Message-ID: <24754870.1075848171128.JavaMail.evans@thyme> Date: Mon, 16 Apr 2001 03:10:00 -0700 (PDT) From: miyung.buster@enron.com To: ann.schmidt@enron.com, bryan.seyfried@enron.com, dg27@pacbell.net, elizabeth.linnell@enron.com, filuntz@aol.com, james.steffes@enron.com, janet.butler@enron.com, jeannie.mandelker@enron.com, jeff.dasovich@enron.com, joe.hartsoe@enron.com, john.neslage@enron.com, john.sherriff@enron.com, joseph.alamo@enron.com, karen.denne@enron.com, lysa.akin@enron.com, margaret.carson@enron.com, mark.palmer@enron.com, mark.schroeder@enron.com, markus.fiala@enron.com, michael.brown@enron.com, mike.dahlke@enron.com, mona.petrochko@enron.com, nicholas.o'day@enron.com, peggy.mahoney@enron.com, peter.styles@enron.com, richard.shapiro@enron.com, rob.bradley@enron.com, sandra.mccubbin@enron.com, shelley.corman@enron.com, stella.chan@enron.com, steven.kean@enron.com, susan.mara@enron.com, mike.roan@enron.com, alex.parsons@enron.com, andrew.morrison@enron.com, lipsen@cisco.com, janel.guerrero@enron.com, shirley.hudler@enron.com, kathleen.sullivan@enron.com, tom.briggs@enron.com, linda.robertson@enron.com, lora.sullivan@enron.com, jennifer.thome@enron.com, jkradin@marathon-com.com, rlichtenstein@marathon-com.com, syamane@marathon-com.com, ken@kdscommunications.com, hgovenar@govadv.com, sgovenar@govadv.com, bhansen@lhom.com, carin.nersesian@enron.com Subject: Energy Issues Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Miyung Buster X-To: Ann M Schmidt, Bryan Seyfried, dg27@pacbell.net, Elizabeth Linnell, filuntz@aol.com, James D Steffes, Janet Butler, Jeannie Mandelker, Jeff Dasovich, Joe Hartsoe, John Neslage, John Sherriff, Joseph Alamo, Karen Denne, Lysa Akin, Margaret Carson, Mark Palmer, Mark Schroeder, Markus Fiala, Michael R Brown, Mike Dahlke, Mona L Petrochko, Nicholas O'Day, Peggy Mahoney, Peter Styles, Richard Shapiro, Rob Bradley, Sandra McCubbin, Shelley Corman, Stella Chan, Steven J Kean, Susan J Mara, Mike Roan, Alex Parsons, Andrew Morrison, lipsen@cisco.com, Janel Guerrero, Shirley A Hudler, Kathleen Sullivan, Tom Briggs, Linda Robertson, Lora Sullivan, Jennifer Thome, jkradin@marathon-com.com, rlichtenstein@marathon-com.com, syamane@marathon-com.com, ken@kdscommunications.com, hgovenar@govadv.com, sgovenar@govadv.com, bhansen@lhom.com, Carin Nersesian X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf Please see the attached articles: Sac Bee, Mon, 4/16: "Tough talk on energy: Many Democratic lawmakers push to seize generators" Sac Bee, Mon, 4/16: "Dan Walters" Sac Bee, Mon, 4/16: "Up the creek without power" SD Union, Sun, 4/15: "SDG&E has rebates for conservers of energy" SD Union, Sun, 4/15: "State energy officials push for San Jose power plant= " SD Union (AP), Sun, 4/15: "PG&E sent hard-nosed proposal to Davis demanding no regulation" SD Union, Sat, 4/14: "Some plants can, but won't, make power" SD Union, Sat, 4/14: "FERC orders release of energy contracts" SD Union, Sat, 4/14: "Escondido, San Marcos may be power partners" SD Union (AP), Sat, 4/14: "Davis promises energy crisis won't cost voters= =20 'one penny' " LA Times, Mon, 4/16: "Utilities to Resume Paying Producers" LA Times, Mon, 4/16: "Tariff May Limit Flow of Natural Gas" LA Times, Sun, 4/15: "Experts Doubtful About Rush to Build Small Power=20 Plants" LA Times, Sat, 4/14: "Davis Says All Power Costs to Be Recovered" LA Times, Mon, 4/16: "Long, Hot, Costly Days" (Commentary) SF Chron, Mon, 4/16: "Passing Along the Cost=20 Many Bay Area businesses resort to surcharges to survive " SF Chron, Mon, 4/16: "Time Seems Bright for Solar Power=20 Big companies bring financial clout to field" SF Chron (AP), Mon, 4/16: "Developments in California's energy crisis"=20 SF Chron, Mon, 4/16: "Plan to Save Edison Faces Skepticism in Sacramento= =20 No legislative clamor for Davis' bailout deal"=20 SF Chron, Sun, 4/15: "NEWS ANALYSIS=20 Bush Administration Faces Static on Energy Policy=20 Environmentalists criticize calls for more drilling" SF Chron, Sun, 4/15: "Bay Theaters Start Bracing for More Blackouts=20 Larger venues buy generators" SF Chron, Sun, 4/15: "PG&E Took Hard Line, Dooming State Talks=20 Secret plan shows utility demanded less regulation" SF Chron, Sat, 4/14: "Energy Efficiency Rules Scaled Back=20 Bush official's move affects appliances" SF Chron, Sun, 4/15: "Power of Micro Vs. Macro=20 Some firms crushed by energy crisis" Mercury News (AP), Mon, 4/16: "PG&E sent hard-nosed proposal to Davis=20 demanding no regulation" Mercury News, Mon, 4/16: "Conservation drive fuels move to 'Cool Roofs' " OC Register, Mon, 4/16: "PUC president outlines the crisis" =20 (Commentary) Individual.com (AP), Mon, 4/16: "Sierra Pacific to suspend quarterly=20 dividend=20 --Sierra Pacific cites energy crisis uncertainty" Energy Insighty, Mon, 4/16: "Low storage levels mean strong refill season" ---------------------------------------------------------------------------= --- ------------------------------------------------- Tough talk on energy: Many Democratic lawmakers push to seize generators. By Jim Sanders BEE CAPITOL BUREAU (Published April 16, 2001)=20 Here's what some California lawmakers see as a trump card in solving the=20 state's energy crisis: Gouge the public, lose your power plant.=20 Faced with growing bills and dwindling options, many Democratic lawmakers a= re=20 pushing for the use of emergency powers or eminent domain to force power=20 generators to negotiate lower wholesale electricity prices.=20 "Step One is to seize a few power plants," said Senate President Pro Tem Jo= hn=20 Burton, D-San Francisco. "That would let (the generators) know we mean=20 business."=20 "There's no negotiation when generators say, 'Pay us what we want, or we'll= =20 shut off California's lights,' " said Phil Angelides, state treasurer. "We= =20 ought to levy an excess profit tax, and if they don't take their foot off o= ur=20 throat, seize a plant or two to sober them up."=20 The increasingly tough talk about seizing assets, while motivated by an=20 immediate desire to extract concessions, fits into a longer-term push for= =20 California to produce some of its own electricity to boost supply and prote= ct=20 against spiraling prices.=20 Critics blast the notion of seizure, however, as a bargaining ploy or=20 political grandstanding.=20 "It's actually quite silly and a waste of time to consider these options,"= =20 said Gary Ackerman, executive director of the Western Power Trading Forum, = an=20 association of wholesale generators.=20 "Seizure would mean the state would pay top dollar for an Edsel -- old, tir= ed=20 plants that are past their prime," he said. "What happens if these people a= re=20 wrong and they're taking the people of California down a dead end?"=20 But others say the time is ripe for radical reform, with the state paying u= p=20 to $50 million a day for electricity and facing prospects of rolling power= =20 blackouts this summer.=20 "The generators will only respond when we take their golden eggs: the plant= s=20 they own," said Douglas Heller of the Foundation for Taxpayer and Consumer= =20 Rights. "They're the ones cheating us, and they're the ones we must target.= "=20 Lawmakers have raised the following two seizure possibilities, each aimed a= t=20 ensuring that more electricity is available at lower than spot-market price= s:=20 Take over private power plants, perhaps contract with utilities to run them= =20 and let the courts decide what fair market price should be paid to the=20 companies that now own them.=20 Leave the plants alone, but seize their contracts with marketers, thus=20 controlling where the power is sold while reducing price markups by=20 eliminating the middleman in spot-market transactions.=20 State Sen. Debra Bowen, D-Marina Del Rey, chairwoman of the state Senate's= =20 Energy Committee, recently suggested a third way for California to acquire= =20 existing electricity assets, without seizing them: Purchase the entire=20 Pacific Gas and Electric Co. in Bankruptcy Court.=20 Such a move could benefit the state and keep PG&E property out of the hands= =20 of private companies that already have too much influence over the=20 electricity market, Bowen said.=20 All sides agree that takeovers would be an extraordinary, unprecedented=20 intervention into California's electricity industry.=20 But Burton said his support for seizures is "very serious." The state could= =20 pay acquisition costs through revenue from electricity sales, he said.=20 "People make money on power plants," he said. "It ain't like they're loss= =20 leaders."=20 Gov. Gray Davis hasn't ruled out the seizure of power generators' assets or= =20 the acquisition of PG&E. But such possibilities raise a million questions,= =20 ranging from taxpayer exposure to technical issues regarding use of any ass= et=20 acquired, Davis spokesman Steve Maviglio said.=20 Seizure, in particular, can be a "risky gamble" that should not be done in= =20 haste, Maviglio said. Private companies targeted by the state could respond= =20 by withholding power or deciding not to invest in new plants at a time when= =20 California is scrambling for more electricity.=20 "Clearly, the governor doesn't want to send a message that California doesn= 't=20 want increased generation," Maviglio said. "Even though generators are=20 gouging us now, they're also the people that build plants."=20 While the Democratic governor has not committed himself to seizure, he=20 supports legislation -- SB 6x -- written by Burton and supported by Angelid= es=20 that would create a public power authority to construct state-owned plants= =20 and help finance conservation and renewable-energy projects.=20 "The notion that we should let electricity be traded by profiteers like a= =20 sheer commodity is ludicrous and dangerous," Angelides said. "Public power = is=20 the public's defense against the greed and dysfunction of a market run amok= ."=20 Power plants aren't cheap, but with the $5.2 billion it has spent or=20 allocated since January to buy energy on the spot market, the state could= =20 generate enough electricity to serve more than 10 million homes. A=20 1,000-megawatt plant burning natural gas would cost about $500 million,=20 according to the California Energy Commission.=20 "We ought never again be in the position of having no ability to control at= =20 least part of the supply and hedge the market," said Darrell Steinberg,=20 D-Sacramento, a member of the Assembly's Energy Committee.=20 S. David Freeman, general manager of the Los Angeles Department of Water an= d=20 Power and an adviser to Davis, said he solidly supports building public=20 plants. He likes the idea of a windfall profits tax but is less enthusiasti= c=20 about asset seizures.=20 "All those things are worth considering and they're part of a common theme:= =20 The state has to take control of its own destiny," Freeman said. "We need t= o=20 conserve and build our way out of this mess. The Lord helps those who help= =20 themselves."=20 But Republican legislators, who have long opposed Davis' efforts to buy=20 statewide electricity transmission, think the state would be making a big= =20 mistake by seizing private plants or building its own.=20 "There's no reason to believe the state of California can run the power=20 business or the transmission business as good as, or better than, the priva= te=20 sector," said Assembly Republican leader Dave Cox of Fair Oaks.=20 The concept of seizure is particularly controversial.=20 "How far can you take this?" Cox asked. "If we have a natural gas shortage,= =20 do we then seize those pipelines?"=20 Jan Smutny-Jones of the Independent Energy Producers Association said state= =20 officials need to stop their "constant haranguing of generators."=20 "Seizing private property didn't work in Cuba, and I don't think it would= =20 work in California," he said.=20 Private electricity companies are investing billions to generate more power= ,=20 and are running their plants as hard as possible to meet the crisis,=20 Smutny-Jones said.=20 Soaring electricity prices have been due largely to high demand, scarce=20 supply, extremely high costs for natural gas to run turbines, and financial= =20 risks tied to the instability of PG&E and Southern California Edison,=20 industry officials say.=20 But state officials claim that market manipulation has contributed as well.= =20 The California Independent System Operator, which manages the statewide=20 transmission grid, has accused power generators of overcharging Californian= s=20 by $6.2 billion since May.=20 In response, the Federal Energy Regulatory Commission recently threatened t= o=20 order generators to refund a portion of the contested charges, $134.8=20 million, mostly covering state purchases in January and February.=20 Tom Williams, a spokesman for Duke Energy Corp., a North Carolina-based=20 company that operates four California power plants, said the company is=20 spending $1.6 billion to upgrade and expand those facilities in an attempt = to=20 ease the energy crunch.=20 State seizures would discourage investment and hurt the industry, Williams= =20 said.=20 "The governor has said that two things need to happen: The state needs more= =20 supply and lower prices," he said. "Seizing power plants would do nothing t= o=20 help those two objectives."=20 Any attempt to take Duke's property through eminent domain would spark a=20 lawsuit, Williams said. "We would fight it vigorously, I can assure you, to= =20 ensure we got fair market value."=20 But Duke would not object to the state building power plants of its own, he= =20 said.=20 "We support any effort, public or private, to add generation to California,= "=20 he said. "The state needs it -- and needs it fast."=20 The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sacbee.c= om .=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------- Dan Walters (Published April 16, 2001)=20 Gray Davis is, by his own description, a cautious, incremental and=20 consensus-oriented politician. One might expect, therefore, that he would b= e=20 circumspect in what he says, as well as what he does.=20 The state's energy crisis, however, is offering new evidence of Davis' odd,= =20 even inexplicable, penchant for saying things that don't square with either= =20 reality or sensibility. It's not the same as President Bush's malapropisms.= =20 Davis knows what he's saying; he just doesn't know, or doesn't care, how=20 ludicrous his words strike others.=20 Take, for example, something Davis said three years ago as he was announcin= g=20 his candidacy for governor. In a feeble attempt to be inspiring -- not easy= =20 for a politician whose name captures his personality -- Davis quoted from a= n=20 inscription engraved into a state office building.=20 The inscription is "Bring me men to match my mountains," but Davis changed = it=20 to "Bring me people to match my mountains" as a gesture to feminists, and= =20 then placed it on the wrong building. To Davis, being politically correct w= as=20 more important than being accurate.=20 Davis had been governor for just six months when he uttered something so=20 outrageous that it continues to reverberate. In a meeting with newspaper=20 editors in San Francisco, Davis castigated the Legislature, which is=20 controlled by his fellow Democrats, as having "a totally different view of= =20 the world than I do, totally different," and then added: "People expect=20 government to reflect the vision that I suggested. Nobody else in the=20 Legislature ran statewide. Their job is to implement my vision. That is the= ir=20 job."=20 To put it mildly, legislators were miffed by this pungent whiff of=20 megalomania, which also disregarded American concepts of government, and=20 Davis had to do some serious fence-mending in subsequent weeks. But did he= =20 learn his lesson about saying things that implied he is the center of the= =20 political universe? Apparently not.=20 Nine months later, Davis said much the same thing about the courts, telling= =20 reporters in Washington that he expects his appointees to the bench to foll= ow=20 his lead on the death penalty and other issues or resign. Davis said that= =20 "while they (judges) have to follow the law =01( they're there because I=20 appointed them and they need to keep faith with my electoral mandate."=20 Another round of explanations and clarifications followed.=20 The governor has uttered so many odd, and ultimately unrealistic, statement= s=20 about the energy crisis this year that a Republican group now collects and= =20 distributes them. In January, he pledged that "there will be no rate=20 increases," even though he and a state Public Utilities Commission controll= ed=20 by his appointees now say hefty rate boosts are necessary. Repeatedly, he h= as=20 declared that an end to the crisis was in sight, only to see the state=20 plummet even further into the abyss. His promise of a short-term state powe= r=20 purchase program has now become an immense and prolonged drain on the state= =20 treasury. And projections of significant new power generation and=20 conservation savings to get the state through the summer are being downgrad= ed=20 severely.=20 During one particularly effusive period in late February, Davis said=20 California is "on the back side of the crisis," pledged that "the combinati= on=20 of rapid efforts to put more megawatts on line and conservation will get us= =20 through the summer," and declared that the state is within a month of=20 completing all the "legislative fixes" needed to settle the crisis.=20 But perhaps Davis' most enduring February declaration was this one: "Believ= e=20 me, if I wanted to raise rates, I could have solved this problem in 20=20 minutes." Maybe that was true in February. But Davis continued to dither an= d=20 the rates are being raised now without any indication that the crisis will = go=20 away anytime soon. Given his record, we should view all of Davis'=20 pronouncements with a strong sense of skepticism.