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Date: Tue, 10 Jul 2001 04:35:00 -0700 (PDT)
From: jeff.dasovich@enron.com
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Please see the following articles:

Sac Bee, Tues, 5/10: No deal in energy refund talks

Sac Bee, Tues, 5/10: Third power plant opens: But the Los Medanos=20
facility isn't pouring out electricity yet

Sac Bee, Tues, 5/10: State reveals high-priced power deals

Sac Bee, Tues, 5/10: Government finds ways to conserve: The Santa Rita=20
Jail goes solar as agencies get creative to cut costs

SD Union, Tues, 5/10: Energy talks reach no settlement; state threatens sui=
t

SD Union, Tues, 5/10: Refunds in jeopardy as talks fail

SD Union, Tues, 5/10: State's massive outlays detailed

SD Union, Tues, 5/10: State releases early spot market energy purchases

LA Times, Mon, 5/9: FERC Judge Says State Owed No More Than $1 Billion

LA Times, Tues, 5/10: Electricity Cost Data Spread the Blame

LA Times, Tues, 5/10: Duke Energy Asked to Allow Release of Data

LA Times, Mon, 5/9: Concern Over Price of Long-Term Power Pacts Grows

SF Chron, Tues, 5/10: State's refund demand rejected=20
Judge ends rebate talks, rebukes $9 billion claim=20

SF Chron, Tues, 5/10: Davis opens another new power plant=20
Pittsburg facility will generate 555 megawatts

SF Chron, Tues, 5/10: California rejects B.C. Hydro $125 million settlement

SF Chron, Tues, 5/10: Davis' criticism of Texas misdirected, report finds

SF Chron, Tues, 5/10: Developments in California's energy crisis

SF Chron, Tues, 5/10: Energy talks reach no settlement; state threatens sui=
t

SF Chron, Tues, 5/10: Toxic fumes not linked to blackouts=20
Backup power OK in facilities, report says

Mercury News, Tues, 5/10: Power suppliers, state fail to agree on refund to=
tal

Mercury News, Tues, 5/10: Power purchase bills exceed $7.5 billion
Biggest suppliers are not from Texas

OC Register, Tues, 5/10: Refund outlook dims

OC Register, Tues, 5/10: State reveals details of power purchases

OC Register, Tues, 5/10: Ghost of Bob Citron roaming halls of capital
Gray Davis is following footsteps of former O.C. treasurer into fiscal=20
chaos      (Commentary)

Individual.com (PRnewswire), Tues, 5/10: Calpine's Los Medanos Energy Cente=
r=20
Adds
Needed Generation to California Second New Major Base Load Generator for=20
California=20

NY Times, Tues, 5/10: California and Generators Still Split After 2-Week Ta=
lks

Wash. Post, Tues, 5/10: Energy Refund Talks Fail In Calif.; Federal Agency'=
s=20
Judge To Propose Settlement

WSJ, Tues, 5/10: California and Energy Companies Miss Deadline

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

No deal in energy refund talks=20
By David Whitney
Bee Washington Bureau
(Published July 10, 2001)=20
WASHINGTON -- Negotiations to settle a tangle of issues arising out of=20
California's electricity debacle sputtered to an end Monday with the sides=
=20
light-years apart on refunds for overpriced wholesale power sales.=20
The impasse raises the specter of years of litigation, with a regulatory=20
judge proposing a formula that could limit refunds to about $1 billion whil=
e=20
California is seeking at least $8.9 billion and perhaps much more.=20
Federal Energy Regulatory Commission administrative judge Curtis Wagner sai=
d=20
that within a week he'll urge the five FERC commissioners to begin=20
fact-finding hearings on how much is truly owed, following guidelines he=20
outlined sketchily Monday.=20
Among them would be limiting the time when refunds are allowed -- something=
=20
that could reduce state claims by about one-third -- and changing the way=
=20
power plant costs are calculated to a formula more favored by generators.=
=20
Gov. Gray Davis said he was heartened by the judge's belief that California=
=20
is due some amount of refund money, rejecting the generators' arguments for=
=20
no refunds.=20
With the 15-day negotiation session nearly moribund, generators and power=
=20
traders had offered up $716 million in proposed refunds in the final days.=
=20
But Wagner indicated that that would have to be offset by money the state=
=20
still owes power companies, meaning no cash would actually change hands.=20
The judge held out the possibility that at least two parties, including San=
=20
Jose-based Calpine Corp., could reach separate agreements with the state.=
=20
"From what I know, it looks like we can reach an agreement," Calpine=20
spokesman Bill Highlander confirmed Monday. But he said he could not disclo=
se=20
any details under Wagner's gag order on participants in the negotiations.=
=20
Enron Corp., one of the nation's highest-profile power traders, said=20
California officials killed the talks by never budging from their claims th=
at=20
the state's consumers deserved at least $8.9 billion in refunds for=20
overcharges.=20
"These talks never had a chance," said Enron spokesman Mark Palmer. "Their=
=20
political skins are worth more than $716 million that the taxpayers of=20
California could have used. It was about creating and maintaining a tool fo=
r=20
a witch hunt."=20
Of the $716 million compromise offer, $510 million was put on the table by=
=20
what Wagner called the "Big Five" generators -- Reliant, Duke, Mirant,=20
Williams and Dynegy -- some of whom are under state investigation. Another=
=20
$125 million was offered by BC Hydro, British Colombia's government utility=
,=20
which is not under FERC jurisdiction, and $16.5 million was offered by six=
=20
California municipal utilities.=20
The Sacramento Municipal Utility District, the state's second-largest=20
municipal utility, also declined to comment on the talks or any settlement=
=20
amount it may have offered, but said it would outline its position in writi=
ng=20
Thursday, the judge's deadline for comments on his proposal.=20
Consumer advocates and some industry officials said the judge's brief publi=
c=20
remarks make it difficult to predict exactly what the impacts could be on t=
he=20
state's troubled electric scene.=20
"If the judge is saying that the refund is topped at a billion that's=20
outrageous," said Nettie Hoge, head of The Utility Reform Network. "If=20
they're going to start doing some fact finding, hallelujah."=20
Hoge said the talks had been unrealistic from the start, because there was =
no=20
effort by FERC to determine how high the overcharges had actually been and=
=20
then work toward a compromise from there.=20
The state used a formula calculated by its nonprofit grid operator, the=20
Independent System Operator, which was attacked by marketers as wildly high=
=20
even while the state called it conservatively low.=20
Joel Newton, representing all five of the big generators, said Monday that=
=20
the ISO has consistently based its demand on "sketchy and incomplete" data.=
=20
The face-off between Davis and power merchants began last fall, as wholesal=
e=20
electricity costs were soaring and California utilities warned that they=20
could be driven into bankruptcy.=20
The governor said generators and traders took advantage of the state's powe=
r=20
shortage to manipulate markets and gouge consumers. Generators said they=20
followed all laws and were only deriving fair profits in a scarcity=20
situation.=20
FERC, which entered the picture because by law it has to ensure that=20
electricity rates are "just and reasonable," has made repeated, unsuccessfu=
l=20
efforts to craft a solution that could appease both sides.=20
State Assembly Speaker Robert Hertzberg, D-Sherman Oaks, said Monday that t=
he=20
failure of the settlement talks to agree on a refund figure "comes as no=20
surprise."=20
Negotiators representing generators "refused to even acknowledge the=20
inescapable fact that they have profited enormously by exploiting a=20
dysfunctional market -- at California's expense," he said.=20
Davis, who had accused the generators of failing to negotiate in good faith=
=20
with state representatives, said that although FERC commissioners have been=
=20
slow to respond to his requests for refunds and for price caps on wholesale=
=20
electricity, they "now have the opportunity to redeem themselves."=20
He suggested the commissioners can opt to award California more than is=20
recommended by the judge.=20
Wagner, after mediating talks that continued throughout the weekend, seemed=
=20
resigned to the fact that trying to bring more than 50 government, utility=
=20
and power generating entities together proved to be an exercise in futility=
.=20
Michael Kahn, head of the California delegation and consultant to the=20
California ISO, nonetheless came away thinking the state had fared pretty=
=20
well.=20
"We came here wanting $8.9 billion," Kahn said. "In all candor, we didn't=
=20
receive any meaningful settlement offers and so the negotiations were not a=
s=20
helpful as we had hoped they would be. But our positions were vindicated"=
=20
because refunds were offered.=20
Meanwhile, Pacific Gas and Electric Co. and Southern California Edison=20
sounded the call for more talks.=20
"We're willing to talk to anyone, anytime about a settlement," said Steve=
=20
Pickett, general counsel of Southern California Edison. PG&E said in a=20
prepared statement that the sessions "provide a solid basis for further=20
negotiations."=20
How much money the state might eventually receive remains the big question=
=20
mark. Wagner said settlement offers of $716 million suggest that eventual=
=20
refunds will amount to "hundreds of millions of dollars, maybe a billion."=
=20
But he also stressed that he would recommend no specific figure to FERC=20
commissioners and does not know how big refunds might eventually be.=20
Other recommendations Wagner said he would make to the commission were a=20
mixed bag for the state.=20
The judge said he would recommend refunds no further back than Oct. 2, 2000=
,=20
an action that Kahn said would immediately slice $3 billion off the state's=
=20
refund analysis that stretched back to May 2000.=20
But Kahn said that was no defeat for the state, which would turn to the=20
courts to recover that and any other sums excluded from a final refund orde=
r.=20
"We still have a viable litigation claim for the remainder," Kahn said.=20
Brent Bailey, vice president and general counsel of Duke Energy of North=20
America, said he felt the formula laid out by Wagner would generate a refun=
d=20
order in the range of $1 billion to $1.5 billion.=20
"It's a reasonable amount in the context of these settlement talks," Bailey=
=20
said.=20

The Bee's David Whitney can be reached at (202) 383-0004 or=20
dwhitney@mcclatchydc.com.=20
Staff writers Emily Bazar and Dale Kasler contributed to this report.



Third power plant opens: But the Los Medanos facility isn't pouring out=20
electricity yet.=20
By Carrie Peyton
Bee Staff Writer
(Published July 10, 2001)=20
The flood of new electricity being welcomed by Gov. Gray Davis was only a=
=20
trickle at the latest power plant that the governor opened on Monday,=20
according to sources close to California's energy crisis.=20
Heralded by Davis as part of a "powerful one-two-three punch" that will bri=
ng=20
California closer to energy independence, the Los Medanos Energy Center in=
=20
Pittsburg spit out no more than 20 megawatts on its opening day, they said.=
=20
That is less than 5 percent of the plant's 555-megawatt operating capacity.=
=20
Los Medanos could generate a couple of hundred megawatts later this week bu=
t=20
is not expected to reach its full output for two to three weeks, according =
to=20
knowledgable sources.=20
Representatives for Calpine and the governor's office, when pressed for=20
details, acknowledged that the plant was not running at full tilt but said=
=20
they did not know how much electricity was actually produced Monday.=20
Calpine, which will bill someone for whatever electricity it sells from Los=
=20
Medanos, is keeping track of the production but the figure wasn't immediate=
ly=20
available for the media, spokeswoman Katherine Potter said.=20
"Even if it was two megawatts, that's two more megawatts that we didn't hav=
e=20
yesterday," said Davis spokesman Steve Maviglio.=20
He said the opening was "largely ceremonial," timed for the convenience of=
=20
the governor and Calpine's top executive.=20
But consumer advocate Harvey Rosenfield called the media event "a deception=
."=20
It was the third highly publicized power plant launch the governor has=20
attended in the past two weeks.=20
"It's the governor trying to convince people he's hard at work solving the=
=20
problem when it's all for show," Rosenfield said. "He's governing by sound=
=20
bite. He's certainly getting his money's worth from the consultants he=20
hired."=20
Davis political adviser Garry South said last week that the governor's new=
=20
radio ad campaign will highlight the efforts to produce more power in=20
California.=20
"Generation comes up in our polls as being the No. 1 thing people want us t=
o=20
do -- build more power plants," South said then. "People want the sense tha=
t=20
progress is being made -- that this is not spiraling out of control."=20
The other two plants that Davis kicked off -- Sunrise in Kern County and=20
Sutter near Yuba City -- have since been running at maximum capacity.=20
Calpine anticipates pumping the full 550 megawatts out of Los Medanos withi=
n=20
a week to 10 days, company officials said.=20
"In the first month of these new plants, there are always stops and starts,=
"=20
said Calpine spokesman Bill Highlander. "Sometimes we shut down altogether.=
"=20
Including the three just-opened facilities, new or expanded power plants ar=
e=20
expected to add 1,500 megawatts to the state's struggling electric grid by=
=20
the end of July, and 870 megawatts of that is already in place, according t=
o=20
the state Independent System Operator.=20
Another 1,000 megawatts is anticipated for the end of August and 1,100 more=
=20
for the end of September, under a rough timetable that is likely to see som=
e=20
plants zip ahead of schedule and others fall behind.=20

The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20
cpeyton@sacbee.com.



State reveals high-priced power deals=20
By Dale Kasler and Chris Bowman
Bee Staff Writers
(Published July 10, 2001)=20
The state Monday released details of its adventures in buying electricity o=
n=20
the spot market, revealing a chaotic world in which prices fluctuate wildly=
=20
within minutes.=20
The Department of Water Resources, which has been criticized for keeping it=
s=20
power-purchasing practices a secret, released 1,770 pages of invoices and=
=20
trade confirmations that provided the most detailed look yet of its purchas=
es=20
since it jumped into the energy-buying business Jan. 17. The information wa=
s=20
released a week after state Controller Kathleen Connell put out details of=
=20
the state's long-term power contracts over the objections of Gov. Gray Davi=
s,=20
her political nemesis.=20
The state has committed about $8.1 billion to buying power on behalf of=20
California's crippled utilities, straining the budget surplus and raising=
=20
questions from lawmakers and others about Davis' policies for resolving the=
=20
state's energy crisis. In turn, state officials have accused many suppliers=
=20
of gouging California to the tune of several billion dollars.=20
When it came to the spot market, the water department was at the mercy of a=
=20
business run amok. The state paid upward of $300 a megawatt-hour for days i=
n=20
January and February -- months when electricity normally should be a lot=20
cheaper. Water officials said prices have dropped to the $100 range largely=
=20
because they've signed a slew of long-term contracts, reducing their=20
dependence on spot sales.=20
"Our exposure earlier this year to the spot market was at the maximum," sai=
d=20
Oscar Hidalgo, spokesman for the water department.=20
The information released Monday covered the first three months of the year=
=20
and didn't include the highest price the water department has paid for=20
electricity: $1,900 a megawatt-hour in May to Reliant Energy Inc., a Texas=
=20
generator that owns several plants in the state. Duke Energy Corp. of North=
=20
Carolina charged even more for power in January, $3,880 a megawatt hour, bu=
t=20
that sale was made to the Independent System Operator, which runs the state=
's=20
transmission grid.=20
The documents show that while the state's stricken utilities no longer buy=
=20
power for themselves, their sister companies have sold expensive power.=20
Through May 31, the state paid a trading arm of Sempra Energy, the parent o=
f=20
San Diego Gas & Electric, some $429 million for power. It paid PG&E Energy=
=20
Trading, an unregulated sister company of Pacific Gas and Electric Co., abo=
ut=20
$23.7 million.=20
Among others, the Los Angeles Department of Water and Power was paid $331=
=20
million through May 31; Canadian utility BC Hydro was paid $1.05 billion;=
=20
Atlanta's Mirant Corp. $1.24 billion; the federal government's Bonne=0F'vil=
le=20
Power Administration $167 million; and the Sacramento Municipal Utility=20
District $80.7 million.=20
Generally, the more desperate the state was for power, the higher the price=
s.=20
For instance, Oklahoma-based generator Williams Cos. commanded $565 a=20
megawatt-hour March 20, when blackouts struck more than 1 million=20
Californians.=20
Location also was critical. On March 8 the state paid the PG&E trading unit=
=20
$250 but only $180 to Arizona-based Pinnacle West Capital Corp. The=20
difference was that PG&E's power was delivered to energy-starved Northern=
=20
California, while Pinnacle's was sent to Southern California where energy=
=20
wasn't so scarce.=20
Split-second timing was also crucial. At 9:09 a.m. Feb. 14, the state paid=
=20
$400 to Mirant for power to be delivered the next day. By 10 a.m. it was=20
paying Mieco Inc., a Long Beach trading firm, $475 for the same product.=20
"That's the spot market -- it's the most volatile market in the world, and =
it=20
changes on a second-by-second basis," said Enron Corp. spokesman Mark Palme=
r.=20
For all the criticism leveled at Duke, Reliant and other big corporations,=
=20
government-owned entities were among the most aggressive at charging high=
=20
prices.=20
BC Hydro, the electric utility owned by the Canadian province of British=20
Columbia, submitted bills for up to $1,000 a megawatt-hour. The city of=20
Glendale charged $375 a megawatt-hour for power in January, while SMUD=20
charged $309 a megawatt-hour in March. The city of Eugene, Ore., averaged=
=20
$450 a megawatt-hour in February.=20
"We play by the rules of the electricity trade marketplace," said BC Hydro=
=20
spokesman Wayne Cousins. "Our traders worked very hard to find additional=
=20
sources of electricity to keep the lights on in California. Had we not come=
=20
through and stepped forward with these supplies, the consequences to=20
California customers would have been severe."=20
The state also said it has spent $14.4 million on administrative costs in=
=20
buying power.=20

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.co=
m.




