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Date: Thu, 5 Apr 2001 03:28:00 -0700 (PDT)
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Please see the following articles:

Sac Bee, Thurs, 4/5:  "Conservation bills hit snag: Provisions added to=20
shield farmers from
 blackouts irritate Senate leaders and delay passage of an overall package.=
"

Sac Bee, Thurs, 4/5:  "Democrats urge U.S. price controls"

San Diego Union, Thurs, 4/5: "California governor prepares to address state=
=20
on energy"=20

San Diego Union, Thurs, 4/5:  "State gets $4.1 billion infusion"

San Diego Union, Thurs, 4/5:  "All California hospitals exempted from=20
blackouts"

San Diego Union, Thurs, 4/5:  "Quick fix proposed for power problems"

LA Times, Thurs, 4/5:  "Treasurer Urges Disclosure of Power Cost"

LA Times, Thurs, 4/5:  "House GOP Moves to Draft Plan to Give the West Summ=
er=20
Energy Aid"

LA Times, Thurs, 4/5:  "California's Electricity Woes Power Up Northwest"

SF Chron, Thurs, 4/5: "Davis Campaign Losing Steam=20
Energy crisis generates possible challengers for governor in 2002 "

SF Chron, Thurs, 4/5:  "Crisis Takes Toll On State Economy=20
DAVIS'S SPEECH: Possible tax on generators "

SF Chron, Thurs, 4/5:  "San Jose Looks Past the Energy Crisis=20
Big server farm OKd in hope the electricity will be there"

SF Chron, Thurs, 4/5:  "More Unpaid Power Plants Face Closing=20
Owners slam PUC silence about bills "

SF Chron, Thurs, 4/5:  "California governor plans to address state on energ=
y=20
"

SF Chron, Thurs, 4/5: "Critics question effectiveness of energy rebates "

SF Chron, Thurs, 4/5:  "Developments in California's energy crisis "

Mercury News, Thurs, 4/5:  "Sharp dispute on economic impact in California"

Mercury News, Thurs, 4/5:  "Gov. Davis prepares to address state on energy"

Orange County, Thurs, 4/5:  "Too much hot air about too little power"      =
  =20
           (Commentary)

Orange County, Thurs, 4/5:  "More pain predicted in electric crisis"

Orange County, Thurs, 4/5:  " 'Windfall tax' on power profits? "

Orange County, Thurs, 4/5:  "PUC chief takes issue with utilities' claims o=
n=20
power crisis"

Orange County, Thurs, 4/5:  "State borrows $4.1 billion for power"

Orange County, Thurs, 4/5:  "Electricity Notebook:  Davis to discuss power=
=20
crisis in=20
televised address"

Individual.com, Thurs, 4/5:  "California Regulators Face Backlash"=20

Individual.com, Thurs, 4/5:  "ICF Consulting Study Predicts Turning Point i=
n=20
Wholesale Power Markets"
=20
Energy Insight, Thurs, 4/5:  "Global Energy Use to Increase by 59%"
---------------------------------------------------------------------------=
---
----------------------------------------------------

Conservation bills hit snag: Provisions added to shield farmers from=20
blackouts irritate Senate leaders and delay passage of an overall package.
By Kevin Yamamura and John Hill
Bee Capitol Bureau
(Published April 5, 2001)=20
Conservation bills designed to keep energy flowing this summer were stalled=
=20
in the Legislature on Wednesday by a dispute over whether some farmers shou=
ld=20
receive special protection from potential summer power blackouts.=20
The proposals make up a complementary, two-house conservation package that=
=20
aims to save California about 4,000 megawatts of energy. The two bills -- S=
B=20
5x by state Sen. Byron Sher, D-Palo Alto, and AB 29x by Assemblywoman=20
Christine Kehoe, D-San Diego -- together would cost the state $1.2 billion,=
=20
though Gov. Gray Davis may reduce that with line-item vetoes should the=20
legislation reach his desk.=20
The dozens of conservation measures include:=20
$20 million in rebates or other incentives to encourage Californians to=20
replace inefficient appliances, with priority given to low- and middle-inco=
me=20
residents.=20
An outreach program to teach schoolchildren about saving energy.=20
$14.5 million for efficient traffic signal lights.=20
Lawmakers want to give the bills to Davis before next week's scheduled spri=
ng=20
recess begins late Thursday, but the legislation remains mired in a=20
cross-house entanglement over a series of changes that the Assembly pencile=
d=20
into SB 5x on Tuesday.=20
The Assembly approved the bill Wednesday on a 74-1 vote, but the Senate=20
adjourned without resolving the dispute.=20
Assembly leaders said that unless several proposals favorable to farmers we=
re=20
included in the bill, a group of Central Valley lawmakers would have oppose=
d=20
it.=20
One proposal limits the amount of time interruptible agricultural customers=
=20
can lose energy to four hours a day or 20 hours per month. Michael Boccador=
o=20
of the Agriculture Energy Consumers Association said farmers and food=20
processors are concerned that their perishables would not be able to surviv=
e=20
beyond that amount of time.=20
The provision would affect "interruptible," customers, those who volunteer =
to=20
lose power in emergencies in exchange for lower rates.=20
Assemblyman Dennis Cardoza, D-Merced, a main proponent of the proposals, sa=
id=20
the state's farmers are going to be the most hurt by rolling blackouts and=
=20
high rates this summer and "are getting ready to leave the state if we don'=
t=20
take care of the problem."=20
But the late change riled Senate leaders. Senate President Pro Tem John=20
Burton, D-San Francisco, said it would shift costs from farmers to urban=20
residents and develop special programs for agricultural customers.=20
"I think the ag people were very greedy, and what they gained in this=20
amendment, they may lose in other stuff," Burton said.=20
Assemblyman Fred Keeley, D-Santa Cruz, said he does not support some of the=
=20
amendments but said that they should not prevent the conservation package=
=20
from moving forward.=20
"We're trying to solve a problem," he said. "In my view, we cannot let the=
=20
perfect be the enemy of the good."=20
Davis met privately with Assembly Republicans on Wednesday for two hours an=
d=20
emerged saying he would talk about rate increases during tonight's=20
five-minute televised speech.=20
Republicans said they discussed proposals that would boost energy supply in=
=20
the state and one to allow businesses to contract on their own for energy,=
=20
which won the Democratic governor's support.=20
State Treasurer Phil Angelides, meanwhile, said he has lined up commitments=
=20
for $4.1 billion in loans to keep the state going for the next few months=
=20
until the sale of bonds to buy electricity. He hopes to get a total of $5=
=20
billion to $6 billion in bridge loans. The money will be used to repay the=
=20
state's general fund for what it has spent on power so far.=20
The loans, in turn, would be paid back with money from the bond sales. But=
=20
Angelides warned that, before the bonds can be sold, he needs more=20
information from Davis about what's being spent on power.=20
"We will be selling the bonds in the public marketplace and so information=
=20
must be made publicly available," he said.=20
The treasurer, who like Davis is a Democrat, said he wants to see the=20
information and the administration's long-term plan before he supports=20
selling bonds in excess of $10 billion, the initial estimate of the bond=20
sale.=20
If the bond sale is delayed, he said, the state could end up paying a highe=
r=20
interest rate on the bridge loan, which comes due Aug. 29.=20
Tim Gage, Davis' finance director, said in a news release Wednesday that it=
=20
was Angelides' bond underwriter, J.P. Morgan, who told him that more than $=
10=20
billion might be needed. Gage said Angelides is well aware that the=20
Department of Water Resources, which is buying power on behalf of the state=
,=20
has gone to great lengths to estimate how much money it needs.=20
Davis has come under fire from legislators, the media and others for not=20
disclosing more details about power purchases. The administration says that=
=20
revealing more would compromise the state's bargaining position.=20
Angelides also said that if Pacific Gas and Electric or Southern California=
=20
Edison challenges a Tuesday decision by the Public Utilities Commission=20
setting the state's share of electricity revenues, the bridge loan could be=
=20
held up.=20
PG&E spokesman Ron Low said the utility is reviewing the PUC decision to se=
e=20
if all its costs of buying power will be covered.=20
The company has 10 days from Tuesday to ask for a rehearing. If PG&E decide=
s=20
not to seek a new hearing, Angelides said, he would expect to complete the=
=20
bridge loan within another week.=20
Angelides said that officials should start turning their attention from=20
paying for power to driving down the costs of electricity by enacting an=20
excess profits tax on generators or buying power plants.=20
A state Senate committee Thursday approved a vaguely defined bill to impose=
 a=20
windfall profits tax on power generators. Under the bill, the revenues rais=
ed=20
by the tax would be returned to ratepayers.=20
"It really doesn't get at the fundamental problem, which is supply," said=
=20
Martin Wilson, a lobbyist for Houston-based Reliant Energy Inc., which owns=
=20
generating plants in California.=20
Wilson said the tax could actually worsen the supply problem by creating "a=
=20
major disincentive" to building power plants in California.=20

The Bee's Kevin Yamamura can be reached at (916) 326-5542 or=20
kyamamura@sacbee.com.=20
Bee Staff Writer Dale Kasler contributed to this report.=20
---------------------------------------------------------------------------=
---
----------------------------------------------------------
Democrats urge U.S. price controls
By David Whitney
Bee Washington Bureau=20
(Published April 5, 2001)=20
WASHINGTON -- Nearly three dozen Democratic House members from California,=
=20
Oregon and Washington joined in support of legislation to impose mandatory=
=20
controls on wholesale electricity prices Thursday amid indications that the=
=20
issue is fast becoming a political powder keg.=20
The legislation was endorsed by House Minority Leader Dick Gephardt, D-Mo.,=
=20
who stood shoulder-to-shoulder with a large contingent of West Coast=20
Democrats at an outdoor news conference. The House members denounced the Bu=
sh=20
administration and the Federal Energy Regulatory Commission for doing nothi=
ng=20
as prices zoom ever higher in a market of perpetual shortage.=20
"They are going to keep FERCing us day in and day out," said Rep. Peter=20
Defazio, D-Ore., in a word play on the acronym for the regulatory commissio=
n.=20
"If the Bush administration is frozen in inaction, congressional members wi=
ll=20
step forward and exert action," Gephardt said.=20
With the West Coast summer of power shortages fast approaching, Rep. Joe=20
Barton, the Texas Republican who heads the House Energy and Commerce energy=
=20
subcommittee, had intended to roll out an energy bill by this week.=20
But the House recesses Friday for a two-week spring break, pushing off any=
=20
House bill until late April. And Barton's spokeswoman, Samantha Jordan, sai=
d=20
it's not certain now that Barton will even introduce legislation as a resul=
t=20
of six days of hearings on the California crisis.=20
"He hasn't decided to do a bill," Jordan said. "He's still looking at=20
options."=20
Some utility and Democratic sources said the White House has quietly urged=
=20
Barton to slow down work on an energy bill because it is worried that=20
Democrats will offer the price-control legislation as an amendment.=20
With fears spreading in the Northeast that New York and possibly other stat=
es=20
could face similarly skyrocketing electricity costs as air conditioners beg=
in=20
turning on in a few weeks, the White House is said to be concerned that suc=
h=20
an amendment could squeak through Congress and force the president's hand o=
n=20
a veto.=20
Last week Barton began circulating a list of ideas for inclusion in an=20
emergency bill. Among the ideas is requiring the FERC to determine if price=
s=20
are being unreasonably jacked up by producers -- something the commission=
=20
already has decided.=20
The ideas also included starting up backup generators on federal buildings,=
=20
authorizing portable generators to be set up and run on military property,=
=20
authorizing the Defense Department to "explore connecting Navy nuclear-ship=
=20
generators to the electric grid" and firing up mothballed non-nuclear plant=
s.=20
One congressional source said the administration has begun dispatching=20
regulatory officials to federal property in California looking at any and=
=20
every suitable location for "dropping in" portable generation plants.=20

The Bee's David Whitney can be reached at (202) 383-0004 or=20
dwhitney@mcclatchydc.com.=20
---------------------------------------------------------------------------=
---
------------------------------------------------------------

California governor prepares to address state on energy=20



By Jennifer Coleman
ASSOCIATED PRESS=20
April 5, 2001=20
SACRAMENTO =01) While California Gov. Gray Davis prepared to address the st=
ate=20
Thursday night on energy, economic forecasters predicted his constitutents=
=20
will pay higher taxes, watch out-of-state investments evaporate and suffer=
=20
scrapped public projects because of the ongoing power crisis.=20
The UCLA Anderson Forecast says the worst economic threat could come from=
=20
state government itself and its scrutiny of private power suppliers, which=
=20
along with blackouts and brownouts, could scare new businesses away.=20
Davis addressed some commercial concerns Wednesday by breaking with his=20
appointees on the Public Utilities Commission by saying private companies a=
nd=20
other large power users should be allowed to contract directly for power wi=
th=20
generators.=20








State gets $4.1 billion infusion=20
All California hospitals exempted from blackouts=20
Quick fix proposed for power problems=20
Continuing coverage: California's Power Crisis=20
?=20



Critics of allowing direct access include PUC President Loretta Lynch and T=
he=20
Utility Reform Network, who say residential customers and small businesses=
=20
unable to garner such contracts will get stuck with the bill for the billio=
ns=20
of dollars the state has and will spend buying electricity for the customer=
s=20
of three cash-strapped utilities.=20
Word came from California's treasurer Wednesday that the state had secured=
=20
$4.1 billion in loans to help pay back the state's power buys.=20
Facing continued refusal from federal energy regulators to cap high energy=
=20
prices, Davis reassessed the tools at his disposal Wednesday, saying he is=
=20
open to supporting a windfall-profits tax being proposed by lawmakers on=20
electric generators that have made a fortune selling power to California th=
is=20
year.=20
Assemblywoman Ellen Corbett, D-San Leandro, introduced a windfall-profits t=
ax=20
bill Wednesday that would tax gross receipts that "significantly exceed" th=
e=20
cost of producing power.=20
It would also tax profits of power marketers who have bought power and late=
r=20
sold it at much higher rates. The rate of the tax was not specified in the=
=20
bill, and Corbett said she expects the details to be worked out later.=20
"We continue to allow some electricity generators and middlemen to reap=20
enormous profits on their sales of electricity into the state. This=20
profiteering must stop," said Corbett.=20
Senators on the Revenue and Tax Committee have also inserted similar langua=
ge=20
into a pending bill.=20
Tom Williams, spokesman for Duke Energy, said he doubted a tax on a selecte=
d=20
industry would be legal. The tax would discourage generators from building=
=20
new power plants in California, he said.=20
"The governor has made very clear that he is trying to do whatever he can t=
o=20
increase the amount of generation in California and reduce the price.=20
Windfall profits taxes do neither of these," said Williams.=20
"Clearly it would have an adverse affect on our decisions on new investment=
=20
or following through on our planned investments," he said.=20
Davis said Wednesday he generally opposes treating profitable companies in=
=20
that manner, "but these profits are outrageous and are at our expense. The=
=20
only things companies understand is leverage. I'm not saying I'll sign it a=
nd=20
I'm not saying I won't sign it."=20
For the first time, Davis also said the state should let companies buy thei=
r=20
power from generators instead of going through the utilities.=20
A January law that allowed the state to begin buying power for two nearly=
=20
bankrupt utilities barred such side contracts.=20
"That was done originally with the thought the state would have more power=
=20
and no one to sell it to if companies got off the grid," Davis said. "But o=
ur=20
problem is the opposite this summer. If companies want to get off the grid,=
=20
we should encourage, not discourage that."=20
The Democratic governor's comments came after he met behind closed doors fo=
r=20
more than two hours with Assembly Republicans, who have sharply criticized=
=20
his handling of the energy crisis.=20
"I think everyone agreed there are no political winners unless we resolve=
=20
this challenge," Davis said. "There were a lot of suggestions in there I'm=
=20
willing to adopt."=20
For instance, he agreed that San Diego Gas and Electric customers should ha=
ve=20
a different benchmark for receiving 20 percent rebates under his program fo=
r=20
consumers who cut their energy use by 20 percent this summer.=20
Unlike other Californians, San Diego residents faced soaring rates last=20
summer and began conserving then, so Davis said they should have to cut 20=
=20
percent from 1999 energy use levels instead of using last summer as a=20
starting point.=20
Davis said he hasn't written the remarks he will make during a five-minute=
=20
address at 6:05 p.m. Thursday that he has asked California television=20
stations to carry live.=20
However, he said he will "share with them (viewers) the progress that we've=
=20
made and what we have to get through."=20
He is expected to talk about the more than 40 percent rate increases approv=
ed=20
last week by the PUC for customers of Pacific Gas and Electric Co. and=20
Southern California Edison Co.=20

