesale= =20 electricity prices. ?????"The PUC has done all it can do to fight wholesale energy prices that= =20 are unjust and unreasonable," said commission President Loretta Lynch. "We= =20 maintain the responsibility to keep the lights on. . . . I believe that=20 adding another 3 cents will comprehensively address the need for revenues." ?????The commission took steps to have utilities begin paying the state=20 Department of Water Resources for the nearly $3 billion in power it has=20 purchased for them since mid-January. ?????The PUC also ordered utilities to start paying for future power from= =20 alternative energy producers who are starved for cash and struggling to=20 operate. The blackouts last Monday and Tuesday were precipitated in part by= =20 loss of power from such companies. ?????But it was the rate increase proposal that packed the auditorium at PU= C=20 headquarters. And the drama of the vote--and the vocal opposition--spurred= =20 each of the five commissioners to forcefully defend the unpopular action. ?????"These are extraordinary moments in California's history," declared=20 Commissioner Geoffrey Brown, a recent appointee of Gov. Gray Davis. "And=20 extraordinary moments require extraordinary courage. Loretta Lynch has take= n=20 a lot of bad hits. But it was she who stepped up to the role of leader in= =20 California." ?????Rate Increase Lacked Support ?????Lynch proposed the rate increase, even though an administrative law=20 judge at the PUC concluded that an increase was unnecessary and the PUC's o= wn=20 consumer protection arm, the Office of Ratepayer Advocates, opposed it. She= =20 also did not have the public support of Davis, who appointed her and two=20 other commissioners. ?????Davis has distanced himself from the PUC's action, saying the commissi= on=20 was acting independently and that he remains unconvinced that a rate increa= se=20 is necessary. ?????Commissioners Henry Duque and Richard Bilas--who were appointed by=20 Republican Gov. Pete Wilson--called the rate hikes long overdue. ?????"Unless ratepayers want to face substantial rolling blackouts this=20 summer, we have to start paying our power bills," Duque said. "It cannot be= =20 done with the current rates." ?????Saying "there is just no blood left in the turnip," Bilas warned that= =20 "absent an immediate rate increase, the utilities will be in Bankruptcy=20 Court." ?????Before the vote, sign-carrying protesters chanted, "Rate hikes, no way= ,=20 make the energy companies pay." And the commission heard a parade of=20 witnesses, most opposing the rate increase. Some called on the state to use= =20 eminent domain to seize power plants, as Davis said he might do as a last= =20 resort. ?????Doug Heller, of the Foundation for Taxpayer and Consumer Rights in San= ta=20 Monica, told the commission, "Go to these power pirates and tell them the= =20 state treasury is not their money orchard." ?????Barbara George, of Women's Energy Matters, said, "We should give the= =20 generators 24 hours to sign their plants over to the state and leave." Geor= ge=20 was one of several people ejected for repeatedly disrupting the meeting. ?????At a hearing Monday, representatives of agriculture and manufacturing= =20 industries warned that the increase would hurt their members and the=20 California economy. ?????The rate hike is the state's largest, according to the Office of=20 Ratepayer Advocates, which researched the issue. ?????Because the electricity rate is just one of many charges on a monthly= =20 utility bill, the overall effect will be about a 28% increase in monthly=20 bills, said PUC staff. ?????Before the PUC action, homeowners and renters in Edison territory paid= =20 7.2 cents per kilowatt-hour for electricity and another 5.3 cents per=20 kilowatt-hour for other services. The new rate, totaling 15.5 cents per=20 kilowatt-hour, boosts the overall bill by about 24%. The increase is about= =20 26% for PG&E residential customers. But under Lynch's proposal, those=20 increases would not be applied equally. ?????To encourage conservation, she seeks a tiered system that would charge= =20 miserly consumers of energy no more than current rates but would impose the= =20 new higher rates on bigger users. ?????The proposal aims the rate increase at those customers who use 30% or= =20 more beyond a so-called baseline amount, which is about half of the average= =20 residential use per month and varies by region. ?????Exactly who will pay the higher electricity rate will be determined by= =20 the PUC in hearings over the next month. Under Lynch's proposal, nearly hal= f=20 of all residential customers would be spared rate increases. ?????Tiered Rates to Encourage Saving ?????Energy experts say tiered rates would encourage conservation, but they= =20 disagree about how much. ?????Davis energy advisor S. David Freeman, general manager of the Los=20 Angeles Department of Water and Power, said utilities have long used tiered= =20 rates when charging low-income customers. "So this is not brand new. It's= =20 just a more aggressive use of it," he said. ?????UC Irvine economist Peter Navarro said he doubted that tiered rates=20 would do much to stave off blackouts. The greatest conservation gains come= =20 from investment in efficient appliances, he said, and that's why tiered rat= es=20 are "no magic bullet." ?????The increase will not show up in utility bills until May at the=20 earliest, said Paul Clanon, chief of the PUC's energy division. ?????The higher charges for electricity consumed between now and whenever t= he=20 new rate structure is incorporated in monthly bills will be calculated=20 retroactively and charged to future bills, Clanon said. ?????Utility executives and consumer advocates all threw up their hands at= =20 the question of whether the rate hike will be enough. ?????"Have we gotten the number right?" Duque said. "I don't know. I hope w= e=20 have. But this is a step in the right direction, and we'll return any money= =20 not used to buy power." ?????Bruce Foster, a Southern California Edison vice president, also said t= he=20 rate increase is a step in the right direction. "Only time will tell," he= =20 said, "if it is sufficient to meet the need." ?????In a statement, PG&E welcomed the PUC action as a "dose of realism," b= ut=20 said the commission left unresolved a host of issues, including how much=20 money the utility will have to pay for power that the state purchases for= =20 PG&E customers. ?????The PUC estimates that the increase will bring in an additional $4.8= =20 billion annually from the 24 million people served by Edison and PG&E. ?????But that amount doesn't go far in today's California wholesale=20 electricity market. ?????The state and utilities spent $5.2 billion in January buying=20 electricity. The state, through the Department of Water Resources, has spen= t=20 nearly $3 billion in taxpayer money to buy electricity on behalf of the=20 utilities since Jan. 19 because power generators refused to sell to the=20 cash-strapped utilities. ?????Money utilities collect from their customers, even with the new rate= =20 hike, is expected to cover a wide array of expenses, including payments on= =20 $10 billion or more in revenue bonds that the state hopes to sell this spri= ng=20 to cover the state's cost of buying power. ?????"The numbers don't add up," said Jason Zeller, an attorney with the=20 Office of Ratepayer Advocates. "Massive [additional rate] increases are my= =20 concern. We are sticking a finger in the dike unless wholesale prices come= =20 down." ---=20 ?????Times staff writer Mitchell Landsberg in Los Angeles contributed to th= is=20 story. -------------------------------------------------------------------------- With Energy Crisis Far From Over, Experts Say More Hikes Possible=20 Power: PUC action leaves questions unanswered, such as how to handle=20 utilities' debts, whether to buy grid.=20 By JENIFER WARREN and MIGUEL BUSTILLO, Times Staff Writers=20 ?????As painful as Tuesday's electricity rate increase will be for some=20 consumers, power experts across the ideological spectrum say California is= =20 not yet close to being free of the energy crisis that has engulfed it and= =20 threatened its economy. ?????Because of that, still more rate hikes are possible, they say. ?????Consumer advocates, power company officials, legislators and regulator= s=20 disagree widely on the causes of and cures for the state's problems. But th= ey=20 agree that California's energy woes are dizzyingly complex. And the rate hi= ke=20 makes nary a dent in many dimensions of the problem. ?????"Is it over? Heavens no!" said Assemblywoman Jackie Goldberg (D-Los=20 Angeles), who heads a state Assembly panel investigating summertime power= =20 supply issues. "It's a necessary step, but we're certainly not out of the= =20 woods yet." ?????The increase, along with another important action Tuesday by the PUC,= =20 did resolve two major issues--how the state will continue to buy electricit= y=20 that the financially shaky utility companies cannot purchase and how=20 electricity consumers will repay California's treasury for those purchases. ?????But the commission left unresolved a host of other questions: what to = do=20 with the roughly $14 billion in debt the state's two biggest utility=20 companies racked up in recent months buying expensive power; whether the=20 state will buy the electricity transmission grid those utilities own; where= =20 to find about $1.5 billion the utilities owe to producers of alternative=20 energy, many of whom have not been paid in months; and how to wrap up=20 negotiations to sign long-term contracts with generators to supply power in= =20 years to come. ?????Said PUC President Loretta Lynch: "Until we can get wholesale prices= =20 under control and get folks to conserve, we're going to be in this pickle f= or=20 a while." ?????Resolving the issue of repaying the treasury for power purchases was= =20 crucial because the state is spending $45 million to $55 million a day to b= uy=20 electricity. To cover those costs, the state is supposed to float bonds,=20 which would be repaid from electricity bills. But without the higher rates,= =20 officials feared there would be no way to cover the bond payments. And=20 without the bonds, all state taxpayers--and not just customers of the priva= te=20 utilities--would be on the hook for the debt. ?????In addition to raising rates, the PUC on Tuesday approved a formula th= at=20 will determine the size of the bond issue, expected to be the largest of it= s=20 kind in U.S. history. ?????The formula allows for $12 billion in bonds. The state's three major= =20 private utilities, Southern California Edison, Pacific Gas & Electric and S= an=20 Diego Gas & Electric, will have to determine how much power the state is=20 buying for them--the figure is roughly 30%--and use a proportionate amount = of=20 the money they collect from customers to pay the state back. ?????A $12-billion bond issue is significantly larger than earlier estimate= s=20 that pegged it at $10 billion. But even the larger number is far less than= =20 some believe will eventually be needed to cover the cost of power the state= =20 is buying. ?????Unless prices are stabilized, state Treasurer Phil Angelides and other= s=20 have warned, further bond issues may be needed. Those, in turn, could requi= re=20 more rate increases. ?????"It's possible that, with the rate increase and if we do a good job wi= th=20 conservation, it's possible that [the bonds] may be less," said state Sen.= =20 Debra Bowen (D-Marina del Ray). "It's also possible that, given the situati= on=20 this summer, where we have not been able to secure anything close to our=20 power needs . . . we could be paying significantly more." ?????The rate increase, which kicks in only for customers who use=20 significantly more power than a "baseline" amount, is intended to ease the= =20 situation by inducing conservation and thereby cutting demand--forcing=20 "energy hogs" to switch off spa pumps or pay the price, as Lynch put it. ?????But no one can predict how the "hogs" will respond or whether the rate= =20 hike--plus conservation incentives moving through the Legislature and the= =20 completion of several new power plants this summer--will be enough to spare= =20 the state from forced outages. ?????Tuesday did little to fuel optimism. Despite temperatures far milder= =20 than on a typical summer day, another Stage 2 energy alert was declared by= =20 the state's Independent System Operator after imports dropped sharply. The= =20 state avoided blackouts, "but it was really close," a Cal-ISO spokeswoman= =20 said. ?????Some state forecasts have California squeaking through the hot months= =20 with no outages, but private forecasters see at least 20 hours of blackouts= .=20 And Reliant Energy, one of the power plant owners, predicts 1,100 hours of= =20 blackouts in the state this year. ?????Beyond the problems of supply, the state has still not resolved the=20 question of the utilities' debt. Edison and PG&E say they've lost nearly $1= 4=20 billion since June because they have had to pay high wholesale power prices= =20 that the state's deregulation law bars them from passing on to ratepayers. ?????Although the PUC estimates that the rate increase will generate an=20 additional $4.8 billion in revenue annually, most of that will go to paying= =20 off bonds and other expenses. None is earmarked to relieve the utilities'= =20 debt. ?????"When you do the math, the amount of money just doesn't get you very= =20 far," said Assemblyman Fred Keeley (D-Boulder Creek). ?????That is where buying the transmission lines is supposed to enter the= =20 picture. Gov. Gray Davis wants the state to pay $7 billion for the lines.