Message-ID: <9848718.1075851633487.JavaMail.evans@thyme> Date: Tue, 10 Jul 2001 14:35:00 -0700 (PDT) From: jeff.dasovich@enron.com To: mday@gmssr.com Subject: Energy Issues Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Jeff Dasovich X-To: MDay X-cc: X-bcc: X-Folder: \Dasovich, Jeff (Non-Privileged)\Dasovich, Jeff\Sent Items X-Origin: DASOVICH-J X-FileName: Dasovich, Jeff (Non-Privileged).pst 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 chao= s (Commentary) Individual.com (PRnewswire), Tues, 5/10: Calpine's Los Medanos Energy Cent= er Adds Needed Generation to California Second New Major Base Load Generato= r for California =09 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 Judge To Propose Settlement WSJ, Tues, 5/10: California and Energy Companies Miss Deadline ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ----------------------- 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 Cali= fornia's electricity debacle sputtered to an end Monday with the sides ligh= t-years apart on refunds for overpriced wholesale power sales.=20 The impasse raises the specter of years of litigation, with a regulatory ju= dge proposing a formula that could limit refunds to about $1 billion while = California is seeking at least $8.9 billion and perhaps much more.=20 Federal Energy Regulatory Commission administrative judge Curtis Wagner sai= d that within a week he'll urge the five FERC commissioners to begin fact-f= inding hearings on how much is truly owed, following guidelines he outlined= sketchily Monday.=20 Among them would be limiting the time when refunds are allowed -- something= that could reduce state claims by about one-third -- and changing the way = 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= is due some amount of refund money, rejecting the generators' arguments fo= r no refunds.=20 With the 15-day negotiation session nearly moribund, generators and power t= raders had offered up $716 million in proposed refunds in the final days. B= ut Wagner indicated that that would have to be offset by money the state st= ill owes power companies, meaning no cash would actually change hands.=20 The judge held out the possibility that at least two parties, including San= 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 spokes= man Bill Highlander confirmed Monday. But he said he could not disclose 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 Califo= rnia officials killed the talks by never budging from their claims that the= state's consumers deserved at least $8.9 billion in refunds for overcharge= s.=20 "These talks never had a chance," said Enron spokesman Mark Palmer. "Their = political skins are worth more than $716 million that the taxpayers of Cali= fornia could have used. It was about creating and maintaining a tool for a = witch hunt."=20 Of the $716 million compromise offer, $510 million was put on the table by = what Wagner called the "Big Five" generators -- Reliant, Duke, Mirant, Will= iams and Dynegy -- some of whom are under state investigation. Another $125= million was offered by BC Hydro, British Colombia's government utility, wh= ich is not under FERC jurisdiction, and $16.5 million was offered by six Ca= lifornia municipal utilities.=20 The Sacramento Municipal Utility District, the state's second-largest munic= ipal utility, also declined to comment on the talks or any settlement amoun= t it may have offered, but said it would outline its position in writing Th= ursday, the judge's deadline for comments on his proposal.=20 Consumer advocates and some industry officials said the judge's brief publi= c remarks make it difficult to predict exactly what the impacts could be on= the state's troubled electric scene.=20 "If the judge is saying that the refund is topped at a billion that's outra= geous," said Nettie Hoge, head of The Utility Reform Network. "If they're g= oing to start doing some fact finding, hallelujah."=20 Hoge said the talks had been unrealistic from the start, because there was = no effort by FERC to determine how high the overcharges had actually been a= nd then work toward a compromise from there.=20 The state used a formula calculated by its nonprofit grid operator, the Ind= ependent System Operator, which was attacked by marketers as wildly high ev= en while the state called it conservatively low.=20 Joel Newton, representing all five of the big generators, said Monday that = 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 electricity costs were soaring and California utilities warned that they = could be driven into bankruptcy.=20 The governor said generators and traders took advantage of the state's powe= r shortage to manipulate markets and gouge consumers. Generators said they = followed all laws and were only deriving fair profits in a scarcity situati= on.=20 FERC, which entered the picture because by law it has to ensure that electr= icity rates are "just and reasonable," has made repeated, unsuccessful effo= rts to craft a solution that could appease both sides.=20 State Assembly Speaker Robert Hertzberg, D-Sherman Oaks, said Monday that t= he failure of the settlement talks to agree on a refund figure "comes as no= surprise."=20 Negotiators representing generators "refused to even acknowledge the inesca= pable fact that they have profited enormously by exploiting a dysfunctional= market -- at California's expense," he said.=20 Davis, who had accused the generators of failing to negotiate in good faith= with state representatives, said that although FERC commissioners have bee= n slow to respond to his requests for refunds and for price caps on wholesa= le electricity, they "now have the opportunity to redeem themselves."=20 He suggested the commissioners can opt to award California more than is rec= ommended by the judge.=20 Wagner, after mediating talks that continued throughout the weekend, seemed= resigned to the fact that trying to bring more than 50 government, utility= and power generating entities together proved to be an exercise in futilit= y.=20 Michael Kahn, head of the California delegation and consultant to the Calif= ornia ISO, nonetheless came away thinking the state had fared pretty well.= =20 "We came here wanting $8.9 billion," Kahn said. "In all candor, we didn't r= eceive any meaningful settlement offers and so the negotiations were not as= helpful as we had hoped they would be. But our positions were vindicated" = because refunds were offered.=20 Meanwhile, Pacific Gas and Electric Co. and Southern California Edison soun= ded the call for more talks.=20 "We're willing to talk to anyone, anytime about a settlement," said Steve P= ickett, general counsel of Southern California Edison. PG&E said in a prepa= red statement that the sessions "provide a solid basis for further negotiat= ions."=20 How much money the state might eventually receive remains the big question = mark. Wagner said settlement offers of $716 million suggest that eventual r= efunds will amount to "hundreds of millions of dollars, maybe a billion." B= ut he also stressed that he would recommend no specific figure to FERC comm= issioners and does not know how big refunds might eventually be.=20 Other recommendations Wagner said he would make to the commission were a mi= xed bag for the state.=20 The judge said he would recommend refunds no further back than Oct. 2, 2000= , an action that Kahn said would immediately slice $3 billion off the state= 's refund analysis that stretched back to May 2000.=20 But Kahn said that was no defeat for the state, which would turn to the cou= rts to recover that and any other sums excluded from a final refund order.= =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 Am= erica, said he felt the formula laid out by Wagner would generate a refund = 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= said.=20 The Bee's David Whitney can be reached at (202) 383-0004 or dwhitney@mcclat= chydc.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 ele= ctricity 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 t= rickle at the latest power plant that the governor opened on Monday, accord= ing 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 California closer to energy independence, the Los Medanos Energy Center = in Pittsburg spit out no more than 20 megawatts on its opening day, they sa= id.=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 is not expected to reach its full output for two to three weeks, accordin= g to knowledgable sources.=20 Representatives for Calpine and the governor's office, when pressed for det= ails, acknowledged that the plant was not running at full tilt but said the= y did not know how much electricity was actually produced Monday.=20 Calpine, which will bill someone for whatever electricity it sells from Los= Medanos, is keeping track of the production but the figure wasn't immediat= ely 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 yesterday," said Davis spokesman Steve Maviglio.=20 He said the opening was "largely ceremonial," timed for the convenience of = the governor and Calpine's top executive.=20 But consumer advocate Harvey Rosenfield called the media event "a deception= ." It was the third highly publicized power plant launch the governor has a= ttended in the past two weeks.=20 "It's the governor trying to convince people he's hard at work solving the = problem when it's all for show," Rosenfield said. "He's governing by sound = bite. He's certainly getting his money's worth from the consultants he hire= d."=20 Davis political adviser Garry South said last week that the governor's new = radio ad campaign will highlight the efforts to produce more power in Calif= ornia.=20 "Generation comes up in our polls as being the No. 1 thing people want us t= o do -- build more power plants," South said then. "People want the sense t= hat 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 Su= tter near Yuba City -- have since been running at maximum capacity.=20 Calpine anticipates pumping the full 550 megawatts out of Los Medanos withi= n a week to 10 days, company officials said.=20 "In the first month of these new plants, there are always stops and starts,= " said Calpine spokesman Bill Highlander. "Sometimes we shut down altogethe= r."=20 Including the three just-opened facilities, new or expanded power plants ar= e expected to add 1,500 megawatts to the state's struggling electric grid b= y the end of July, and 870 megawatts of that is already in place, according= to the state Independent System Operator.=20 Another 1,000 megawatts is anticipated for the end of August and 1,100 more= for the end of September, under a rough timetable that is likely to see so= me plants zip ahead of schedule and others fall behind.=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or 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 the spot market, revealing a chaotic world in which prices fluctuate wild= ly within minutes.=20 The Department of Water Resources, which has been criticized for keeping it= s power-purchasing practices a secret, released 1,770 pages of invoices and= trade confirmations that provided the most detailed look yet of its purcha= ses since it jumped into the energy-buying business Jan. 17. The informatio= n was released a week after state Controller Kathleen Connell put out detai= ls of the state's long-term power contracts over the objections of Gov. Gra= y Davis, her political nemesis.=20 The state has committed about $8.1 billion to buying power on behalf of Cal= ifornia's crippled utilities, straining the budget surplus and raising ques= tions from lawmakers and others about Davis' policies for resolving the sta= te's energy crisis. In turn, state officials have accused many suppliers 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= business run amok. The state paid upward of $300 a megawatt-hour for days = in January and February -- months when electricity normally should be a lot= cheaper. Water officials said prices have dropped to the $100 range largel= y because they've signed a slew of long-term contracts, reducing their depe= ndence on spot sales.=20 "Our exposure earlier this year to the spot market was at the maximum," sai= d Oscar Hidalgo, spokesman for the water department.=20 The information released Monday covered the first three months of the year = and didn't include the highest price the water department has paid for elec= tricity: $1,900 a megawatt-hour in May to Reliant Energy Inc., a Texas gene= rator that owns several plants in the state. Duke Energy Corp. of North Car= olina charged even more for power in January, $3,880 a megawatt hour, but t= hat sale was made to the Independent System Operator, which runs the state'= s transmission grid.=20 The documents show that while the state's stricken utilities no longer buy = 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 San Diego Gas & Electric, some $429 million for power. It paid PG&E Energ= y Trading, an unregulated sister company of Pacific Gas and Electric Co., a= bout $23.7 million.=20 Among others, the Los Angeles Department of Water and Power was paid $331 m= illion through May 31; Canadian utility BC Hydro was paid $1.05 billion; At= lanta's Mirant Corp. $1.24 billion; the federal government's Bonne=07ville = Power Administration $167 million; and the Sacramento Municipal Utility Dis= trict $80.7 million.=20 Generally, the more desperate the state was for power, the higher the price= s. For instance, Oklahoma-based generator Williams Cos. commanded $565 a me= gawatt-hour March 20, when blackouts struck more than 1 million Californian= s.=20 Location also was critical. On March 8 the state paid the PG&E trading unit= $250 but only $180 to Arizona-based Pinnacle West Capital Corp. The differ= ence was that PG&E's power was delivered to energy-starved Northern Califor= nia, while Pinnacle's was sent to Southern California where energy wasn't s= o scarce.=20 Split-second timing was also crucial. At 9:09 a.m. Feb. 14, the state paid = $400 to Mirant for power to be delivered the next day. By 10 a.m. it was pa= ying 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 changes on a second-by-second basis," said Enron Corp. spokesman Mark Pa= lmer.=20 For all the criticism leveled at Duke, Reliant and other big corporations, = government-owned entities were among the most aggressive at charging high p= rices.=20 BC Hydro, the electric utility owned by the Canadian province of British Co= lumbia, submitted bills for up to $1,000 a megawatt-hour. The city of Glend= ale charged $375 a megawatt-hour for power in January, while SMUD charged $= 309 a megawatt-hour in March. The city of Eugene, Ore., averaged $450 a meg= awatt-hour in February.=20 "We play by the rules of the electricity trade marketplace," said BC Hydro = spokesman Wayne Cousins. "Our traders worked very hard to find additional s= ources of electricity to keep the lights on in California. Had we not come = through and stepped forward with these supplies, the consequences to Califo= rnia customers would have been severe."=20 The state also said it has spent $14.4 million on administrative costs in b= uying 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 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 = 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= photovoltaic system -- the largest rooftop project ever constructed in the= United States -- will cut the jail's demand on the electric grid by up to = 20 percent, according to Muniz, Alameda County's energy program manager.=20 That sun power, combined with conservation projects already completed at th= e jail, will slash about $300,000 a year from the facility's energy bill. M= uniz 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 bu= siness decision, just investing your money," said Muniz. "There's virtually= no maintenance on this equipment. It just sits on your roof and converts r= ight into electricity that you're using as soon as you generate it. I think= (solar) is the wave of the future, even though it's been around 30 or 40 y= ears."=20 The Santa Rita Jail project is among the largest, and perhaps most conspicu= ous, examples of steps government agencies are taking to cut electricity us= e in response to skyrocketing power bills and Gov. Gray Davis' call for pub= lic entities to conserve.=20 Among the examples:=20 San Francisco leaders are pondering a bond measure to finance solar-powered= rooftop projects around the city.=20 The Tulare County town of Lindsay will open City Hall two hours earlier -- = at 6 a.m.-- and close at 4:30 p.m. Monday through Thursday this summer so o= ffices can stay dark all day Friday and during peak-use afternoon hours.=20 Sacramento County has instituted a casual dress policy so employees can bet= ter withstand office temperatures that climb as high as 78 degrees. Workers= have also set sprinklers to run at night so that electric water pumps oper= ate during low demand.