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.c= om .=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------- Up the creek without power By Kevin Yamamura BEE CAPITOL BUREAU (Published April 16, 2001)=20 Assemblyman Dennis Cardoza was headed to a federal energy hearing in Boise,= =20 Idaho, on Tuesday to help save California from rolling power blackouts.=20 But hours before the scheduled departure came an unexpected twist: a blacko= ut=20 of his own.=20 Cardoza, a Merced Democrat, resides on a 36-foot Gulf Star watercraft=20 anchored along the Sacramento River during the week.=20 He and other lawmakers had planned to take a 5:30 a.m. chartered flight to= =20 Boise, which meant Cardoza had to rise by 4 a.m., said staff member Doug=20 White. Sometime during the night, however, the juice cut out.=20 While Cardoza woke up on time -- thanks to a battery-powered alarm clock --= =20 he faced other problems. "He had to take a really, really cold bath with=20 bottled water," White said.=20 In the end, Cardoza barely made the flight -- arriving at the airport just= =20 before the plane departed.=20 White said Cardoza's boat, powered by a series of batteries like those foun= d=20 in cars, fell victim to vandalism.=20 $%&#@@&%$ timecards!!!=20 Tensions apparently remain high at the Office of Criminal Justice Planning= =20 between some employees and their bosses.=20 So high, in fact, that members of the California State Employees Associatio= n=20 distributed leaflets Tuesday in front of the agency's office on the K Stree= t=20 Mall, criticizing management for what they consider to be high turnover rat= es=20 and failed leadership.=20 Some are particularly incensed about a new computer timekeeping system that= =20 tracks when they leave and where they go. Union President Perry Kenny said= =20 the system treats workers like "inmates."=20 OCJP Chief Deputy Director Allen Sawyer said it is a response to a state=20 audit issued two years ago that showed the agency lacked accountability for= =20 workers' time. He added that he feels managers have a "great relationship"= =20 with staff.=20 An arbitrator is scheduled to review the matter in mid-June.=20 The latest dispute follows criticism in December of OCJP Director Frank=20 Grimes for allegedly using profanity in a mandatory meeting with staff.=20 Grimes denied the claim, calling it a "false allegation."=20 Bigger than a bowl game The 1951 University of San Francisco football squad won nine games, lost no= ne=20 and is considered by many to be among the greatest college teams in history= .=20 But the Dons were snubbed by bowl game organizers because the team fielded= =20 two African American players. They stayed home while squads with blemished= =20 records -- including those they had beaten -- moved on to the postseason.= =20 To mark the team's 50th anniversary this fall, Sen. Barbara Boxer, D-Calif.= ,=20 has asked President Bush to honor the squad by inviting members to a White= =20 House ceremony. In particular, Boxer noted the team's integrity.=20 "The team was offered the chance to compete without the African American=20 players, but they unanimously refused on principle," she wrote.=20 Jeff Logan, a Boxer spokesman, said the senator has not yet received a=20 response from the president but expects to hear soon.=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------- SDG&E has rebates for conservers of energy=20 By Karen Kucher=20 UNION-TRIBUNE STAFF WRITER=20 April 15, 2001=20 Doris Tuley of El Cajon no longer switches on her TV during the day. She=20 turns on so few lights she has to squint to read, and does her laundry only= =20 at night.=20 "We are cutting back -- and yet the bill keeps going up," she said.=20 Last week, Tuley, 63, found another way to save. She took six halogen=20 torchiere lamps to La Mesa's Porter Hall to exchange for fluorescent lamps,= =20 which use less electricity.=20 The replacements were free, provided by San Diego Gas & Electric Co. under = an=20 outreach program for seniors.=20 It is one of many rebates and incentives offered by the utility, which is= =20 spending about $50 million to encourage residents and businesses to conserv= e=20 energy.=20 In the market for a new refrigerator? Consumers who purchase energy-saving= =20 models can pocket up to $125. Buying the right dishwasher could get you a $= 50=20 rebate, while $75 is available for those who purchase qualified clothes=20 washers.=20 SDG&E also offers rebates for homeowners who install insulation,=20 energy-efficient windows, new gas water heaters or energy-saving swimming= =20 pool pumps. Apartment building owners can get incentives to retrofit=20 appliances in units, and developers who build homes that don't waste power= =20 can get money, too.=20 The utility has offered programs promoting efficiency and conservation sinc= e=20 the 1970s, with rebates and other costs covered by ratepayer fees, said Yol= e=20 Whiting, SDG&E's director of consumer programs and services.=20 Surge in interest Such incentives have gained new importance in recent months, as skyrocketin= g=20 prices and blackouts have become a reality for Californians.=20 Consumers have been flooding the utility's Web site (http://www.sdge.com) a= nd=20 phone lines to find more information.=20 "In the past, I can remember when it was hard to convince folks that they= =20 needed to save energy," Whiting said. "We are getting a lot of response and= a=20 lot of interest now."=20 SDG&E is trying to encourage its customers to reduce total demand by 75=20 megawatt-hours or more during 2001.=20 If it creates a 23 megawatt-hour reduction and meets other goals, it will= =20 receive a $2.7 million incentive payment from the state Public Utilities=20 Commission, Whiting said.=20 The 23 megawatt-hours are enough to meet the demands of 17,250 households.= =20 Managers of stores that sell appliances say they have seen a rise in=20 refrigerator sales in the first quarter of the year, which they believe is= =20 related to California's energy crisis.=20 Consumers are particularly interested in finding appliances carrying the=20 Energy Star label of the U.S. Department of Energy and U.S. Environmental= =20 Protection Agency because those appliances save the most energy and qualify= =20 for rebates.=20 "A lot of people don't understand Energy Star, but they do understand energ= y=20 efficiency," said Harry Overlock, who manages the Sears store in El Cajon.= =20 Energy expert Michael Lamb said a 10-year-old refrigerator may use twice as= =20 much power as a new model.=20 "Modern refrigerator technology has come a long way in 10 years," said Lamb= ,=20 a certified energy manager at Energy Efficiency and Renewable Energy=20 Clearinghouse, a program operated by the U.S. Department of Energy.=20 "As a general rule of thumb, a modern refrigerator of the same size with=20 similar features will use about half the amount of power as one made about = 10=20 years ago, and about a third of the power of one made about 15 years ago.= =20 "The technology has just gotten a whole lot better," he said.=20 Lamb said newer models offer better compressor motors and evaporation fan= =20 motors, more intelligent controls and better insulation.=20 Shop carefully Although those models can be more expensive, consumers like them because th= e=20 rebate defrays some of the initial cost and because the long-term energy=20 savings are attractive.=20 However, a representative from the Utility Consumers' Action Network=20 public-interest group warned consumers to research rebates before they shop= =20 for appliances.=20 A UCAN intern who recently went to several local stores found that many=20 salespeople seemed unfamiliar with rebate programs and didn't know what=20 models qualified for them, said Jodi Beebe, an energy analyst with UCAN.=20 "The best thing to do is do it with foresight," Beebe said.=20 Sears' Overlock said he thinks rebates encourage consumers to replace=20 inefficient appliances -- and he'd like to see more offered.=20 Bill Walker, manager of the Home Depot in Grantville, says his customers ar= e=20 buying everything in the store related to energy efficiency.=20 "Ever since the gas and electric bills have gone nuts, we are seeing a ton = of=20 energy-saving items from across the board (being bought). We can't keep=20 insulation on the shelves," Walker said.=20 "The energy-saving light bulbs are through the ceiling. We are up over 500= =20 percent on energy-saving light bulbs," he said. "People are buying like 20 = at=20 a time and changing out their whole house."=20 The Home Depot sales aren't unusual.=20 SDG&E says regional sales of energy-efficient light bulbs, which are=20 subsidized by the utility company, exceeded projections for the first three= =20 months of the year. Funds for several rebates also are being drawn down=20 quickly, although Whiting said there is no immediate danger of the utility= =20 ending any of the programs.=20 "I would love to run out of money this year," she said. "We are doing=20 everything we can to get these funds into the hands of consumers."=20 ---------------------------------------------------------------------------= --- ----------------------------------------------- State energy officials push for San Jose power plant=20 ASSOCIATED PRESS=20 April 15, 2001=20 SAN JOSE =01) In an effort to ease this summer's promised power drain, stat= e=20 energy officials are pushing for approval of a proposed power plant in San= =20 Jose's Coyote Valley, despite recommendations that other sites may be more= =20 environmentally suitable, a newspaper reported Sunday.=20 California Energy Commission top administrators undermined a negative=20 environmental assessment of the project and recommended approval of Calpine= =20 Corp.'s Metcalf Energy Center over other sites, the San Jose Mercury News= =20 found, citing internal documents and transcripts obtained through a=20 California Public Records Act request.=20 But commission deputy director Bob Therkelsen denied any impartial dealings= =20 concerning the plant.=20 "I would not deny that some of the staff have strong feelings," Therkelsen= =20 said . "But I think the process allowed all perspectives to be heard."=20 San Jose City Council opposes the project because the city had planned to= =20 save the property for high-tech campuses.=20 Commission administrators and attorneys directed an analyst to downplay oth= er=20 sites' advantages and quieted him at a hearing when he tried to voice his= =20 concerns over the pressure that prompted him to alter his findings, the=20 newspaper found. The commission also reversed a third analyst's=20 recommendation that Calpine obtain a contract for recycled water prior to= =20 construction, which could have slowed building the plant.=20 A 574-page Preliminary Staff Assessment released in May identified other mo= re=20 "environmentally preferable" sites, including two industrial sites in=20 Fremont.=20 Therkelsen said the report was a premature draft that changed as more=20 information became available.=20 "I was concerned that the alternatives were being portrayed more=20 optimistically than realistically," Therkelsen said.=20 Analyst Gary Walker, a 21-year veteran, reported other plant sites would be= =20 more suitable, but was later told his report was full of "bias" and=20 "inconsistencies," the newspaper reported.=20 In an e-mail, senior commission attorney Arlene Ichien said Metcalf must be= =20 cast in a better light or it would be hard for the commission to grant=20 approval.=20 "Staff is building a strong case for finding the alternative sites feasible= ,"=20 Ichien wrote.=20 In a report last fall, Walker's discussion of other sites' advantages was= =20 ultimately replaced by a warning that the Silicon Valley is at risk for=20 blackouts unless Metcalf is built.=20 The final report recommended approval.=20 Another analyst was told to change his report about how much noise the plan= t=20 would create and the amount of insulation needed to quiet it, the newspaper= =20 reported. The analyst was taken off the project, and the final assessment= =20 released last October said insulation was not necessary because of the few= =20 homes near the plant.=20 The five-member commission is expected to make its decision this summer=20 during the power crisis' peak load. There is a push to build power plants i= n=20 the technology-dominated Silicon Valley, which imports most of its=20 electricity. The plant would use 3 million to 6 million gallons of water a= =20 day, but with San Jose officials opposed to the plant, it is unclear where= =20 that water would come from.=20 Calpine and its development partner, Bechtel Enterprises, wants the plant= =20 operating by 2002.=20 ---------------------------------------------------------------------------= --- -------------------------------------------- PG&E sent hard-nosed proposal to Davis demanding no regulation=20 ASSOCIATED PRESS=20 April 15, 2001=20 SAN FRANCISCO =01) Pacific Gas and Electric Co. officials demanded the util= ity=20 be cut free from state regulation and be allowed to push huge rate increase= s=20 onto its customers, two weeks before negotiations with Gov. Gray Davis brok= e=20 off, the San Francisco Chronicle reported Sunday.=20 "Perhaps we misjudged their primary concern," said Steve Maviglio, the=20 governor's spokesman. "It wasn't resolving their credit issue. It was=20 extracting vengeance on the PUC."=20 In addition to insisting that it be released from the state Public Utilitie= s=20 Commission's regulatory grip, PG&E demanded it be allowed to buy back its= =20 power lines without competitive offers if the state ever decided to sell. I= n=20 addition, it wanted to continue profiting from any telecommunications lines= =20 or antennas linked to the system, according to a Feb. 28 eight-page proposa= l=20 obtained by the Chronicle.=20 PG&E denies the document influenced the outcome between the utility and the= =20 state.=20 "It is ludicrous to suggest that this document caused the negotiations to= =20 break down," said PG&E spokesman Ron Low. "There were negotiations that=20 occurred later and other documents that followed."=20 At the time of the utility's bankruptcy filing April 6, PG&E Corp. Chairman= =20 Robert Glynn said no talks had been held for three weeks. PG&E's proposal h= ad=20 been delivered about two before talks ceased.=20 PG&E has said it's entitled to recoup $9 billion it paid for wholesale powe= r=20 because of PUC-regulated rate caps, which kept the utility from passing hig= h=20 costs onto customers.=20 The proposal said this money "will be fully recovered in retail rates witho= ut=20 further CPUC review for prudence or any other purpose," the Chronicle=20 reported.=20 The document went on to demand the PUC drop all proceedings concerning PG&E= ,=20 including an investigation into whether the utility violated California law= =20 by transferring millions to parent company PG&E Corp. prior to filing=20 bankruptcy.=20 "They took a position on regulatory matters that was out of touch with=20 reality," Maviglio said.=20 PG&E Corp. spokesman Shawn Cooper declined to comment on the proposal.=20 "That document is confidential," he said.=20 Ratepayer advocates say they're baffled by PG&E's demands.=20 "It's like the Japanese insisting that we surrender Hawaii after we beat th= em=20 in World War II," said Harvey Rosenfield, consumer advocate for the=20 Foundation for Taxpayer and Consumer Rights.=20 ---------------------------------------------------------------------------= --- ----------------------------------------------- Some plants can, but won't, make power=20 Too costly to run, they sit off-line By Jonathan Heller=20 UNION-TRIBUNE STAFF WRITER=20 April 14, 2001=20 While San Diegans are being asked to turn off lights and wash dishes by han= d=20 because of the energy shortage, three power plants capable of supplying pow= er=20 for about 155,000 homes have sat idle for up to two weeks.=20 The cogeneration plant at the Iceoplex skating complex in Escondido has bee= n=20 off-line since April 1 because a state agency that regulates its prices has= =20 set them so low it can't afford to produce electricity, a plant official sa= id=20 yesterday.=20 Three other cogeneration plants at the North Island Naval Air Station, the= =20 Naval Training Center and the 32nd Street Naval Station also are off-line.= =20 Together, they can produce 155 megawatts, or about 5 percent of the county'= s=20 total demand at this time of year. A megawatt is enough energy to power 750= =20 to 1,000 homes, depending on the time of year and other factors.=20 Unlike conventional power generators, which can set their own prices under= =20 deregulation, cogeneration plants and other alternative power providers, su= ch=20 as wind and solar plants, sell power under a price formula set by the=20 California Public Utilities Commission.=20 The PUC changed the formula April 1, and since then cogenerators across the= =20 state have complained they can't recoup their costs under the new pricing= =20 system.=20 "Anyone who can do math can figure out that losing money is no incentive to= =20 generate power," said Ann MacLeod, executive director of the California=20 Cogeneration Council.=20 This situation is different from the one that led Houston-based Dynegy Corp= .=20 to threaten to shut down its San Diego-area plants this week. Dynegy said i= t=20 no longer wants to sell power because it is afraid the state is not able to= =20 pay the bill.