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


State gets $4.1 billion infusion=20



Treasurer to Davis: Don't pay generators' 'ransom'
By Ed Mendel=20
UNION-TRIBUNE STAFF WRITER=20
April 5, 2001=20
SACRAMENTO -- State Treasurer Phil Angelides announced an agreement for a=
=20
$4.1 billion short-term loan yesterday that would provide urgently needed=
=20
cash to begin repaying the state general fund for power purchases.=20
Angelides said the loan is needed to protect the state's credit rating and=
=20
preserve "important funding for programs such as education, public safety a=
nd=20
children's services."=20
The treasurer also sent a letter to Gov. Gray Davis warning that plans to=
=20
increase the size of a $10 billion bond, which would repay the short-term=
=20
loan and finance future power purchases, may only delay the "reality of=20
runaway energy prices."=20
Angelides urged Davis and the Legislature to send power generators a messag=
e=20
by considering a windfall profits tax or seizure of power plants that=20
utilities sold under a failed deregulation plan.=20
"These are very tough guys," Angelides said, "and you don't negotiate with=
=20
them by trying to figure out night and day how to pay their ransom. You've=
=20
got to push back on them. It's the only thing they understand."=20
The state Senate began moving a bill yesterday that would impose a windfall=
=20
profits tax on generators. The governor declined to say whether he would si=
gn=20
the bill, but Davis did say its movement was "not an entirely unpleasant=20
event."=20
"These profits are just outrageous," said Davis, echoing the treasurer's vi=
ew=20
of the generators. "They are coming at our expense directly, and the only=
=20
things companies understand is leverage."=20
The governor, who had previously briefed Democrats in both houses on his=20
handling of the electricity crisis, emerged from a two-hour meeting with=20
Assembly Republicans yesterday and announced two agreements.=20
Davis said he would make an adjustment sought by San Diego County residents=
=20
in his "20/20" conservation plan, which reduces electricity bills 20 percen=
t=20
if customers reduce their energy use 20 percent below the same summer month=
=20
in the previous year.=20
San Diego Gas and Electric ratepayers reduced their power use last summer=
=20
when the utility became the first to be deregulated and bills doubled and=
=20
tripled before rates were capped by legislation.=20
The governor also said that businesses and other large users of electricity=
=20
should be allowed to contract directly with generators for power. He said n=
ew=20
contracts were barred because the state thought it would need customers to=
=20
pay for state power purchases.=20
"Our problem is just the opposite," Davis said. "We should encourage that a=
nd=20
not discourage it."=20
Assembly Republicans said Davis told them that he will discuss the need for=
=20
an increase in electricity rates in a statewide television address schedule=
d=20
for 6:05 p.m. today.=20
The state Public Utilities Commission, controlled by Davis appointees,=20
abruptly imposed the biggest rate increase in state history on Pacific Gas=
=20
and Electric and Southern California Edison customers last week. An SDG&E=
=20
rate increase is pending.=20
Davis said the PUC rate increase was "premature" and promised to give his=
=20
view after studying data. The PUC increase was more than 40 percent for=20
electricity and about 26 percent in the total bill, which includes=20
transmission and distribution costs.=20
The state began buying power for utility customers in mid-January after PG&=
E=20
and Edison were pushed to the brink of bankruptcy. Their rates were frozen=
=20
under deregulation as wholesale power costs soared, producing a debt of abo=
ut=20
$13 billion.=20
State officials are considering purchasing the utilities' transmission=20
systems as a way to provide the utilities with money to pay that debt.=20
Sempra Energy Chief Executive Stephen Baum said yesterday in New York that=
=20
the company, which owns SDG&E, wants $1.4 billion for its part of the grid,=
=20
but state officials have offered $1.2 billion. The state has not disclosed=
=20
any details about the SDG&E negotiations.=20
Edison reached a tentative agreement with the state last month to sell its=
=20
larger part of the grid for $2.76 billion.=20
So far, the state has spent about $4 billion to buy electricity. Angelides=
=20
said he has a commitment for a $4.125 billion short-term or "bridge" loan=
=20
from three lenders: J.P. Morgan, $2.5 billion; Lehman Brothers, $1 billion;=
=20
and Bear Stearns, $625 million.=20
The treasurer said he hopes to get other lenders and reach a total of $5=20
billion to $6 billion. But, Angelides said, the loan could be blocked if=20
utilities challenge a decision by the PUC on Tuesday that gives the state=
=20
$3.5 billion a year from the monthly bills collected by utilities from=20
ratepayers.=20
PG&E and Edison have said they believe the PUC action does not leave them=
=20
enough money and will drive them deeper into debt. The utilities said=20
yesterday that they have not decided whether to challenge the PUC ruling.=
=20
Angelides said the utilities have 10 days from Tuesday to challenge the PUC=
=20
decision. He said that if the PUC did not quickly resolve a challenge,=20
legislation would be needed to allow the short-term loan. If the utilities =
do=20
not challenge the PUC action, he would expect to close the short-term loan =
by=20
about April 23.=20
Angelides said the short-term loan, obtained at 5.38 percent interest, must=
=20
be repaid by Aug. 29 or it will automatically convert into a long-term loan=
=20
with an interest rate that is two percentage points higher and due Aug. 29,=
=20
2004.=20
The plan is to repay the short-term loan with the biggest municipal bond in=
=20
the history of the nation, which would be paid off by ratepayers over a doz=
en=20
years. But Angelides and the Davis administration disagree about how large=
=20
the bond should be.=20
Angelides wanted to limit the bond to $10 billion. He warned last month tha=
t=20
the money, which will also pay for upcoming electricity purchases, could be=
=20
exhausted by September if the state continues to buy power at high rates.=
=20
PUC President Loretta Lynch said the $3.5 billion in ratepayer revenue=20
allocated to the state would allow a bond issue of $12 billion to $14=20
billion. The Davis administration says a bond in that range is needed to=20
spread the cost of power purchases over a decade and avoid a huge rate=20
increase.=20
Angelides said a bond cannot be issued unless the Davis administration=20
publicly discloses detailed information about power purchases -- prices pai=
d=20
in the past and estimates for the future. Newspapers and Republican=20
legislators have filed lawsuits to force the release of the information.=20
The Legislature yesterday sent Davis a bill by state Sen. Dede Alpert,=20
D-Coronado, that would cap rates for businesses served by SDG&E at 6.5 cent=
s=20
per kilowatt-hour.=20
Currently, businesses whose peak demand exceeds 100 kilowatt-hours a month=
=20
pay market rates for electricity, which in some cases have soared to 37 cen=
ts=20
per kilowatt-hour. An Alpert aide said Davis is expected to sign the bill.
Staff writer Bill Ainsworth and Bloomberg News Service contributed to this=
=20
report.=20
---------------------------------------------------------------------------=
---
------------------------------------


All California hospitals exempted from blackouts=20



By John Berhman=20
UNION-TRIBUNE STAFF WRITER=20
April 5, 2001=20
All hospitals in California, regardless of their size, are now ensured that=
=20
their power will remain on during rolling blackouts, thanks to a ruling by=
=20
the state Public Utilities Commission.=20
Previously, hospitals with fewer than 100 beds were not exempt from rolling=
=20
blackouts imposed by power companies, Jan Emerson, a vice president for the=
=20
California Healthcare Association, said yesterday.=20
"The PUC had that 100-beds-or-more rule on the books since 1980, but they=
=20
came to realize that there is no magic number when you are putting people's=
=20
lives in jeopardy," Emerson said.=20
The PUC decision, made on Tuesday, "takes the decision out of the hands of=
=20
the power companies" and ensures electricity for all hospitals, she said. S=
an=20
Diego Gas & Electric Co. has been cooperative about maintaining power to=20
hospitals during rolling blackouts here, Emerson said, but the state's othe=
r=20
two companies, Southern California Edison and Pacific Gas & Electric, have=
=20
not been.=20
She said that during blackouts of March 19 and 20, about a dozen hospitals=
=20
lost power, ranging in size from the 750-bed Long Beach Medical Center to t=
he=20
40-bed Adventist Health Redbud Community Hospital in Clear Lake, north of S=
an=20
Francisco.=20
A lawsuit filed March 22 on behalf of the hospitals, and backed by the heal=
th=20
care association, forced the commission to change its policy, Emerson said.=
=20
The decision was well-received in San Diego County.=20
"We had been assured by SDG&E that we would be given a high priority to kee=
p=20
our power on during a rolling blackout," said Corey Seale, chief executive=
=20
officer for the 47-bed Fallbrook Hospital. "But we're very pleased by the P=
UC=20
action because this guarantees us service absolutely even during rolling=20
blackouts."=20
Utility companies have argued that hospitals have backup generators that ca=
n=20
kick in during rolling blackouts, Emerson said, "but that can take 10 to 15=
=20
seconds to occur, and for someone undergoing open-heart surgery, that delay=
=20
could be fatal."=20
---------------------------------------------------------------------------=
---
--------------------------------------


Quick fix proposed for power problems=20



Clean-air waivers part of GOP package
By Toby Eckert=20
COPLEY NEWS SERVICE=20
April 5, 2001=20
WASHINGTON -- A key House Republican said yesterday he is drafting emergenc=
y=20
legislation to help California and other states facing power crises this=20
summer, and hopes to put it on a fast track for passage.=20
Rep. Joe Barton, R-Texas, indicated his proposal would allow waivers of=20
clean-air regulations that critics say hamper power generation, but would n=
ot=20
include electricity price controls sought by California officials. Barton=
=20
backed away from the controversial idea of plugging nuclear-fueled Navy=20
vessels into the power grid.=20
Barton -- who chairs the House energy and air quality subcommittee -- said =
he=20
hopes to "get some bipartisan consensus" before actually introducing=20
legislation. But his approach already is alienating some Democrats.=20
"The clean-air moves would be an enormous problem," said a spokesman for Re=
p.=20
Henry Waxman, D-Los Angeles, a subcommittee member. "If you're not doing=20
(price controls) and instead weakening clean-air laws, you're not really=20
doing anything."=20
Capitol Hill sources said Barton won't introduce a bill if it appears=20
subcommittee members from Western states would be able to attach language=
=20
calling for price controls. He is also awaiting a green light from the Whit=
e=20
House, the sources said.=20
Democrats from California, Oregon and Washington, joined by House Minority=
=20
Leader Richard Gephardt, D-Mo., introduced a bill Wednesday that would=20
require federal regulators to impose wholesale price controls in the West f=
or=20
the next two years and order refunds for high electricity prices dating bac=
k=20
to June 1, 2000. New power plants would be exempt from the price limits,=20
which would be based on the cost of producing power, plus a profit margin.=
=20
In a speech to the National Energy Marketers Association, Barton said he=20
hopes his subcommittee can pass a bill shortly after Congress returns April=
=20
22 from its Easter recess. It would be the first move by Congress to addres=
s=20
the power crunch roiling California and the West and looming in other=20
regions.=20
"California is too big a part of our economy, too big a part of our=20
population base. We can't just say, 'Let California take care of=20
California,'?" Barton said. " .?.?. Unless we pass a law that says, 'Summer=
=20
shall not start in California until September the first,' we've got to do=
=20
something right now to help them this summer."=20
Barton refused to say exactly what he would propose. But he indicated that =
a=20
draft bill he planned to circulate among subcommittee members would paralle=
l=20
proposals he sent to the White House recently.=20
They included directing the EPA to waive nitrogen oxide emission limits on=
=20
power plants if a governor declares an electricity emergency, increasing th=
e=20
use of backup generators, allowing the start-up of mothballed nuclear power=
=20
plants, providing federal funding for the expansion of a crucial Central=20
Valley power conduit known as Path 15 and directing the Federal Emergency=
=20
Management Agency to make plans for blackout response.=20
Barton said "technical reasons" sidelined his proposal to use nuclear-power=
ed=20
Navy vessels to keep the lights on in California.=20
"Plus, you've got some national security issues. Do you really want a nucle=
ar=20
aircraft carrier that might need to be dispatched to the South China Sea ti=
ed=20
up to the grid in San Diego?" he added.=20
The Bush administration was said to be less than impressed with the idea.=
=20
Barton said he didn't "have any definitive answers" yet from the White Hous=
e=20
on his proposals.=20
Barton did not waver in his opposition to price controls, dismissing them a=
s=20
"a political expedient that can hold down the price until the next election=
."=20
President Bush also opposes price limits.=20
---------------------------------------------------------------------------=
---
-----------------------------------


Treasurer Urges Disclosure of Power Cost=20

Energy: Angelides warns that $10-billion bond issue to finance purchases=20
can't be sold otherwise. Davis, who has resisted such a move, sees a chance=
=20
of more blackouts.=20

By MIGUEL BUSTILLO and DAN MORAIN, Times Staff Writers=20

?????SACRAMENTO--State Treasurer Phil Angelides warned Wednesday that he=20
cannot sell a record $10 billion in bonds to finance purchases of electrici=
ty=20
unless the state reveals the price it is paying for power--something Gov.=
=20
Gray Davis has refused to do.
?????The warning came as Davis acknowledged that his efforts to secure enou=
gh=20
electricity to meet demand could fall short, raising the possibility of mor=
e=20
blackouts.
?????"The real crunch," Davis said Wednesday, "will be in May and June and=
=20
late April"--much earlier than the usual peak in August, September and earl=
y=20
October. Angelides said he cannot secure the largest municipal bond offerin=
g=20
in American history until Wall Street can see what California is spending o=
n=20
power and what it expects to spend in the future.
?????"You can't go to the marketplace to sell $10 billion in bonds and say,=
=20
'We don't have a public plan,' " Angelides said.
?????Angelides announced that he has secured $4.1 billion in short-term=20
"bridge" financing to repay the state for power purchases until the bonds a=
re=20
issued. That deal remains clouded, in part by the utilities' resistance to=
=20
using customer payments to repay the bonds promptly.
?????The governor is scheduled to give a five-minute televised address on=
=20
energy at 6:05 tonight, expected to be carried by all Los Angeles televisio=
n=20
stations.
?????In addition to discussing the potential for more blackouts, Davis is=
=20
expected to outline his efforts to expand power production, renew his call=
=20
for Californians to cut electricity use and address the question of rate=20
hikes.
?????"I'm certainly going to share with [Californians] the progress we've=
=20
made and what we have to do together over the near term to get through this=
=20
challenge," Davis told reporters. " . . . We have to accept responsibility=
=20
for solving the problem. I'm going to lay out exactly how to do that."
?????Sensing the urgency, the Legislature spent much of Wednesday pushing=
=20
forward a $1.2-billion package of conservation bills crucial to helping=20
California escape widespread power outages during the hot season.
?????And in another move to boost summer supplies, the California Energy=20
Commission approved two "peaking plants" under a new fast-track, 21-day=20
permit process ordered by Davis.
?????Designed to produce power to meet sudden demand, such plants are a maj=
or=20
part of the governor's plan to help avert blackouts this summer, and=20
commissioners approved them unanimously. But they expressed qualms about th=
e=20
vague standards in place for the plants--one to be built near San Diego, th=
e=20
other in Palm Springs--in part because the facilities have been exempted fr=
om=20
the usual environmental reviews.
?????Most experts assume that peaking plants are pressed into service only=
=20
when demand for electricity is highest. But the facilities approved Wednesd=
ay=20
are capable of operating for as much as 85% of the time.
?????The partnership that owns the plants--a venture between Shell Oil and =
an=20
arm of engineering giant Bechtel Enterprises--is in talks to sell electrici=
ty=20
to the state for 10 years or more. But current contracts call for the sale =
of=20
500 hours of electricity for the next three years, said John Jones, a=20
representative of the partnership.
?????The company would sell the rest of its electricity on the open market,=
=20
presumably at higher prices--and not necessarily in California.
?????Suggesting that the facilities may not fit the definition of peaking=
=20
plants, outgoing Commissioner Robert Laurie called for more public disclosu=
re=20
about the implications of Davis' emergency order.
?????"They may be large; they may be small," Laurie said. "They may operate=
=20
300 hours; they may operate 8,000 hours."