Government finds ways to conserve: The Santa Rita Jail goes solar as agenci=
es=20
get creative to cut costs.
By Cheryl Miller
Bee Correspondent
(Published July 10, 2001)=20
To Matt Muniz, the solar panels sprouting on the rooftop of the Santa Rita=
=20
Jail in Dublin aren't just energy-makers; they're money in the bank.=20
When all 4,000 panels are completely installed this month, the 500-kilowatt=
=20
photovoltaic system -- the largest rooftop project ever constructed in the=
=20
United States -- will cut the jail's demand on the electric grid by up to 2=
0=20
percent, according to Muniz, Alameda County's energy program manager.=20
That sun power, combined with conservation projects already completed at th=
e=20
jail, will slash about $300,000 a year from the facility's energy bill. Mun=
iz=20
is already scouting other county rooftops for solar potential.=20
"With the cost of electricity going up, you can start looking at it as a=20
business decision, just investing your money," said Muniz. "There's virtual=
ly=20
no maintenance on this equipment. It just sits on your roof and converts=20
right into electricity that you're using as soon as you generate it. I thin=
k=20
(solar) is the wave of the future, even though it's been around 30 or 40=20
years."=20
The Santa Rita Jail project is among the largest, and perhaps most=20
conspicuous, examples of steps government agencies are taking to cut=20
electricity use in response to skyrocketing power bills and Gov. Gray Davis=
'=20
call for public entities to conserve.=20
Among the examples:=20
San Francisco leaders are pondering a bond measure to finance solar-powered=
=20
rooftop projects around the city.=20
The Tulare County town of Lindsay will open City Hall two hours earlier -- =
at=20
6 a.m.-- and close at 4:30 p.m. Monday through Thursday this summer so=20
offices can stay dark all day Friday and during peak-use afternoon hours.=
=20
Sacramento County has instituted a casual dress policy so employees can=20
better withstand office temperatures that climb as high as 78 degrees.=20
Workers have also set sprinklers to run at night so that electric water pum=
ps=20
operate during low demand.=20
"When you start to see the bills going up and you start to hear concerns fr=
om=20
some citizens, that obviously raises the threshold of wanting to help out,"=
=20
said Jolena Voorhis, an energy analyst at the California State Association =
of=20
Counties. "Certainly (counties) stepped up to the plate when they were aske=
d=20
to increase conservation efforts. They've done about as much as humanly=20
possible."=20
Kings County leaders thought they made a great deal in 1992 when they signe=
d=20
up for Southern California Edison's interruptible load program, which=20
promises customers lower rates in exchange for agreeing to shut down=20
electrical services in times of shortage.=20
Then California's power crisis hit full-force this year. Since January,=20
Edison has called on the Central Valley county to cut electricity at its=20
Hanford government center 16 times -- for up to six hours each cycle.=20
At times that meant no lights to greet the public, no computers to process=
=20
food stamp requests and during the Valley's foggy winter days, no heat to=
=20
warm many of the 1,200 employees.=20
"We had one week in January when we were virtually shut down," said Chief=
=20
Administrative Officer Larry Spikes. "We just decided we couldn't function=
=20
that way."=20
So Kings County supervisors bought a $550,000 diesel-powered generator to=
=20
match those already at the jail and juvenile center. They also decided to=
=20
open and close administrative offices one hour earlier this summer so=20
buildings can power down before high demand hits the grid around 4 p.m.=20
The new hours, dimmed hallways and moments of darkness that occur when the=
=20
generators kick on have become a routine part of doing government business=
=20
these days, Spikes said.=20
So far, most counties have been able to absorb higher energy costs without=
=20
cutting into programs because of relatively healthy budgets in recent years=
,=20
Voorhis said.=20
Public agencies' power troubles have proved a boon to some businesses.=20
Revenues at PowerLight, the Berkeley company that installed the Santa Rita=
=20
Jail photovoltaic system, have tripled since last year.=20
"The last six months have been particularly intense," said Janice Lin,=20
director of business development for PowerLight. "In some ways the energy=
=20
crisis in California has been a call to action."=20
The Sacramento Municipal Utility District, which already boasts the largest=
=20
photovoltaic program in the country, has a 2,000-customer waiting list for=
=20
solar projects and plans to bring sun power to the state Capitol, said Don=
=20
Osborn, SMUD's solar program manager.=20
Back in Dublin, the 3,600 inmates at the Santa Rita Jail still receive thre=
e=20
meals, air conditioning and hot showers -- powered now, in part, by the=20
plentiful sun in this relatively fog-free part of the East Bay.=20
The $4 million project, financed entirely with state and utility subsidies,=
=20
should generate enough savings to pay for itself within the decade, Muniz=
=20
said.=20
"It's a good investment for the money we're putting up front," he said.








Energy talks reach no settlement; state threatens suit=20






By Mark Sherman
ASSOCIATED PRESS=20
July 10, 2001=20
WASHINGTON =01) With talks between the state and power generators stalled,=
=20
California may go to court to help win the $8.9 billion state officials=20
believe it was overcharged for electricity.=20
"I think we have demonstrated very clearly both to the FERC and to the judg=
e=20
that the state is owed $8.9 billion and will settle for nothing less," said=
=20
Roger Salazar, a spokesman for Gov. Gray Davis.=20
With negotiations at an impasse, the administrative law judge for the Feder=
al=20
Energy Regulatory Commission said California is probably owed no more than =
$1=20
billion in refunds.



"The numbers were too far apart," said Curtis Wagner, the FERC chief=20
administrative law judge.=20
California, Wagner said, may receive nothing at all, because generators may=
=20
be owed more than they have to return for any overcharges.=20
He placed the refunds owed the state at between $716 million and $1 billion=
.=20
Power providers had offered $716 million as part of an overall settlement,=
=20
while California state officials sought $8.9 billion, Wagner said.=20
He said California officials had not made the case for $8.9 billion in=20
refunds.=20
Salazar, however, said the state would go to court and may ask for $20=20
billion.=20
Separately, Wagner split off claims of overcharges from the Pacific=20
Northwest, saying he has not had time to consider those allegations under t=
he=20
short timetable ordered by FERC last month.=20
Wagner served as a mediator during the 15 days of negotiations and will=20
recommend a settlement to FERC by next Monday. The commission ordered the=
=20
talks last month in an effort to resolve differences between producers and=
=20
the state over the breakdown of California's deregulated electricity market=
.=20
Consumer advocates assailed the judge's recommendation and urged the state =
to=20
continue its attempt to get refunds from what they say are profiteering pow=
er=20
companies.=20
"It's like catching a bank robber, but instead of making him give back all =
of=20
it, you only make him give back 5 percent of what he stole," said Douglas=
=20
Heller, spokesman for the Santa Monica-based Foundation for Taxpayer and=20
Consumer Rights.=20
Power generators, however, were generally pleased with Wagner's comments.=
=20
Brent Bailey, general counsel for Duke Energy, said even if the formula=20
Wagner recommends produces $1.5 billion in refunds, "that's a reasonable=20
amount in the context of these settlement talks."=20
California officials, negotiating on behalf of utilities, the Public=20
Utilities Commission and state power buyers, accused the producers of=20
manipulating supply to unfairly drive up prices.=20
The producers have acknowledged prices are high, but blame jumps in the pri=
ce=20
of natural gas, which fuels many power plants, and the workings of the free=
=20
market.=20
The bill for wholesale power in California soared to $27 billion last year=
=20
from $7 billion the year before. Davis has estimated the state could spend =
as=20
much as $50 billion this year.=20
The producers reiterated Monday that California's numbers are grossly=20
inflated. Attorneys for the five major generators =01) Duke Energy, Dynegy,=
=20
Mirant, Reliant Energy and the Williams Cos. =01) said in a statement that =
they=20
have made a "very substantial global settlement offer."=20
Reliant would agree to no more than $50 million in refunds as part of an=20
overall settlement that also would have to include protection from addition=
al=20
legal claims, said John H. Stout, a company senior vice president.=20
But Stout also said, "Reliant's fundamental position has been and remains=
=20
that no refunds are justified."=20












Refunds in jeopardy as talks fail=20






Judge sees possibility of offsets equal to the billions sought by state
By Toby Eckert=20
COPLEY NEWS SERVICE=20
July 10, 2001=20
WASHINGTON -- Settlement talks between California and power providers accus=
ed=20
of electricity price gouging collapsed yesterday, and the judge who will no=
w=20
hand the case over to federal regulators set a course far from favorable to=
=20
the state's demand for $8.9 billion in refunds.=20
"There are refunds due that total hundreds of millions of dollars and maybe=
 a=20
billion dollars," Curtis L. Wagner Jr., chief administrative law judge for=
=20
the Federal Energy Regulatory Commission, said in previewing the=20
recommendations he will make to the commission.=20
But Wagner, who mediated the talks, also suggested that power sellers are=
=20
still owed sums for electricity "that probably are higher than any=20
overcharges" for which they may have to pay refunds.=20
That opened the possibility that California could see no cash refunds, only=
 a=20
reduction in the billions of dollars the power generators and marketers cla=
im=20
they are owed by state entities and utilities.=20
Wagner said he would recommend that FERC hold a "fast-track hearing" to try=
=20
to untangle the complex financial claims and counterclaims arising from=20
California's power crisis.=20
Wagner also outlined a method that he said FERC should use for calculating=
=20
refunds.=20
While his proposed formula includes part of one method the state used, it=
=20
contains several elements for calculating electricity costs that were favor=
ed=20
by power sellers, who maintain that California's numbers are wildly=20
exaggerated.=20
"I would suspect that would result in a number much below $8.9 billion," sa=
id=20
Joe Ronan, vice president of Calpine, a San Jose-based electricity generato=
r.=20
"I think (Wagner's method) reflects more accurately what actually happened"=
=20
in the state's dysfunctional power market.=20
But Michael Kahn, the state's lead negotiator, said Wagner "vindicated"=20
California's core arguments.=20
"The hundreds of people who came here on the other side had argued to the=
=20
mediator that there should not be any refunds, and that position was loudly=
=20
rejected," said Kahn, chairman of the organization that manages most of=20
California's power grid.=20
"We think the numbers, even using the judge's formula, are going to be in t=
he=20
multiple billions. Whatever amount of money .?.?. is awarded to us, we will=
=20
have viable claims in state court and other jurisdictions for the remainder=
.=20
So what we have here is a situation where California will get its $8.9=20
billion."=20
Power sellers acknowledged that the threat of litigation remains worrisome =
to=20
them. They sought an end to investigations of their conduct, and immunity=
=20
from legal action as part of their bargaining position.=20
During two weeks of negotiations ordered by FERC, the two sides came nowher=
e=20
near bridging their differences. Wagner said a number of power sellers had=
=20
put forward offers that totaled $716.1 million.=20
"That's a long way from splitting the difference," he said. "In 15 days, yo=
u=20
can't work miracles."=20
Yesterday -- the deadline for completing the talks -- the ill will between=
=20
the two sides broke into the open as Wagner allowed reporters into the=20
previously closed hearings.=20
Each side essentially accused the other of bargaining in bad faith and=20
failing to put forward realistic proposals.=20
John H. Stout, a senior vice president at Reliant Energy Wholesale Group,=
=20
said the state used "biased calculations" to arrive at its $8.9 billion=20
refund demand. He also said that Reliant offered to knock $50 million off t=
he=20
$300 million it claims it is still owed for power sold into the state.=20
Kahn shot back that Reliant made the offer confidentially to Wagner and nev=
er=20
approached the state.=20
Figures scrutinized
"This is the first time we've heard any of this information. And to give th=
e=20
impression that somehow there's been cooperation or forthcomingness, I thin=
k=20
is misleading," Kahn said.=20
The state's refund calculations were scrutinized repeatedly during the talk=
s.=20
The $8.9 billion figure emerged from a study by the California power grid=
=20
operator of charges for electricity between May 2000 and May 2001, a period=
=20
when wholesale power prices soared.=20
Kahn said the figure was essentially duplicated when the state went back an=
d=20
calculated what power costs would have been if a pricing method instituted =
by=20
FERC last month had been in effect for the entire yearlong period.=20
FERC ordered the pricing method in a bid to tame wholesale prices in the=20
West.=20
In a partial win for the state, Wagner said he would recommend that FERC us=
e=20
the order retroactively as a basis for calculating refunds, an approach=20
resisted by the power sellers.=20
But he said that FERC should only scrutinize charges going back to October=
=20
2000, and should make several key changes in how power-generating costs are=
=20
calculated.=20
For instance, he said, FERC should determine the actual amount of gas heat =
it=20
takes to generate a megawatt of electricity and use spot market prices in=
=20
Northern and Southern California to determine the cost of gas, rather than =
a=20
statewide average cost, computed monthly.=20
Fewer overcharges?
Those and other parts of the complex formula Wagner will recommend could=20
increase the benchmark cost of producing power and drive down the amount of=
=20
overcharges.=20
Kahn said that applying FERC's pricing method only back to October would pu=
t=20
about $3 billion of the state's refund claim off-limits.=20
Brent Bailey, vice president and general counsel for Duke Energy North=20
America, said, "We think (Wagner's) modifications are certainly a vast=20
improvement over FERC's June 19 order and also certainly over (the state's)=
=20
model."=20
America.=20
In Sacramento, Gov. Gray Davis issued a statement characterizing the=20
electricity suppliers as pirates who refused to negotiate in good faith.=20
"While in the past the FERC has shown little, if any, interest in consumers=
,=20
they now have the opportunity to redeem themselves by returning the $8.9=20
billion California has demonstrated it is owed," Davis said.=20
Despite the harsh rhetoric, both sides indicated that they would continue=
=20
trying to reach one-on-one settlements.=20
Ronan of Calpine said the generator was close to making a deal with the=20
state. Bailey said that while Duke would continue to push for a "global=20
settlement" between all the parties, "We've had serious settlement talks wi=
th=20
the state over the last few days and hope to continue."=20













