Message-ID: <11841140.1075848036817.JavaMail.evans@thyme> Date: Fri, 6 Apr 2001 02:45:00 -0700 (PDT) From: miyung.buster@enron.com To: california.group@enron.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: California working group X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_3\Notes Folders\California X-Origin: KEAN-S X-FileName: skean.nsf Please see the following articles: Sac Bee, Fri, 4/6: "Energy supply setback: Big generator can't be forced to sell emergency power to the state, a U.S. court rules" Sac Bee, Fri, 4/6: "In TV address, Davis embraces rate increase" Sac Bee, Fri, 4/6: Governor's speech transcript Sac Bee, Fri, 4/6: "Dan Walters: Davis finally acknowledges 'crisis,' back= s=20 a rate increase" San Diego Union, Thurs, 4/5: "Davis endorses rate hikes, defends handling = of=20 energy crisis" San Diego Union, Thurs,4/5: "San Diego utility overspent $98 million,=20 consumer group says " LA Times, Fri, 4/6: "Davis Acknowledges Need for Rate Hike" LA Times, Fri, 4/6: "Putting the Heat on 2-Fridge Households" SF Chron, Fri, 4/6: "Davis Proposes Tiered Plan To Boost Rates=20 Governor wants slightly lower increases than PUC adopted " SF Chron, Fri, 4/6: "Legislature Pounds Out Conservation Package=20 Davis expected to sign $1.1 billion measures" SF Chron, Fri, 4/6: "At least 3.6 million families face possible power=20 cutoffs" Mercury News, Fri, 4/6: "Davis reveals plan, including rate hikes" Mercury News, Thurs, 4/5: "Davis gives up fight against rate hikes" Mercury News, Thurs, 4/5: "Western states share shortage of electricity" Mercury News, Fri, 4/6: "Getting real on rates" (Editorial= ) Orange County, Fri, 4/6: "Davis: Rate hikes a must" Orange County, Fri, 4/6: "Davis' power-crisis plan brings questions from= =20 Wall Street" Orange County, Fri, 4/6: "Davis pulls energy switch" Individual.com, Fri, 4/6: "[B] PG&E defaults on Los Alamos Energy power=20 payment" Energy Insight, Fri, 4/6: "Energy-related firms fare well on Fortune 500= =20 list" (Enron mentioned) ---------------------------------------------------------------------------= --- ---------------------------------------------------------- Energy supply setback: Big generator can't be forced to sell emergency powe= r=20 to the state, a U.S. court rules. By Denny Walsh and Carrie Peyton BEE STAFF WRITERS (Published April 6, 2001)=20 In a development that does not bode well for California's energy supply, a= =20 federal appellate court Thursday halted enforcement of a lower court order= =20 that a big electricity generator must sell emergency power to the state=20 without guarantee of payment.=20 State energy officials said the ruling wouldn't have any immediate effect b= ut=20 could precipitate a power emergency if the generator decided to take a plan= t=20 off-line for maintenance.=20 On March 21, citing "rolling blackouts (that have) darkened the California= =20 landscape," U.S. District Judge Frank C. Damrell Jr. imposed an injunction= =20 against Reliant Energy Services Inc., one of the nation's major generators.= =20 Houston-based Reliant controls approximately 3,800 megawatts, or about 20= =20 percent, of the gas-fired generation capacity in the state, and Damrell fou= nd=20 that loss of that production "poses an imminent threat."=20 But Thursday, a three-judge panel of the 9th U.S. Circuit Court of Appeals= =20 granted an emergency stay of the injunction, saying Reliant has shown "a hi= gh=20 likelihood of success on the merits" of its appeal.=20 While not spelling it out, the panel apparently bases its finding on the=20 question of the courts' jurisdiction over the energy market. The panel=20 directed that a hearing on the appeal be scheduled for the second week in= =20 July.=20 The decision leaves California's electric grid more fragile, at least=20 temporarily, according to the state Independent System Operator, which=20 maintains and controls power transmissions.=20 It gives the agency no immediate recourse if Reliant chooses to shut down a= ny=20 of its plants for maintenance, said ISO Vice President Jim Detmers.=20 "It's not going to change anything overnight, and it's not going to change= =20 anything over the weekend," said Detmers. "But if Reliant decided on a=20 unilateral action to take their units off for maintenance ... we definitely= =20 could have a system emergency."=20 Reliant officials, when told of the ruling, took a conciliatory tone but=20 declined to specify their next move.=20 "Reliant ... has pledged to keep the lights on in California," said company= =20 lobbyist Marty Wilson, and "is still of a mind to want to cooperate."=20 Without further comment, the appeals court judges cited a 1980 U.S. Distric= t=20 Court decision. In that case, 14 cities sued Florida Power and Light Co.,= =20 alleging that it was violating a number of laws in its sales of power and= =20 production of electricity.=20 The judge found, however, that the Federal Power Act reserves oversight of= =20 interstate utilities exclusively to the Federal Energy Regulatory Commissio= n.=20 He ruled that only the commission may bring an action involving energy sale= s=20 into federal court -- unless it is a request to review a commission order,= =20 and that goes directly to an appellate court.=20 The lawsuit before Damrell was brought by the ISO to force Reliant and two= =20 other generators to respond to ISO's emergency orders for power, even thoug= h=20 the agency is buying on behalf of two retailers that are broke and hopeless= ly=20 in debt.=20 Because Pacific Gas and Electric Co. and Southern California Edison can't p= ay=20 their bills -- about $14 billion -- some wholesalers want to cut off sales = to=20 the utilities.=20 The other three defendants in the ISO's suit -- Dynegy Power Corp. of Houst= on=20 and Tulsa-based AES Corp. and its marketer, Williams Energy Marketing &=20 Trading Co. -- have entered into written agreements with ISO to continue=20 supplying emergency power until the FERC decides whether they are required = to=20 sell to companies that are not creditworthy.=20 But Charles Robinson, ISO general counsel, points out that the generators c= an=20 rescind those agreements with 48 hours' notice.=20 "My hope is this is a temporary setback," said Robinson. He added, however,= =20 that the practical effect is "at least for now, we don't have a tool to=20 compel them to do what we believe they're obligated to do" -- respond to=20 emergency demands for power.=20 Reliant has insisted since the suit was filed Feb. 6 that Damrell has no=20 jurisdiction over the rate schedules that govern dealings between generator= s=20 and the ISO, and that the Federal Power Act mandates that the FERC must=20 settle any disputes about terms of those tariffs.=20 In issuing the injunction, Damrell acknowledged that the FERC has special= =20 expertise concerning agreements between generators and ISO.=20 "Absent the extreme exigencies of the California power crisis, the court=20 agrees that a stay pending further action by the FERC would be proper," he= =20 said. "But those are not the facts here. Electricity is in critically short= =20 supply. The health and safety of the people of California are potentially a= t=20 risk."=20 Immediately upon receiving the 9th Circuit's order Thursday, attorneys for= =20 the ISO asked Damrell to set an accelerated schedule for its motion to amen= d=20 the suit. The agency apparently has crafted a new complaint stressing its= =20 view that the matter is an ordinary contract dispute over which the judge h= as=20 jurisdiction.=20 Damrell scheduled a hearing on the motion for Thursday.=20 In a further development that could complicate the state's dire need for=20 energy, an alternative supplier won a court fight Thursday to bypass the bi= g=20 utilities and sell its power on the open market.=20 Timber giant Sierra Pacific Industries, which operates four biomass plants= =20 that produce power for PG&E, obtained a temporary restraining order in=20 Sacramento Superior Court that says Sierra Pacific is not required to sell= =20 its power to PG&E.=20 The ruling means PG&E and Southern Edison could lose power as alternative= =20 energy generators, fed up with months of nonpayment, sue to be able to sell= =20 their comparatively cheap product elsewhere, including outside the state.= =20 The Bee's Denny Walsh can be reached at (916) 321-1189 or dwalsh@sacbee.com= .=20 Bee staff writer Dale Kasler contributed to this report.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------ In TV address, Davis embraces rate increase By Dan Smith BEE DEPUTY CAPITOL BUREAU CHIEF (Published April 6, 2001)=20 Seeking to ease Californians' energy fears, Gov. Gray Davis on Thursday=20 proposed a tiered electricity rate increase that would hit the heaviest pow= er=20 users the hardest.=20 The Democratic governor, whose popularity has been plummeting, told a=20 statewide television audience in a five-minute speech from his Capitol=20 office: "It's become increasingly clear ... that some rate increases now ar= e=20 necessary to keep our lights on and our economy strong."=20 The address came as California enters its fifth month of acute power woes= =20 that have resulted in periodic electricity blackouts.=20 In embracing a rate increase as part of the solution to California's energy= =20 nightmare, Davis joined a long list of financial and energy experts --=20 including members of his own staff -- who for months have said a rate=20 increase is imperative.=20 The state Public Utilities Commission last week approved a $4.8 billion a= =20 year, average 30 percent rate increase for customers of cash-strapped Pacif= ic=20 Gas and Electric Co., Southern California Edison and San Diego Gas &=20 Electric.=20 But Davis said his plan, which he will ask the PUC to approve instead, is= =20 better. Administration officials said the governor's plan goes easier on=20 commercial users and conservation-minded residential users, but preserves t= he=20 largest rate increases for heavy residential users. Sacramento Municipal=20 Utility District customers would be unaffected by Davis' proposal.=20 The 55 percent of PG&E residential customers who use less than 130 percent = of=20 the "baseline" amount of power, for instance, would see no increase. Medium= =20 users -- those using between 130 percent and 200 percent of the baseline=20 amount -- would see an average bill of $70 rise to $77. But heavy users wou= ld=20 see their bills go from $138 a month to $189.=20 "Here's the point," Davis said. "The more you use, the more you pay. The mo= re=20 you conserve, the more you save. Conservation is our best short-term weapon= =20 against blackouts and price gouging."=20 The rate increase would come on top of an average 9 percent residential rat= e=20 increase imposed in January. Davis advisers said the proposed increase woul= d=20 eliminate the need for an additional 10 percent increase scheduled to take= =20 effect next year.=20 Davis said his plan would raise enough money to "restore the utilities to= =20 financial stability" if the companies agree to sell their transmission line= s=20 to the state, drop their lawsuits against the state and promise to sell che= ap=20 power for 10 years. The administration has been negotiating to buy the powe= r=20 transmission lines for weeks, and has made little progress with PG&E.=20 Even though the governor's rate proposal would raise about 15 percent less= =20 revenue than the PUC plan, administration officials insisted it would provi= de=20 the utility companies enough money to cover future power purchases and redu= ce=20 their debts over time. They said they discovered that the state can buy pow= er=20 more cheaply than the PUC thought it could and presumed greater savings=20 through conservation.=20 Davis' plan relies heavily on floating billions of dollars in bonds,=20 essentially stretching the impact of a rate hike over as many as 15 years.= =20 Not only would the state borrow about $12 billion to pay for its purchases,= =20 but the utilities would borrow about $8 billion. They'd repay the $8 billio= n=20 through a slice of the money generated by the rate increase. The utilities= =20 also would get a cash infusion of something less than $7 billion from the= =20 sale of the transmission grid.=20 Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights said= =20 Davis' numbers, while apparently offering a "bailout" of utilities' debts= =20 designed to please Wall Street, simply don't add up.=20 "He's cooking the books to lower the apparent price to the public, and then= =20 they're going to figure out a way to ram this down our throats after the 20= 02=20 election," he said.=20 Analysts called the plan long overdue and questioned whether it would work.= =20 "It's definitely a plan from the Wall Street cookbook, but can he get it=20 done? Can he get it done in a believable time frame?" said bond analyst Sha= wn=20 Burke of Barclays Capital in New York.=20 Davis' speech disappointed nearly all other parties.=20 "Unfortunately, the steps the governor announced tonight still do not appea= r=20 to offer a comprehensive solution to resolve California's energy crisis,"= =20 PG&E said in a prepared statement.=20 Davis continued to blame power generators for "ripping us off" and federal= =20 regulators for failing to stop them, and spent much of his speech detailing= =20 the steps that he and state lawmakers have taken to confront the crisis thu= s=20 far.=20 "Those around (the Capitol) have heard the speech," said Senate President P= ro=20 Tem John Burton, D-San Francisco. "He was talking to 34 million Californian= s=20 who hadn't."=20 Some gubernatorial advisers had been pushing for the speech for weeks,=20 arguing that Davis needed to explain his actions -- and his intentions -- a= s=20 the onset of warm weather enhances the prospect of power blackouts.