= =20 PG&E and Edison could then use the infusion of cash to pay off their bills= =20 and become credit-worthy once more. ?????But negotiations over sale of the transmission grid seem to have bogge= d=20 down. Meanwhile, support for the deal in the Legislature appears to be=20 slipping. Republicans have long been opposed, but now support among Democra= ts=20 is waning. ?????Keeley, a critic of the transmission purchase all along, believes that= =20 the state should instead buy the utilities' hydro-electric generators,=20 contending that they would bring in revenue from the power generated at the= =20 dams. ?????"We're just going to sink dough into that [transmission system]," Keel= ey=20 said, adding that the grid needs an estimated $1 billion in repairs. The=20 hydro system, by contrast, would be a revenue-producing asset that could he= lp=20 lower rates, he said. ?????A related question--still unresolved--is the fate of the state's nearl= y=20 700 producers of alternative and renewable energy, which supply more than a= =20 quarter of the electricity used by California consumers. In a separate acti= on=20 Tuesday, the PUC ordered utilities to begin paying the producers--whose=20 megawatts are desperately needed and who, in many instances, have not been= =20 paid since November. ?????On Tuesday, the small producers delivered a little more than half of= =20 their usual supplies to the utilities--a trend that has dragged on for=20 several weeks and last week helped nudge the state into blackouts. ?????Producers welcomed the PUC's order that they start getting paid. But,= =20 they said, the move failed to address back payments, estimated at $1.5=20 billion, owed by Edison and PG&E. ?????"Generators find it more predictable and less risky to operate in Thir= d=20 World countries than they do in the state of California," griped Marty Quin= n,=20 executive vice president and chief operating officer of Ridgewood Power LLC= ,=20 which owns three small gas-fired generators. ?????Any move to resolve that issue, of course, would increase the debt owe= d=20 by the utilities. ?????On another front, state negotiators are finding it difficult to seal= =20 long-term electricity contracts at rates more favorable than those on the= =20 volatile spot market. ?????So far, only 22 contracts have been signed, in part because generators= =20 are reluctant to commit to lower prices while they're still owed billions o= f=20 dollars by the near-bankrupt utilities. Experts say the power secured by th= e=20 current contracts will supply less than half of what the state will need th= is=20 summer. ?????Despite all the unsettled questions, at least one utility analyst, Dan= =20 Ford of the Lehman Bros. investment firm, said the PUC's actions should=20 remove the immediate threat of utility bankruptcy and begin to lift the=20 "California cloud" over electricity generators. ?????But in a sign that the energy crisis is still causing concern on Wall= =20 Street, Standard & Poor's said it would continue to carry a cautionary cred= it=20 rating for the state. ?????The rating agency, which placed California on a "credit watch" after t= he=20 state government began spending millions to purchase electricity, said in a= =20 news release that it was not clear whether the rate hike would be enough. ?????Hovering in the background, meanwhile, is the threat of a ballot=20 initiative that could unravel whatever solutions state officials ultimately= =20 craft. Leaders of the Foundation for Taxpayer and Consumer Rights have vowe= d=20 that any utility "bailout" would likely trigger a "voter revolt." ?????"The rate increase certainly makes an initiative more likely," the=20 foundation's lobbyist, Doug Heller, said Tuesday. If Gov. Davis does not=20 protect the public from "profiteers," Heller said, his group is ready to pu= sh=20 forward with an initiative in 2002. ---=20 ?????Times staff writers Virginia Ellis, Dan Morain, Tim Reiterman, Nancy= =20 Rivera-Brooks, Julie Tamaki, Nancy Vogel and Rone Tempest contributed to th= is=20 story.=20 -------------------------------------------------------------------------- NEWS ANALYSIS Davis Keeps His Distance From Utility Rate Hikes=20 By DAN MORAIN, Times Staff Writer=20 ?????SACRAMENTO--Gov. Gray Davis, convinced that he can't win votes by=20 delivering bad news, avoided the task of telling Californians what virtuall= y=20 all experts have been saying for months--that electricity bills are going u= p. ?????Indeed, on Tuesday, the Democratic governor quickly moved to distance= =20 himself from a rate hike of as much as 46% that was approved by the=20 California Public Utilities Commission, led by his appointee Loretta Lynch. ?????That and other recent moves have thrown Davis' credibility into=20 question--even in his own Democratic Party. ?????"If you're the governor," said political consultant Darry Sragow, "you= =20 don't want to take the blame for a massive rate increase that is not going = to=20 sit well with a lot of voters. You want to be in a position where you can= =20 say, 'I didn't have a choice; my back was against the wall.' " ?????Davis describes his view of the situation as "optimistic." He has call= ed=20 it an "energy challenge," not a crisis, even as the state's two largest=20 utilities border on bankruptcy, and the state experienced blackouts a week= =20 ago, in mid-March, when electricity use was 50% less than it will be in the= =20 summer, when demand is highest. ?????Davis and his aides say the governor is fully engaged in the problem,= =20 understands its many dimensions and is working long hours to solve it. But= =20 the crisis wears on, and an increasing number of lawmakers, including fello= w=20 Democrats, are alarmed. ?????"It's an energy crisis, not an energy challenge," said Senate Energy= =20 Committee Chairwoman Debra Bowen (D-Marina del Rey), who began warning of a= =20 coming energy shortage 13 months ago. ?????"This is a major crisis," Sen. Don Perata (D-Alameda) said, "and it=20 would appear he is overwhelmed by it." ?????"If you don't face reality," said Sen. John Vasconcellos (D-Santa=20 Clara), "you can't possibly improve it. His posture has been baffling. I=20 lament what is going on. This is my beloved state, and we're in serious=20 peril, and it scares me." ?????Many academics, utility executives, Wall Street analysts and legislato= rs=20 concluded weeks and months ago that rate hikes were necessary, given the=20 soaring wholesale price of electricity. Even Davis has acknowledged that a= =20 rate hike might solve the situation. ?????"Believe me," Davis said Feb. 16, "if I wanted to raise rates, I could= =20 have solved this problem in 20 minutes." ?????But in a reaction that added to lawmakers' bewilderment, Davis said in= a=20 statement Tuesday that the PUC action was "premature because we do not have= =20 all the appropriate finance numbers necessary to make a decision." ?????"Until we do," the statement continued, "I cannot support any rate=20 increase." ?????In taking steps to raise rates, Lynch may well end up taking substanti= al=20 flak for her governor. ?????"Recent polls show the PUC is very unpopular in this state," Sragow=20 said. "Gray Davis is still popular. Voters clearly don't see a connection= =20 between the governor and the PUC." ?????Davis' aides say the governor didn't talk to Lynch before she acted.= =20 Lynch, a frequent visitor to the Capitol, was in Sacramento late last week= =20 and again Tuesday. She may not have spoken to Davis, but she did make other= =20 top administration officials aware of her plans. ?????Lynch could have decided to act on her own. The state Constitution giv= es=20 the commission authority to raise utility rates. But the governor is well= =20 known as a micro-manager, involved in the most minute details of state=20 governance. Davis repeatedly has said he expects all his appointees to "thi= nk=20 like I think," and not to act on their own. ?????As recently as last week, Davis directed that the PUC take specific=20 actions to help ensure that alternative energy producers get paid. ?????Davis has said the Legislature's job is to implement his vision. He ha= s=20 said judges he appoints who later break from him on major issues should=20 resign. His appointees "should not be free agents." ?????So he strained his credibility by saying he was unaware that Lynch wou= ld=20 move to raise rates Tuesday, particularly given events that occurred late= =20 last week. ?????On Friday, Davis Finance Director Tim Gage and Susan Kennedy, one of h= is=20 top aides, met with Assembly leaders behind closed doors. At the meeting, a= =20 participant warned that rates might have to rise 50% to 100%. ?????Also Friday, a top aide to Davis told The Times that Davis' staff was= =20 convinced that a rate hike was necessary, even as Davis continued to public= ly=20 oppose it. On Sunday, a top Davis aide referred reporters to Lynch, who=20 confirmed that she would move to raise rates Tuesday. ?????Two months ago, Harry Snyder of Consumers Union was defending Davis.= =20 Now, Snyder, who has worked with Davis on various issues for decades, is,= =20 like many others, raising questions about the governor's credibility, his= =20 penchant for secrecy and his competence. ?????"Something is wrong," Snyder said. "Either he is over his depth, or it= =20 is hubris, or it is the great river in Egypt, 'Denial.' " ?????Here are some of the governor's statements and actions, since called= =20 into question: ?????* Davis held a news conference Feb. 23 to say he had reached an=20 agreement on a rescue plan with Southern California Edison that included a= =20 deal to buy its massive transmission system for $2.76 billion. A final=20 package, he said, would be announced within a week, not only with Edison bu= t=20 with San Diego Gas and Electric. ?????A month later, a top utility executive described the talks as=20 "dreadfully slow." Negotiations over a similar deal with Pacific Gas &=20 Electric, which he said back in February would be completed by now, are eve= n=20 further behind. ?????* Davis has refused to release details about contracts he signed with= =20 independent generators to buy power. He said, however, that the contracts= =20 accounted for 6,000 to 7,000 megawatts of electricity this summer, a=20 significant amount that would help protect the state from having to buy muc= h=20 of its power on the far more costly spot market. ?????Last week, when he released some scant details in a report on the=20 contracts, experts who read it concluded that California would be forced to= =20 buy half or more of its electricity on the expensive spot market. ?????* Davis brushed aside reporters' questions last week about the blackou= ts=20 that rolled across the state. He remained cloistered as the outages continu= ed=20 for a second day, emerging only after they ended to announce a plan to ensu= re=20 that alternative energy producers would be paid. A week after he called on= =20 lawmakers to quickly approve a bill that would help get them paid, the=20 legislation remains stalled. ?????"It is inept at all levels and doesn't encourage any confidence that h= e=20 can handle it," Snyder said. "Moreover, it doesn't encourage us that he is= =20 going to tell the truth." ?????The energy crisis is perilous for Davis' reelection effort next year.= =20 But the governor's strategy of being unremittingly optimistic and going to= =20 great lengths to maintain his opposition to rate hikes, could be to his=20 benefit when he faces voters. ?????"Ethically," said UC Berkeley political scientist Bruce Cain, "not bei= ng=20 forthcoming is worse. Politically, the more he can obfuscate, the more like= ly=20 it is some people will buy the obfuscation. . . . The reason we see=20 obfuscation is that obfuscation works." ?????Not all politicians follow that maxim. ?????Davis' predecessor, Republican Gov. Pete Wilson, held a news conferenc= e=20 in 1991, as California plunged into a recession, to announce that he was=20 pushing for what became the largest tax increase in state history, calling = it=20 necessary to help erase a $14-billion deficit. Top advisors had urged him t= o=20 leave the delivery of such bad news to others. ?????"Any time you deliver bad news to voters you're taking a risk," said D= an=20 Schnur, who was Wilson's spokesman. "But it is a much bigger risk to allow = a=20 situation to fester, without preparing voters for decisions that have to be= =20 made. ?????"Nobody likes pain," Schnur said. "But they are much more willing to= =20 tolerate it if they understand why it is necessary." -------------------------------------------------------------------------- Federal Energy Agency Unlikely to Order Refunds=20 Power: Regulatory panel says much of the overcharge alleged by Cal-ISO is= =20 beyond its jurisdiction, and questions whether the rest is "excessive."=20 By MEGAN GARVEY and RICHARD SIMON, Times Staff Writers=20 ?????WASHINGTON--What are the chances that federal regulators will order=20 electricity wholesalers to refund $6.3 billion in alleged overcharges? ?????Zero. ?????Officials of the Federal Energy Regulatory Commission have=20 already made clear that nearly $3 billion--almost half the total that=20 California's grid operator said last week was excessive--is off the table= =20 because a statute of limitations puts alleged overcharges that took place= =20 before Oct. 2 beyond their reach.=20 ?????As for the rest, lawyers familiar with the agency and industry observe= rs=20 note that FERC has consistently hesitated to use its full legal authority t= o=20 enforce "fair and reasonable" rates because of difficulty in defining that= =20 phrase. Some within FERC question how much of the "excessive" rates=20 documented by the California Independent System Operator fall beyond FERC's= =20 jurisdiction--for example, rates charged by municipal power suppliers that= =20 are not regulated by the federal agency. ?????So far, FERC has ordered electricity wholesalers to justify or refund= =20 only $124 million in alleged overcharges--just 5% of the amount that the=20 Cal-ISO has identified. That sum deals only with rates charged in January a= nd=20 February 2001 during Stage 3 alerts--periods when electricity reserves fall= =20 below 1.5%. ?????FERC's approach to the alleged California overcharges will probably no= t=20 become any more aggressive as a result of the two new members it will soon= =20 have. President Bush has picked two state utility regulators to fill=20 vacancies on the five-member commission, the White House announced Tuesday. ?????The president plans to nominate Pat Wood III, chairman of the Texas=20 Utility Commission and a Bush ally, and Nora Mead Brownell, a member of the= =20 Pennsylvania Public Utility Commission, to the FERC governing board. ?????Administration officials have indicated that Wood, 38, would assume th= e=20 FERC chairmanship, a position now held by Curt Hebert Jr., a staunch advoca= te=20 of energy deregulation. ?????Shake-Up at FERC Was Expected ?????The shake-up has been expected because of continuing complaints that= =20 FERC has not been aggressive enough in dealing with high energy prices and= =20 electricity shortages in California and elsewhere in the West. Hebert in=20 particular has angered California officials with his opposition to price=20 controls on wholesale electricity sales. ?????Although the administration wants to appear sympathetic to California'= s=20 plight, replacing Hebert has been a problem because he is a protege of Sena= te=20 Majority Leader Trent Lott (R-Miss.). ?????Cal-ISO officials--who pointed out that their $6.3-billion figure was= =20 part of a study calling for stronger market controls, not for refunds--may= =20 still formally ask FERC to augment the refund order for January and Februar= y.