=20 "When you start to see the bills going up and you start to hear concerns fr= om some citizens, that obviously raises the threshold of wanting to help ou= t," said Jolena Voorhis, an energy analyst at the California State Associat= ion of Counties. "Certainly (counties) stepped up to the plate when they we= re asked to increase conservation efforts. They've done about as much as hu= manly possible."=20 Kings County leaders thought they made a great deal in 1992 when they signe= d up for Southern California Edison's interruptible load program, which pro= mises customers lower rates in exchange for agreeing to shut down electrica= l services in times of shortage.=20 Then California's power crisis hit full-force this year. Since January, Edi= son has called on the Central Valley county to cut electricity at its Hanfo= rd 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 = food stamp requests and during the Valley's foggy winter days, no heat to w= arm many of the 1,200 employees.=20 "We had one week in January when we were virtually shut down," said Chief A= dministrative Officer Larry Spikes. "We just decided we couldn't function t= hat way."=20 So Kings County supervisors bought a $550,000 diesel-powered generator to m= atch those already at the jail and juvenile center. They also decided to op= en and close administrative offices one hour earlier this summer so buildin= gs 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 = generators kick on have become a routine part of doing government business = these days, Spikes said.=20 So far, most counties have been able to absorb higher energy costs without = cutting into programs because of relatively healthy budgets in recent years= , 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 = Jail photovoltaic system, have tripled since last year.=20 "The last six months have been particularly intense," said Janice Lin, dire= ctor of business development for PowerLight. "In some ways the energy crisi= s in California has been a call to action."=20 The Sacramento Municipal Utility District, which already boasts the largest= photovoltaic program in the country, has a 2,000-customer waiting list for= solar projects and plans to bring sun power to the state Capitol, said Don= Osborn, SMUD's solar program manager.=20 Back in Dublin, the 3,600 inmates at the Santa Rita Jail still receive thre= e meals, air conditioning and hot showers -- powered now, in part, by the p= lentiful sun in this relatively fog-free part of the East Bay.=20 The $4 million project, financed entirely with state and utility subsidies,= should generate enough savings to pay for itself within the decade, Muniz = 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 By Mark Sh= erman ASSOCIATED PRESS July 10, 2001 WASHINGTON - With talks between the = state and power generators stalled, California may go to court to help win = the $8.9 billion state officials believe it was overcharged for electricity= . "I think we have demonstrated very clearly both to the FERC and to the j= udge that the state is owed $8.9 billion and will settle for nothing less,"= said Roger Salazar, a spokesman for Gov. Gray Davis. With negotiations at= an impasse, the administrative law judge for the Federal Energy Regulatory= Commission said California is probably owed no more than $1 billion in ref= unds. "The numbers were too far apart," said Curtis Wagner, the FERC chi= ef administrative law judge. California, Wagner said, may receive nothing = at all, because generators may be owed more than they have to return for an= y overcharges. He placed the refunds owed the state at between $716 millio= n and $1 billion. Power providers had offered $716 million as part of an ov= erall settlement, while California state officials sought $8.9 billion, Wag= ner said. He said California officials had not made the case for $8.9 bill= ion in refunds. Salazar, however, said the state would go to court and may= ask for $20 billion. Separately, Wagner split off claims of overcharges f= rom the Pacific Northwest, saying he has not had time to consider those all= egations under the short timetable ordered by FERC last month. Wagner serv= ed as a mediator during the 15 days of negotiations and will recommend a se= ttlement to FERC by next Monday. The commission ordered the talks last mont= h in an effort to resolve differences between producers and the state over = the breakdown of California's deregulated electricity market. Consumer adv= ocates assailed the judge's recommendation and urged the state to continue = its attempt to get refunds from what they say are profiteering power compan= ies. "It's like catching a bank robber, but instead of making him give bac= k all of it, you only make him give back 5 percent of what he stole," said = Douglas Heller, spokesman for the Santa Monica-based Foundation for Taxpaye= r and Consumer Rights. Power generators, however, were generally pleased w= ith Wagner's comments. Brent Bailey, general counsel for Duke Energy, said= even if the formula Wagner recommends produces $1.5 billion in refunds, "t= hat's a reasonable amount in the context of these settlement talks." Calif= ornia officials, negotiating on behalf of utilities, the Public Utilities C= ommission and state power buyers, accused the producers of manipulating sup= ply to unfairly drive up prices. The producers have acknowledged prices ar= e high, but blame jumps in the price of natural gas, which fuels many power= plants, and the workings of the free market. The bill for wholesale power= in California soared to $27 billion last year from $7 billion the year bef= ore. Davis has estimated the state could spend as much as $50 billion this = year. The producers reiterated Monday that California's numbers are grossl= y inflated. Attorneys for the five major generators - Duke Energy, Dynegy, = Mirant, Reliant Energy and the Williams Cos. - said in a statement that the= y have made a "very substantial global settlement offer." Reliant would ag= ree to no more than $50 million in refunds as part of an overall settlement= that also would have to include protection from additional legal claims, s= aid John H. Stout, a company senior vice president. But Stout also said, "= Reliant's fundamental position has been and remains that no refunds are jus= tified." Refunds in jeopardy as talks fail Judge sees p= ossibility of offsets equal to the billions sought by state By Toby Eckert = COPLEY NEWS SERVICE July 10, 2001 WASHINGTON -- Settlement talks between= California and power providers accused of electricity price gouging collap= sed yesterday, and the judge who will now hand the case over to federal reg= ulators set a course far from favorable to the state's demand for $8.9 bill= ion in refunds. "There are refunds due that total hundreds of millions of = dollars and maybe a billion dollars," Curtis L. Wagner Jr., chief administr= ative law judge for the Federal Energy Regulatory Commission, said in previ= ewing the recommendations he will make to the commission. But Wagner, who = mediated the talks, also suggested that power sellers are still owed sums f= or electricity "that probably are higher than any overcharges" for which th= ey may have to pay refunds. That opened the possibility that California co= uld see no cash refunds, only a reduction in the billions of dollars the po= wer generators and marketers claim they are owed by state entities and util= ities. Wagner said he would recommend that FERC hold a "fast-track hearing= " to try to untangle the complex financial claims and counterclaims arising= from California's power crisis. Wagner also outlined a method that he sai= d FERC should use for calculating refunds. While his proposed formula incl= udes part of one method the state used, it contains several elements for ca= lculating electricity costs that were favored by power sellers, who maintai= n that California's numbers are wildly exaggerated. "I would suspect that = would result in a number much below $8.9 billion," said Joe Ronan, vice pre= sident of Calpine, a San Jose-based electricity generator. "I think (Wagner= 's method) reflects more accurately what actually happened" in the state's = dysfunctional power market. But Michael Kahn, the state's lead negotiator,= said Wagner "vindicated" California's core arguments. "The hundreds of pe= ople who came here on the other side had argued to the mediator that there = should not be any refunds, and that position was loudly rejected," said Kah= n, chairman of the organization that manages most of California's power gri= d. "We think the numbers, even using the judge's formula, are going to be = in the multiple billions. Whatever amount of money . . . is awarded to us, = we will have viable claims in state court and other jurisdictions for the r= emainder. So what we have here is a situation where California will get its= $8.9 billion." Power sellers acknowledged that the threat of litigation r= emains worrisome to them. They sought an end to investigations of their con= duct, and immunity from legal action as part of their bargaining position. = During two weeks of negotiations ordered by FERC, the two sides came nowhe= re near bridging their differences. Wagner said a number of power sellers h= ad put forward offers that totaled $716.1 million. "That's a long way from= splitting the difference," he said. "In 15 days, you can't work miracles."= Yesterday -- the deadline for completing the talks -- the ill will betwee= n the two sides broke into the open as Wagner allowed reporters into the pr= eviously closed hearings. Each side essentially accused the other of barga= ining in bad faith and failing to put forward realistic proposals. John H.= Stout, a senior vice president at Reliant Energy Wholesale Group, said the= state used "biased calculations" to arrive at its $8.9 billion refund dema= nd. He also said that Reliant offered to knock $50 million off the $300 mil= lion it claims it is still owed for power sold into the state. Kahn shot b= ack that Reliant made the offer confidentially to Wagner and never approach= ed the state. Figures scrutinized "This is the first time we've heard any = of this information. And to give the impression that somehow there's been c= ooperation or forthcomingness, I think is misleading," Kahn said. The stat= e's refund calculations were scrutinized repeatedly during the talks. The = $8.9 billion figure emerged from a study by the California power grid opera= tor of charges for electricity between May 2000 and May 2001, a period when= wholesale power prices soared. Kahn said the figure was essentially dupli= cated when the state went back and calculated what power costs would have b= een if a pricing method instituted by FERC last month had been in effect fo= r the entire yearlong period. FERC ordered the pricing method in a bid to = tame wholesale prices in the West. In a partial win for the state, Wagner = said he would recommend that FERC use the order retroactively as a basis fo= r calculating refunds, an approach resisted by the power sellers. But he s= aid that FERC should only scrutinize charges going back to October 2000, an= d should make several key changes in how power-generating costs are calcula= ted. For instance, he said, FERC should determine the actual amount of gas= heat it takes to generate a megawatt of electricity and use spot market pr= ices in Northern and Southern California to determine the cost of gas, rath= er than a statewide average cost, computed monthly. Fewer overcharges? Tho= se and other parts of the complex formula Wagner will recommend could incre= ase the benchmark cost of producing power and drive down the amount of over= charges. Kahn said that applying FERC's pricing method only back to Octobe= r would put about $3 billion of the state's refund claim off-limits. Brent= Bailey, vice president and general counsel for Duke Energy North America, = said, "We think (Wagner's) modifications are certainly a vast improvement o= ver FERC's June 19 order and also certainly over (the state's) model." Ame= rica. In Sacramento, Gov. Gray Davis issued a statement characterizing the= electricity suppliers as pirates who refused to negotiate in good faith. = "While in the past the FERC has shown little, if any, interest in consumers= , they now have the opportunity to redeem themselves by returning the $8.9 = billion California has demonstrated it is owed," Davis said. Despite the h= arsh rhetoric, both sides indicated that they would continue trying to reac= h one-on-one settlements. Ronan of Calpine said the generator was close to= making a deal with the state. Bailey said that while Duke would continue t= o push for a "global settlement" between all the parties, "We've had seriou= s settlement talks with the state over the last few days and hope to contin= ue." State's massive outlays detailed Energy bill exce= eded $100 million on 3 days By Jennifer Coleman ASSOCIATED PRESS July 10,= 2001 SACRAMENTO -- On three days in May, California's daily power spendin= g topped $100 million, according to a report released yesterday by state po= wer traders. The California Department of Water Resources report, which ad= dressed spot market electricity purchases since January, was released along= with 1,770 pages of documents that specifically detailed the first three m= onths of last-minute power purchases. Such power buys on the spot market t= ypically get the most expensive electricity available. The report details = the department's electricity spending since Jan. 17, when the state took ov= er electricity purchases for Pacific Gas and Electric Co., San Diego Gas & = Electric Co., and Southern California Edison. The utilities had amassed bi= llions in debts and were no longer creditworthy enough to purchase power. S= ince then, the state has spent nearly $8 billion to keep the lights on. Th= e state's daily spending peaked May 10 at $102.4 million. The second-highes= t daily total was May 23, when the state spent $101.8 million. The day befo= re, the state spent $100 million. But since May, spot market prices have d= ropped, due in part to moderate weather, lower natural gas prices, increase= d conservation which lowered demand and because of increased scrutiny by la= wmakers and investigators into possible price manipulation. Gov. Gray Davis= has said long-term contracts also drove the price down. "It does look lik= e some of the spot market prices have gone down, but it looks like it's pri= marily due to natural gas prices," said Jamie Fisfis, spokesman for Assembl= y Republicans. The slight reduction in spot market prices "underscores que= stions about the strategy of locking us into long-term contracts, if natura= l gas prices continue to drop," Fisfis said. Most of the long-term contrac= ts run for 10 years, with one lasting for 20 years. "It's unfortunate that= it looks like we'll never get out from under these contracts," Fisfis said= . Davis has already released details of the state's long-term power contra= cts after losing a court battle with Republican legislators and several new= s organizations, including The Associated Press and The Copley Press, which= publishes The San Diego Union-Tribune. Davis released copies of those con= tracts, but wanted to delay the release of the spot market buys and short-t= erm contracts. Releasing those details too soon after the purchases would r= eveal the state's buying strategy and could cause generators to raise their= already sky-high prices, Davis said. The number of spot market buys will = lessen, the Davis administration says, as more long-term contracts are sign= ed, reducing the state's exposure to the high-priced purchases. The govern= or's office will release future short-term contracts and spot market buys w= ill be released on a quarterly basis, with a 90-day lag time. Second quarte= r information will be released in October and third quarter documents will = be available in January. Davis maintains the delay is needed to protect it= s ability to negotiate further spot-market power buys. According to the wa= ter department, Canadian Powerex, the marketing arm of BC Hydro, has been p= aid $1.05 billion for spot market purchases as of May 31. But Atlanta-base= d Mirant Corp. topped that list, getting $1.24 billion as of the end of May= . The newly released short-term contracts also show what the state had to = pay when it needed power the most. On March 19 and 20, when rolling blacko= uts hit California again, the state was forced into paying above-average pr= ices in its largest short-term contracts. For example, Mirant sold the sta= te 650 megawatts an hour at off-peak usage times on March 20 for $345 a meg= awatt hour, more than $70 above the average price of $272.96. The day befo= re, Mirant charged $343 a megawatt hour at off-peak in northern California = when the average cost was $254.52. Also on March 19, Mirant charged the st= ate about $96 above the average price for power in Northern California on a= sale of 6,400 megawatt hours during off-peak times. Other top-selling gen= erators, as of May 31: Sempra Cos., $429 million. Los Angeles Departmen= t of Water and Power, $331 million. Dynegy, $296 million. TransAlta Ene= rgy, $202 million. Bonneville Power, $168 million. Duke Energy, $164 mi= llion. State releases early spot market energy purchases By = Jennifer Coleman ASSOCIATED PRESS July 10, 2001 SACRAMENTO - On three day= s in May, California's daily power allowance topped $100 million, according= to a report released Monday by state power traders. However, the source o= f those high prices was from not solely from Texas, home to many of the pow= er marketers and wholesalers Gov. Gray Davis has blamed for much of Califor= nia's power woes. Public and private power companies such as Canada's B.C.