=20 Davis has come under increasing criticism, including from some members of h= is=20 own party, for failing to stem the crisis. Detractors say Davis has been=20 indecisive -- even inattentive -- in his handling of the crisis, while his= =20 proposals falter in the Legislature and at negotiating tables with=20 near-bankrupt utilities.=20 Consumer groups, meanwhile, say Davis' failure to more forcefully take on= =20 power generators has allowed the crisis to fester, and they blame him for t= he=20 rate increases. As the 2002 re-election campaign looms, some private polls= =20 now say support for the once-popular Davis is eroding.=20 Davis didn't make believers out of Republicans. Assembly GOP leader Dave Co= x=20 said the speech was more talk than substance. "Frankly, he didn't offer any= =20 new solutions to the problems," said Cox, of Fair Oaks. "What we heard=20 tonight was the governor saying, 'Oops, I guess we're going to have to rais= e=20 rates,' while all along he'd been saying a rate increase wasn't necessary.= =20 And, frankly, it wasn't necessary if we'd gotten started back in September.= "=20 Also on Thursday, the Legislature sent Davis a $1.1 billion conservation an= d=20 low-income assistance package aimed at reducing California's risk of rollin= g=20 blackouts this summer.=20 By passing two bills -- SB 5x by state Sen. Byron Sher, D-Palo Alto, and AB= =20 29x by Assemblywoman Christine Kehoe, D-San Diego -- lawmakers met their=20 stated goal of sending conservation measures to Davis before heading off on= a=20 weeklong spring recess.=20 The Bee's Dan Smith can be reached at (916) 321-5249 or smith@sacbee.com.= =20 Bee Staff Writers Amy Chance, John Hill, Kevin Yamamura, Dale Kasler and Ji= m=20 Sanders contributed to this report.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------- Governor's speech transcript (Published April 6, 2001)=20 Here is the text of Gov. Gray Davis' remarks on energy:=20 Good evening. I'm speaking to you tonight from Sacramento on the most=20 difficult issue facing California: our energy crisis.=20 Simply stated, we have two problems: Supply is too low and costs are too=20 high. Both result from the flawed deregulation scheme created back in 1996.= =20 But no matter how we got into this mess, you hired me to solve problems. An= d=20 that's what I'm doing.=20 The only long-term solution is to build more power plants. We must also cut= =20 back on consumption and stabilize the utilities. But prices won't fall and= =20 supply won't be truly reliable until we generate more power than we consume= .=20 Yet in the 12 years before I took office, not a single major power plant wa= s=20 built in California. Not one. Since I became governor, we've licensed 12=20 major power plants. Ten more are in the pipeline. And we're doing this=20 without weakening our commitment to clean air and clean water.=20 Deregulation required the utilities to sell off many of their power plants = to=20 independent generating companies. The generators are free to charge whateve= r=20 they want because they're governed only by federal regulators who refuse to= =20 control wholesale energy prices.=20 This past winter, the prices charged by the generators shot through the roo= f,=20 driving the utilities to the brink of bankruptcy.=20 In January, with the feds still refusing to do their job, California steppe= d=20 in to purchase the power the utilities could no longer afford to buy. We=20 didn't take over to save the utilities. We took over to keep the power on a= nd=20 the economy strong. That's not all:=20 We also negotiated long-term contracts for electricity at vastly lower=20 prices.=20 I used my emergency powers to seize control of low-cost power contracts the= =20 utilities were about to forfeit to the generators.=20 We began negotiations to buy the utilities' transmission system.=20 We cut red tape and offered cash incentives to speed up construction of pow= er=20 plants.=20 We're launching an $800 million conservation program.=20 We're moving to establish a public power authority to build more power. If= =20 the private sector fails to build all the plants California needs, we'll=20 build them ourselves.=20 And because I share your concern that the generators are ripping us off,=20 we're using every legal remedy to root out and punish illegal conduct.=20 We can't fix 12 years of inaction overnight. But we're making real progress= .=20 Now, as you know, I have fought tooth and nail against raising rates. It's= =20 become increasingly clear, however, that with rising natural gas prices, th= e=20 feds' failure to control costs, and the state's lack of supply, that some= =20 increases now are necessary to keep our lights on and our economy strong.= =20 But I remain committed to protecting average Californians from massive rate= =20 hikes. So I'm urging the Public Utilities Commission to adopt a plan that= =20 will protect average consumers, reward those who conserve and motivate the= =20 biggest users to cut back.=20 Under my proposal, more than half of you won't pay a penny more. For the=20 rest, the average increase will be 26 and a half percent. But many in that= =20 group will pay only about a 10 percent rate increase. The heaviest users wi= ll=20 see their rates rise 34 and a half percent on average. That includes busine= ss=20 paying their share. This is in addition to the 9 percent surcharge we've al= l=20 been paying since last winter.=20 But all Californians can reduce their bills through conservation.=20 Here's the point: The more you use, the more you pay. The more you conserve= ,=20 the more you save. Conservation is our best short-term weapon against=20 blackouts and price-gouging. By flexing your power, you'll help secure our= =20 energy future.=20 Unlike the PUC, my plan includes funds to restore the utilities to financia= l=20 stability -- if they agree to three main conditions:=20 They must provide low-cost regulated power to the state for 10 years. Agree= =20 to sell us their transmission system. And dismiss their lawsuits which seek= =20 to double your electricity rates.=20 My proposal raises rates fairly, assures us of long-term power, stabilizes= =20 the utilities and promotes conservation.=20 Our emphasis on conservation is critical. In order to make it through the= =20 summer, we must cut demand by at least 10 percent.=20 Already we've launched programs to cut back commercial lighting, and reduce= =20 consumption in office buildings, supplies and government facilities.=20 My friends, we do have a power shortage but we are far from powerless. We a= re=20 34 million strong and if each of us does our part, we can minimize=20 disruptions and get through the summer. We are Californians. We've withstoo= d=20 earthquakes, floods, fires, and droughts.=20 Yes, this mess is man-made, but with your help and God's blessing, we'll ge= t=20 through this as well.=20 Thank you and good night.=20 ---------------------------------------------------------------------------= --- -------------------------------------------------- Dan Walters: Davis finally acknowledges 'crisis,' backs a rate increase (Published April 6, 2001)=20 Gov. Gray Davis -- under fire from the media and other politicians for his= =20 passive, incremental handling of the state's deepening energy crisis --=20 unveiled Thursday what he said was a comprehensive scheme to resolve it,=20 including a hefty increase in power rates paid by most consumers.=20 It was a full-court press by Davis and his administration, including a brie= f=20 statewide television address and a turnout of aides to sell the scheme to t= he=20 media. Davis -- for the first time -- even used the term "crisis" to descri= be=20 the situation after weeks of insisting it was merely a "challenge."=20 Clearly, a major motivating factor in the governor's new activism is that h= is=20 own re-election in 2002 is now in peril if the energy crisis persists and h= e=20 continues to deal with it reactively. Editorial writers have been describin= g=20 Davis' reactive approach as cowardly, and private polls have been indicatin= g=20 that since an unexpected power blackout hit last month, Davis' approval=20 ratings have been plummeting, from well over 60 percent to perhaps half tha= t=20 level. And certainly Davis' own nonstop polling has told him the same thing= .=20 While much of Thursday evening's five-minute address was a truncated versio= n=20 of what Davis has been saying publicly for the past few weeks, most recentl= y=20 at the state Democratic convention in Anaheim last weekend, the one new=20 element was an endorsement of rate increases after months of insisting that= =20 the problems could be resolved "within the existing rate structure." Davis= =20 proposed a rate boost similar in structure, but apparently slightly less,= =20 than the one tentatively endorsed by the state Public Utilities Commission= =20 last week. Davis had insisted that the PUC, although controlled by his=20 appointees, had acted on its own, but the widespread skepticism about that= =20 posture merely added to his image problems.=20 Like the PUC plan, the Davis rate scheme would concentrate the rate increas= es=20 on heavy residential power users and businesses. "I'm urging the (PUC) to= =20 adopt a plan that will protect average consumers, reward those who conserve= =20 and motivate the biggest users to cut back," Davis said, adding that the pl= an=20 will "restore the utilities to financial stability" if they agree to sell= =20 their intercity power transmission system to the state, provide low-cost=20 power to the state for 10 years and drop federal lawsuits seeking=20 compensation for their immense debts.=20 It's unclear, however, whether the average 26.5 percent boost in rates to= =20 customers of the three major privately owned utilities -- about 70 percent = of=20 Californians -- will do all that the Democratic governor insists it will. H= e=20 and his aides say it will cover the $5 billion or so that the state's gener= al=20 fund already has spent on emergency power purchases since January, finance= =20 future purchases and still provide enough "headroom" to pay off the=20 utilities' $13 billion in debts, part of which would be covered by the=20 transmission grid buyout. But the utilities and their creditors were alread= y=20 complaining that the PUC's somewhat larger rate boost was too small to cove= r=20 all the various costs and debts.=20 Davis aides refused to release specific numbers on how each cost factor wou= ld=20 be covered by the proposed rate boost. The governor's hike would come on to= p=20 of a 9 percent surcharge on power bills imposed in January and now being ma= de=20 permanent.=20 Even if it pencils out and is implemented by the PUC, however, the Davis pl= an=20 would leave Californians with some of the nation's highest utility rates an= d=20 invite a backlash from consumer activists who have been threatening to=20 sponsor a 2002 ballot measure if there's a "bailout" of utilities. The plan= =20 would also have to win the approval of Wall Street bankers, who would=20 underwrite and market the billions of dollars in bonds that Davis wants to= =20 float to pay for past debts and future power costs.=20 Will it be implemented? Will it work? Will it arrest Davis' slide in the=20 polls? No one can say for certain -- and that includes the governor himself= .=20 The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.c= om .=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------ Davis endorses rate hikes, defends handling of energy crisis=20 By Jennifer Coleman ASSOCIATED PRESS=20 April 5, 2001=20 SACRAMENTO =01) Gov. Gray Davis told Californians in a live address Thursda= y=20 night that he now thinks rate increases are needed to resolve the state's= =20 power crisis.=20 Davis, reacting to record rate hikes of up to 46 percent approved by state= =20 regulators last week for Pacific Gas and Electric Co. and Southern Californ= ia=20 Edison power customers, said he wants to make those who use the most=20 electricity bear the bulk of the price hikes.=20 "The more you conserve, the more you save," Davis said. "Conservation is ou= r=20 best short-term weapon against blackouts and price-gouging."=20 San Diego utility overspent $98 million, consumer group says=20 Text of Gov. Gray Davis' energy speech=20 ?=20 Speaking from his Capitol office in a televised five-minute speech, Davis= =20 lashed out at federal power regulators for failing to help California and= =20 defended his handling of the state's energy problems.=20 The Democrat told viewers California's short power supply and high wholesal= e=20 costs are the result of a "flawed deregulation scheme" signed into law in= =20 1996 by then-Republican Gov. Pete Wilson.=20 "But no matter how we got into this mess, you hired me to solve problems an= d=20 that's what I'm doing," he said.=20 Davis said he has fought utility rate increases "tooth and nail" but now=20 thinks they are needed to help finance the state's power purchases on behal= f=20 of Edison, PG&E and a third strapped utility, San Diego Gas & Electric.=20 The power buys have cost taxpayers $4.7 billion since January, money that= =20 will eventually be recouped from ratepayers.=20 Davis said the utilities were pushed to the brink of bankruptcy by soaring= =20 wholesale power costs and federal regulators' refusal to cap wholesale=20 prices.=20 "In January, with the feds still refusing to do their job, California stepp= ed=20 in to purchase the power the utilities could no longer afford to buy," Davi= s=20 said. "We didn't take over to save the utilities. We took over to keep the= =20 power on and the economy strong."