State's massive outlays detailed=20






Energy bill exceeded $100 million on 3 days
By Jennifer Coleman=20
ASSOCIATED PRESS=20
July 10, 2001=20
SACRAMENTO -- On three days in May, California's daily power spending toppe=
d=20
$100 million, according to a report released yesterday by state power=20
traders.=20
The California Department of Water Resources report, which addressed spot=
=20
market electricity purchases since January, was released along with 1,770=
=20
pages of documents that specifically detailed the first three months of=20
last-minute power purchases.=20
Such power buys on the spot market typically get the most expensive=20
electricity available.=20
The report details the department's electricity spending since Jan. 17, whe=
n=20
the state took over electricity purchases for Pacific Gas and Electric Co.,=
=20
San Diego Gas & Electric Co., and Southern California Edison.=20
The utilities had amassed billions in debts and were no longer creditworthy=
=20
enough to purchase power. Since then, the state has spent nearly $8 billion=
=20
to keep the lights on.=20
The state's daily spending peaked May 10 at $102.4 million. The=20
second-highest daily total was May 23, when the state spent $101.8 million.=
=20
The day before, the state spent $100 million.=20
But since May, spot market prices have dropped, due in part to moderate=20
weather, lower natural gas prices, increased conservation which lowered=20
demand and because of increased scrutiny by lawmakers and investigators int=
o=20
possible price manipulation. Gov. Gray Davis has said long-term contracts=
=20
also drove the price down.=20
"It does look like some of the spot market prices have gone down, but it=20
looks like it's primarily due to natural gas prices," said Jamie Fisfis,=20
spokesman for Assembly Republicans.=20
The slight reduction in spot market prices "underscores questions about the=
=20
strategy of locking us into long-term contracts, if natural gas prices=20
continue to drop," Fisfis said.=20
Most of the long-term contracts run for 10 years, with one lasting for 20=
=20
years.=20
"It's unfortunate that it looks like we'll never get out from under these=
=20
contracts," Fisfis said.=20
Davis has already released details of the state's long-term power contracts=
=20
after losing a court battle with Republican legislators and several news=20
organizations, including The Associated Press and The Copley Press, which=
=20
publishes The San Diego Union-Tribune.=20
Davis released copies of those contracts, but wanted to delay the release o=
f=20
the spot market buys and short-term contracts. Releasing those details too=
=20
soon after the purchases would reveal the state's buying strategy and could=
=20
cause generators to raise their already sky-high prices, Davis said.=20
The number of spot market buys will lessen, the Davis administration says, =
as=20
more long-term contracts are signed, reducing the state's exposure to the=
=20
high-priced purchases.=20
The governor's office will release future short-term contracts and spot=20
market buys will be released on a quarterly basis, with a 90-day lag time.=
=20
Second quarter information will be released in October and third quarter=20
documents will be available in January.=20
Davis maintains the delay is needed to protect its ability to negotiate=20
further spot-market power buys.=20
According to the water department, Canadian Powerex, the marketing arm of B=
C=20
Hydro, has been paid $1.05 billion for spot market purchases as of May 31.=
=20
But Atlanta-based Mirant Corp. topped that list, getting $1.24 billion as o=
f=20
the end of May.=20
The newly released short-term contracts also show what the state had to pay=
=20
when it needed power the most.=20
On March 19 and 20, when rolling blackouts hit California again, the state=
=20
was forced into paying above-average prices in its largest short-term=20
contracts.=20
For example, Mirant sold the state 650 megawatts an hour at off-peak usage=
=20
times on March 20 for $345 a megawatt hour, more than $70 above the average=
=20
price of $272.96.=20
The day before, Mirant charged $343 a megawatt hour at off-peak in northern=
=20
California when the average cost was $254.52.=20
Also on March 19, Mirant charged the state about $96 above the average pric=
e=20
for power in Northern California on a sale of 6,400 megawatt hours during=
=20
off-peak times.=20
Other top-selling generators, as of May 31:=20
?Sempra Cos., $429 million.=20
?Los Angeles Department of Water and Power, $331 million.=20
?Dynegy, $296 million.=20
?TransAlta Energy, $202 million.=20
?Bonneville Power, $168 million.=20
?Duke Energy, $164 million.=20







State releases early spot market energy purchases=20






By Jennifer Coleman
ASSOCIATED PRESS=20
July 10, 2001=20
SACRAMENTO =01) On three days in May, California's daily power allowance to=
pped=20
$100 million, according to a report released Monday by state power traders.=
=20
However, the source of those high prices was from not solely from Texas, ho=
me=20
to many of the power marketers and wholesalers Gov. Gray Davis has blamed f=
or=20
much of California's power woes.=20
Public and private power companies such as Canada's B.C. Hydro, the Los=20
Angeles Department of Water and Power and Sacramento's public utility also=
=20
were high on the list.=20
The California Department of Water Resources released the report, along wit=
h=20
1,770 pages of documents that also detailed the last-minute power purchases=
=20
the state made on the spot market in the first three months of the year.=20
Last-minute power buys on the spot market typically get the most expensive=
=20
electricity available.=20
The report details the department's electricity spending since Jan. 17, whe=
n=20
the state took over electricity purchases for Pacific Gas & Electric Co., S=
an=20
Diego Gas & Electric Co., and Southern California Edison.=20
The utilities had amassed billions in debts and were no longer creditworthy=
=20
enough to purchase power. Since then, the state has spent nearly $8 billion=
=20
to keep the lights on.=20
The state's daily spending peaked May 10 at $102.4 million. The=20
second-highest daily total was May 23, when the state spent $101.8 million.=
=20
The day before, the state spent $100 million.=20
But since May, spot market prices have dropped, due in part to moderate=20
weather, lower natural gas prices, increased conservation which lowered=20
demand and because of increased scrutiny by lawmakers and investigators int=
o=20
possible price manipulation. Gov. Gray Davis has said long-term contracts=
=20
also drove the price down.=20
"It does look like some of the spot market prices have gone down, but it=20
looks like it's primarily due to natural gas prices," said Jamie Fisfis,=20
spokesman for Assembly Republicans.=20
The slight reduction in spot market prices "underscores questions about the=
=20
strategy of locking us into long-term contracts, if natural gas prices=20
continue to drop," Fisfis said.=20
Most of the long-term contracts run for 10 years, with one lasting for 20=
=20
years.=20
"It's unfortunate that it looks like we'll never get out from under these=
=20
contracts," Fisfis said.=20
Davis has already released details of the state's long-term power contracts=
=20
after losing a court battle with Republican legislators and several news=20
organizations, including The Associated Press, who said keeping the contrac=
ts=20
veiled violated the state's open records law.=20
Davis released copies of those contracts, but wanted to delay the release o=
f=20
the spot market buys and short-term contracts. Releasing those details too=
=20
soon after the purchases would reveal the state's buying strategy and could=
=20
cause generators to raise their already sky-high prices, Davis said.=20
The number of spot market buys will lessen, the Davis administration says, =
as=20
more long-term contracts are signed, reducing the state's exposure to the=
=20
high-priced purchases.=20
The governor's office will release future short-term contracts and spot=20
market buys will be released on a quarterly basis, with a 90-day lag time.=
=20
Second quarter information will be released in October and third quarter=20
documents will be available in January.=20
Davis maintains DWR needs the delay to protect its ability to negotiate=20
further spot-market power buys.=20
According to the DWR, Canadian Powerex, the marketing arm of BC Hydro, has=
=20
been paid $1.05 billion for spot market purchases as of May 31.=20
But Atlanta-based Mirant Corp. topped that list, getting $1.24 billion as o=
f=20
the end of May.=20
The newly released short-term contracts also show what the state had to pay=
=20
when it needed power the most.=20
On March 19 and 20, when rolling blackouts hit California again, the state=
=20
was forced into paying above-average prices in its largest short-term=20
contracts.=20
For example, Mirant sold the state 650 megawatts an hour at off-peak usage=
=20
times on March 20 for $345 a megawatt hour, more than $70 above the average=
=20
price of $272.96. The day before, Mirant charged $343 a megawatt hour at=20
off-peak in northern California when the average cost was $254.52.=20
Also on March 19, Mirant charged the state about $96 above the average pric=
e=20
for power in Northern California on a sale of 6,400 megawatt hours during=
=20
off-peak times.=20
Other top selling generators, as of May 31:=20
=01) Sempra Companies, $429 million.=20
=01) Los Angeles Department of Water and Power, $331 million.=20
=01) Dynegy, $296 million.=20
=01) TransAlta Energy, $202 million.=20
=01) Bonneville Power, $168 million.=20
=01) Duke Energy, $164 million.=20









FERC Judge Says State Owed No More Than $1 Billion
From Associated Press

July 9 2001

WASHINGTON -- California is owed no more than "a billion dollars" from powe=
r=20
wholesalers, a federal regulatory judge said today at the end of 15 days of=
=20
settlement talks in the state's electricity crisis.

Curtis Wagner, the Federal Energy Regulatory Commission's chief=20
administrative law judge, said that at the same time the power suppliers=20
probably are owed more than that.

The net effect of his preliminary recommendation is that California probabl=
y=20
will receive no refunds from wholesalers.

Wagner said power generators had offered $761 million in refunds. The state=
=20
has asked for $8.9 billion since May 2000. Wagner said he will not recommen=
d=20
refunds for power sales that occurred before Oct. 2.

It was not immediately clear what impact the judge's preliminary=20
recommendation would have on efforts to settle the dispute.

Both sides said before the judge's announcement that they expected a=20
protracted legal battle in the event the talks did not produce a settlement=
.

Michael Kahn, Gov. Gray Davis's representative in the talks, has said the=
=20
state would seek more than twice the claimed overcharges if the dispute mov=
ed=20
from mediated talks to a courtroom.

The producers reiterated today that California's numbers are grossly=20
inflated. Attorneys for the five major generators-- Duke Energy, Dynegy,=20
Mirant, Reliant Energy and the Williams Cos.-- said in a statement that the=
y=20
have made a "very substantial global settlement offer."

John H. Stout, a senior vice president for Reliant Energy, said his company=
=20
would agree to no more than $50 million in refunds, as part of an overall=
=20
settlement that also would have to include protection from additional legal=
=20
claims.

But Stout also said, "Reliant's fundamental position has been and remains=
=20
that no refunds are justified."

FERC ordered the talks last month in an effort to resolve differences betwe=
en=20
producers and the state over the breakdown of California's deregulated=20
electricity market.

The state has accused the producers of manipulating supply to unfairly driv=
e=20
up prices. The producers have acknowledged that prices are high, but blame=
=20
jumps in the price of natural gas, which fuels many power plants, and the=
=20
workings of the free market.

The bill for wholesale power in California soared to $27 billion last year=
=20
from $7 billion the year before. Davis has estimated that the state could=
=20
spend as much as $50 billion this year.

----

On the Net:

Federal Energy Regulatory Commission: http://www.ferc.fed.us/=20
Copyright 2001, Los Angeles Times=20




Electricity Cost Data Spread the Blame
Power: Many suppliers charged more than the firms that Davis has pilloried,=
=20
records show.
RICH CONNELL and ROBERT J. LOPEZ and DOUG SMITHS
TIMES STAFF WRITER

July 10 2001

SACRAMENTO -- California's energy meltdown involves a far more diverse grou=
p=20
of wholesale electricity merchants than suggested by Gov. Gray Davis, who h=
as=20
aggressively blamed a handful of Texas companies, state records show.

During the first three months of this year--one of the worst stretches of=
=20
power shortages during the crisis--an assortment of public and private=20
entities charged the state prices averaging well above some of those paid t=
o=20
Texas firms, according to documents released to The Times on Monday by the=
=20
Department of Water Resources, which now buys power for California.

Among those setting and collecting some of the highest average prices per=
=20
megawatt-hour were a Canadian public utility, a subsidiary of San Diego Gas=
 &=20
Electric's parent company, and the Los Angeles Department of Water and Powe=
r,=20
the report shows. Their average prices ranged from $498 a megawatt-hour=20
charged by Powerex, the trading arm of British Columbia's BC Hydro, to $292=
=20
an hour by the DWP. In fact, some of the biggest private power companies=20
singled out for criticism by Davis and other state officials--Dynegy Inc.,=
=20
Duke Energy and Mirant--charged less than the average prices the state paid=
=20
for the period. Those companies' average prices ranged from $146 to $240 pe=
r=20
megawatt-hour, according to an analysis of the documents.

The figures cover the various types of spot and longer-term power purchased=
=20
by the state during three months that included rolling blackouts and more=
=20
than a month of razor-thin reserves, leading to continuous power emergencie=
s.

Davis spokesman Steve Maviglio said the governor has directed his sharpest=
=20
barbs at private out-of-state generators because, in general, they have=20
reaped the highest profits over the longest period.

"You have to look at the whole picture," Maviglio said.

"The governor was expressing his displeasure with the arrogance of the=20
generators who wear cowboy hats," he said. "Their profits were 100% to 400%=
=20
above last year. . . . Just because there are other entities who are chargi=
ng=20
us more [per megawatt-hour] doesn't change the fact that we are getting=20
ripped off by companies from Houston, Tulsa, Atlanta or Charlotte."

The report by the Department of Water Resources was provided to The Times o=
n=20
the same day the state released 1,700 pages of documents on California's=20
electricity purchases on the volatile spot market for the year's first=20
quarter.

The records detail how the state spent nearly $8 billion buying power in th=
e=20
first five months of the year, and underscore the complexity of the state's=
=20
energy problem. They also show that patterns of high prices are not limited=
=20
to a few generators.

Oscar Hidalgo, a spokesman for the water resources agency, said that the=20
reports together show that prices were extremely volatile early in the year=
.=20
"All the prices were high," he said, noting the downward trend in costs sin=
ce=20
his agency began buying power in mid-January.

The average price per megawatt-hour for all state purchases went from $316 =
in=20
January to $243 in May. Spot prices fell from an average of $321 per hour t=
o=20
$271, the reports show.

In the first quarter of the year, some public entities' prices far exceeded=
=20
those of the biggest private companies. For example, Houston-based Enron, o=
ne=20
of the nation's biggest power traders, charged an average of $181 per=20
megawatt-hour. And Atlanta-based Mirant, which sold the most to the state, =
a=20
total of $706 million, charged an average of $225 per megawatt-hour.

By contrast, a Calgary, Canada, firm, TransAlta Energy, averaged $335 a=20
megawatt-hour, and the Sacramento Municipal Utility District had average=20
charges of $330 per megawatt-hour.

A spokesman for Enron, Mark Palmer, said recently that the "vilification of=
=20
Enron was based on politics, not facts." Spokesmen for BC Hydro could not b=
e=20
reached late Monday to comment on its huge sales to the state. In the past,=
=20
the utility has defended its pricing practices, saying it has offered=20
last-minute hydroelectric power that helped keep California's lights on.

A spokeswoman for Sempra, the parent company of San Diego Gas & Electric,=
=20
said late Monday the company was unable to comment because it had yet to se=
e=20
the figures released by the state. Officials at DWP, who could not be reach=
ed=20
Monday evening, have defended their pricing, saying the costs of producing=
=20
the power needed by the state were extremely high.

More Power Bought Than Projected

Hidalgo, of the Department of Water Resources, said his agency's efforts,=
=20
coupled with conservation by business and consumers and falling natural gas=
=20
prices, have begun to tame the state's market.

Still, the state had to purchase $321 million in power in April and May,=20
about 10% more than Davis' analysts had projected.

Hidlago said that was because of hot weather in May and other supply proble=
ms=20
in April. He said reports will show that power purchases fell short of stat=
e=20
projections in June and early July.

The reports also will show that prices paid by the state were down in June=
=20
and July, partly because spot prices have fallen sharply, often to well und=
er=20
$100 a megawatt-hour.

A summary Department of Water Resources report released Monday credited=20
Davis' program of nurturing new power generation and establishing long-term=
=20
power contracts with with "moving the California electric energy industry=
=20
closer to normalcy."=20
Copyright 2001, Los Angeles Times=20




Duke Energy Asked to Allow Release of Data
Power: Senator says the generator is refusing to make public some informati=
on=20
crucial to the price-gouging probe. Firm says it's complying.
CARL INGRAM
TIMES STAFF WRITER

July 10 2001

SACRAMENTO -- The chairman of a Senate committee probing suspected price=20
gouging during the California energy crisis charged Monday that Duke Energy=
=20
is refusing to allow him to make public information key to his investigatio=
n.

Sen. Joe Dunn (D-Santa Ana) said Duke has made the price bidding informatio=
n=20
from its Chula Vista plant available to committee members and staffers. But=
=20
under a federal confidentiality rule, the data cannot be made public withou=
t=20
Duke's consent.

The documents concern the Chula Vista plant, which former employees have=20
alleged was ramped up and down to drive up power prices during three days i=
n=20
January. However, state records show that the agency overseeing the=20
electricity grid ordered those gyrations to keep the power flowing througho=
ut=20
the state. Dunn said Duke's refusal thwarts the committee's investigation a=
nd=20
efforts to enact possible remedial legislation because the confidential=20
information cannot be shared with others in the Legislature or the public.