=20 The Iceoplex plant, operated by Purenergy Corp., produces just under 50=20 megawatts, nearly enough to supply a city the size of Escondido. Jim=20 Hinrichs, Purenergy's general manager in San Diego, said he did not know ho= w=20 long it would be shut down.=20 "Our plant in Escondido is currently off-line until such time as we can=20 procure gas at a price where we can cover our fuel costs," Hinrichs said.= =20 The three plants on the Navy bases, operated by Sithe Energies Corp., produ= ce=20 between 23 and 45 megawatts each.=20 It was unclear why those plants were shut down. A spokesman for Sithe=20 Energies could not be reached for comment late yesterday.=20 The Naval Training Center plant went off-line April 2, the North Island pla= nt=20 on April 3 and the 32nd Street plant on April 6, according to the Independe= nt=20 System Operator, which manages the state's power grid.=20 Those outages were unplanned, according to the Independent System Operator= =20 Web site.=20 Stephanie McCorkle, an ISO spokeswoman, said she could not comment on why t= he=20 plants were shut down. She did say that about half of all alternative power= =20 generators, including cogenerators, wind and solar plants, are currently=20 off-line in the state. That translates to 3,000 megawatts, or enough energy= =20 for about 3 million homes.=20 The four San Diego cogeneration plants are under contract to sell electrici= ty=20 to SDG&E, which feeds it into the regional power grid.=20 "If they don't run, they don't get paid," said Art Larson, an SDG&E=20 spokesman. "That's one simple aspect of the contract."=20 There are other cogeneration plants in the county that are still operating,= =20 although most of them are much smaller than the four that are off-line.=20 "During this period of demand shortfalls, we think it's in the best interes= t=20 of the community that every available power generating source be up and=20 operating," Larson said.=20 James Loewen, a PUC analyst, acknowledged that the PUC's decision has=20 resulted in lower payments to the cogenerators. He said the pricing formula= =20 and payments to cogenerators are tied to the cost of natural gas imported= =20 into California.=20 The PUC changed the formula to one that would factor in gas coming in from= =20 the Oregon border, where prices are historically cheaper, he said.=20 But cogenerators contend the new formula has made it uneconomical to turn o= n=20 their plants.=20 "It defies common sense," said MacLeod of the cogeneration council. "We are= =20 hoping the PUC has become aware in the last month as how bad that decision= =20 was."=20 ---------------------------------------------------------------------------= --- --------------------------------------------------- FERC orders release of energy contracts=20 Regulators' demand for secret deals riles Davis administration By Toby Eckert? COPLEY NEWS SERVICE=20 April 14, 2001=20 WASHINGTON -- Federal regulators have ordered power suppliers to turn over= =20 copies of their confidential short-term and long-term contracts with=20 California, which the regulators intend to share with a congressional=20 committee.=20 In a letter sent to the power companies Thursday, the Federal Energy=20 Regulatory Commission said it would "treat these contracts as confidential"= =20 unless the supplier waives confidentiality.=20 It is unclear whether the House Government Reform Committee is under the sa= me=20 obligation, though FERC said the information would be given to the committe= e=20 "under confidential seal."=20 Gov. Gray Davis has been keeping details of the contracts secret, arguing= =20 that revealing the information would weaken the state's bargaining position= =20 in negotiations with other suppliers. FERC's order angered the Davis=20 administration, which fears the information will be leaked once it is in=20 federal hands.=20 "It just seems to me that FERC is trying to give generators more leverage,"= =20 said Davis spokesman Steve Maviglio. "The more information we release, the= =20 more Californians are going to have to pay."=20 FERC's letter to the 49 power suppliers came two days after Republican=20 congressmen threatened to issue subpoenas for the contracts at a U.S. House= =20 Government Reform Committee hearing in Sacramento on the power crisis.=20 "We want that information," Rep. Dan Burton, R-Ind., the committee chairman= ,=20 told California Public Utilities Commission President Loretta Lynch.=20 So do California news organizations -- including The San Diego Union-Tribun= e=20 -- and Republican state lawmakers, who have filed separate suits to get it.= =20 The California Department of Water Resources has been buying power on behal= f=20 of the state's cash-strapped utilities. FERC said it wanted to see the=20 contracts "to determine how successful efforts have been to fashion long-te= rm=20 contracts and to reduce reliance on spot markets," where electricity prices= =20 are typically higher.=20 FERC issued an order Dec. 15 designed to encourage long-term contracts and= =20 bring some stability to California's chaotic power market.=20 The letter to the power companies said FERC "intends to provide copies of t= he=20 contracts to the Committee on Government Reform under confidential seal."= =20 A FERC spokeswoman said she was unsure whether that meant the committee wou= ld=20 be obligated to keep the information secret. She referred the question to t= he=20 committee. A spokesman for the committee could not be reached for comment.= =20 FERC gave the power suppliers until the close of business Monday to file th= e=20 contract copies.=20 Meanwhile, for the second time this week, Energy Secretary Spencer Abraham= =20 defended the Bush administration's response to the California crisis. Criti= cs=20 have blistered the administration for refusing to consider price controls o= n=20 wholesale electricity.=20 In a letter to members of Congress and California legislators released by t= he=20 Energy Department on Friday, Abraham outlined 11 steps the administration a= nd=20 FERC have taken, such as ordering federal agencies to expedite permits for= =20 new power plants and asking power providers to do everything they can to=20 avoid disruptions this summer.=20 "Regrettably, our well-founded opposition to price caps has been claimed by= =20 some to suggest the administration either does not care about California an= d=20 the West or is doing nothing to address the problem," Abraham wrote.=20 Abraham made similar comments when briefing reporters Monday on the Energy= =20 Department's proposed budget for fiscal year 2002.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------- Escondido, San Marcos may be power partners=20 Cities seeking way to forge rate deals By Jonathan Heller=20 UNION-TRIBUNE STAFF WRITER=20 April 14, 2001=20 ESCONDIDO -- After months of tiptoeing around the idea of working with San= =20 Marcos to buy cheap energy, the Escondido City Council might be ready to ge= t=20 serious.=20 On Wednesday, the council is expected to direct City Manager Rolf Gunnarson= =20 to initiate a formal working arrangement with San Marcos officials on a=20 project to seek inexpensive, stable energy rates.=20 "The time for talking is over," said City Councilwoman June Rady.=20 Rady approached San Marcos City Councilman Lee Thibadeau in January with th= e=20 idea of the two cities working together. That was before Sempra Energy=20 Resources made public its plans to build a 500-megawatt power plant in=20 Escondido.=20 Now Rady believes that the two cities can join forces and forge a deal with= =20 Sempra to nail down inexpensive electricity rates. Sempra officials have sa= id=20 they're willing to discuss possible rate deals with the city.=20 If the council votes to move forward with the cooperative plan, Gunnarson= =20 would take the lead with San Marcos City Manager Rick Gittings.=20 "I would propose to work closely with Mr. Gittings as well as the city=20 attorney's office, and with legal and technical consultants, to develop=20 policy options for the council to consider," Gunnarson wrote in a report to= =20 the council.=20 To buy power directly, instead of through a utility such as San Diego Gas &= =20 Electric, a city has to adopt a special legal arrangement, such as forming = a=20 municipal utility district. San Marcos has done that, but it would be a mor= e=20 lengthy process for Escondido. San Marcos is a charter city and has more=20 flexibility under the state Constitution. Escondido is a general law city.= =20 Escondido, however, might have the option of forming a joint-powers authori= ty=20 with San Marcos to buy power.=20 Gittings said in a letter to Escondido officials that he believes the Sempr= a=20 proposal is an excellent opportunity for both cities.=20 "The project may possibly alleviate the power requirements of our two citie= s=20 and provide a much-needed generating facility in the northeastern portion o= f=20 the county," Gittings said.=20 The Sempra plant would be built in Quail Hills in the southwestern part of= =20 Escondido, not far from the San Marcos boundary.=20 Sempra has had several meetings with Escondido officials and residents, but= =20 has not yet submitted a formal proposal.=20 ---------------------------------------------------------------------------= --- --------------------------------------------------- Davis promises energy crisis won't cost voters 'one penny'=20 ASSOCIATED PRESS=20 April 14, 2001=20 LOS ANGELES =01) Gov. Gray Davis promised that taxpayers will end up spendi= ng=20 "not one penny" on the energy crisis because struggling utilities will repa= y=20 billions of dollars the state treasury has spent to keep the lights on.=20 "We will not only be paid for all our expenses to date, we'll have enough .= ..=20 to continue buying power through this year and hopefully 2002," Davis told= =20 the Los Angeles Times on Friday.=20 But the governor also admitted California still faces possible blackouts th= is=20 summer, especially during hot spells when air conditioners will be running= =20 full blast.=20 Davis has asked state lawmakers to approve spending another $500 million to= =20 buy power for bankrupt Pacific Gas and Electric and credit-poor Southern=20 California Edison, bringing his total requests to $5.2 billion.=20 The governor, however, said he expected the state money to be repaid by ear= ly=20 2003 under his plan to float $12.4 billion in bonds. The bonds, to be issue= d=20 in June, would be repaid by utility ratepayers.=20 The governor's plan, which was approved by the Legislature, was adopted wit= h=20 hopes that the state could negotiate long-term contracts with power supplie= rs=20 and eventually stabilize prices. Those lower prices have yet to materialize= ,=20 and state Treasurer Phil Angelides has raised questions about the plan in= =20 recent weeks.=20 Davis also said he inherited the power crunch.=20 He was state controller in 1996 when the state Legislature was discussing= =20 utility deregulation but "I basically wasn't asked to take a position and I= =20 didn't take a position," Davis said. "I didn't give it much thought."=20 He also blamed the crunch on out-of-state wholesale electricity producers.= =20 They have gouged California utilities and are "the biggest snakes on the=20 planet Earth," the governor said.=20 But he reserved most of the blame for the Federal Energy Regulatory=20 Commission, calling it "the culprit" in the crisis. Davis said the commissi= on=20 has refused to cap wholesale prices, and as early as 1995 turned down state= =20 requests to build more power plants.=20 On Friday, California's power grid operator called on the federal commissio= n=20 to increase the amount of money it ordered electricity generators to refund= =20 last month. The California Independent System Operator has said power=20 generators have overcharged utilities billions of dollars more than the $12= 4=20 million in January and February power sales questioned by the Federal Energ= y=20 Regulatory Commission so far.=20 ---------------------------------------------------------------------------= --- --------------------------------------------------- Utilities to Resume Paying Producers=20 Electricity: Some small companies that provide power say the new rate plans= =20 are not enough to get them back online.=20 By JULIE TAMAKI, Times Staff Writer=20 ?????SACRAMENTO--The state's two biggest utilities are scheduled to resume= =20 paying hundreds of small power producers this week, but at least some=20 producers say they plan to remain offline. ?????Jay Henneberry, an attorney representing a small gas-fired power plant= =20 in Oxnard, said his client does not plan to start generating electricity=20 again for Southern California Edison today, because of a controversial new= =20 rate plan that he said would force his client to operate at a loss. ?????The company, EF Oxnard Inc., sued Edison last week, alleging that the= =20 utility owes it more than $13.5 million for past electricity deliveries. Th= e=20 lack of payment, according to EF Oxnard officials, prompted natural gas=20 suppliers to cut them off in February, forcing Oxnard to stop producing=20 electricity. ?????Henneberry noted that the new rate plan fails to address the utilities= '=20 past debt to producers, which who are collectively owed more than $1.8=20 billion. ?????"Those payments are only on a going-forward basis," Henneberry said.= =20 "They do nothing for $13.5 million owed to my client." ?????The situation underscores the problems the state faces as it tries to= =20 get California's nearly 700 producers of alternative and renewable energy= =20 paid and, in cases such as EF Oxnard, back in business. ?????These companies, which include producers of solar, wind and thermal=20 power, provide more than a quarter of the electricity consumed in Californi= a.=20 But their output has been cut by as much as half in recent weeks due in par= t=20 to the payment problems. ?????A new rate plan approved by the Public Utilities Commission last month= =20 to help get those producers paid has triggered a growing number of gas-fire= d=20 power producers to sue Pacific Gas & Electric and Edison to get out of thei= r=20 contracts with the utilities. The power suppliers say the new rate plan wou= ld=20 force them to operate at a loss, because it does not adequately compensate= =20 them for rising natural gas costs. ?????"We are not going to run our plants if we can't run them profitably,"= =20 said Marty Quinn, executive vice president and chief operating officer of= =20 Ridgewood Power LLC, which owns three small gas-fired generators in=20 California that are not operating. ?????In a related matter, a hearing is scheduled today in a legal battle=20 between Edison and a small geothermal producer. An Imperial County judge=20 previously freed CalEnergy from its contract with Edison because of the=20 utility's failure to pay the company, which has since been selling its=20 supplies on the wholesale power market. ?????The court is expected to rule today on CalEnergy's request for roughly= =20 $100 million in payments it is owed by Edison, and could also act on an=20 Edison request that Cal- Energy be required to resume selling power to the= =20 utility. ?????"If Edison shows that it is credit-worthy and capable of making paymen= ts=20 on a going-forward basis, I'm sure the judge will take that into account,"= =20 said CalEnergy official Jonathan Weisgall. "But one of our concerns is how= =20 long will Edison continue to make these payments." ?????An official with Sierra Pacific Industries, which received court=20 permission earlier this month to sell power generated by six plants it owns= =20 in California to a buyer other than PG&E, said Sierra Pacific does not plan= =20 to resume transmitting electricity to the utility. ?????"From our point of view we have terminated those contracts," said Bob= =20 Ellery, Sierra Pacific's director of energy resources. ?????Henneberry said he doubts that Edison plans to pay EF Oxnard because t= he=20 new rate arrangement covers only deliveries made in April and beyond. ?????An Edison spokesman said his company sent payments totaling $206 milli= on=20 to small producers Friday, but said he did not know whether checks were sen= t=20 to producers that have gone offline. A spokesman for PG&E estimates that th= e=20 monthly bill to small producers will total $200 million to $400 million. ?????Ridgewood, Oxnard and Sierra Pacific generate a total of 140 megawatts= =20 of electricity, or enough power to serve more than 105,000 typical homes.= =20 State officials have at times been forced to replace the lost deliveries by= =20 purchasing power on the pricey wholesale and spot markets. ?????The California Independent System Operator, which oversees the state's= =20 power grid, said it received about 3,800 megawatts of power Friday from sma= ll=20 producers, compared to the 6,000 megawatts the small producers usually=20 deliver. In recent weeks the group's output has dipped as low as 3,000=20 megawatts. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------- Tariff May Limit Flow of Natural Gas=20 Power: A tax designed to protect the Gas Co. may be stifling efforts to shi= p=20 more of the fuel needed by many California generators.