=20 FERC ordered wholesalers to justify $124 million worth of charges shortly= =20 after Cal-ISO asked for $550 million in refunds for December and January. ?????FERC's refund process reflects the ambiguities facing federal regulato= rs=20 who oversee an electricity market that was designed to follow the law of=20 supply and demand. At stake may be the final bill for electricity used to= =20 date in California as well as future rates. ?????And the debate over the role refunds should play in addressing=20 skyrocketing wholesale electricity prices underscores diverging philosophie= s=20 of what went wrong in the California market and how to fix it. What role=20 should the government--specifically FERC, an agency with a mandate to ensur= e=20 "fair and reasonable" rates--play? ?????"The whole notion that there's such a thing as a just price is kind of= =20 an anachronism from New Deal days," said Pietro Nivola, a Brookings Institu= te=20 scholar who studies regulatory politics. "Especially as we move closer to= =20 some form of deregulation, we've come to understand that the price is what= =20 the traffic will bear. In this case, utilities simply have to be able to ge= t=20 higher rates at the retail end." ?????But others say FERC has failed to assert its authority, allowing the= =20 wholesalers to operate with impunity. ?????"The message FERC has sent so far is, as long as you leave 10 cents of= =20 every dollar in the bank we won't pull the alarm," said Mark Cooper, direct= or=20 of research for the Consumer Federation of America. ?????Some on Capitol Hill say a massive refund order by FERC--while highly= =20 unlikely--would go a long way toward reining in wholesale prices. But FERC= =20 officials and many economists say that view is myopic and may do more harm= =20 than good, potentially discouraging new suppliers from entering a market=20 already too tight. The memory of the 1970s oil crisis and a prevalent view= =20 among economists that government intervention made matters worse has inform= ed=20 the views of some longtime government officials and observers. ?????Refunds Called 'Inferior Remedy' ?????A clear sign of FERC's reluctance to call for refunds came late last= =20 year, when the commission issued its initial proposition for remedies for t= he=20 California price increases. FERC officials said at the time, "Refunds may b= e=20 an inferior remedy from a market perspective and not the fundamental soluti= on=20 to any problems occurring in California markets." ?????The decision by FERC to scrutinize electricity charges only during Sta= ge=20 3 alerts in January and February was harshly criticized earlier this month = by=20 some lawmakers and utility company officials. They complained that the narr= ow=20 focus eliminated tens of millions of dollars in charges some observers=20 believed were outrageous. ?????But even the $124 million questioned by FERC has been defended by the= =20 wholesale companies. In briefs filed with the agency last week, they said= =20 rates exceeding $430 per megawatt-hour--compared with a pre-crisis average = of=20 $30 per megawatt-hour--were justified by the increased credit risk=20 wholesalers took in selling to near-bankrupt utilities that have billions o= f=20 dollars in outstanding debts. ?????Duke Energy, which FERC has said overcharged California by $20 million= ,=20 signaled some room for compromise in its compliance filing.=20 ?????"We would be willing to forgo collection of credit premiums for these= =20 months provided we were paid the FERC clearing price," company president Ji= m=20 Donnell said this week. "If we are not assured payment, the credit premiums= =20 are obviously appropriate, and we would reserve our right to collect the=20 entire amount of the bids that are subject to the FERC order." ?????Both of Bush's Republican nominees to the commission are expected to w= in=20 Senate confirmation. But they can expect a grilling from Sen. Dianne=20 Feinstein (D-Calif.), who has accused power suppliers of price-gouging and= =20 FERC of doing little to stop it.=20 ?????"Certainly, my vote would be dependent on whether they're going to be= =20 responsive to the present situation," Feinstein said Tuesday, grousing that= =20 the administration has been "recalcitrant to the point of arrogance." ?????Feinstein met Tuesday with Vice President Dick Cheney, head of a White= =20 House energy task force, but she described the meeting as "disappointing."= =20 Feinstein also sent a letter to Bush asking to meet with him on the=20 California crisis, and adding a hand-written note: "The West needs your hel= p." ?????A spokesman for Gov. Gray Davis said he hoped the new commissioners=20 would have a "more sympathetic ear" for the concerns of the Western states. ?????But word of the nominations came as Bush reiterated his opposition to= =20 price controls. "Price controls contributed to the gas lines of the 1970s,= =20 and the United States will not repeat the mistake again," he said in a spee= ch=20 in Kalamazoo, Mich. ?????The nominees drew praise from the Electric Power Supply Assn. The grou= p=20 expressed confidence that they would be "strong proponents of completing th= e=20 much-needed transition to truly competitive and vibrant power markets all= =20 across the country." ?????Neither Wood nor Brownell could be reached for comment. Wood said in a= =20 statement: "On our best day as regulators, we cannot deliver benefits to=20 customers as well as a functional market can. But the market must work righ= t=20 first." ---------------------------------------------------------------------------= --- ----------------------------------------------- Wednesday, March 28, 2001=20 A Painful Step=20 Electricity rate increase may help, but Gov. Davis is yet to offer an=20 understandable plan to end the crisis.=20 ?????By approving a whopping rate hike for big power users, the state Publi= c=20 Utilities Commission finally has recognized the grim reality of the=20 electricity market in California, even if Gov. Gray Davis has not.=20 Electricity costs more these days, even aside from the piratical rates=20 charged by big generating companies at times during this emergency.=20 ?????The increase, while probably necessary, will not by itself solve the= =20 crisis or prevent rolling blackouts this summer. The two biggest private=20 utilities, Southern California Edison and Pacific Gas & Electric, still are= =20 saddled with as much as $13 billion in debt for past power purchases. State= =20 government still is shelling out some $50 million in daily power purchases= =20 and has committed as much as $40 billion to future power contracts. Davis= =20 continues to negotiate a takeover of the utilities' share of the state powe= r=20 transmission grid in exchange for paying off some of the utilities' debts.= =20 ?????Despite all the hand-wringing and arm-waving, nothing that state=20 government has done since January has provided any significant new power=20 generation or conservation. Consumers are right to wonder what happened to = a=20 promised statewide conservation campaign. After first ducking the power=20 problem, Davis launched a flurry of initiatives early in the year, most of= =20 them still works in progress. But he still has not given the people an=20 understandable, coherent plan for getting out of this fix. Worse, he refuse= s=20 even to say how much the state is spending on power even as he plunges=20 Sacramento into the power business for decades into the future.=20 ?????The irony of Tuesday's rate increase is that the state might have dodg= ed=20 much of the mess if it had raised rates three months ago. But Davis, seekin= g=20 reelection next year, insisted that the crisis be solved "within the existi= ng=20 rate structure." Late last week he attended a political fund-raiser at a Pa= lm=20 Springs golf club while his staff was being briefed on the need for higher= =20 rates, literally distancing himself from the act.=20 ?????The rate increase, which will be drafted over the next 30 days, affect= s=20 customers of Edison and PG&E but not residents of Los Angeles or other citi= es=20 with full municipal power systems. The stated intent is that bigger users,= =20 particularly businesses, will pay higher rates and be encouraged to save=20 major amounts of power during the summer. Under one scenario, nearly half o= f=20 households--low and medium users--would pay no more than they do now. The= =20 boost is also intended to compensate taxpayers for the state's daily power= =20 purchases, although there is no assurance yet that the new rates will meet= =20 the full cost. The increase should be structured to give ratepayers some=20 relief if lawsuits against power generators' exorbitant pricing are=20 successful in winning refunds.=20 ?????Those skeptical ratepayers who believe that the crisis is just a big= =20 rip-off by the utilities and the energy companies will consider the increas= e=20 more of the same. You can't blame them, considering the lack of straight ta= lk=20 from the governor, including his dodging of the rate issue.=20 ?????However, most state experts, including Davis' own utilities=20 commissioners, say the rate increase is a critical first step in solving=20 California's power problems. If Davis has a plan to fix the problem some=20 other way, he should present it in detail to the people of California now.= =20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- --------------------------------- PUC Votes To Jack Up Power Rates=20 Tiered increases approved as protests disrupt meeting=20 David Lazarus, Chronicle Staff Writer Wednesday, March 28, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03= /28/M N231034.DTL=20 The bill finally came due for California's experiment with electricity=20 deregulation as consumers were hit yesterday with the largest rate increase= =20 in state history, an average 40 percent jump in monthly power costs.=20 The immediate rate hike was unanimously approved by the Public Utilities=20 Commission during a rowdy meeting that was repeatedly interrupted by chanti= ng=20 and jeers from protesters.=20 Highway Patrol officers were directed by PUC President Loretta Lynch to=20 remove several demonstrators from the packed San Francisco auditorium.=20 "These are extraordinary moments in California's history, and extraordinary= =20 moments demand extraordinary courage," PUC member Geoffrey Brown said befor= e=20 the rate increase was passed.=20 The commissioners approved a new 30 percent increase and made permanent a= =20 "temporary" 10 percent increase adopted in January. This will allow the=20 state's two largest utilities to charge customers an extra $4.8 billion a= =20 year.=20 PUC members said higher rates will help overcome the wide disparity between= =20 skyrocketing costs charged by power companies for electricity and the=20 relatively low amount paid by consumers under California's 1996 deregulatio= n=20 law.=20 However, consumers' bills will not go up until a "tiered" rate system can b= e=20 introduced, requiring those who use more power to pay higher fees. That=20 system is expected to be in place by May.=20 Gov. Gray Davis, who has tried to distance himself from the PUC's move sinc= e=20 it was unveiled Monday, said in a statement yesterday that the rate increas= e=20 was "premature" and that he did not support the decision.=20 "While I have opposed rate increases, if it becomes clear that a rate=20 increase is absolutely necessary for the good of the state, I will support= =20 one that is fair and do my duty to convince Californians of its necessity,"= =20 he said.=20 Several PUC members acknowledged that such a huge rate increase might not= =20 have been necessary had the commission acted sooner to remedy California's= =20 power woes.=20 "We should have done this in January," Brown said, "but we didn't have enou= gh=20 information."=20 "This rate increase is long overdue," said Richard Bilas, who also sits on= =20 the commission. "We are finally transfusing some blood."=20 CONSUMERS PROTEST If so, the donor -- ratepayers -- did not go willingly to the operating=20 theater. A number of citizens rose to speak at yesterday's meeting, and not= =20 one was in favor of higher power rates.=20 "This is being shoved down the people's throats," said Dorothy Diez, an=20 elderly San Francisco resident. "Why don't they put the bills where they=20 belong and not on my back?"=20 She and others called on state officials to take a harder line with out-of-= =20 state power generators, which have reaped windfall profits by charging sky-= =20 high wholesale prices for their electricity.=20 Consumer groups urged the PUC to support special taxes on the generators'= =20 earnings or even seizure of the companies' California power plants.=20 "Your actions are reprehensible," Ross Mirkarimi, a public-power supporter,= =20 told the commission. "Do not do Gov. Davis' dirty work."=20 The governor did not attend yesterday's meeting, but his presence nonethele= ss=20 loomed large over the proceedings.=20 Consumer advocates derided Davis' claims this week that he played no role i= n=20 the decision to raise rates. They noted that the governor's appointees hold= a=20 majority on the PUC and worked closely with Davis on a variety of past=20 issues.=20 Davis' staff was briefed on the rate hike before the PUC publicized its=20 decision.=20 'DAVIS CONTROLS PUC'=20 "Gov. Davis controls the PUC," said Doug Heller, assistant organizing=20 director of the Foundation for Taxpayer and Consumer Rights. "He is=20 responsible for the rate hike. We are paying more because of the failure of= =20 his leadership."=20 "It seems absurd that Gov. Davis is saying his own agency is acting without= =20 his consent," said Susannah Churchill, head of energy policy for the=20 California Public Interest Research Group. "He's just looking for political= =20 cover."=20 The PUC decision was made on a day when California's grid operators declare= d=20 a Stage 2 alert, the first in a week, indicating that power reserves had=20 dropped below 5 percent.=20 When tiered rates are implemented, customers of Pacific Gas and Electric Co= .=20 will see rates go up between 9 percent for "medium" power users and 36=20 percent for "heavy" users.=20 Those who can keep power consumption to within 130 percent of pre-=20 established limits will see no increase beyond the 10 percent rate hike=20 adopted in January.=20 Customers of Southern California Edison will see rates increase between 8 a= nd=20 27 percent.=20 Bruce Foster, an Edison vice president, called the rate increase "a step in= =20 the right direction," but said further increases may be needed to defray=20 soaring power costs this summer.=20 PG&E spokesman Ron Low said the San Francisco utility needs to study the=20 PUC's decision more closely before determining whether a 40 percent rate hi= ke=20 will be sufficient.