Dunn said Duke cited a rule of the Federal Energy Regulatory Commission tha=
t=20
gives the company the authority to decide which records it makes public and=
=20
which stay secret.

"The only one who can release the data is Duke. We agreed to be bound by wh=
at=20
is provided in the FERC tariff, nothing more or less," he said.

Former Employees Tell of Maneuvers

Dunn noted that the committee is considering trying to obtain the informati=
on=20
elsewhere and "release it over Duke's objections."

Three former workers at the Duke plant near Chula Vista testified last mont=
h=20
under oath that the plant, among other things, was ramped up and down in wh=
at=20
seemed to be an effort to maximize revenue during the Jan. 16-18 emergency.

But Duke countered immediately that it had merely obeyed orders of the=20
California Independent System Operator, which keeps the state's electricity=
=20
grid in balance. Duke later provided Cal-ISO documents backing up its=20
explanation.

Duke executives insisted that the former employees failed to provide a full=
=20
picture of the plant's operation during the three days.

But Dunn, chairman of the select Senate committee on alleged price gouging,=
=20
said Monday that by refusing to authorize release of all the subpoenaed dat=
a,=20
Duke was guilty of the same tactics.

"Duke is trying to draw the impression that it has [provided] the full=20
picture. But they are fully aware that we cannot draw any final conclusions=
=20
until all that data has been released. That hasn't occurred," Dunn said.

To make a determination whether the Chula Vista power was withheld to drive=
=20
up prices, Dunn said, the committee must publicly examine "the bids Duke=20
submitted from which the ISO issued orders to the plant." They include the=
=20
expensive hour-ahead and day-ahead markets, he said.

Duke, a North Carolina-based wholesaler that operates several plants in=20
California, noted that it considers the information proprietary and=20
off-limits to legislators not on the committee.

Duke spokesman Tom Williams insisted that the generator is attempting to=20
comply with the committee's demands. But he was unable to say whether Duke=
=20
would agree to make the bidding documents public along with other records t=
he=20
committee plans to turn over.

"We are complying now," Williams said. "There is some suggestion that we ar=
e=20
leaving stuff out when we have not had a chance to testify. . . . I don't=
=20
know what we are ultimately going to do."

The committee had threatened to cite eight wholesale generators unless they=
=20
provide pricing and bidding documents by Wednesday. Six, including Duke, ha=
ve=20
said they would comply to avoid a contempt citation. Two, Enron and Mirant,=
=20
were cited.

Dunn said the committee on Wednesday likely will give companies that are=20
trying to comply an extra week to do so, but others probably will be formal=
ly=20
charged with contempt in a report to the full Senate. The upper house is th=
e=20
final arbiter of such issues.

Although there is scant precedent for levying penalties against those cited=
=20
for contempt, Dunn said he favors imposing severe fines. In 1929, the most=
=20
recent case, a cement company executive was sent to jail.=20
Copyright 2001, Los Angeles Times=20





NEWS ANALYSIS
Concern Over Price of Long-Term Power Pacts Grows
Embedded costs may yield more rate hikes, critics say, and the $43-billion=
=20
total could complicate plans to rescue Edison.
DAN MORAIN
TIMES STAFF WRITER

July 9 2001

SACRAMENTO -- Even as the summer progresses without blackouts, and Gov. Gra=
y=20
Davis prepares for yet another news conference today to symbolically switch=
=20
on a new power plant, the work in the Capitol has shifted to the seemingly=
=20
more daunting task of balancing the books.

It's a task with potentially far more long-lasting implications for state=
=20
coffers, for businesses' bottom lines and for consumers' wallets.

In particular, long-term power contracts trumpeted by the governor's office=
=20
as helping to bring stability to California's out-of-control electricity=20
market are having the opposite effect politically. A growing concern about=
=20
the $43-billion price tag of the contracts is complicating one of Davis' mo=
st=20
ambitious energy initiatives: a proposed financial rescue of Southern=20
California Edison, which already faces an uncertain fate in the Legislature=
.=20
Questions about the contracts come as California readies a complex=20
$13.4-billion bond sale to reimburse the state's general fund for other pow=
er=20
purchases.

Critics worry that costs embedded in the contracts, on top of the billions=
=20
needed to pay for the Edison rescue, could lead to additional electricity=
=20
rate hikes for consumers. Key lawmakers, consumer advocates and business=20
lobbyists are urging that at least some of the pacts be renegotiated.

Citing a recent plunge in wholesale energy costs, these critics say the sta=
te=20
should work to shorten the duration of the contracts and lower some of the=
=20
prices. They argue that the state entered into the deals under duress after=
=20
California's utilities neared insolvency and the state Department of Water=
=20
Resources took over the purchasing of electricity for more than 25 million=
=20
residents.

"They are vulnerable," Senate Energy Committee Chairwoman Debra Bowen=20
(D-Marina del Rey) said of deals the state struck with independent power=20
companies when prices were at record highs.

Bowen lauds Davis administration negotiators for signing "the best deals th=
ey=20
could." But she said that in the crisis atmosphere in which the negotiation=
s=20
took place, "the state had two cards and the generators had 50."

Contracts Open to Challenges

The contracts could be challenged in court or, more immediately, before the=
=20
Federal Energy Regulatory Commission in Washington. There, an administrativ=
e=20
law judge could direct that the pacts be reworked as part of a settlement o=
f=20
allegations by Davis that generators overcharged the state for electricity =
by=20
$8.9 billion.

"We ought not to say, 'Fine, the contracts were the best we could do,' "=20
Bowen said.

For his part, Davis says he is willing to accept partial payment of the $8.=
9=20
billion in the form of contracts with terms more favorable to the state. He=
=20
attributes the recent sharp drop in wholesale electricity prices to=20
conservation, the administration's effort to increase power supply and--a=
=20
major factor--the long-term contracts, which slashed the state's reliance o=
n=20
the volatile daily, or spot, market.

"You can see the value of these long-term contracts . . . dramatically=20
shrinking our overall price, which is what matters to Californians," Davis=
=20
said, pointing out that the average cost of power plunged 30% from May to=
=20
June.

Davis energy advisor S. David Freeman, who helped negotiate the contracts,=
=20
said they may end up costing less than $43 billion, given the recent declin=
e=20
in prices for natural gas, the main fuel for California's=20
electricity-generating plants.

Freeman also compared critics to someone who calls the fire department to=
=20
douse a blaze. "After the fire is out," he said, "you complain about the=20
water damage."

The contracts have other defenders, among them UC Berkeley economics=20
professor Severin Borenstein, who says the deals helped to tame the volatil=
e=20
spot market by reducing generators' incentive to drive up prices, while=20
reducing the state's exposure to wild swings in price.

"The point of signing long-term contracts is not to get a great price; it's=
=20
to reduce risk," Borenstein said.

Still, experts have been picking through the pacts ever since a Superior=20
Court judge in San Diego, ruling in a California Public Records Act lawsuit=
=20
by news organizations and Republican lawmakers, ordered last month that Dav=
is=20
unseal the contracts.

An analysis done for the Assembly by three experts--one each representing=
=20
Southern California Edison; the Utility Reform Network, a consumer group; a=
nd=20
large electricity consumers--concluded that the about $43-billion price tag=
=20
announced by the administration may not account for all the costs. When oth=
er=20
expenses are factored in--ranging from environmental equipment upgrades to=
=20
any new energy-related taxes--the contracts could cost an additional 10% to=
=20
20%.

"Once the contracts were made public," Senate Republican leader Jim Brulte =
of=20
Rancho Cucamonga said, "just about anyone who can read began calling for=20
those contracts to be renegotiated."

As buyers' remorse spreads through the Capitol, the contracts increasingly=
=20
are seen as a hurdle--or a bargaining chip--as Davis and lawmakers confront=
=20
fast-approaching deadlines in their effort to prevent the energy crisis fro=
m=20
morphing into a broader financial crisis.

A bill pushed by Davis to avert bankruptcy for the financially hobbled=20
Southern California Edison must be approved by Aug. 15. The deadline could =
be=20
tighter, because the Legislature is scheduled to adjourn for a monthlong=20
break July 20.

Davis' rescue plan, along with legislative alternatives, languishes in the=
=20
Legislature. The plan, which has little apparent support, would require the=
=20
state to buy Edison's system of transmission lines for $2.76 billion and=20
permit the utility to charge ratepayers for the rest of its back debt of $3=
.5=20
billion.

Some lobbyists and lawmakers believe that the electricity rate hike approve=
d=20
in March by the California Public Utilities Commission--at 3 cents a=20
kilowatt-hour the largest in state history--may not be enough. The revenue=
=20
generated under the new rate structure must cover the costs of the long-ter=
m=20
power contracts and repay the planned $13.4 billion in bonds, which would b=
e=20
the largest municipal deal ever.

Whether there would be sufficient money left to pay for the Edison rescue=
=20
remains to be seen. But some experts say the utility may need to seek a=20
separate rate hike to cover its costs.

As written, the contracts have few escape clauses; Davis cannot simply walk=
=20
away from them if he concludes that prices are too high. Still, criticism=
=20
persists and crosses political lines.

Harry Snyder, longtime Sacramento lobbyist for Consumers Union, and Jack=20
Stewart, president of the California Manufacturers and Technology Assn.,=20
rarely find themselves on the same side of a debate. But in separate=20
interviews, they sounded similar themes.

"If there is a way to buy our way out of these contracts, even if we have t=
o=20
pay damages, we'd be better off in the long run," Snyder said.

Stewart, like other business leaders, does not advocate abrogating the=20
contracts. But like many familiar with the terms, he hopes that some deals=
=20
can be renegotiated.

"They are problematic," he said.

In a move that critics fear could lock in high electricity prices for the=
=20
next decade, the Davis administration is pushing the PUC to agree within a=
=20
month to limit its authority to question costs incurred by the Department o=
f=20
Water Resources as it goes about procuring power.

State Treasurer Phil Angelides said the PUC must act so he can complete the=
=20
$13.4-billion bond sale. A binding agreement is necessary so that Wall Stre=
et=20
investors can be assured that they will be repaid.

"The state will be out of cash by the end of the year without the bond sale=
,"=20
he said. "We will move toward fiscal insolvency."

The so-called rate agreement, a draft of which was obtained by The Times,=
=20
would bind customers of the three big regulated utilities to pay more than=
=20
just the principal and interest on the $13.4 billion in bonds. Consumers=20
would have to pay for consultants, lawyers, to pay taxes, fees and other=20
as-yet-undefined charges that may be incurred by the Department of Water=20
Resources.

Additionally, the PUC would be obligated to approve payments for programs b=
y=20
which the state would pay large and small customers to cut electricity use,=
=20
although the Legislature has not approved the programs and their details=20
remain to be worked out. The Department of Water Resources estimates the co=
st=20
to be $800 million, spread over this year and next.

"It is loaded up," Senate President Pro Tem John Burton (D-San Francisco)=
=20
said of the proposed rate deal, adding that it would require the commission=
=20
to "raise rates to cover whatever the Department of Water Resources decides=
=20
to do."

"That is giving a blank check to some bureaucratic office," he said.

'Dictatorial Power' Warning

Stewart of the manufacturers group also is alarmed by the plan, saying it=
=20
would provide the water agency with "dictatorial power."

"As skeptical as we are of the PUC process, at least there is a process,"=
=20
Stewart said, referring to the commission's procedures to set electricity=
=20
rates. "There is no process for DWR. DWR just tells the PUC, 'This is what =
we=20
need,' and the PUC must approve it."

Others say the rate agreement is a standard piece of work, given the=20
extraordinary step the Legislature took in January when it authorized the=
=20
Department of Water Resources to buy power for utilities that had fallen so=
=20
deeply into debt that they could no longer carry out their obligation to=20
consumers.

In essence, Davis energy advisor Freeman said, lawmakers in January created=
=20
"the equivalent of a public power purchasing agency" beyond the jurisdictio=
n=20
of the PUC.

"There is no public power agency in California that is reviewed by the PUC,=
"=20
said Freeman, former head of the Los Angeles Department of Water and Power.

*

Times staff writer Nancy Rivera Brooks in Los Angeles contributed to this=
=20
story.=20
Copyright 2001, Los Angeles Times=20





State's refund demand rejected=20
Judge ends rebate talks, rebukes $9 billion claim=20
Zachary Coile, Christian Berthelsen, Chronicle Staff Writers
Tuesday, July 10, 2001=20
,2001 San Francisco Chronicle=20
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/07/10/MN117914=
.DTL=20
Washington -- An administrative law judge, delivering a powerful message to=
=20
Gov. Gray Davis and California energy officials, cast aside the state's cla=
im=20
that it is owed $8.9 billion in electricity overcharges by generators and=
=20
called for further hearings to determine "hard numbers."=20
The judge, ending talks designed to settle the dispute between California a=
nd=20
power sellers, said the state and its cash-strapped utilities may owe more =
in=20
unpaid electricity bills than they are owed for overcharges by the=20
generators.=20
The comments by Federal Energy Regulatory Commission chief administrative l=
aw=20
Judge Curtis L. Wagner, although a strong endorsement of the generators'=20
position, seemed to indicate that neither side wanted to settle the issue=
=20
before it reached the five-member regulatory commission.=20
"There are refunds due (to California) that total hundreds of millions of=
=20
dollars and maybe a billion dollars," Wagner said yesterday.=20
"At the same time, there are sums due to sellers from the California=20
Independent System Operator and the investor-owned utilities in the state o=
f=20
California that probably are higher than any overcharges that (the state) m=
ay=20
come up with."=20
Now, it will be up to the federal regulators to settle the case. But the=20
recommendations by Wagner, who mediated the talks, carry significant weight=
=20
with the commission and cast doubt on the state's chances of collecting the=
=20
full $8.9 billion it claims to be owed.=20
The judge said he will recommend that the commission order new hearings to=
=20
calculate what the state and the power sellers are each owed. The hearings=
=20
would be overseen by an administrative law judge and would last 45 to 60=20
days, Wagner said.=20
CLOSING SESSION
Wagner made his comments in the closing session of the 15-day talks, which=
=20
were ordered last month by the regulatory commission to try to defuse the=
=20
dispute between power wholesalers and California officials before it reache=
d=20
the courts.=20
The judge's message was a sharp rebuke to the unyielding stand by Californi=
a=20
leaders -- especially Davis, who last week said he wouldn't take a dime les=
s=20
than $8.9 billion for California's consumers.=20
The governor issued a statement shortly after the close of talks insisting=
=20
that California had won its basic case that the state is owed refunds.=20
"I am pleased that Judge Wagner accepted our methodology for calculating=20
refunds and rejected the generators' position that no refunds are due," Dav=
is=20
said.=20
The governor's chief representative at the talks, Michael Kahn, called the=
=20
judge's statement a "ringing endorsement" of the state's call for refunds.=
=20
Kahn said the judge's order would improve the state's legal position if it=
=20
files suit against power sellers.=20
GENERATORS FAVORED
But much of the judge's order seemed to favor the generators.=20
For example, state officials have made the case they should be refunded $8.=
 9=20
billion for alleged overcharges from May 2000 to May 2001 -- even though th=
e=20
regulatory commission has said only that the period starting Oct. 2, 2000=
=20
could be considered.=20
The judge said yesterday that he would stick with the October date, meaning=
=20
that more than a third of the state's claim -- at least $3 billion -- would=
=20
not be refunded by the commission.=20
Brent Bailey, vice president and general counsel of Duke Energy North=20
America, said that under Wagner's guidelines, the state may be eligible for=
=20
$1 billion to $1.5 billion.=20
"Certainly to the extent that it helped refute what California has been=20
saying, it's a victory," Bailey said of the judge's statement.=20
But Davis said the nation's big power sellers never came to the table with =
a=20
serious offer.=20
"Not surprisingly, the energy pirates that bilked ratepayers out of billion=
s=20
of dollars stonewalled and refused to negotiate in good faith," Davis said.=
=20
$716 MILLION OFFER=20
Wagner disclosed yesterday that the generators had made an offer to=20
California: $716 million in refunds.=20
The judge said the figure included about $510 million from the so-called Bi=
g=20
Five generators, as well as $125 million from BC Hydro's Powerex, $49.6=20
million by a group of 15 electricity marketers, $16.5 million by six=20
California municipal utilities and $25 million offered by other out-of-stat=
e=20
power sellers.=20
California officials say it was not a legitimate offer because it included =
no=20
cash. It was simply an agreement by the companies to wipe some of the state=
's=20
debt off the books.=20
Throughout the talks, generators complained that the California team was=20
trying to shield some California companies and government power providers=
=20
from having to pay any refunds, and trying to disproportionately extract su=
ms=20
from out-of-state power companies.=20
FAVORITISM CHARGED
According to documents and interviews, the state attempted to remove Pacifi=
c=20
Gas and Electric Co., Southern California Edison, San Diego Gas & Electric.=
,=20
the Los Angeles Department of Water and Power and other government power=20
suppliers from the group from which it was asking for refunds, even though=
=20
they were paid the same high rates for power as everyone else.=20
Representatives for the power sellers said they believe that Davis made a=
=20
political decision to demagogue the companies while refusing to compromise =
on=20
the state's claims. They say the governor calculated that his reputation=20
would be enhanced by continuing to attack the generators.=20
"The California delegation did not come into these talks with any willingne=
ss=20
to compromise," said Mark Stultz, vice president of the Electric Power Supp=
ly=20
Association, a Washington, D.C., trade group. "They went in with a dollar=
=20
figure and never budged on that figure. If you're looking for a settlement,=
=20
you have to be willing to compromise."=20
Up next 1. The Federal Energy Regulatory Commission will consider, probably=
=20
on July 25,=20
new hearings on how much, if anything, California was overcharged. 2. If=20
ordered by the commission, an administrative law judge will take testimony =
on=20
how much the state says it was overcharged and how much generators say they=
=20
are owed. 3. Regulators will rule based on the judge's recommendation. If t=
he=20
parties disagree, they can go to court.=20
E-mail the writers at zcoile@sfchronicle.com. and cberthelsen@sfchronicle.c=
om
., Zachary Coile reported from Washington, D.C., and Christian Berthelsen i=
n=20
San Francisco.=20
,2001 San Francisco Chronicle ? Page?A - 1=20