=20 By CHRISTINE HANLEY, Times Staff Writer=20 ?????Two projects aimed at boosting the capacity of California's natural ga= s=20 delivery network are stalled by a little-known tariff that power companies= =20 would have to pay to use the new pipelines. ?????The tax was established six years ago by the Public Utilities Commissi= on=20 and requires electricity generators and other natural gas customers to pay = an=20 extra fee if they use pipelines not controlled by Southern California Gas C= o. ?????At the time, officials as well as consumer advocates believed the tari= ff=20 would protect the firm's residential and small business owners. ?????But amid California's energy crisis, some officials contend that the= =20 tariff is preventing the state from boosting pipeline capacity at a time wh= en=20 more natural gas is desperately needed to fuel power plants. ?????California, which makes more than half its electricity from natural ga= s,=20 has not expanded its gas distribution network in eight years. Experts warn= =20 that the system is running close to capacity and that easing constraints is= a=20 crucial step in any rescue plan. ?????Two companies are trying to add capacity: Questar wants to convert an= =20 old oil pipeline that runs 700 miles underground from New Mexico to Long=20 Beach, and Williams Co. wants to push its existing Kern River-Mojave pipeli= ne=20 farther west, also to Long Beach. ?????But both companies said they are having trouble signing up customers= =20 because power companies don't want to pay the tariff. ?????Watson Cogeneration Co., which operates a 400-megawatt generator in Lo= s=20 Angeles County, is considering using Questar's pipelines but said it cannot= =20 complete any deal until the tariff issue is resolved. ?????"With the state building all these new gas-fired plants, the question = I=20 have is, where are they going to get the gas?" said Pat King, executive=20 director of the firm. ?????Questar, Williams Co. and other energy companies have been fighting th= e=20 tariff in a series of hearings before the PUC. Last year, the commission=20 concluded that the tariff may discourage the construction of badly needed n= ew=20 power plants in Southern California and asked the Gas Co. to develop a new= =20 pricing system. ?????But the issue was reassigned earlier this year to a new administrative= =20 law judge as the commission reshuffled its load to handle more pressing=20 energy emergencies. That judge does not expect a final ruling any time soon= . ?????"The case is in limbo," said Carol Brown, the judge, who must sift=20 through years of transcripts before writing a draft decision. She predicted= =20 that "we might all be old and gray" by the time a final vote is taken by th= e=20 full commission. ?????Enacted in 1995, the so-called Residual Load Service tariff can levy= =20 massive penalties against Gas Co. customers who choose an alternate=20 distributor but later have to return to the company's network. ?????If service on a competing pipeline is interrupted, a power plant that= =20 had to switch back to the Gas Co. for a day of deliveries could be charged= =20 what it would cost to reserve that capacity for an entire year. ?????For many power plants, the risk of leaving the Gas. Co. with the tarif= f=20 in place is simply too high. ?????"If there's any risk that that might happen, there's no way you're goi= ng=20 to sign up for another pipeline, because you'd end up paying twice for=20 natural gas service," said Tom Beach, a former PUC staffer and a consultant= =20 for Crossborder Energy who testified against the tariff. "It just shows how= =20 punitive this rate is and how it discourages people from bringing in new=20 pipelines and trying to compete with SoCal Gas." ?????Critics charge that the tariff is so punitive that not a single power= =20 supplier has left Southern California Gas. ?????The tariff was approved with ratepayers in mind--and actually was=20 heavily endorsed by consumer activists. Without it, they said, Southern=20 California Gas could pass on any loss in business from competing pipelines = to=20 its residential and other core customers. ?????Still, Pacific Gas & Electric Co., California's other top gas utility,= =20 has never requested such a tariff to protect its Northern California=20 territory from competitors. ?????But as PG&E itself points out, the market is more competitive in=20 Southern California, where four of the five major interstate pipelines=20 serving California cross the state border. ?????"We never felt we needed it," said Staci Homrig, a PG&E spokeswoman.= =20 "There's not the same competitive situation up here as there is down there.= " ?????The Gas Co. says the tariff is necessary to prevent power plants from= =20 shopping around for the best pipeline deal and then using the company's lin= es=20 as a backup system during emergencies. The company said that could disrupt= =20 service to its regular customers. ?????"It's not really economical to have our facilities standing by--not=20 being used--and not being paid for it," said Steve Rahon, a Gas Co.=20 regulatory manager. "They want our facilities to be ready in case they can'= t=20 receive all of their load from the Questar pipeline. We want this tariff to= =20 be able to charge a fair price for that." ?????Furthermore, the utility says, its customers need to be protected from= =20 higher rates and the utility needs to be able to compete on a level playing= =20 field with interstate pipelines that play by different pricing and delivery= =20 rules. ?????The pipeline companies agree that bypass customers should pay a price= =20 for swinging back and forth between providers. But they argue that the=20 existing tariff is so high it is preventing fair competition. As proof of= =20 that, they say, energy companies have resisted siting power plants in the G= as=20 Co.'s territory. What's more, the tariff has never been triggered. ?????"It's important to note that no one has ever taken service under this= =20 rate because it's such a risk," Beach said. ?????During a rate proceeding last year, the PUC found that "gas supply=20 competition is critical to the economic survival of both existing and new= =20 electric generators" and agreed that the tariff may be discouraging the=20 siting of new power plants in the Los Angeles Basin. ?????The commission ordered Southern California Gas to come up with a new= =20 pricing system that must "not be the equivalent" of the old one. The Gas Co= .=20 has proposed two alternative rate structures, both of which do not impress= =20 the pipeline companies. ?????It will be up to Brown, the administrative law judge, to choose betwee= n=20 the Gas Co.'s proposals and those suggested by opposing parties. She could= =20 also suggest yet another rate, or repeal the existing tariff altogether. ?????"I need to write a decision. And that's kind of a daunting project,"= =20 said Brown, who inherited the case in January. ?????"I really can't give you a projection," she said. "It's one of those= =20 things that if the commission decides it's incredibly important and needs i= t=20 done, it will be moved to the top of my list. And that order could come at= =20 any time or it might never come." ---------------------------------------------------------------------------= --- ------------------------------------------------------------------ Experts Doubtful About Rush to Build Small Power Plants Energy: State wants =01,peaker=01, units to fill 40% of summer gap. But var= ious=20 factors make that seem unlikely. By TIM REITERMAN, Times Staff Writer ?????Gov. Gray Davis has mobilized state government and invited developers = to=20 put dozens of small =01+peaker=01+ power plants online =01+at warp speed=01= + to help=20 avert blackouts this summer. ?????But, as California races against time, industry experts say the=20 logistics and uncertainties of power plant construction make it doubtful th= e=20 state will have as much peaker electricity as it is seeking: ?????Generating turbines--which resemble giant jet engines--are in tight=20 supply. Design, engineering, construction and testing take several months.= =20 And community opposition is sometimes a concern because the plants can be= =20 noisy and add to air pollution. ?????Without knowing how much people will conserve, state officials estimat= e=20 the summer energy shortage at about 5,000 megawatts--enough to serve 3.7=20 million homes. They are counting on emergency peaking plants, usually=20 providing 50 to 100 megawatts each, to make up about 40% of that shortfall. ?????But records and interviews with energy experts, state officials and=20 potential plant developers show that: ?????* A contracting program the state hopes will bring in about 1,100=20 megawatts of peaking power has been stalled for weeks. Officials are still= =20 negotiating with about 10 developers and are uncertain how much power will = be=20 available for summer. ?????* An effort begun last year to issue plant permits within four months= =20 led to approval of only one 50-megawatt plant at San Francisco Internationa= l=20 Airport. Officials there say the deal is collapsing. Half a dozen other pla= nt=20 applications were withdrawn due to site problems, including pollution. ?????* The state=01,s new accelerated 21-day permit approval program is far= from=20 meeting Davis=01, goal of getting plants capable of producing an additional= =20 1,000 megawatts in operation for the summer. ?????The California Energy Commission approved two projects, and five more= =20 are being reviewed, for a total of about 500 megawatts. State officials=20 concede that not all the power will be available the entire summer because= =20 developers have until Sept. 30--after summer ends--to get plants online. ?????During a recent workshop to promote the construction of peaker plants,= =20 Roger Johnson of the energy commission said the panel is tracking an=20 additional 900 megawatts worth of plant proposals that developers are=20 expected to file in April. ?????=01+It is possible we can meet the goal,=01+ he said, adding that Sout= hern=20 California Edison has 20 requests for new power plant hookups totaling an= =20 additional 1,665 megawatts. ?????Can those proposed Southern California plants, most of them designed t= o=20 run during times of peak electricity demand, be ready for the summer? ?????=01+We don=01,t think so,=01+ said Ronald D. Nunnally, director of fed= eral=20 regulation and contracts in Edison=01,s transmission and distribution unit.= =20 =01+There=01,s a lot of hurdles. . . . A workshop [like this] would be more= useful=20 for next summer. ?????=01+Anything not in the process now has [only] a remote chance of bein= g=20 online this summer,=01+ he said in a remark echoed by a number of plant=20 developers. =01+Chances are slim.=01+ ?????=01,People Can=01,t Seem to Move=01, ?????The=20 state reserved a cavernous auditorium at an Ontario hotel March 29 for what= =20 was billed as a workshop and =01+energy fair.=01+ About 50 potential develo= pers,=20 consultants and sellers of power turbines attended. And many, while praisin= g=20 the state=01,s efforts to encourage deal-making and streamline permitting, = had=20 no deals on the horizon, let alone in the works. ?????=01+People can=01,t seem to move,=01+ said Los Angeles consultant and = developer=20 Bob Hoffman, who attended the conference to sell a Japanese turbine that=20 could power a peaker plant. =01+I talked to people with great projects. It = doesn=01, t seem to be congealing.=01+ ?????After two weeks on the California market, the=20 turbine was later sold for use in a plant in Nigeria. ?????To encourage plant development, the state has compressed the permit=20 process. It has offered to quickly contract to purchase power. It has helpe= d=20 prospective developers find smog credits, which allow them to emit air=20 pollutants for a price per ton. And it has enlisted major utilities in=20 quickly hooking up proposed plants to natural gas lines that fuel them and = to=20 the grid that carries electricity to users. ?????=01+Nobody has ever moved this rapidly, still being mindful of all=20 environmental standards, to put power online,=01+ Davis told The Times=01,= =20 editorial board Friday. ?????The energy commission has also developed a list of potential peaker=20 plant sites that have a minimum of two acres and proximity to gas and=20 electricity infrastructure. ?????The commission identified the San Francisco Bay Area, parts of the=20 Central Valley and San Diego as the regions most in need of peaking power= =20 plants, but said the Los Angeles region could also benefit. ?????Thirty-two sites with a potential for producing 1,700 to 3,400 megawat= ts=20 of peaking power passed the initial screening for suitability, according to= a=20 Feb. 21 report. They ranged from a soap factory in Sacramento County and a= =20 paper mill in Ontario to the former Ft. Ord army base near Monterey and the= =20 Pitchess Honor Ranch in Los Angeles County. ?????The only project approved under the four-month permitting program=20 initiated after outages last summer was El Paso Merchant Energy Co.=01,s=20 proposed United Golden Gate plant, which would provide about 50 megawatts t= o=20 San Francisco International Airport. =01+The deal is not dead but it=01,s n= ear=20 dead,=01+ said airport spokesman Ron Wilson. =01+We=01,re looking for anoth= er=20 supplier.=01+ Company spokeswoman Kim Wallace said the firm still hopes to = make=20 a deal. ?????The California Independent System Operator contracted with developers = of=20 about 29 peaker plants last year, but the state Department of Water=20 Resources, which has been buying power since mid-January, is renegotiating= =20 longer pacts. =01+We will try to get as many as we can for this summer,=01+= said=20 Vijay Patel of the department. =01+They are all in play.=01+ ?????The new=20 contracts, he said, will be for five to 10 years and allow plants to run=20 several thousand hours a year--far more than peaking plants commonly do. Th= e=20 companies, he said, would be free to sell power on the open market after th= ey=20 fulfilled their power sales contracts to California. ?????=01+These will run in peak periods and any time we need to call for po= wer,=01+=20 said energy commission spokesman Rob Schlichting. =01+Maybe we should call = them=20 Stage 3 power plants.=01+ ?????When The Times contacted owners of about 20 plant=20 sites on the state list, few said they had deals or solid proposals for=20 construction. Many were fielding calls from owners of turbines and potentia= l=20 developers who had seen their names on a state Web site. ?????=01+We=01,re on the list but don=01,t belong there,=01+ said Dave Rib,= manager of a=20 solar plant in Boron. =01+We are the largest solar plant in the world. We= =01,re=20 here in the Mojave Desert. We do not develop plants, and we have no plans t= o.=20 Maybe [the energy commission] will find a developer.=01+ ?????Exploring Several=20 Sites ?????Several sites are being explored by Calpine, which has 11 turbines and= a=20 contract to provide 495 megawatts to the state, starting with 90 in August.= =20 The proposed peaker locations are in Northern California. Spokesman Bill=20 Highlander said the company will not divulge more precise locations until a= =20 feasibility study is finished. ?????In Solano County, a peaker has been in planning since last summer at= =20 Lambie Industrial Park, named after nearby pastures with lambs. ?????Hal Mitchell, a principal of Sterling Energy, said the plant will=20 produce 147 megawatts and could be running by September. =01+We have a clie= nt=20 who wanted to put some assets in the ground,=01+ he said. =01+Coincidentall= y the=20 big crunch came along. [It] would have been built despite the energy crisis= . ?????=01+We=01,ve been getting all kinds of calls, people selling equipment= , people=20 trying to buy projects, and flakes,=01+ Mitchell added. =01+Some say, =01,I= got five=20 acres on top of a mountain. How =01,bout building me a power plant?=01, =01= + ?????Phil=20 Consiglio, vice president of Merit Energy Systems in Burbank, said he is=20 close to contracting with a developer at Ft. Ord, a former military base th= at=20 now houses Cal State Monterey, among other things. =01+There is an area=20 scheduled for utility usage,=01+ he said. =01+We found an area where they a= re=20 removing contaminated water [from the ground] and cleaning it. It=01,s not= =20 potable, but we can use it for a power plant. ?????=01+It will not be up and running for the summer.=01+ ?????Two oil production=20 facilities in Inglewood and Montebello are on the list. Steve Rusch, manage= r=20 of government affairs for Stocker Resources Inc., said three developers are= =20 interested in one of the sites. But he said he is skeptical that such sites= =20 can be turned into plants by summer. =01+The biggest issue is land use,=01+= he=20 said. =01+ =01,Not in my backyard.=01, . . . Another thing is that pollutio= n offsets=20 are tough to get. The reins need to be loosened up.=01+ ?????A Stocker site in=20 San Luis Obispo County is on a list of more than 100 other potential sites= =20 that state officials say require further evaluation. These include a soup= =20 factory and a former nuclear power plant. ?????Some sites were found to have =01+fatal flaws=01+ because they were to= o near=20 habitat of endangered species such as the fairy shrimp. Numerous sites are= =20 hydroelectric facilities owned by Pacific Gas & Electric Co. in mountainous= =20 areas far from gas lines necessary to fuel them. ?????Anticipated community resistance was listed as a problem with a site i= n=20 Morro Bay, where Duke Energy is already expanding a full-size power plant. ?????=01+This [listing] is news to me,=01+ said Duke spokesman Tom Williams= . =01+We=20 can=01,t even burp in Morro Bay without a permit.=01+ ?????Mark Seedaal, Duke=01,s=20 director of electrical modernization, said it would probably take the compa= ny=20 nine months to design, install and get on the grid even a small peaker plan= t=20 of 50 megawatts. =01+You don=01,t just drive up on a truck, put it down and= drive=20 away,=01+ he said. =01+I don=01,t see how you can do it by the summer of=20 2001.=01+ ?????The Sacramento Municipal Utility District has an existing=20 cogeneration plant at a Procter & Gamble factory and is already building a= =20 peaker scheduled to begin operation in May. ?????