= Hydro, the Los Angeles Department of Water and Power and Sacramento's publ= ic utility also were high on the list. The California Department of Water = Resources released the report, along with 1,770 pages of documents that als= o detailed the last-minute power purchases the state made on the spot marke= t in the first three months of the year. Last-minute power buys on the spo= t market typically get the most expensive electricity available. The repor= t details the department's electricity spending since Jan. 17, when the sta= te took over electricity purchases for Pacific Gas & Electric Co., San Dieg= o Gas & Electric Co., and Southern California Edison. The utilities had am= assed billions in debts and were no longer creditworthy enough to purchase = power. Since then, the state has spent nearly $8 billion to keep the lights= on. The state's daily spending peaked May 10 at $102.4 million. The secon= d-highest daily total was May 23, when the state spent $101.8 million. The = day before, the state spent $100 million. But since May, spot market price= s have dropped, due in part to moderate weather, lower natural gas prices, = increased conservation which lowered demand and because of increased scruti= ny by lawmakers and investigators into possible price manipulation. Gov. Gr= ay Davis has said long-term contracts also drove the price down. "It does = look like some of the spot market prices have gone down, but it looks like = it's primarily due to natural gas prices," said Jamie Fisfis, spokesman for= Assembly Republicans. The slight reduction in spot market prices "undersc= ores questions about the strategy of locking us into long-term contracts, i= f natural gas prices continue to drop," Fisfis said. Most of the long-term= contracts run for 10 years, with one lasting for 20 years. "It's unfortun= ate that it looks like we'll never get out from under these contracts," Fis= fis said. Davis has already released details of the state's long-term powe= r contracts after losing a court battle with Republican legislators and sev= eral news organizations, including The Associated Press, who said keeping t= he contracts veiled violated the state's open records law. Davis released = copies of those contracts, but wanted to delay the release of the spot mark= et buys and short-term contracts. Releasing those details too soon after th= e purchases would reveal the state's buying strategy and could cause genera= tors to raise their already sky-high prices, Davis said. The number of spo= t market buys will lessen, the Davis administration says, as more long-term= contracts are signed, reducing the state's exposure to the high-priced pur= chases. The governor's office will release future short-term contracts and= spot market buys will be released on a quarterly basis, with a 90-day lag = time. Second quarter information will be released in October and third quar= ter documents will be available in January. Davis maintains DWR needs the = delay to protect its ability to negotiate further spot-market power buys. = According to the DWR, Canadian Powerex, the marketing arm of BC Hydro, has = been paid $1.05 billion for spot market purchases as of May 31. But Atlant= a-based Mirant Corp. topped that list, getting $1.24 billion as of the end = of May. The newly released short-term contracts also show what the state h= ad to pay when it needed power the most. On March 19 and 20, when rolling = blackouts hit California again, the state was forced into paying above-aver= age prices in its largest short-term contracts. For example, Mirant sold t= he state 650 megawatts an hour at off-peak usage times on March 20 for $345= a megawatt hour, more than $70 above the average price of $272.96. The day= before, Mirant charged $343 a megawatt hour at off-peak in northern Califo= rnia when the average cost was $254.52. Also on March 19, Mirant charged t= he state about $96 above the average price for power in Northern California= on a sale of 6,400 megawatt hours during off-peak times. Other top sellin= g generators, as of May 31: - Sempra Companies, $429 million. - Los Angel= es Department of Water and Power, $331 million. - Dynegy, $296 million. -= TransAlta Energy, $202 million. - Bonneville Power, $168 million. - Duke= Energy, $164 million. FERC Judge Says State Owed No More Than $1= Billion From Associated Press July 9 2001 WASHINGTON -- California is ow= ed no more than "a billion dollars" from power wholesalers, a federal regul= atory judge said today at the end of 15 days of settlement talks in the sta= te's electricity crisis. Curtis Wagner, the Federal Energy Regulatory Comm= ission's chief administrative law judge, said that at the same time the pow= er suppliers probably are owed more than that. The net effect of his preli= minary recommendation is that California probably will receive no refunds f= rom wholesalers. Wagner said power generators had offered $761 million in = refunds. The state has asked for $8.9 billion since May 2000. Wagner said h= e will not recommend refunds for power sales that occurred before Oct. 2. = It was not immediately clear what impact the judge's preliminary recommenda= tion would have on efforts to settle the dispute. Both sides said before t= he judge's announcement that they expected a protracted legal battle in the= event the talks did not produce a settlement. Michael Kahn, Gov. Gray Dav= is's representative in the talks, has said the state would seek more than t= wice the claimed overcharges if the dispute moved from mediated talks to a = courtroom. The producers reiterated today that California's numbers are gr= ossly inflated. Attorneys for the five major generators-- Duke Energy, Dyne= gy, Mirant, Reliant Energy and the Williams Cos.-- said in a statement that= they have made a "very substantial global settlement offer." John H. Stou= t, a senior vice president for Reliant Energy, said his company would agree= to no more than $50 million in refunds, as part of an overall settlement t= hat also would have to include protection from additional legal claims. Bu= t Stout also said, "Reliant's fundamental position has been and remains tha= t no refunds are justified." FERC ordered the talks last month in an effor= t to resolve differences between producers and the state over the breakdown= of California's deregulated electricity market. The state has accused the= producers of manipulating supply to unfairly drive up prices. The producer= s have acknowledged that prices are high, but blame jumps in the price of n= atural gas, which fuels many power plants, and the workings of the free mar= ket. The bill for wholesale power in California soared to $27 billion last= year from $7 billion the year before. Davis has estimated that the state c= ould spend as much as $50 billion this year. ---- On the Net: Federal En= ergy Regulatory Commission: http://www.ferc.fed.us/ Copyright 2001, Los A= ngeles Times Electricity Cost Data Spread the Blame Power: Many suppl= iers charged more than the firms that Davis has pilloried, records show. RI= CH CONNELL and ROBERT J. LOPEZ and DOUG SMITHS TIMES STAFF WRITER July 10 = 2001 SACRAMENTO -- California's energy meltdown involves a far more divers= e group of wholesale electricity merchants than suggested by Gov. Gray Davi= s, who has aggressively blamed a handful of Texas companies, state records = show. During the first three months of this year--one of the worst stretch= es of power shortages during the crisis--an assortment of public and privat= e entities charged the state prices averaging well above some of those paid= to Texas firms, according to documents released to The Times on Monday by = the Department of Water Resources, which now buys power for California. Am= ong those setting and collecting some of the highest average prices per meg= awatt-hour were a Canadian public utility, a subsidiary of San Diego Gas & = Electric's parent company, and the Los Angeles Department of Water and Powe= r, the report shows. Their average prices ranged from $498 a megawatt-hour = charged by Powerex, the trading arm of British Columbia's BC Hydro, to $292= an hour by the DWP. In fact, some of the biggest private power companies s= ingled out for criticism by Davis and other state officials--Dynegy Inc., D= uke Energy and Mirant--charged less than the average prices the state paid = for the period. Those companies' average prices ranged from $146 to $240 pe= r megawatt-hour, according to an analysis of the documents. The figures co= ver the various types of spot and longer-term power purchased by the state = during three months that included rolling blackouts and more than a month o= f razor-thin reserves, leading to continuous power emergencies. Davis spok= esman Steve Maviglio said the governor has directed his sharpest barbs at p= rivate out-of-state generators because, in general, they have reaped the hi= ghest profits over the longest period. "You have to look at the whole pict= ure," Maviglio said. "The governor was expressing his displeasure with the= arrogance of the generators who wear cowboy hats," he said. "Their profits= were 100% to 400% above last year. . . . Just because there are other enti= ties who are charging us more [per megawatt-hour] doesn't change the fact t= hat we are getting ripped off by companies from Houston, Tulsa, Atlanta or = Charlotte." The report by the Department of Water Resources was provided t= o The Times on the same day the state released 1,700 pages of documents on = California's electricity purchases on the volatile spot market for the year= 's first quarter. The records detail how the state spent nearly $8 billion= buying power in the first five months of the year, and underscore the comp= lexity of the state's energy problem. They also show that patterns of high = prices are not limited to a few generators. Oscar Hidalgo, a spokesman for= the water resources agency, said that the reports together show that price= s were extremely volatile early in the year. "All the prices were high," he= said, noting the downward trend in costs since his agency began buying pow= er in mid-January. The average price per megawatt-hour for all state purch= ases went from $316 in January to $243 in May. Spot prices fell from an ave= rage of $321 per hour to $271, the reports show. In the first quarter of t= he year, some public entities' prices far exceeded those of the biggest pri= vate companies. For example, Houston-based Enron, one of the nation's bigge= st power traders, charged an average of $181 per megawatt-hour. And Atlanta= -based Mirant, which sold the most to the state, a total of $706 million, c= harged an average of $225 per megawatt-hour. By contrast, a Calgary, Canad= a, firm, TransAlta Energy, averaged $335 a megawatt-hour, and the Sacrament= o Municipal Utility District had average charges of $330 per megawatt-hour.= A spokesman for Enron, Mark Palmer, said recently that the "vilification = of Enron was based on politics, not facts." Spokesmen for BC Hydro could no= t be reached late Monday to comment on its huge sales to the state. In the = past, the utility has defended its pricing practices, saying it has offered= last-minute hydroelectric power that helped keep California's lights on. = A spokeswoman for Sempra, the parent company of San Diego Gas & Electric, s= aid late Monday the company was unable to comment because it had yet to see= the figures released by the state. Officials at DWP, who could not be reac= hed Monday evening, have defended their pricing, saying the costs of produc= ing the power needed by the state were extremely high. More Power Bought T= han Projected Hidalgo, of the Department of Water Resources, said his agen= cy's efforts, coupled with conservation by business and consumers and falli= ng natural gas prices, have begun to tame the state's market. Still, the s= tate had to purchase $321 million in power in April and May, about 10% more= than Davis' analysts had projected. Hidlago said that was because of hot = weather in May and other supply problems in April. He said reports will sho= w that power purchases fell short of state projections in June and early Ju= ly. The reports also will show that prices paid by the state were down in = June and July, partly because spot prices have fallen sharply, often to wel= l under $100 a megawatt-hour. A summary Department of Water Resources repo= rt released Monday credited Davis' program of nurturing new power generatio= n and establishing long-term power contracts with with "moving the Californ= ia electric energy industry closer to normalcy." Copyright 2001, Los Angel= es Times Duke Energy Asked to Allow Release of Data Power: Senator sa= ys the generator is refusing to make public some information crucial to the= price-gouging probe. Firm says it's complying. CARL INGRAM TIMES STAFF WRI= TER July 10 2001 SACRAMENTO -- The chairman of a Senate committee probing= suspected price gouging during the California energy crisis charged Monday= that Duke Energy is refusing to allow him to make public information key t= o his investigation. Sen. Joe Dunn (D-Santa Ana) said Duke has made the pr= ice bidding information from its Chula Vista plant available to committee m= embers and staffers. But under a federal confidentiality rule, the data can= not be made public without Duke's consent. The documents concern the Chula= Vista plant, which former employees have alleged was ramped up and down to= drive up power prices during three days in January. However, state records= show that the agency overseeing the electricity grid ordered those gyratio= ns to keep the power flowing throughout the state. Dunn said Duke's refusal= thwarts the committee's investigation and efforts to enact possible remedi= al legislation because the confidential information cannot be shared with o= thers in the Legislature or the public. Dunn said Duke cited a rule of the= Federal Energy Regulatory Commission that gives the company the authority = to decide which records it makes public and which stay secret. "The only o= ne who can release the data is Duke. We agreed to be bound by what is provi= ded in the FERC tariff, nothing more or less," he said. Former Employees T= ell of Maneuvers Dunn noted that the committee is considering trying to ob= tain the information elsewhere and "release it over Duke's objections." Th= ree former workers at the Duke plant near Chula Vista testified last month = under oath that the plant, among other things, was ramped up and down in wh= at seemed to be an effort to maximize revenue during the Jan. 16-18 emergen= cy. But Duke countered immediately that it had merely obeyed orders of the= California Independent System Operator, which keeps the state's electricit= y grid in balance. Duke later provided Cal-ISO documents backing up its exp= lanation. Duke executives insisted that the former employees failed to pro= vide a full picture of the plant's operation during the three days. But Du= nn, chairman of the select Senate committee on alleged price gouging, said = Monday that by refusing to authorize release of all the subpoenaed data, Du= ke was guilty of the same tactics. "Duke is trying to draw the impression = that it has [provided] the full picture. But they are fully aware that we c= annot draw any final conclusions until all that data has been released. Tha= t hasn't occurred," Dunn said. To make a determination whether the Chula V= ista power was withheld to drive up prices, Dunn said, the committee must p= ublicly examine "the bids Duke submitted from which the ISO issued orders t= o the plant." They include the expensive hour-ahead and day-ahead markets, = he said. Duke, a North Carolina-based wholesaler that operates several pla= nts in California, noted that it considers the information proprietary and = off-limits to legislators not on the committee. Duke spokesman Tom William= s insisted that the generator is attempting to comply with the committee's = demands. But he was unable to say whether Duke would agree to make the bidd= ing documents public along with other records the committee plans to turn o= ver. "We are complying now," Williams said. "There is some suggestion that= we are leaving stuff out when we have not had a chance to testify. . . . I= don't know what we are ultimately going to do." The committee had threate= ned to cite eight wholesale generators unless they provide pricing and bidd= ing documents by Wednesday. Six, including Duke, have said they would compl= y to avoid a contempt citation. Two, Enron and Mirant, were cited. Dunn sa= id the committee on Wednesday likely will give companies