Davis opens another new power plant=20
Pittsburg facility will generate 555 megawatts=20
Bernadette Tansey, Chronicle Staff Writer
Tuesday, July 10, 2001=20
,2001 San Francisco Chronicle=20
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/07/10/MN175828=
.DTL=20

Pittsburg -- Workers were still scraping wet concrete on support columns as=
=20
Gov. Gray Davis celebrated the startup of a new power plant in Pittsburg=20
yesterday -- the latest in a string of openings Davis hopes will help=20
California "build its way" out of the energy crisis. The state rushed to=20
throw as many megawatts on line as it could when it looked like the summer=
=20
would feature regular blackouts, and yesterday the governor said it was=20
paying off.=20
"This is the third plant I've helped open in the last 13 days," Davis said,=
=20
pumping his fist as the Calpine Corp. plant belched an impressive burst of=
=20
steam. "In the past 13 days, we've put more power on the grid than Californ=
ia=20
did throughout the 1990s."=20
The 555-megawatt Los Medanos Energy Center and the Sutter Energy Center tha=
t=20
Calpine opened in Yuba City last week bring a total of 1,115 megawatts=20
online. Last month, Davis threw the switch on a Bakersfield plant that open=
ed=20
more than a month ahead of schedule.=20
Davis used yesterday's event to blast out-of-state generators that he=20
maintains have gouged the state for electricity. Yet he lauded San Jose-bas=
ed=20
Calpine as a sort of energy favorite son.=20
"They were the first to enter long-term contracts with us," the governor=20
said. Calpine is among the big energy firms being pressed by the state to=
=20
issue refunds for what the governor insists were overcharges, but unlike th=
e=20
others, Davis said, Calpine is giving ground in negotiations.=20
"They likely will be the first to enter into settlements with us," he said.=
=20
Although the Los Medanos plant is one of a generation of efficient new gas-=
=20
fired plants that will be as much as 40 percent cheaper to run than their=
=20
forebears, the state will be paying well above current market rates for the=
=20
first three months of its contract with Calpine.=20
Calpine President Peter Cartwright insisted, however, that the company is n=
ot=20
making excess profits off the deal. To ensure that Calpine could provide th=
e=20
electricity even if plant construction wasn't finished by its mid-July targ=
et=20
date, the company bought the needed power from other energy traders at $232=
 a=20
megawatt hour when market rates were higher, he said.=20
In addition to the 300 megawatts it has pledged to the state, Calpine will=
=20
supply electricity to the Sacramento Municipal Utility District and other=
=20
power agencies.=20
In the long term, Calpine will be selling power to California at $59 a=20
megawatt hour, Cartwright said.=20
A spokesman for the state Department of Water Resources, which started buyi=
ng=20
power in January after state utilities buckled under high prices, said=20
Calpine's rate is well below the $70 a megawatt hour the state is aiming fo=
r=20
as an average price for the long-term contracts.=20
Cartwright said that with its recently opened plants, along with an 875-=20
megawatt facility it plans to open in Pittsburg next May, the company is=20
doing its share to ease the state's supply crunch.=20
"Ours are the lowest contracts in the state," he said. "If these plants=20
weren't online, we'd be having blackouts."=20
A spokeswoman from the state agency that manages the power grid said=20
California is skating so close to blackouts that "every megawatt counts."=
=20
"It's definitely making a difference and it will continue to do so over the=
=20
summer," said Lorie O'Donley, a spokeswoman for the Independent System=20
Operator.=20
E-mail Bernadette Tansey at btansey@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 11=20





California rejects B.C. Hydro $125 million settlement=20

Tuesday, July 10, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/s=
tate0
321EDT0105.DTL=20
(07-10) 00:21 PDT VANCOUVER, British Columbia (AP) --=20
California has rejected an offer by B.C. Hydro's power trading subsidiary t=
o=20
refund $125 million to settle the state's allegations that it was overcharg=
ed=20
by the Canadian power company.=20
The dispute will now be resolved by U.S. judicial and regulatory authoritie=
s.=20
The offer from Hydro's Powerex subsidiary came during 15 days of settlement=
=20
talks between power generators and distributors, California and other weste=
rn=20
states.=20
The talks, initiated by the Federal Energy Regulatory Commission, which=20
regulates cross-border power sales in the United States, concluded Monday=
=20
evening without resolution.=20
Hydro spokeswoman Elisha Odowichuk said that under the offer, the Crown=20
corporation would have been subtracted $125 million from the $290 million=
=20
California still owes British Columbia for power sales.=20
The $125 million was Powerex's first offer and it did not change through th=
e=20
negotiations, she said. The company put conditions on that refund figure, b=
ut=20
Odowichuk would not say what those conditions were.=20
California has charged that Powerex gouged it by more than $430 million.=20
Odowichuk said Hydro had to join the settlement talks to preserve its=20
otherwise lucrative power trading relationship with California.=20
Electricity imports and exports statistics compiled by Canada's National=20
Energy Board show Powerex exported more than $900 million worth of energy=
=20
from January to April.=20
The average cost of that power was $661.56 a megawatt hour.=20
Prices have dropped to around $140 a megawatt hour since the regulatory=20
commission instituted price caps on June 19.=20
,2001 Associated Press ?=20





Davis' criticism of Texas misdirected, report finds=20
Lynda Gledhill, Mark Martin, Chronicle Staff Writers
Tuesday, July 10, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/07=
/10/M
N48875.DTL=20
Sacramento -- Texas-based electricity generators have received the brunt of=
=20
criticism from Gov. Gray Davis for gouging California during the power=20
crisis, but financial information released yesterday shows the lion's share=
=20
of the money went elsewhere.=20
Companies with headquarters in Texas garnered less than 10 percent of=20
California's multibillion-dollar energy purchases, while public and private=
=20
energy companies from Canada to Georgia to California got the rest.=20
The $424 million that went to Texas companies may still be more than the=20
state should have been charged, and administration officials are attempting=
=20
to get refunds from a host of companies, both in and out of Texas.=20
Earlier this year, Davis lambasted the Bush administration for not acting=
=20
against power firms in his home state. "What's going on here, pure and=20
simple, is unconscionable price-gouging by the big energy producers -- most=
=20
of them, incidentally, located in Texas," he said in May.=20
Yesterday, a spokesman for the governor broadened the verbal assault, sayin=
g=20
the Texas firms are representative of the many other out-of-state generator=
s=20
who have also gouged California.=20
"Anywhere they wear cowboy hats, they probably have handkerchiefs across=20
their face because they are robbing us blind," said Steve Maviglio, Davis'=
=20
spokesman.=20
The latest financial information is contained in a report by the state=20
Department of Water Resources detailing $7.2 billion in power purchases fro=
m=20
Jan. 17 through the end of May.=20
About $5.2 billion of that was spent on the spot market where power buys ar=
e=20
made a day, hour or even a few minutes before the electricity is actually=
=20
used.=20
Because the spot purchases are made with little notice, they are the most=
=20
expensive kind of power on the market. The state was forced to step in and=
=20
buy the power when the credit ratings of California's major utilities dropp=
ed=20
as the energy crisis worsened. The crisis was caused by a series of events=
=20
that forced the utilities to pay more for electricity than they could recov=
er=20
from customers.=20
The numbers released yesterday show that Texas companies weren't alone in=
=20
receiving a share of the energy crisis pie. Some $1.2 billion went to Miran=
t,=20
an Atlanta-based company. Mirant has refused to turn over documents=20
subpoenaed by the state Legislature as part of its investigation into alleg=
ed=20
market manipulation. Mirant could face contempt proceedings.=20
Municipal generators have also fared well during the energy crisis. Powerex=
,=20
a wholly owned power marketing subsidiary of Vancouver-based BC Hydro,=20
received $1 billion from the state for spot market electricity.=20
The Los Angeles Department of Water and Power, which Davis said charged=20
higher average spot market prices than some generators, received $331=20
million.=20
E-mail Lynda Gledhill at lgledhill@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 9=20





Developments in California's energy crisis=20
The Associated Press
Tuesday, July 10, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/s=
tate1
041EDT0134.DTL=20
(07-10) 07:41 PDT (AP) --=20
Developments in California's energy crisis:=20
TUESDAY=3D
* No power alerts Tuesday as electricity reserves stay above 7 percent.=20
MONDAY=3D
* A Federal Energy Regulatory Commission administrative law judge says that=
=20
California is entitled to no more than $1 billion in refunds for excessive=
=20
energy costs. Gov. Gray Davis had been seeking $8.9 billion for overcharges=
.=20
* The Department of Water and Power releases 1,770 pages of documents=20
detailing the state's spot market power purchases in the first quarter of t=
he=20
year. DWR also releases a report showing that the state's daily power buys=
=20
topped $100 million on three days in May.=20
The DWR report says the energy companies that were paid the most by the sta=
te=20
for last-minute power were: Mirant Corp., which was paid $1.24 billion as o=
f=20
the end of May; Canada-based Powerex, $1.05 billion; and Sempra Companies,=
=20
$429 million.=20
* Davis ceremonially switches on the largest licensed power plant to come=
=20
online this year, Calpine's 559-megawatt Los Medanos Energy Center in=20
Pittsburg.=20
* No power alerts as electricity reserves stay above 7 percent.=20
* Shares of Edison International closed at $14, up 69 cents. PG&E Corp. ros=
e=20
65 cents to close at $14.10. Sempra Energy, the parent company of San Diego=
=20
Gas & Electric Co., closed at $27.52, down 21 cents.=20
WHAT'S NEXT=3D
* U.S. Bankruptcy Judge Dennis Montali decides Tuesday whether millions of=
=20
Pacific Gas and Electric Co. ratepayers can form their own creditors'=20
committee to represent them in the utility's bankruptcy proceeding.=20
* The Senate committee investigating possible price manipulation in=20
California's energy market meets Wednesday. The committee will vote on=20
contempt citations against generators Mirant and Enron, which failed to=20
comply with subpoenas for documents. The committee will meet again July 18 =
to=20
consider compliance by six other suppliers that have until Tuesday to turn=
=20
over documents.=20
THE PROBLEM:
High demand, high wholesale energy costs, transmission glitches and a tight=
=20
supply worsened by scarce hydroelectric power in the Northwest and=20
maintenance at aging California power plants are all factors in California'=
s=20
electricity crisis.=20
Southern California Edison and Pacific Gas and Electric say they've lost=20
nearly $14 billion since June 2000 to high wholesale prices the state's=20
electricity deregulation law bars them from passing on to consumers. PG&E,=
=20
saying it hasn't received the help it needs from regulators or state=20
lawmakers, filed for federal bankruptcy protection April 6. Electricity and=
=20
natural gas suppliers, scared off by the companies' poor credit ratings, ar=
e=20
refusing to sell to them, leading the state in January to start buying powe=
r=20
for the utilities' nearly 9 million residential and business customers. The=
=20
state is also buying power for a third investor-owned utility, San Diego Ga=
s=20
& Electric, which is in better financial shape than much larger Edison and=
=20
PG&E but is also struggling with high wholesale power costs.=20
The Public Utilities Commission has approved average rate increases of 37=
=20
percent for the heaviest residential customers and 38 percent for commercia=
l=20
customers, and hikes of up to 49 percent for industrial customers and 15=20
percent or 20 percent for agricultural customers to help finance the state'=
s=20
multibillion-dollar power buys.=20
Track the state's blackout warnings on the Web at=20
www.caiso.com/SystemStatus.html.=20
,2001 Associated Press ?=20




Energy talks reach no settlement; state threatens suit=20
MARK SHERMAN, Associated Press Writer
Tuesday, July 10, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/s=
tate0
400EDT7473.DTL=20
(07-10) 01:00 PDT WASHINGTON (AP) --=20
With talks between the state and power generators stalled, California may g=
o=20
to court to help win the $8.9 billion state officials believe it was=20
overcharged for electricity.=20
"I think we have demonstrated very clearly both to the FERC and to the judg=
e=20
that the state is owed $8.9 billion and will settle for nothing less," said=
=20
Roger Salazar, a spokesman for Gov. Gray Davis.=20
With negotiations at an impasse, the administrative law judge for the Feder=
al=20
Energy Regulatory Commission said California is probably owed no more than =
$1=20
billion in refunds.=20
"The numbers were too far apart," said Curtis Wagner, the FERC chief=20
administrative law judge.=20
California, Wagner said, may receive nothing at all, because generators may=
=20
be owed more than they have to return for any overcharges.=20
He placed the refunds owed the state at between $716 million and $1 billion=
.=20
Power providers had offered $716 million as part of an overall settlement,=
=20
while California state officials sought $8.9 billion, Wagner said.=20
He said California officials had not made the case for $8.9 billion in=20
refunds.=20
Salazar, however, said the state would go to court and may ask for $20=20
billion.=20
Separately, Wagner split off claims of overcharges from the Pacific=20
Northwest, saying he has not had time to consider those allegations under t=
he=20
short timetable ordered by FERC last month.=20
Wagner served as a mediator during the 15 days of negotiations and will=20
recommend a settlement to FERC by next Monday. The commission ordered the=
=20
talks last month in an effort to resolve differences between producers and=
=20
the state over the breakdown of California's deregulated electricity market=
.=20
Consumer advocates assailed the judge's recommendation and urged the state =
to=20
continue its attempt to get refunds from what they say are profiteering pow=
er=20
companies.=20
"It's like catching a bank robber, but instead of making him give back all =
of=20
it, you only make him give back 5 percent of what he stole," said Douglas=
=20
Heller, spokesman for the Santa Monica-based Foundation for Taxpayer and=20
Consumer Rights.=20
Power generators, however, were generally pleased with Wagner's comments.=
=20
Brent Bailey, general counsel for Duke Energy, said even if the formula=20
Wagner recommends produces $1.5 billion in refunds, "that's a reasonable=20
amount in the context of these settlement talks."=20
California officials, negotiating on behalf of utilities, the Public=20
Utilities Commission and state power buyers, accused the producers of=20
manipulating supply to unfairly drive up prices.=20
The producers have acknowledged prices are high, but blame jumps in the pri=
ce=20
of natural gas, which fuels many power plants, and the workings of the free=
=20
market.=20
The bill for wholesale power in California soared to $27 billion last year=
=20
from $7 billion the year before. Davis has estimated the state could spend =
as=20
much as $50 billion this year.=20
The producers reiterated Monday that California's numbers are grossly=20
inflated. Attorneys for the five major generators -- Duke Energy, Dynegy,=
=20
Mirant, Reliant Energy and the Williams Cos. -- said in a statement that th=
ey=20
have made a "very substantial global settlement offer."=20
Reliant would agree to no more than $50 million in refunds as part of an=20
overall settlement that also would have to include protection from addition=
al=20
legal claims, said John H. Stout, a company senior vice president.=20
But Stout also said, "Reliant's fundamental position has been and remains=
=20
that no refunds are justified."=20