=20 Davis, who repeatedly has said the state can resolve the power problems=20 without rate hikes, told viewers he now thinks rate increases are necessary= =20 to finance the power purchases.=20 His new stance comes after the state Public Utilities Commission last week= =20 approved rate increases of up to 46 percent for customers of Edison and PG&= E.=20 The commission has not yet decided how to spread the rate increases among t= he=20 utilities' customers.=20 Davis said he will propose a tiered rate plan that would mean a 26.5 percen= t=20 rate increase for the average customer. Under the governor's plan, the=20 heaviest power users would see an average 34.5 percent rate increase.=20 According to the Davis administration, the governor's plan would let Edison= ,=20 PG&E and the state's third investor-owned utility, San Diego Gas & Electric= ,=20 to make a total of $8 billion in debt payments over a decade.=20 Davis' plan would shift the burden of the PUC rate increase to heavier=20 residential, commercial and industrial power users while largely sparing=20 agricultural users, who would only see increases of 5 to 15 percent.=20 "We are going to take the governor's proposal under advisement and give it = a=20 lot of weight, I suspect," PUC Commissioner Carl Wood said, adding that the= =20 commission will seek input from consumer groups and businesses before makin= g=20 a final decision.=20 The three utilities say they have lost more than $14 billion since June due= =20 to soaring wholesale power costs. More than $13 billion of that comes from= =20 Edison and PG&E, who have been barred under the state's deregulation law fr= om=20 recovering the rising costs from their customers.=20 Davis =01) facing mounting pressure from Republicans and fellow Democrats t= o=20 resolve California's energy crisis =01) delivered the speech from behind a = desk,=20 with his hands clasped in front of him.=20 He assured residents that the state would survive the crisis.=20 "We are Californians. We've withstood earthquakes, floods, fires and=20 droughts," Davis said. "Yes, this is man-made, but with your help and God's= =20 blessing, we'll get through this as well."=20 He said he would stand by his plan to help restore the utilities to financi= al=20 health by negotiating state acquisition of their transmission lines and=20 requiring them to sell low-cost power to the state for a decade and drop=20 their lawsuits seeking to double their electric rates.=20 Davis urged Californians to help cut power use 10 percent to fend off rolli= ng=20 blackouts this summer, when residents will crank their air conditioners and= =20 demand will rise sharply.=20 The Legislature on Thursday afternoon sent Davis proposals that would spend= =20 $1.1 billion on conservation programs for consumers and businesses. Davis= =20 plans to sign the measures.=20 He listed actions he has taken to try to solve the power crisis, including= =20 negotiating long-term contracts to purchase power and buy the utilities'=20 transmission lines.=20 Davis also said he has cut red tape and provided incentives to speed power= =20 plant construction after a decade with none built.=20 "We can't fix 12 years of inaction overnight. But we're making real=20 progress," he said.=20 The speech, the first such message Davis has delivered besides his annual= =20 State of the State address, comes as the GOP and even fellow Democrats=20 criticize the governor's handling of the crisis.=20 Consumer groups, angered by the rate increases, are promising a revolt at t= he=20 polls in 2002, planning to roll back the rate hikes through an initiative= =20 that would share the ballot with Davis, who is up for re-election then.=20 Consumer advocate Harvey Rosenfield said Davis is failing to protect utilit= y=20 customers. He compared power suppliers to blackmailers charging an=20 "extortionary price for electricity."=20 "Nothing the governor has said tonight will do anything to stop the=20 profiteers," said Rosenfield of the Foundation for Consumer and Taxpayer=20 Rights in Santa Monica.=20 Power supplier Duke Energy said it has done nothing wrong and doesn't deser= ve=20 criticism for the wholesale prices.=20 "We are running our power plants at historically high levels to keep=20 consumers' lights on," Duke said in a written statement.=20 ---------------------------------------------------------------------------= --- ---------------------------------------- San Diego utility overspent $98 million, consumer group says=20 ASSOCIATED PRESS=20 April 5, 2001=20 SAN FRANCISCO =01) San Diego Gas and Electric Co. could have saved its cust= omers=20 $98 million by buying electricity using contracts rather than over-relying = on=20 purchases from the expensive daily market, a state consumer agency says.=20 The state Office of Ratepayer Advocates, the consumer arm of the Public=20 Utilities Commission, filed testimony Thursday recommending the PUC not all= ow=20 the San Diego utility to pass along the amount to its customers.=20 A call to Sempra Energy Corp., the parent company of SDG&E, was not=20 immediately returned Thursday night.=20 In August, the state Legislature capped electricity rates at 6.5 cents per= =20 kilowatt hour for the customers of SDG&E after customers saw their bills=20 skyrocket when the utility began passing along the market price of power.= =20 Since the price cap, SDG&E has undercollected around $400 million from its= =20 customers, said Steve Linsey, an ORA supervisor.=20 "Had SDG&E acted reasonably and prudently, SDG&E rates still would have=20 increased, but not by nearly as much," read a statement from the ORA.=20 "We're not saying that they could have seen the level or extent that the=20 overpricing occurred," Linsey said. "But just based on the history and=20 volatility of the market and supply and demand fundamentals that would have= =20 led them to hedge their portfolio rather than being totally exposed to the= =20 spot market."=20 ---------------------------------------------------------------------------= --- ------------------------------------ Davis Acknowledges Need for Rate Hike=20 Electricity: In a statewide TV broadcast, he says the average would be 26.5= %.=20 For the first time, he calls situation a "crisis."=20 By DAN MORAIN, Times Staff Writer=20 ?????SACRAMENTO--After spending months voicing opposition to rate hikes, Go= v.=20 Gray Davis acknowledged to a statewide television audience Thursday night t= he=20 need for an electricity rate increase that would average 26.5%. ?????For the first time calling it an "energy crisis," Davis enumerated ste= ps=20 he has taken, then said he has fought "tooth and nail against raising rates= ."=20 But citing a need for increases, the Democratic governor called for a tiere= d=20 system in which people who use the most electricity pay the most--as much a= s=20 37% more if they use more than twice their minimum allotment. ?????"Here's the point: The more you use, the more you pay," Davis said. "T= he=20 more you conserve, the more you save. Conservation is our best short-term= =20 weapon against blackouts and price gouging." ?????Davis said his proposed rate plan is sufficient to help reduce the=20 $13-billion debt of Southern California Edison and Pacific Gas & Electric.= =20 Although the bulk of the rate increase would be used to help California=20 finance bonds for long-term power purchases, about 10% to 15% would be=20 earmarked for the utilities--so long as they agree to sell their transmissi= on=20 lines to the state, according to the administration. ?????The decision to offer the utilities at least some rate hike monies=20 brought a sharp response from lawmakers. Consumer advocates also are sure t= o=20 be unhappy. ?????"We are not in this business to bail out these guys," said Senate=20 President Pro Tem John Burton (D-San Francisco). ?????Added Harry Snyder of Consumers Union: "Absolute giveaway . . . He is= =20 going to pay them off completely for all their mistakes." ?????The governor took the unusual step of reserving air time on statewide= =20 television at a time when he is slipping in polls and surveys show that the= =20 public is increasingly concerned about the energy crisis. Gov. Pete Wilson= =20 took a similar step during the recession in 1992 when he moved to raise tax= es=20 and cut government spending. ?????The speech took on greater urgency as the California Independent Syste= m=20 Operator, the entity that oversees power distribution, warned Thursday that= =20 the state will face 34 days of rotating blackouts if consumers and business= es=20 use the same amount of electricity this summer that they did last year. The= =20 blackouts could be extensive enough to darken 5 million homes at once. ?????The governor's speech came hours after the Legislature approved a reco= rd=20 $1.1 billion in energy conservation measures designed to provide consumers= =20 with incentives to reduce electricity use.=20 ?????In his speech, Davis renewed his call to Californians to curtail=20 electricity use by at least 10%, even as a new report was issued warning th= at=20 the state faces repeated summer blackouts because of a major gap in the=20 supply of power during the coming months. ?????"We are 34 million strong, and if each of us does our part, we can=20 minimize disruptions and get through the summer," Davis said. ?????The governor did not speak in detail on any issue, including the rate= =20 hike. The talk lasted a mere five minutes, delivered in fewer than 800 word= s. ?????Under Davis' proposal, Southern California Edison residential customer= s=20 would face an average increase of 2.21 cents per kilowatt hour. San Diego G= as=20 & Electric customers would have a 2.57-cent hike, while Pacific Gas &=20 Electric would have a 2.44-cent boost. Business rates would rise slightly= =20 more. ?????Davis blamed the rate hikes on rising natural gas prices, a lack of=20 adequate generation and the federal government's refusal to cap wholesale= =20 power prices. ?????Rates for customers of the state's two largest utilities rose 9% in=20 January. That boost remains in effect. Legislation approved earlier this ye= ar=20 bars further rate increases for those who use up to 30% more than their=20 so-called baseline allocation. ?????According to administration estimates, 53% of consumers would experien= ce=20 no rate hike beyond the 9% boost approved in January. A fourth of all=20 households would face increases averaging 34.5%. ?????Under the proposal, which requires Public Utilities Commission approva= l,=20 people who use up to 200% of their baseline allocation would see rates on= =20 that portion of their electricity use go up by 9%, plus the 9% already=20 imposed for a total of 18%. ?????Electricity users who consume more than twice their baseline allocatio= n=20 would pay between 33% and 37% more for kilowatts used beyond 200% of their= =20 baseline allocation. ?????Davis' proposed rate increase is somewhat lower than that proposed by= =20 the PUC, in part because he had more information, including the price that= =20 the state is paying for electricity, his aides said. ?????"My proposal raises rates fairly, assures us of long-term power,=20 stabilizes the utilities and promotes conservation," Davis said. ?????Although there has been wide news coverage of the crisis, the governor= 's=20 aides said Davis felt a need to talk directly to Californians to sum up the= =20 steps that he has taken to solve the problem. ?????Perhaps adding to the urgency, utility customers could start seeing=20 increases in their bills as early as next month. Further raising the stakes= =20 for the speech, Davis warned this week that supplies will be so short that= =20 there could be blackouts by the end of the month, and continue into May and= =20 June. ?????"The public is more aware of what is going on on this issue than any= =20 other issue I have seen, ever," said Democratic political consultant Gale= =20 Kaufman. "People have gotten three or four bills that they're unhappy with= =20 and they may have been in a blackout or two. There is a concern for the=20 future. ?????"By not talking to the public for a long time," Kaufman said, "and=20 focusing it on one speech in one day, people will dissect this five minutes= ,=20 much more than if he would have had a regular dialogue." ?????In what some political consultants see as a reflection of Davis'=20 declining political strength, a recent Times poll showed that in Davis'=20 hometown of Los Angeles, only 14% are more likely to vote for a candidate= =20 endorsed by Davis, while 21% would be less likely. ?????Several recent private polls show that a majority of Californians woul= d=20 not vote to reelect Davis if he were on the ballot today, though Davis does= =20 not face voters in a general election for 19 months, giving him plenty of= =20 time to recover. ?????"People need to be reassured that there is a strong sense of direction= ,"=20 said Bill Carrick, a Democratic consultant. "I don't think people are looki= ng=20 for a magic wand. But they need a sense that there is sense of direction." ?????Other political consultants said Davis used television to get his=20 message out because newspaper accounts have raised questions about his=20 handling of the situation. Also, voters who get the bulk of their informati= on=20 from television news generally have less knowledge about the nuances of the= =20 crisis. ?????"He is not doing well with the print story," said Republican consultan= t=20 Wayne C. Johnson, "so he has decided to change venues." ?????Johnson, like many consultants, also said the governor's declining pol= l=20 numbers likely influenced his decision to make the television appearance,= =20 carried on most stations across the state during 6 p.m. news shows. ?????"Gray Davis doesn't do anything that the polls don't dictate," Johnson= =20 said. "He is doing this because the polls show his support is in free-fall.