=01+We=01,re a little confused as to why we=01,re on the state list,= =01+ said=20 spokesman Greg Fishman. So how long did the district=01,s peaker take to bu= ild?=20 =01+It is a seven- or eight-month process to do the actual construction,=01= + he=20 said. =01+And . . . getting the parts is often a yearlong process.=01+ ?????One=20 site on the state list is in Redding, where the municipal utility district= =20 broke ground on a 43-megawatt plant that was two years in the planning and= =20 will not be finished much before summer of 2002. ?????=01+The state would like to take some credit, but it is all the city o= f=20 Redding,=01+ said Pat Keener, group manager for energy services. ?????The first two projects approved by the energy commission under the=20 21-day program are Wildflower Energy LP peakers totaling 225 megawatts in= =20 Palm Springs and San Diego. Project manager John Jones said that they have= =20 been in development since last year, that construction started a week ago a= nd=20 that the plants should be running sometime in July. ?????=01+If [other developers] have not started [the permitting] already,= =01+ he=20 said, =01+it would be a real challenge to be up by the summer.=01+ ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------ Davis Says All Power Costs to Be Recovered Crisis: Governor vows that under his plan, billions spent by the state will= =20 be recouped within months. He admits summer outages are an ominous=20 possibility. By MITCHELL LANDSBERG and MIGUEL BUSTILLO, Times Staff Writers ?????Billions of dollars that have been drained from the state treasury to= =20 buy electricity so far this year will be fully repaid by June 30, and=20 taxpayers will wind up spending =01+not one penny=01+ on the energy crisis,= an=20 optimistic Gov. Gray Davis pledged Friday. ?????=01+We will not only be paid off for all our expenses to date, we=01,l= l have=20 enough . . . to continue buying power through this year and hopefully throu= gh=20 2002,=01+ Davis said in an interview with Times editors and reporters. ?????The governor admitted that Californians face an uncertain--and possibl= y=20 treacherous--summer. Already, he said, state officials have begun consultin= g=20 with law enforcement officials around the country to develop a plan for=20 dealing with the blackouts that could become a part of daily life during ho= t=20 spells. ?????But he was nevertheless upbeat about the financial package he has=20 crafted to rescue the state=01,s big private utilities. And he was unusuall= y=20 salty in his denunciations of those he considers responsible for the power= =20 shortages and price surges that have wreaked havoc in the state=01,s newly= =20 deregulated electricity market. ?????Davis described the out-of-state power generators and marketers who ha= ve=20 raised the price of electricity by hundreds of percentage points as =01+the= =20 biggest snakes on the planet Earth.=01+ ?????He questioned what his predecessors=20 in state leadership were thinking when they failed to plan for growth in=20 electricity demand. But he saved most of his vituperation for the federal= =20 agency that has refused the state=01,s entreaties to place a cap on wholesa= le=20 electricity prices. ?????=01+If you=01,re looking for a culprit, I=01,ll give you a culprit,=01= + he said.=20 =01+The culprit is the Federal Energy Regulatory Commission.=01+ As far bac= k as=20 1995, Davis charged, the commission was undermining California by overrulin= g=20 state agencies that were seeking permission to build more power plants. ?????=01+They=01,ve consistently turned a deaf ear to my pleas, Sen. [Diann= e]=20 Feinstein=01,s pleas, the pleas of the governors and representatives of Ore= gon=20 and Washington,=01+ he said. =01+So if there is a villain, it clearly is th= e=20 Federal Energy Regulatory Commission.=01+ ?????Davis said the state was forging=20 ahead on its own to solve the crisis. Through a combination of an=20 $850-million conservation plan and what the governor described as the faste= st=20 power plant construction program in California history, the state hopes to= =20 keep blackouts to a minimum this summer. ?????Asked what he would tell Californians who will be paying higher rates= =20 while suffering through outages, Davis said: =01+Look . . . we live in one = of=20 the best places on the planet at one of the most fortunate times. Virtually= =20 nobody alive had to go through the Holocaust, the Depression, any of the=20 world wars. . . . In everyone=01,s life comes a little sun and a little rai= n. We=20 have to just act like adults and work our way through this problem. That=01= ,s=20 what I=01,d say.=01+ ?????Blaming Others for the Crisis ?????Davis expressed frustration at the hand he has been dealt, repeatedly= =20 insisting that he had inherited the power problems, not created them. ?????At the time that deregulation was being considered by the Legislature = in=20 1996, Davis was state controller. =01+I basically wasn=01,t asked to take a= =20 position and I didn=01,t take a position,=01+ he said. =01+I didn=01,t give= it much=20 thought.=01+ ?????Since January, the state has been forced to spend $5.2 billion=20 buying power that Southern California Edison and Pacific Gas & Electric hav= e=20 been unable to afford. ?????A Davis-sponsored plan approved by the Legislature calls for the state= =20 to float bonds to repay the state and help finance the purchases. The bonds= ,=20 in turn, would be repaid by utility ratepayers through their monthly bills. ?????The 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. ?????On average, California has been burning through $50 million a day on= =20 electricity--and that number will soon go up to about $57 million,=20 administration officials say, because of a federal regulatory decision last= =20 week. That decision requires the state to buy power on behalf of cash-poor= =20 utilities, regardless of price. ?????Despite the mind-numbing figures, Davis and his financial advisors=20 insisted Friday that they have created a plan that will make the utilities= =20 self-supporting--and take taxpayers off the hook--by early 2003. Here=01,s = how: ?????* A record $12.4 billion in bonds scheduled to be issued in June would= =20 not only repay the budget, but would cover future state purchases of=20 electricity and help the utilities repay their debts. ?????* New, higher=20 electricity rates would give California about $6 billion this year. That=20 money, along with the portion of the bond money left over after repayment o= f=20 the state=01,s debts, would be used to finance future state power purchases= . ?????The rationale behind those estimates is nearly impossible to scrutiniz= e,=20 because Davis=01, cadre of Wall Street advisors and utility experts has ref= used=20 to make public the contract information on which the figures are based. ?????They have even kept the information from state Treasurer Phil=20 Angelides--the elected official charged with implementing the bond deal tha= t=20 is the linchpin of the recovery plan. ?????In recent weeks, Angelides has made a series of public statements=20 raising questions about the plan. ?????At the current rate that California is spending money on electricity,= =20 Angelides estimated, the bond issue will run out this fall--not, as Davis= =20 said, in 2002. ?????Davis and his advisors said Friday that Angelides did not understand t= he=20 true status of California=01,s foray into the power business because the=20 administration had not shared its numbers with him. Davis planned to share= =20 more information with Angelides in coming weeks as the bond deal grew neare= r,=20 they said. The state will also be required to disclose some information whe= n=20 its bonds are offered for sale. ?????Davis insisted Friday that he has crafted =01+a very well thought-thro= ugh=20 plan,=01+ adding that it had been given the =01+Good Housekeeping Seal of A= pproval=01+=20 by major Wall Street investment firms. ?????Davis complained that the energy crisis has diverted his attention fro= m=20 other pressing matters, and said that, since late December, he has spent a= =20 total of only 10 working hours dealing with issues other than energy. ?????=01+I realize I have to deal with it but it=01,s ridiculous,=01+ Davis= said. =01+I=20 can=01,t deal with education, the environment, health care, nothing. That= =01,s all=20 I do.=01+ ?????In other developments Friday: ?????* A key Davis aide, Communications Director Phil Trounstine, resigned= =20 his $113,000-a-year job =01+to spend more time with my family and pursue a= =20 variety of offers in strategic communications.=01+ ?????Trounstine, a former=20 newspaper political writer who has written many of Davis=01, key speeches, = had=20 most recently been coordinating the governor=01,s energy conservation publi= city=20 campaign. The resignation will take effect at the end of the month. ?????* A state energy panel recommended Friday that AES Corp., a major powe= r=20 generator in California, should be forced to sell any electricity it makes= =20 from two now mothballed generators in Huntington Beach to the state in=20 exchange for expedited review of the company=01,s operating permit. ?????The California Energy Commission=01,s licensing committee, which is=20 overseeing the company=01,s pursuit of a fast-track permit, had previously= =20 stopped short of attaching such a condition to the project after being warn= ed=20 by commission lawyers that doing so would violate interstate commerce laws. ?????But in a revised decision, the committee found that without a sales=20 provision guaranteeing that power will be sold to California, the state wou= ld=20 be deprived of its ability to effectively respond to the energy crisis. ?????If adopted by the full energy commission, which is scheduled to consid= er=20 AES=01, permit request Wednesday in Sacramento, the sales requirement would= set=20 a precedent. --- ?????Times staff writer Christine Hanley contributed to this story. ---------------------------------------------------------------------------= --- -------------------------------------------------------------- Monday, April 16, 2001=20 Long, Hot, Costly Days=20 With a power-hungry summer nearing, state leaders and other Californians=20 aren't doing enough to prepare. And that's risky business.=20 ?????It's going to be a long, hot, frustrating and expensive summer in=20 California. Even a grim recent forecast that the state would endure 34 days= =20 of rolling blackouts could be optimistic. It could also be a dangerous=20 summer. One energy expert says, "We need to prepare for this as if we're=20 preparing for a natural diaster." But we're not, or not enough, perhaps=20 because Gov. Gray Davis seems loath to admit that the state's immediate=20 energy future is as bad as it is.=20 ?????Look at it this way. A megawatt-hour is enough power to serve about=20 1,000 average homes for one hour. This August, some of those megawatt-hours= =20 may cost, wholesale, nearly 20 times what they cost two years ago--an=20 increase from $40 in August 1999 to $750 in contracts already made for this= =20 August.=20 ?????Peak summer demand in California is 55,000 megawatts or more. The stat= e=20 could fall 3,000 to 7,000 megawatts a day short of that, in part because=20 drought in the Pacific Northwest will severely curtail hydropower.=20 ?????Davis says the $850-million conservation program he signed into law la= st=20 week, combined with existing programs, can cut at least 5,000 megawatts fro= m=20 peak demand this summer. But at this late date, it will be very difficult t= o=20 get a persuasive statewide program into effect before the hot days arrive.= =20 ?????Higher electricity rates, pending before the Public Utilities=20 Commission, and the governor's promise of a 20% rebate for power savings=20 should spur some conservation. Again, those actions have yet to be=20 implemented and are unlikely to have much effect in time for air conditioni= ng=20 season.=20 ?????Even so, Californians can certainly understand that every kilowatt the= y=20 save is a kilowatt that need not be scrounged at top dollar. Every thousand= =20 kilowatts add up to a megawatt that won't have to be bought from unscrupulo= us=20 generators selling at villainous prices during the hours of high=20 demand--prices that will be demanded even if they cripple the California=20 economy that is laying such golden eggs for the sellers.=20 ?????The biggest power hog is air conditioning, for both homes and=20 businesses. Part of the state's conservation program is intended to help=20 finance more efficient new systems, but considerable savings can be made=20 through just a good inspection and repair and turning up the thermostat a f= ew=20 degrees.=20 ?????When blackouts do come, the state and the utilities should put them on= a=20 set schedule rather than conducting them at random. This would help elimina= te=20 some of the uncertainty and panic involved. Cities with municipal power=20 systems, including Los Angeles, will avoid blackouts but can help by=20 conserving power and continuing to sell the resulting surplus to other part= s=20 of the state.=20 ?????Gov. Davis says he expects to have perhaps four new plants up and=20 producing by August. He spins a scenario of a tough summer followed by a=20 continuous easing as more plants are built, prices come down and the state= =20 gets out of the power-buying business. He also says the state will be repai= d=20 every penny it has spent to buy power as Sacramento issues revenue bonds=20 funded by the coming electricity price increases.=20 ?????We can only take Davis at his word. He has not offered an accounting o= f=20 the spending from the state's general fund to buy power, both daily and in= =20 long-term contracts, or revealed the assumptions that underlie his=20 projections. Of course the money for repayment will come from higher rates= =20 paid by consumers. The public interest in how these billions are spent=20 overshadows any fear that companies might find out the details of long-term= =20 contracts, which Davis cites as the cause for his secrecy.=20 ?????Even if residents and businesses are wholehearted in their conservatio= n,=20 however, and even if the state does everything right to increase supply,=20 there's still the obstinate Federal Energy Regulatory Commission, which see= ms=20 not to understand the word "regulatory." FERC refuses to impose a reasonabl= e,=20 cost-based and very temporary price cap on wholesale power sales in the Wes= t.=20 The main opponent of price caps, FERC Chairman Curtis L. Hebert Jr., says= =20 caps don't work because "the energy is going to go where the money is." Tha= t=20 sounds just like legendary bank robber Willie Sutton, who said he robbed=20 banks because that's where the money is.=20 ?????Open markets are fine--when they work right. Power is a necessity of= =20 life. The federal government has an obligation to protect the public health= =20 and safety. A temporary cap that allowed for a healthy profit would not=20 discourage energy companies from investing in new power plants. It would=20 certainly prevent Californians from being mugged again and might help the= =20 state avoid a true calamity.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------- Passing Along the Cost=20 Many Bay Area businesses resort to surcharges to survive=20 Matthew Yi, Chronicle Staff Writer Monday, April 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /16/M N52884.DTL=20 Just outside the double doors of the Englander Sports Pub & Restaurant in S= an=20 Leandro is a hand-written sign: "There will be a 5% PG&E surcharge added to= =20 all food served."=20 It's more than just a sign of the times in these days of energy crisis in= =20 California.=20 As gas and electricity bills skyrocket, many businesses around the Bay Area= =20 are resorting to adding energy surcharges to stay afloat. Hotels around the= =20 state already have started asking customers to pay more. Now, even everyday= =20 consumptions such as dining out and working out at the gym will cost more.= =20 "It was fun to do business. You go home, sleep at night time, get up the ne= xt=20 day and say, 'Hey, we're gonna do it all over again,' " said Englander owne= r=20 Jot Mangat, 46. "But now, you go home and you're wondering how much my PG&E= =20 bill is going to be. Where is this money going to come from?"=20 Last year, his power bill was around $3,400 a month. But in February, it=20 nearly doubled to $6,000, and that's even before the Public Utilities=20 Commission decided to raise rates as much as 40 percent this year.=20 Mangat thinks that by this summer, his power bills may eclipse his monthly= =20 rent, which is $8,000 for his downtown San Leandro establishment.=20 "This is one of the nicest restaurants in San Leandro," he said. "San Leand= ro=20 is proud of this place, but PG&E can put us out of business."=20 Mark Cavalli, 34, and Donna Clark, 35, both of Oakland, said they had been= =20 caught off guard when they noticed the $1 energy surcharge added to their= =20 dinner bill on Friday at the Englander.=20 "I felt I understood it, especially with all those TVs running," Clark said= .=20 "But I didn't like the place enough to come back here again and pay the=20 surcharge. If I liked it more, maybe I wouldn't mind paying extra."=20 SLIM MARGINS, HIGH PRICES Escalating power costs are particularly hard on restaurants because their= =20 profit margin is already slim, averaging 2 to 7 percent, said John Dunlap,= =20 president and CEO of the California Restaurant Association, a lobbying grou= p=20 in Sacramento.