Toxic fumes not linked to blackouts=20
Backup power OK in facilities, report says=20
Jason B. Johnson, Chronicle Staff Writer
Tuesday, July 10, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/07=
/10/M
NC115768.DTL=20
Despite a power-related mishap that released toxic fumes from an industrial=
=20
plant in May, rolling blackouts are not expected to cause dangerous release=
s=20
in Contra Costa, a county study concludes.=20
The county Health Department report found that 52 industrial facilities hav=
e=20
adequate backup power plans.=20
The report to be presented to the Board of Supervisors today was prompted b=
y=20
a freak traffic accident that knocked out power at Richmond's General=20
Chemical Corp. plant. When the plant powered back up, a cloud of sulfur=20
trioxide and sulfur dioxide was released.=20
Contra Costa hazardous materials director Lew Pascalli said that there is=
=20
always a possibility that a plant's hydraulic or mechanical systems could=
=20
fail but that those chances are slight given the growing number of power=20
plants coming online and the state's successful conservation effort.=20
He also said industry has done a good job preparing for outages.=20
"The industry is doing a good-faith effort in this particular instance to=
=20
make sure that nothing happens," Pascalli said.=20
County officials relied on industry records in determining the adequacy of=
=20
the different plans, such as having multiple electrical leads feeding a=20
source regulating hazardous materials.=20
Denny Larson, spokesman for the group Communities for a Better Environment,=
=20
said the report relied too heavily on industry self-reporting.=20
"Unfortunately, the conclusions of the report can't be backed up by the=20
facts," Larson said. "Oil and chemical plants in Contra Costa have repeated=
ly=20
had toxic releases due to power failures over the years."=20
The 52 facilities include chemical plants, oil refineries and small shops=
=20
that produce limited amounts of hazardous materials.=20
For many of these businesses, the loss of power would shut down their=20
operations and make it impossible for substances to be released.=20
Larger facilities, like oil refineries, have either their own backup=20
generators or contracts with cogeneration plants that could supply all or=
=20
most of their power independent of the electricity power grid, according to=
=20
the report.=20
Plans are also in place to conduct partial shutdowns at plants running on=
=20
reserve power during a blackout.=20
General Chemical said all electrical feeds to the chamber processing=20
chemicals are automatically pulled in the event of loss of power. A backup=
=20
generator will automatically come online to keep operations stable.=20
Dow Chemical has a contract with a Calpine power plant to supply it with=20
electricity. Battery backup and diesel emergency engines are also at the si=
te=20
to ensure enough power to run lights, alarms, controls and emergency shutdo=
wn=20
equipment.=20
e-mail Jason B. Johnson at jbjohnson@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 11=20







Power suppliers, state fail to agree on refund total=20
Posted at 10:41 p.m. PDT Monday, July 9, 2001=20
BY JIM PUZZANGHERA=20

Mercury News Washington Bureau=20


WASHINGTON -- California officials and power suppliers failed to agree on=
=20
refunds for electricity overcharges as 15 days of contentious negotiations=
=20
ended Monday, leaving the matter in the hands of a federal judge who said t=
he=20
state is owed much less than the $8.9 billion it demands.=20
The judge overseeing the talks for the Federal Energy Regulatory Commission=
=20
put the refunds at between several hundred million dollars and a billion=20
dollars. His estimate is closer to the $716.1 million offer made by power=
=20
suppliers during negotiations. The offer was rejected by California=20
officials.=20
But it was unclear Monday which side in the bitter refund battle would=20
prevail, and California officials indicated the dispute is probably headed =
to=20
court. At stake is how much the state's electricity consumers will ultimate=
ly=20
have to pay for costs that skyrocketed as California's deregulation system=
=20
collapsed.=20
Curtis Wagner, the commission's chief administrative law judge, will=20
recommend a formula for the commission to use to calculate a refund dating=
=20
back to October. That formula -- a complex methodology that involves factor=
s=20
such as daily natural gas prices -- includes many of the provisions the=20
energy suppliers had advocated during the talks.=20
Michael Kahn, who headed the California negotiating team, said the state=20
would contest some aspects of the formula. But even without changes, Kahn=
=20
said he was confident the formula will result in more refunds than Wagner=
=20
estimated.=20
``We think the numbers even using the judge's formula are going to be in th=
e=20
multiple billions,'' said Kahn, chairman of the state Independent System=20
Operator, which runs the electricity grid. ``California will get its $8.9=
=20
billion dollars. If we don't get all of it from the commission .?.?. we'll=
=20
still get the remainder of the money'' through the courts.=20
Amount in dispute=20
Power industry representatives appeared pleased with the judge's plan.=20
``We haven't gone and run the full numbers but it's going to be nowhere nea=
r=20
the $8.9 billion,''' said Brent Bailey, vice president and general counsel=
=20
for Duke Energy North America. ``But let's face it, that's a pie-in-the-sky=
=20
number that nobody in there believed in their right mind was a legitimate=
=20
number.''=20
Wagner acknowledged he had not calculated any figures using his formula,=20
saying he arrived at his dollar estimate based on the offers made by the=20
suppliers.=20
The energy commission ordered the private settlement conference last month=
=20
when it enacted new price controls to try to rein in soaring electricity=20
prices in California and throughout the West. Commissioners hoped that unde=
r=20
pressure of a deadline and their looming intervention the state and the pow=
er=20
suppliers could resolve the refund issue and stave off future litigation.=
=20
But the suppliers and state officials never came close to a deal,=20
participants said.=20
``The numbers were too far apart. You saw $8.9 billion on one end and you s=
aw=20
$716 million on the other end, and that's a long way to splitting the=20
difference,'' Wagner said. ``I think a lot of the parties genuinely wanted =
to=20
settle. Others didn't.''=20
Wagner now has until Monday to make his recommendation to the five-member=
=20
commission, which will make the final ruling on refunds. To date, the=20
commission has ordered $125 million in refunds for periods since last Oct. =
2.=20
Wagner said Monday that he will ask that a special hearing be set up in the=
=20
next 60 days to get the detailed information from the state and power=20
suppliers needed to determine a refund total using his formula.=20
The state may not end up with any cash, as any refund total could be applie=
d=20
to the several billion dollars California and its utilities still owe many =
of=20
the power suppliers.=20
Reflecting the tone of the negotiations, California Gov. Gray Davis on Mond=
ay=20
blamed power suppliers for the failure of the talks and challenged the=20
commission to resolve the situation.=20
``Not surprisingly, the energy pirates that bilked ratepayers out of billio=
ns=20
of dollars stonewalled and refused to negotiate in good faith with our team=
=20
in Washington, D.C.,'' Davis said. ``While in the past the FERC has shown=
=20
little, if any, interest in consumers, they now have the opportunity to=20
redeem themselves by returning the $8.9 billion California has demonstrated=
=20
it is owed.''=20
Davis may go to court=20
At the opening of a new power plant in Contra Costa County on Monday, Davis=
=20
told reporters that he's prepared to take the power generators to court if=
=20
FERC doesn't order the full refund. Davis also said the ISO's estimate of=
=20
$8.9 billion doesn't represent all the overcharges. He said other estimates=
=20
put the figure as high as $20 billion, although he did not elaborate about=
=20
how those figures were calculated.=20
John H. Stout, senior vice president for Reliant Energy Wholesale Group, sa=
id=20
the state used faulty methodology to arrive at the $8.9 billion figure.=20
California officials and several suppliers said they would continue to=20
negotiate separately, and an official with San Jose-based Calpine said his=
=20
company is close to a settlement with the state.=20
Power suppliers urged Wagner not to calculate refunds by applying the energ=
y=20
commissions' June price-limits plan retroactively. But that's what Wagner=
=20
said he will do. It was a victory for California officials, who had pushed=
=20
for it. Wagner, however, also made some changes to the price-limit plan tha=
t=20
power suppliers had wanted. He applied it only back to Oct. 2, 2000. State=
=20
officials wanted it to cover up to May 2000.=20
$3 billion difference=20
The state's $8.9 billion figure comes from May 2000 through May 2001.=20
Factoring refunds beginning with Oct. 2, 2000, eliminates about $3 billion =
in=20
overcharges the state says occurred in the earlier period.=20
Among the changes to the commission's formula that Wagner made was to revis=
e=20
the way the prevailing electricity price limit is calculated. Wagner wants=
=20
the price limit determined for each hour of each day. The commission's=20
formula sets a price limit during Stage One power emergencies that remains =
in=20
effect until the next emergency.=20
But in a sign of just how complex the issue is, Stanford University economi=
st=20
Frank Wolak said he believes the standards described by the judge will=20
produce a much higher figure than $1 billion.=20
``That's the methodology the state used,'' said Wolak, who advises the=20
California ISO on market issues. ``By using the marginal unit for each hour=
,=20
you'll get refund numbers on the order of what the state estimated.''=20


Mercury News Staff Writers Brandon Bailey and Dana Hull contributed to this=
=20
report.=20



Contact Jim Puzzanghera at jpuzzanghera@krwashington.com or (202) 383-6043.=
=20












Power purchase bills exceed $7.5 billion=20
Published Tuesday, July 10, 2001, in the San Jose Mercury News=20
BY MARK GLADSTONE, NOAM LEVEY AND DION NISSENBAUM=20

Mercury News Sacramento Bureau=20


SACRAMENTO -- Six months after jumping into the electricity business, the=
=20
Davis administration on Monday provided the first detailed glimpse of=20
California's daily power purchases, showing more than $5 billion in payment=
s,=20
much of it to government-owned utilities and private companies that state=
=20
officials have branded as price gougers.=20
The state spent an additional $2.5 billion on a variety of contracts and=20
other electricity services designed to stabilize the volatile energy market=
s,=20
according to documents that the state agreed to release last week amid a=20
legal dispute over public access to the data.=20
In roughly the first five months of the year, the state shelled out $1.2=20
billion to Atlanta-based Mirant, the most any company was paid for=20
electricity, followed by $1 billion to Powerex, the marketing arm of BC Hyd=
ro=20
in British Columbia. It also paid $331 million to the Los Angeles Departmen=
t=20
of Water and Power.=20
The documents raise questions about some of the common assumptions that hav=
e=20
arisen around the electricity crisis. For instance, almost 40 percent of th=
e=20
state's purchases have come from government-run power generators in=20
California and elsewhere, but not Texas; some of the biggest suppliers are=
=20
from the Northwest.=20
Gov. Gray Davis, who has ambitions to run for the White House, has put much=
=20
of the blame for the soaring costs of power on energy companies based in=20
President Bush's home state.=20
The figures are tucked inside 1,770 of pages of invoices that Davis has=20
resisted divulging, saying disclosure would encourage suppliers to charge=
=20
more. The state, which last month released information on its long-term=20
electricity contracts worth $43 billion, agreed Thursday to release the fir=
st=20
quarter details.=20
Short on explanation=20
The figures were disclosed late Monday by the California Department of Wate=
r=20
Resources, which buys power for the state's financially strapped major=20
utilities, and seem to buttress the administration's contention that the=20
price of power is gradually dropping but offer little or no explanation for=
=20
what prompted the decrease.=20
In January, for instance, the average price for power on the spot market wa=
s=20
$321 a megawatt hour. It peaked in April at $332 and dropped to $271 in May=
.=20
One megawatt powers about 750 homes.=20
Davis spokesman Steve Maviglio said the price data supports the governor's=
=20
assertions that California has been gouged. ``The bad guys are clearly the=
=20
out-of-state generators,'' Maviglio said. ``There has been a significant=20
shift of money out of California.''=20
But the documents fail to shed much light on whether, as the administration=
=20
contends, the price drop was due to long-term power contracts negotiated by=
=20
the state earlier this year. Critics contend that the Davis administration=
=20
panicked and rushed into deals that commit the state to pay high prices for=
=20
many years.=20
Used for support=20
Republican officials used the price information to bolster their attacks=20
against Davis, a Democrat, for signing long-term contracts with power=20
generators even as the price of power on the spot market was coming down,=
=20
partly because of the declining price of natural gas used to fuel many=20
plants.=20
``It's more clear than ever that the long-term contracts are a bad deal,''=
=20
said Assemblyman Tony Strickland, R-Camarillo. ``The governor's really hurt=
=20
the ratepayers for the next five or 10 years.''=20
The newly released bills highlight the volatility of California's energy=20
market, where the price per megawatt hour ranged from $70 to $1,000. On any=
=20
given day, the records show, the prices from seller to seller varied widely=
,=20
with some of the highest prices being charged by public utilities and=20
companies outside Texas.=20
On one day in February, for example, San Diego-based Sempra Energy was=20
charging $165 per megawatt hour, the Eugene Water and Electric Board was=20
charging nearly $500 and Duke Energy, a North Carolina company, was chargin=
g=20
up to $575.=20
The state's daily spending peaked May 10 at $102.4 million for all power,=
=20
including the spot market and contracted power.=20
The state began buying power in mid-January on behalf of the state's major=
=20
utilities, which were unable to borrow money to buy power after amassing=20
enormous debts for electricity.=20
San Jose-based Calpine Corp., which is building several new power plants=20
around California including one in South San Jose, did only $29 million wor=
th=20
of business with the state in the first five months of the year, according =
to=20
the figures.=20
The state began buying power in mid-January when Pacific Gas & Electric Co.=
=20
and Southern California Edison Co. were on the ropes financially. PG&E late=
r=20
went into bankruptcy.=20
On Monday, state lawmakers took another shot at trying to cobble together a=
=20
plan to rescue financially ailing Edison.=20
While most concede that a rescue plan Davis worked out with Edison will not=
=20
win the necessary support in the Legislature, lawmakers have created severa=
l=20
working groups to come up with alternatives.=20
Compromise plan=20
On Monday, state Sen. Byron Sher, D-Redwood City, unveiled the latest=20
compromise proposal that seeks to protect average ratepayers and small=20
businesses from further rate increases and forces everyone else to help=20
finance the Edison bailout.=20
The ``shared pain'' proposal would force power producers, owed about $1=20
billion, to take a 30 percent ``haircut'' and agree to forgive about $300=
=20
million in Edison debts. Edison would be asked to swallow $1.2 billion --=
=20
about a third of its debt. And big users would be asked to pay off the=20
remaining $2 billion in debts, possibly by paying higher prices for power.=
=20
In exchange, large companies would be given the opportunity to buy power on=
=20
the open market, a system that would allow many of them to sign cheap energ=
y=20
deals.=20
Sher presented the proposal to Senate Democrats Monday afternoon, but it=20
remains unclear how much support the framework will receive in the=20
Legislature.=20


Contact Mark Gladstone at mgladstone@sjmercury.com or (916) 325-4314.=20

?