= " ?????Until Thursday, Davis had not characterized the situation as a "crisis= ,"=20 instead calling it a "challenge." That euphemism raised the hackles of many= =20 legislators. ?????"It's pretty clear: The public is angry and scared," said state Sen. D= on=20 Perata (D-Alameda). "They want a sense that someone is in control, and that= =20 there is some certitude of where we're going. We're lacking both." ?????The Legislature, meanwhile, approved two measures touted as ways to cu= t=20 the state's power needs this summer, when hot temperatures traditionally=20 cause demand to surge--a situation that this year could result in blackouts= . ?????The bills had been bogged down in squabbling between the Assembly and= =20 Senate. The delay raises questions about whether the conservation incentive= s=20 will be in place long enough to have an immediate effect. ?????The bills, a $709-million measure by state Sen. Byron Sher (D-Stanford= )=20 and a $409-million measure by Assemblywoman Christine Kehoe (D-San Diego),= =20 contain a dizzying range of financial "carrots" designed to help people cut= =20 power use. ?????There is $50 million to help low- and moderate-income consumers replac= e=20 energy-wasting appliances such as old refrigerators with new, more=20 energy-efficient equipment, $60 million to help consumers replace older=20 lighting systems, $7 million to teach school children about energy=20 efficiency, and $50 million for electricity meters for businesses. ?????The Senate bill won final passage on a 31-6 vote; the Assembly bill=20 cleared the Legislature on a 55-15 vote. However, not everyone supported th= e=20 concept of government subsidies to reduce power use. ?????Meanwhile, utility watchers issued gloomy reports early Thursday,=20 helping to drag down the stocks of Edison International and PG&E Corp.,=20 parent corporations of the beleaguered utilities. Edison closed at $12.64 p= er=20 share, down 34 cents or 2.6%, while PG&E fell to $11.38 per share, down 27= =20 cents or 2.3%, on the New York Stock Exchange. ?????Standard & Poor's said it is unlikely that Southern California Edison= =20 and Pacific Gas & Electric will regain a sound credit rating soon. The Wall= =20 Street debt-rating firm lowered the utilities' credit rating to high-risk= =20 junk-bond status in January when they began defaulting on debt. ?????Standard & Poor's cited a lack of action by Davis and state legislator= s,=20 and said rate increases approved by the PUC will not be sufficient to pay a= ll=20 electricity costs. Banks and other creditors will run out of patience befor= e=20 long unless a settlement is reached to help the utilities pay past debts,= =20 Standard & Poor's said. ?????The firm predicted that "the coming weeks are likely to be critical if= =20 the utilities are to be made financially sound companies once again and avo= id=20 bankruptcy proceedings." ---------------------------------------------------------------------------= --- ------------------------------------------------------------------- Putting the Heat on 2-Fridge Households=20 Electricity: Utilities intensify bid to cut the numbers of spare iceboxes a= nd=20 freezers, which experts say use enough energy to power 200,000 homes.=20 By MARTHA L. WILLMAN, Times Staff Writer=20 ?????Parked next to the two cars in Gordon Gould's Valencia garage is a=20 side-by-side white Whirlpool refrigerator, stocked with all the TV dinners,= =20 Dreyer's ice cream and cold Pepsi he can't squeeze into the duplicate fridg= e=20 in his kitchen. ?????To conservationists, Gould's extra refrigerator--and 1 million more li= ke=20 it in garages throughout the state--is a symbol of how our energy-guzzling= =20 lifestyle is straining the state's power supply. To Gould, it's something h= e=20 can't bear to live without. ?????"I need it for drinks and frozen foods," said Gould, 78, who has lived= =20 alone since his wife died last fall. "We've always had two refrigerators. I= =20 absolutely need it." ?????You wouldn't think of this dilemma as a key part of California's=20 electricity crisis. Yet the state Public Utilities Commission is prepared t= o=20 spend nearly $10 million this year to persuade people to turn in their gara= ge=20 iceboxes. ?????The California Energy Commission estimates that spare refrigerators an= d=20 freezers throughout the state suck up enough juice to collectively power=20 200,000 homes. After air-conditioning units, refrigerators are considered t= he=20 largest consumers of electricity in the typical household. ?????Many owners of spare refrigerators view them as a necessity. Whether= =20 that is true or not, people will tenaciously cling to the appliances becaus= e=20 they offer "a little extra security" at a time in which many still do not= =20 believe that an energy crisis is real, said Dallas Willard, a USC philosoph= y=20 professor. ?????"It represents the idea of something in reserve, and there is not very= =20 much that people have in reserve in this culture," Willard said. "We go for= =20 elaborate security systems such as SUVs with giant tires that look like the= y=20 could run over small buildings, or huge ugly dogs that serve no purpose but= =20 to scare people. It's a sense of a fragility of the system put together wit= h=20 not being sure there is a problem there." ?????Then, too, homeowners can expect scant financial rewards, at least=20 immediately, for giving up their garage refrigerators. In Southern Californ= ia=20 Edison's territory, owners are paid just $35, or offered $50 worth of compa= ct=20 fluorescent light bulbs, in exchange for working refrigerators. As the=20 program expands to Northern California and San Diego County, the bounty wil= l=20 rise to $75. Die-hard adherents of spare refrigerators, such as Gould, scof= f=20 at such offers. ?????"It's important to me," he said, adding that he wouldn't consider even= a=20 $75 rebate. "There's not enough room in my other one." ?????He's got plenty of company. A few blocks away, Robin Ray keeps a simil= ar=20 grip on the 1980s-vintage Kenmore standing tall in his garage. ?????"I utilize that refrigerator way too much to get rid of it," said Ray,= =20 38, who lives with his wife and their 5-year-old son. "We use it to store a= ll=20 the extra meat, fish and chicken we buy every time we run to Costco." ?????Mary Potts has both a gleaming black 23.5-cubic-foot, side-by-side=20 refrigerator and a 20-cubic-foot upright freezer in her garage nearby. ?????"I know it's a luxury--we try to watch our power usage--but you need i= t=20 to keep drinks, soda pops and food for parties," said Potts, an insurance= =20 executive. ?????State officials believe that with energy costs rising, residents will = be=20 more willing to decommission their spare refrigerators. And they point out= =20 that a recycling program in Edison's territory has been a huge success,=20 resulting in 254,000 refrigerators being turned in over the last seven year= s. ?????Still, with more than 9 million new refrigerators sold in the U.S. eac= h=20 year, according to Appliance Magazine, the secondhand fridge market=20 flourishes in classified ads and thrift stores. No one knows exactly how ma= ny=20 refrigerators are permanently disabled or sent out of the country, but ener= gy=20 experts say the number of total units is not dwindling, despite recycling= =20 efforts nationwide. ?????With a median life span of 19 years, refrigerators and freezers "often= =20 take on a second, third and fourth lifetime," said Wayne Morris of the Assn= .=20 of Home Appliance Manufacturers, an international trade organization.=20 ?????Paul Janzen, who recently moved to Telluride, Colo., is advertising "a= n=20 old junker refrigerator for $25" among the furnishings he is trying to shed= =20 at his Orange County apartment. He bought the full-size, used refrigerator= =20 for $45 from a Salvation Army thrift store 10 years ago. "It probably uses = a=20 whole lot of energy, but it still works wonderfully," Janzen said. ?????Indeed, experts say old refrigerators use up to four times the energy = of=20 the newest models. ?????"Most people simply don't think about the refrigerator as a major ener= gy=20 user. It's not like a hair dryer that you have to turn on," said David=20 Goldstein of the Natural Resources Defense Council, an environmental advoca= cy=20 group that has pushed for more efficient appliances. ?????Energy experts estimate that 10% to 14% of California households harbo= r=20 an extra refrigerator or freezer. Appliance repair workers informally guess= =20 that the number in Southern California is higher, based on their firsthand= =20 experience in servicing refrigerators in affluent suburban neighborhoods. ?????"Most people have a spare refrigerator, as a convenience," said Terry= =20 McVicker, owner of Certified Service in Anaheim. But he said calls to fix= =20 spares in the last six months have dropped as more people have complained= =20 about energy costs. ?????Others, however, are so attached to the convenience that they are=20 willing to fix or replace their garage iceboxes. ?????"A lot of times, people get used to them," said Scott Kassner, general= =20 manager of Angel Appliances in North Hills. "So if one dies, they are just = as=20 likely to find a used one to put in its place." ?????Within the next few weeks, the three major private utilities in=20 California will intensify a campaign to capture spare appliances with=20 advertising, bill inserts, roving exhibits and other promotions. ?????"This year we are trying our best to get as many of these refrigerator= s=20 and freezers offline prior to the summer season," said Jeannette Duvall-War= d,=20 refrigerator recycling program manager for Edison, which is also coordinati= ng=20 the effort by Pacific Gas & Electric and San Diego Gas & Electric. ?????To qualify for rebates, refrigerators must be 10 to 25 cubic feet and = in=20 working condition. Edison customers have a choice of a $35 rebate or a=20 five-pack of compact fluorescent lightbulbs worth $50. Because the programs= =20 are new, consumers in the Bay Area and San Diego will receive $75 rebates. = In=20 exchange, customers can expect annual energy savings of $150 or more. ?????Among those taking advantage of the rebates is Ruth Beatty of Covina,= =20 who has turned in three appliances in the last year, collecting $35 rebates= =20 on each. He said the first was a refrigerator only 5 years old that require= d=20 repeated repairs. The second, recycled from a neighbor's garage, "would tal= k=20 to me, like a dog moaning" and caused his monthly electric bills to double.= =20 The latest was a 15-year-old freezer he turned in as a cost-cutting move. ?????"When the electric bill becomes more than the rent, you start=20 investigating," he said. ---------------------------------------------------------------------------= --- ------------------------------------------------------------------ Davis Proposes Tiered Plan To Boost Rates=20 Governor wants slightly lower increases than PUC adopted=20 Lynda Gledhill, Greg Lucas, Chronicle Sacramento Bureau Friday, April 6, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /06/M N141706.DTL=20 After months of denying that rate increases were needed to pull California= =20 out of its energy crisis, Gov. Gray Davis yesterday proposed an average 37= =20 percent increase for residential users served by PG&E.=20 The governor's electricity rate increases are slightly lower than the ones= =20 adopted by the PUC last week. He said about half of the state's residential= =20 customers would see no increase at all.=20 Davis has blamed the energy crisis on his GOP predecessor, out-of-state=20 energy generators and federal regulators.=20 But in a rare statewide television address last night, he acknowledged that= =20 pointing the finger would not solve California's flawed deregulation plan= =20 that plunged utilities into debt as wholesale energy prices rose and retail= =20 rates remained frozen.=20 "It's become increasingly clear . . . that with rising natural gas prices,= =20 the (Federal Energy Regulatory Commission's) failure to control costs and t= he=20 state's lack of supply, that some rate increases are necessary to keep our= =20 lights on and our economy strong," Davis said.=20 By embracing a rate increase lower than the PUC's, Davis tried to portray= =20 himself politically as a leader, but he also put himself in jeopardy should= =20 his plan fail.=20 Last week, the PUC approved a rate increase that would average 40 percent.= =20 That includes making permanent a temporary 10 percent average increase=20 adopted by the commission in January.=20 Davis also would make that average 10 percent increase permanent.=20 The PUC's rate would lift the customer's price per kilowatt by about 3 cent= s.=20 Under Davis' plan, the rate for PG&E customers would be 2.44 cents.=20 Consumer advocates blasted Davis' plan as a bailout for investor-owned=20 utilities.=20 "Gov. Davis blamed everyone but himself tonight," said Harvey Rosenfeld,=20 president of the Foundation for Taxpayer and Consumer Rights.=20 Rosenfeld said Davis must have the courage to stand up to out-of-state powe= r=20 generators and, if they don't reduce their profits to fair levels, impose= =20 taxes on their windfall gains. If that doesn't work, he said, the state=20 should move to seize power plants.=20 Even though Davis' plan would generate less revenue than the PUC's increase= ,=20 he says he can do more with less.