?????Measures Focus on Cutting Consumption
?????The conservation bills that lawmakers addressed Wednesday--supported b=
y=20
environmentalists and the business community alike--represent the largest=
=20
such investment in history and are designed to get Californians to cut ener=
gy=20
consumption this summer.
?????The measures would provide everything from rebates for buyers of new,=
=20
efficient refrigerators to free power-saving lightbulbs for poor people. Al=
l=20
told, the measures are expected to save California roughly the amount of=20
electricity produced by eight power plants.
?????Legislators had hoped to get the bills to the governor's desk by the e=
nd=20
of this week, but some turbulence slowed the progress.
?????The trouble began Tuesday, when Assembly Democrats and Republicans fro=
m=20
agricultural areas said they would not vote for the Senate bill, SB 5X, unt=
il=20
it was amended to include programs to help agriculture. Concluding that=20
opposition might stall the bill in the lower house, Assembly leaders agreed=
=20
to the amendments, including one that protects agribusiness from blackouts.
?????That move infuriated the bill's author, Sen. Byron Sher (D-Stanford),=
=20
and started a war of words between the houses.
?????"What they did and the way they did it I found a little untoward," sai=
d=20
Senate Leader John Burton (D-San Francisco), calling the agricultural=20
interests "greedy."
?????In the end, the bill cleared the Assembly by a vote of 74 to 1=20
Wednesday. It now returns to the Senate. A second conservation bill, AB 29X=
=20
by Assemblywoman Christine Kehoe (D-San Diego), containing more than $400=
=20
million more for conservation programs, also awaits action there.
?????While the governor has been pushing for the bills, their price tag=20
exceeds what he has pledged to spend on conservation, and he is expected to=
=20
trim the legislation once it arrives on his desk.

?????Concerns About Depleting Treasury
?????Angelides, meanwhile, sent a letter to Davis outlining his problems in=
=20
issuing the $10 billion in bonds needed to repay the state for the power it=
=20
has been buying on the spot market. To avert mass blackouts, California mad=
e=20
its risky foray into the power-buying business in January after the state's=
=20
two largest utilities said they were nearly bankrupt and generators would n=
o=20
longer sell to them.
?????The state has been buying power at the rate of roughly $50 million a=
=20
day. A Davis-sponsored plan calls for the $10 billion in bonds to repay the=
=20
state; the bonds, in turn, would be retired by utility customers through=20
their monthly bills.
?????That plan was based on the premise that the state would be able to=20
stabilize, and eventually lower, the price of electricity by entering into=
=20
long-term contracts with power suppliers. Those lower prices have yet to=20
materialize, raising increasing questions about whether $10 billion will be=
=20
enough.
?????"I think there is no doubt that if we continue to chunk out general fu=
nd=20
money without end, what's going to happen is that we're going to deplete ou=
r=20
treasury, we're going to harm the very programs that we care most about, an=
d=20
our credit rating will come down," Angelides said.
?????The governor's finance director, Tim Gage, said such fears are=20
unfounded. Officials have planned all along to release some details on=20
California's power purchases to the Public Utilities Commission so the pane=
l=20
could determine how much money is needed to repay the bonds, he said: "I=20
would think that any information required to sell the bonds will be provide=
d.=20
. . . I don't know how specific it's going to have to be."
?????Also on Wednesday:
?????* The Assembly and Senate passed a bill placing price caps on large=20
power users in San Diego, currently the only area in California where some=
=20
are feeling the full sting of the deregulation law adopted in 1996. San Die=
go=20
was the first and only area where state regulators lifted price caps, the=
=20
expected outcome of deregulation. The result last summer was that bills=20
doubled or tripled virtually overnight.
?????The bill, SB 43 by Sen. Dede Alpert (D-Coronado), would protect medium=
=20
and large power users such as businesses, school districts and hospitals fr=
om=20
the full cost of electricity on the open market. Homeowners and other small=
=20
consumers are protected under legislation approved last year.
?????* Lawmakers in both houses announced legislation that would place a=20
windfall profits tax on power companies that sell electricity to California=
=20
at excessive prices. "It's time to gouge the gougers," said Assemblywoman=
=20
Dion Aroner (D-Berkeley), a sponsor of the Assembly proposal.
?????In the upper house, a bill (SB 1X) that would tax power producers'=20
profits at an unspecified rate and rebate the money to taxpayers cleared it=
s=20
first committee hurdle. Davis said he has "an open mind" about the=20
legislation.
?????Power producers said a windfall tax would do nothing to solve the=20
fundamental problem--a shortage of electricity--and would have an=20
inflationary effect because the expense would be passed on to consumers.
?????* California Public Utilities Commission President Loretta Lynch said =
no=20
additional electricity rate hikes will be necessary if Californians conserv=
e=20
energy and electricity producers don't raise prices.
?????Lynch, speaking to reporters after a speech Wednesday at the UCLA=20
Anderson Business Forecast quarterly meeting on the economy, also said=20
conservation efforts endorsed by Davis will help keep prices down by reduci=
ng=20
demand.
?????"If we conserve, some of those sellers will get cut out," said Lynch.
---=20
?????Times staff writers Julie Tamaki, Seema Mehta, Nancy Vogel, Stuart=20
Silverstein and Jenifer Warren contributed to this story.
---------------------------------------------------------------------------=
---
----------------------------------------------------------------


House GOP Moves to Draft Plan to Give the West Summer Energy Aid=20

By RICHARD SIMON and RICARDO ALONSO-ZALDIVAR, Times Staff Writers=20

?????WASHINGTON--Congressional Republicans are drafting an emergency bill t=
o=20
help the West cope with a summer of predicted electricity turmoil, offering=
=20
such possible measures as aid to ease a notorious bottleneck in the=20
California transmission system and directing federal disaster officials to=
=20
prepare for power outages.
?????The move came as Democratic criticism of the Bush administration's=20
response to the power crunch intensified Wednesday. The administration has=
=20
become more defensive about criticism that it has left California on its ow=
n=20
to solve its crisis.
?????Rep. Joe Barton (R-Texas), the influential chairman of the House energ=
y=20
and air quality subcommittee, said he is splicing together the emergency=20
legislation and hopes to introduce it when Congress returns from the Easter=
=20
recess.
?????"We can't just say, 'Let California take care of California,' " Barton=
=20
said at an energy conference in Washington.
?????Although the bill will not contain the price caps sought by Democrats=
=20
and a handful of Republicans, Barton said in an interview that he will allo=
w=20
amendments in support of price controls during committee deliberations.
?????"They will have a chance to see whether the votes are there," Barton=
=20
said. "I don't think the votes are there, but I see no reason why [supporte=
rs=20
of price controls] can't have the full right to offer an amendment."
?????A list circulated by GOP staff in recent weeks includes a range of ide=
as=20
such as relaxing environmental rules, subject to a governor's request;=20
increasing federal energy assistance to low-income consumers; firing up=20
mothballed power plants; and directing federal facilities to reduce energy=
=20
use by 10%.
?????Some of the ideas are more practical than others. Referring to a=20
proposal to connect nuclear ships to the electricity grid, Barton said: "Do=
=20
you really want a nuclear aircraft carrier that might need to be dispatched=
=20
to the South China Sea tied up to the grid in San Diego?"
?????On the issue of relaxing clean air rules--another sensitive point for=
=20
Democrats--Barton said his bill would not make permanent changes in=20
environmental requirements. Instead, it would grant governors the flexibili=
ty=20
to allow power plants that have exceeded emissions limits to temporarily ke=
ep=20
operating during emergencies.
?????That, he contended, would be less harmful than one likely alternative:=
=20
individuals and companies relying on their own generators during blackouts.=
=20
"It doesn't make a lot of sense to allow diesel generators to kick in and=
=20
shut down units that use natural gas," Barton said.
?????Separately, Sen. Frank Murkowski (R-Alaska), chairman of the Senate=20
Energy and Natural Resources Committee, has asked for an inventory of all=
=20
possible energy sources in the West and "what actions will be necessary to=
=20
bring those sources online or increase their current generation."
?????But Democrats said that without price controls, Republican-sponsored=
=20
bills would be of little help this summer to California.
?????"If it doesn't provide wholesale price caps, it doesn't do what is=20
needed to help California," said Phil Schiliro, chief of staff for Rep. Hen=
ry=20
A. Waxman (D-Los Angeles).
?????House Democratic Leader Richard Gephardt of Missouri joined a group of=
=20
House Democrats from California, Oregon and Washington in unveiling price=
=20
control legislation.
?????Rep. Peter A. DeFazio (D-Ore.) accused the Bush administration of=20
conducting "faith-based regulation" of energy prices. "Flip the switch and=
=20
pray the lights come on, and that you'll be able to afford the bill at the=
=20
end of the month," he said.
?????The administration contends that price controls will discourage=20
investment in new power plants. "Price caps don't work," Barton said in=20
remarks to the National Energy Marketers Assn. "Price caps aren't going to=
=20
get you more supply."
?????Sen. Dianne Feinstein (D-Calif.) is preparing to introduce another pri=
ce=20
control bill in the Senate. Acknowledging Bush's opposition to price=20
controls, she said her proposal seeks only "cost-based rates."=20
?????Price control supporters say they can structure the controls to ensure=
=20
that power suppliers recover their costs and make a "reasonable" profit. Th=
ey=20
also say they can exempt new power plants in order to address Bush's concer=
ns.
?????Barton warned that the federal measures are unlikely to prevent=20
blackouts altogether.
?????"It's going to be a tough summer out West. . . . I don't see any=20
scenario where you don't have severe blackouts on a consistent basis this=
=20
summer," he said.=20
---------------------------------------------------------------------------=
---
-------------------------------------------------------------------


California's Electricity Woes Power Up Northwest=20

Bonneville agency's sales to Golden State keep rates low for customers up=
=20
north. But doubts remain on how long the region can benefit from its federa=
l=20
dams.=20