that are trying to= comply an extra week to do so, but others probably will be formally charge= d with contempt in a report to the full Senate. The upper house is the fina= l arbiter of such issues. Although there is scant precedent for levying pe= nalties against those cited for contempt, Dunn said he favors imposing seve= re fines. In 1929, the most recent case, a cement company executive was sen= t to jail. Copyright 2001, Los Angeles Times NEWS ANALYSIS Concern = Over Price of Long-Term Power Pacts Grows Embedded costs may yield more rat= e hikes, critics say, and the $43-billion total could complicate plans to r= escue Edison. DAN MORAIN TIMES STAFF WRITER July 9 2001 SACRAMENTO -- Eve= n as the summer progresses without blackouts, and Gov. Gray Davis prepares = for yet another news conference today to symbolically switch on a new power= plant, the work in the Capitol has shifted to the seemingly more daunting = task of balancing the books. It's a task with potentially far more long-la= sting implications for state coffers, for businesses' bottom lines and for = consumers' wallets. In particular, long-term power contracts trumpeted by = the governor's office as helping to bring stability to California's out-of-= control electricity market are having the opposite effect politically. A gr= owing concern about the $43-billion price tag of the contracts is complicat= ing one of Davis' most ambitious energy initiatives: a proposed financial r= escue of Southern California Edison, which already faces an uncertain fate = in the Legislature. Questions about the contracts come as California readie= s a complex $13.4-billion bond sale to reimburse the state's general fund f= or other power purchases. Critics worry that costs embedded in the contrac= ts, on top of the billions needed to pay for the Edison rescue, could lead = to additional electricity rate hikes for consumers. Key lawmakers, consumer= advocates and business lobbyists are urging that at least some of the pact= s be renegotiated. Citing a recent plunge in wholesale energy costs, these= critics say the state should work to shorten the duration of the contracts= and lower some of the prices. They argue that the state entered into the d= eals under duress after California's utilities neared insolvency and the st= ate Department of Water Resources took over the purchasing of electricity f= or more than 25 million residents. "They are vulnerable," Senate Energy Co= mmittee Chairwoman Debra Bowen (D-Marina del Rey) said of deals the state s= truck with independent power companies when prices were at record highs. B= owen lauds Davis administration negotiators for signing "the best deals the= y could." But she said that in the crisis atmosphere in which the negotiati= ons took place, "the state had two cards and the generators had 50." Contr= acts Open to Challenges The contracts could be challenged in court or, mor= e immediately, before the Federal Energy Regulatory Commission in Washingto= n. There, an administrative law judge could direct that the pacts be rework= ed as part of a settlement of allegations by Davis that generators overchar= ged the state for electricity by $8.9 billion. "We ought not to say, 'Fine= , the contracts were the best we could do,' " Bowen said. For his part, Da= vis says he is willing to accept partial payment of the $8.9 billion in the= form of contracts with terms more favorable to the state. He attributes th= e recent sharp drop in wholesale electricity prices to conservation, the ad= ministration's effort to increase power supply and--a major factor--the lon= g-term contracts, which slashed the state's reliance on the volatile daily,= or spot, market. "You can see the value of these long-term contracts . . = . dramatically shrinking our overall price, which is what matters to Califo= rnians," Davis said, pointing out that the average cost of power plunged 30= % from May to June. Davis energy advisor S. David Freeman, who helped nego= tiate the contracts, said they may end up costing less than $43 billion, gi= ven the recent decline in prices for natural gas, the main fuel for Califor= nia's electricity-generating plants. Freeman also compared critics to some= one who calls the fire department to douse a blaze. "After the fire is out,= " he said, "you complain about the water damage." The contracts have other= defenders, among them UC Berkeley economics professor Severin Borenstein, = who says the deals helped to tame the volatile spot market by reducing gene= rators' incentive to drive up prices, while reducing the state's exposure t= o wild swings in price. "The point of signing long-term contracts is not t= o get a great price; it's to reduce risk," Borenstein said. Still, experts= have been picking through the pacts ever since a Superior Court judge in S= an Diego, ruling in a California Public Records Act lawsuit by news organiz= ations and Republican lawmakers, ordered last month that Davis unseal the c= ontracts. An analysis done for the Assembly by three experts--one each rep= resenting Southern California Edison; the Utility Reform Network, a consume= r group; and large electricity consumers--concluded that the about $43-bill= ion price tag announced by the administration may not account for all the c= osts. When other expenses are factored in--ranging from environmental equip= ment upgrades to any new energy-related taxes--the contracts could cost an = additional 10% to 20%. "Once the contracts were made public," Senate Repub= lican leader Jim Brulte of Rancho Cucamonga said, "just about anyone who ca= n read began calling for those contracts to be renegotiated." As buyers' r= emorse spreads through the Capitol, the contracts increasingly are seen as = a hurdle--or a bargaining chip--as Davis and lawmakers confront fast-approa= ching deadlines in their effort to prevent the energy crisis from morphing = into a broader financial crisis. A bill pushed by Davis to avert bankruptc= y for the financially hobbled Southern California Edison must be approved b= y Aug. 15. The deadline could be tighter, because the Legislature is schedu= led to adjourn for a monthlong break July 20. Davis' rescue plan, along wi= th legislative alternatives, languishes in the Legislature. The plan, which= has little apparent support, would require the state to buy Edison's syste= m of transmission lines for $2.76 billion and permit the utility to charge = ratepayers for the rest of its back debt of $3.5 billion. Some lobbyists a= nd lawmakers believe that the electricity rate hike approved in March by th= e California Public Utilities Commission--at 3 cents a kilowatt-hour the la= rgest in state history--may not be enough. The revenue generated under the = new rate structure must cover the costs of the long-term power contracts an= d repay the planned $13.4 billion in bonds, which would be the largest muni= cipal deal ever. Whether there would be sufficient money left to pay for t= he Edison rescue remains to be seen. But some experts say the utility may n= eed to seek a separate rate hike to cover its costs. As written, the contr= acts have few escape clauses; Davis cannot simply walk away from them if he= concludes that prices are too high. Still, criticism persists and crosses = political lines. Harry Snyder, longtime Sacramento lobbyist for Consumers = Union, and Jack Stewart, president of the California Manufacturers and Tech= nology Assn., rarely find themselves on the same side of a debate. But in s= eparate interviews, they sounded similar themes. "If there is a way to buy= our way out of these contracts, even if we have to pay damages, we'd be be= tter off in the long run," Snyder said. Stewart, like other business leade= rs, does not advocate abrogating the contracts. But like many familiar with= the terms, he hopes that some deals can be renegotiated. "They are proble= matic," he said. In a move that critics fear could lock in high electricit= y prices for the next decade, the Davis administration is pushing the PUC t= o agree within a month to limit its authority to question costs incurred by= the Department of Water Resources as it goes about procuring power. State= Treasurer Phil Angelides said the PUC must act so he can complete the $13.= 4-billion bond sale. A binding agreement is necessary so that Wall Street i= nvestors can be assured that they will be repaid. "The state will be out o= f cash by the end of the year without the bond sale," he said. "We will mov= e toward fiscal insolvency." The so-called rate agreement, a draft of whic= h was obtained by The Times, would bind customers of the three big regulate= d utilities to pay more than just the principal and interest on the $13.4 b= illion in bonds. Consumers would have to pay for consultants, lawyers, to p= ay taxes, fees and other as-yet-undefined charges that may be incurred by t= he Department of Water Resources. Additionally, the PUC would be obligated= to approve payments for programs by which the state would pay large and sm= all customers to cut electricity use, although the Legislature has not appr= oved the programs and their details remain to be worked out. The Department= of Water Resources estimates the cost to be $800 million, spread over this= year and next. "It is loaded up," Senate President Pro Tem John Burton (D= -San Francisco) said of the proposed rate deal, adding that it would requir= e the commission to "raise rates to cover whatever the Department of Water = Resources decides to do." "That is giving a blank check to some bureaucrat= ic office," he said. 'Dictatorial Power' Warning Stewart of the manufactu= rers group also is alarmed by the plan, saying it would provide the water a= gency with "dictatorial power." "As skeptical as we are of the PUC process= , at least there is a process," Stewart said, referring to the commission's= procedures to set electricity rates. "There is no process for DWR. DWR jus= t tells the PUC, 'This is what we need,' and the PUC must approve it." Oth= ers say the rate agreement is a standard piece of work, given the extraordi= nary step the Legislature took in January when it authorized the Department= of Water Resources to buy power for utilities that had fallen so deeply in= to debt that they could no longer carry out their obligation to consumers. = In essence, Davis energy advisor Freeman said, lawmakers in January create= d "the equivalent of a public power purchasing agency" beyond the jurisdict= ion of the PUC. "There is no public power agency in California that is rev= iewed by the PUC," said Freeman, former head of the Los Angeles Department = of Water and Power. * Times staff writer Nancy Rivera Brooks in Los Angel= es contributed to this story. Copyright 2001, Los Angeles Times Sta= te's refund demand rejected Judge ends rebate talks, rebukes $9 billion cl= aim Zachary Coile, Christian Berthelsen, Chronicle Staff Writers Tuesday,= July 10, 2001 ?2001 San Francisco Chronicle URL: http://www.sfgate.com/= cgi-bin/article.cgi?f=3D/c/a/2001/07/10/MN117914.DTL Washington -- An adm= inistrative law judge, delivering a powerful message to Gov. Gray Davis and= California energy officials, cast aside the state's claim that it is owed = $8.9 billion in electricity overcharges by generators and called for furthe= r hearings to determine "hard numbers." The judge, ending talks designed t= o settle the dispute between California and power sellers, said the state a= nd its cash-strapped utilities may owe more in unpaid electricity bills tha= n they are owed for overcharges by the generators. The comments by Federal= Energy Regulatory Commission chief administrative law Judge Curtis L. Wagn= er, although a strong endorsement of the generators' position, seemed to in= dicate that neither side wanted to settle the issue before it reached the f= ive-member regulatory commission. "There are refunds due (to California) t= hat total hundreds of millions of dollars and maybe a billion dollars," Wag= ner said yesterday. "At the same time, there are sums due to sellers from = the California Independent System Operator and the investor-owned utilities= in the state of California that probably are higher than any overcharges t= hat (the state) may come up with." Now, it will be up to the federal regul= ators to settle the case. But the recommendations by Wagner, who mediated t= he talks, carry significant weight with the commission and cast doubt on th= e state's chances of collecting the full $8.9 billion it claims to be owed.= The judge said he will recommend that the commission order new hearings t= o calculate what the state and the power sellers are each owed. The hearing= s would be overseen by an administrative law judge and would last 45 to 60 = days, Wagner said. CLOSING SESSION Wagner made his comments in the closing= session of the 15-day talks, which were ordered last month by the regulato= ry commission to try to defuse the dispute between power wholesalers and Ca= lifornia officials before it reached the courts. The judge's message was a= sharp rebuke to the unyielding stand by California leaders -- especially D= avis, who last week said he wouldn't take a dime less than $8.9 billion for= California's consumers. The governor issued a statement shortly after the= close of talks insisting that California had won its basic case that the s= tate is owed refunds. "I am pleased that Judge Wagner accepted our methodo= logy for calculating refunds and rejected the generators' position that no = refunds are due," Davis said. The governor's chief representative at the t= alks, Michael Kahn, called the judge's statement a "ringing endorsement" of= the state's call for refunds. Kahn said the judge's order would improve th= e state's legal position if it files suit against power sellers. GENERATOR= S FAVORED But much of the judge's order seemed to favor the generators. Fo= r example, state officials have made the case they should be refunded $8. 9= billion for alleged overcharges from May 2000 to May 2001 -- even though t= he regulatory commission has said only that the period starting Oct. 2, 200= 0 could be considered. The judge said yesterday that he would stick with t= he October date, meaning that more than a third of the state's claim -- at = least $3 billion -- would not be refunded by the commission. Brent Bailey,= vice president and general counsel of Duke Energy North America, said that= under Wagner's guidelines, the state may be eligible for $1 billion to $1.= 5 billion. "Certainly to the extent that it helped refute what California = has been saying, it's a victory," Bailey said of the judge's statement. Bu= t Davis said the nation's big power sellers never came to the table with a = serious offer. "Not surprisingly, the energy pirates that bilked ratepayer= s out of billions of dollars stonewalled and refused to negotiate in good f= aith," Davis said. $716 MILLION OFFER Wagner disclosed yesterday that the= generators had made an offer to California: $716 million in refunds. The = judge said the figure included about $510 million from the so-called Big Fi= ve generators, as well as $125 million from BC Hydro's Powerex, $49.6 milli= on by a group of 15 electricity marketers, $16.5 million by six California = municipal utilities and $25 million offered by other out-of-state power sel= lers. California officials say it was not a legitimate offer because it in= cluded no cash. It was simply an agreement by the companies to wipe some of= the state's debt off the books. Throughout the talks, generators complain= ed that the California team was trying to shield some California companies = and government power providers from having to pay any refunds, and trying t= o disproportionately extract sums from out-of-state power companies. FAVOR= ITISM CHARGED According to documents and interviews, the state attempted to= remove Pacific Gas and Electric Co., Southern California Edison, San Diego= Gas & Electric., the Los Angeles Department of Water and Power and other g= overnment power suppliers from the group from which it was asking for refun= ds, even though they were paid the same high rates for power as everyone el= se. Representatives for the power sellers said they believe that Davis mad= e a political decision to demagogue the companies while refusing to comprom= ise on the state's claims. They say the governor calculated that his reputa= tion would be enhanced by continuing to attack the generators. "The Califo= rnia delegation did not come into these talks with any willingness to compr= omise," said Mark Stultz, vice president of the Electric Power Supply Assoc= iation, a Washington, D.C., trade group. "They went in with a dollar figure= and never budged on that figure. If you're looking for a settlement, you h= ave to be willing to compromise." Up next 1. The Federal Energy Regulatory= Commission will consider, probably on July 25, new hearings on how much, = if anything, California was overcharged. 