=20 The governor's plan would eliminate a 10 percent rate increase scheduled to= =20 kick in next March. The PUC's would not.=20 Davis said his slightly lower rate not only would provide enough money to p= ay=20 off a bond California is set to issue for power purchases but also would pa= y=20 off a portion of PG&E and Southern California Edison's $14 billion debt.=20 The remainder of the debt would be erased by the state's purchase of the PG= &E=20 and Edison's transmission lines, an idea Davis again endorsed last night.= =20 The PUC's rate increase did not address the utilities' debt.=20 The state will have to issue a bond of somewhere between $12.4 billion and= =20 $14 billion to cover power purchases, said John Stevens, Davis' top energy= =20 adviser. The state has spent about $4 billion so far.=20 All of this can be in a smaller rate increase because the governor's office= =20 has different numbers, Stevens said. The numbers will be provided to the=20 board,=20 but have not been made available yet.=20 PUC Commissioner Carl Wood said the board would review Davis' plan.=20 "There isn't a big gulf," he said. "These are more recent numbers. But the= =20 PUC has the ultimate responsibility to make rates."=20 While the PUC rate increase has already been adopted, the tiered structure= =20 has not.=20 Reaction to the speech was not overwhelmingly supportive.=20 A statement by PG&E said it supported the governor's efforts to increase=20 conservation but said the speech did not go far enough.=20 "However, the state's power crisis has been ongoing for nearly a year now,= =20 with little relief in sight," the statement said. "Unfortunately, the steps= =20 the governor announced tonight still do not appear to offer a comprehensive= =20 solution to resolve California's energy crisis."=20 Republicans were not any more supportive.=20 Davis' only announced 2002 Republican challenger said Davis had failed to= =20 take responsibility for his "mismanagement" that had made the crisis worse.= =20 "Gov. Gray Davis looked us right in the eye and said nothing," said Secreta= ry=20 of State Bill Jones. "The first responsibility of leadership is to tell the= =20 truth. Gray Davis needs to level with the people of California -- not=20 continue to tell them bits and pieces that he thinks they want to hear." Th= e=20 admission that rate increases are necessary is a politically dicey move for= =20 Davis, but one widely seen as necessary.=20 The Democratic governor had come under increasing pressure to take decisive= =20 action after the PUC's action last week.=20 But Davis political adviser Garry South said Davis needed to take the time = to=20 make sure the numbers were right.=20 "I think people understand when a public official comes forward and looks= =20 them in the eye and says here is what we need to do to solve it," he said.= =20 "The governor clearly has the authority to ask the PUC to do something."=20 Davis said he opposed the increase at the time, and denied having any=20 knowledge of the plan, despite having appointed a majority of the board.=20 In his speech, Davis "urged" the PUC to consider the plan.=20 Davis had maintained since last fall that he wanted to work to solve the=20 energy crisis without a rate increase.=20 "If I wanted to raise rates, I could have solved this in 20 minutes," Davis= =20 said in February.=20 Even with the rate increase there are still many pieces of the energy puzzl= e=20 that must be solved.=20 The rate increase will cover only the utilities' back debt if there is an= =20 agreement to sell the transmission systems. So far, those negotiations have= =20 progressed very slowly.=20 Davis urged conservation as the main way to get through the summer.=20 "The more you use, the more you pay," Davis said.=20 He lauded two conservation bills passed by the legislature yesterday that= =20 provide about $1.1 billion for various programs, such as refrigerator trade= -=20 ins.=20 Also yesterday, Reliant Energy, one of the out-of-state generators providin= g=20 California with power, won a court ruling yesterday that means it no longer= =20 has to make forced sales of electricity to the state.=20 The Ninth Circuit Court of Appeals lifted an injunction from a lower court= =20 that forced the energy provider to sell to California, no matter whether it= =20 was paid or not.=20 E-mail Lynda Gledhill and Greg Lucas at lgledhill@sfchronicle.com and=20 glucas@sfchronicle.com.=20 A look at Gov. Davis' proposed rate increase, by the numbers. Proposed=20 rates do not include the average 10 percent temporary increase adopted in= =20 January that Davis wants to make permanent). -- Increase for the 55 percent of residential customers who use less=20 electricity than 130 percent of their predetermined baseline: 0% Average increase for people who use between 130 and 200 percent of=20 baseline=20 amounts: 10% Average increase for users who surpass 200 percent of baseline: 34.5% Average increase for "flat rate" industrial and commercial users 29% Average increase for "time of use" industrial and commercial users 30% (Proposed rates do not include the average 10 percent temporary increase= =20 adopted in January that Davis wants to make permanent.) ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Legislature Pounds Out Conservation Package=20 Davis expected to sign $1.1 billion measures=20 Greg Lucas, Sacramento Bureau Chief Friday, April 6, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /06/M N97060.DTL=20 Sacramento -- After a long day of haggling, both houses of the Legislature= =20 yesterday approved a $1.1 billion package of energy conservation measures= =20 designed to cut California electricity use as quickly as possible.=20 Much of the money goes to existing state programs offering loans, grants an= d=20 cash to business, agricultural, residential and low-income ratepayers. Gov.= =20 Gray Davis is expected to sign the bills.=20 Programs include rebates on new refrigerators and air conditioners, as well= =20 as grants to place reflective surfaces on roofs and replace traffic lights= =20 with energy-efficient bulbs and weatherize homes.=20 "These are well-known programs," said state Sen. Byron Sher, D-Palo Alto,= =20 author of one of the bills in the package. "They have been very effective."= =20 Lawmakers were divided over which consumers should get the most assistance,= =20 and fights flared between urban and rural lawmakers over the size of=20 assistance to agricultural interests.=20 The final compromise gives the bulk of the money to the Public Utilities=20 Commission and the California Energy Commission, which administer a host of= =20 conservation programs.=20 One-fifth of the $1.1 billion is devoted to programs helping the state's=20 poorest consumers.=20 Of the $240 million in low-income aid, $100 million will go to subsidize up= =20 to 25 percent of gas or electric bills in low-income households.=20 A poor household is defined as one that is below 150 percent of the federal= =20 poverty level -- roughly a family of four earning $25,000.=20 The program, known as California Alternate Rates for Energy, is administere= d=20 by the utilities and paid for by $180 million in surcharges on other=20 consumers' bills. The $100 million will go to expand the program.=20 An additional $120 million is pegged for a program that helps households=20 below 60 percent of the state median income -- $33,000 for a family of four= .=20 The program offers subsidies and grants for home-energy efficiencies like= =20 insulation, weather-stripping and low-flow shower heads.=20 Among the other programs receiving more money:=20 -- $50 million to beef up new air conditioner and refrigerator rebate=20 programs run by local utilities.=20 -- $50 million in 3 percent loans to replace inefficient display=20 refrigerators like the ones that hold drinks in mini-marts, liquor stores o= r=20 convenience stores.=20 -- $60 million to municipal utilities like those in Sacramento, Alameda and= =20 Palo Alto to expand their conservation efforts.=20 -- $10 million for cities and counties to replace stoplights with energy=20 efficient light-emitting diodes or LEDs.=20 -- $35 million in grants to businesses that recoat the roofs of their low-= =20 story buildings with reflective surfaces.=20 -- $35 million to create "demand responsive" buildings that use an Internet= =20 connection that can automatically adjust thermostats or lights when power= =20 alerts are called.=20 -- $50 million for a grab bag program for other innovative energy savings.= =20 -- $10 million to retrofit existing gas agriculture pumps with alternative= =20 fuels.=20 Information on these programs will be posted on www.flexyourpower.com, whic= h=20 also has links to the Public Utilities Commission and local utilities.=20 E-mail Greg Lucas at glucas@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 13=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- At least 3.6 million families face possible power cutoffs=20 Friday, April 6, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/06/n= ation al0450EDT0471.DTL=20 (04-06) 01:50 PDT WASHINGTON (AP) -- At least 3.6 million households are at= =20 risk of having their power cut off because they cannot afford soaring energ= y=20 costs, according to a study.=20 The survey was released Thursday by the National Energy Assistance Director= s'=20 Association, which represents officials who distribute federal energy aid t= o=20 poor families.=20 The study says 3.6 million families in 18 states and Washington, D.C., have= =20 fallen behind in payments to power utilities. Officials from the other 32= =20 states did not provide data for the survey.=20 Mark Wolfe, director of the association, says it comes as no surprise that= =20 poor families are having trouble keeping up with power costs.=20 Energy prices have been climbing in recent months as a result of increasing= =20 demand, reduced oil production overseas and skyrocketing wholesale costs in= =20 the West. The high wholesale prices have been blamed in part on deregulatio= n=20 in California's power market.=20 ------< ?On the Net: ?National Energy Assistance Directors' Association: ww= w.neada.org/ ?,2001 Associated Press ? ?-----------------------------------= -------------------------------------------?-------------------------------= --------------------------------????Davis reveals plan, including rate hike= s ?Posted at 10:07 p.m. PDT Thursday, April 5, 2001 ?BY DION NISSENBAUM ?AN= D HALLYE JORDAN ??Mercury News Sacramento Bureau ???SACRAMENTO -- In a rare= statewide television address, Gov. Gray Davis on ?Thursday abandoned his s= truggle to keep electricity rates from skyrocketing ?and proposed an increa= se of about 26.5 percent for almost half of the state's ?residents. ?Though= he had vowed repeatedly to protect Californians from footing the bill ?for= the state's failed deregulation plan, Davis offered an approach that ?appe= ars similar to the rate structure adopted last week by utilities ?regulator= s to prevent the crisis from deepening. ?Last week, Davis had insisted that= he didn't know that the Public Utilities ?Commission intended to raise rat= es and called the decision ``premature.'' ?Davis did not indicate in his sp= eech what led him to reach his decision, but ?a top adviser said Davis acte= d when he became confident the numbers required ?it. ?``I have fought tooth= and nail against raising rates,'' said Davis, who ?appeared somber and sli= ghtly nervous during the five-minute speech carried ?live by more than 75 s= tations and C-SPAN. ``It has become increasingly clear, ?however, that with= rising natural gas prices, the feds' failure to control ?costs and the sta= te's lack of supply that some rate increases are needed to ?keep our lights= on and our economy humming.'' ?Under his plan, the Democratic governor sai= d, more than half of the state's ?residential customers would not see highe= r energy bills. But residential ?customers who use more than 130 percent of= their baseline usage would see ?increases. Customers using the most electr= icity would face a jump of 34.5 ?percent, on average. ?Rates for businesses= would increase about 30 percent. ?Northern half hit hardest ?The governor'= s plan also calls for Northern Californians to shoulder the ?biggest rate i= ncreases. Customers of Pacific Gas & Electric Co., the utility ?in the wors= t financial condition, would see their electric bills rise an ?average of 2= 8 percent if they use more than 130 percent of their baseline ?usage. ?Alth= ough Davis stressed that ``more than half of you won't pay a penny ?more,''= figures from the utilities commission and PG&E suggest far more ?customers= may be subject to the governor's rate increase. ?PG&E spokesman Ron Low sa= id that only 31 percent of the utility's residential ?customers used no mor= e than 130 percent of their baseline last year. ?The governor offered scant= details about the proposal, but the plan appears ?similar to the one adopt= ed by the Public Utilities Commission. ``It doesn't ?look like there is a b= ig gulf between the overall numbers,'' said ?Commissioner Carl Wood. ?The P= UC plan -- the largest rate increase in state history -- envisions ?electri= c bills for homes and apartments going up by as much as 36 percent for ?tho= se who use the most energy. ?Both proposals come on top of a 9 percent resi= dential rate increase approved ?in January by the PUC that was intended to = be temporary, but is now expected ?to become permanent. ?Davis contrasted h= is plan with the PUC plan, saying he plans to earmark a ?portion of the rev= enue to help the utilities pay off some of their more than ?