Refund outlook dims=20
Talks break down; judge says state is owed much less than its $8.9 billion=
=20
demand -- and unpaid bills may offset gains.=20
July 10, 2001=20
By DENA BUNIS
and JOHN HOWARD
The Orange County Register=20
WASHINGTON The nation's chief energy judge said Monday that California is=
=20
owed maybe $1 billion in refunds from power generators, a fraction of the=
=20
$8.9 billion demanded by Gov. Gray Davis.=20
And even at that, said Judge Curtis Wagner, the electricity sellers are owe=
d=20
so much more in unpaid power bills that in the end California might not see=
=20
one red cent.=20
Wagner announced his recommendation to the Federal Energy Regulatory=20
Commission after two weeks of fruitless negotiations between all the partie=
s=20
to California's electricity crisis. With no settlement, the matter is now i=
n=20
the commissioners' hands.=20
Power generators, Wagner said, had offered a combined $716 million in=20
refunds, an offer the state rejected. "I don't think it's 8.9 (billion=20
dollars)," he said afterwards, "because I haven't been shown that it was."=
=20
For California consumers, every dollar the state can extract in refunds is =
a=20
dollar less that ratepayers have to shell out for state-purchased power. An=
d=20
the more money the state gets back, the better the chances of warding off=
=20
future rate increases.=20
"California will get its $8.9 billion," insisted Michael Kahn, head of the=
=20
state's delegation and the California Independent System Operator. Kahn=20
brushed off Wagner's comments, finding victory in the judge's assertion tha=
t=20
the state is owed some refunds, a concept the generators have been unwillin=
g=20
to embrace up to now, he said.=20
Since the talks began, some generators have made refund offers -- last week=
=20
Duke Energy offered $20 million and on Monday, Reliant officials revealed=
=20
their refund offer was $50 million, provided all other actions against the=
=20
company were dropped.=20
But the net result of the 15- day closed-door sessions is that California i=
s=20
no closer to getting repaid for what it claims was price gouging by power=
=20
companies going back to May 2000 than it was the day the talks began.=20
And it means the state is in for possibly more hearings before the FERC. If=
=20
unsuccessful there, the whole issue could wind up in court for years.=20
"You can take a horse to water but cannot make him drink," Wagner said duri=
ng=20
an afternoon public session where he made his preliminary recommendation. H=
e=20
has seven days to put his ideas in writing. At several points during the=20
often-tense talks, Wagner expressed frustration to the negotiators and trie=
d=20
to get them to agree, even to the point of holding an unprecedented Sunday=
=20
session.=20
"The numbers were too far apart," Wagner said.=20
While Kahn insisted the state had made progress, on hearing of the judge's=
=20
comments, state Sen. John Burton, D-Francisco, called them "barely better=
=20
than a jab in the eye with a sharp stick." Burton agreed with Kahn that the=
=20
state has to do all it can to get more than that.=20
And Davis backed up his team.=20
"Our delegation made a clear and compelling factual argument that there wer=
e=20
overcharges made because the market was broken," Davis said. "Remarkably, t=
he=20
energy generators and suppliers refused to recognize their responsibility t=
o=20
the people of California and own up to their profiteering."=20
Power generators seemed satisfied with the judge's views, even though John=
=20
Stout, vice president of Reliant Energy, said his company's "fundamental=20
position has been and remains that no refunds are justified."=20
Brent Bailey, general counsel for Duke Energy, called the judge's=20
recommendation, "a fair one."=20
Republican lawmakers in Sacramento were quick to say it was Davis' failed=
=20
energy policies that brought California to this point. They also distanced=
=20
themselves from the state's refund request.=20
"I don't believe there really exists a true justification for that number,"=
=20
said Assemblyman John Campbell, R-Irvine. "I've never considered that=20
anything more than a wild number to throw out there."=20
The two sides are so far apart in their estimates of overcharges because th=
ey=20
are using different assumptions about how to compute the complex pricing=20
structure. And Wagner was more persuaded with the majority of the generator=
s'=20
methods.=20
To start with, the state is asking for $8.9 billion, but about $3 billion o=
f=20
those alleged overcharges happened between May and October 2000, a period=
=20
FERC is not looking at. FERC issued two refund orders in March, finding tha=
t=20
power companies had $124 million in overcharges during power alerts. But th=
e=20
state is challenging that finding, saying there were overcharges beyond tho=
se=20
limited times. And the state is also asking FERC to reconsider allowing=20
refunds for May to October 2000.=20
How energy panel affects California=20
Six months ago, few people had heard of FERC. Now the Federal Energy=20
Regulatory Commission, the agency charged with making sure that the nation'=
s=20
power markets are running smoothly and that wholesale prices are "just and=
=20
reasonable," rolls off the tongue.=20
The five commissioners who make up FERC - all of whom were members of their=
=20
home state's Public Utilities Commissions - ordered the settlement talks th=
at=20
concluded Monday. They had hoped all the parties involved in California's=
=20
electricity crisis could reach an agreement on proposed refunds, long-term=
=20
power contracts and other issues that have divided the parties for months.=
=20
FERC's chief judge, Curtis Wagner, was asked to mediate the talks.=20
WHAT WAS AT STAKE?=20
For the state: $8.9 billion that Gov. Gray Davis said was the amount power=
=20
companies overcharged California in the past year. Wagner's finding? There=
=20
should be refunds. But more like $1 billion.=20
For the generators: More than $5 billion that they say they are owed for=20
unpaid power bills. Wagner's finding? Generators are owed more money than t=
he=20
refunds they owe California. He did not specify by how much.=20
For California consumers: A stable electricity market. Until the refund iss=
ue=20
is settled and power prices are stabilized long term, what the future holds=
=20
for rate increase remains uncertain. Wagner's finding? No settlement.=20
Consumers still in limbo.=20
HOW DID WE GET HERE?=20
In spring 2000, wholesale power prices began to soar. The state began=20
appealing to FERC to cap wholesale prices. In the meantime the utilities we=
re=20
running out of money. Generators weren't paid for all the electricity they=
=20
sold. Rolling blackouts began.=20
Starting in January, the state began buying the power, replacing the=20
near-bankrupt utilities. Politicians from Sacramento to Washington increase=
d=20
the pressure on FERC to cap rates. More than $27 billion was spent to buy=
=20
power for California last year, compared with $7 billion the year before. T=
he=20
price tag could reach $50 billion this year.=20
On June 19, FERC imposed the kind of soft price caps experts say could=20
moderate wholesale rates. Wholesale prices have come down, but the caps hav=
e=20
caused confusion among generators, leading some to hold some power off the=
=20
market.=20
WHAT'S NEXT?=20
The FERC commissioners will receive Wagner's report within a week. In it, h=
e=20
will suggest they hold a fast-track formal hearing that would last no more=
=20
than 60 days.=20
If they agree, after that hearing the commission would rule on refunds and=
=20
other California market issues.=20
If either the state or the other parties to this dispute disagree, they can=
=20
contest FERC's decision in court. Such legal proceedings could last many=20
years.















State reveals details of power purchases=20
Report shows last-minute energy buys in first three months of 2001.=20
July 10, 2001=20
By JENNIFER COLEMAN
The Associated Press=20
SACRAMENTO On three days in May, California's daily power allowance topped=
=20
$100 million, according to a report released by state power traders.=20
The California Department of Water Resources released the report Monday,=20
along with 1,770 pages of documents that also detailed the last- minute pow=
er=20
purchases the state made on the spot market in the first three months of th=
e=20
year.=20
The report details the department's electricity spending since Jan. 17, whe=
n=20
the state took over electricity purchases for Pacific Gas & Electric Co., S=
an=20
Diego Gas & Electric Co., and Southern California Edison.=20
The utilities had amassed billions in debts and were no longer creditworthy=
=20
enough to purchase power. Since then, the state has spent nearly $8 billion=
=20
to keep the lights on.=20
The state's daily spending peaked May 10 at $102.4 million. The=20
second-highest daily total was May 23, when the state spent $101.8 million.=
=20
But since May, spot-market prices have dropped, due in part to moderate=20
weather, lower natural gas prices, increased conservation that lowered dema=
nd=20
and because of increased scrutiny by lawmakers and investigators into=20
possible price manipulation. Gov. Gray Davis has said long-term contracts=
=20
also drove the price down.=20
"It does look like some of the spot-market prices have gone down, but it=20
looks like it's primarily due to natural gas prices," said Jamie Fisfis,=20
spokesman for Assembly Republicans.=20
The slight reduction in spot-market prices "underscores questions about the=
=20
strategy of locking us into long-term contracts, if natural gas prices=20
continue to drop," Fisfis said.=20
Most of the long-term contracts run for 10 years, with one lasting for 20=
=20
years.=20
Davis already has released details of the state's long-term power contracts=
=20
after losing a court battle with Republican legislators and several news=20
organizations.=20
But Davis wanted to delay the release of the spot-market buys and short-ter=
m=20
contracts until now to keep the state's buying strategy secret.According to=
=20
the state, Atlanta-based Mirant Corp. got $1.24 billion as of May 31 for=20
spot-market purchases.=20
Canadian Powerex, the marketing arm of BC Hydro, has been paid $1.05 billio=
n.=20
The newly released short-term contracts also show that on March 19-20, when=
=20
the state had rolling blackouts, the state paid above-average prices in its=
=20
largest short-term contracts.=20
For example, Mirant sold the state 650 megawatt-hours at off-peak usage tim=
es=20
on March 20 for $345 a megawatt-hour, more than $70 above the average price=
=20
of $272.96.=20















Tuesday, July 10, 2001=20






Ghost of Bob Citron roaming halls of capitol=20
Gray Davis is following footsteps of former O.C. treasurer into fiscal chao=
s




JOHN M.W. MOORLACH=20
Mr. Moorlach is the Orange County treasurer-tax collector.=20

A recent L.A. Times poll found that Californians still remain unconvinced=
=20
that our state suffers from a shortage of energy. Perhaps the state's=20
subsidizing of the actual costs for electricity these past five months has=
=20
caused us to believe that everything is fine. It is not.=20
The state has been spending an average of $57 million, a medium-sized city'=
s=20
annual budget, per day for electricity. Now California is headed toward the=
=20
same financial catastrophe that was imposed on its shareholder-owned=20
utilities, finding one of them in Chapter 11 bankruptcy and another on the=
=20
precipice. At this pace, it will not be long before the state will be stari=
ng=20
a Chapter 9 bankruptcy filing in the face.=20
That's why I'm gnawed by this "d,j. vu" sensation. The similarities and=20
parallels between California of 2001 and Orange County of 1994 are=20
frightening. Here's a refresher. In 1994 the county, through former Treasur=
er=20
Robert Citron, was borrowing at variable rates and investing at fixed rates=
.=20
The "experts" and the "politicos" were comfortable with the investment=20
scheme.=20
No wonder the electorate was convinced that there were no investing=20
improprieties. Even while their former treasurer was very secretive about h=
ow=20
he was investing and what his "exit strategy" would be. Guess what? The=20
unexpected happened. Short-term borrowing rates doubled. The cost of=20
borrowing suddenly exceeded the revenues being generated.=20
It caused the investment pool to implode and Orange County taxpayers realiz=
ed=20
a $1.64 billion loss. In spite of pleas to avoid or minimize this train wre=
ck=20
the county's leadership, he ignored it. The rest is history. In a=20
half-pregnant deregulation scheme, the state capped the retail price that t=
he=20
utilities can charge. It also eliminated the availability to acquire=20
electricity through the use of long-term contracts.=20
Guess what? The unexpected happened. The wholesale price for electricity=20
spiked dramatically above the inflexible retail price cap. It depleted the=
=20
available funds for the utilities, and then some, and they are imploding. I=
n=20
spite of pleas from the utilities imploring Gov. Gray Davis to avoid or=20
minimize this train wreck, he ignored them. The rest is also history.=20
It gets worse. Davis doesn't allow for the immediate raising of retail rate=
s=20
and decides to have the state secretly purchase electricity. Guess what? Th=
e=20
expected happened. He depleted our budget surplus! Our reserves! Nearly $9=
=20
billion - and counting! He's a Citron, only quintupled!=20
And in the light of day, the secret purchases were not attractively priced=
=20
and only compound this financial nightmare. Gov. Davis has done what no=20
Libertarian or Republican could ever dream of doing in such a short time. H=
e=20
has returned the budget surplus created by taxpayers to the residents of=20
California by subsidizing their electricity bills.=20
Bravo! It may not be the most equitable way of refunding taxes, but has=20
anyone ever thought up a more efficient method? But, that's not all. He wan=
ts=20
it back! Davis now wants to borrow some $13 billion to replace the spent=20
reserves and purchase even more electricity at rates in excess of the retai=
l=20
prices! When does this train wreck in slow motion stop?=20
And how do we pay off these bonds? Davis did not want to raise rates last=
=20
summer or this past winter. But now he will to pay off this historically=20
largest municipal bond offering with a significant utility rate increase. T=
he=20
ratepayers will be reminded for 10 years after Davis is gone about his=20
expensive brilliance. And this elected official wants to purchase the power=
=20
grids and bureaucratically manage the utilities? I say "no."=20
If we don't show some leadership in Sacramento soon, potential bond buyers=
=20
will also say "no," unless they receive an attractive interest rate. Just a=
sk=20
Edison International about attractive interest rates. It just subscribed $8=
00=20
million in bonds paying 14 percent. Tragically, Gov. Davis walked into his=
=20
position with an existing budget surplus and now has no tangible legacy to=
=20
show for it. No reserves. No improved highways. No new schools. No=20
infrastructure improvements. Only interest payments.=20
Wasn't that Citron's legacy? If amortized over 10 years at 6 percent, the=
=20
citizens of California will pay an additional $4.4 billion in interest cost=
s.=20
Over 15 years it's $6.7 billion. And therein lies the true legacy of Davis,=
=20
squandering the entire budget surplus that he inherited on interest resulti=
ng=20
from his indecisiveness and lack of leadership!=20
It is so tragic that the perpetrator of this colossal mess is still in deni=
al=20
and continues to play the "blame game." Orange County played the "blame=20
game," too. But it had obvious perpetrators and succeeded in a court of law=
=20
in securing a significant amount in retribution payments. I'm not so sure=
=20
California will have a similar result.=20










Calpine's Los Medanos Energy Center Adds Needed Generation to California=20
Second New Major Base Load Generator for California=20