=20 "The PUC has done all it can," said Lynch, the PUC president. "We have foug= ht=20 back hard in every venue possible against unjust energy prices."=20 NO FEDERAL HELP In the end, though, she said state regulators were forced to admit that no= =20 help would be forthcoming from federal authorities in capping wholesale pow= er=20 rates, and that generators would continue exploiting California's chronic= =20 electricity shortage.=20 "We maintain a responsibility to keep the lights on," Lynch said.=20 Along the same lines, the PUC approved a requirement that PG&E and Edison= =20 repay the state Department of Water Resources for about $4 billion in power= =20 purchases made on the cash-strapped utilities' behalf.=20 The commission also passed a motion forcing PG&E and Edison to pay smaller= =20 power generators for their output. Half of all such generators were shut do= wn=20 during last week's blackouts because they had not been paid by the utilitie= s.=20 However, the PUC is only requiring that utilities pay for future electricit= y=20 purchases, and did not address the millions of dollars in payments still ow= ed=20 the power companies.=20 Ann MacLeod, executive director of the California Cogeneration Council, an= =20 association of smaller generators, said that by avoiding the question of ba= ck=20 debt, the PUC's move will do nothing to restore plants to operation.=20 "These generators will not come back online as a result of this decision,"= =20 she said. "In fact, a greater number likely will have to drop offline."=20 Protesters chanting, "Hell no, we won't pay," urged consumers after the PUC= =20 meeting to not include the higher fees in upcoming bills.=20 "This is just the beginning," said Medea Benjamin, who was among the=20 demonstrators evicted from the earlier proceedings. "Rates will go up and u= p=20 and up."=20 What's Next=20 The McCain-Feingold campaign finance reform bill faces several more tests,= =20 among them:=20 - An amendment by Sen. Fred Thompson, R-Tenn., that would double the=20 contributions that donors may make to candidates, PACs and some other=20 organizations. A vote is expected today.=20 - Sen. Mitch McConnell, the measure's chief foe, refused yesterday to agree= =20 to allow a final vote on the legislation tomorrow. McConnell, R-Ky., left= =20 open the possibility of using parliamentary maneuvers to block a final vote= .=20 Chronicle News Services=20 THE ENERGY CRUNCH Low to Medium Users=20 (up to 130% of baseline)=20 0%=20 Medium Users=20 (130% to 200% of baseline)=20 9%=20 Heavy Users=20 (more than 200% of baseline)=20 36%=20 UNDERSTANDING YOUR BILL 1. Total Electric Charges: The electric usage multiplied by the rate in=20 dollars and cents.=20 2. Legislated 10% Reduction: 10 percent reduction, financed with bond sale,= =20 mandated by state law that set deregulation in motion. Remains in effect=20 until no later than March 31, 2002.=20 3. Net charges: The cost of electricity service after 10 percent reduction.= =20 Breakdown of electric charges=20 4. Electric Energy Charge: Average cost of buying electricity during billin= g=20 period.=20 5. Transmission: Cost of moving electricity from plants to distribution=20 centers.=20 6. Distribution: Cost of moving electricity from distribution centers to=20 homes.=20 7. Public Purpose Programs: Funds benefit programs such as affordable servi= ce=20 for low-income families and conservation programs.=20 8. Nuclear Decommissioning: Fee to restore plant sites to original conditio= n=20 once shut down.=20 9. Competition Transition Charge: Originally built into rates as a charge= =20 above the cost of providing power. Called "headroom," it was essentially an= =20 extra fee to pay back utilities for their investments in power plants. At t= he=20 moment, it's a negative number because the cost of buying power on the=20 wholesale market is so much higher than the rate customers can be charged b= y=20 law.=20 10. Trust Transfer Amount: Fee to pay off bonds that financed 10 percent ra= te=20 reduction.=20 Baseline Information Box=20 11. Baseline Quantities: The maximum amount of usage that can be billed at= =20 the regular rate; varies by season, climate zone and heat source.=20 12. Baseline Usage: Amount of electricity usage up to baseline quantity=20 level, billed at regular rate.=20 13. Over Baseline Usage: Amount of electricity used above baseline=20 quantities, at a higher rate.=20 HOW THINGS WOULD CHANGE The primary areas in which a customer bill would change under the new syste= m=20 would be:=20 1. The creation of a new line item in the Baseline Information box for=20 electricity used 130 percent above the baseline. The line would reflect how= =20 much was used at that level and the rate for that usage.=20 2. A higher dollar amount in the Electric Energy Charge line item reflectin= g=20 the increase cost from the rate hike. .=20 SOURCE: PG&E Web site; interviews.=20 E-mail David Lazarus at dlazarus@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Developments in California's power crisis=20 The Associated Press Wednesday, March 28, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/03/28/s= tate0 859EST0138.DTL=20 , , -- (03-28) 05:59 PST Here is a look at developments in California's=20 electricity crisis:<=20 WEDNESDAY:< ?-- The state remains free of power alerts in the early morning= as power ?reserves stay above 7 percent. ?-- The Assembly resumes hearings= on California's high natural gas prices. ?-- The Assembly is expected to t= ry again to pass a bill that would let the ?state Public Utilities Commissi= on order Southern California Edison Co. and ?Pacific Gas & Electric Co. to = pay alternative-energy plants. ?TUESDAY:<=20 -- The PUC votes unanimously to approve electricity rate hikes of up to 46= =20 percent for customers of California's two largest utilities. The board vote= s=20 5-0 to increase rates immediately for PG&E and Edison despite yells from=20 protesters. The increases are the largest in California history.=20 -- Stock in both utilities suffer slight losses after expectations of the= =20 rate hikes Monday caused shares in PG&E Corp. to surge 29 percent and Ediso= n=20 International's stock to gain 30 percent. Edison International closed down = 39=20 cents at $14.16 a share. PG&E Holding Corp., parent of Pacific Gas &=20 Electric, closed down 55 cents at $13.20.=20 -- In a Tuesday afternoon conference call, Southern California Edison says = it=20 will begin paying interest to its bondholders after weeks of failure to pay= .=20 Company authorities say they have not heard whether the news will boost the= ir=20 credit rating and do not specify a dollar amount for monthly interest=20 payments.=20 -- The Los Angeles Department of Water and Power, which is not attached to= =20 the state power grid and is not affected by deregulation, issues a statemen= t=20 Tuesday assuring that customer rates ``will continue to remain stable.''=20 -- Standard & Poors retains California's cautionary credit rating despite= =20 state regulators' decision to raise electricity rates. The state has been o= n=20 a credit watch ``with negative implications'' since it began spending $45= =20 million a day to buy electricity for customers of two nearly bankrupt=20 utilities. The crediw watch will remain in effect despite a rate increase= =20 state regulators approved Tuesday.=20 -- President Bush says the electricity price caps sought by California's Gr= ay=20 Davis and other Western governors would worsen the region's energy crisis= =20 instead of helping cure it. In a speech to the Kalamazoo Chamber of Commerc= e,=20 Bush says price controls helped cause the gasoline crisis of the 1970s, and= =20 he won't make the same mistake.=20 -- Joseph Fichera, the governor's chief negotiator on the purchase of=20 transmission lines, says he is exchanging drafts of proposed agreements wit= h=20 Edison officials but won't say how soon a final agreement may be reached. H= e=20 says negotiations are continuing with PG&E and San Diego Gas & Electric.=20 -- State agencies announce a March 29 workshop in Ontario for developers wh= o=20 hope to build peaking power plants in time for this summer. The event is=20 similar to one held two weeks ago in Sacramento. Peaking plants are used fo= r=20 short periods when power supplies run low.=20 -- California's Independent System Operator declares a Stage 2 alert when= =20 electricity reserves were approaching only 5 percent of available power. IS= O=20 spokeswoman Stephanie McCorkle says the alert was triggered when 1,000=20 megawatts was unexpectedly lost from the Pacific Northwest. WHAT'S NEXT:< ?= -- The Davis administration continues negotiations with Edison, PG&E and Sa= n ?Diego Gas & Electric Co. over state acquisition of their transmission li= nes.< ?THE PROBLEM:<=20 High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices that the state's electricity deregulation law bars them fr= om=20 passing onto ratepayers, and are close to bankruptcy.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers.=20 ,2001 Associated Press ?=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Energy Nominees Would Give GOP Majority on Panel=20 Carolyn Lochhead, Chronicle Washington Bureau Wednesday, March 28, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03= /28/M N139149.DTL=20 Washington -- President Bush nominated two new commissioners to the nation'= s=20 top energy regulatory body yesterday, retaining the current chairman who ha= s=20 criticized California's handling of its energy crisis.=20 Bush tapped a fellow Texan, Patrick Henry Wood III, chairman of the Texas= =20 Public Utilities Commission, and Nora Mead Brownell, a Pennsylvania public= =20 utility commissioner, to fill two vacancies on the five-member Federal Ener= gy=20 Regulatory Commission.=20 The appointments would give Republicans a 3-to-2 majority on FERC, as the= =20 commission is known, and probably solidify the agency's opposition to=20 imposing wholesale energy price caps sought by California Gov. Gray Davis a= nd=20 Sen. Dianne Feinstein, both Democrats.=20 Both nominations require Senate confirmation, and Feinstein indicated=20 yesterday that she might oppose the nominations.=20 "I would hope they would come in and talk with me," she said. "Certainly my= =20 vote would be dependent on whether they would be responsive to the present= =20 situation. Up to this point, the administration has been recalcitrant to th= e=20 point of arrogance. If that is the case with these new appointees as well,= =20 they won't have my vote."=20 FERC regulates wholesale power markets and interstate natural gas pipelines= .=20 Curt Hebert, named chairman by Bush earlier this year, will remain in his= =20 post. Although Hebert's outspoken free-market views are in sync with the=20 administration's, there had been speculation that Bush would tap Wood for t= he=20 top job. Some thought Bush might want a familiar ally to head an agency tha= t=20 used to be a regulatory backwater but now is among the most politically=20 sensitive spots in the administration.=20 Wood has overseen electric utility deregulation in Texas, which is schedule= d=20 to open its market to competition Jan. 1, 2002, but based on a model that= =20 differs significantly from California's scheme. Texas has attracted ample n= ew=20 power generation since 1995, and is experimenting with partial retail=20 competition for commercial users.=20 Brownell helped oversee Pennsylvania's electricity deregulation, which is= =20 cited as a successful contrast to California's experiment.=20 FERC has come under heavy political fire from California Democrats for not= =20 cracking down hard enough on alleged price gouging of California utilities = by=20 out-of-state energy producers.=20 Hebert has been sharply critical of California's response to its electricit= y=20 mess, once describing Davis' plan to take over the utilities' transmission= =20 lines as "nationalization." He is adamantly opposed to price controls and= =20 enjoys the strong backing of fellow Mississippian and Senate Majority Leade= r=20 Trent Lott, who pressured the White House to keep him.=20 Hebert and Energy Secretary Spencer Abraham have voiced strong opposition t= o=20 price controls on wholesale electricity, arguing that would worsen=20 California's blackouts by discouraging electricity sales from outside the= =20 state.=20 Vice President Dick Cheney, who met informally with about 10 senators in hi= s=20 Senate office yesterday, also restated the administration's opposition to= =20 price caps, telling Feinstein price controls would not work and citing thei= r=20 failure in the Nixon administration.=20 Feinstein, who has said she equates helping California with the willingness= =20 to impose federal price caps, called Cheney's response "very disappointing.= "=20 "There was really no overture," Feinstein said. "There was very little=20 willingness to help. Not even an offer of help. It is truly amazing to me,= =20 because this crisis is not going to be confined to California. . . . What w= e=20 really need is a period of price stability . . . and they keep going back t= o=20 Nixon and price controls and saying they don't work. We all know that, but= =20 what we are seeking is an interim period of stability until we can increase= =20 supply."=20 Tell Us What You Think -- Can you save 20 percent on your energy usage? Gov= .=20 Gray Davis' administration is offering rebates to Californians who save on= =20 power starting in June, and if you've got a strategy for conserving, The=20 Chronicle wants to hear it. We'll be writing about the hardest-working ener= gy=20 savers in a future story. To get involved, write to the Energy Desk, San=20 Francisco Chronicle, 901 Mission St., San Francisco, CA 94103; or send e-ma= il=20 to energysaver@sfchronicle.com.=20 E-mail Carolyn Lochhead at clochhead@sfchronicle.com=20 ,2001 San Francisco Chronicle ? Page?A - 13=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Megawatt Foolish=20 Strike a Pose for Energy Conservation=20 Arrol Gellner Wednesday, March 28, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/03= /28/H O179614.DTL=20 "Spare at the spigot," admonishes an old proverb, "and let out the bunghole= ."=20 That rather tidily sums up America's haphazard attitude toward energy=20 conservation. We gladly rally to trim our energy use by a few percent,=20 whether at home, at work or in our cars, but we ultimately feel little=20 urgency to change the overwhelming wastefulness of our built environment.= =20 During the past two decades, we've done plenty of "sparing at the spigot,"= =20 and that can only be applauded.