2. If ordered by the commission, a= n administrative law judge will take testimony on how much the state says i= t was overcharged and how much generators say they are owed. 3. Regulators = will rule based on the judge's recommendation. If the parties disagree, the= y can go to court. E-mail the writers at zcoile@sfchronicle.com . and cber= thelsen@sfchronicle.com ., Zachary Coile reported from Washington, D.C., an= d Christian Berthelsen in San Francisco. ?2001 San Francisco Chronicle = Page A - 1 Davis opens another new power plant Pittsburg facility wil= l generate 555 megawatts Bernadette Tansey, Chronicle Staff Writer Tuesda= y, July 10, 2001 ?2001 San Francisco Chronicle URL: http://www.sfgate.co= m/cgi-bin/article.cgi?f=3D/c/a/2001/07/10/MN175828.DTL Pittsburg -- Wo= rkers were still scraping wet concrete on support columns as Gov. Gray Davi= s celebrated the startup of a new power plant in Pittsburg yesterday -- the= latest in a string of openings Davis hopes will help California "build its= way" out of the energy crisis. The state rushed to throw as many megawatts= on line as it could when it looked like the summer would feature regular b= lackouts, and yesterday the governor said it was paying off. "This is the = third plant I've helped open in the last 13 days," Davis said, pumping his = fist as the Calpine Corp. plant belched an impressive burst of steam. "In t= he past 13 days, we've put more power on the grid than California did throu= ghout the 1990s." The 555-megawatt Los Medanos Energy Center and the Sutte= r Energy Center that Calpine opened in Yuba City last week bring a total of= 1,115 megawatts online. Last month, Davis threw the switch on a Bakersfiel= d plant that opened more than a month ahead of schedule. Davis used yester= day's event to blast out-of-state generators that he maintains have gouged = the state for electricity. Yet he lauded San Jose-based Calpine as a sort o= f energy favorite son. "They were the first to enter long-term contracts w= ith us," the governor said. Calpine is among the big energy firms being pre= ssed by the state to issue refunds for what the governor insists were overc= harges, but unlike the others, Davis said, Calpine is giving ground in nego= tiations. "They likely will be the first to enter into settlements with us= ," he said. Although the Los Medanos plant is one of a generation of effic= ient new gas- fired plants that will be as much as 40 percent cheaper to ru= n than their forebears, the state will be paying well above current market = rates for the first three months of its contract with Calpine. Calpine Pre= sident Peter Cartwright insisted, however, that the company is not making e= xcess profits off the deal. To ensure that Calpine could provide the electr= icity even if plant construction wasn't finished by its mid-July target dat= e, the company bought the needed power from other energy traders at $232 a = megawatt hour when market rates were higher, he said. In addition to the 3= 00 megawatts it has pledged to the state, Calpine will supply electricity t= o the Sacramento Municipal Utility District and other power agencies. In t= he long term, Calpine will be selling power to California at $59 a megawatt= hour, Cartwright said. A spokesman for the state Department of Water Reso= urces, which started buying power in January after state utilities buckled = under high prices, said Calpine's rate is well below the $70 a megawatt hou= r the state is aiming for as an average price for the long-term contracts. = Cartwright said that with its recently opened plants, along with an 875- m= egawatt facility it plans to open in Pittsburg next May, the company is doi= ng its share to ease the state's supply crunch. "Ours are the lowest contr= acts in the state," he said. "If these plants weren't online, we'd be havin= g blackouts." A spokeswoman from the state agency that manages the power g= rid said California is skating so close to blackouts that "every megawatt c= ounts." "It's definitely making a difference and it will continue to do so= over the summer," said Lorie O'Donley, a spokeswoman for the Independent S= ystem Operator. E-mail Bernadette Tansey at btansey@sfchronicle.com . ?20= 01 San Francisco Chronicle Page A - 11 California rejects B.C. Hyd= ro $125 million settlement Tuesday, July 10, 2001 ?2001 Associated Press= URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/= 07/10/state0321EDT0105.DTL (07-10) 00:21 PDT VANCOUVER, British Columbia = (AP) -- California has rejected an offer by B.C. Hydro's power trading sub= sidiary to refund $125 million to settle the state's allegations that it wa= s overcharged by the Canadian power company. The dispute will now be resol= ved by U.S. judicial and regulatory authorities. The offer from Hydro's Po= werex subsidiary came during 15 days of settlement talks between power gene= rators and distributors, California and other western states. The talks, i= nitiated by the Federal Energy Regulatory Commission, which regulates cross= -border power sales in the United States, concluded Monday evening without = resolution. Hydro spokeswoman Elisha Odowichuk said that under the offer, = the Crown corporation would have been subtracted $125 million from the $290= million California still owes British Columbia for power sales. The $125 = million was Powerex's first offer and it did not change through the negotia= tions, she said. The company put conditions on that refund figure, but Odow= ichuk would not say what those conditions were. California has charged tha= t Powerex gouged it by more than $430 million. Odowichuk said Hydro had to = join the settlement talks to preserve its otherwise lucrative power trading= relationship with California. Electricity imports and exports statistics = compiled by Canada's National Energy Board show Powerex exported more than = $900 million worth of energy from January to April. The average cost of th= at power was $661.56 a megawatt hour. Prices have dropped to around $140 a= megawatt hour since the regulatory commission instituted price caps on Jun= e 19. ?2001 Associated Press Davis' criticism of Texas misdirected= , report finds Lynda Gledhill, Mark Martin, Chronicle Staff Writers Tuesd= ay, July 10, 2001 ?2001 San Francisco Chronicle URL: http://www.sfgate.c= om/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/07/10/MN48875.DTL S= acramento -- Texas-based electricity generators have received the brunt of = criticism from Gov. Gray Davis for gouging California during the power cris= is, but financial information released yesterday shows the lion's share of = the money went elsewhere. Companies with headquarters in Texas garnered le= ss than 10 percent of California's multibillion-dollar energy purchases, wh= ile public and private energy companies from Canada to Georgia to Californi= a got the rest. The $424 million that went to Texas companies may still be= more than the state should have been charged, and administration officials= are attempting to get refunds from a host of companies, both in and out of= Texas. Earlier this year, Davis lambasted the Bush administration for not= acting against power firms in his home state. "What's going on here, pure = and simple, is unconscionable price-gouging by the big energy producers -- = most of them, incidentally, located in Texas," he said in May. Yesterday, = a spokesman for the governor broadened the verbal assault, saying the Texas= firms are representative of the many other out-of-state generators who hav= e also gouged California. "Anywhere they wear cowboy hats, they probably h= ave handkerchiefs across their face because they are robbing us blind," sai= d Steve Maviglio, Davis' spokesman. The latest financial information is co= ntained in a report by the state Department of Water Resources detailing $7= .2 billion in power purchases from Jan. 17 through the end of May. About $= 5.2 billion of that was spent on the spot market where power buys are made = a day, hour or even a few minutes before the electricity is actually used. = Because the spot purchases are made with little notice, they are the most = expensive kind of power on the market. The state was forced to step in and = buy the power when the credit ratings of California's major utilities dropp= ed as the energy crisis worsened. The crisis was caused by a series of even= ts that forced the utilities to pay more for electricity than they could re= cover from customers. The numbers released yesterday show that Texas compa= nies weren't alone in receiving a share of the energy crisis pie. Some $1.2= billion went to Mirant, an Atlanta-based company. Mirant has refused to tu= rn over documents subpoenaed by the state Legislature as part of its invest= igation into alleged market manipulation. Mirant could face contempt procee= dings. Municipal generators have also fared well during the energy crisis.= Powerex, a wholly owned power marketing subsidiary of Vancouver-based BC = Hydro, received $1 billion from the state for spot market electricity. The= Los Angeles Department of Water and Power, which Davis said charged higher= average spot market prices than some generators, received $331 million. E= -mail Lynda Gledhill at lgledhill@sfchronicle.com . ?2001 San Francisco Ch= ronicle Page A - 9 Developments in California's energy crisis The= Associated Press Tuesday, July 10, 2001 ?2001 Associated Press URL: http= ://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/state= 1041EDT0134.DTL (07-10) 07:41 PDT (AP) -- Developments in California's e= nergy crisis: TUESDAY=3D * No power alerts Tuesday as electricity reserves= stay above 7 percent. MONDAY=3D * A Federal Energy Regulatory Commission = administrative law judge says that California is entitled to no more than $= 1 billion in refunds for excessive energy costs. Gov. Gray Davis had been s= eeking $8.9 billion for overcharges. * The Department of Water and Power r= eleases 1,770 pages of documents detailing the state's spot market power pu= rchases in the first quarter of the year. DWR also releases a report showin= g that the state's daily power buys topped $100 million on three days in Ma= y. The DWR report says the energy companies that were paid the most by the= state for last-minute power were: Mirant Corp., which was paid $1.24 billi= on as of the end of May; Canada-based Powerex, $1.05 billion; and Sempra Co= mpanies, $429 million. * Davis ceremonially switches on the largest licens= ed power plant to come online this year, Calpine's 559-megawatt Los Medanos= Energy Center in Pittsburg. * No power alerts as electricity reserves sta= y above 7 percent. * Shares of Edison International closed at $14, up 69 c= ents. PG&E Corp. rose 65 cents to close at $14.10. Sempra Energy, the paren= t company of San Diego Gas & Electric Co., closed at $27.52, down 21 cents.= WHAT'S NEXT=3D * U.S. Bankruptcy Judge Dennis Montali decides Tuesday whe= ther millions of Pacific Gas and Electric Co. ratepayers can form their own= creditors' committee to represent them in the utility's bankruptcy proceed= ing. * The Senate committee investigating possible price manipulation in C= alifornia's energy market meets Wednesday. The committee will vote on conte= mpt citations against generators Mirant and Enron, which failed to comply w= ith subpoenas for documents. The committee will meet again July 18 to consi= der compliance by six other suppliers that have until Tuesday to turn over = documents. THE PROBLEM: High demand, high wholesale energy costs, transmis= sion glitches and a tight supply worsened by scarce hydroelectric power in = the Northwest and maintenance at aging California power plants are all fact= ors in California's electricity crisis. Southern California Edison and Pac= ific Gas and Electric say they've lost nearly $14 billion since June 2000 t= o high wholesale prices the state's electricity deregulation law bars them = from passing on to consumers. PG&E, saying it hasn't received the help it n= eeds from regulators or state lawmakers, filed for federal bankruptcy prote= ction April 6. Electricity and natural gas suppliers, scared off by the com= panies' poor credit ratings, are refusing to sell to them, leading the stat= e in January to start buying power for the utilities' nearly 9 million resi= dential and business customers. The state is also buying power for a third = investor-owned utility, San Diego Gas & Electric, which is in better financ= ial shape than much larger Edison and PG&E but is also struggling with high= wholesale power costs. The Public Utilities Commission has approved avera= ge rate increases of 37 percent for the heaviest residential customers and = 38 percent for commercial customers, and hikes of up to 49 percent for indu= strial customers and 15 percent or 20 percent for agricultural customers to= help finance the state's multibillion-dollar power buys. Track the state'= s blackout warnings on the Web at www.caiso.com/SystemStatus.html . ?2001 = Associated Press Energy talks reach no settlement; state threatens s= uit MARK SHERMAN, Associated Press Writer Tuesday, July 10, 2001 ?2001 As= sociated Press URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news= /archive/2001/07/10/state0400EDT7473.DTL (07-10) 01:00 PDT WASHINGTON (AP= ) -- With talks between the state and power generators stalled, California= may go to court to help win the $8.9 billion state officials believe it wa= s overcharged for electricity. "I think we have demonstrated very clearly = both to the FERC and to the judge that the state is owed $8.9 billion and w= ill settle for nothing less," said Roger Salazar, a spokesman for Gov. Gray= Davis. With negotiations at an impasse, the administrative law judge for = the Federal Energy Regulatory Commission said California is probably owed n= o more than $1 billion in refunds. "The numbers were too far apart," said = Curtis Wagner, the FERC chief administrative law judge. California, Wagner= said, may receive nothing at all, because generators may be owed more than= they have to return for any overcharges. He placed the refunds owed the s= tate at between $716 million and $1 billion. Power providers had offered $7= 16 million as part of an overall settlement, while California state officia= ls sought $8.9 billion, Wagner said. He said California officials had not = made the case for $8.9 billion in refunds. Salazar, however, said the stat= e would go to court and may ask for $20 billion. Separately, Wagner split = off claims of overcharges from the Pacific Northwest, saying he has not had= time to consider those allegations under the short timetable ordered by FE= RC last month. Wagner served as a mediator during the 15 days of negotiati= ons and will recommend a settlement to FERC by next Monday. The commission = ordered the talks last month in an effort to resolve differences between pr= oducers and the state over the breakdown of California's deregulated electr= icity market. Consumer advocates assailed the judge's recommendation and u= rged the state to continue its attempt to get refunds from what they say ar= e profiteering power companies. "It's like catching a bank robber, but ins= tead of making him give back all of it, you only make him give back 5 perce= nt of what he stole," said Douglas Heller, spokesman for the Santa Monica-b= ased Foundation for Taxpayer and Consumer Rights. Power generators, howeve= r, were generally pleased with Wagner's comments. Brent Bailey, general co= unsel for Duke Energy, said even if the formula Wagner recommends produces = $1.5 billion in refunds, "that's a reasonable amount in the context of thes= e settlement talks." California officials, negotiating on behalf of utilit= ies, the Public Utilities Commission and state power buyers, accused the pr= oducers of manipulating supply to unfairly drive up prices. The producers = have acknowledged prices are high, but blame jumps in the price of natural = gas, which fuels many power plants, and the workings of the free market. T= he bill for wholesale power in California soared to $27 billion last year f= rom $7 billion the year before. Davis has estimated the state could spend a= s much as $50 billion this year. The producers reiterated Monday that Cali= fornia's numbers are grossly inflated. Attorneys for the five major generat= ors -- Duke Energy, Dynegy, Mirant, Reliant Energy and the Williams Cos. --= said in a statement that they have made a "very substantial global settlem= ent offer." Reliant would agree to no more than $50 million in refunds as = part of an overall settlement that also would have to include protection fr= om additional legal claims, said John H. Stout, a company senior vice presi= dent. But Stout also said, "Reliant's fundamental position has been and re= mains that no refunds are justified." Toxic fumes not linked to black= outs Backup power OK in facilities, report says Jason B. Johnson, Chronic= le Staff Writer Tuesday, July 10, 2001 ?2001 San Francisco Chronicle UR= L: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001= /07/10/MNC115768.DTL Despite a power-related mishap that released toxic f= umes from an industrial plant in May, rolling blackouts are not expected to= cause dangerous releases in Contra Costa, a county study concludes. The c= ounty Health Department report found