$12 billion deb= t they ran up purchasing power last year. ?To receive that deal, Davis said= , the utilities would need to agree to ?provide cheap power from their own = plants for a decade, agree to sell the ?state their transmission lines and = drop their lawsuits that could lead to ?higher rates. ?The speech marked a = dramatic turning point for Davis, who entered the energy ?crisis with a ple= dge to derail any plans to raise rates for average ?Californians. For month= s, Davis expressed his ``hope and expectation'' that ?the crisis could be r= esolved without forcing Californians to pay dramatically ?more for electric= ity. ?Davis and the Democrat-controlled Legislature are still struggling to= find a ?way out of the energy crisis that has brought two rounds of rollin= g ?blackouts, forced PG&E and Southern California Edison to the brink of ?f= inancial collapse and threatened to push California into an economic ?tails= pin. ?But as the complex pieces of the state's rescue plan failed to come t= ogether ?and the price tag continued to rise, Davis and lawmakers were left= with few ?options. ?While Davis steadfastly stood by his ``hope and expect= ation'' that he could ?avoid rate increases, most other state leaders had a= lready come to the ?conclusion that there was no way out of the crisis with= out them. ?But the governor recently softened his stance and said he would = support ?higher energy bills if he saw no other options. ?Some consumer act= ivists attacked the governor Thursday and vowed to fight the ?rate increase= at the ballot box. ?``The governor's plan is: Turn out the lights, get you= r wallets out and wait ?in the dark until the utility bill comes,'' said Ha= rvey Rosenfield, head of ?the Foundation for Taxpayer and Consumer Rights. = ?Some Californians who watched the speech also expressed disappointment tha= t ?Davis had given up on his fight against rate increases. ?``He said he di= dn't want to raise prices but he did anyway,'' said Craig ?Vomvardieri, 46,= of San Jose. ``Twenty-six percent still sounds like a big ?chunk of change= to me. But I guess he's trying to deal with it the best he ?can.'' ?Felix = Hill, 81 of San Jose, said Davis did not offer real solutions: ``He's ?just= trying to save his political hide.'' ?GOP reaction ?Republicans criticized= the governor for waiting so long to act on a crisis ?that they charged cou= ld have been addressed with less painful remedies last ?year before the pro= blems became so severe. ?State Sen. Tom McClintock, R-Thousand Oaks, said D= avis was leading the state ?down the path of ``heavy taxes, oppressive regu= lations, new bureaucracies, ?endless mandates to conserve even more, and ul= timately sky-high prices and ?rolling blackouts.'' ?The address marked the = first time since his January State of the State ?message that Davis has tak= en his case directly to the public. And it was the ?first time since 1992 -= - when GOP Gov. Pete Wilson talked about the recession ?-- that a governor = has delivered such a speech to Californians. ?Davis less popular now ?The c= risis has created a political challenge for the Democratic governor, who ?u= ntil recently has enjoyed strong support in the polls. His popularity has ?= taken a hit in recent weeks in the wake of growing criticism from prominent= ?members of his own party, the PUC's massive rate increase and a surprise = ?series of blackouts. ?After months of work, state leaders have little to s= how for their efforts to ?bring the crisis under control. The state continu= es to spend about $50 ?million a day to buy electricity, a job it took on i= n January when PG&E and ?Edison lost their ability to buy power themselves = because of mounting debts. ?Since then, Davis and his advisers have been tr= ying to piece together a ?bailout plan for the two companies. The plan, whi= ch calls for the state to ?buy 26,000 miles of transmission lines from the = two troubled utilities and ?San Diego Gas & Electric, has languished. ?Davi= s has expressed hopes of completing the deals soon, but talks with PG&E ?ha= ve been put to the side while the governor tries to reach an agreement with= ?Edison. ?Another key piece of the rescue plan -- a summertime conservatio= n -- has also ?been stalled by special interest wrangling. ?More than $1.1 = billion in conservation programs were hung up this week by ?efforts by the = agriculture community to win special protections from ?blackouts. ?After tw= o chaotic days, sorting through pages of last-minute changes proposed ?by l= obbyists and rounding up votes including a threat to intercept one ?senator= at the airport and bring him back to vote, lawmakers narrowly ?approved th= e bills. ?The funds -- $710 million in SB 5X by Sen. Byron Sher, D-Redwood = City, and ?$408 million in AB29X by Assemblywoman Christine Kehoe, D-San Di= ego -- will ?pay for a range of programs, from grants for weatherizing home= s to rebates ?for new energy-efficient appliances. ?In his address, Davis t= outed conservation as the best way to ward off higher ?energy bills. ?``The= more you use, the more you pay,'' Davis said. ``The more you conserve, ?th= e more you save.'' ??Mercury News Staff Writers Mark Gladstone, John Woolfo= lk and Dana Hull ?contributed to this report. ??---------------------------= ---------------------------------------------------?-----------------------= -------------------------------------------------------?--------------?????= Davis gives up fight against rate hikes ?Posted at 11:00 p.m. PDT Thursday,= April 5, 2001 ?BY DION NISSENBAUM AND HALLYE JORDAN ??Mercury News Sacrame= nto Bureau ???SACRAMENTO -- In a rare statewide television address, Gov. Gr= ay Davis on ?Thursday abandoned his struggle to keep electricity rates from= skyrocketing ?and proposed an increase of about 26.5 percent for almost ha= lf of the state's ?residents. ?Though he had vowed repeatedly to protect Ca= lifornians from footing the bill ?for the state's failed deregulation plan,= Davis offered an approach that ?appears similar to the rate structure adop= ted last week by utilities ?regulators to prevent the crisis from deepening= . ?Last week, Davis had insisted that he didn't know that the Public Utilit= ies ?Commission intended to raise rates and called the decision ``premature= .'' ?Davis did not indicate in his speech what led him to reach his decisio= n, but ?a top adviser said Davis acted when he became confident the numbers= required ?it. ?``I have fought tooth and nail against raising rates,'' sai= d Davis, who ?appeared somber and slightly nervous during the five-minute s= peech carried ?live by more than 75 stations and C-SPAN. ``It has become in= creasingly clear, ?however, that with rising natural gas prices, the feds' = failure to control ?costs and the state's lack of supply that some rate inc= reases are needed to ?keep our lights on and our economy humming.'' ?Under = his plan, the Democratic governor said, more than half of the state's ?resi= dential customers would not see higher energy bills. But residential ?custo= mers who use more than 130 percent of their baseline usage would see ?incre= ases. Customers using the most electricity would face a jump of 34.5 ?perce= nt, on average. ?Rates for businesses would increase about 30 percent. ?Nor= thern half hit hardest ?The governor's plan also calls for Northern Califor= nians to shoulder the ?biggest rate increases. Customers of Pacific Gas & E= lectric Co., the utility ?in the worst financial condition, would see their= electric bills rise an ?average of 28 percent if they use more than 130 pe= rcent of their baseline ?usage. ?Although Davis stressed that ``more than h= alf of you won't pay a penny ?more,'' figures from the utilities commission= and PG&E suggest far more ?customers may be subject to the governor's rate= increase. ?PG&E spokesman Ron Low said that only 31 percent of the utility= 's residential ?customers used no more than 130 percent of their baseline l= ast year. ?The governor offered scant details about the proposal, but the p= lan appears ?similar to the one adopted by the Public Utilities Commission.= ``It doesn't ?look like there is a big gulf between the overall numbers,''= said ?Commissioner Carl Wood. ?The PUC plan -- the largest rate increase i= n state history -- envisions ?electric bills for homes and apartments going= up by as much as 36 percent for ?those who use the most energy. ?Both prop= osals come on top of a 9 percent residential rate increase approved ?in Jan= uary by the PUC that was intended to be temporary, but is now expected ?to = become permanent. ?Davis contrasted his plan with the PUC plan, saying he p= lans to earmark a ?portion of the revenue to help the utilities pay off som= e of their more than ?$12 billion debt they ran up purchasing power last ye= ar. ?To receive that deal, Davis said, the utilities would need to agree to= ?provide cheap power from their own plants for a decade, agree to sell the= ?state their transmission lines and drop their lawsuits that could lead to= ?higher rates. ?The speech marked a dramatic turning point for Davis, who = entered the energy ?crisis with a pledge to derail any plans to raise rates= for average ?Californians. For months, Davis expressed his ``hope and expe= ctation'' that ?the crisis could be resolved without forcing Californians t= o pay dramatically ?more for electricity. ?Davis and the Democrat-controlle= d Legislature are still struggling to find a ?way out of the energy crisis = that has brought two rounds of rolling ?blackouts, forced PG&E and Southern= California Edison to the brink of ?financial collapse and threatened to pu= sh California into an economic ?tailspin. ?But as the complex pieces of the= state's rescue plan failed to come together ?and the price tag continued t= o rise, Davis and lawmakers were left with few ?options. ?While Davis stead= fastly stood by his ``hope and expectation'' that he could ?avoid rate incr= eases, most other state leaders had already come to the ?conclusion that th= ere was no way out of the crisis without them. ?But the governor recently s= oftened his stance and said he would support ?higher energy bills if he saw= no other options. ?Some consumer activists attacked the governor Thursday = and vowed to fight the ?rate increase at the ballot box. ?``The governor's = plan is: Turn out the lights, get your wallets out and wait ?in the dark un= til the utility bill comes,'' said Harvey Rosenfield, head of ?the Foundati= on for Taxpayer and Consumer Rights. ?Some Californians who watched the spe= ech also expressed disappointment that ?Davis had given up on his fight aga= inst rate increases. ?``He said he didn't want to raise prices but he did a= nyway,'' said Craig ?Vomvardieri, 46, of San Jose. ``Twenty-six percent sti= ll sounds like a big ?chunk of change to me. But I guess he's trying to dea= l with it the best he ?can.'' ?Felix Hill, 81 of San Jose, said Davis did n= ot offer real solutions: ``He's ?just trying to save his political hide.'' = ?GOP reaction ?Republicans criticized the governor for waiting so long to a= ct on a crisis ?that they charged could have been addressed with less painf= ul remedies last ?year before the problems became so severe. ?State Sen. To= m McClintock, R-Thousand Oaks, said Davis was leading the state ?down the p= ath of ``heavy taxes, oppressive regulations, new bureaucracies, ?endless m= andates to conserve even more, and ultimately sky-high prices and ?rolling = blackouts.'' ?The address marked the first time since his January State of = the State ?message that Davis has taken his case directly to the public. An= d it was the ?first time since 1992 -- when GOP Gov. Pete Wilson talked abo= ut the recession ?-- that a governor has delivered such a speech to Califor= nians. ?Davis less popular now ?The crisis has created a political challeng= e for the Democratic governor, who ?until recently has enjoyed strong suppo= rt in the polls. His popularity has ?taken a hit in recent weeks in the wak= e of growing criticism from prominent ?members of his own party, the PUC's = massive rate increase and a surprise ?series of blackouts. ?After months of= work, state leaders have little to show for their efforts to ?bring the cr= isis under control. The state continues to spend about $50 ?million a day t= o buy electricity, a job it took on in January when PG&E and ?Edison lost t= heir ability to buy power themselves because of mounting debts. ?Since then= , Davis and his advisers have been trying to piece together a ?bailout plan= for the two companies. The plan, which calls for the state to ?buy 26,000 = miles of transmission lines from the two troubled utilities and ?San Diego = Gas & Electric, has languished. ?Davis has expressed hopes of completing th= e deals soon, but talks with PG&E ?have been put to the side while the gove= rnor tries to reach an agreement with ?Edison. ?Another key piece of the re= scue plan -- a summertime conservation -- has also ?been stalled by special= interest wrangling. ?More than $1.1 billion in conservation programs were = hung up this week by ?efforts by the agriculture community to win special p= rotections from ?blackouts. ?After two chaotic days, sorting through pages = of last-minute changes proposed ?by lobbyists and rounding up votes includi= ng a threat to intercept one ?senator at the airport and bring him back to = vote, lawmakers narrowly ?approved the bills. ?The funds -- $710 million in= SB 5X by Sen. Byron Sher, D-Redwood City, and ?$408 million in AB29X by As= semblywoman Christine Kehoe, D-San Diego -- will ?pay for a range of progra= ms, from grants for weatherizing homes to rebates ?for new energy-efficient= appliances. ?In his address, Davis touted conservation as the best way to = ward off higher ?energy bills. ?