=20 We've passed minimal building energy standards such as California's Title 2= 4=20 but then wiped out much of the savings by building the sort of needlessly= =20 bloated, energy-guzzling homes that now sprawl across acre after acre of on= ce=20 pastoral landscape.=20 We've enacted minimum standards for gas mileage -- excepting SUVs, but you= =20 don't drive one of those, do you? -- yet we've made little headway in curbi= ng=20 our reliance on the automobile itself.=20 How did we get into this jam? A fair share of the blame for our disastrous= =20 land-use policies belongs at the feet of the very people who insisted they= =20 knew better: the postwar city planners.=20 They've left us our current legacy of hyperorganized zoning ordinances that= =20 encourage -- in fact practically mandate -- urban sprawl. These in turn hav= e=20 produced a national reliance upon the automobile that has only increased.= =20 ON THE ROAD AGAIN, AND AGAIN Flying in the face of all we've learned about the environment during the pa= st=20 decades, the year 2000 set the all-time record for U.S. automobile sales,= =20 with some 17.4 million cars and trucks sold.=20 And no wonder Americans remain auto-centered. Too many planners and state= =20 transportation departments still consider freeway expansion programs the=20 solution to our mass transportation woes, even though it's been demonstrate= d=20 time and again that bigger highways merely invite more traffic instead of= =20 reducing it.=20 We consumers are to blame as well, for buying into the idea that a=20 snowballing trend of consumption is the very embodiment of success. We're= =20 hooked on big houses; but because housing prices are so high in the Bay Are= a,=20 we're willing to move out to less populated areas so we can afford them.=20 We willingly drive an hour or even two to get to work -- a commute that wou= ld=20 have been considered perfectly absurd even 20 years ago. Pretty soon, of=20 course, the new community is as choked with cars and asphalt as the old one= .=20 The real pity is that we've recognized the folly of these trends for decade= s,=20 and we've done next to nothing to even protest them, let alone change them.= =20 PLANNING FOR THE PAST And thanks to the hidebound attitudes of so many civic planning departments= ,=20 little of substance has changed in our land use policy since the 1950s: Our= =20 hyperorganized zoning ordinances still jealously guard the outdated postwar= =20 ideal of the single-family home surrounded by largely useless strips of=20 "setback" land, and continue to frown on more intelligent arrangements such= =20 as zero-lot-line construction, courtyard homes and mixed commercial and=20 residential planning.=20 By all means, save all the energy you can. But while any move toward=20 conservation is commendable, it's America's fundamental building practices= =20 that really need changing, not the position of the light switch in your=20 hallway.=20 Arrol Gellner is an Emeryville architect who also teaches at Chabot College= ,=20 Las Positas College and the Building Education Center. Write to him at=20 home@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?WB - 1=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- New York mayor calls for cap on power prices=20 Wednesday, March 28, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/03/28/n= ation al0701EST0506.DTL=20 (03-28) 04:01 PST NEW YORK (AP) -- Mayor Rudolph Giuliani is urging federal= =20 regulators to set price controls on wholesale power producers to protect=20 consumers from rate hikes this summer.=20 In a speech Tuesday to Wall Street and utility executives, Giuliani said a= =20 surge in electricity prices last summer and an imminent shortage of power= =20 supplies demand government intervention. Electricity bills rose an average = 43=20 percent for New Yorkers last July.=20 ``The double-digit price increases that New Yorkers had to pay last summer= =20 are just unacceptable,'' Giuliani said.=20 Giuliani said the move toward deregulation in the early 1990s was done=20 hastily and needs to be adjusted. Until more power plants are constructed, = a=20 temporary price cap would protect consumers, he said.=20 A spokesman for KeySpan, a major New York-area energy producer, said such= =20 price caps would likely discourage the construction of new power plants.=20 In California, deregulation, power plant maintenance and scarce=20 hydroelectricity have been blamed for an extended power crisis that has led= =20 to rolling blackouts four times this year. On Tuesday, California regulator= s=20 approved rate increases of up to 46 percent for customers of that state's t= wo=20 largest utilities.=20 ,2001 Associated Press ?=20 ---------------------------------------------------------------------------= --- --------------------------------- Power regulators approve rate hikes of up to 46 percent=20 KAREN GAUDETTE, Associated Press Writer Wednesday, March 28, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/03/28/s= tate0 302EST0101.DTL=20 (03-28) 05:53 PST SAN FRANCISCO (AP) -- Sam Sahouria owns a small downtown= =20 grocery and deli, a few blocks from the offices of the state Public Utiliti= es=20 Commission. He now fears a decision by the PUC could force him to lose the= =20 store he has run for the past 15 years.=20 Amid the jeers of protesters yelling ``Hell, no, we won't pay,'' the PUC=20 voted unanimously Tuesday to approve electricity rate hikes of up to 46=20 percent for customers of California's two largest utilities.=20 The increases for Pacific Gas and Electric Co. and Southern California Edis= on=20 Co., which take effect immediately, are the largest in California history.= =20 ``It's terrible, we will probably go out of business,'' Sahouria said. ``It= 's=20 very simple -- we cannot afford any rate increases.''=20 PUC commissioners, who voted 5-0 for the rate hikes, said they were necessa= ry=20 to head off blackouts this summer and to keep the cash-starved utilities fr= om=20 going under.=20 However, the PUC simultaneously ordered the nearly bankrupt utilities to pa= y=20 the state for billions of dollars of electricity it has bought on behalf of= =20 their customers, and to pay producers of renewable energy for future=20 electricity deliveries.=20 ``The PUC has done all it can,'' commission president Loretta Lynch said.= =20 ``We have fought back hard in every venue possible against these unjust=20 energy prices.''=20 Not all PG&E and Edison customers will face higher bills. The PUC said it= =20 would create a tiered system that will protect low-income customers and=20 penalize those customers who use the most electricity.=20 Ratepayers have labeled the plan a ``rip-off'' that could hit as many as 10= =20 million homes and businesses fighting to stay cool amid rolling blackouts a= nd=20 spiraling energy costs. The rate hikes could effect as many as 25 million= =20 Californians.=20 The increase is on top of a 9 percent to 15 percent rate hike the PUC=20 approved in January and made permanent Tuesday. An additional 10 percent=20 increase already is scheduled for next year.=20 ``Our bills have gone from $26 to $70 for a stinking studio apartment and w= e=20 don't have a heater, we use the oven to heat up the studio,'' said Belinda= =20 Lazzerini, 40, who serves fruit smoothies at Jitters & Shakes in downtown S= an=20 Francisco. ``The laundromat has gone up from $1.50 to $3, so now we will ha= ve=20 to clean our clothes by hand and dry them in the basement. It's crazy.''=20 Though utilities still cannot set their own rates for electricity because o= f=20 a rate freeze mandated by the state's 1996 attempt at deregulation, the PUC= =20 has the authority to increase rates. The rate freeze must end by March 2002= .=20 The PUC meeting was disrupted at least five times by screaming protesters.= =20 Before the meeting, a group led by former Green Party senatorial candidate= =20 Medea Benjamin stood in the PUC chambers with yellow signs saying ``We Won'= t=20 Pay.''=20 ``We don't need increases in our bills, we need increases in law enforcemen= t=20 so our governor can protect us from these modern-day robber barons,'' said= =20 Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa=20 Monica.=20 Meanwhile, the state remained free of power alerts Wednesday morning as pow= er=20 reserves stayed above 7 percent.=20 ---------------------------------------------------------------------------= --- --------------------------------- No explanation given after officials approve 27 percent rate hike=20 Posted at 10:00 p.m. PST Tuesday, March 27, 2001=20 BY STEVE JOHNSON=20 Mercury News=20 After months of waiting for the state's elected leaders to act, California'= s=20 Public Utilities Commission on Tuesday unanimously approved the largest=20 electricity rate increase in at least two decades, and offered no assurance= s=20 that more hikes won't be needed soon.=20 The 3-cent per kilowatt-hour increase would boost average rates for all=20 customers by 27 percent, although the precise residential and business rate= s=20 have yet to be determined. It is effective immediately and will show up on= =20 bills in May.=20 The commission's vote in San Francisco played out against an odd political= =20 backdrop: Gov. Gray Davis, who appointed three of its five members, said he= =20 wasn't consulted about the planned rate hike and that he does not favor it.= =20 But Davis, after learning Sunday night about the plan, apparently did not= =20 seek to block the commission's action. Instead, he issued a statement=20 immediately after the vote that called it ``premature because we do not hav= e=20 all the appropriate financial numbers necessary to make a decision. Until w= e=20 do, I cannot support any rate increase.''=20 The commission, however, said it had no alternative but to raise rates,=20 considering that the state in recent weeks has been forced to spend billion= s=20 in taxpayer funds on power because its cash-strapped utilities are no longe= r=20 credit-worthy.=20 But even some commissioners were uneasy. Davis' most recent appointee on th= e=20 commission, Geoffrey Brown, acknowledged during the Tuesday meeting that ``= we=20 as commissioners had very little time to review this.''=20 In fact, an administrative law judge -- using much the same evidence that w= as=20 included in the decision to raise rates -- had concluded recently that no= =20 such increase was justified.=20 The commission did not explain how it arrived at the increase of 3 cents pe= r=20 kilowatt-hour. Previously, officials with Pacific Gas & Electric Co. and=20 Southern California Edison had only sought a 2-cent per kilowatt-hour=20 increase.=20 Experts pointed to a number of unanswered questions that make it uncertain= =20 whether a 3-cent hike will bring in sufficient revenue to cover the enormou= s=20 cost the state has incurred since it began buying power.=20 The state still doesn't know how much its effort to bail out PG&E and Ediso= n=20 -- which involves a state purchase of the utilities' high-voltage lines --= =20 will cost. It's also unclear how much the state might wind up spending on t= he=20 expensive electricity spot market this summer, and whether an additional ra= te=20 increase would be needed to cover that.=20 ``Have we got the number right?'' asked Commissioner Henry Duque, in=20 reference to the 3-cent increase. ``I don't know. But I hope we have.''=20 Roderick Wright, D-Los Angeles, who chairs the Assembly Utilities Committee= ,=20 told the commission that he opposed the idea of approving any rate hike now= ,=20 until the state has a better idea of the total amount that consumers=20 ultimately will have to bear.=20 By establishing a 3-cent increase now, ``we'll be back in a short time,=20 potentially doing it again,'' he said. ``To be nickeled and dimed to death = as=20 we're doing here, I don't think that does anybody any good.''=20 Signs of confusion=20 Utility officials sounded similarly unimpressed and confused.=20 ``While providing a welcome dose of realism,'' PG&E president Gordon Smith= =20 said in a prepared statement, the rate hike and other actions taken by the= =20 commission Tuesday ``do not offer a comprehensive solution, fail to resolve= =20 the uncertainty of the crisis and may even create more instability.''=20 Among PG&E's major concerns is whether the utilities will be compensated fo= r=20 their debts -- which they claim total about $13 billion -- and whether PG&E= =20 or the state will be responsible for the cost of power purchased on the spo= t=20 market.=20 Bruce Foster, an Edison vice president, offered a similar lukewarm=20 endorsement of the increase. ``I'm not saying that it will do it,'' he said= ,=20 acknowledging the possibility of more increases down the road, but he calle= d=20 the hike ``a step in the right direction.''=20 Rate hike vs. bankruptcy=20 Commissioner Richard Bilas said he feared that if the utilities were forced= =20 into bankruptcy, the judge overseeing such a case could order much bigger= =20 rate hikes to stabilize the companies' finances.=20 ``A rate increase designed by this commission is far better than one design= ed=20 by a bankruptcy judge,'' Bilas said, adding that he also was concerned abou= t=20 how the state appeared to be buying electricity ``like a drunken sailor.''= =20 But others reacted angrily to the commission's decision. Several protesters= =20 hoisted signs at the meeting that read, ``we won't pay'' and chanted, ``rat= e=20 hikes go away, make the energy companies pay.'' Police later escorted them= =20 out of the meeting after commission President Loretta Lynch became annoyed = at=20 their noisy interruptions.=20 Instead of raising rates, they and other consumer advocates urged Davis to= =20 use the state's power of eminent domain to take over the power plants=20 operated by companies accused of gouging the public.=20 ``The governor should start seizing plants until these crooks start playing= =20 by the rules of society,'' said Mike Florio, senior attorney with The Utili= ty=20 Reform Network in San Francisco. ``They're economic war criminals.''=20 Officials in Davis' office said Tuesday that they intend to review the=20 commission's action and decide over the next few weeks whether to support i= t=20 or seek changes. But to some people, the governor's claim of ignorance abou= t=20 the commission's plan -- and his seeming inability to do anything to stop t= he=20 rate hike from being approved -- severely strained credulity.=20 ``Give me a break,'' said Sen. John Vasconcellos, D-San Jose. ``Who appoint= ed=20 them and who's been giving orders all along?''=20 Davis did say for the first time Tuesday that he might be willing to consid= er=20 having consumers pay more for electricity. ``If it becomes clear that a rat= e=20 increase is absolutely necessary for the good of the state,'' he said, ``I= =20 will support one that is fair.''