July 10, 2001=20




Second New Major Base Load Generator for California=20
SAN JOSE, Calif., July 9 /PRNewswire/ -- San Jose, Calif.-based Calpine=20
Corporation (NYSE: CPN) announced today that its 555-megawatt Los Medanos=
=20
Energy Center in Pittsburg, Calif. is providing needed electricity to=20
California's strained power grid. Los Medanos is the second major=20
combined-cycle facility to be licensed and built in California in over a=20
decade. Fueled by natural gas, the facility is designed to add up to=20
555-megawatts of clean, reliable electricity to California on a 24 hours a=
=20
day, seven days a week availability. As a cogeneration facility, the projec=
t=20
also delivers electricity and steam to USS POSCO for use in industrial=20
processing.=20
Governor Gray Davis and Calpine CEO Peter Cartwright will hold a press=20
conference Monday afternoon to commission the Los Medanos Energy Center and=
=20
to recognize the support of the local community, the construction and trade=
s=20
people, and numerous organizations that helped develop the facility.=20
Cartwright said, "We are committed to creating innovative energy solutions=
=20
for California's growing power market. Los Medanos exemplifies excellence i=
n=20
power generation-ratepayers and the environment benefit as Calpine brings t=
o=20
California new energy resources like Los Medanos."=20
Los Medanos is the second of eleven announced modern, fuel-efficient energy=
=20
centers Calpine is building in the State as part of a $6 billion energy=20
initiative. Three additional facilities are under construction, including a=
n=20
880-megawatt facility in Pittsburg at Dow Chemical's facility. By year-end=
=20
2005, Calpine expects to be generating 12,000 megawatts of clean, affordabl=
e=20
electricity to help repower California.=20
Calpine broke ground on the Los Medanos Energy Center in September 1999. Mo=
re=20
than 600 construction and trade personnel worked on the project over a=20
20-month period. During the past several months, the project scheduled two=
=20
ten-hour shifts, seven days a week to get the plant operating as soon as=20
possible in light of the energy crisis. And over the past several weeks,=20
technical teams worked round the clock to complete the facility. The total=
=20
cost of construction is estimated to be approximately $350 million.=20
The Los Medanos Energy Center is located in Pittsburg, Calif., in Contra=20
Costa County adjacent to the USS POSCO plant and is operated by a 22-member=
=20
staff of highly trained personnel.=20
As with all of Calpine's modern base load facilities, Los Medanos uses=20
combined-cycle design with natural gas-fired turbines in combination with a=
=20
steam turbine to achieve maximum fuel efficiency. Advanced emissions contro=
l=20
technology enables Calpine to reduce certain emissions by more than 90=20
percent.=20
Based in San Jose, Calif., Calpine Corporation is dedicated to providing=20
customers with reliable and competitively priced electricity. Calpine is=20
focused on clean, efficient, natural gas-fired generation and is the world'=
s=20
largest producer of renewable geothermal energy. Calpine has launched the=
=20
largest power development program in North America. To date, the company ha=
s=20
approximately 34,000 megawatts of base load capacity and 7,200 megawatts of=
=20
peaking capacity in operation, under construction, pending acquisitions and=
=20
in announced development in 29 states, the United Kingdom and Canada. The=
=20
company was founded in 1984 and is publicly traded on the New York Stock=20
Exchange under the symbol CPN. For more information about Calpine, visit it=
s=20
Website at www.calpine.com.=20
This news release discusses certain matters that may be considered=20
"forward-looking" statements within the meaning of Section 27A of the=20
Securities Act of 1933, as amended, and Section 21E of the Securities=20
Exchange Act of 1934, as amended, including statements regarding the intent=
,=20
belief or current expectations of Calpine Corporation ("the Company") and i=
ts=20
management. Prospective investors are cautioned that any such forward-looki=
ng=20
statements are not guarantees of future performance and involve a number of=
=20
risks and uncertainties that could materially affect actual results such as=
,=20
but not limited to, (i) changes in government regulations, including pendin=
g=20
changes in California, and anticipated deregulation of the electric energy=
=20
industry, (ii) commercial operations of new plants that may be delayed or=
=20
prevented because of various development and construction risks, such as a=
=20
failure to obtain financing and the necessary permits to operate or the=20
failure of third-party contractors to perform their contractual obligations=
,=20
(iii) cost estimates are preliminary and actual cost may be higher than=20
estimated, (iv) the assurance that the Company will develop additional=20
plants, (v) a competitor's development of a lower-cost generating gas-fired=
=20
power plant, and (vi) the risks associated with marketing and selling power=
=20
from power plants in the newly competitive energy market. Prospective=20
investors are also cautioned that the California energy environment remains=
=20
uncertain. The Company's management is working closely with a number of=20
parties to resolve the current uncertainty, while protecting the Company's=
=20
interests. Management believes that a final resolution will not have a=20
material adverse impact on the Company. Prospective investors are also=20
referred to the other risks identified from time to time in the Company's=
=20
reports and registration statements filed with the Securities and Exchange=
=20
Commission.=20
MAKE YOUR OPINION COUNT - Click Here=20
http://tbutton.prnewswire.com/prn/11690X52413521=20
SOURCE Calpine Corporation=20
CONTACT: media, Katherine Potter, 408-995-5115, ext. 1168, or investors, Ri=
ck=20
Barraza, 408-995-5115, ext. 1125, both of Calpine Corporation=20
Web site: http://www.calpine.com (CPN)=20











National Desk; Section A=20
California and Generators Still Split After 2-Week Talks
By JOSEPH KAHN
?=20
07/10/2001=20
The New York Times=20
Page 14, Column 1=20
c. 2001 New York Times Company=20
WASHINGTON, July 9 -- A federal mediator ended two weeks of negotiations=20
about California 's demands for electricity refunds today, with the state a=
nd=20
power suppliers seemingly no closer to a settlement than when the talks=20
began.=20
The failure of the negotiations shifts the burden of resolving the yearlong=
=20
dispute to the Federal Energy Regulatory Commission, to which the mediator=
=20
may recommend a pricing formula that would mean refunds of about $1 billion=
.=20
California , which wants $8.9 billion, vowed today that it would seek that=
=20
much and more, through the courts if necessary.=20
Although electricity prices in the West have eased in recent weeks, the pow=
er=20
crisis that has afflicted California and other Western states seems unlikel=
y=20
to be resolved unless rival parties can agree on how much electricity shoul=
d=20
have cost during the last 13 months.=20
The power market has been mired in an accounting gridlock. The state claims=
=20
that generating companies began grossly overcharging for electricity -- wit=
h=20
prices soaring by a factor of 10 or 20 over year-before levels -- beginning=
=20
in late spring last year. Generators say they are prepared to pay some=20
refunds, but argue that California 's estimates of overcharges are radicall=
y=20
inflated.=20
The mediator in the settlement talks was Curtis L. Wagner Jr., an=20
administrative law judge for the federal agency, who said today that the=20
negotiations had failed to reach the comprehensive voluntary settlement he=
=20
had sought.=20
Mr. Wagner said he would recommend to the agency's commissioners that they=
=20
convene a 60-day evidentiary hearing that would impose an administrative=20
solution. He also said he would suggest a method for determining fair price=
s=20
for electricity .=20
Under federal law, the energy commission has the obligation to ensure ''jus=
t=20
and reasonable'' electricity rates. Though the commission declared last yea=
r=20
that California 's electricity market had broken down, it only recently beg=
an=20
imposing price controls on the market and has yet to address accusations of=
=20
past overcharges systematically.=20
While the scope of any refunds remains uncertain, Mr. Wagner's remarks=20
appeared more favorable for generators than for Western states, which have=
=20
collectively pressed for as much as $15 billion in refunds.=20
Mr. Wagner said that to determine how much California should have paid for=
=20
power since last September, when the commission began monitoring California=
=20
energy prices, he would suggest that the agency retroactively apply a price=
=20
control formula it adopted in June. He also indicated that he supported a w=
ay=20
of calculating the costs of power generation that is closer to the method=
=20
favored by power companies than to the one put forward by California=20
officials. The judge suggested that the formula he is recommending could=20
require generators to pay back hundreds of millions or ''maybe a billion''=
=20
dollars.=20
California officials gave a positive cast to the judge's statements, callin=
g=20
them a step forward because he formally acknowledged that companies would=
=20
have to pay some refunds. They also noted that whatever the level of=20
federally mandated refunds, they would have the option of seeking more in=
=20
court.=20
''We are still going to get the $8.9 billion,'' said Michael Kahn, who=20
represented Gov. Gray Davis of California in the talks. ''If we don't get i=
t=20
all from the commission, we will get the remainder in the courts.''=20
Governor Davis himself said today that if the agency did not provide refund=
s=20
in the amount the state claims it is owed, it would sue generators for $18=
=20
billion to $20 billion. ''We are in a war with generators, mostly out of=20
state, that are trying to bleed us dry,'' Mr. Davis said, speaking at the=
=20
ceremonial opening of a power plant in Northern California .=20
Representatives of several generating companies said that during the=20
settlement talks, they collectively offered to refund California about $500=
=20
million. They estimated that the calculation method suggested by the judge=
=20
would result in refunds of no more than $1.5 billion -- far closer to their=
=20
offer than to California 's demand.=20
Still, several executives said they now hoped to reach individual settlemen=
ts=20
with the state that would end the threat of prolonged litigation and allow=
=20
them to collect several billion dollars they say they are owed by the state=
=20
and its leading, financially pressed utilities, which ran up huge debts to=
=20
suppliers in the last year.=20
''We remain very interested in reaching a global settlement with the state=
=20
that will put this problem behind us once and for all,'' said Brent Bailey,=
=20
vice president and general counsel of Duke Energy.=20





Financial=20
Energy Refund Talks Fail In Calif.; Federal Agency's Judge To Propose=20
Settlement
Peter Behr
?=20
07/10/2001=20
The Washington Post=20
FINAL=20
Page E01=20
Copyright 2001, The Washington Post Co. All Rights Reserved=20
California consumers were overcharged by as much as $1 billion by electrici=
ty=20
suppliers since October, a federal administrative judge said yesterday afte=
r=20
state officials and power suppliers failed to reach an agreement on the=20
disputed charges.=20
Gov. Gray Davis (D) and California power officials wanted $8.9 billion in=
=20
refunds dating back to May 2000, when the state's energy crisis began.=20
A group of generating companies headed by units of Duke Energy Corp., Relia=
nt=20
Energy Inc. and Williams Cos. offered refunds of $716.1 million in the past=
=20
week, going back to October. The companies said refunds should be offset by=
=20
the larger amounts they are owed for unpaid power deliveries to the state.=
=20
"The numbers were too far apart," Curtis L. Wagner Jr., chief judge of the=
=20
Federal Energy Regulatory Commission, told reporters after two weeks of=20
closed negotiations ended yesterday. Wagner acknowledged that his refund=20
number was imprecise and said further hearings before FERC are needed to pi=
n=20
down the figure.=20
Calpine Corp. of San Jose and possibly one other supplier are expected to=
=20
reach individual settlements with the state, the judge said.=20
"A lot of the parties genuinely wanted to settle and others didn't," Wagner=
=20
told reporters. "There's an old southern saying," said the 72-year-old=20
Tennessean. "You can take a horse to water, but you can't make it drink."=
=20
He declined to say which side balked, but previously he had blasted=20
California officials for not modifying their initial demands.=20
Wagner said he will send his own refund formula to FERC's five commissioner=
s=20
within a week. His formula essentially will reflect what he thinks reasonab=
le=20
electricity prices would have been in the state at various times since=20
October, considering fuel costs and other factors. Charges over those level=
s=20
would be subject to refund, if FERC agrees.=20
The judge's recommendation is likely to carry considerable weight with FERC=
's=20
commissioners, according to energy analysts. Earlier this year, FERC=20
tentatively ordered $125 million in refunds for the first three months of=
=20
this year, an amount that Davis called far too low.=20
Facing increasing political pressure from Congress, FERC -- with two new=20
members appointed by President Bush -- has taken a harder line on Californi=
a=20
's power prices. Last month, the commissioners imposed price restraints on=
=20
wholesale power transactions in California and 10 other western states.=20
Wagner patterned his formula after FERC's ruling last month.=20
The nation's wealthiest state has been battered by an extraordinary surge i=
n=20
electricity and gas prices that have pushed its electricity costs up from $=
7=20
billion in 1999 to an estimated $27 billion last year. Power prices did not=
=20
retreat from record levels until last month.=20
Davis's top aides quickly claimed vindication yesterday.=20
"We think the numbers, even using the judge's formula, are going to be in t=
he=20
multiple billions," said Michael Kahn, chairman of the California Independe=
nt=20
System Operator, the state's power grid manager.=20
Kahn noted that the state refused to drop a growing list of legal claims=20
against the principal energy suppliers, most of them headquartered outside=
=20
the state. The companies had insisted on being released from the state's=20
legal claims as part of any settlement, according to sources close to the=
=20
negotiations.=20
"We will have a viable claim in state court and other jurisdictions for the=
=20
remainder," Kahn said. " California will get its $8.9 billion."=20
But the state's own expert witness, economist Eric Hildebrandt, chief marke=
t=20
monitor for the California grid, testified before Wagner that the=20
out-of-state generators and other nonpublic power suppliers would owe about=
=20
$3.7 billion using FERC's pricing formula of last month -- less than half t=
he=20
$8.9 billion goal.=20
Duke Energy is "very pleased'' by Wagner's action, said Brent Bailey, vice=
=20
president and general counsel of the Charlotte-based company. The generator=
s,=20
however, repeated their claims that Davis is trying to make them scapegoats=
=20
for the state's failed electricity deregulation plan.=20
The major generators, in a statement yesterday, said they had delivered onl=
y=20
20 million megawatt hours out of the 145 million the state power grid used=
=20
from October 2000 to last May. (A megawatt supplies enough power for about=
=20
750 homes.)=20
California utilities and municipal power companies also reaped large profit=
s,=20
the generators said.=20
"The refunds sought by California would send a profoundly counterproductive=
=20
message to suppliers: when prices are low and surpluses exist, you face a=
=20
steep downside; when scarcity develops and prices rise we will take away al=
l=20
upside [profit]. No one will invest [in California power facilities] in tha=
t=20
climate," the generators' statement said. "The power supply shortage thus=
=20
will continue without relief."=20

http://www.washingtonpost.com=20
Contact: http://www.washingtonpost.com=20









Economy=20

California and Energy Companies Miss Deadline
By Richard B. Schmitt
?=20
07/10/2001=20
The Wall Street Journal=20
Page A2=20
(Copyright (c) 2001, Dow Jones & Company, Inc.)=20
WASHINGTON -- State officials and power-company executives failed to meet a=
=20
federal deadline for settling $8.9 billion of disputed California electrici=
ty=20
charges, as a federal mediator overseeing the talks suggested the state's=
=20
demand was excessive.=20
Cautioning that he hadn't done formal calculations, Curtis L. Wagner Jr., t=
he=20
chief administrative law judge of the Federal Energy Regulatory Commission,=
=20
put the level of potential refunds at "hundreds of millions of dollars, may=
be=20
a billion dollars." He also said any sums due the state could well be offse=
t=20
by monies its insolvent utilities owe in unpaid power bills.=20
Mr. Wagner said he would recommend to the commission that any refunds be=20
calculated only from October -- the state had been seeking rebates calculat=
ed=20
from May 2000 -- in line with an earlier FERC jurisdictional ruling. That=
=20
decision alone would shave $3 billion from the $8.9 billion claim.=20
Mr. Wagner, who is expected to issue formal findings in the next few days,=
=20
said he would recommend that the FERC hold an evidentiary hearing to assess=
=20
the correct method for figuring refunds.=20
The collapse of the talks doesn't preclude individual deals later between=
=20
energy companies and the state, which has accused them of overcharging for=
=20
power during the past two years. Yesterday, some industry lawyers indicated=
 a=20
willingness to keep bargaining, and Mr. Wagner said two "partial" settlemen=
ts=20
were in the works.=20
Yet, absent any such solution, the overcharge issue -- a flash point in the=
=20
California power crisis -- is apt to be resolved in protracted legal and=20
regulatory proceedings, which could drag on for months or even years.=20
The negotiations began June 25, with a deadline set for midnight last night=
.=20
But late yesterday, participants indicated they were billions of dollars=20
apart, with basic differences over everything from the disputed charges to=
=20
doubts about whether the FERC, which ordered the talks, could enforce a dea=
l=20
because of the industry's questions about the reach of the agency's=20
authority.=20
"We haven't reached a settlement. We really haven't come close," said John=
=20
Stout a senior vice president of Reliant Energy Inc.'s wholesale-power grou=
p.=20
Reliant had offered to pay California about $50 million to extricate itself=
=20
from the fight. That is more than a third of the Houston company's operatin=
g=20
profit during the relevant period, he said, although far shy of the more th=
an=20
$375 million California sought from Reliant.=20
Mr. Wagner said the industry offered a total of $716 million to settle the=
=20
matter.=20
The refund issue is fast becoming a test of the agency's authority and=20
credibility. The FERC, a onetime regulatory backwater, has come under inten=
se=20
scrutiny of late for its largely hands-off monitoring of deregulated=20
California markets. The commission has ordered some companies to pay refund=
s,=20
but they have been relatively small -- such as a $124 million rebate coveri=
ng=20
wholesale electricity bills in California in January and February.=20
California Gov. Gray Davis has said he hopes two new FERC members will take=
 a=20
much more aggressive tack. The agency is expected to act quickly on the=20
judge's call for a hearing and other findings.=20
Yesterday, Michael Kahn, a San Francisco lawyer representing Gov. Davis at=
=20
the settlement, declared he was "gratified" by Mr. Wagner's findings, sayin=
g=20
they validated the state's claims to some refunds, a concept the industry h=
ad=20
rejected at the talks' outset. "We've had a ringing endorsement of the idea=
=20
of refunds and we'll get back lots of money," he said, adding that what the=
=20
state doesn't recoup via the FERC it will pursue in court.=20
But power generators, who derided the state's request for a huge refund as=
=20
"ludicrous" and "unsound," felt vindicated by yesterday's proceedings. "The=
=20
state came away with far less than its expectations," said Robert Loeffler,=
=20
an attorney for a unit of AES Corp. of Arlington, Va. "The common expectati=
on=20
now is that any refunds will be way below this $9 billion."