``The more you use, the more you pay,'' Dav= is said. ``The more you conserve, ?the more you save.'' ??Mercury News Staf= f Writers Mark Gladstone, John Woolfolk and Dana Hull ?contributed to this = report. ???----------------------------------------------------------------= --------------?------------------------------------------------------------= ------------------?----------------------??????Western states share shortag= e of electricity ?Posted at 11:00 p.m. PDT Thursday, April 5, 2001 ?BY STEV= E JOHNSON ??Mercury News ???All across the West, an unsettling realization = is sinking in: The threat of ?blackouts and electric rate increases is no l= onger confined to California. ?In the past few months, consumers in at leas= t eight other Western states have ?been slapped with higher electricity bil= ls, largely because of the same ?out-of-control wholesale market that is wr= eaking havoc here. Wholesale prices ?in the Pacific Northwest are even high= er than in California, raising fears ?that California may be forced into a = bidding war to get the power it ?desperately needs. ?So far, officials in m= ost Western states expect to get through the summer ?without blackouts. Eve= n so, electricity supplies are worrisomely thin. ?``I don't recall a time w= hen it has been as tight as this,'' said Robert ?Dintelman, assistant execu= tive director of the Western Systems Coordinating ?Council, which plans to = release a report today assessing power supplies ?throughout the region. ?Th= e problem is expected to receive intense scrutiny Tuesday when officials ?f= rom California and 10 other Western states meet with the Federal Energy ?Re= gulatory Commission in Boise, Idaho, to discuss the spreading energy crisis= ?and what can be done about it. ?Julie Leonard, who manages Westy's Garden= Lanes, a 40-lane bowling alley in ?Boise, is among those who hope the solu= tion can be found quickly. Idaho Power ?is seeking to boost electric bills = by 24 percent for residents and 20 percent ?for most businesses. If approve= d, she said, it would tack $500 onto the ?bowling alley's $2,500 monthly po= wer bill. ?``Everybody is upset about it,'' Leonard said. ``They don't like= it, but what ?are they going to do about it. Everybody is trying to conser= ve whatever ?energy they can.'' ?Like Gov. Gray Davis and some other Wester= n governors, Leonard favors having ?the federal government impose regionwid= e caps on the wholesale price of ?power, which lately has been up to 10 tim= es higher than it was a year ago and ?up to 10 times what many Eastern stat= es now pay. ?But given the commission's past resistance to caps and the inc= reasing ?difficulty providing power to the West's fast-growing population, = averting ?problems this summer could prove difficult -- especially if unusu= ally hot ?weather sends electricity use soaring. ?``The entire Western grid= could be very short, and when that happens the ?price goes through the roo= f and .?.?. we get a scramble for power,'' said ?Severin Borenstein, who di= rects the University of California Energy ?Institute. ?The biggest victim i= n such a scramble could be California, because it imports ?about 20 percent= of the power it needs, more than any other Western state. ?That has become= a particular concern recently because of what has happened to ?prices in O= regon and Washington state, where a drought has severely crimped ?their hyd= roelectric power. ?In April last year, wholesale power at peak times was se= lling for about $36 a ?megawatt-hour in California, vs. $31 at a Washington= trading hub and $35 at ?another hub in Oregon, according to a survey by En= ergy NewsData. On ?Wednesday, the top price in California was $300 per mega= watt-hour, vs. $345 ?in Oregon and $350 in Washington. ?If that price diffe= rence persists into summer, some energy specialists fear, ?electricity supp= liers may be more willing to sell to Washington or Oregon ?than here during= emergencies, which could result in a nasty interstate ?rivalry. ?``The las= t thing that any of us needs is some sort of civil war between the ?states = because everyone will lose,'' said Tom Williams, a spokesman for Duke ?Ener= gy of Charlotte, N.C. Unfortunately, he added, ``I don't think imports ?are= going to show up in California this summer. And if they do, they're going = ?to be very, very expensive.'' ?Some experts aren't troubled by the price d= ifference, characterizing it as a ?temporary and insignificant development.= They also think too much is being ?made of rising prices and power constra= ints throughout the West. ?``Everybody has a knot in their stomach'' becaus= e supplies are tighter than ?in recent years, said Thomas Feiler of the Roc= ky Mountain Institute, an ?energy policy think tank in Colorado. But he cal= led most of the concerns ?``overstated,'' because ``the market fundamentals= just don't support that ?kind of Chicken Little thinking.'' ?While experts= consider the threat of blackouts to be most acute in California ?-- follow= ed by Washington and Oregon -- other states are in relatively good ?shape b= ecause they were more diligent about building power plants. ?Arizona is a g= ood example. Although ``summer is going to be a test,'' ?according to Heath= er Murphy, a spokeswoman for the Arizona Corporation ?Commission, which ove= rsees utilities, ``there is an air of confidence with ?caution.'' ?Still, a= t least one small Arizona community that does not generate its own ?power a= nd must buy it on the volatile spot market recently asked for a rate ?incre= ase. And across the West, other communities are facing similar troubles. ?A= side from Arizona and California, rate increases recently have been approve= d ?or proposed in portions of Colorado, Idaho, Nevada, Oregon, Utah, Washin= gton ?and Wyoming. California's rates are still higher in many cases. Even = so, the ?change in some of these other communities is not insignificant. A = temporary ?50 percent rate increase approved in Tacoma, Wash., in December = raised the ?average monthly electric bill for a home with electric heat fro= m $85.30 to ?$123.70. And the bill could go up more in October. ?That isn't= sitting well in a lot of places. And despite data that shows ?Californians= are better about conserving energy than consumers elsewhere, ?many other W= esterners hold this state responsible for the regionwide ?wholesale market = meltdown that led to their rate increases. ?``Basically, California is the = 1,000-pound gorilla in the Western power ?grid,'' said Richard Comerford, a= spokesman for Colorado's largest municipal ?utility in Colorado Springs, w= hich is asking for a 25 percent rate increase ?from its 175,000 customers. = ``The problems California is facing, with too ?much demand and not enough s= upply, is driving the price in the entire Western ?region. So to compete, w= e have to pay the same high price.'' ??Contact Steve Johnson at sjohnson@sj= mercury.com or (408) 920-5043. ???-----------------------------------------= -------------------------------------?-------------------------------------= -----------------------------------------?-------------------??????Getting = real on rates ?Published Friday, April 6, 2001, in the San Jose Mercury New= s ?THE best part of Gov. Gray Davis's Thursday night television address on = the ?energy crisis was the direct endorsement of a rate increase. ?Granted,= the Public Utilities Commission cleared the path 10 days ago by ?raising r= ates. In response, Davis had waffled. All winter he had pretended he ?could= restore stability to the system while protecting the current rates. ?Now t= hat he has seen the light on the necessity of higher rates both to ?procure= energy and to prompt conservation, Davis delivered the news in ?person. ?D= avis had not addressed Californians on the electricity shortage since ?Janu= ary. He was in danger of leaving the impression that the crisis was not ?cr= itical and that he was not engaged. ?Davis's rate plan seems roughly simila= r to that of the PUC. Both are ?structured to protect thrifty consumers and= designed to pressure the heavy ?users into cutting back. Davis called for = all Californians to cut demand 10 ?percent. ?The question is whether rate p= rotection for more than 50 percent of ?consumers, which Davis promised, wil= l lessen their incentive to conserve. ?But while the words in the speech we= re on point, the tone lacked zest. Davis ?is no Franklin Roosevelt. Too bad= , because in the call to conservation, some ?rhetoric to quicken the civic = virtue in the citizenry would have helped the ?cause. ?Unless the summer is= unexpectedly cool, conservation will be critical to ?avoiding blackouts. W= hile some additional supply will be coming online, it is ?not possible to b= uild fast enough. ?A part of that conservation has to come from average Cal= ifornians inspired to ?make sacrifices, such as as sitting in a hot house f= or a couple hours in the ?afternoon instead of turning on the air condition= ing. ?Wisely, Davis didn't review the promises he made in his January state= of the ?state speech, the last time he addressed Californians on energy. ?= Then, he had bashed the independent power generators and promised to ``rega= in ?control over the power that's generated in California and commit it to = the ?public good.'' ?Not a lot of progress has been made on that score. The= state has been ?purchasing power both for day-to-day needs and for the fut= ure. Davis has not ?reported specifically on what it is paying and how much= power is lined up. ?His plan to restore the financial health of Pacific Ga= s & Electric and ?Southern California Edison continues to hinge on state pu= rchase of the ?transmission system. Those negotiations have been crawling a= long. ?The governor faces a delicate task of convincing Californians of the= gravity ?of the electricity shortage for the coming summer without creatin= g a panic. ?They would like to feel he's got the situation in hand. Thursda= y's speech ?proved at least that he's got it in mind.??--------------------= ----------------------------------------------------------?----------------= --------------------------------------------------------------?------------= ------------?????Davis: Rate hikes a must ?April 6, 2001 ?The Orange County= Register ?Gov. Gray Davis for the first time Thursday endorsed electricity= rate ?increases, saying the strapped utilities need help to return to solv= ency. ?Addressing Californians in a televised speech, he lashed out at fede= ral ?regulators for refusing to limit wholesale electricity prices. ?Until = Thursday, Davis repeatedly said the state could resolve the power ?crisis w= ithout rate hikes. ?He announced his change of mind about two weeks after t= he Public Utilities ?Commission came out with a similar rate plan, using si= milar reasoning. ?The PUC must approve any change in rates. ?Some consumer = groups are promising a revolt at the polls in 2002, hoping to ?roll back th= e rate hikes through a ballot initiative.???-------------------------------= -----------------------------------------------?---------------------------= ---------------------------------------------------?-----------------------= -----------?????Davis' power-crisis plan brings questions from Wall Street = ?April 6, 2001 ?By KATE BERRY?The Orange County Register ?Wall Street analy= sts and investment bankers grilled Gov. Gray Davis' ?financial advisers Thu= rsday on a plan that would use a portion of an ?electricity rate increase t= o pay off some of the power-buying debts of ?Southern California Edison and= Pacific Gas & Electric. ?Joe Fichera, Davis' top financial adviser, said t= he new plan would raise $3.5 ?billion a year from ratepayers. About 5 perce= nt would pay off about $8 ?billion of the $14 billion debt accumulated by t= he state's two largest ?utilities. ?"The governor said tonight he wants the= utilities to be stabilized,'' said ?Fichera, who spoke to Wall Street anal= ysts in a conference call. "He supports ?a rate increase. Part of the rate = increase goes to their back debt. He's ?showing a commitment to avoid bankr= uptcy.'' ?Both utilities have delayed reporting their results for last year= 's fourth ?quarter because they are considering taking write-offs for whole= sale ?electricity debts. The utilities have incurred the debts since May be= cause ?they could not pass on their full costs to consumers protected by a = rate ?freeze. ?Under Davis' plan, the utilities could issue their own bonds= to pay off their ?debts, using the dedicated cash stream from ratepayers t= o service the bonds, ?Fichera said. ?In return, both utilities would have t= o agree to drop lawsuits against the ?state, sell their transmission lines = and supply power to the state for 10 ?years at cost-based prices, which inc= lude a profit for the companies. ?Fichera said negotiations with the utilit= ies are continuing and that he was ?exploring alternatives if the utilities= did not sign up for the plan. ?Stephen Frank, chairman and chief executive= of Edison, responded with a terse ?statement: "We will look to what action= s follow the governor's words ?tonight.'' ?Pacific Gas & Electric stated: "= The steps the governor announced tonight ?still do not appear to offer a co= mprehensive solution to resolve California's ?energy crisis.'' ?The Davis p= lan also includes the sale of $12.4 billion to $14 billion in ?bonds to cov= er power purchases made by the state Department of Water ?Resources. The bo= nds are to be repaid by ratepayers through their electricity ?bills over 12= to 15 years. ?But it was unclear to bankers and analysts whether the rate = increases ?proposed by Davis would cover the skyrocketing costs of electric= ity, ?particularly this summer. ?Davis' advisers declined to disclose how m= uch DWR is paying for electricity. ?Davis' rate plan assumes a 10 percent a= cross-the-board reduction in energy ?use this summer. Without conservation,= analysts said, the calculations could ?be off, triggering more rate increa= ses.???