By KIM MURPHY, Times Staff Writer=20

?????PORTLAND, Ore.--As California searched last summer for surplus=20
electricity to keep its air conditioners humming, the Bonneville Power=20
Administration stepped forward to help.
?????How much did the marketing agency charge for each of the 489,000=20
megawatt-hours it shipped south, power generated by the massive federal=20
hydropower dams in the Northwest?
?????If you guessed $22.39, the amount BPA charges public utilities in=20
Seattle, think again. The average price was three times that. And at the=20
height of the power-marketing frenzy, Bonneville got $750 a megawatt-hour, =
33=20
times what public utilities and private firms in the Pacific Northwest were=
=20
paying.
?????As power generators throughout the West profited from California's=20
energy appetite last year, so too did Northwest customers: BPA netted $400=
=20
million from sales to the Golden State, which helped hold down rates for=20
private electricity users here who already pay the lowest rates in the=20
nation--half of what Californians pay.
?????And major aluminum, steel and chemical companies across the=20
region--which not only pay lower rates but also have the right to purchase=
=20
certain allotments of energy produced by the federal dams--stand to pocket=
=20
$1.8 billion in the next few months by reselling or exchanging their shares=
=20
so Bonneville can help California out of its crisis.
?????How long, Northwestern politicians wonder, can the region hold onto th=
e=20
exclusive benefits of a multibillion-dollar network of 29 federal dams on t=
he=20
Columbia and Snake rivers--legendary edifices such as Bonneville and Grand=
=20
Coulee?
?????How long, others ask, should it be able to?
?????California's two Democratic senators--Dianne Feinstein and Barbara=20
Boxer--have questioned the fairness of locking in low power rates "for a=20
select group of consumers, to the detriment of tens of millions of others=
=20
whose taxes also paid for the facilities that generate and manage that powe=
r=20
source."
?????Said David Luken of the Edison Electrical Institute, a coalition of=20
investor-owned utilities: "It would be as if California took all the revenu=
es=20
from offshore oil and used it to hold down gasoline prices in Los Angeles."
?????Critics estimate that BPA routinely sells its power to customers in th=
e=20
Northwest for about $1 billion a year less than it could earn at market=20
rates. Last year, the gap spread to about $3 billion. The BPA is the major=
=20
reason homeowners in Seattle are paying 5.4 cents a kilowatt-hour for=20
electricity; Southern California Edison customers pay 10.2 cents.
?????After suspending sales to California late last year because the power=
=20
the BPA was able to generate in the face of an extreme drought was needed i=
n=20
the Northwest, the agency briefly resumed sending electricity south last=20
month--dispatching between 600 to 1,000 megawatts an hour for about eight=
=20
days between March 7 and March 21.
?????Although officials would not disclose the negotiated price, the market=
=20
rate for power then ranged from $210 to $350 a megawatt-hour.
?????Despite the windfall sales to California, however, the BPA has its=20
problems. With contracts to deliver much more power than it can generate, B=
PA=20
has said it would have to institute rate increases totaling $3 billion a ye=
ar=20
or more unless it can wean substantial blocs of customers off of federal=20
power.
?????The belt-tightening threatens the region's aluminum industry and=20
ratepayers in Washington state, Oregon, Montana and Idaho--some of whom=20
already have seen their electric bills rise 50% or more over the last few=
=20
months.
?????The looming fiscal emergency is so severe that Oregon Gov. John=20
Kitzhaber recently proposed seeking a temporary reprieve from most of BPA's=
=20
annual $732-million debt repayment. That is money to reimburse federal=20
taxpayers, who funded the region's massive system of concrete and generator=
s.
?????Most Northwestern political leaders are loath to miss a Treasury=20
payment--as many believe that would leave the agency ripe for plunder.
?????That is the region's greatest fear: that California's hefty=20
congressional delegation will make a grab for the agency's power.
?????The debate over who controls BPA--and who benefits from it--promises t=
o=20
emerge as a key question before Congress as the West's energy woes continue=
.
?????Several Northwestern legislators have proposed buying BPA back from th=
e=20
federal government in an attempt to lock in benefits for regional ratepayer=
s.=20
Congressional lawmakers last year countered with a proposal to force=20
Bonneville to sell low-cost power to private utilities in California. Some=
=20
also proposed auctioning BPA power at market rates--ending the cost-based,=
=20
regional-preference formula.
?????BPA contracts with about a dozen users--companies such as Alcoa, Kaise=
r=20
and Reynolds--that have guaranteed the energy-intensive aluminum industry=
=20
access to a fifth of Bonneville's power at rates lower than those paid by=
=20
other customers have come under particular scrutiny.
?????The contracts are so lucrative that Kaiser is expected to earn up to=
=20
$500 million this year by shutting down its factories and remarketing its B=
PA=20
power allocation.
?????BPA cites the aluminum industry's value as a reliable, steady-load=20
buyer--as opposed to residential utilities, whose fluctuating loads are=20
harder to serve.
?????But Seattle energy analyst Kevin Bell calls the industry contracts "an=
=20
incredibly bad deal." Unable to generate enough power to meet its=20
commitments, the BPA has been forced to buy power on the open market at 40=
=20
cents a kilowatt-hour, supply it to firms such as Kaiser for 2 cents, and=
=20
watch Kaiser sell it again for 40 cents.
?????It is, in fact, only the recently deregulated electricity market that=
=20
has made BPA power an attractive deal. In the mid-1990s, clients were=20
flocking away from Bonneville to cheaper generators. Aluminum companies at=
=20
the time agreed to prices that were higher than what was available elsewher=
e,=20
gambling that the market price would go up.
?????"If we're going to talk about why Bonneville has preferential rates in=
=20
the Northwest, shouldn't we also talk about why California has preferential=
=20
rates for federal power in California?" said acting BPA administrator Steve=
=20
Wright. "Federal policy is, in general, the indigenous electrical power=20
resources in a region are dedicated to the loads in that region. The power=
=20
from Hoover Dam goes to the people in the Southwest. The Central Valley=20
Project goes to people in Northern California."
?????Bonneville for years has enjoyed a mutually beneficial power exchange=
=20
with California. Although the agency often profits from surplus power sales=
=20
to California, the majority of the power it has sent south over the years h=
as=20
been either at low, long-term rates to such cities as Burbank, Glendale and=
=20
Pasadena, or as part of an exchange program in which California returns twi=
ce=20
as much as it borrows.
?????And while Bonneville ratepayers profited from the brief period of=20
sky-high wholesale power rates last summer, its sales represented less than=
=20
1% of the California power market and probably had the effect of lowering,=
=20
not raising, overall market rates, BPA officials said.
?????Indeed, Bonneville often sold power to California at less than its own=
=20
cost-based rates during the first two years of deregulation after 1998.
?????And Northwestern legislators point out that the hydropower dams, for a=
ll=20
their advantages, have come at considerable cost to the region: Two wild=20
rivers now are throttled. The price for trying to bring back endangered=20
salmon has reached nearly $4 billion so far, most of it borne by BPA=20
ratepayers.
?????The question of sharing the hydropower bonanza outside the Northwest=
=20
never came up until the 1960s--with the construction of two major power=20
arteries linking Bonneville's transmission grid with California. The=20
846-mile-long link between Celio, Ore., and Sylmar is the world's biggest=
=20
direct current power line.
?????Before agreeing to the transmission links, Northwestern politicians=20
insisted on a "regional preference" for BPA power, giving the Northwestern=
=20
states first crack at power generated on the Columbia.
?????It is no different today.
?????"Unless we control the destiny of Bonneville, we're not going to contr=
ol=20
the Northwest region," said Oregon state Senate President Gene Derfler, who=
=20
has proposed a regional takeover of BPA. "California is definitely a threat=
=20
at this point. They would take our power, all of it, and say, 'Thank you.'=
=20
And what are we going to do about it? They have 52 congressmen; the Northwe=
st=20
states have 15."

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

Davis Campaign Losing Steam=20
Energy crisis generates possible challengers for governor in 2002=20
Carla Marinucci, John Wildermuth
Thursday, April 5, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04=
/05/M
N113404.DTL=20
Until this week, most Democrats simply scratched their heads over talk abou=
t=20
who might be crazy enough to launch a primary challenge to Gov. Gray Davis =
in=20
2002.=20
After all, the Democratic governor has amassed $26 million in campaign cash=
,=20
had 60 percent approval ratings and was being talked about as a guy on the=
=20
2004 Democratic presidential list.=20
That was before the phrases "rolling blackout" and "Stage 3 alert" came int=
o=20
the California lexicon.=20
Davis again found himself on the defensive last weekend over the energy=20
crisis -- but it was in front of a home crowd of Democrats gathered at the=
=20
state party convention. Democratic Controller Kathleen Connell opened fire =
on=20
the governor, urging him to get off the dime and stop blaming the GOP for t=
he=20
power crunch.=20
Meanwhile, grumbling among the party faithful was rampant -- the result of=
=20
his failure to cultivate relations with Democratic legislators and grassroo=
ts=20
activists alike, some said.=20
So, in the semidarkened Anaheim arena where a Stage 2 alert was in effect,=
=20
the Demo buzz turned to what might happen in the event the governor's polls=
=20
tank, the lights continue to flicker -- and the pressure is on to throw him=
=20
over the side and save themselves.=20
It's all just talk -- but here are some of the names being floated as=20
possible opponents:=20
-- State Treasurer Phil Angelides: Angelides, a strong supporter of state=
=20
acquisition of power utilities, got national media attention last month whe=
n=20
he announced his proposal to fix the energy crisis -- including the creatio=
n=20
of a state public power authority to provide new generating plants. He talk=
ed=20
tough, and won an enthusiastic response at the convention, when he warned:=
=20
"Out-of-state generators: If you do not take your foot off our throats . . =
.=20
you may leave us no option but to (take) your power plants."=20
A successful developer, Angelides is one of the few Democrats who may not b=
e=20
intimidated by Davis' $26 million war chest. "If he's invested wisely in th=
e=20
past few years, that'd be chump change," said one insider.=20
-- State Controller Kathleen Connell: Connell blasted Davis last weekend,=
=20
telling The Chronicle that "the emperor has no clothes" on the energy crisi=
s=20
and that voters will soon tire of him putting blame on former Gov. Pete=20
Wilson.=20
The governor's people say the talk was born of desperation: She faces term=
=20
limits as controller and is lagging in the polls in her race for Los Angele=
s=20
mayor.=20
-- State Sen. Don Perata: Yes, a real longshot, some delegates said, but th=
e=20
politically hungry and talkative East Bay pol has been offering tough=20
assessments of Davis' performance on energy recently. He'd have a lot of wo=
rk=20
in getting more name ID statewide, but Perata is a master at corralling fre=
e=20
media. Lately, he's been on the tube, morning and night, far more than Davi=
s,=20
with proposals on energy and education -- two of the governor's favorite=20
topics.=20
In addition to the governor's race, candidates are maneuvering for so- call=
ed=20
"down ballot" stateside contests next year.=20
No widely known Democrat is expected to challenge Lt. Gov. Cruz Bustamante =
or=20
Attorney General Bill Lockyer for their current spots.=20
But term limits will be putting plenty of politicians out of work, and the=
=20
Democrats' sweep of statewide offices in 1998 has left few open spots for t=
he=20
ambitious.=20
Some of the Democratic primary races shaping up:=20
-- Secretary of state: March Fong Eu, who held the job from 1974 to 1994,=
=20
before term limits, has announced she's running again. John Garamendi, the=
=20
state's first elected insurance commissioner and a former longtime=20
legislator, is in, as is Michela Alioto, who lost to incumbent Republican=
=20
Bill Jones four years ago. San Francisco Assemblyman Kevin Shelley also is=
=20
considering a run.=20
-- Insurance commissioner: Judge Harry Low has not yet decided whether he=
=20
will try to keep the office he was appointed to last year after Republican=
=20
Chuck Quackenbush resigned amid scandal. If he doesn't, word is that Sen.=
=20
Jackie Speier, D-Hillsborough, may run.=20
-- State Board of Equalization: San Francisco Assemblywoman Carole Migden,=
=20
another victim of term limits, is looking to replace Democrat Johan Klehs i=
n=20
a district that would extend from the Oregon border to Santa Cruz.=20
"I've got $1 million in the bank, and I know the area," said Migden, who=20
expects little competition for the seat. "I'd also be the first woman to=20
serve on the board." Besides, she said, "It will be nice to get into my car=
=20
and drive up to Humboldt County to talk to people. It will get me away from=
=20
some of the head games in Sacramento."=20
E-mail the authors at cmarinucci@sfchronicle.com and=20
jwildermuth@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 7=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------
Crisis Takes Toll On State Economy=20
DAVIS'S SPEECH: Possible tax on generators=20
Lynda Gledhill, Greg Lucas, Chronicle Sacramento Bureau
Thursday, April 5, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04=
/05/M
N108119.DTL=20

Sacramento -- On the eve of a statewide television address by Gov. Gray=20
Davis, action by lawmakers stalled on nearly $1.4 billion in state programs=
=20
to stimulate energy conservation.=20
Penalizing generators for huge profits they have raked in during California=
's=20
energy crisis is just one point Davis may bring up during tonight's speech.=
=20
"I'm of an open mind about that subject," he said after a two-hour meeting=
=20
with Assembly Republicans. "I generally don't think making a profit is wron=
g,=20
but these profits have been excessive."=20
The governor also is expected to discuss recently approved rate increases,=
=20
sweeping conservation efforts and new power plant construction when the=20
cameras come on at 6:05 p.m.=20
The unusual address -- the first by a California governor in nine years --=
=20
comes amid growing criticism that Davis has not done enough to solve the=20
deepening crisis as well as his perceived refusal to keep Californians=20
informed.=20
"A lot of what he has been doing and what he's set in motion is not=20
particularly well known to the average person out there," said Garry South,=
=20
Davis' chief political adviser. "It's hard in a state like California to=20
project specific bits of information outside the context of a paid media=20
campaign."=20
Others see the address as a strong indicator that Davis realizes he is losi=
ng=20
favor with voters.=20
Earlier this year, Davis was widely seen as a leader in resolving the mess.=
=20
DAVIS SLIPPING IN POLLS
That has changed. Recent polls by Assembly Democrats and the Service=20
Employees International Union have shown Davis' popularity -- and that of=
=20
other incumbent lawmakers -- dropping like a stone.=20
As the crisis deepens, there are mounting calls in Sacramento for the state=
=20
to use the power of eminent domain to take over private power plants.=20
California's flawed 1996 deregulation plan required major utilities to sell=
=20
many of their power plants to private companies. State Sens. Don Perata,=20
D-Oakland, and Jackie Speier, D-Hillsborough, are among those calling for t=
he=20
state to start seizing them.=20
Such a drastic measure is little more than talk right now.=20
Drawing just as much attention is a bill by Assemblywoman Ellen Corbett, D-=
=20
San Leandro, that would impose a windfall-profit tax on the generators.=20
GENERATORS' PROFITS UP
Many generators have seen their bottom lines swell as wholesale electricity=
=20
prices skyrocketed. Lawmakers have yet to define "windfall profits," but so=
me=20
favor penalizing generators that sell electricity at rates higher than=20
regulators deem "fair and reasonable."=20
The tax would allow some of the profits to be returned to consumers or to t=
he=20
state, which has spent around $4 billion buying electricity since Jan. 17.=
=20
Although any windfall-profit tax has a long way to go before reaching Davis=
'=20
desk, the governor said yesterday that it is an idea worth considering.=20
"I'm not saying I would sign it or not sign it," Davis said, "but having a=
=20
bill working its way through the Legislature is not an entirely unpleasant=
=20
effect."=20
Anything that might help consumers is sure to please Davis, who is taking=
=20
heat because of a Public Utilities Commission decision allowing utilities t=
o=20
raise rates by an average of 40 percent.=20
TIERED INCREASES
The increase would be tiered, meaning those who consume the most would pay=
=20
the most. Davis, who frequently said he did not want rates to go up, has=20
denied knowing about the PUC increase.=20
Davis told Assembly Republicans yesterday that he would mention the increas=
e=20
during tonight's address. That prompted some lawmakers to speculate he may=
=20
endorse a smaller increase and soften the blow by touting subsidies and=20
rebates for those who conserve electricity.=20
Conservation has long been the keystone of Davis' energy plan. The governor=
=20
is pushing lawmakers to pass nearly $1.4 billion in energy conservation=20
programs so he can sign the bills before tonight's address. Such an effort =
is=20
sure to go down to the wire, however, because the bills sputtered yesterday=
.=20
The bills are a cornucopia of grants, rebates, low-interest loans and other=
=20
expenditures intended to reward Californians who cut down on consumption.=
=20
"This is aimed at giving Californians commonsense tools to begin energy=20
conservation as soon as possible," said Assemblywoman Christine Kehoe, D-Sa=
n=20
Diego.=20
But the bills stalled yesterday amid partisan squabbling. The Senate held u=
p=20
an Assembly bill that would spend $408 million on various conservation=20
efforts because it objected to changes the Assembly made to a Senate=20
proposal.=20
The $1.1 billion Senate bill would set aside $240 million in cash and=20
conservation assistance for the state's poorest ratepayers. The Assembly=20
passed the bill yesterday after adding several provisions benefiting the=20
agriculture industry. Senate Democrats complained the amendments penalized=
=20
urban consumers.=20
Davis has become a tireless cheerleader for conservation, but he realizes i=
t=20
won't be enough to end the crisis.=20
Yesterday, he indicated for the first time that he would support allowing=
=20
private companies and other large users to cut the utilities out of the loo=
p=20
entirely by contracting directly with generators for power.=20
Lawmakers in January passed legislation barring such contracts amid fears t=
he=20
state would have no one to sell power to. But Davis said yesterday that suc=
h=20
a move could preserve the state's creaking electrical grid during the dog=
=20
days of summer.=20
E-mail Lynda Gledhill and Greg Lucas at lgledhill@sfchronicle.com and=20
glucas@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 1=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------
San Jose Looks Past the Energy Crisis=20
Big server farm OKd in hope the electricity will be there=20
Maria Alicia Gaura, Chronicle Staff Writer
Thursday, April 5, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04=
/05/M
N142441.DTL=20