=20 "If you're a restaurateur on the brink . . . or if you're not having a good= =20 year, this could push you over the edge," Dunlap said. "You're going to see= =20 hundreds of restaurants closing statewide because of this. . . . I can assu= re=20 you, there will be a body count."=20 And that's exactly what Martha Pena, manager at Fentons Creamery & Restaura= nt=20 in Oakland, wants to avoid.=20 The popular ice cream parlor started adding energy surcharges to customers'= =20 bills two months ago: 25 cents per $10 for takeouts and 30 cents per $10 fo= r=20 dining in.=20 They also posted a sign near the front door to alert customers.=20 "Sometimes people ask us why we're doing this, but after we give them the= =20 explanation, they say they understand," Pena said.=20 Fentons' ice cream was still as sweet Saturday, even with the 30-cent bump = in=20 their lunch bill, said John and Theresa Strickland of Pleasanton.=20 "Actually we didn't even notice," John Strickland said, adding that he was= =20 willing to pay the little bit extra if it meant keeping a place like Fenton= s=20 in business.=20 BUSINESS THREAT "The energy crisis is going to put smaller places out of business unless th= ey=20 add surcharges," Theresa Strickland said. "The little fish can't compete wi= th=20 the big sharks."=20 Fentons' gas bill more than doubled from $400 to $1,000 a month since last= =20 year, while the electricity bill has stayed relatively stable at around $30= 0.=20 But that was during the winter season when the business doesn't have to bla= st=20 its air conditioning. The power bill picture will likely look drastically= =20 different when the weather warms up this spring and summer, said Fentons=20 bookkeeper Dan Tonelli.=20 Bars and restaurants are not the only businesses to feel the pinch.=20 At the Albany Sauna & Hot Tubs, owner Tim Adam has already raised prices=20 twice since December.=20 "It's really upsetting that we're passing this on (to our customers)," he= =20 said. "People who come in here are just ordinary people who care about thei= r=20 health. . . . People are saying they're paying more everywhere. . . . What= =20 we're frustrated about is that (our) cost of living is going up."=20 For half-hour sessions, Adam raised the price from $9 to $10 last December,= =20 and then added another $1 starting April 6.=20 The increases aren't arbitrary. Adam carefully calculated the figures to ma= ke=20 sure the extra revenues just cover his PG&E bill, which has tripled.=20 Adam already has tried to cut down by installing energy efficient light=20 bulbs, shutting down unneeded lights and asking customers to use only one= =20 towel.=20 But the bottom line is that his business needs energy to heat water for hot= =20 tubs, rocks for the dry sauna, and to run washers and dryers for towels.=20 YMCA ADDS $1 SURCHARGE Across the Bay, the YMCA of San Francisco also has decided to add energy=20 surcharges: $1 per month across the board for everyone.=20 After six months, the YMCA will reconsider whether to stop, continue or=20 increase the surcharges, spokeswoman Jane Holt said.=20 At the Central YMCA in the Tenderloin, the gas bill has nearly tripled to= =20 $23,000 as administrators scramble for ways to save energy, she said.=20 "We've put in fluorescent lights. . . . All the boilers and other systems a= re=20 working as efficiently as possible . . . insulated the pipes, added digital= =20 timers for lights," Holt said.=20 But that hasn't put a dent in the monthly bill.=20 And despite the extra fees that will be collected from the Central YMCA's 3= ,=20 500 members, that will not cover increases in the PG&E bills, forcing the= =20 group to use reserve funds, Holt said.=20 Jerry Englebardt, a runner and Y member from New York who visits San=20 Francisco four months a year, said he noticed the increase but wasn't=20 bothered because "the facilities here are so good."=20 "In New York," Englebardt said, "they think people in California are going= =20 around with candles. It's being played up as if California is going out of= =20 business. But it's not true."=20 HEALTH CLUBS RAISE FEES Health clubs that feature heated pools, with their high energy costs, are= =20 really feeling the pinch.=20 Linda Hansen, general manager of Walnut Creek Sports & Fitness Club, said= =20 adding a $3.50 per month energy surcharge to her members' fees was difficul= t=20 because they had just raised their rates by 7 percent at the end of last=20 year.=20 "We have one heated pool, and we keep it at 83 degrees," Hansen said. "When= =20 we had the cold spell, that was killing us. . . . But what else can we do?"= =20 "Inside, I'm screaming . . ." Hansen said. "I'm angry, really angry that th= e=20 state of California has put the businesses in such a precarious situation."= =20 Tell Us What You Think -- Can you save 20 percent on your energy usage? Gov= .=20 Gray Davis' administration is offering rebates to Californians who save on= =20 power starting in June, and if you've got a strategy for conserving, The=20 Chronicle wants to hear it. We'll be writing about the hardest-working ener= gy=20 savers in a future story. To get involved, write to the Energy Desk, San=20 Francisco Chronicle, 901 Mission St., San Francisco CA 94103; or send e-mai= l=20 to energysaver@sfchronicle. com.=20 Chronicle staff writers Tyche Hendricks and Meredith May contributed to thi= s=20 report. / E-mail Matthew Yi at myi@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Time Seems Bright for Solar Power=20 Big companies bring financial clout to field=20 Jim Doyle, Chronicle Staff Writer Monday, April 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /16/M N28455.DTL=20 On the sun-bleached floor of the Mojave Desert, solar-thermal plants are=20 producing electricity to fulfill a long-term contract with Southern=20 California Edison Co.=20 Rows of parabolic mirrors focus the sun's rays into a high-energy beam that= =20 heats an element to make steam, which turns an electrical turbine. In all,= =20 nine solar-thermal units near Barstow generate enough daytime power for 350= ,=20 000 homes.=20 "This technology has been around for 15 years," said Bob Cable, manager of= =20 KJC Operating Co., which runs five of the solar-thermal units for investors= =20 that include East Coast utilities and insurance firms. "It's very reliable.= =20 And with today's high fuel prices, we're a bargain.=20 "There's really nothing like us in the world," Cable said. And for renewabl= e=20 energy advocates, that's the problem.=20 Solar-thermal is just one of several renewable forms of energy that have=20 languished for years. No new plants have been built in a decade, mainly=20 because power produced using low-cost fossil fuels made alternative energy= =20 look pricey.=20 But now that the price of natural gas has shot up, solar, wind and geotherm= al=20 are more attractive to big energy suppliers.=20 "There's a lot of consolidation in the field now. Big players are coming in= =20 and setting up divisions for solar and wind energy," said Dave Renee, a=20 research analyst for the National Renewable Energy Laboratory in Golden,=20 Colo.,=20 a division of the U.S. Department of Energy.=20 Even before the power crisis, oil and gas companies were increasing their= =20 stake in renewables and buying up smaller energy firms because of rising fu= el=20 costs and tighter environmental restrictions on fossil fuel plants.=20 Sharp, the Japanese electronics company, last year became the world's large= st=20 producer of photovoltaic solar cells, which convert sunlight directly into= =20 electricity. At the Sydney Olympics, BP Solar -- a division of British=20 Petroleum's energy-producing empire -- powered a solar suburb of 650 homes = to=20 house the athletes.=20 A year ago, Shell Oil created its Shell Renewables division, which formed a= =20 joint venture with Siemens Solar, another leading manufacturer of solar=20 cells. Shell predicts that by 2050 half the U.S. energy mix will be=20 renewable.=20 Enron, the Texas supplier of natural gas, has bought Zond, a major wind pow= er=20 company. The oil companies have also invested in hydrogen fuel cell=20 technology, which may soon be used to power cars, homes, offices and=20 factories.=20 "We think the new technologies are going to get better, and prices will com= e=20 down," said George Douglas, a spokesman for the National Renewable Energy= =20 Laboratory. "And we think the price of conventional power plants, whatever= =20 fuel they're using, is going to come up."=20 12 PERCENT RENEWABLE POWER=20 Today, only 12 percent of California's power comes from renewables, but=20 advocates envision a future electrical grid with a diverse mix of=20 nonpolluting energy sources, large and small.=20 "California should be much more aggressive in pursuing the renewable energy= =20 options," said Dick Swanson, president of SunPower Corp., a Silicon Valley= =20 company that has developed new solar technology being used in power plants = in=20 Australia and Arizona. "We are leaving the state too vulnerable if we are t= oo=20 dependent on natural gas."=20 Gov. Gray Davis wants to rush 5,000 megawatts of capacity into service by= =20 July through construction of large and small power plants. Renewable energy= =20 advocates say Californians should carefully consider which kind.=20 "The investments we make this year and next year will stay with us for the= =20 next 30 years," said Kari Smith, a regulatory affairs manager for Powerligh= t,=20 which makes photovoltaic systems for factories and office parks. "We need t= o=20 promote as much renewable energy as possible so that we're not stuck again= =20 with a fossil fuel economy."=20 Sixteen percent of the new 5,000 megawatts will come from renewables --=20 mainly from wind power, but also from biomass, energy created from organic= =20 waste.=20 The California Energy Commission's $202 million subsidy program for renewab= le=20 plants offers financing incentives of as much as 1.5 cents per kilowatt hou= r,=20 or up to one quarter of cost, to help these systems compete.=20 ECONOMIC INCENTIVES Environmentalists want more economic incentives for renewables, and also=20 taxes on fossil fuel power plants to offset the pollution they cause.=20 Since the 1970s, most government subsidies for renewable technologies have= =20 gone to solar power, although it accounts for less than 1 percent of the=20 state's electricity -- less than geothermal (5 percent), wind (2 percent),= =20 small hydro plants (3 percent) and biomass (2 percent).=20 Solar has proved costly to develop, but appears to be on the verge of payin= g=20 off.=20 "In the last 20 years the cost of producing electricity from solar cells ha= s=20 dropped tenfold," Douglas said. "We can expect it to drop at a similar rate= =20 over the next 20 years by raising efficiencies of solar cells and decreasin= g=20 the manufacturing costs."=20 The U.S. market for solar energy has grown steadily in recent years, but mo= re=20 than 70 percent of photovoltaic systems are exported to developing countrie= s.=20 Solar panels, used since the late 1950s on orbiting satellites, are only no= w=20 becoming affordable. A household unit can cost $10,000 to $30,000, though i= n=20 California, state rebates can reduce the cost by half.=20 In December, the state Energy Commission received 50 applications from home= s=20 and businesses for its "buy down" program, which offers rebates of up to 50= =20 percent for the cost of solar panels and small wind generators. In January,= =20 there were 250. In February, there were 245.=20 WAIT LIST FOR HOME SYSTEMS In Sacramento, the local utility district sells solar panels to residential= =20 customers at reduced rates. The utility, which also installs the panels, ha= s=20 a waiting list of 700 homeowners for a total of 100 solar units available= =20 this year.=20 "We foresee the day in the next five or 10 years when photovoltaics will=20 compete with fossil fuel-generated power price-wise without subsidies," sai= d=20 Vince Schwent, who runs the Sacramento Municipal Utility District's solar= =20 energy program. "At that point, the market for solar will explode. Mass=20 production will lead to lower prices."=20 Independents that have tried to break into California's power market,=20 however, have had difficulty obtaining investors and loans for unconvention= al=20 technologies.=20 "The investment market and engineers have been focused on the creation of= =20 large power plants," said Richard Harkrader, a North Carolina energy=20 consultant. "How do you persuade people to make the higher investment in=20 return for no emissions and (ending the uncertainty of) fuel costs?"=20 But solar research scientist Jim Augustyn, a contractor for the U.S.=20 Department of Energy, cautions against the federal or state governments=20 pushing too hard for alternative energy systems.=20 "The government could do more, but they have to be careful about how they d= o=20 it," Augustyn said. "You can't just throw a lot of money at the technology= =20 and expect it to grow fast. You have to build this whole infrastructure.=20 There are people who can install a photovoltaic system on your roof, but=20 there are not a lot of them."=20 Scientists disagree on how much fossil fuel the Earth holds. But few think= =20 this year's energy crisis will be the last.=20 "I think that we should view this century as a transition away from fossil= =20 fuels," SunPower's Swanson said. "If we wait too long, it's just going to b= e=20 that much more painful."=20 Energy Economics With tax credits and rebates, wind power is already=20 competitive in price with conventional energy sources, and solar power is= =20 fast becoming more affordable. . The cost of building a natural gas boiler= =20 runs about $1 million per megawatt of capacity. Wind generators cost about= =20 the same to build. Solar thermal units cost more than twice as much. But th= e=20 fluctuating price of fuel must be factored into the cost of making=20 electricity from natural gas.=20 E-mail Jim Doyle at jdoyle@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 13=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Developments in California's energy crisis=20 The Associated Press Monday, April 16, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/16/s= tate0 946EDT0145.DTL&type=3Dnews=20 , , -- (04-16) 06:57 PDT Here is a look at developments in California's=20 energy crisis:=20 MONDAY:< ?-- The state is under no power alerts as reserves stay above 7 pe= rcent. ?-- Gov. Gray Davis is expected to meet with legislative leaders ove= r a plan ?to buy Southern California Edison's transmission lines. ?-- Ediso= n and Pacific Gas & Electric Co. are scheduled to begin paying ?hundreds of= smaller generators for future deliveries, under a plan by the ?Public Util= ities Commission. ?SUNDAY:<=20 -- PG&E officials demanded the utility be cut free from state regulation an= d=20 be allowed to push huge rate increases onto its customers, two weeks before= =20 negotiations with Davis broke off, the San Francisco Chronicle reported.=20 -- State energy officials are pushing for approval of a power plant in San= =20 Jose's Coyote Valley, despite recommendations that other sites may be more= =20 environmentally suitable, the San Jose Mercury News reported.=20 The deputy director of the California Energy Commission, Bob Therkelsen,=20 denied any impartial dealings concerning the plant.=20 FRIDAY:< ?-- Davis asks state lawmakers to approve spending $500 million mo= re to buy ?power for two struggling utilities, bringing his total requests = to $5.2 ?billion. ?-- The Federal Energy Regulatory Commission orders gener= ators who have sold ?electricity to the state to share power purchase infor= mation with the federal ?agency, which will then supply the information to = a House subcommittee that ?held three days of hearings this week on Califor= nia's energy problems. ?-- A business group, the California Alliance for En= ergy and Economic ?Stability, says a proposed restructuring of the state's = electric rate ?structure by the PUC would hurt the state's economy by putti= ng a greater rate ?burden on businesses. ?-- Edison is granted a stay in a = federal lawsuit it brought against the PUC ?seeking to raise rates. Edison = says both sides agreed to stop discovery and ?postpone hearings on all moti= ons while the state considers an agreement ?brokered by Davis last week. Ei= ther side can request that the stay be lifted ?with five days notice. ?-- A= Superior Court judge in Los Angeles agrees to consider whether the dozen ?= or so cases filed against Edison by small power generators should be ?conso= lidated into one case. The companies say they have not been paid for ?power= delivered to the utility since November. ?-- Edison says it has sent $206 = million in payments to all small power ?generators that have provided the u= tility with estimates of their April ?bills. Under a PUC plan, Edison and P= G&E were required to pay the so-called ?``qualifying facilities'' by Monday= . ?-- The state is under no power alerts as reserves stay above 7 percent. = ?WHAT'S NEXT:<=20 -- Davis will lobby legislative leaders on Monday, Senate Republicans and= =20 Assembly Democrats Tuesday, and Senate Democrats Wednesday to support his= =20 agreement to purchase Southern California Edison's power transmission lines= =20 as a way of helping the company pay off its debt. The governor wants to buy= =20 the power lines for $2.76 billion, but lawmakers of both parties have=20 challenged the plan.=20 -- An Imperial County judge could rule Monday whether Edison must pay=20 CalEnergy, a geothermal power producer, $140 million in past payments.=20 CalEnergy has already been granted the right to break its contract with=20 Edison and sell power on the open market.=20 -- Edison and PG&E are expected to file their 2000 earnings reports April 1= 7.