=20 Dion Nissenbaum and Hallye Jordan contributed to this report. ---------------------------------------------------------------------------= --- -------------------------------------------------- Impact of increases will vary greatly=20 Posted at 9:44 p.m. PST Tuesday, March 27, 2001=20 BY JOHN WOOLFOLK=20 Mercury News=20 The rate increases approved Tuesday will hit Californians in very different= =20 ways: The heaviest users of electricity will probably pay the most, and=20 nearly half of residential users will likely see no increase at all.=20 Although the details aren't yet final, state regulators say they intend to= =20 fashion a ``tiered structure'' to implement the higher rates. Here's how th= e=20 proposal will affect your bill:=20 When do the higher rates kick in?=20 Regulators consider the increase effective immediately but say it won't=20 appear on bills until May. While regulators agreed that rates will rise, th= ey=20 still have to approve a structure for how customers will share the cost.=20 Hearings are expected next month. Once the structure is approved, regulator= s=20 say, utilities can apply it retroactively to Tuesday's rate approval.=20 Do the new rates affect all Californians?=20 No. The Public Utilities Commission, which approved the rate increase, has= =20 authority over only investor-owned utilities: Pacific Gas & Electric Co.,= =20 Southern California Edison and San Diego Gas & Electric, which together ser= ve=20 about 10 million homes and businesses. The increase affects PG&E and Edison= ,=20 but not San Diego. Municipal utilities, including Santa Clara, Palo Alto,= =20 Alameda, Sacramento and Los Angeles are governed independently and exempt.= =20 How will the new rates work?=20 Regulators are planning a tiered rate structure in which large commercial a= nd=20 power-guzzling residential customers pay a greater share. Residential=20 customers would pay more according to how much they exceed their ``baseline= ''=20 amount.=20 What is the baseline?=20 The baseline is considered the average household usage. It was established= =20 years ago to encourage conservation by charging a higher rate for electrici= ty=20 usage over that amount.=20 Does everybody have the same baseline?=20 No. Customers are assigned different baselines to account for variations in= =20 electricity needs caused by regional climate, household type and season.=20 How many baselines are there?=20 PG&E residential customers in the San Francisco Bay Area are divided among= =20 three climatic baseline territories: the coastal areas including San=20 Francisco and the Peninsula, the East Bay and South Bay, and the Santa Cruz= =20 Mountains.=20 Within those territories, there are separate baselines for single-family=20 homes and multifamily apartment complexes, as well as for homes with only= =20 electric appliances instead of both gas and electric.=20 In addition, baseline rates are adjusted for summer and winter usage. Summe= r=20 rates begin May 1, and winter rates begin Nov. 1.=20 How do I find out my baseline?=20 Your electric bill shows the baseline amount in kilowatt-hours and the rate= =20 you are billed for that amount. It also shows how much power you used over= =20 the baseline and the rate you were billed for it.=20 How does the baseline affect my bill?=20 Customers already pay about 14 percent more for power they use over their= =20 baseline. Under the proposed tiered rates, PG&E customers who use no more= =20 than 130 percent of their baseline amount wouldn't pay any more than they d= o=20 now. PG&E customers who use up to twice their baseline would see an average= 9=20 percent increase in monthly bills. Those who use more than twice their=20 baseline would see an average increase of 36 percent. Edison customers woul= d=20 have similar rates. Almost half of the utilities' customers don't exceed 13= 0=20 percent of their baseline.=20 Why am I hearing different reports about the size of the rate increase?=20 The increase can be calculated many ways. The commission approved an increa= se=20 of 3 cents a kilowatt-hour, three times the 1-cent surcharge approved in=20 January, which was made permanent Tuesday. Because the 1-cent increase=20 averaged 10 percent, some have said that, plus the 3 cents, amounts to a=20 40-percent increase.=20 Others have added 3 cents to the amount the utilities charge just for=20 electricity, which for PG&E is now 6.4 cents, and come up with a 47-percent= =20 increase.=20 Because total rates include transmission and maintenance surcharges, others= =20 have added 3 cents to the average total rate of 11.14 cents for all=20 customers, a 27-percent increase. Under the tiered proposal, the average=20 residential rate would rise 20.8 percent from 12.46 cents to 15.05 cents.= =20 But average bills for residents' bills would increase up to 36 percent,=20 depending on electricity use.=20 Can my business avoid the rate hike by saving energy?=20 The proposed tiered rate structure based on the baseline use doesn't apply = to=20 commercial and industrial businesses. In fact, the proposal calls for a=20 proportionately greater increase for businesses, which pay lower rates than= =20 residential customers. Commercial customers would see a 22.6-percent=20 increase. Industrial customers, generally over 500 kilowatt-hours a month,= =20 would see a 41-percent increase.=20 But businesses can still get a discount on summer bills by saving power. Go= v.=20 Gray Davis this month ordered 20-percent rebates for all customers who redu= ce=20 electricity usage 20 percent over last year between June and September.=20 Residential and small commercial rebates will be based on 20 percent=20 reduction of total consumption, while commercial and industrial rebates wil= l=20 be based on 20 percent reduction of peak load.=20 If I qualify for assistance in paying my bills now, will I have to pay more= ?=20 Possibly. The proposal calls for exempting customers in the California=20 Alternative Rates for Energy program, and expanding eligibility from 150=20 percent to 175 percent of federal poverty guidelines. But commissioners=20 aren't ruling out tiered rates for those customers to encourage them to sav= e=20 electricity.=20 Contact John Woolfolk at (408) 278-3410 or at jwoolfolk@sjmercury.com=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------------- PUC raises power rates=20 Edison customers could see monthly bills go up by 27%. The agency plans to= =20 build a tiered system costing more for heavy users.=20 March 28, 2001=20 From Register staff=20 and news service reports=20 Dorothy Kascak, 82, of Cypress holds her dog, Baron. Kascak needs oxygen fu= ll=20 time. She's afraid power rate hikes will make air conditioning too costly Photo: Bruce Chambers / The Register ? ? SAN FRANCISCO Amid the jeers of protesters yelling "Hell no, we won't pay,"= =20 the state Public Utilities Commission voted unanimously Tuesday to approve= =20 electricity rate increases of as high as 36 percent for customers of=20 California's two largest power utilities.=20 The rate increases for Pacific Gas & Electric Co. and Southern California= =20 Edison Co., which take effect immediately, are the largest in California=20 history, totaling $4.8 billion a year.=20 PUC commissioners said the increases were necessary to head off blackouts= =20 this summer and to keep the cash-starved utilities from going under.=20 The PUC simultaneously ordered the utilities to pay the state for billions = of=20 dollars of electricity it has bought on behalf of their customers, and to p= ay=20 producers of renewable energy for future supplies.=20 Commission President Loretta Lynch said the PUC had tried to avoid rate=20 increases but saw no other option.=20 The commission voted to boost rates by 3 cents a kilowatt-hour. PG&E rates= =20 would rise by as much as 36 percent and Edison rates by as much as 27=20 percent.=20 Not all PG&E and Edison customers will face higher bills.=20 The PUC said it would create a tiered system that will protect customers wh= o=20 don't use much electricity and penalize those who use more.=20 Dorothy Kascak, 82, of Cypress is on 24-hour oxygen supplied by a machine i= n=20 her home that runs on electricity.=20 Her bill is already $135 a month despite the fact that she gets a reduction= =20 for being on life support.=20 "They say we're going to have to go without air conditioning in the summer,= "=20 she said.=20 "I can't live without air conditioning. I have a bad heart, bad lungs and I= 'm=20 a diabetic." ---------------------------------------------------------------------------= --- ------------------------------------------ Energy payments not enough, gas-using generators say=20 March 28, 2001=20 By HANH KIM QUACH The Orange County Register=20 Natural-gas-dependent alternative generators say that even if the major=20 utilities begin paying them for energy, it won't be enough cash.=20 State regulators at the Public Utilities Commission on Tuesday ordered=20 Southern California Edison and Pacific Gas & Electric to start paying=20 alternative-energy producers $79 per megawatt-hour. But alternative=20 generators that use natural gas say that's at least $20 below what it costs= =20 to produce the energy.=20 "On the short run, we can't generate,'' said David Lloyd of NRG Energy Inc.= ,=20 which this month shut down its 260- megawatt plant in the Bay area that sel= ls=20 steam to the C&H sugar factory next door. "It just costs so much for=20 electricity.''=20 Alternative generators have been paid little, or nothing, the past four=20 months and are now collectively owed more than $1 billion by the utilities.= =20 The situation has prompted many of the small generators to scale back or sh= ut=20 down their plants, resulting in a 2,900-megawatt loss to California - enoug= h=20 to power 2.9 million homes. That was a factor in blackouts last week and th= e=20 state's Stage 2 energy alert Tuesday.=20 There are two classes of alternative generators: renewables, which use sola= r,=20 wind or clean-burning technologies to produce energy, and co-generators,=20 which use natural gas to produce energy but share the heat output with a=20 manufacturer. Renewables, which make up half of the 10,000 alternative-ener= gy=20 megawatts, say they're likely to continue producing but would like to be pa= id=20 what they've been owed the past four months.=20 PUC spokeswoman Kyle Devine said $79 per megawatt-hour should work for=20 generators if the natural gas is transported through an Oregon pipeline - a= =20 cheaper route - rather than through a pipeline from the Southwest.=20 But a gas proposal that Ken Ross of Delta Energy Co. in Santa Ana received= =20 Tuesday showed the transportation price to be just as expensive.=20 ---------------------------------------------------------------------------= --- --------------- Bush to nominate 2 who favor free markets for energy panel=20 March 28, 2001=20 By DENA BUNIS The Orange County Register=20 WASHINGTON President George W. Bush will nominate two new federal energy=20 regulators whose history indicates that, like him, they favor free markets= =20 and don't favor price controls.=20 Bush said Tuesday that he will ask the Senate to confirm Patrick Wood,=20 chairman of the Texas Public Utility Commission, and Nora Mead Brownell, a= =20 commissioner with the Pennsylvania PUC, to the five-member Federal Energy= =20 Regulatory Commission.=20 Both Republican nominees have presided over the deregulation of their state= 's=20 energy markets, so far with more success than California.=20 Sen. Dianne Feinstein, D-Calif., who sits on the Energy and Natural Resourc= es=20 Committee, which will hold hearings on the FERC appointees, issued an early= =20 warning.=20 "Certainly my vote would be dependent on whether they would be responsive t= o=20 the present situation,'' Feinstein said. "Up to this point, the=20 administration has been recalcitrant to the point of arrogance. If that is= =20 the case with these new appointees as well, they won't have my vote."=20 However, neither is expected to have trouble getting confirmation.=20 Wood, PUC chairman since 1995, has said Texas' deregulation climate is=20 different from California's.=20 Unlike California, the Texas deregulation encourages long-term contracts.= =20 Texas has more power reserves and it's easier to get a permit to build a=20 plant there.=20 Brownell has been on the Pennsylvania PUC since 1997.=20 Pennsylvania's market also differs greatly from California's in several way= s.=20 The state is a net exporter of power while California is an importer, and= =20 Pennsylvania's deregulation plan did not force utilities to sell their=20 plants.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------- Davis backs power rate hikes if 'necessary'=20 He says PUC approval of hikes Tuesday is 'premature.' S&P is unsure how=20 conservation will affect revenue.=20 March 28, 2001=20 By JOHN HOWARD The Orange County Register=20 SACRAMENTO Gov. Gray Davis shifted his position opposing electricity rate= =20 hikes, saying he would support them "if it becomes clear it is absolutely= =20 necessary for the good of the state."=20 The governor's statement Tuesday came just hours after the Public Utilities= =20 Commission, a panel controlled by Davis' appointees, endorsed a plan to rai= se=20 monthly bills by as much 36 percent. The increase eventually would be tied = to=20 a flexible rating plan in which light users will pay a little more, medium= =20 users (those who conserve energy) will pay moderately more, and heavy users= =20 will pay a lot more. Details of the plan are not yet set.=20 Davis called the PUC's decision "premature," saying scant information was= =20 available to justify increases.=20 "While I have opposed rate increases, if it becomes clear a rate increase i= s=20 absolutely necessary for the good of the state, I will support one that is= =20 fair and do my duty to convince Californians of its necessity," Davis said.= =20 Boosting electricity rates to help resolve California's energy crisis is=20 likely to increase the state's $10 billion revenue bond sale to $12 billion= =20 or more, entailing more interest charges and a longer payback.=20 Standard and Poor's, the Wall Street credit-rating agency, called the ratin= g=20 plan "a complicated formula that will only increase rates on heavy users of= =20 electricity."=20 "It is unclear exactly how many users will be affected, and whether revenue= s=20 will slip under the rate-raising formula as consumers respond by conserving= =20 electricity," S&P said.=20 Also unclear is how the money from increased rates would be divided. The=20 state, which has been buying power on behalf of the utilities, says it has= =20 first rights to the money. The utilities have challenged that.