Even as the blackouts roll and state budget reserves are drained to purchas=
e=20
electricity, some Silicon Valley officials are confident that California's=
=20
energy crisis will be relatively short lived.=20
That may explain why a proposal to build the world's largest server farm=20
sailed through San Jose's approval process this week, despite the fact that=
=20
the project will consume as much electricity as all the homes in Bakersfiel=
d.=20
"The state is predicting that there will be a whole bunch of new electrical=
=20
power being generated in the next two or three years," said San Jose=20
Councilman Chuck Reed. "We could eventually be back in the position where=
=20
(generators) are begging people to buy their power, like they did in the=20
1980s. "=20
The fact that San Jose-based U.S. DataPort wants to build here at all=20
indicates that even energy-dependent businesses are betting on a rapid=20
solution to California's energy crisis.=20
"I am confident about that, and I think the rest of my colleagues in the ar=
ea=20
are as well," said Grant Sedgwick, president and CEO of San Jose based U. S=
.=20
DataPort. "It won't happen overnight, but in practical terms, we are=20
embarking on a five- to six-year project right now. I think that halfway=20
through, this (energy crisis) will be a part of history."=20
The project approved by the San Jose City Council Tuesday night -- industry=
=20
insiders prefer the term "Internet data center" to the less-dignified "serv=
er=20
farm" -- will be the world's largest, able to handle as much as 15 percent =
of=20
global Internet traffic.=20
The $1.2 billion project will comprise 10 huge air-conditioned warehouses o=
n=20
174 acres, stacked with the computers that run the Internet. The facility i=
s=20
expected to consume 180 megawatts of electricity when fully built out. Ther=
e=20
are scores of smaller server farms in the Silicon Valley area, but none tha=
t=20
comes close to the size, scope and energy draw of the U.S. DataPort facilit=
y.=20
What is significant about all such data centers is that any interruption of=
=20
power wreaks havoc on their equipment. In recognition of the current=20
precarious state of California's electricity grid, U.S. DataPort will build=
 a=20
small natural-gas fired power plant capable of producing 30 megawatts of=20
reliable power to supply phase one of its project. That supply will be back=
ed=20
up more than 80 enormous diesel generators capable of switching on without=
=20
missing a beat.=20
But in order to acquire city permits for additional buildings, the company=
=20
will have to devise a plan for additional energy generation on-site, and co=
me=20
up with a way to eliminate the backup generators that run on highly polluti=
ng=20
diesel fuel.=20
The company will not necessarily be required to build the extra generating=
=20
capacity, or to eliminate the generators. Everything depends on what happen=
s=20
to California's economy and energy situation in coming years.=20
"We will be self-sufficient (in energy) for the first couple of years," sai=
d=20
John Mogannam, senior vice-president of U.S. DataPort. "After that, we do=
=20
believe that the energy problem will be behind us, and there will be=20
sufficient energy available on the grid.=20
"But the City Council has given us a very strong message that we need to se=
ek=20
ways to (eventually) remove those diesel engines from the site. Building a=
=20
full-sized power plant is one option that we will be looking into."=20
U.S. DataPort is now building a similar-sized data facility in Virginia tha=
t=20
will be powered by a 250-megawatt gas-powered turbine, Mogannam said.=20
Something similar might work in San Jose, although any final decision on=20
whether to build will be years away.=20
Company officials will also study a variety of alternative energy sources,=
=20
with the hope that improved technology may make such options viable in the=
=20
coming years.=20
Opponents of the San Jose server farm charge that key portions of the proje=
ct=20
are illegally vague. The Santa Clara Valley Chapter of the Audubon Society=
=20
may consider a lawsuit challenging the council's approval of the project.=
=20
"The biggest potential issue here is that the law doesn't allow you to brea=
k=20
a project into little segments and sneak it into a community," said Craig=
=20
Breon, executive director of the group. "If your true plans are to build a=
=20
250-megawatt plant in the Alviso area, you have to inform the community. Yo=
u=20
have to study it in the environmental documents."=20
Especially troubling is the suspicion that council members approved the=20
project with an eye on uncertain future scenarios, Breon said. "They are=20
talking about a single power plant, but in the meantime we are getting more=
=20
diesel with this project than at any other single site in the Bay Area," he=
=20
said. "Any way you look at it, it's a major air pollution source."=20
Mogannam acknowledged that plans for completing the project, including=20
construction of a power plant, were vague, but pointed out that the city ha=
d=20
final say over any plans for the site.=20
E-mail Maria Gaura at mgaura@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?A - 15=20
---------------------------------------------------------------------------=
---
----------------------------------------------------------------------
More Unpaid Power Plants Face Closing=20
Owners slam PUC silence about bills=20
David Lazarus, Chronicle Staff Writer
Thursday, April 5, 2001=20
,2001 San Francisco Chronicle=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04=
/05/B
U224271.DTL=20
As state officials struggle to reduce California's mounting energy debts,=
=20
smaller power companies warned yesterday that more plants will shut down --=
=20
increasing the likelihood of blackouts -- until they get paid all the money=
=20
they are owed.=20
The California Cogeneration Council, an association of small, gas-fired pla=
nt=20
owners, appealed to the Federal Energy Regulatory Commission for help in=20
recouping sky-high operating costs from utilities.=20
The council's move followed a lawsuit filed Tuesday against PG&E Corp. by o=
ne=20
plant operator, Dynamis Inc. The company charges that it was forced to shut=
=20
down because PG&E has yet to pay for more than $3 million worth of power.=
=20
"You're going to see more lawsuits and more plants closing," council=20
Executive Director Ann MacLeod said in San Francisco. "The blackout situati=
on=20
is just going to get worse."=20
Smaller generators -- known in industry parlance as "qualifying facilities"=
=20
or "QFs" -- are owed hundreds of millions of dollars by PG&E and Southern=
=20
California Edison for electricity received since last fall.=20
Half of the roughly 600 QF plants were shut down last month, contributing t=
o=20
rolling blackouts throughout the state. The plant owners said they were=20
unable to pay for the natural gas needed to keep their facilities running.=
=20
In response, the California Public Utilities Commission voted last week to=
=20
require utilities to pay the QFs for all future power purchases. However, t=
he=20
PUC avoided the thornier question of money already owed to the generators.=
=20
It also changed the way smaller generators calculate their costs, lowering=
=20
the amount that can be charged for natural-gas expenses.=20
Moreover, the PUC has yet to determine how the limited funds collected from=
=20
ratepayers will be divided among the various parties now in line with their=
=20
hands out -- QFs, utilities and the state itself, which has spent more than=
=20
$4 billion purchasing juice on behalf of PG&E and Edison.=20
A final decision still may be weeks away. Nevertheless, PUC members trumpet=
ed=20
last week's order as a solution to all the QFs' troubles.=20
"At a time when every megawatt is needed, we cannot afford for any producti=
on=20
to be lost due to lack of payment," Commissioner Carl Wood said.=20
"This allows us to get supply back online," PUC President Loretta Lynch=20
agreed. "It will get the lights back on in California."=20
Or will it?=20
"The PUC is dead wrong," MacLeod said. "It doesn't add up. There's still th=
e=20
gaping hole of the bills that are past due."=20
For example, Berry Petroleum Co. near Bakersfield operates three small plan=
ts=20
that provide 100 megawatts to California's electricity system -- enough pow=
er=20
to light 100,000 homes. The company estimates it is owed $27 million by PG&=
E=20
and Edison.=20
Jerry Hoffman, Berry's chief executive officer, said he has had to shut dow=
n=20
four of five generating turbines at his plants, and expects the fifth turbi=
ne=20
to be idled by the end of this week.=20
"We just can't cover our costs," he said. "And we're not alone. There are a=
=20
lot of other QFs shutting down."=20
Hoffman said he was bewildered by assertions from Gov. Gray Davis' office=
=20
that the state is entitled to recoup its energy expenses before anyone else=
.=20
"I don't understand how the state can just step to the front of the line wh=
en=20
all this money is owed to us," he said. "We ought to be paid first because =
we=20
were generating power first."=20
In the case of Dynamis, the company shut down its 42-megawatt plant in=20
February after PG&E paid only 15 cents on the dollar for more than $3 milli=
on=20
in outstanding bills.=20
"Dynamis simply does not have the financial resources to continue extending=
=20
credit to PG&E, particularly given PG&E's refusal to make any past due=20
payments and with no assurance of payment for any future deliveries," said=
=20
Michel Gaucher, the company's owner.=20
Dynamis is suing for its back payments as well as suspension of its long-=
=20
term contract with the utility.=20
An average 40 percent rate increase approved by the PUC last week will resu=
lt=20
in an additional $4.8 billion being collected from consumers each year.=20
But not one cent will go toward paying off about $14 billion in debt racked=
=20
up by PG&E and Edison because of soaring wholesale electricity prices.=20
That debt has prevented the utilities from making good on their obligations=
=20
to QFs, and it may be months before PG&E and Edison are once again on firme=
r=20
financial footing.=20
Until then, many of the generating firms say they will be closing their=20
doors, which will only exacerbate California's approaching summer of energy=
=20
discontent.=20
"The PUC's decision not to pay back payments was like a 2 by 4 over the=20
head," MacLeod said. "It told the plant owners that things are just going t=
o=20
get worse."=20
E-mail David Lazarus at dlazarus@sfchronicle.com.=20
,2001 San Francisco Chronicle ? Page?D - 1=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------
California governor plans to address state on energy=20
JENNIFER COLEMAN, Associated Press Writer
Thursday, April 5, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/05/n=
ation
al0614EDT0503.DTL=20
(04-05) 03:14 PDT SACRAMENTO, Calif. (AP) -- While Gov. Gray Davis prepared=
=20
to speak to the state Thursday night about California's energy crisis,=20
economic forecasters predicted the power crunch would lead to higher taxes=
=20
and scrapped public projects.=20
Davis said Wednesday he hadn't written his five-minute address, but that he=
=20
planned to discuss ``the progress that we've made and what we have to get=
=20
through.''=20
Among other things, he was expected to talk about the more than 40 percent=
=20
rate increases approved last week by the Public Utilities Commission for=20
customers of the state's two largest utilities, Pacific Gas and Electric Co=
.=20
and Southern California Edison Co. He has asked California television=20
stations to carry his remarks live.=20
California has been hit with rolling blackouts and tight power supplies=20
blamed in part on soaring wholesale electricity costs.=20
On Wednesday, the state got more bad economic news: The UCLA Anderson=20
Business Forecast said Californians would face higher taxes and a tighter=
=20
state budget because of the billions of state dollars being spent on=20
emergency power. The blackouts and the state's scrutiny of private power=20
suppliers also threaten to scare away new businesses, the report said.=20
Facing continued refusal from federal energy regulators to cap high energy=
=20
prices, Davis said Wednesday he would be willing to support a=20
windfall-profits tax on electric generators that have made a fortune sellin=
g=20
power to California this year.=20
A bill to that effect was introduced Wednesday in the state Assembly. It=20
would tax gross receipts that ``significantly exceed'' the cost of producin=
g=20
power and tax profits of power marketers who have bought power and later so=
ld=20
it at much higher rates.=20
``We continue to allow some electricity generators and middlemen to reap=20
enormous profits on their sales of electricity into the state. This=20
profiteering must stop,'' Democratic Assemblywoman Ellen Corbett said.=20
Duke Energy spokesman Tom Williams said he doubted a tax on a selected=20
industry would be legal. He added that such a tax would discourage generato=
rs=20
from building new power plants in California.=20
``The governor has made very clear that he is trying to do whatever he can =
to=20
increase the amount of generation in California and reduce the price.=20
Windfall-profits taxes do neither of these,'' Williams said.=20
Davis said he generally opposes treating profitable companies in that manne=
r,=20
``but these profits are outrageous and are at our expense. The only things=
=20
companies understand is leverage.''=20
For the first time, Davis also said the state should let companies buy thei=
r=20
power from generators instead of going through the utilities.=20
The Utility Reform Network and the head of the PUC oppose the idea. They=20
argue residential customers and small businesses unable to contract with=20
generators would get stuck with the bill for the billions of dollars the=20
state has and will spend buying electricity for the customers of the=20
cash-strapped utilities.=20
---------------------------------------------------------------------------=
---
----------------
Critics question effectiveness of energy rebates=20
DON THOMPSON, Associated Press Writer
Thursday, April 5, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/05/s=
tate0
301EDT0100.DTL=20
(04-05) 00:01 PDT SACRAMENTO (AP) -- Lawmakers Wednesday debated spending=
=20
$1.1 billion on conservation programs for energy-strapped California, even =
as=20
some critics questioned the effectiveness of rebates and other incentives i=
n=20
cutting power use.=20
State officials are counting on consumer conservation to help get Californi=
a=20
through high summer power demand as the state faces a tight power supply an=
d=20
high wholesale energy prices.=20
The Assembly on Wednesday approved a $710 million conservation package=20
designed to complement a $408 million conservation measure awaiting Senate=
=20
action. Each bill must return to the other house before going to the=20
governor.=20
Gov. Gray Davis four weeks ago asked lawmakers to approve $404 million in n=
ew=20
conservation spending to augment $424 million in existing programs. He said=
=20
the conservation efforts together could cut 3,700 megawatts from this=20
summer's power use. That's enough power for more than 2.7 million household=
s.=20
The measures include rebates for fluorescent lightbulbs and energy-efficien=
t=20
home appliances.=20
Such programs appear popular with consumers; Southern California Edison=20
recently started publicizing its rebates with bill inserts and door hangers=
,=20
and in two weeks has received 3,500 responses from interested consumers.=20
San Diego Gas & Electric distributed what was supposed to be a three-month=
=20
supply of energy-efficient lightbulbs in two months, and likely will soon=
=20
exhaust $19.4 million in residential conservation incentives that was=20
supposed to last all year.=20
Yet critics question whether rebate programs produce the energy savings the=
y=20
promise.=20
``Most of these programs end up being a wash,'' said Jerry Taylor, director=
=20
of Natural Resource Studies at the conservative Cato Institute in Washingto=
n,=20
D.C.=20
Many residents who claim the rebates would have purchased the=20
energy-efficient products anyway, and the incentives aren't likely to=20
convince those uninterested in conservation to buy expensive energy-efficie=
nt=20
products, Taylor said.=20
Some programs also can have unintended consequences, he said.=20
Installing energy-saving air conditioners, for instance, can result in a=20
``rebound effect'': People rationalize that they can afford to use their=20
air-conditioning more, Taylor said.=20
And people who buy new refrigerators often simply move their old ones to th=
e=20
basement or garage as a spare, he said.=20
Legislators and utilities are trying to avoid some of the pitfalls, mainly =
by=20
offering bonuses to people who turn in their old appliances.=20
Edison, for example, says it takes into account those who would have=20
purchased energy-efficient appliances without the rebates.=20
Even discounting those ``free riders,'' residential rebates are expected to=
=20
cut more than 100 million kilowatt hours this year, said Lynda Ziegler,=20
Edison's director of business and regulatory planning.=20
That's enough to power 16,700 homes for a year.=20
Utility-offered rebates vary by company.=20
Pacific Gas and Electric Co. offers $75, Edison $100, and SDG&E $100 to $15=
0,=20
depending on the model, for Energy Star-rated refrigerators that generally=
=20
sell for more than $1,000.=20
Some groups contend legislators and utilities haven't been aggressive enoug=
h=20
in promoting conservation.=20
Five conservation groups joined forces Wednesday to accuse lawmakers of=20
taking too long to act.=20
One of them, the California Public Interest Research Group, released a repo=
rt=20
touting conservation and renewable energy programs as the key to resolving=
=20
electricity problems across the West.=20
The San Diego-based Utility Consumers Action Network questions whether=20
utilities have done their best to publicize incentives that in fact take=20
money out of their corporate pockets.=20
In a sharply worded letter to PG&E President and CEO Gordon Smith last week=
,=20
the state's top utility regulator, California Public Utilities Commission=
=20
President Loretta Lynch, said the utility isn't moving quickly enough to=20
publicize conservation programs.=20
Smith replied that the programs PG&E instituted late last month ``are ahead=
=20
of schedule and exceeding expectations.''=20
Utilities have made rebates easier to obtain, said Edison's Ziegler and UCA=
N=20
energy analyst Jodi Beebe.=20
``Up until recently it was incredibly difficult for your average Joe to get=
=20
their hands on these rebates,'' Beebe said.=20
Beebe said the information still doesn't reach many consumers at the point =
of=20
sale.=20
Most grocery stores don't carry energy-efficient light bulbs, for instance;=
=20
consumers have to make a special trip to a home improvement store. Retailer=
s=20
often fail to do enough to publicize rebates on specific appliances, Beebe=
=20
said.=20
``It may have some sort of energy-efficient label on it, but people see the=
=20
price tag and walk away,'' she said.=20
That was the case Wednesday at Filco Discount Centers in Sacramento, where=
=20
several customers made energy efficiency a top priority -- but steered away=
=20
from the top-dollar appliances that carry the Energy Star label and typical=
ly=20
qualify for utility rebates.=20
Ernest and Monica Marks of Sacramento said they have cut power use in half =
to=20
counter soaring electric rates.=20
But they turned away from an Energy Star refrigerator after one look at the=
=20
$1,399 price tag.=20
They and other Filco customers were unaware of rebates, and a trio of=20
salesmen there said that is typical.=20
``People are going to buy energy-efficient appliances whether there are=20
rebates or not,'' said salesman Mark Brandes. ``The rebates are nice, but I=
=20
can't say that it spurs any sales.''=20
Consumers who can afford the more expensive models are lured by energy-use=
=20
savings that manufacturers say can top $100 a year on clothes washers and=
=20
dishwashers, Brandes said.=20
UCAN's Beebe and lawmakers including Senate leader John Burton, D-San=20
Francisco, worry that means the rebates won't go to the residents who need=
=20
them most: those with lower incomes who often buy old used appliances.=20
---------------------------------------------------------------------------=
---
----------------
Developments in California's energy crisis=20
The Associated Press
Thursday, April 5, 2001=20
,2001 Associated Press=20
URL:=20
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/05/s=
tate0
939EDT0163.DTL=20
, , -- (04-05) 06:39 PDT Here is a look at developments in California's=20
energy crisis:<=20
THURSDAY:< ?-- Gov. Gray Davis addresses the state on energy, planning a 6:=
05 p.m. ?five-minute broadcast from his office. ?-- No power alerts were ca=
lled during the morning as energy reserves stayed ?above 7 percent. ?WEDNES=
DAY:<=20
-- Economic forecasters say Californians will pay higher taxes, out-of-stat=
e=20
investments could dry up, and public projects will be scrapped because of t=
he=20
state's power crisis. The UCLA Anderson Forecast says the worst economic=20
threat could come from state government itself and its scrutiny of private=
=20
power suppliers, which along with blackouts and brownouts, could scare new=
=20
businesses away.=20
-- The state is free of power alerts as reserves stay above 7 percent.=20
-- The Legislature sends Davis a bill extending a rate cap for San Diego Ga=
s=20
& Electric's residential and small-business customers to medium and large=
=20
businesses.=20
-- The Senate Appropriations Committee sends the Senate a $408 million ener=
gy=20
conservation measure that would provide grants and loans to improve energy=
=20
efficiency at homes, businesses and government agencies. The state Energy=
=20
Commission estimates the bill could save 1,700 megawatts this summer, enoug=
h=20
power for nearly 1.3 million homes.=20
-- An Assembly committee rejects a bill by Assemblyman Dean Florez,=20
D-Shafter, that he calls an alternative to Gov. Gray Davis' plan to buy the=
=20
transmission lines of financially strapped Southern California Edison,=20
Pacific Gas and Electric Co. and San Diego Gas & Electric Co.=20
Florez' bill would create special districts of each utilities' properties,=
=20
including their land, transmission lines, power plants and even their=20
corporate offices. Each district would issue bonds against the property, an=
d=20
the state would assess a tax on that property to repay the bonds. If a=20
utility defaulted on the taxes, the state would be first in line to take th=
e=20
property after paying the balance of the bonds.=20
-- Congressional Democrats including Reps. Mike Honda and Anna Eshoo of=20
California announce legislation that would impose power rates based on the=
=20
cost of service and let Western states recover overcharges by power=20
suppliers. Honda accuses the Federal Energy Regulatory Commission of failin=
g=20
to protect California utility customers by taking such steps on its own.=20
<=20
WHAT'S NEXT:< ?-- The Davis administration continues negotiations with Edis=
on, PG&E and San ?Diego Gas & Electric Co. over state acquisition of their =
transmission lines. ?-- FERC holds a conference Tuesday in Boise, Idaho, on=
 Western energy issues. ?-- Edison and PG&E are expected to file their 2000=
 earnings reports April 17. ?-- The Assembly plans to resume hearings in it=
s inquiry into California's ?highest-in-the-nation natural gas prices April=
 18. ?< ?THE PROBLEM:<=20
High demand, high wholesale energy costs, transmission glitches and a tight=
=20
supply worsened by scarce hydroelectric power in the Northwest and=20
maintenance at aging California power plants are all factors in California'=
s=20
electricity crisis.=20
Edison and PG&E say they've lost nearly $14 billion since June to high=20
wholesale prices that the state's electricity deregulation law bars them fr=
om=20
passing onto ratepayers, and are close to bankruptcy.=20
Electricity and natural gas suppliers, scared off by the two companies' poo=
r=20
credit ratings, are refusing to sell to them, leading the state in January =
to=20
start buying power for the utilities' nearly 9 million residential and=20
business customers.=20
,2001 Associated Press ?=20
---------------------------------------------------------------------------=
---
---------------------------------------------------------------