=20 -- The state Senate starts hearings April 18 in its inquiry into allegation= s=20 that electricity suppliers illegally withheld power to drive up California'= s=20 wholesale prices. Wholesalers deny such accusations.=20 -- Also April 18, the Assembly plans to resume hearings in its inquiry into= =20 California's highest-in-the-nation natural gas prices.=20 THE PROBLEM:< ?High demand, high wholesale energy costs, transmission glitc= hes and a tight ?supply worsened by scarce hydroelectric power in the North= west and ?maintenance at aging California power plants are all factors in C= alifornia's ?electricity crisis. ?Edison and PG&E say they've lost nearly $= 14 billion since June to high ?wholesale prices that the state's electricit= y deregulation law bars them from ?passing on to consumers. PG&E, saying it= hasn't received the help it needs ?from regulators or state lawmakers, fil= ed for federal bankruptcy protection ?April 6. ?Electricity and natural gas= suppliers, scared off by the two companies' poor ?credit ratings, are refu= sing to sell to them, leading the state in January to ?start buying power f= or the utilities' nearly 9 million residential and ?business customers. The= state is also buying power for a third investor-owned ?utility, San Diego = Gas & Electric, which is in better financial shape than ?much larger Edison= and PG&E but also struggling with high wholesale power ?costs. ?The Public= Utilities Commission has raised rates up to 46 percent to help ?finance th= e state's multibillion-dollar power-buying. ?Even before those increases, C= alifornia residents paid some of the highest ?prices in the nation for elec= tricity. Federal statistics from October show ?residential customers in Cal= ifornia paid an average of 10.7 cents per ?kilowatt hour, or 26 percent mor= e than the nationwide average of 8.5 cents. ?Only customers in New England,= New York, Alaska and Hawaii paid more. ?,2001 Associated Press ? ?--------= ----------------------------------------------------------------------?----= -----------------------------------------------------------?Plan to Save Ed= ison Faces Skepticism in Sacramento ?No legislative clamor for Davis' bailo= ut deal ?Greg Lucas, Sacramento Bureau Chief?Monday, April 16, 2001 ?,2001 = San Francisco Chronicle ?URL: ?http://www.sfgate.com/cgi-bin/article.cgi?fi= le=3D/chronicle/archive/2001/04/16/M?N138633.DTL&type=3Dnews ?Sacramento --= Gov. Gray Davis may have a hard time persuading skeptical ?lawmakers to ap= prove the deal he reached last week to rescue Southern ?California Edison. = ?It's a sell job with the highest stakes. Without legislative approval, the= ?deal collapses, and Edison probably joins Pacific Gas and Electric Co. in= ?bankruptcy court. ?"I don't feel there is a gun to my head to pass this d= eal with Edison. This ?is going to be pounded like a cheap steak," said Sen= . Don Perata, D-Oakland. ?"It's the governor who is going to have to come i= n and sell it to us," Perata ?said. "I don't intend to deal with intermedia= ries." ?That's the central tension as lawmakers return today from a one-wee= k spring ?break. ?There is also a mountain of bills on other issues that ha= ve languished for ?months while the Legislature wrestled with the state's e= nergy mess. ?But it is Davis' $2.7 billion dollar deal -- and its bankrolli= ng of a hefty ?chunk of Edison's financial recovery with ratepayer dollars = -- that could ?elevate some Democrats' private grumblings about the governo= r into open ?rebellion. ?WHOLESALE APPROVAL SOUGHT?Magnifying that legislat= ive grumpiness, Davis wants lawmakers to rubber- ?stamp his deal. ?"The gov= ernor would prefer if they took the negotiation lock, stock and ?barrel but= they have the right to amend it as needed," said Steve Maviglio, ?Davis' p= ress secretary. "We don't want them to, but they can." ?In an April 10 fili= ng with the Securities and Exchange Commission, Edison ?suggests that if th= e Legislature changes the deal or balks at voting for it, ?all bets are off= . ?"They can have it that way, as long as they're comfortable with the answ= er ?not being yes," said state Sen. Debra Bowen, D-Marina del Rey, chairwom= an of ?the upper house's energy committee. "Last time I checked, the Senate= don't ?cotton much to ultimatums." ?Bowen, who will lead the Senate's revi= ew of the deal, opposes it. ?"I don't understand why this is a good deal fo= r ratepayers. It looks like a ?deal for Edison shareholders and the credito= rs," she said. "And I don't ?understand what the rush is, because it does n= othing to help us this summer." ?UTILITY CAN WALK AWAY?The deal itself says= that if legislative approval is not given by Aug. 15, ?Edison can walk awa= y. ?Maviglio said Davis plans to be in Sacramento this week to meet with ?l= awmakers and pitch his deal. But he did not know when Davis would present ?= proposed legislation. ?Frustrated by the governor's past refusal to present= a comprehensive package ?of bills to address the energy crisis, lawmakers = have said they won't do ?anything about the Edison deal until Davis gives t= hem a bill to introduce. ?There are already signs that Davis' proposal is a= nything but a legislative ?slam dunk. ?Senate President Pro Tem John Burton= , D-San Francisco, said last week that ?the plan needs to be subjected to "= extensive" legislative hearings by the ?Senate energy and appropriations co= mmittees and possibly the judiciary ?committees. ?Extensive hearings is oft= en legislative code for death by 1,000 cuts. ?Lawmakers have also questione= d the cost of buying Edison's transmission ?lines. More lawmakers are also = wondering what benefit the state gets from ?owning a portion of the grid in= stead of all of it. ?Before PG&E's bankruptcy, much of the Legislature's an= d governor's actions ?were driven by a desire to prevent bankruptcies for f= ear it would cut ?consumers off from power. ?But more than a week after PG&= E filed for bankruptcy, the lights are still on ?and, increasingly, lawmake= rs are saying that perhaps a bankruptcy court is a ?better venue than the p= olitical process to sort out the problems of PG&E and ?Edison. ?"There is a= re-evaluation happening," said Assemblywoman Helen Thomson, D- ?Davis. ?NO= T A REGIONAL PRIORITY?Thomson also said bailing out Edison is not a top-of-= the-list priority for ?Northern California lawmakers. ?"What are those Sout= hern California power lines going to connect up to? How's ?this deal going = to benefit electricity in the north?" Thomson said. "You can ?buy a lot of = health care, school books and traffic relief for $2.7 billion. " ?The state= has already spent about $5.2 billion to buy electricity on behalf ?of Cali= fornia's two largest investor-owned utilities. ?Democrats also can vote aga= inst the Edison deal with the blessing of consumer ?groups that brand Davis= ' deal a gargantuan giveaway to Edison, with the ?bailout coming mainly at = the expense of ratepayers. ?"It's dead on arrival. It's a complete capitula= tion to Edison that will cost ?ratepayers billions of dollars," said Harvey= Rosenfield, head of the ?Foundation for Taxpayer and Consumer Rights. ?"If= the governor says the Legislature stopped me from forcing you, the ?ratepa= yer, to bail out Edison I don't think legislators have much to fear ?from t= hat criticism," Rosenfield said. ?Besides the price, there are many other a= spects of the deal to which ?Democrats may object. According to an analysis= by legislative staff members: ?"It will take a while to elevate the comfor= t level," said Assemblyman Herb ?Wesson, D-Los Angeles. ?E-mail Greg Lucas = at glucas@sfchronicle.com. ?,2001 San Francisco Chronicle ? Page?A - 1 ?---= ---------------------------------------------------------------------------= ?---------------------------------------------------------------?NEWS ANALY= SIS ?Bush Administration Faces Static on Energy Policy ?Environmentalists c= riticize calls for more drilling ?Carolyn Lochhead, Chronicle Washington Bu= reau?Sunday, April 15, 2001 ?,2001 San Francisco Chronicle ?URL: ?http://ww= w.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04/15/M?N23= 8312.DTL&type=3Dnews ?Washington -- The new national energy policy that Pre= sident Bush will roll ?out in a few weeks is intended as a bold call to add= ress a crisis made vivid ?by California's blackouts. ?The hope has been tha= t California's woes -- and soaring energy prices ?nationwide -- have whette= d the appetite for key elements expected in the Bush ?plan: more nuclear po= wer, more coal and more drilling for oil and gas. ?It's not turning out tha= t way. ?Instead, the administration finds itself under attack as rabidly an= ti- ?environment and is losing GOP support on Capitol Hill for its proposal= to ?open the Arctic National Wildlife Refuge to oil exploration. ?"Their v= ision for the American West begins in the oil field and ends at the ?gas pu= mp," said Jay Watson, regional director of the Wilderness Society. ?And as = summer threatens to darken California -- with shortages spilling ?across th= e Northwest -- the administration is fending off calls for ?electricity pri= ce controls fueled by a coordinated Democratic drive to blame ?Bush for the= blackouts. ?Even before taking office, the Bush camp had feared that Calif= ornia's ?electricity mess could become a political and economic sinkhole. S= o far, it ?has. ?While Bush, a Texas oil veteran, campaigned on reversing t= he Clinton ?administration's energy "neglect," California's crisis made ene= rgy an ?unwelcome early priority, consuming vast quantities of White House = attention ?during Bush's critical first months in office. ?Bush tapped Vice= President Dick Cheney, another oil veteran, to head a ?Cabinet-level task = force to plot out a plan. While California posed risks, ?the administration= calculated that the state could also serve as a poster ?child for what hap= pens when energy needs are ignored. ?But so far, a proposal to drill in the= Arctic National Wildlife Refuge has ?become the poster child. ?As the plan= 's outlines take shape, there is more that will send ?environmentalists to = the barricades: more use of coal, more nuclear power, ?more drilling for oi= l and gas on public lands, more power lines and ?pipelines, and easier lice= nsing of hydroelectric dams. ?"We're looking at all different approaches to= it and want to present a ?balanced approach," Interior Secretary Gale Nort= on said Thursday. ?DEFENDING A POSITION?Top Bush officials are playing defe= nse, listing ways they are helping ?California and explaining why their str= ategy does not include price controls. ?Yet as California's crisis spreads = across the West, so does the call for ?price controls, even as support for = more production fails to build. ?"Unfortunately the national focus . . . ha= s been diverted away from the ?challenge of inadequate supply to price cont= rols," said Energy Secretary ?Spencer Abraham recently. ?Meanwhile, high en= ergy prices are undermining the economy. Indeed, the reason ?the White Hous= e so resists price caps is its conviction that caps would make ?the shortag= es -- and the economic damage -- worse. ?Bush's answer is to boost supply. = But the combination makes for dangerous ?politics: an energy policy that is= portrayed as both anti-environment and ?anti- California. ?Fred C. Smith, = head of the Competitive Enterprise Institute, one of many ?conservative pol= icy groups closely allied with the administration, thinks the ?public will = come Bush's way. ?"When they're faced with a choice between no air conditio= ning and no lights ?and no jobs, or drilling in areas they have never been = to . . . they're going ?to be crying for getting energy out there," he said= . ?GAS-RICH FORMATION?Although drilling in the Arctic Refuge has drawn the = most heat -- and is ?already losing Republican votes in the Senate -- Bush = may focus more on the ?Overthrust Belt, a geological formation in the Rocki= es considered potentially ?rich in natural gas. ?President Bill Clinton blo= cked large portions of the area to drilling when he ?put roadless designati= ons on 58 million acres during his last days in office. ?A Bush reversal of= Clinton's move is "virtually guaranteed," said Robert ?Nelson, a Universit= y of Maryland professor close to the administration. "The ?Overthrust Belt = is one of the major prospective gas areas in the country." ?Studies estimat= e it might hold 137 trillion cubic feet of gas, enough to meet ?all current= U.S. needs for nearly seven years. But 40 percent of that is on ?federal l= and that is closed to drilling. ?A draft Interior Department report indicat= es a broad-ranging review of all ?such land policies. The administration mi= ght even look at Clinton's new ?national monuments designations, such as th= e Carrizo Plain between ?Bakersfield and Santa Maria that is thought to hav= e gas potential. ?The administration says 90 new power plants must be built= each year to keep ?up with demand, and it sees nuclear power, which now pr= ovides 20 percent of ?the nation's electricity, as an alternative to over-r= eliance on the natural- ?gas generators. ?Cheney also advocates nuclear pow= er -- which does not produce the carbon ?dioxide emissions many scientists = believe cause global warming -- as a ?response to the barrage of criticism = for the administration's exit from the ?Kyoto Protocol, which calls for lar= ge cuts in carbon dioxide emissions. ?The United States has not built a nuc= lear plant since the Three Mile Island ?accident a generation ago. But prop= onents contend that new plants are ?smaller, safer and cheaper and can be b= uilt in months, not years, although ?Cheney concedes that the problem of wa= ste disposal is unsolved. ?Although many environmentalists cut their teeth = on the anti-nuclear movement, ?up to now they have not actively opposed nuc= lear power plant relicensing. ?Whether they will accept new construction is= another matter. ?At the same time, the administration is planning a big pu= sh for coal -- which ?does produce large amounts of carbon dioxide and othe= r emissions. Coal- fired ?generators, which produce 52 percent of the natio= n's electricity, are ?increasingly being supplanted by cleaner natural gas = plants. Bush's budget ?calls for a new $150 billion "clean coal power initi= ative," and Abraham ?emphasized that the United States has a 250-year suppl= y of coal at current ?use levels. ?CONSERVATION LACKING?But even environmen= tal groups that resisted criticizing Bush when he took ?office now blast hi= m for rejecting conservation as an alternative. ?"Leading people to believe= that America can drill its way out of its energy ?dependence is just silly= ," said Philip Kavits, spokesman for the National ?Wildlife Federation. ?Ly= nn Scarlett, president of the libertarian Reason Foundation and nominated ?= by Bush to a top Interior Department post, maintains that U.S. environmenta= l ?standards and technology argue for meeting more energy needs here. ?"If = anyone in the world is going to do it in an environmentally sensitive ?way,= it's going to be the United States," she said. "Not Russia, not Iraq, ?not= China." ?Scarlett also said the administration "has every intention" of us= ing ?alternative fuels, especially biomass. ?Bush and his top officials hav= e warned from the outset that the new energy ?policy will offer few direct = remedies for California. ?"Those who wish for overnight solutions I think a= re not going to find us able ?to solve every problem in a matter of days," = Abraham said. ?Indeed, Bush himself has said that California's electricity = meltdown is a ?problem that California has to fix, and that his energy poli= cy will be aimed ?more broadly. ?When the policy emerges, however, it may o= nly heap fuel on the fight with ?environmentalists, and face criticism for = doing little to aid California. ?E-mail Carolyn Lochhead at clochhead@sfchr= onicle.com. ?,2001 San Francisco Chronicle ? Page?A - 15 ?-----------------= -------------------------------------------------------------?-------------= --------------------------------------------------?Bay Theaters Start Braci= ng for More Blackouts ?Larger venues buy generators ?Jesse Hamlin, Chronicl= e Staff Writer?Sunday, April 15, 2001 ?,2001 San Francisco Chronicle ?URL: = ?http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/0= 4/15/M?N233430.DTL&type=3Dnews ?Conductor Murray Perahia and the orchestra = of the Academy of St. Martin in ?the Fields were rehearsing at Davies Symph= ony Hall a few weeks ago when the ?stage suddenly went dark. A rolling blac= kout had hit, just 90 minutes before ?the performance. ?With a flashlight, = a stagehand led the musicians backstage, where the hall's ?emergency genera= tor provided just enough light for them to finish the ?rehearsal -- standin= g on the loading dock. As the patrons arrived, they were ?kept outside the = hall -- the San Francisco Symphony kindly provided chairs ?for ticket holde= rs, if not the performers. The show started 30 minutes late, ?after the pow= er had returned. ?Anticipating more blackouts this summer, the Symphony has= rented a $1,500-a- ?month generator just to power the Davies stage lights.