=20 California hopes to borrow $10 billion by selling revenue bonds in May to= =20 cover its costs of purchasing emergency electricity since December. Through= =20 April 7, those costs are expected to total $4.2 billion.=20 The bond money also will be used to pay for power under long-term contracts= ,=20 which is much cheaper than power bought just before it is used.=20 Critics have questioned whether $10 billion will be sufficient. PUC Preside= nt=20 Loretta Lynch said the increased rates would support at least a $12 billion= =20 bond sale. Davis spokesman Steve Maviglio and Joseph Fichera, a Davis fisca= l=20 adviser, declined to discuss a specific amount.=20 ---------------------------------------------------------------------------= --- -------------------------------------- Cheney says state's on its own=20 March 28, 2001=20 By DENA BUNIS The Orange County Register=20 WASHINGTON Sen. Dianne Feinstein says Vice President Dick Cheney on Tuesday= =20 offered no hope of federal help for California's electricity crisis, and sh= e=20 is once again appealing to the president to meet with her.=20 "It was very disappointing,'' Feinstein said in an interview after a=20 45-minute meeting Cheney had with a group of 10 senators. "I practically=20 begged for a period of reliability and stability so we could get through th= e=20 summer, and I didn't get any feeling back that there was going to be any=20 help.''=20 Cheney insisted, Feinstein said, that California has to "straighten itself= =20 out'' and was not moved by the fact that the Public Utility Commission was= =20 poised to increase rates nearly 40 percent.=20 After the meeting, Feinstein sent President George W. Bush a two-page lette= r.=20 "Your administration has not yet offered any constructive solution to this= =20 problem,'' she wrote. "If the federal government continues to ignore the=20 situation, the result may very well be economic disaster for millions of=20 small businesses and residents.''=20 Feinstein wrote a final plea that Bush meet with her and Sen. Gordon Smith,= =20 R-Ore., who is co-sponsoring a bill authorizing short-term regional price= =20 caps.=20 Bush on Tuesday reiterated his position against price caps in a speech in= =20 Michigan.=20 Feinstein has heard little sympathy for her state from colleagues, who have= =20 repeatedly said Californians have not felt any real pain. Rep. Jennifer Dun= n,=20 R-Wash., recently complained that Californians were turning on their hot tu= bs=20 without worrying about paying higher costs.=20 Feinstein said such criticism is exaggerated. But she said she hopes the ra= te=20 increase approved by the PUC will show critics the state "is doing the righ= t=20 thing.''=20 Sen. Barbara Boxer, D-Calif., who said she was not invited to meet with=20 Cheney, said she was concerned that the rate increase would be "making=20 consumers bear the brunt" of the electricity crisis.=20 Before a rate increase is considered, Boxer said, the PUC should make sure= =20 average residential consumers and small businesses are protected and take= =20 whatever legal action is available against "those generating companies who= =20 colluded and unlawfully manipulated prices.=20 "We should get something in return, some assets," Boxer added, also calling= =20 on the utilities to contribute some of the money they diverted to their=20 parent companies.=20 ---------------------------------------------------------------------------= --- ------------------------------------------ Highest rate hike in state history raises consumer anger=20 O.C. residents and businesses resent 'energy hog' label.=20 March 28, 2001=20 By KATE BERRY The Orange County Register=20 Helen Lewis, a Villa Park homemaker, believes the rate hike unfairly target= s=20 families with children.=20 Dorothy Kascak, an 82-year-old Cypress resident who uses an oxygen machine= =20 24-hours a day, is furious at being called an "energy hog.''=20 And Vic Peterson, a homebuilder in Corona del Mar, has angry words for Gov.= =20 Gray Davis for allowing the energy crisis to escalate, potentially=20 endangering the economy.=20 Throughout Orange County, residents and businesses responded angrily to the= =20 approval Tuesday of a 3-cent-a-kilowatt-hour rate increase by the Californi= a=20 Public Utilities Commission.=20 "There are a lot of handicapped citizens that are on fixed incomes,'' said= =20 Kascak, who has been on an oxygen machine for eight years. "If they raise o= ur=20 rates 40 percent, what am I going to do?''=20 Though oxygen users typically receive a discount on their electricity rates= ,=20 they will be subject to the rate increase like everyone else, said Bruce=20 Foster, vice president of regulatory affairs at Southern California Edison.= =20 Many businesses are concerned that higher power costs could push California= =20 and the nation into a recession.=20 "It's upsetting,'' said Peterson, who owns Peterson Construction & Design= =20 Inc. "Less money coming into California means less people purchasing. Who a= re=20 we going to sell homes to?''=20 At Panama Joe's Hair Design in Irvine, owner Joe Gayle said he has no choic= e=20 but to pay the higher rates. He's got hair dryers, electric hair clippers,= =20 lights, a refrigerator, a microwave and computer to run a nine-station hair= =20 salon.=20 Last month Gayle's bill was $234. A year ago it was $183. Now he expects it= =20 to top $300 a month.=20 "They jack it up because they know there is nothing we can do," he said.=20 Then there's the effect on families, especially those who live in large=20 houses.=20 The PUC will debate in the next month how to implement a tiered-rate plan,= =20 with large users paying the highest rates. A plan proposed Monday by PUC=20 President Loretta Lynch targets what she called "energy hogs" by increasing= =20 rates on usage over 130 percent of a consumer's minimum "baseline"=20 allocation, which varies by neighborhood.=20 For Lewis, the Villa Park homemaker, conservation will barely put a dent in= =20 her electric bill. The 4,300-square-foot house she shares with her husband= =20 and three children has a monthly baseline of 267 kilowatt-hours, while the= =20 family's energy consumption routinely runs from 1,200 to 1,500=20 kilowatts-hours.=20 "It's not as if we're leaving the lights on,'' said Lewis. "But they are=20 taking people that have houses and have washers and dryers, and penalizing= =20 them. Families will be hit very hard.''=20 Register staff writer Elizabeth Aguilera contributed to this report.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- Lighten up ... it's just a California thing=20 Outside the state, there is almost a smug satisfaction in our energy=20 failures. But most here remain optimistic.=20 March 28, 2001=20 By TERI SFORZA The Orange County Register=20 Beckie Boyden of Irvine Orthopedics and Physical Medicine tends to her=20 receptionist duties by candlelight during a recent rolling blackout Photo: Bruce Chambers / The Register ? ? California. Global trendsetter. High-tech nexus. Crucible for creativity.= =20 The Golden State is raw fiscal muscle, with an economy bigger than China's= =20 and twice the size of Canada's. But alas. California can't keep the lights= =20 on.=20 "It's amazing to think that we have the world's seventh-largest economy - a= nd=20 a Third World power system," said Fred Smoller, chairman of the=20 political-science department at Chapman University. "It's certainly a blow = to=20 our collective ego."=20 Rolling blackouts finally hit Orange County last week. Workers were plunged= =20 into darkness. Children studied by candlelight. Cars crawled through lawles= s=20 intersections. Elevators halted between floors, libraries checked out books= =20 by hand, and portable generators were rushed to sewer-lift stations to keep= =20 raw sewage from spilling into the ocean.=20 Outsiders scoff. Californians are a gaggle of goofy tree-huggers guilty of= =20 "mass myopia" and "willful energy abnegation," charged Charles Krauthammer,= =20 columnist for the New York Daily News.=20 "Californians refuse to acknowledge that in the real world, their desire fo= r=20 one good (an unsullied environment) might actually conflict with another=20 desire (hot water in their Jacuzzis)."=20 Sensing weakness, other states are pouncing.=20 Glow-in-the-dark mouse pads saying "Michigan. We never leave you in the dar= k"=20 are landing in the mailboxes of California CEOs. Alongside flashlights=20 boasting "The lights are always on in Tennessee." And nine-volt batteries,= =20 courtesy of the Greater Raleigh (N.C.) Chamber of Commerce ("In the dark=20 about where to grow your business?").=20 "Our CEO got the flashlight pitch," said David Sonksen, executive vice=20 president and chief financial officer of Microsemi Corp. in Santa Ana. "But= =20 he threw it away. It would take 10 years of exorbitant power costs to even= =20 make a dent in the costs associated with moving."=20 Clever ambulance chasing, Orange County Business Council Vice President Bil= l=20 Carney calls it. And while some companies say they'll think seriously about= =20 expanding, it doesn't seem like anyone intends to leave.=20 "California has it all over everywhere else. Sorry!" said Lisa Green, a vic= e=20 president for Entridia Corp. "The power thing is a little bit of a pain, bu= t=20 not that much of a pain."=20 "I'll take sweltering on a summer day over a Michigan winter any time," sai= d=20 Laer Pearce, a public relations consultant in Laguna Hills.=20 Which is not to dismiss the seriousness of the crisis. "I'm concerned about= =20 what it means for our economy," said Naomi Vine, director of the Orange=20 County Museum of Art, whose offices went dark without warning one day last= =20 week. "If businesses can't be productive, what does that mean for the year= =20 ahead?"=20 "It's really scary," said Pearce, who held his breath as the lights went ou= t=20 in buildings across the street last week. "This is one that, when they were= =20 studying California's infrastructure, nobody even predicted. What's going t= o=20 happen with the sewers and roads and airports and everything else?"=20 Indeed, the crisis may be exposing the weak spots in California's go-go=20 economy.=20 One concern is that production shifted this year from California to more=20 energy-reliable areas might never return, Carney said. And if, even for the= =20 short term, California businesses are perceived as being unreliable supplie= rs=20 because they have unreliable power, the effects could be lasting, he said.= =20 Others worry about the effect of outages on people themselves. As a culture= ,=20 we've becoming utterly dependent upon electricity to work, to play, to=20 communicate. "Everything we do is electric," said Pearce. "We just couldn't= =20 go back to knocking it out on a manual typewriter anymore."=20 And it's starting to sink in that things will get worse before they get=20 better, said Al Milo, director at the Fullerton Public Library, which lost= =20 power briefly last week.=20 But things will get better, the stubborn optimists say.=20 "This is a great thing that's happening," said Gerran Brown of Brown Coloni= al=20 Mortuary in Santa Ana. "Energy prices may go up temporarily, but people wil= l=20 learn to turn lights off and not drive gas-guzzling SUVs, and eventually=20 we'll have a truly free market where the consumer will win."=20 California will emerge from this darkness stronger than ever, with new=20 technologies, a new conservation ethic and a new emphasis on alternative,= =20 renewable forms of energy. "It's a new opportunity for us to be an=20 international leader," Carney said.=20 Carney was hosting two Korean businessmen last week when there was a great,= =20 sudden click and lights went out at the Business Council's office. "They to= ld=20 me politely, to make me feel better I'm sure, that they have blackouts in= =20 Korea, too," Carney said.=20 ---------------------------------------------------------------------------= --- ---------------------------------------- Conserve and save=20 A proposed tiered-billing format is designed to spare low power users from= =20 the rate increases. Baseline is the bottom line.=20 March 28, 2001=20 By ANNE C. MULKERN and KATE BERRY The Orange County Register=20 The state's power crisis hit your wallet Tuesday when state regulators hike= d=20 electricity rates as much as 36 percent.=20 Your bill could be headed up as a result. Here are answers to some of your= =20 questions about the rate hike:=20 Q: How much more will I pay?=20 A: Details of the plan haven't been finalized. But the idea is to create a= =20 three-level rate structure. Those who use more electricity will pay the=20 highest rates and those who conserve will save.=20 Consumers who use less than l30 percent of their baseline power allocation= =20 will escape any increase. (We explain baseline below.)=20 The rate increase will be distributed across the two higher tiers. The Publ= ic=20 Utilities Commission over the next 30 days will come up with a plan to=20 determine exact rates for the two higher levels, as well as for different= =20 types of customers, such as residential and small business.=20 Q: So what is baseline?=20 A: Baseline is the portion of your usage considered necessary for essential= s.=20 To encourage conservation, it's set below the amount most people use.=20 The percentage of Edison customers who use less than 130 percent of baselin= e=20 is roughly 48 percent in winter months and 45 percent in the summer.=20 Because baseline is set based on the average household's use, it means a=20 single person living in an apartment can have the same baseline as a=20 homeowner with four children.=20 Baseline varies depending on where you live. Warmer areas get higher=20 baselines. There are different baselines for the summer and winter. People= =20 who use medical equipment in their homes can get higher baseline allocation= s.=20 All-electric homes get higher baselines.=20 Q: What's the reason for this rate hike? Are they really doing this to get= =20 people to conserve?=20 A: Conservation is a side benefit. The primary motivation is money.=20 The state has already shelled out $3 billion buying power in the last three= =20 months for customers of the near-insolvent utilities.=20 The state plans to issue bonds, which will be paid for by consumers, to cov= er=20 the power purchases. But Wall Street bankers must have proof of a steady=20 revenue stream - a rate increase - to convince them the bonds can be repaid= .=20 However, people inevitably will conserve if they are paying more for their= =20 power, so the plan will also help reduce demand.=20 Q: I'm already conserving. How can I cut my bill further?=20 A: It's nitty-gritty time. Replace your incandescent light bulbs with=20 fluorescent bulbs. Clean those coils at the back of your refrigerator. Turn= =20 your air conditioner down or off. Reduce the amount of time you use your po= ol=20 pump.