Sharp dispute on economic impact in California=20
Posted at 11:11 p.m. PDT Wednesday, April 4, 2001=20
BY JENNIFER BJORHUS=20

Mercury News=20


In the midst of California's energy angst comes a report from the state's=
=20
pre-eminent economic forecasters that may surprise many.=20
The UCLA Business Forecast, issued Wednesday, concludes that the billions t=
he=20
state could spend on power will do little more than dent the state's $1.25=
=20
trillion economy. Calling the state's rolling blackouts a ``nuisance,''=20
economist Christopher Thornberg concludes that ``an hour without power can =
be=20
viewed as an extended coffee break for most businesses.''=20
That cheerful prediction drew sharp criticism from other economists and the=
=20
business community, but none took issue with a more ominous point highlight=
ed=20
by the report: There is a dearth of information about just what economic to=
ll=20
the energy crisis will take on the world's seventh largest economy.=20
What is the bill for a 36 percent increase in electricity rates, soaring=20
natural gas bills, the lost output of companies shut down by outages and=20
costly state electricity purchases?=20
State financial analysts do not know.=20
And neither does anyone else, it seems, although estimates range as high as=
=20
$100 billion.=20
Although he expressed doubt about being able to determine the financial hit=
,=20
Thornberg said, ``I have a feeling that eventually I'm going to have to sit=
=20
down and try.''=20
In his report, Thornberg estimated the state would spend $30 billion on=20
electricity. But he did not calculate the total financial impact of high ga=
s=20
bills or the impact the crisis will have on such things as disposable incom=
e,=20
productivity, inflation and job growth.=20
Still, Thornberg said, he thinks the crisis will drive up business costs he=
re=20
just 1 or 2 percent.=20
``I don't think it's that big a deal,'' he said.=20
Tell that to dairy processors who have thrown out spoiled milk, or plastics=
=20
manufacturer Paul Strong, who reports his Simi Valley company lost $250,000=
=20
last year when it was forced to shut down while molten plastic hardened in=
=20
the molds.=20
``Overly cavalier,'' said Allan Zaremberg, president of the California=20
Chamber of Commerce, explaining that rolling blackouts are a serious proble=
m=20
for his members.=20
``Ridiculous,'' snorted Michael Boccadoro, executive director of the=20
Agricultural Energy Consumers Association.=20
As part of its state budget-making, California's Department of Finance has=
=20
started revising its economic forecast for California to account for power=
=20
problems. The analysts will issue the revision around May 15, said the=20
state's chief economist Ted Gibson.=20
The Bay Area Economic Forum, too, is working with McKinsey & Company to stu=
dy=20
the economic effects on the region. The group expects to finish its analysi=
s=20
in about two weeks.=20
For now, lawmakers and others trying to craft solutions are dealing with=20
dribs and drabs of numbers. Gov. Gray Davis has refused to release details =
of=20
the state's power purchases, prompting several news organizations to sue an=
d=20
other Sacramento politicians to question his decision.=20
While California operates in the dark, Washington state has already done an=
=20
analysis.=20
State fiscal analysts in Washington did a small study of the energy check=
=20
being handed to the state. They concluded that rising electricity and natur=
al=20
gas prices will erode disposable income by $1.7 billion a year and slow job=
=20
growth by half a percent, costing 43,000 jobs that otherwise would have bee=
n=20
added over three years. Energy problems could also tip the state into=20
recession, the study warns.=20
``It's a worst-case scenario that presumes nothing is done,'' said Ed=20
Penhale, spokesman for the Washington Office of Financial Management. ``It'=
s=20
pretty basic modeling.''=20
Various California politicians have taken a shot at estimates.=20
State Controller Kathleen Connell has said the state will spend $26.8 billi=
on=20
buying energy over the next 18 months, rate increases will cost ratepayers =
$7=20
billion and bond financing will cost $12.4 billion. That alone totals about=
=20
$46 billion, not including $9 billion to buy the utilities' power grids.=20
Steve Cochrane, senior economist at Economy.com near Philadelphia, Pa.,=20
warned that the increase in retail electricity prices will cut disposable=
=20
income, slow the California economy and push an already high inflation rate=
=20
higher.=20
Unless businesses save on power costs through more conservation, the increa=
se=20
in electricity costs alone will push up the price of goods and services=20
produced in California about 6 percent. Already, he pointed out, the area's=
=20
6.5 percent inflation is double the nation's.=20
Cochrane's team is trying to build a model to measure the impact, he said,=
=20
adding that he is ``much more alarmed'' than Thornberg.=20
``The whole country is watching this,'' Cochrane said.=20
He said slowing job growth, slowing retail sales, lost productivity and=20
reduced disposable income, together with energy purchases could total $100=
=20
billion.=20
More worrisome, Cochrane said, are the long-term effects on the California=
=20
economy over the next 10 years. Higher energy costs will make businesses=20
think hard about expanding in the state, he said. And wiping out the genera=
l=20
fund surplus means the state will not have the cash to spend on things like=
=20
new schools and public works projects, undertakings that produce jobs.=20
Jack Kyser, chief economist for the Los Angeles County Economic Development=
=20
Corporation, agrees. Kyser estimated that rolling blackouts during just two=
=20
weeks in January alone cost businesses in his area around $500 million.=20
``Maybe it's because I'm too close to it. I think that this has the potenti=
al=20
to seriously affect the state,'' said Vince Signorotti, spokesman for=20
CalEnergy, a geothermal generator in southern California that is suing=20
Southern California Edison for money it has not been paid for power. ``To=
=20
ignore the colossal impact that this could have, it's sort of myopic.''=20


Contact Jennifer Bjorhus at jbjorhus@sjmercury.com or (408) 920-5660.

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





Gov. Davis prepares to address state on energy=20
Posted at 6:40 a.m. PDT Thursday, April 5, 2001=20
BY JENNIFER COLEMAN=20

Associated Press Writer=20



SACRAMENTO (AP) -- While California Gov. Gray Davis prepared to address the=
=20
state Thursday night on energy, economic forecasters predicted his=20
constitutents will pay higher taxes, watch out-of-state investments evapora=
te=20
and suffer scrapped public projects because of the ongoing power crisis.=20
The UCLA Anderson Forecast says the worst economic threat could come from=
=20
state government itself and its scrutiny of private power suppliers, which=
=20
along with blackouts and brownouts, could scare new businesses away.=20
Davis addressed some commercial concerns Wednesday by breaking with his=20
appointees on the Public Utilities Commission by saying private companies a=
nd=20
other large power users should be allowed to contract directly for power wi=
th=20
generators.=20
Critics of allowing direct access include PUC President Loretta Lynch and T=
he=20
Utility Reform Network, who say residential customers and small businesses=
=20
unable to garner such contracts will get stuck with the bill for the billio=
ns=20
of dollars the state has and will spend buying electricity for the customer=
s=20
of three cash-strapped utilities.=20
Word came from California's treasurer Wednesday that the state had secured=
=20
$4.1 billion in loans to help pay back the state's power buys.=20
Facing continued refusal from federal energy regulators to cap high energy=
=20
prices, Davis reassessed the tools at his disposal Wednesday, saying he is=
=20
open to supporting a windfall-profits tax being proposed by lawmakers on=20
electric generators that have made a fortune selling power to California th=
is=20
year.=20
Assemblywoman Ellen Corbett, D-San Leandro, introduced a windfall-profits t=
ax=20
bill Wednesday that would tax gross receipts that ``significantly exceed''=
=20
the cost of producing power.=20
It would also tax profits of power marketers who have bought power and late=
r=20
sold it at much higher rates. The rate of the tax was not specified in the=
=20
bill, and Corbett said she expects the details to be worked out later.=20
``We continue to allow some electricity generators and middlemen to reap=20
enormous profits on their sales of electricity into the state. This=20
profiteering must stop,'' said Corbett.=20
Senators on the Revenue and Tax Committee have also inserted similar langua=
ge=20
into a pending bill.=20
Tom Williams, spokesman for Duke Energy, said he doubted a tax on a selecte=
d=20
industry would be legal. The tax would discourage generators from building=
=20
new power plants in California, he said.=20
``The governor has made very clear that he is trying to do whatever he can =
to=20
increase the amount of generation in California and reduce the price.=20
Windfall profits taxes do neither of these,'' said Williams.=20
``Clearly it would have an adverse affect on our decisions on new investmen=
t=20
or following through on our planned investments,'' he said.=20
Davis said Wednesday he generally opposes treating profitable companies in=
=20
that manner, ``but these profits are outrageous and are at our expense. The=
=20
only things companies understand is leverage. I'm not saying I'll sign it a=
nd=20
I'm not saying I won't sign it.''=20
For the first time, Davis also said the state should let companies buy thei=
r=20
power from generators instead of going through the utilities.=20
A January law that allowed the state to begin buying power for two nearly=
=20
bankrupt utilities barred such side contracts.=20
``That was done originally with the thought the state would have more power=
=20
and no one to sell it to if companies got off the grid,'' Davis said. ``But=
=20
our problem is the opposite this summer. If companies want to get off the=
=20
grid, we should encourage, not discourage that.''=20
The Democratic governor's comments came after he met behind closed doors fo=
r=20
more than two hours with Assembly Republicans, who have sharply criticized=
=20
his handling of the energy crisis.=20
``I think everyone agreed there are no political winners unless we resolve=
=20
this challenge,'' Davis said. ``There were a lot of suggestions in there I'=
m=20
willing to adopt.''=20
For instance, he agreed that San Diego Gas and Electric customers should ha=
ve=20
a different benchmark for receiving 20 percent rebates under his program fo=
r=20
consumers who cut their energy use by 20 percent this summer.=20
Unlike other Californians, San Diego residents faced soaring rates last=20
summer and began conserving then, so Davis said they should have to cut 20=
=20
percent from 1999 energy use levels instead of using last summer as a=20
starting point.=20
Davis said he hasn't written the remarks he will make during a five-minute=
=20
address at 6:05 p.m. Thursday that he has asked California television=20
stations to carry live.=20
However, he said he will ``share with them (viewers) the progress that we'v=
e=20
made and what we have to get through.''=20
He is expected to talk about the more than 40 percent rate increases approv=
ed=20
last week by the PUC for customers of Pacific Gas and Electric Co. and=20
Southern California Edison Co.