that 52 industrial facilities have ade= quate backup power plans. The report to be presented to the Board of Super= visors today was prompted by a freak traffic accident that knocked out powe= r at Richmond's General Chemical Corp. plant. When the plant powered back u= p, a cloud of sulfur trioxide and sulfur dioxide was released. Contra Cost= a hazardous materials director Lew Pascalli said that there is always a pos= sibility that a plant's hydraulic or mechanical systems could fail but that= those chances are slight given the growing number of power plants coming o= nline and the state's successful conservation effort. He also said industr= y has done a good job preparing for outages. "The industry is doing a good= -faith effort in this particular instance to make sure that nothing happens= ," Pascalli said. County officials relied on industry records in determini= ng the adequacy of the different plans, such as having multiple electrical = leads feeding a source regulating hazardous materials. Denny Larson, spoke= sman for the group Communities for a Better Environment, said the report re= lied too heavily on industry self-reporting. "Unfortunately, the conclusio= ns of the report can't be backed up by the facts," Larson said. "Oil and ch= emical plants in Contra Costa have repeatedly had toxic releases due to pow= er failures over the years." The 52 facilities include chemical plants, oi= l refineries and small shops that produce limited amounts of hazardous mate= rials. For many of these businesses, the loss of power would shut down the= ir operations and make it impossible for substances to be released. Larger= facilities, like oil refineries, have either their own backup generators o= r contracts with cogeneration plants that could supply all or most of their= power independent of the electricity power grid, according to the report. = Plans are also in place to conduct partial shutdowns at plants running on = reserve power during a blackout. General Chemical said all electrical feed= s to the chamber processing chemicals are automatically pulled in the event= of loss of power. A backup generator will automatically come online to kee= p operations stable. Dow Chemical has a contract with a Calpine power plan= t to supply it with electricity. Battery backup and diesel emergency engine= s are also at the site to ensure enough power to run lights, alarms, contro= ls and emergency shutdown equipment. e-mail Jason B. Johnson at jbjohnson@= sfchronicle.com . ?2001 San Francisco Chronicle Page A - 11 Pow= er suppliers, state fail to agree on refund total Posted at 10:41 p.m. PDT= Monday, July 9, 2001 BY JIM PUZZANGHERA Mercury News Washington Bureau = WASHINGTON -- California officials and power suppliers failed to agree o= n refunds for electricity overcharges as 15 days of contentious negotiation= s ended Monday, leaving the matter in the hands of a federal judge who said= the state is owed much less than the $8.9 billion it demands. The judge o= verseeing the talks for the Federal Energy Regulatory Commission put the re= funds at between several hundred million dollars and a billion dollars. His= estimate is closer to the $716.1 million offer made by power suppliers dur= ing negotiations. The offer was rejected by California officials. But it w= as unclear Monday which side in the bitter refund battle would prevail, and= California officials indicated the dispute is probably headed to court. At= stake is how much the state's electricity consumers will ultimately have t= o pay for costs that skyrocketed as California's deregulation system collap= sed. Curtis Wagner, the commission's chief administrative law judge, will = recommend a formula for the commission to use to calculate a refund dating = back to October. That formula -- a complex methodology that involves factor= s such as daily natural gas prices -- includes many of the provisions the e= nergy suppliers had advocated during the talks. Michael Kahn, who headed t= he California negotiating team, said the state would contest some aspects o= f the formula. But even without changes, Kahn said he was confident the for= mula will result in more refunds than Wagner estimated. ``We think the num= bers even using the judge's formula are going to be in the multiple billion= s,'' said Kahn, chairman of the state Independent System Operator, which ru= ns the electricity grid. ``California will get its $8.9 billion dollars. If= we don't get all of it from the commission . . . we'll still get the remai= nder of the money'' through the courts. Amount in dispute Power industry = representatives appeared pleased with the judge's plan. ``We haven't gone = and run the full numbers but it's going to be nowhere near the $8.9 billion= ,''' said Brent Bailey, vice president and general counsel for Duke Energy = North America. ``But let's face it, that's a pie-in-the-sky number that nob= ody in there believed in their right mind was a legitimate number.'' Wagne= r acknowledged he had not calculated any figures using his formula, saying = he arrived at his dollar estimate based on the offers made by the suppliers= . The energy commission ordered the private settlement conference last mon= th when it enacted new price controls to try to rein in soaring electricity= prices in California and throughout the West. Commissioners hoped that und= er pressure of a deadline and their looming intervention the state and the = power suppliers could resolve the refund issue and stave off future litigat= ion. But the suppliers and state officials never came close to a deal, par= ticipants said. ``The numbers were too far apart. You saw $8.9 billion on = one end and you saw $716 million on the other end, and that's a long way to= splitting the difference,'' Wagner said. ``I think a lot of the parties ge= nuinely wanted to settle. Others didn't.'' Wagner now has until Monday to = make his recommendation to the five-member commission, which will make the = final ruling on refunds. To date, the commission has ordered $125 million i= n refunds for periods since last Oct. 2. Wagner said Monday that he will a= sk that a special hearing be set up in the next 60 days to get the detailed= information from the state and power suppliers needed to determine a refun= d total using his formula. The state may not end up with any cash, as any = refund total could be applied to the several billion dollars California and= its utilities still owe many of the power suppliers. Reflecting the tone = of the negotiations, California Gov. Gray Davis on Monday blamed power supp= liers for the failure of the talks and challenged the commission to resolve= the situation. ``Not surprisingly, the energy pirates that bilked ratepay= ers out of billions of dollars stonewalled and refused to negotiate in good= faith with our team in Washington, D.C.,'' Davis said. ``While in the past= the FERC has shown little, if any, interest in consumers, they now have th= e opportunity to redeem themselves by returning the $8.9 billion California= has demonstrated it is owed.'' Davis may go to court At the opening of a= new power plant in Contra Costa County on Monday, Davis told reporters tha= t he's prepared to take the power generators to court if FERC doesn't order= the full refund. Davis also said the ISO's estimate of $8.9 billion doesn'= t represent all the overcharges. He said other estimates put the figure as = high as $20 billion, although he did not elaborate about how those figures = were calculated. John H. Stout, senior vice president for Reliant Energy W= holesale Group, said the state used faulty methodology to arrive at the $8.= 9 billion figure. California officials and several suppliers said they wou= ld continue to negotiate separately, and an official with San Jose-based Ca= lpine said his company is close to a settlement with the state. Power supp= liers urged Wagner not to calculate refunds by applying the energy commissi= ons' June price-limits plan retroactively. But that's what Wagner said he w= ill do. It was a victory for California officials, who had pushed for it. W= agner, however, also made some changes to the price-limit plan that power s= uppliers had wanted. He applied it only back to Oct. 2, 2000. State officia= ls wanted it to cover up to May 2000. $3 billion difference The state's $= 8.9 billion figure comes from May 2000 through May 2001. Factoring refunds = beginning with Oct. 2, 2000, eliminates about $3 billion in overcharges the= state says occurred in the earlier period. Among the changes to the commi= ssion's formula that Wagner made was to revise the way the prevailing elect= ricity price limit is calculated. Wagner wants the price limit determined f= or each hour of each day. The commission's formula sets a price limit durin= g Stage One power emergencies that remains in effect until the next emergen= cy. But in a sign of just how complex the issue is, Stanford University ec= onomist Frank Wolak said he believes the standards described by the judge w= ill produce a much higher figure than $1 billion. ``That's the methodology= the state used,'' said Wolak, who advises the California ISO on market iss= ues. ``By using the marginal unit for each hour, you'll get refund numbers = on the order of what the state estimated.'' Mercury News Staff Writers B= randon Bailey and Dana Hull contributed to this report. Contact Jim Puz= zanghera at jpuzzanghera@krwashington.com or (202) 383-6043. = Power purchase bills exceed $7.5 billion Published Tuesday, July 10, 2001,= in the San Jose Mercury News BY MARK GLADSTONE, NOAM LEVEY AND DION NISSE= NBAUM Mercury News Sacramento Bureau SACRAMENTO -- Six months after ju= mping into the electricity business, the Davis administration on Monday pro= vided the first detailed glimpse of California's daily power purchases, sho= wing more than $5 billion in payments, much of it to government-owned utili= ties and private companies that state officials have branded as price gouge= rs. The state spent an additional $2.5 billion on a variety of contracts a= nd other electricity services designed to stabilize the volatile energy mar= kets, according to documents that the state agreed to release last week ami= d a legal dispute over public access to the data. In roughly the first fiv= e months of the year, the state shelled out $1.2 billion to Atlanta-based M= irant, the most any company was paid for electricity, followed by $1 billio= n to Powerex, the marketing arm of BC Hydro in British Columbia. It also pa= id $331 million to the Los Angeles Department of Water and Power. The docu= ments raise questions about some of the common assumptions that have arisen= around the electricity crisis. For instance, almost 40 percent of the stat= e's purchases have come from government-run power generators in California = and elsewhere, but not Texas; some of the biggest suppliers are from the No= rthwest. Gov. Gray Davis, who has ambitions to run for the White House, ha= s put much of the blame for the soaring costs of power on energy companies = based in President Bush's home state. The figures are tucked inside 1,770 = of pages of invoices that Davis has resisted divulging, saying disclosure w= ould encourage suppliers to charge more. The state, which last month releas= ed information on its long-term electricity contracts worth $43 billion, ag= reed Thursday to release the first quarter details. Short on explanation = The figures were disclosed late Monday by the California Department of Wate= r Resources, which buys power for the state's financially strapped major ut= ilities, and seem to buttress the administration's contention that the pric= e of power is gradually dropping but offer little or no explanation for wha= t prompted the decrease. In January, for instance, the average price for p= ower on the spot market was $321 a megawatt hour. It peaked in April at $33= 2 and dropped to $271 in May. One megawatt powers about 750 homes. Davis = spokesman Steve Maviglio said the price data supports the governor's assert= ions that California has been gouged. ``The bad guys are clearly the out-of= -state generators,'' Maviglio said. ``There has been a significant shift of= money out of California.'' But the documents fail to shed much light on w= hether, as the administration contends, the price drop was due to long-term= power contracts negotiated by the state earlier this year. Critics contend= that the Davis administration panicked and rushed into deals that commit t= he state to pay high prices for many years. Used for support Republican o= fficials used the price information to bolster their attacks against Davis,= a Democrat, for signing long-term contracts with power generators even as = the price of power on the spot market was coming down, partly because of th= e declining price of natural gas used to fuel many plants. ``It's more cle= ar than ever that the long-term contracts are a bad deal,'' said Assemblyma= n Tony Strickland, R-Camarillo. ``The governor's really hurt the ratepayers= for the next five or 10 years.'' The newly released bills highlight the v= olatility of California's energy market, where the price per megawatt hour = ranged from $70 to $1,000. On any given day, the records show, the prices f= rom seller to seller varied widely, with some of the highest prices being c= harged by public utilities and companies outside Texas. On one day in Febr= uary, for example, San Diego-based Sempra Energy was charging $165 per mega= watt hour, the Eugene Water and Electric Board was charging nearly $500 and= Duke Energy, a North Carolina company, was charging up to $575. The state= 's daily spending peaked May 10 at $102.4 million for all power, including = the spot market and contracted power. The state began buying power in mid-= January on behalf of the state's major utilities, which were unable to borr= ow money to buy power after amassing enormous debts for electricity. San J= ose-based Calpine Corp., which is building several new power plants around = California including one in South San Jose, did only $29 million worth of b= usiness with the state in the first five months of the year, according to t= he figures. The state began buying power in mid-January when Pacific Gas &= Electric Co. and Southern California Edison Co. were on the ropes financia= lly. PG&E later went into bankruptcy. On Monday, state lawmakers took anot= her shot at trying to cobble together a plan to rescue financially ailing E= dison. While most concede that a rescue plan Davis worked out with Edison = will not win the necessary support in the Legislature, lawmakers have creat= ed several working groups to come up with alternatives. Compromise plan O= n Monday, state Sen. Byron Sher, D-Redwood City, unveiled the latest compro= mise proposal that seeks to protect average ratepayers and small businesses= from further rate increases and forces everyone else to help finance the E= dison bailout. The ``shared pain'' proposal would force power producers, o= wed about $1 billion, to take a 30 percent ``haircut'' and agree to forgive= about $300 million in Edison debts. Edison would be asked to swallow $1.2 = billion -- about a third of its debt. And big users would be asked to pay o= ff the remaining $2 billion in debts, possibly by paying higher prices for = power. In exchange, large companies would be given the opportunity to buy = power on the open market, a system that would allow many of them to sign ch= eap energy deals. Sher presented the proposal to Senate Democrats Monday a= fternoon, but it remains unclear how much support the framework will receiv= e in the Legislature. Contact Mark Gladstone at mgladstone@sjmercury.com= or (916) 325-4314. =09 Refund outlook dims Talks break down; judge says state is owe= d much less than its $8.9 billion demand -- and unpaid bills may offset gai= ns. July 10, 2001 By DENA BUNIS and JOHN HOWARD The Orange County Registe= r WASHINGTON The nation's chief energy judge said Monday that California i= s owed maybe $1 billion in refunds from power generators, a fraction of the= $8.9 billion demanded by Gov. Gray Davis. And even at that, said Judge Cu= rtis Wagner, the electricity sellers are owed so much more in unpaid power = bills that in the end California might not see one red cent. Wagner announ= ced his recommendation to the Federal Energy Regulatory Commission after tw= o weeks of fruitless negotiations between all the parties to California's e= lectricity crisis. With no settlement, the matter is now in the commissione= rs' hands. Power generators, Wagner said, had offered a combined $716 mill= ion in refunds, an offer the state rejected. "I don't think it's 8.9 (billi= on dollars)," he said afterwards, "because I haven't been shown that it was= ." For California consumers, every dollar the state can extract in refunds= is a dollar less that ratepayers have to shell out for state-purchased pow= er. And the more money the state gets back, the better the chances of wardi= ng off future rate increases. "California will get its $8.9 billion," insi= sted Michael Kahn, head of the state's delegation and the California Indepe= ndent System Operator. Kahn brushed off Wagner's comments, finding victory = in the judge's assertion that the state is owed some refunds, a concept the= generators have been unwilling to embrace up to now, he said. Since the t= alks began, some generators have made refund offers -- last week Duke Energ= y offered $20 million and on Monday, Reliant officials revealed their refun= d offer was $50 million, provided all other actions against the company wer= e dropped. But the net result of the 15- day closed-door sessions is that = California is no closer to getting repaid for what it claims was price goug= ing by power companies going back to May 2000 than it was the day the talks= began. And it means the state is in for possibly more hearings before the= FERC. If unsuccessful there, the whole issue could wind up in court for ye= ars. "You can take a horse to water but cannot make him drink," Wagner sai= d during an afternoon public session where he made his preliminary recommen= dation. He has seven days to put his ideas in writing. At several points du= ring the often-tense talks, Wagner expressed frustration to the negotiators= and tried to get them to agree, even to the point of holding an unpreceden= ted Sunday session. "The numbers were too far apart," Wagner said. While = Kahn insisted the state had made progress, on hearing of the judge's commen= ts, state Sen. John Burton, D-Francisco, called them "barely better than a = jab in the eye with a sharp stick." Burton agreed with Kahn that the state = has to do all it can to get more than that. And Davis backed up his team. = "Our delegation made a clear and compelling factual argument that there we= re overcharges made because the market was broken," Davis said. "Remarkably= , the energy generators and suppliers refused to recognize their responsibi= lity to the people of California and own up to their profiteering." Power = generators seemed satisfied with the judge's views, even though John Stout,= vice president of Reliant Energy, said his company's "fundamental position= has been and remains that no refunds are justified." Brent Bailey, genera= l counsel for Duke Energy, called the judge's recommendation, "a fair one."