=20 Many items in your house use electricity when they are plugged in, even if= =20 they're not in use. You can cut consumption by unplugging your television,= =20 computer, coffeepot, toaster and blow dryer.=20 Q. When will I pay the increase?=20 A: The rate hike takes effect immediately. But it could take Southern=20 California Edison a month to 45 days to implement it, so you could face=20 retroactive charges on a follow-up bill.=20 Q. I live in south Orange County and buy electricity from San Diego Gas &= =20 Electric Co. Does this plan affect me?=20 A: No. SDG&E has applied for a rate increase, but state regulators have not= =20 yet voted on that request.=20 Q. I'm outraged. We didn't ask for deregulation and now we're paying more.= =20 How can I protest?=20 A: Call or write you state lawmakers and the governor. You can also join on= e=20 of the consumer groups fighting the rate hike, such as the Foundation for= =20 Taxpayer and Consumer Rights. It is at (310) 392-0522. The Utility Reform= =20 Network is at (415) 929-8876.=20 ---------------------------------------------------------------------------= --- ----------------------------------- National Desk; Section A=20 RECORD RATE HIKE SET IN CALIFORNIA=20 By EVELYN NIEVES=20 ?=20 03/28/2001=20 The New York Times=20 Page 1, Column 1=20 c. 2001 New York Times Company=20 SAN FRANCISCO, March 27 -- California's power regulators approved the large= st=20 utility rate increases in state history today in an effort to avert more=20 rolling blackouts and keep the state's principal electricity producers from= =20 collapsing in bankruptcy.=20 Despite Gov. Gray Davis's repeated statements that no new rate increases=20 would be needed to keep the state's two largest utilities solvent, the Stat= e=20 Public Utilities Commission said today that it had no choice but to raise= =20 rates by up to 46 percent for customers of the two utilities to avoid a=20 greater catastrophe if the companies went bankrupt.=20 ''We have fought back hard in every venue possible against these unjust=20 energy prices,'' said Loretta Lynch, the commission president and a Davis= =20 appointee, who had proposed the increases on Monday.=20 Ms. Lynch said that under a tiered rate system that would be hammered out= =20 within the next 30 days, heavy power users would face the greatest increase= s=20 while light users would face little or no increases. Customers will see the= =20 rate increases in their May utility bills.=20 Perhaps 45 percent of consumers under this system -- including the poorest= =20 residents, who would be exempt -- will face no increase at all, Ms. Lynch= =20 said. Heavy users will face increases of about 36 percent, she said.=20 Coupled with the average 10 percent temporary rate increase in January that= =20 the commission made permanent today, those consumers will pay 46 percent mo= re=20 for utilities than they did in December.=20 But even people who use small amounts of power and do not see their rates= =20 increase could feel the impact if commercial power customers, from small=20 businesses to megastores, pass on their higher electricity costs through=20 price increases.=20 Before the rate increases, power costs in California were slightly higher= =20 than the national average, but lower than the prices paid in New York and= =20 other Northeastern States. Residential electricity users already pay an=20 average of about $65 a month, state officials say. In addition, under a=20 previous commission decision, rates will go up an additional 10 percent nex= t=20 year.=20 The commission, which approved the rate increase 5 to 0, also voted to=20 require that the two large utilities, the Pacific Gas and Electric Company= =20 and Southern California Edison, reimburse the state's Department of Water= =20 Resources $4 billion spent on their behalf and begin paying alternative=20 energy generators, which account for more than a quarter of the state's dai= ly=20 energy needs. The two utilities have not paid their bills for months, sayin= g=20 they are nearly bankrupt because under deregulation of the power industry,= =20 wholesalers have been allowed to float prices while retail rates were cappe= d.=20 The Department of Water Resources has spent $45 million a day since January= =20 buying power on the utilities' behalf. Small alternative energy producers h= ad=20 not been paid at all for months, with dire consequences. For two days last= =20 week, the state's power managers were forced to order rolling blackouts=20 across parts of the state, in part because the small energy producers shut= =20 down half their capacity because they had not been paid.=20 The rate increases will make the payoff more feasible, Ms. Lynch said, whil= e=20 encouraging energy conservation. But a representative of the state's=20 alternative-energy generators, known as qualifying facilities, complained= =20 that the commission did nothing to address the roughly $1.5 billion the=20 utilities owed producers.=20 ''I'm not sure what our options are at this point if the state wants the=20 qualified facilities to be a part of the solution,'' said David Fogarty, a= =20 spokesman for the Western States Petroleum Association and alternative-ener= gy=20 co-generators, representing about 50 alternative-energy producers in=20 California.=20 For those on all sides, the commission seemed to raise as many questions as= =20 it answered. Consumer advocates, who interrupted the hearing five times,=20 questioned why the commission had decided on the vote so abruptly, with onl= y=20 24-hour notice to the public. Spokesmen for each of the utility companies= =20 said they had no idea what the rate increases would mean to the average=20 customer until the tiered system was determined. They also said they did no= t=20 know whether these new rates would mean the end of rolling blackouts.=20 ''They may know something that I don't know,'' said Bruce Foster, vice=20 president of regulatory affairs at Southern California Edison, speaking of= =20 the commission's vote outside the hearing room.=20 Mr. Foster also complained that the commission's directive to begin paying= =20 bills to the state and the alternative energy producers -- or face a penalt= y=20 equal to the amount owed -- might be illegal and said that the company woul= d=20 look into appealing it.=20 Ron Low, a spokesman for Pacific Gas and Electric, also complained that the= =20 commission's actions seemed rushed and lacked specifics.=20 The rate increase will generate about $2.5 billion a year for Pacific Gas a= nd=20 Electric, unit of PG&E and $2.3 billion for Southern California Edison, a= =20 unit of Edison International. While those revenues will help the utilities= =20 buy power on the wholesale market in the future, the commission made no=20 provision for paying off about $13 billion in debt accumulated by the=20 utilities as a result of past wholesale costs. That issue would be left to= =20 the governor and state legislators.=20 The commission heard public comment before the vote, but did not answer=20 questions afterward. Consumer advocates were furious, many blaming Governor= =20 Davis.=20 The governor today issued a statement calling the commission's move=20 premature. ''From the beginning, I've said that my main goal was to solve= =20 this problem while protecting the consumer from undue rate hikes,'' Mr. Dav= is=20 said. ''The P.U.C.'s action today was premature because we do not have all= =20 the appropriate financial numbers necessary to make a decision.''=20 Mr. Davis's statement seemed to reflect the awareness he and his aides feel= =20 about the potential political backlash from big rate increases. Even as oth= er=20 politicians warned that such increases would be necessary, Mr. Davis has=20 vowed to avoid them. On Monday he insisted that he had not spoken to any=20 members of the commission about the rate increase proposal and that he had = no=20 control over its actions.=20 But Mr. Davis appointed three of the body's five members, and since taking= =20 office two years ago he has been emphatic in saying that he expects his=20 appointees to state boards and commissions to reflect his policies.=20 He also did not hesitate to complain that he could not control the previous= =20 members of the commission, because they were Republican appointees, and his= =20 aides acknowledged that top gubernatorial advisers had consulted with Ms.= =20 Lynch and approved her plans.=20 Politicians in both parties said Mr. Davis was trying to shift blame for an= y=20 rate increase to the commission while claiming that increases were approved= =20 over his objections. They predicted that that effort could backfire by maki= ng=20 Mr. Davis look both timorous and calculating.=20 Chart: ''THE COST -- The Price of Power'' Average cost per kilowatt-hour fo= r=20 residential customers for 2000. Chart shows costs for following states:=20 Connecticut ... Maine ... Massachusetts ... Rhode Island ... Vermont ... Ne= w=20 Jersey ... New York ... Pennsylvania ... Illinois ... Indiana ... Michigan= =20 ... Ohio ... Wisconsin ... Iowa ... Kansas ... Minnesota ... Missouri ...= =20 Nebraska ... South Dakota ... Delaware ... D.C. ... Georgia ... Maryland ..= .=20 North Carolina ... South Carolina ... Virginia ... West Virginia ... Alabam= a=20 ... Kentucky ... Mississippi ... Tennessee ... Arkansas ... Louisiana ...= =20 Oklahoma ... Texas ... Arizona ... Colorado ... Idaho ... Montana ... Nevad= a=20 ... New Mexico ... Utah ... California ... Oregon ... Washington ... Alaska= =20 ... Hawaii ... Wyoming ... Florida ... New Hampshire ... North Dakota=20 (Source: U.S. Department of Energy) (pg. A14)=20 ---------------------------------------------------------------------------= --- ---------------------------------------- Calif. Regulators Raise Power Rates By KAREN GAUDETTE Associated Press Writer SAN FRANCISCO (AP) _ As protesters jeered ``Hell, no, we won't pay!''=20 California regulators approved electricity rate increases of up to 46 perce= nt=20 Tuesday to head off blackouts this summer and keep the state's two biggest= =20 utilities from going under.=20 The increases _ approved 5-0 by the Public Utilities Commission _ are the= =20 biggest in California history and take effect immediately for the 25 millio= n=20 people served by Pacific Gas and Electric Co. and Southern California Ediso= n=20 Co.=20 ``The PUC has done all it can,'' commission president Loretta Lynch said.= =20 ``We have fought back hard in every venue possible against these unjust=20 energy prices.''=20 The PUC also ordered the utilities to pay the state for billions of dollars= =20 of electricity it has bought on behalf of their customers. Just how much=20 wasn't known; the state has not disclosed how much it has spent on various= =20 long- and short-term power contracts.=20 For the rate increase, the commission said it will create a tiered system= =20 that will protect poor people and penalize customers who use the most=20 electricity.=20 Lynch proposed the higher rates as a way to force ``electricity hogs'' to= =20 conserve and to help keep SoCal Edison and PG&E solvent.=20 The plan is also seen as a way to protect California's budget surplus, whic= h=20 is being drained of $40 million to $50 million a day as the state buys powe= r=20 for the cash-strapped utilities. Since the crisis began, more than $4.2=20 billion in taxpayer money has been spent to keep the lights on.=20 SoCal Edison and PG&E say they have lost more than $13 billion since last= =20 summer because of high wholesale electricity prices and because California'= s=20 1996 deregulation law prevents the utilities from passing those costs on to= =20 their customers.=20 Both have urged the PUC to raise rates. Following the PUC meeting, SoCal=20 Edison said it will begin paying interest to bondholders after weeks of=20 missing payments.=20 The rate increase will be on top of the 9 percent to 15 percent hike approv= ed=20 by the PUC in January, and a 10 percent increase already scheduled for next= =20 year.=20 Ratepayers and consumer groups branded the latest plan a rip-off.=20 ``We are being held hostage by a handful of energy companies that, under=20 deregulation, got control of our electricity supply,'' said Harvey=20 Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in= =20 Santa Monica. ``Until our elected officials start acting to protect us, we= =20 are going to be at their mercy, at the mercy of this ripoff.''=20 Democratic Gov. Gray Davis has said that he opposes rate increases but that= =20 he has no power over the PUC. However, three of the PUC members are his=20 appointees. And his aides have told lawmakers that rates have to rise.=20 Residents already pay about $65 per month for electricity _ 7.2 cents per= =20 kilowatt hour to SoCal Edison and 6.5 cents per kwh to PG&E.=20 The latest rate hike would mean a 42 percent increase for SoCal Edison=20 customers and 46 percent for PG&E customers for electricity alone. Since th= e=20 rates are bundled with other fees, the average price of a kilowatt hour is= =20 closer to 12.5 cents for SoCal Edison customers and 10.5 cents for PG&E=20 customers.=20 Spokesmen for both utilities said it is impossible to calculate how much th= e=20 plan will cost customers because the effects of the tiered system are not= =20 known.=20 The PUC meeting was disrupted at least five times by screaming protesters,= =20 and dismay over the plan was seen elsewhere.=20 Sam Sahouria, owner of the Fox Plaza Grocery and Deli in San Francisco, sai= d=20 rate hikes could be too much for his family-run store to bear. ``It's=20 terrible. We will probably go out of business,'' he said.=20 Belinda Lazzerini, 40, who serves fruit smoothies at Jitters & Shakes in Sa= n=20 Francisco, said her electric bills have jumped to $70 for her studio=20 apartment.=20 ``The Laundromat has gone up from $1.50 to $3, so now we will have to clean= =20 our clothes by hand and dry them in the basement,'' she said. ``It's crazy.= ''=20 The state has pledged to issue at least $10 billion in revenue bonds to buy= =20 power for SoCal Edison and PG&E _ bonds that would be repaid by the=20 utilities' customers. However, state officials have told lawmakers that sta= te=20 efforts to help the utilities could hit $23 billion by 2003.=20 California's Independent System Operator declared a Stage 2 alert Tuesday a= s=20 electricity reserves dropped to about 5 percent.=20 The alert follows two days of statewide rolling blackouts last week and two= =20 others in January. ISO spokeswoman Stephanie McCorkle said many power plant= s=20 that use alternative sources of energy remained down, in part because haven= 't=20 been paid by the utilities.=20 =20