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






Too much hot air about too little power=20
Thursday, April 5, 2001=20
To deal more directly with the energy crisis, Assembly Republicans last wee=
k=20
replaced Assemblyman Bill Campbell of Orange as their leader with Assemblym=
an=20
David Cox of Sacramento. Mr. Cox has some good ideas, but we would urge him=
=20
not to use the energy crisis, tempting as it may be, for pure political gai=
n.=20
His mission should be to fix the mess as much as possible before the summer=
=20
crunch is upon us.=20
Mr. Cox is a former Sacramento County Supervisor and served on the Sacramen=
to=20
Municipal Utility District Board of Directors, giving him some experience i=
n=20
the electricity field. In an interview, he outlined the party's main goals,=
=20
which we found encouraging:=20
l "We will continue to introduce plans and bills that expedite new supply,"=
=20
he said. He criticized Democratic solutions, including Gov. Gray Davis'=20
proposal to buy the power grid and Assembly Bill 1X, which gave the=20
government the authority to use bonds to buy power. Neither creates any new=
=20
energy, Mr. Cox said. "There is one solution, putting more electrons into t=
he=20
system," he insisted. He said some Democrats also understand that fact.
l "Get the QFs back on line in a contractual situation," he said. The=20
qualifying facilities are small producers, usually of alternative sources=
=20
such as wind and geothermal power. "They have to see some prospect of getti=
ng=20
the money that's owed to them" by the utilities, which have withheld paymen=
ts=20
because of their strapped financial situation. The QFs limited their=20
production during last month's blackouts. The QFs supply one-third of the=
=20
state's power and are crucial to limiting blackouts this summer.
l Conservation.
And, he said the GOP opposes rate increases. He believes natural gas prices=
=20
will decline as the weather moderates in Western states and demand slackens=
.
He said, of course, that the attempted 1996 "deregulation" was flawed. But =
he=20
believes real deregulation can work, as it has in other states "if you have=
=20
12 percent to 15 percent more supply than demand. You then have competition=
=20
and competition brings down rates." By contrast, California has to import=
=20
about 20 percent of its power.
Republicans are a minority in both houses of the Legislature. But they=20
obviously hope to score political gains against the reigning Democrats, who=
=20
so far have not been able to shape and communicate an approach to weatherin=
g=20
and recovering from the crisis. Mr. Cox's ideas generally are good -=20
obviously increasing supply is key - but the Republican opposition to retai=
l=20
rate increases seems as na<ve (and unbelievable) as the governor's.=20
The hard truth is that energy prices everywhere have risen, including not=
=20
only natural gas but gasoline and diesel fuel.
We would reiterate to Mr. Cox and to the GOP to minimize politically=20
motivated positions and focus on the merits of a strong recovery plan.=20
California needs to move beyond politics and toward solutions. Mr. Cox shou=
ld=20
help lead the way.


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








More pain predicted in electric crisis=20
Most economists say increases in utility bills will take some toll on the=
=20
state's condition - sooner or later.=20
April 5, 2001=20
By MARY ANN MILBOURN
and KATE BERRY
The Orange County Register=20
Californians haven't yet felt the full economic effect of electric rate=20
increases, but it's coming, many regional economic experts said Wednesday.=
=20
The rate hikes are like a $5 billion tax, said economist Anil Puri, dean of=
=20
the school of business and economics at California State University,=20
Fullerton.=20
"It will have a negative impact on consumer confidence as well as on the=20
pocketbook," he said. "Prices in general are going up, there are fewer jobs=
=20
and falling incomes. Every little bit adds to that misery. You can't ignore=
=20
it."=20
Economists differ about when and how strongly the effect of rising=20
electricity prices will be felt. That's in part because the effects aren't=
=20
yet showing up in economic surveys.=20
Businesses and consumers, however, report that they are already hurting=20
because of rising power costs.=20
Steven Zimmerman, managing director of the Standard & Poor's bond rating=20
agency, said it's hard to determine right now how much of the state economy=
=20
is already being affected by the rate increases and how much is just the=20
overall slowdown.=20
"If the energy crisis goes on for some length of time, it will affect the=
=20
economy," said Zimmerman, speaking Wednesday at the quarterly UCLA forecast=
=20
conference.=20
Economist Esmail Adibi, director of the Anderson Center for Economic Resear=
ch=20
at Chapman University in Orange, said the 9 percent electricity rate increa=
se=20
in January had little effect because it was offset in large part by a=20
quarter-percent sales tax cut.=20
"But the newest increase will be about $4.8 billion in extra cost," said=20
Adibi, who released his own economic forecast in December. "It's going to=
=20
have some negative impact."=20
The economist who foresees the smallest effect is UCLA visiting Professor=
=20
Christopher Thornberg, who told the quarterly UCLA economic forecast=20
conference that electricity prices would have relatively little economic=20
effect on the long-term economy.=20
Thornberg said electricity is such a small part of the overall cost of doin=
g=20
business that even the companies that have to bear the greatest burden,=20
paying up to 36 percent more for power, will see little effect on their=20
bottom line.=20
Consumers, he said, will be paying more, but it should not affect their=20
overall spending.=20
"Certainly it's going to sting. Certainly it's going to decrease profits, b=
ut=20
it's not that big a hit," he said.=20
Puri, who will release his own economic forecast in May, said Thornberg=20
appeared to be understating the short-term effect of the rate increases.=20
UCLA economist Tom Lieser expects that the electricity crisis will have an=
=20
effect not only on business, but also on government services, because of th=
e=20
$14 billion in bonds the state is expected to sell to pay off its electrici=
ty=20
purchases.=20
"It's nothing that will bankrupt us, but it's money that could have been us=
ed=20
on something else," Lieser said.=20
UCLA economists, for example, believe what remains of the state surplus wil=
l=20
be used to finance K-12 education, but budgets for universities, prisons,=
=20
health care and welfare will not get the funds that had been expected.=20
Locally, the rate increases are affecting the Orange County budget.=20
Diane Thomas, county spokeswoman, said only $13.3 million was budgeted for=
=20
this fiscal year for electricity and natural gas, about the same as what wa=
s=20
spent last year.=20
But by the end of the fiscal year on June 30, the county expects to have=20
spent an additional $2.6 million on electricity and natural gas. Officials=
=20
tentatively expect to budget about $18.6 million for fiscal 2001-2002.=20
Dick Collins, president and chief executive officer of Astech Manufacturing=
=20
in Santa Ana, said the rate increases are hurting now.=20
"We had a 15 percent increase (in electricity costs) in January and (expect=
)=20
a 40 percent increase next, so we're talking a 50 percent to 60 percent=20
increase," said Collins, whose company makes exhaust systems for airplane=
=20
engines. "To say that doesn't have an impact is laughable."=20
He said power costs have run about 5 percent of his total sales, but now he=
's=20
looking at a more than 50 percent increase in his electric bill.=20
Because he needs reliable power, Collins said he is also investing in a=20
backup diesel generator for $250,000 - 20 percent of his annual capital=20
budget.=20
"I think (Thornberg) is na<ve," Collins said.=20
Consumers, too, are having a tough go of it, said Eugene N. Cramer, a retir=
ed=20
San Clemente engineer, who got hit by San Diego Gas & Electric's increases=
=20
last summer.=20
"When our utility bills went up $300, we didn't buy as much, we decided to=
=20
forgo a vacation," he said.=20
Register staff writer Chris Reed contributed to this report.

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---
------------------------------------------------------------------------







'Windfall tax' on power profits?=20
Assembly Democrats target profiteering.=20
April 5, 2001=20
By Daniel Taub
Bloomberg News=20
SACRAMENTO - Electricity generators and traders whose profits in California=
=20
are deemed to be excessive would pay a "windfall profits" tax under a plan=
=20
endorsed by Democrats in the state Assembly.=20
Assembly Bill 128-X, introduced Wednesday in the Assembly, would impose the=
=20
tax retroactive to Jan. 1. The bill's authors haven't decided what percenta=
ge=20
above a generator's or trader's cost to deliver electricity would be deemed=
=20
"windfall profits."=20
"The intent of the bill is to discourage profiteering," said Assemblywoman=
=20
Hannah- Beth Jackson, a Democrat from Santa Barbara and one of the bill's=
=20
authors.=20
California's two largest electric utilities, PG&E Corp.'s Pacific Gas &=20
Electric and Edison International's Southern California Edison, are on the=
=20
verge of bankruptcy. They racked up more than $14 billion in losses over th=
e=20
past year buying power at prices higher than they were allowed to charge=20
customers.=20
Gov. Gray Davis has dubbed generators "out-of-state profiteers" who collect=
ed=20
billions of dollars from electricity sales while pushing PG&E and Edison=20
toward insolvency. California's power-grid manager has alleged that=20
generators and traders overcharged California by $6.8 billion between May a=
nd=20
February.=20
Generators criticized Assembly Bill 128-X as being unnecessary and a=20
disincentive to power sellers wanting to do business in California.=20
"We have said the rates that we have charged have been just and reasonable=
=20
and therefore there is no basis for a windfall tax," said Steve Stengel,=20
spokesman for Houston-based Dynegy Inc.A windfall-profits tax "does nothing=
"=20
to solve the power shortage in California, said Richard Wheatley, spokesman=
=20
for Houston-based Reliant Energy Inc., which operates power plants in the=
=20
state. The state experienced two days of blackouts last month after power=
=20
demand outstripped available supplies.

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---
------------------------------------------------------------------------







PUC chief takes issue with utilities' claims on power crisis=20
April 5, 2001=20
By KATE BERRY
The Orange County Register=20
Loretta Lynch, president of the California Public Utilities Commission, sai=
d=20
Wednesday that California is "in a war" with sellers of electricity -=20
corporations that she said have drained much of the value out of the=20
California economy.=20
Lynchaddressed more than 300 business executives at UCLA's quarterly Anders=
on=20
economic forecast conference.=20
Of the state's electricity crisis, Lynch sought to dispel five myths she sa=
id=20
businesses and consumers believe about the state's power problems:=20
Utilities claim they were not allowed to enter long-term contracts, which=
=20
would have lowered prices. On the contrary, Lynch said utilities were given=
=20
the authority nine times to enter contracts to hedge their prices going=20
forward.=20
The utilities plan to pass on real electricity costs to consumers on their=
=20
bills if they win pending court cases.=20
Lynch said the utilities are responsible for the risk of higher costs.=20
"The utilities made their bargain and the Federal Energy Regulatory=20
Commission blessed that bargain," she said.=20
Increased electricity supply would cause prices to drop.=20
"It's not simply a question of supply because if it were, prices would trac=
k=20
demand," Lynch said.=20
Instead, prices in California remain high during periods of very low demand=
=20
including at night, in early morning hours and during winter months when=20
there is less consumption. In December 1999, when consumption in California=
=20
was less than 20,000 megawatts at 10 p.m. on the average day, costs average=
d=20
$24 a megawatt-hour, Lynch said. By comparison, in December 2000, during=20
periods of the same consumption, electricity prices averaged $212 a=20
megawatt-hour.=20
Early rate hikes would have solved everything.=20
Electricity prices began skyrocketing in December, Lynch maintains, because=
=20
FERC lifted a $250 cap on wholesale prices.=20
"Without price caps, all we do is enable further gaming of the market," she=
=20
said.=20
The market will impose price discipline on energy sellers.=20
Lynch claimed the decisions that led to deregulation were based on ideology=
,=20
not facts. The ideology, she said, led people to assume power generators=20
would be curbed by market forces. Instead, the generators were able to take=
=20
advantage of those forces, she said.

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







State borrows $4.1 billion for power=20
Governor, Water Resources Department must reveal details on buys for three=
=20
struggling utilities.=20
April 5, 2001=20
By Alexa Haussler
The Associated Press=20
SACRAMENTO - California has secured $4.1 billion in loans to help pay back=
=20
state money spent to buy power for three financially struggling utilities,=
=20
the state treasurer said Wednesday.=20
To close the deal, Gov. Gray Davis and the state Department of Water=20
Resources must release details of how much the state has spent and expects =
to=20
spend on the power buys, Treasurer Phil Angelides said.=20
The loans are needed to preserve state government's financial health, he=20
said.=20
"If we continue to chunk out of the general fund without end, we're going t=
o=20
deplete our treasury, we're going to harm the very programs that we care=20
about and our credit rating will come down," Angelides said.=20
Angelides delivered a letter to Davis on Wednesday detailing the terms of t=
he=20
loan and pressing him to reveal details of the state's past and expected=20
power purchases. Davis' director of finance, Tim Gage, said Angelides' lett=
er=20
was "old news."=20
"The treasurer is well aware of the extensive due diligence being conducted=
=20
by the Department of Water Resources in preparing the revenue requirements=
=20
and cash flow analysis for power purchases to be submitted to the (Public=
=20
Utilities Commission)," Gage said.=20
Davis last week asked lawmakers to approve spending another $500 million to=
=20
buy power on behalf of the state's three strapped investor-owned utilities,=
=20
Southern California Edison, Pacific Gas and Electric and San Diego Gas &=20
Electric, raising state money committed to the power buys to $4.7 billion.=
=20
Davis administration officials told several key Democratic Assembly members=
=20
last month that the state's power-buying for the utilities could cost $23=
=20
billion by the end of next year.=20
Angelides said the loans would be provided by J.P. Morgan, Lehman Brothers=
=20
and Bear Stearns and would be offered at a 5.38 percent interest rate as lo=
ng=20
as they are paid back by Aug. 29.=20
The state expects to pay them back after issuing revenue bonds in May to=20
raise more money for its power buys, he said. Those bonds will eventually b=
e=20
repaid by Edison and PG&E customers.=20
The DWR has bought power for the utilities since early January, when Edison=
=20
and PG&E disclosed they were on the verge of bankruptcy and electricity=20
suppliers began denying credit.=20
Edison and PG&E say they have lost more than $14 billion since June due to=
=20
high wholesale power costs the state's deregulation law blocks them from=20
recovering from their customers. The San Diego utility is also struggling=
=20
with soaring wholesale prices, although unlike the other two much larger=20
utilities, it has not characterized itself as near bankruptcy.=20
Standard & Poor's credit-rating agency has had the state under review for=
=20
possible downgrade since its power-buying began.