--------------------------------------------------------------------= ----------?----------------------------------------------------------------= --------------?--?????Davis pulls energy switch ?His proposal for a rate hi= ke, weighted toward heavy electricity users, ?represents a shift from previ= ous position. ?April 6, 2001 ?By JOHN HOWARD?The Orange County Register ?SA= CRAMENTO - Gov. Gray Davis said Thursday that Californians' electricity ?ra= tes must be raised to ease the state's energy crisis, and that some of the = ?money should help bail out the strapped utilities, which have rung up $14 = ?billion in debt. ?Embracing rate increases for the first time, Davis said = in a rare, ?five-minute, statewide television address that he "fought tooth= and nail ?against raising rates," but that "some rate increases are needed= to keep our ?lights on and our economy strong." ?The Democratic governor a= lso said that the proposed rate hike - a flexible ?scheme in which the heav= iest users would pay the most - would pay down the ?huge debt that utilitie= s have rung up buying wholesale electricity. ?But to take advantage of that= money - Davis didn't say how much - the ?utilities would have to agree to = three things: sell thousands of miles of ?transmission lines to the state, = provide at least a decade's worth of ?low-cost power to the state, and drop= all court actions seeking new rate ?increases. The proposal, which Davis u= rged the state Public Utilities ?Commission to adopt, would apply to Southe= rn California Edison, Pacific Gas & ?Electric Co. and San Diego Gas & Elect= ric Co. ?Senate leader critical of 'bailout' ?That provision to help the ut= ilities drew a sharp response from Senate Leader ?John Burton, D-San Franci= sco, a top consumer advocate. ?"We are not in the business of bailing those= guys out, and that's what he's ?doing. So you raise my rates $2, then you = say you're going to give 50 cents ?to the utilities to pay off back debt. W= hat that means to me is you could ?have covered the cost of electricity wit= h just $1.50," Burton said. ?Doug Heller of the Santa Monica-based Foundati= on for Taxpayer and Consumer ?Rights, was equally critical. ?"Gov. Davis, i= f you're going to pick our pockets, tell us how much you're ?really going t= o take because you can't pay off the energy cartel and bail out ?the utilit= ies with the rate increase that (you) talked about tonight," Heller ?said. = ?In Orange County, at least one resident who watched Davis' speech question= ed ?the state's handling of the crisis. ?"Everybody who's been watching thi= s understands that if you have a decreasing ?supply and an increasing deman= d, prices will go up. But the question is, why ?wasn't anyone managing this= thing a long time ago?" said Henry Eilbirt, ?president of the Community As= sociation of Leisure World-Laguna Woods, which ?represents about 3,500 resi= dents. "What the governor said is all very nice, ?but it doesn't solve the = problem. In fact, it seems like the governor is ?stepping away from a solut= ion." ?PUC, Davis plans are similar ?Two weeks ago, the PUC adopted a plan = - in some respects similar to Davis' - ?to raise rates through a tiered sch= eme in which the lightest users of ?electricity pay the least and the heavi= est users the most. It would raise ?customers' bills up to 36 percent. ?Und= er the Davis plan, roughly half of all electricity customers would not ?fac= e increases because their electricity consumption is already low or ?modera= te. But heavier users, nearly a fourth of all customers, would face a 9 ?pe= rcent increase, and those who consume the most face a 48 percent increase, = ?or from $129 to $171 on the average bill of a heavy Edison customer. ?"It = sends the signal, the more you use the more you pay," said V. John White, ?= executive director of the Center for Energy Efficiency and Renewable ?Techn= ologies. ?But Dave Cox, R-Fair Oaks, the Assembly's GOP leader and a former= utility ?executive, said the governor provided little hard information to = the public ?about how the electricity crisis will be resolved. ?"One day he= said there wasn't going to be a rate increase, and now he's ?saying it loo= k like we are going to have to. It kind of strains the ?credibility, doesn'= t it?" Cox said the speech was designed to make people ?feel as good as pos= sible in the crisis. ?"It was warm and fuzzy. It was a great political spee= ch, but it didn't ?provide any specificity on how to solve the problem,'' C= ox said. ?Staff writers Hanh Kim Quach, Kimberly Kindy and Andrew Horan con= tributed to ?this report.???-----------------------------------------------= -------------------------------?-------------------------------------------= -----------------------------------?-???[B] PG&E defaults on Los Alamos Ene= rgy power payment ??????San Francisco, April 5 (BridgeNews) - Los Alamos En= ergy, a division of Out ?Takes Inc., said Thursday that it was not paid for= past deliveries of ?electricity delivered to Pacific Gas & Electric (PG&E)= . The company joins a ?slew of other power providers that have not been pai= d by PG&E because of the ?utilities financial difficulties. The power produ= cer (qualifying facility, or ?QF) terminated its contract with PG&E March 1= 6 because of lack of payment. ?The termination was not contested by PG&E. ?= ?* * *???The company is in the process of exp= loring alternative buyers or markets for ?electricity sales. ?"While Los Al= amos Energy has demanded payment in full for electricity ?delivered to PG&E= , there can be no assurance that PG&E will, or can make such ?payment in ac= cordance with the demand," the company said in a statement. ?Los Alamos did= not return calls for comment on how much PG&E owes and what ?action it is = planning to pursue against PG&E. Some QFs are contemplating ?involuntary ba= nkruptcy action if PG&E does not create a settlement with ?California Gov. = Gray Davis on how to pay its around $4 billion debt. ?"In view of PG&E cont= inuing its existence absent reorganization, envisaged to ?be detrimental to= the interests of LAE as an unsecured creditor, there can be ?no assurance = of LAE collecting payments due from PG&E," the Dallas-based ?company conclu= ded. End ???---------------------------------------------------------------= ---------------?-----------------------------------------------------------= -----???Friday, April 6, 2001??????By Rick Stouffer ?rstouffer@ftenergy.com= ??While technology stocks in 2000 got whacked=01*taking much of the stock = market's ?oomph with it=01*guess what? America's energy woes meant no "whoa= s" when it came ?to reigning in revenues at the nation's energy-related com= panies.??Fortune 500 list numbers released this week show that energy-conne= cted firms ?did quite well in 2000, with 48 utility, pipeline, independent = power ?producer, convergent-type firms making the annual prestigious revenu= es list. ??Energy is top category?According to Fortune Magazine's research,= in terms of revenue growth, the top ?business category was what it calls e= nergy, including such giants as Duke ?Energy, Reliant Energy, UtiliCorp Uni= ted and Avista Corp. Combined this group ?experienced an 83.7% increase in = revenues from 1999. ??Second in revenue growth from a percentage increase w= as the pipeline ?category, including such firms as Enron Corp., Dynegy Inc.= , El Paso Energy ?Corp. and Williams. Combined this group saw 2000 revenues= jump 71.8%.???Even gas and electric utilities grew in double-digit bites d= uring 2000, up a ?strong 34.3% to capture seventh place among industry type= s. ??On the profit side, over a one-year period, pipeline companies came in= third, ?up 73.2%; energy firms took 10th place, up 23.4%; and gas and elec= tric ?companies captured 28th place, up 5.4%. Fastest profit growth year-ov= er-year ?was recorded in the mining, crude oil production category, up an a= mazing ?473.7%.??Not only did many of the energy-related listees make the T= op 500 mark=01*they ?pummeled it. ??Higher energy prices certainly led to v= ery large, black revenue and profit ?lines in company financials. In numero= us cases, revenues, and to a lesser ?extent profits, experienced double-, e= ven triple-digit increases from the ?year before. ??However, some industry = followers said the glowing revenue figures had a lot ?to do with good times= in trading natural gas and electricity=01*and, indeed ?profits as a percen= tage of revenues struggled to get out of the single ?digits. ??Enron leads = the pack?Leading the energy pack, excluding the major oil companies, which = are ?acknowledged to be in another galaxy in terms of revenues and profits,= was ?Enron Corp., listed in an industry grouping with the pipeline firms. = ?Obviously, Fortune Magazine was looking at the Houston, Texas-based giant'= s ?roots when grouping it with the pipes; but then, perhaps because it has = ?become so divergent in its paths, pipes was the only category that made an= y ?sense. ??Regardless, Enron's 2000 revenues more than doubled its nearest= ?energy-related challenger's figure, with revenues totaling $100.8 billion= =01*up ?151% from 1999, according to Fortune. ??On the overall Fortune 500 = list (the magazine actually tracks the top 1,000 ?firms), Enron was the onl= y energy-related (again excluding Big Oil) company ?to make the Top 10, set= tling in at No. 7. ??Duke has the profits?Manning the No. 2 energy-related = spot in a category Fortune calls "energy," ?was Duke Energy Corp., with 200= 0 revenues totaling $49.3 billion=01*up 127% from ?a year earlier. On the l= arger 500 list, Duke ranked No. 17. ??Duke may not have had Enron's revenue= s, but the Charlotte, N.C.-based titan ?led all comers in profits, pegged a= t a very patriotic $1,776 billion, ?bettering by 18% its 1999 numbers. ??Dy= negy (listed as a pipeline company) edged Reliant Energy (in the energy ?ca= tegory) in terms of 2000 revenues, $29.4 billion to $29.3 billion. Close ?b= ehind was another energy firm, UtiliCorp United, with 2000 revenues just ?u= nder $29 billion. ??The above trio on the Fortune 500 list, ranked by reven= ues, took the 54th, ?55th and 60th spots, respectively, on the highly regar= ded honor roll. ?Reliant's revenues jumped 92% year-to-year, Dynegy's rose = 91% and UtiliCorp's ?revenues climbed a strong 56% year-over-year. ??Southe= rn largest in its class?The largest firm in Fortune's gas and electric util= ity class was Atlanta, ?Ga.-based Southern Co., ranked fifth in terms of re= venues with $23.4 billion, ?but No. 2 in profits, at more than $1.3 billion= . Southern's revenues in 2000 ?ballooned 102%, while profits inched up by 3= %. Southern captured the 76th ?position on the actual Fortune 500 list. ??I= t's interesting to note that no matter how things change, they have a way o= f ?staying relatively the same. In 1999, the top five (actually four) energ= y ?firms in Fortune's list were MidAmerican Energy Holdings, UGI Corp., USE= C ?Inc. and NorthWestern Corp. ??For 2000, MidAmerican is not listed as it = was taken private by a trio of ?players headed by billionaire investor Warr= en Buffett; UGI fell to 10th ?place; USEC to 14th; and Northwestern Corp. t= o fifth. ??In the pipeline category in 1999, Enron was No. 1, followed by D= ynegy, ?Williams, El Paso and KN Energy. For 2000, Enron is tops, followed = by Dynegy, ?El Paso, Williams and TransMontaigne Inc. ??In the utility cate= gory, in 1999, the top five included PG&E Corp., Duke, ?Texas Utilities, Ut= iliCorp and Entergy. In 2000, Southern, PG&E, TXU, ?American Electric Power= and Edison International filled the top spots. ??Ironically, two of those = top five firms for 2000 could be in Chapter 11 ?bankruptcy protection befor= e the next Fortune 500 list comes out. ??Are the figures as rosy as they ap= pear? PricewaterhouseCoopers' Gerald Keenan ?cautions that the mind-bogglin= g leaps in year-over-year revenue totals were ?recorded while margins thems= elves shrank from where they were just a few ?years ago. ??"In large part, = a number of folks made trading much more of their portfolio," ?said Keenan,= PwC's energy strategy partner in Chicago. "Some of the ?astronomical price= s in the West also contributed. It's a situation where the ?revenues report= ed were much higher, but there was a significant drop in net ?income as a p= ercentage of sales." ??Indeed, in the Fortune 500 list's column titled "pro= fits as a percentage of ?revenues," only two of the top five listmakers in = the energy, pipelines and ?gas and electric utilities categories topped the= 5% mark. Southern and Edison ?International recorded profits as a percenta= ge of revenues figure of 6%.??Keenan suggests that as companies continue to= move, within the context of ?deregulation, toward merchant trading, revenu= es will continue on the present ?path, while margins will remain low. ??Exx= on Mobil blows away competition?And which firm took top honors in the Fortu= ne 500 list? For the first time ?since 1984, General Motors Corp. fell from= the top spot=01*blown out, actually=01*?by two firms, No 2, Wal-Mart Store= s Inc. and No. 1, oil giant Exxon Mobil. ??GM owned the top spot from the i= nception of the Fortune list in 1954 until ?1975, when skyrocketing oil pri= ces allowed then-Exxon Corp. to become No. 1. ??Last year, Exxon Mobil's re= venues totaled $210.4 billion, $17.1 billion more ?than Wal-Mart, and $25.8= billion more than GM. ?