= Republican lawmakers in Sacramento were quick to say it was Davis' failed= energy policies that brought California to this point. They also distanced= themselves from the state's refund request. "I don't believe there really= exists a true justification for that number," said Assemblyman John Campbe= ll, R-Irvine. "I've never considered that anything more than a wild number = to throw out there." The two sides are so far apart in their estimates of = overcharges because they are using different assumptions about how to compu= te the complex pricing structure. And Wagner was more persuaded with the ma= jority of the generators' methods. To start with, the state is asking for = $8.9 billion, but about $3 billion of those alleged overcharges happened be= tween May and October 2000, a period FERC is not looking at. FERC issued tw= o refund orders in March, finding that power companies had $124 million in = overcharges during power alerts. But the state is challenging that finding,= saying there were overcharges beyond those limited times. And the state is= also asking FERC to reconsider allowing refunds for May to October 2000. = How energy panel affects California Six months ago, few people had heard o= f FERC. Now the Federal Energy Regulatory Commission, the agency charged wi= th making sure that the nation's power markets are running smoothly and tha= t wholesale prices are "just and reasonable," rolls off the tongue. The fi= ve commissioners who make up FERC - all of whom were members of their home = state's Public Utilities Commissions - ordered the settlement talks that co= ncluded Monday. They had hoped all the parties involved in California's ele= ctricity crisis could reach an agreement on proposed refunds, long-term pow= er contracts and other issues that have divided the parties for months. FER= C's chief judge, Curtis Wagner, was asked to mediate the talks. WHAT WAS A= T STAKE? For the state: $8.9 billion that Gov. Gray Davis said was the amo= unt power companies overcharged California in the past year. Wagner's findi= ng? There should be refunds. But more like $1 billion. For the generators:= More than $5 billion that they say they are owed for unpaid power bills. W= agner's finding? Generators are owed more money than the refunds they owe C= alifornia. He did not specify by how much. For California consumers: A sta= ble electricity market. Until the refund issue is settled and power prices = are stabilized long term, what the future holds for rate increase remains u= ncertain. Wagner's finding? No settlement. Consumers still in limbo. HOW D= ID WE GET HERE? In spring 2000, wholesale power prices began to soar. The = state began appealing to FERC to cap wholesale prices. In the meantime the = utilities were running out of money. Generators weren't paid for all the el= ectricity they sold. Rolling blackouts began. Starting in January, the sta= te began buying the power, replacing the near-bankrupt utilities. Politicia= ns from Sacramento to Washington increased the pressure on FERC to cap rate= s. More than $27 billion was spent to buy power for California last year, c= ompared with $7 billion the year before. The price tag could reach $50 bill= ion this year. On June 19, FERC imposed the kind of soft price caps expert= s say could moderate wholesale rates. Wholesale prices have come down, but = the caps have caused confusion among generators, leading some to hold some = power off the market. WHAT'S NEXT? The FERC commissioners will receive Wa= gner's report within a week. In it, he will suggest they hold a fast-track = formal hearing that would last no more than 60 days. If they agree, after = that hearing the commission would rule on refunds and other California mark= et issues. If either the state or the other parties to this dispute disagr= ee, they can contest FERC's decision in court. Such legal proceedings could= last many years. State reveals details of power purchases = Report shows last-minute energy buys in first three months of 2001. July 1= 0, 2001 By JENNIFER COLEMAN The Associated Press SACRAMENTO On three days= in May, California's daily power allowance topped $100 million, according = to a report released by state power traders. The California Department of = Water Resources released the report Monday, along with 1,770 pages of docum= ents that also detailed the last- minute power purchases the state made on = the spot market in the first three months of the year. The report details = the department's electricity spending since Jan. 17, when the state took ov= er electricity purchases for Pacific Gas & Electric Co., San Diego Gas & El= ectric Co., and Southern California Edison. The utilities had amassed bill= ions in debts and were no longer creditworthy enough to purchase power. Sin= ce then, the state has spent nearly $8 billion to keep the lights on. The = state's daily spending peaked May 10 at $102.4 million. The second-highest = daily total was May 23, when the state spent $101.8 million. But since May= , spot-market prices have dropped, due in part to moderate weather, lower n= atural gas prices, increased conservation that lowered demand and because o= f increased scrutiny by lawmakers and investigators into possible price man= ipulation. Gov. Gray Davis has said long-term contracts also drove the pric= e down. "It does look like some of the spot-market prices have gone down, = but it looks like it's primarily due to natural gas prices," said Jamie Fis= fis, spokesman for Assembly Republicans. The slight reduction in spot-mark= et prices "underscores questions about the strategy of locking us into long= -term contracts, if natural gas prices continue to drop," Fisfis said. Mos= t of the long-term contracts run for 10 years, with one lasting for 20 year= s. Davis already has released details of the state's long-term power contr= acts after losing a court battle with Republican legislators and several ne= ws organizations. But Davis wanted to delay the release of the spot-market= buys and short-term contracts until now to keep the state's buying strateg= y secret.According to the state, Atlanta-based Mirant Corp. got $1.24 billi= on as of May 31 for spot-market purchases. Canadian Powerex, the marketing= arm of BC Hydro, has been paid $1.05 billion. The newly released short-te= rm contracts also show that on March 19-20, when the state had rolling blac= kouts, the state paid above-average prices in its largest short-term contra= cts. For example, Mirant sold the state 650 megawatt-hours at off-peak usa= ge times on March 20 for $345 a megawatt-hour, more than $70 above the aver= age price of $272.96. Tuesday, July 10, 2001 Ghost o= f Bob Citron roaming halls of capitol Gray Davis is following footsteps of= former O.C. treasurer into fiscal chaos JOHN M.W. MOORLACH Mr. Moorla= ch is the Orange County treasurer-tax collector. A recent L.A. Times poll= found that Californians still remain unconvinced that our state suffers fr= om a shortage of energy. Perhaps the state's subsidizing of the actual cost= s for electricity these past five months has caused us to believe that ever= ything is fine. It is not. The state has been spending an average of $57 m= illion, a medium-sized city's annual budget, per day for electricity. Now C= alifornia is headed toward the same financial catastrophe that was imposed = on its shareholder-owned utilities, finding one of them in Chapter 11 bankr= uptcy and another on the precipice. At this pace, it will not be long befor= e the state will be staring a Chapter 9 bankruptcy filing in the face. Tha= t's why I'm gnawed by this "d?j? vu" sensation. The similarities and parall= els between California of 2001 and Orange County of 1994 are frightening. H= ere's a refresher. In 1994 the county, through former Treasurer Robert Citr= on, was borrowing at variable rates and investing at fixed rates. The "expe= rts" and the "politicos" were comfortable with the investment scheme. No w= onder the electorate was convinced that there were no investing improprieti= es. Even while their former treasurer was very secretive about how he was i= nvesting and what his "exit strategy" would be. Guess what? The unexpected = happened. Short-term borrowing rates doubled. The cost of borrowing suddenl= y exceeded the revenues being generated. It caused the investment pool to = implode and Orange County taxpayers realized a $1.64 billion loss. In spite= of pleas to avoid or minimize this train wreck the county's leadership, he= ignored it. The rest is history. In a half-pregnant deregulation scheme, t= he state capped the retail price that the utilities can charge. It also eli= minated the availability to acquire electricity through the use of long-ter= m contracts. Guess what? The unexpected happened. The wholesale price for = electricity spiked dramatically above the inflexible retail price cap. It d= epleted the available funds for the utilities, and then some, and they are = imploding. In spite of pleas from the utilities imploring Gov. Gray Davis t= o avoid or minimize this train wreck, he ignored them. The rest is also his= tory. It gets worse. Davis doesn't allow for the immediate raising of reta= il rates and decides to have the state secretly purchase electricity. Guess= what? The expected happened. He depleted our budget surplus! Our reserves!= Nearly $9 billion - and counting! He's a Citron, only quintupled! And in = the light of day, the secret purchases were not attractively priced and onl= y compound this financial nightmare. Gov. Davis has done what no Libertaria= n or Republican could ever dream of doing in such a short time. He has retu= rned the budget surplus created by taxpayers to the residents of California= by subsidizing their electricity bills. Bravo! It may not be the most equ= itable way of refunding taxes, but has anyone ever thought up a more effici= ent method? But, that's not all. He wants it back! Davis now wants to borro= w some $13 billion to replace the spent reserves and purchase even more ele= ctricity at rates in excess of the retail prices! When does this train wrec= k in slow motion stop? And how do we pay off these bonds? Davis did not wa= nt to raise rates last summer or this past winter. But now he will to pay o= ff this historically largest municipal bond offering with a significant uti= lity rate increase. The ratepayers will be reminded for 10 years after Davi= s is gone about his expensive brilliance. And this elected official wants t= o purchase the power grids and bureaucratically manage the utilities? I say= "no." If we don't show some leadership in Sacramento soon, potential bond= buyers will also say "no," unless they receive an attractive interest rate= . Just ask Edison International about attractive interest rates. It just su= bscribed $800 million in bonds paying 14 percent. Tragically, Gov. Davis wa= lked into his position with an existing budget surplus and now has no tangi= ble legacy to show for it. No reserves. No improved highways. No new school= s. No infrastructure improvements. Only interest payments. Wasn't that Cit= ron's legacy? If amortized over 10 years at 6 percent, the citizens of Cali= fornia will pay an additional $4.4 billion in interest costs. Over 15 years= it's $6.7 billion. And therein lies the true legacy of Davis, squandering = the entire budget surplus that he inherited on interest resulting from his = indecisiveness and lack of leadership! It is so tragic that the perpetrato= r of this colossal mess is still in denial and continues to play the "blame= game." Orange County played the "blame game," too. But it had obvious perp= etrators and succeeded in a court of law in securing a significant amount i= n retribution payments. I'm not so sure California will have a similar resu= lt. Calpine's Los Medanos Energy Center Adds Needed Generation t= o California Second New Major Base Load Generator for California Jul= y 10, 2001 Second New Major Base Load Generator for California SAN JO= SE, Calif., July 9 /PRNewswire/ -- San Jose, Calif.-based Calpine Corporati= on (NYSE: CPN) announced today that its 555-megawatt Los Medanos Energy Cen= ter in Pittsburg, Calif. is providing needed electricity to California's st= rained power grid. Los Medanos is the second major combined-cycle facility = to be licensed and built in California in over a decade. Fueled by natural = gas, the facility is designed to add up to 555-megawatts of clean, reliable= electricity to California on a 24 hours a day, seven days a week availabil= ity. As a cogeneration facility, the project also delivers electricity and = steam to USS POSCO for use in industrial processing. Governor Gray Davis a= nd Calpine CEO Peter Cartwright will hold a press conference Monday afterno= on to commission the Los Medanos Energy Center and to recognize the support= of the local community, the construction and trades people, and numerous o= rganizations that helped develop the facility. Cartwright said, "We are co= mmitted to creating innovative energy solutions for California's growing po= wer market. Los Medanos exemplifies excellence in power generation-ratepaye= rs and the environment benefit as Calpine brings to California new energy r= esources like Los Medanos." Los Medanos is the second of eleven announced = modern, fuel-efficient energy centers Calpine is building in the State as p= art of a $6 billion energy initiative. Three additional facilities are unde= r construction, including an 880-megawatt facility in Pittsburg at Dow Chem= ical's facility. By year-end 2005, Calpine expects to be generating 12,000 = megawatts of clean, affordable electricity to help repower California. Cal= pine broke ground on the Los Medanos Energy Center in September 1999. More = than 600 construction and trade personnel worked on the project over a 20-m= onth period. During the past several months, the project scheduled two ten-= hour shifts, seven days a week to get the plant operating as soon as possib= le in light of the energy crisis. And over the past several weeks, technica= l teams worked round the clock to complete the facility. The total cost of = construction is estimated to be approximately $350 million. The Los Medano= s Energy Center is located in Pittsburg, Calif., in Contra Costa County adj= acent to the USS POSCO plant and is operated by a 22-member staff of highly= trained personnel. As with all of Calpine's modern base load facilities, = Los Medanos uses combined-cycle design with natural gas-fired turbines in c= ombination with a steam turbine to achieve maximum fuel efficiency. Advance= d emissions control technology enables Calpine to reduce certain emissions = by more than 90 percent. Based in San Jose, Calif., Calpine Corporation is= dedicated to providing customers with reliable and competitively priced el= ectricity. Calpine is focused on clean, efficient, natural gas-fired genera= tion and is the world's