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







Electricity notebook=20
Davis to discuss power crisis in televised address.=20
April 5, 2001=20
SACRAMENTO - Gov. Gray Davis, in his first statewide television address=20
targeting California's energy crisis, tonight will discuss last week's=20
increase in electricity rates and his attempts to ease the state's power=20
crisis.=20
The Democratic governor's five-minute remarks are scheduled for 6:05 p.m. a=
nd=20
will be carried by stations across the state, according to Davis press aide=
=20
Steve Maviglio.=20
"The governor will discuss rates. No discussion of electricity would be=20
complete without rates. But there are other things. He will also talk about=
=20
conservation, generation and the solvency of the state's utilities," Mavigl=
io=20
said.=20
Davis has said the recent decision by the state Public Utilities Commission=
=20
to boost electricity bills by as much as 36 percent was premature and based=
=20
on insufficient data.=20
He said this week he would soon offer his view of whether rates should have=
=20
been increased.=20
The governor has said for months it was his "hope and expectation" that=20
electricity rates would not be raised. But in recent weeks he said he would=
=20
consider seeking an increase if the "good of the state" required it.=20
Utility owner, state differ on value of firm's share=20
SAN DIEGO - Sempra Energy, owner of California's third-largest utility, wan=
ts=20
$1.4 billion for its part of the state's power grid, while state officials=
=20
have offered $1.2 billion, Sempra Chief Executive Stephen Baum said.=20
California officials want to buy the power-transmission assets of=20
California's utilities to help Edison International and PG&E Corp. pay more=
=20
than $14 billion in power- buying debt.=20
For the plan to work, the state needs the systems of all three utilities,=
=20
Baum said.=20
Edison reached a tentative agreement with the state to sell its power lines=
=20
for $2.76 billion last month.=20
After Edison's final agreement, rescue pacts are expected to be reached wit=
h=20
PG&E and then Sempra, Joseph Fichera, the state's top energy crisis adviser=
,=20
said last week.=20
Sempra will move quickly to close an agreement once its turn comes, Baum=20
said.=20
"I hope it goes through and I hope it goes through soon," Baum told an=20
investors' conference in New York.=20
San Diego-based Sempra can invest money from the sale more profitably in=20
power plants in the United States and abroad, he said.=20
The Legislature would have to approve the transactions.=20
Blackouts are "inevitable" this summer in California, when demand for=20
electricity will outstrip supply on the hottest days by as much as 5,000=20
megawatts, or enough to light 5 million U.S. homes, Baum said.=20
"I don't see a significant demand reduction and there's not going to be=20
enough power generation in place," Baum said.=20
Register staff writer John Howard and Bloomberg News contributed to this=20
report.

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




California Regulators Face Backlash


By MICHAEL LIEDTKE
AP Business Writer
SAN FRANCISCO (AP) via NewsEdge Corporation -=20
Some Californians have turned to song and rhyme to vent their anger at the=
=20
commission that approved electricity rate increases for customers of the=20
state's cash-strapped utilities.=20
``Your stench of unspoken arrogance disgusts us,'' said San Francisco=20
resident David Alt, reading an acerbic poem.=20
``I'm reading now by candlelight, wrapped in blankets day and night,'' rapp=
ed=20
retired teacher Wellingby Boyce of Davis, drawing applause Tuesday at a=20
meeting of the Public Utilities Commission.=20
The commission last week approved rate increases of more than 40 percent fo=
r=20
customers of Pacific Gas and Electric Co. and Southern California Edison Co=
.=20
On Wednesday morning, the state was free of power alerts as reserves stayed=
=20
above 7 percent. State power grid officials issued a Stage 2 alert _ meanin=
g=20
reserves were below 5 percent _ on Monday after transmission lines were=20
downed by high wind, interfering with electricity imported from the=20
Northwest.=20
Commissioner Geoffrey Brown dismissed the protesters at Tuesday's meeting a=
s=20
unruly ``self-appointed activists'' who were long on rhetoric and short on=
=20
solutions.=20
Commission President Loretta Lynch said she believed the protesters conveye=
d=20
widespread frustration over the rapidly rising price of power.=20
``I'm glad people are upset because it means they are paying attention,''=
=20
Lynch said. ``Hopefully, we can all band together against the energy=20
wholesalers responsible for this mess.''=20
The majority of protesters belonged to the Green Party and a group called=
=20
Public Power Now, which are pushing the state to seize control of the=20
regulated utilities and California's electricity plants.=20
On Monday, the Public Utilities Commission agreed to investigate the parent=
=20
companies of PG&E and SoCal Edison, as well as Sempra Energy Corp., the=20
holding company for San Diego Gas and Electric, for possible financial=20
misconduct.=20
The companies said they have done nothing wrong and described the PUC=20
investigation as a waste of time.=20
The inquiry will focus on whether PG&E Corp. and Edison International milke=
d=20
the nearly bankrupt utilities for cash and hoarded profits from their=20
unregulated businesses that should have been used to help bail out the=20
utilities.=20
Forced to pay more for electricity on the wholesale market than they could=
=20
charge their customers under the state's 1996 energy deregulation law, the=
=20
two utilities say they have run up combined debts of about $14 billion over=
=20
the last 10 months.=20
Gov. Gray Davis has promised that electricity from new plants will stay in=
=20
California, but it is unclear if new power plants can be forced to sell the=
ir=20
electricity to the state, The Sacramento Bee newspaper reported Wednesday.=
=20
Attorneys for the state Energy Commission, which has a role in approving ne=
w=20
large power plants, said they believe the state cannot stop them from=20
exporting power, even in exchange for a rushed environmental review of thei=
r=20
projects.=20


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

ICF Consulting Study Predicts Turning Point in Wholesale Power Markets




FAIRFAX, Va., April 4 /PRNewswire/ via NewsEdge Corporation -=20
ICF Consulting recently completed the Fourth Edition of its Bulk Power=20
Outlook subscription study, which concludes that the outlook for the=20
wholesale power markets is at a turning point. After years of generation=20
capacity shortages, the number of new plants under construction promises an=
=20
end to shortages in one to three years in practically every U.S. regional=
=20
power market.=20
ICF Consulting does not believe this turning point will occur everywhere at=
=20
the same time. California, other western states, and some other markets fac=
e=20
potentially serious shortages this summer. "California faces potentially=20
severe problems this summer," says Judah Rose, managing director of ICF=20
Consulting's wholesale power practice. "However, even California can expect=
=20
to be in balance within three years and prices will moderate and extreme=20
price spikes will occur less frequently. Also, we are very concerned about=
=20
New York City for this summer."=20
ICF Consulting's previous three editions of Bulk Power Outlook strenuously=
=20
warned that the lack of construction would result in extremely high prices=
=20
reaching thousands of dollars per MWh. "Since 1995, we advised everyone to=
=20
develop generation and/or secure it, even peaking facilities, because price=
s=20
were going to skyrocket," says Rose. "At the time, ICF Consulting was the=
=20
only entity to anticipate correctly the current high prices and shortages.=
=20
Today a different approach is needed."=20
Using the same ICF Consulting IPM(TM) power model from previous studies, th=
is=20
Outlook predicts that the current level of plant construction is enough to=
=20
solve shortages. Since construction takes two to three years, relief will n=
ot=20
be available this summer. In a few markets, construction is more than=20
sufficient -- e.g., ERCOT (Texas). "Regulators, consumers, and producers ne=
ed=20
to be sensitive to current difficulties and base decisions on future=20
developments," says Rose. "Moderating oil and gas prices over the same peri=
od=20
also will help lower power prices. In addition, a return to normal hydro=20
conditions by 2002 will further reinforce the effects of new plant=20
construction."=20
The implications of this change in wholesale market conditions are far=20
ranging. First, regulators can expect market conditions to be more supporti=
ve=20
of deregulation, especially if they facilitate private-sector initiative.=
=20
Second, power plant developers will need to be more selective. Third,=20
unregulated retail sales will be more feasible, reversing a trend of=20
significant problems in developing retail businesses. "Our findings are not=
=20
that markets don't work but rather they don't work perfectly, especially wh=
en=20
barriers combine with lack of experience. We can clearly see a powerful=20
market response to four years of high prices," Rose concludes.=20
For more information on this topic or to obtain a copy of Fourth Edition Bu=
lk=20
Power Outlook study, contact Judah Rose at 703-934-3342 or Elizabeth Kaiga =
at=20
703-934-3497.=20
ICF Consulting, with more than 30 years of experience, is one of the world'=
s=20
leading professional services firms advising clients on managing global=20
resources in a sustainable way. ICF Consulting helps clients optimize energ=
y=20
resources, meet environmental challenges, foster economic and community=20
development, enhance transportation projects and policies, and manage=20
information technology resources. ICF Consulting's 800 employees are based =
in=20
16 offices around the globe, including offices in Bangkok, Fairfax, London,=
=20
Los Angeles, Melbourne, Moscow, New York, San Francisco, Toronto, and=20
Washington, D.C. The firm reported gross revenue of $109 million in 2000. F=
or=20
additional information, please visit our Web site at=20
http://www.icfconsulting.com .=20

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---
---------------------------------------

Thursday, April 5, 2001=20


By Kathleen McFall=20
kmcfall@ftenergy.com=20

Worldwide energy consumption is projected to grow by 59% over the next two=
=20
decades, according to International Energy Outlook 2001 (IEO), a report=20
released last week by the U.S. Energy Information Administration (EIA). The=
=20
IEO is an annual projection of worldwide energy trends for the subsequent=
=20
20-year period.=20

A whopping half of the projected growth is expected to occur in the=20
developing nations of Asia (including China, India and South Korea) and in=
=20
Central and South America, where strong economic growth is expected to spur=
=20
robust demand for energy.=20

The report predicts, in a base-case scenario, that oil prices will remain a=
t=20
current levels of $25 to $28 per barrel until 2003 when they return to the=
=20
price trajectory anticipated in last year's outlook for the mid-term. Last=
=20
year, the agency forecasted world oil prices would be $22 per barrel in=20
constant 1998 U.S. dollars ($36 per barrel in nominal dollars) at the end o=
f=20
the projection period.=20

"Persistently high world oil prices, stronger than anticipated economic=20
recovery in Southeast Asia and robust economic growth in the former Soviet=
=20
Union (FSU) have all impacted the mid-term outlook for world energy use," t=
he=20
current report said.=20

Natural gas will dominate
The report forecasts that natural gas will remain the fastest growing=20
component of primary world energy consumption. Over the next two decades, g=
as=20
use is projected to nearly double=01*reaching 162 trillion cubic feet in 20=
20.=20
Natural gas is expected to account for the largest increment in electricity=
=20
generation (accounting for 41% of the total increment in energy used for=20
electricity generation).

"Gas use surpassed coal use (on a Btu basis) for the first time in 1999, an=
d=20
by 2020 it is expected to exceed coal use by 44%," said the report.=20

While the official forecast is that natural gas will dominate world energy=
=20
growth and realize substantial market growth based on extrapolation of=20
current fundamentals, concern is percolating among some industry players=20
about the potential demand destruction that could accompany high gas prices=
,=20
at least in U.S. markets.=20

"If we continue to see $5 and $10 gas prices over any extended period of=20
time, the likelihood that natural gas will capture the market opportunities=
=20
that are presented is remote," said Bill Hobbs, president of energy marketi=
ng=20
and trading at Williams Cos. Inc.=20

In the U.S, high natural gas prices have industry insiders pondering the=20
possibility of new coal or nuclear plants, an option that just last year=20
would have seemed politically infeasible.=20

"I think a healthy gas price is in the $2.50 to $3 range," said Hobbs, as=
=20
reported by Reuters, after addressing the Ziff Energy North American Natura=
l=20
Gas Strategies Conference in Houston.=20

Recent EIA projections for the domestic gas industry are above these levels=
.=20
It is "unlikely that wellhead prices will decline to the level of $2 per=20
thousand cubic feet of one year ago," Mary J. Hutzler, EIA's director of=20
forecasting, told a House committee late in March. "In 2001, the average=20
wellhead price is projected to be about $4.70 per thousand cubic feet."=20

Nuclear grows, renewables slow
Worldwide, nuclear power will continue to remain viable during the forecast=
=20
period, said the IEA report. Global consumption of electricity generated fr=
om=20
nuclear power is expected to increase from 2,396 billion kWh in 1999 to 2,6=
36=20
billion kWh in 2015 before declining to 2,582 billion kWh at the end of the=
=20
forecast period.=20

"Most of the growth in nuclear capacity in the reference case is expected t=
o=20
occur in the developing world (particularly developing Asia), where=20
consumption of electricity from nuclear power is projected to increase by=
=20
4.9% per year between 1999 and 2020," said the report. Nuclear growth from=
=20
new plants in the industrialized world is not anticipated except in France=
=20
and Japan.=20

Renewable energy use is projected to rise by 53% between 1999 and 2020, but=
=20
its current 9% share of total energy consumption will drop to 8% by 2020. T=
he=20
agency attributes this to the fact that renewable energy will remain costli=
er=20
than fossil fuel alternatives. "Despite recent high prices, over the long=
=20
term energy prices are forecasted to remain relatively low, constraining th=
e=20
expansion of hydroelectricity and other renewable resources," the report=20
said.=20

"Much of the growth in renewable energy over the next two decades is=20
attributed to large-scale hydroelectric projects in the developing world,=
=20
particularly developing Asia, where China, India and other developing natio=
ns=20
(Malaysia, Nepal and Vietnam, among others) are already building or plannin=
g=20
to build hydro projects that each exceed 1,000 MW," concluded the agency.=
=20

Energy intensity improves=20
In the IEO forecast, energy intensity=01*energy consumption per dollar of g=
ross=20
domestic product=01*in the industrialized world is expected to improve=20
(decrease) by 1.3% per year between 1999 and 2020, about the same rate of=
=20
improvement observed between 1970 and 1999.=20

"Energy use per person generally declined from 1970 through the mid-1980s,=
=20
and then tended to increase as energy prices declined. Per capita energy us=
e=20
is expected to increase slightly (in the U.S.) through 2020, as efficiency=
=20
gains only partially offset higher demand for energy services," said EIA's=
=20
Hutzler in her congressional testimony. Energy intensity is also projected =
to=20
improve in the developing countries=01*by 1.4% per year=01*as their economi=
es begin=20
to behave more like those of the industrialized countries as a result of=20
improving standards of living.=20

Extrapolation of all these trends leads to predictions of growth in carbon=
=20
dioxide emissions of 5.8 billion metric tons carbon equivalent in 1990 to 7=
.8=20
billion metric tons in 2010 and 9.8 billion metric tons by 2020.=20

"The rate of worldwide energy and carbon emissions growth would be=20
considerably higher, except for continued improvements in energy intensity,=
"=20
the report said.=20

Not surprisingly, much of the rise in carbon emissions will occur in the=20
developing world, where emerging economies are expected to produce the=20
largest increases in energy consumption despite current low emissions=20
relative to industrialized countries. Developing countries account for 81% =
of=20
the projected increase in carbon dioxide emissions between 1990 and 2010 an=
d=20
account for 76% between 1990 and 2020. For context, the U.S. produces about=
=20
20% of the existing carbon emissions.=20