largest producer of renewable geothermal energy. Ca= lpine has launched the largest power development program in North America. = To date, the company has approximately 34,000 megawatts of base load capaci= ty and 7,200 megawatts of peaking capacity in operation, under construction= , pending acquisitions and in announced development in 29 states, the Unite= d Kingdom and Canada. The company was founded in 1984 and is publicly trade= d on the New York Stock Exchange under the symbol CPN. For more information= about Calpine, visit its Website at www.calpine.com. This news release di= scusses certain matters that may be considered "forward-looking" statements= within the meaning of Section 27A of the Securities Act of 1933, as amende= d, and Section 21E of the Securities Exchange Act of 1934, as amended, incl= uding statements regarding the intent, belief or current expectations of Ca= lpine Corporation ("the Company") and its management. Prospective investors= are cautioned that any such forward-looking statements are not guarantees = of future performance and involve a number of risks and uncertainties that = could materially affect actual results such as, but not limited to, (i) cha= nges in government regulations, including pending changes in California, an= d anticipated deregulation of the electric energy industry, (ii) commercial= operations of new plants that may be delayed or prevented because of vario= us development and construction risks, such as a failure to obtain financin= g and the necessary permits to operate or the failure of third-party contra= ctors to perform their contractual obligations, (iii) cost estimates are pr= eliminary and actual cost may be higher than estimated, (iv) the assurance = that the Company will develop additional plants, (v) a competitor's develop= ment of a lower-cost generating gas-fired power plant, and (vi) the risks a= ssociated with marketing and selling power from power plants in the newly c= ompetitive energy market. Prospective investors are also cautioned that the= California energy environment remains uncertain. The Company's management = is working closely with a number of parties to resolve the current uncertai= nty, while protecting the Company's interests. Management believes that a f= inal resolution will not have a material adverse impact on the Company. Pro= spective investors are also referred to the other risks identified from tim= e to time in the Company's reports and registration statements filed with t= he Securities and Exchange Commission. MAKE YOUR OPINION COUNT - Click Her= e http://tbutton.prnewswire.com/prn/11690X52413521 SOURCE Calpine Corpora= tion CONTACT: media, Katherine Potter, 408-995-5115, ext. 1168, or investo= rs, Rick Barraza, 408-995-5115, ext. 1125, both of Calpine Corporation Web= site: http://www.calpine.com (CPN) National Desk; Section A C= alifornia and Generators Still Split After 2-Week Talks By JOSEPH KAHN 0= 7/10/2001 The New York Times Page 14, Column 1 c. 2001 New York Times Co= mpany WASHINGTON, July 9 -- A federal mediator ended two weeks of negotiat= ions about California 's demands for electricity refunds today, with the st= ate and power suppliers seemingly no closer to a settlement than when the t= alks began. The failure of the negotiations shifts the burden of resolving= the yearlong dispute to the Federal Energy Regulatory Commission, to which= the mediator may recommend a pricing formula that would mean refunds of ab= out $1 billion. California , which wants $8.9 billion, vowed today that it = would seek that much and more, through the courts if necessary. Although e= lectricity prices in the West have eased in recent weeks, the power crisis = that has afflicted California and other Western states seems unlikely to be= resolved unless rival parties can agree on how much electricity should hav= e cost during the last 13 months. The power market has been mired in an ac= counting gridlock. The state claims that generating companies began grossly= overcharging for electricity -- with prices soaring by a factor of 10 or 2= 0 over year-before levels -- beginning in late spring last year. Generators= say they are prepared to pay some refunds, but argue that California 's es= timates of overcharges are radically inflated. The mediator in the settlem= ent talks was Curtis L. Wagner Jr., an administrative law judge for the fed= eral agency, who said today that the negotiations had failed to reach the c= omprehensive voluntary settlement he had sought. Mr. Wagner said he would = recommend to the agency's commissioners that they convene a 60-day evidenti= ary hearing that would impose an administrative solution. He also said he w= ould suggest a method for determining fair prices for electricity . Under = federal law, the energy commission has the obligation to ensure ''just and = reasonable'' electricity rates. Though the commission declared last year th= at California 's electricity market had broken down, it only recently began= imposing price controls on the market and has yet to address accusations o= f past overcharges systematically. While the scope of any refunds remains = uncertain, Mr. Wagner's remarks appeared more favorable for generators than= for Western states, which have collectively pressed for as much as $15 bil= lion in refunds. Mr. Wagner said that to determine how much California sho= uld have paid for power since last September, when the commission began mon= itoring California energy prices, he would suggest that the agency retroact= ively apply a price control formula it adopted in June. He also indicated t= hat he supported a way of calculating the costs of power generation that is= closer to the method favored by power companies than to the one put forwar= d by California officials. The judge suggested that the formula he is recom= mending could require generators to pay back hundreds of millions or ''mayb= e a billion'' dollars. California officials gave a positive cast to the ju= dge's statements, calling them a step forward because he formally acknowled= ged that companies would have to pay some refunds. They also noted that wha= tever the level of federally mandated refunds, they would have the option o= f seeking more in court. ''We are still going to get the $8.9 billion,'' s= aid Michael Kahn, who represented Gov. Gray Davis of California in the talk= s. ''If we don't get it all from the commission, we will get the remainder = in the courts.'' Governor Davis himself said today that if the agency did = not provide refunds in the amount the state claims it is owed, it would sue= generators for $18 billion to $20 billion. ''We are in a war with generato= rs, mostly out of state, that are trying to bleed us dry,'' Mr. Davis said,= speaking at the ceremonial opening of a power plant in Northern California= . Representatives of several generating companies said that during the se= ttlement talks, they collectively offered to refund California about $500 m= illion. They estimated that the calculation method suggested by the judge w= ould result in refunds of no more than $1.5 billion -- far closer to their = offer than to California 's demand. Still, several executives said they no= w hoped to reach individual settlements with the state that would end the t= hreat of prolonged litigation and allow them to collect several billion dol= lars they say they are owed by the state and its leading, financially press= ed utilities, which ran up huge debts to suppliers in the last year. ''We = remain very interested in reaching a global settlement with the state that = will put this problem behind us once and for all,'' said Brent Bailey, vice= president and general counsel of Duke Energy. Financial Energy Refu= nd Talks Fail In Calif.; Federal Agency's Judge To Propose Settlement Peter= Behr 07/10/2001 The Washington Post FINAL Page E01 Copyright 2001, = The Washington Post Co. All Rights Reserved California consumers were over= charged by as much as $1 billion by electricity suppliers since October, a = federal administrative judge said yesterday after state officials and power= suppliers failed to reach an agreement on the disputed charges. Gov. Gray= Davis (D) and California power officials wanted $8.9 billion in refunds da= ting back to May 2000, when the state's energy crisis began. A group of ge= nerating companies headed by units of Duke Energy Corp., Reliant Energy Inc= . and Williams Cos. offered refunds of $716.1 million in the past week, goi= ng back to October. The companies said refunds should be offset by the larg= er amounts they are owed for unpaid power deliveries to the state. "The nu= mbers were too far apart," Curtis L. Wagner Jr., chief judge of the Federal= Energy Regulatory Commission, told reporters after two weeks of closed neg= otiations ended yesterday. Wagner acknowledged that his refund number was i= mprecise and said further hearings before FERC are needed to pin down the f= igure. Calpine Corp. of San Jose and possibly one other supplier are expec= ted to reach individual settlements with the state, the judge said. "A lot= of the parties genuinely wanted to settle and others didn't," Wagner told = reporters. "There's an old southern saying," said the 72-year-old Tennessea= n. "You can take a horse to water, but you can't make it drink." He declin= ed to say which side balked, but previously he had blasted California offic= ials for not modifying their initial demands. Wagner said he will send his= own refund formula to FERC's five commissioners within a week. His formula= essentially will reflect what he thinks reasonable electricity prices woul= d have been in the state at various times since October, considering fuel c= osts and other factors. Charges over those levels would be subject to refun= d, if FERC agrees. The judge's recommendation is likely to carry considera= ble weight with FERC's commissioners, according to energy analysts. Earlier= this year, FERC tentatively ordered $125 million in refunds for the first = three months of this year, an amount that Davis called far too low. Facing= increasing political pressure from Congress, FERC -- with two new members = appointed by President Bush -- has taken a harder line on California 's pow= er prices. Last month, the commissioners imposed price restraints on wholes= ale power transactions in California and 10 other western states. Wagner pa= tterned his formula after FERC's ruling last month. The nation's wealthies= t state has been battered by an extraordinary surge in electricity and gas = prices that have pushed its electricity costs up from $7 billion in 1999 to= an estimated $27 billion last year. Power prices did not retreat from reco= rd levels until last month. Davis's top aides quickly claimed vindication = yesterday. "We think the numbers, even using the judge's formula, are goin= g to be in the multiple billions," said Michael Kahn, chairman of the Calif= ornia Independent System Operator, the state's power grid manager. Kahn no= ted that the state refused to drop a growing list of legal claims against t= he principal energy suppliers, most of them headquartered outside the state= . The companies had insisted on being released from the state's legal claim= s as part of any settlement, according to sources close to the negotiations= . "We will have a viable claim in state court and other jurisdictions for = the remainder," Kahn said. " California will get its $8.9 billion." But th= e state's own expert witness, economist Eric Hildebrandt, chief market moni= tor for the California grid, testified before Wagner that the out-of-state = generators and other nonpublic power suppliers would owe about $3.7 billion= using FERC's pricing formula of last month -- less than half the $8.9 bill= ion goal. Duke Energy is "very pleased'' by Wagner's action, said Brent Ba= iley, vice president and general counsel of the Charlotte-based company. Th= e generators, however, repeated their claims that Davis is trying to make t= hem scapegoats for the state's failed electricity deregulation plan. The m= ajor generators, in a statement yesterday, said they had delivered only 20 = million megawatt hours out of the 145 million the state power grid used fro= m October 2000 to last May. (A megawatt supplies enough power for about 750= homes.) California utilities and municipal power companies also reaped la= rge profits, the generators said. "The refunds sought by California would = send a profoundly counterproductive message to suppliers: when prices are l= ow and surpluses exist, you face a steep downside; when scarcity develops a= nd prices rise we will take away all upside [profit]. No one will invest [i= n California power facilities] in that climate," the generators' statement = said. "The power supply shortage thus will continue without relief." http= ://www.washingtonpost.com Contact: http://www.washingtonpost.com = Economy California and Energy Companies Miss Deadline By Richard B. Sch= mitt 07/10/2001 The Wall Street Journal Page A2 (Copyright (c) 2001, = Dow Jones & Company, Inc.) WASHINGTON -- State officials and power-company= executives failed to meet a federal deadline for settling $8.9 billion of = disputed California electricity charges, as a federal mediator overseeing t= he talks suggested the state's demand was excessive. Cautioning that he ha= dn't done formal calculations, Curtis L. Wagner Jr., the chief administrati= ve law judge of the Federal Energy Regulatory Commission, put the level of = potential refunds at "hundreds of millions of dollars, maybe a billion doll= ars." He also said any sums due the state could well be offset by monies it= s insolvent utilities owe in unpaid power bills. Mr. Wagner said he would = recommend to the commission that any refunds be calculated only from Octobe= r -- the state had been seeking rebates calculated from May 2000 -- in line= with an earlier FERC jurisdictional ruling. That decision alone would shav= e $3 billion from the $8.9 billion claim. Mr. Wagner, who is expected to i= ssue formal findings in the next few days, said he would recommend that the= FERC hold an evidentiary hearing to assess the correct method for figuring= refunds. The collapse of the talks doesn't preclude individual deals late= r between energy companies and the state, which has accused them of overcha= rging for power during the past two years. Yesterday, some industry lawyers= indicated a willingness to keep bargaining, and Mr. Wagner said two "parti= al" settlements were in the works. Yet, absent any such solution, the over= charge issue -- a flash point in the California power crisis -- is apt to b= e resolved in protracted legal and regulatory proceedings, which could drag= on for months or even years. The negotiations began June 25, with a deadl= ine set for midnight last night. But late yesterday, participants indicated= they were billions of dollars apart, with basic differences over everythin= g from the disputed charges to doubts about whether the FERC, which ordered= the talks, could enforce a deal because of the industry's questions about = the reach of the agency's authority. "We haven't reached a settlement. We = really haven't come close," said John Stout a senior vice president of Reli= ant Energy Inc.'s wholesale-power group. Reliant had offered to pay Califor= nia about $50 million to extricate itself from the fight. That is more than= a third of the Houston company's operating profit during the relevant peri= od, he said, although far shy of the more than $375 million California soug= ht from Reliant. Mr. Wagner said the industry offered a total of $716 mill= ion to settle the matter. The refund issue is fast becoming a test of the = agency's authority and credibility. The FERC, a onetime regulatory backwate= r, has come under intense scrutiny of late for its largely hands-off monito= ring of deregulated California markets. The commission has ordered some com= panies to pay refunds, but they have been relatively small -- such as a $12= 4 million rebate covering wholesale electricity bills in California in Janu= ary and February. California Gov. Gray Davis has said he hopes two new FER= C members will take a much more aggressive tack. The agency is expected to = act quickly on the judge's call for a hearing and other findings. Yesterda= y, Michael Kahn, a San Francisco lawyer representing Gov. Davis at the sett= lement, declared he was "gratified" by Mr. Wagner's findings, saying they v= alidated the state's claims to some refunds, a concept the industry had rej= ected at the talks' outset. "We've had a ringing endorsement of the idea of= refunds and we'll get back lots of money," he said, adding that what the s= tate doesn't recoup via the FERC it will pursue in court. But power genera= tors, who derided the state's request for a huge refund as "ludicrous" and = "unsound," felt vindicated by yesterday's proceedings. "The state came away= with far less than its expectations," said Robert Loeffler, an attorney fo= r a unit of AES Corp. of Arlington, Va. "The common expectation now is that= any refunds will be way below this $9 billion."=09