= And that's cheap ?compared to the $10,000 to $13,000 monthly rental fee Bi= ll Graham ?Presents/SFX expects to pay for each big generator to be install= ed at ?Shoreline Amphitheater, the Chronicle Pavilion and other concert ven= ues. ?California's energy crunch is putting the squeeze on arts and enterta= inment ?organizations and recreational facilities around the Bay Area, most= of whom ?have seen their power bills soar this year. ?A few have already r= aised prices to cover higher energy costs. Others are ?swallowing the incre= ases but may have to boost prices if power costs keep ?rising. The bigger v= enues are preparing for rolling blackouts. ?"We are exploring the possibili= ty of surcharges for areas that are costing us ?more to operate, specifical= ly higher utility costs," said Neal Pinkser, ?executive vice president of t= heater operations for United Artists Theater ?Circuit Inc., which owns 25 m= ovie theaters in California. ?Concert promoter Bill Graham Presents has bee= n hit by skyrocketing power ?costs, but is concerned also about public safe= ty. ?"If a rolling blackout comes and you have 25,000 people in your venue,= you ?might have a safety issue," said Sherry Wasserman, a Bill Graham seni= or vice ?president. That's why the company is getting those monster generat= ors. ?"The power necessary to continue running your standard rock show -- t= he ?lights, the sound -- is enormous," Wasserman said. ?BGP is not raising = prices. But, "If utility prices continue to rise, it would ?be naive to thi= nk that the cost wouldn't be passed on to the consumer, one ?way or another= ." ?The big nonprofit groups have no immediate plans to raise ticket prices= . But ?they're doing what they can to conserve. ?The staff at Walnut Creek'= s Dean Lesher Regional Center for the Arts has shut ?off decorative lights = around the building and on the trees. Stage lights no ?longer stay on after= lighting checks. ?In San Francisco, American Conservatory Theatre, whose $= 8,373 January PG&E ?bill was 50 percent higher than last year, has dimmed t= he lobby lights at the ?Geary Theater and is using the air cooling system m= ore judiciously. ?The War Memorial Performing Arts Center, which manages th= e city-owned Davies ?Hall, Opera House and Veterans Building, has switched = off or toned down ?lights throughout the buildings. The Opera House columns= , once illuminated ?nightly, are only lit up on performance nights by bulbs= whose wattage has ?been reduced from 500 to 300. The 1,000 or so lights in= the Davies lobby have ?been dimmed by 15 percent. ?The War Memorial gets i= ts electricity from the city's Hetch-Hetchy project ?but has been hit with = whopping increases on its gas bill. It expects to be ?able to pay its power= bills this year, but "I am concerned about the budget ?implications if ene= rgy prices should continue to go up," said War Memorial ?Managing Director = Beth Murray. "If they do, and we cannot accommodate it ?within our revenue = capability, we would have to consider increasing rental ?rates." ?The San F= rancisco Ballet, which performs at the Opera House, worries more ?about rol= ling blackouts than rent hikes. ?"We're much more concerned about the impac= t on performances should the power ?go out at the Opera House," said Ballet= General Manager Glenn McCoy. "We ?can't avoid it, but we've planned for th= e evacuation of audiences and ?employees. There are lots of flashlights aro= und." ?The power at the Opera House comes from several substations so the e= ntire ?building wouldn't go dark during a blackout, but the stage lights, r= igging ?and some auditorium lights would shut down. An emergency generator = would ?power the exit signs. ?Like everyone else, movie theaters are conser= ving energy by turning off ?lights whenever possible. But you can't flip of= f the 4,000-watt projector ?bulbs. And with summer coming, the high cost of= air-conditioning is bound to ?put a chill on profits. ?"It's going to be a= nightmare this summer because of the added costs," said ?Alan Michaan, own= er of the Renaissance Rialto chain, which owns the four- ?screen Grand Lake= Theatre in Oakland and three other East Bay movie houses. ?Michaan, who ho= ped not to have to raise prices, is paying $5,000 more a month ?for power t= han he did a year ago. His February PG&E bills totaled $16, 048. ?"It's tak= ing a significant chunk out of our profit," he said. He won't cut ?down on = the air-conditioning this summer, but he has turned off chandeliers ?and re= duced the hours the marquee is on. ?Smaller facilities are being squeezed, = too. San Francisco's The Marsh has ?goosed up prices to pay for power. The = small nonprofit group, which presents ?plays and performance art, has bumpe= d its Monday night ticket up a buck and ?its weekend comedy shows from $5 t= o $7. ?At the Paddock Bowl in Pacheco, prices are going up to pay for power= . The ?$1-a-game Monday night special just went up 50 cents. The regular $2= .50 rate ?will soon be $3.50. ?"My gas bills have gone up over 300 percent = in the last few months," said ?manager Mark Willard, who was expecting a bi= g jump in his electricity bill. ?During the summer, the alley runs the air-= conditioning 16 hours a day. The ?price increase "is unfortunate, but we ha= ve no way around it to keep the ?business going." ?E-mail Jesse Hamlin at j= hamlin@sfchronicle.com. ?,2001 San Francisco Chronicle ? Page?A - 17 ?-----= -------------------------------------------------------------------------?-= --------------------------------------------------------------?PG&E Took Ha= rd Line, Dooming State Talks ?Secret plan shows utility demanded less regul= ation ?David Lazarus, Chronicle Staff Writer?Sunday, April 15, 2001 ?,2001 = San Francisco Chronicle ?URL: ?http://www.sfgate.com/cgi-bin/article.cgi?fi= le=3D/chronicle/archive/2001/04/15/M?N176098.DTL&type=3Dnews ??PG&E's bailo= ut talks with Gov. Gray Davis fell apart after the utility ?demanded unprec= edented freedom from regulatory oversight and the ability to ?pass along hu= ge rate increases to consumers, The Chronicle has learned. ?Pacific Gas and= Electric Co. claimed that its decision this month to file for ?bankruptcy = protection in San Francisco resulted from the governor's ?unwillingness to = negotiate a fair deal. ?But a confidential proposal submitted by PG&E durin= g the talks shows that the ?utility was the more ambitious and stubborn neg= otiator and that the deal ?sought by the company was doomed to fail from th= e outset. ?"It's like the Japanese insisting that we surrender Hawaii after= we beat them ?in World War II," said Harvey Rosenfield, head of the Founda= tion for Taxpayer ?and Consumer Rights in Santa Monica. ?He described PG&E'= s demands as "breathtaking in their level of self- ?delusion." ?A copy of t= he eight-page, single-spaced proposal was obtained by The ?Chronicle. ?"PG&= E was arrogant and defiant, and acted like we owed them something," said ?S= teve Maviglio, a spokesman for the governor. "That's not how you enter into= ?a negotiation." ?UTILITY MAKES DEMANDS?Among the utility's demands: ?-- P= G&E insisted that it be cleared of any wrongdoing when it transferred ?mill= ions of dollars to its parent company. ?-- In a sale of its power grid to t= he state, PG&E still wanted to retain ?possession of valuable assets, inclu= ding the right to profit from any ?telecommunications lines or antennas lin= ked to the system. ?-- PG&E required that it be given first right of refusa= l if the state ever ?chose to sell off the power lines, allowing the utilit= y to buy back the ?system without competitive offers. ?"It is ludicrous to = suggest that this document caused the negotiations to ?break down," said Ro= n Low, a PG&E spokesman. "There were negotiations that ?occurred later and = other documents that followed." ?The company's proposal is dated Feb. 28. S= ources familiar with the ?negotiations said PG&E did not significantly depa= rt from its initial offer ?during follow-up meetings. ?Robert Glynn, chairm= an of the utility's parent company, PG&E Corp., said that ?when the bankrup= tcy filing was made April 6, no substantive talks had been ?held for at lea= st three weeks. ?This would have made PG&E's proposal only about two weeks = old when the ?negotiations unraveled. ?AT AN IMPASSE?Sources said the utili= ty refused to budge during that interval and that the ?impasse centered pri= marily on PG&E's insistence that it be subject to less ?oversight by the Ca= lifornia Public Utilities Commission. ?"They took a position on regulatory = matters that was out of touch with ?reality," said Maviglio, the governor's= spokesman. ?Indeed, the single most striking aspect of PG&E's proposal is = its repeated ?references to a reduction in the state PUC's regulatory autho= rity. ?For example, the utility argues that it is entitled to recoup from c= onsumers ?about $9 billion in costs accrued because of runaway wholesale po= wer prices. ?The proposal says this money "will be fully recovered in retai= l rates without ?further CPUC review for prudence or any other purpose." ?P= G&E also insisted that virtually all official restrictions on its activitie= s ?based on the 1996 legislation that deregulated California's electricity = ?market be overturned. ?"The CPUC will terminate or modify the scope of exi= sting commission ?proceedings and will not initiate new proceedings related= to implementation ?of (the legislation) or issues pertaining to the reason= ableness and recovery ?of costs," the proposal stipulates. ?This would incl= ude a current investigation by the state PUC into whether PG&E ?violated st= ate law by transferring millions of dollars from the utility to ?its parent= company before filing for bankruptcy. ?PG&E's proposal maintains that the = state "will waive and release all claims ?arising out of the dispute," incl= uding the money transfer and a restructuring ?of the parent company that pr= otected it from the utility's financial woes. ?Furthermore, it instructs th= at the state PUC "will issue an order finding ?that PG&E and PG&E Corp. hav= e fully complied with state laws and CPUC orders ?. . . and that their cond= uct and transactions did not contravene public ?policy." ?"It's Bob Glynn t= hinking he's god of the universe," said Nettie Hoge, ?executive director Th= e Utility Reform Network in San Francisco. "PG&E doesn't ?think they're beh= olden to state law. They think they're a law unto ?themselves." ?Shawn Coop= er, a spokesman for PG&E's parent company, declined to discuss the ?content= s of the proposal. "That document is confidential," he said. ?THE EDISON DE= AL?No language concerning compliance with state laws was included in the ac= cord ?reached last week between the governor and Southern California Edison= . ?That agreement, which still requires final approval from lawmakers, woul= d ?restore the utility to creditworthiness in return for acquisition of its= ?power lines and other concessions. ?Sources said the deal reached with Ed= ison is "very close" to terms offered by ?the state to PG&E. ?Yet, while PG= &E's proposal seeks to diminish the regulatory role of the PUC, ?the Edison= accord bends over backward to stress the PUC's authority over the ?utility= . ?"It is expressly understood that there is no intention to change (Edison= ) ?continuing to be a public utility that is subject to the jurisdiction of= the ?California Public Utilities Commission," it states on the first page.= ?Maviglio said he did not sit in on the talks with either utility, but he = ?learned from negotiators that both PG&E and Edison had misgivings about th= e ?PUC's role as a consumer watchdog. ?"Edison had some mistrust of the PUC= , but they understood that they had to ?live with the regulators," he said.= ?PG&E, on the other hand, harbored a deeper grudge, which Maviglio said wa= s ?"very emotional" for the utility. He speculated that PG&E desired retrib= ution ?for a past regulatory setback. ?"Perhaps we misjudged their primary = concern," he said. "It wasn't resolving ?their credit issue. It was extract= ing vengeance on the PUC." ?TALKS GROUND TO HALT?Maviglio said the talks qu= ickly hit a brick wall after PG&E submitted its ?deal terms. While state ne= gotiators were prepared to discuss many of the ?points, he said, they could= not yield on matters of regulatory oversight. ?"We were willing to negotia= te the terms of the deal but not constitutional ?controls," Maviglio said. = "They were attempting not just to set the course of ?the future but also to= right the wrongs of the past." ?The first sign of trouble emerged when PG&= E officials told The Chronicle in ?late March that it appeared the negotiat= ions had collapsed. The governor's ?office, perhaps optimistically, maintai= ned that all was well. ?Around this time, however, PG&E's Glynn made the fa= teful decision to abandon ?the talks and to instead file for bankruptcy pro= tection. The company gave no ?indication of its move to the governor. ?Apri= l 5 would prove to be a pivotal date in California's energy saga. ?While PG= &E was preparing to file for bankruptcy the next morning and was ?handing o= ut last-minute bonuses and raises to thousands of employees, Davis ?was put= ting the final touches on a televised speech in which he would all but ?ass= ure the utilities they would recover their costs through rate increases. ?S= ources said the governor's negotiators called PG&E to brief the company's ?= chief financial officer, Peter Darbee, on what Davis was about to say. ?The= y had to pull Darbee from a meeting of PG&E's board of directors, where, ?p= resumably, the official vote was being taken to file for Chapter 11. Darbee= ?was informed about the intended speech but said little in response. ?The = next day, after making the bombshell bankruptcy announcement, PG&E's ?Glynn= laid blame for the collapse of bailout talks entirely on Davis. ?"We liste= ned carefully to the (governor's) statement and the commentary that ?follow= ed, and this decision is the result," he said. ?"The negotiations we have b= een involved in since last November have gone ?nowhere," Glynn added. "Over= the last month, the kindest thing to say is ?progress has dramatically slo= wed." ?"There was no room for negotiation," countered Maviglio. "It was the= ir way or ?the highway." ?Rosenfield of the Foundation for Taxpayer and Con= sumer Rights seldom sees eye ?to eye with the governor. But in this case, h= e finds himself defending Davis. ?"The document absolves the governor of re= sponsibility for PG&E's bankruptcy, ?" Rosenfield said. "It's good to know = there are limits beyond which even ?Davis wouldn't go." ?The governor's neg= otiators remain hopeful that a deal still can be reached ?with PG&E compara= ble to the state's accord with Edison. ?Maviglio said PG&E has several mont= hs in which to file a Chapter 11 ?reorganization plan. He said state offici= als are prepared to work with PG&E ?to produce a plan that meets both sides= ' goals. ?"It would be the smart thing for them to do," Maviglio noted. "Wh= en they come ?out of bankruptcy, they'll still be subject to regulation." ?= E-mail David Lazarus at dlazarus@sfchronicle.com. ?,2001 San Francisco Chro= nicle ? Page?A - 1 ?-------------------------------------------------------= -----------------------?---------------------------------------------------= ------------?Energy Efficiency Rules Scaled Back ?Bush official's move affe= cts appliances ?Washington Post?Saturday, April 14, 2001 ?,2001 San Francis= co Chronicle ?URL: ?http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chron= icle/archive/2001/04/14/M?N94172.DTL&type=3Dnews ?Washington -- The Energy = Department announced yesterday the rollback of a ?Clinton administration ru= le mandating increased energy savings for central ?air conditioners and hea= t pumps in favor of a less stringent rule applauded ?by appliance manufactu= rers. ?Energy conservation advocates said the decision forfeits an opportun= ity to ?reduce electricity consumption by a vital margin in summer, when he= at waves ?raise the threat of power blackouts. The Bush administration's pl= an is likely ?to face legal and congressional challenges, opponents predict= ed. ?The Bush administration said the rule it will propose, requiring a 20 = percent ?increase in energy efficiency over the current standard, would pro= duce major ?energy savings and air quality gains. Over the next 30 years, i= t would ?eliminate the need for 27 new electric power plants, officials sai= d. ?The Clinton standard, mandating a 30 percent gain, would have offset th= e need ?for 39 plants of the same size, officials said. The difference in e= nergy ?savings between the two standards over 30 years equals the annual el= ectricity ?use by all American households today, Energy Department official= s said. Both ?rules would take effect in 2006. ?Energy Secretary Spencer Ab= raham called the new rule a "realistic" and ?affordable standard. "We were = particularly concerned that the Clinton rule ?placed too high a cost burden= on consumers," he said. ?Conservation groups said the administration bowed= to industry pressure. ?"California will now have to build an additional tw= o power plants to make up ?for what President Bush did today," said Philip = Clapp, president of the ?National Environmental Trust. ?"They're working ve= ry hard to make the nation more energy-inefficient," said ?David Nemtzow, p= resident of the Alliance to Save Energy. ?Earlier in the week, the Energy D= epartment approved a Clinton administration ?energy-saving rule for clothes= washers and water heaters. ?The air conditioner rule, which divided manufa= cturers, was based on disputed ?calculations of how much new units would co= st to make and how affordable ?consumers would find them. ?Energy Departmen= t officials concluded that new units meeting the 20 percent ?energy-saving = standard would add $213 to the average models priced at $2,000 ?and more to= day, while the Clinton administration standard would cost $335 ?more. ?Prop= onents of the higher standard said that is a trivial cost difference ?sprea= d over the nearly 20-year life of new air conditioning and heat pump ?units= . ?Efficiency Requirements for Future Appliances Rules approved by the Bush= ?administration this week will have these effects on future models: ?CLOTH= ES WASHERS?-- Energy usage cut: 35 percent ?-- Price increase: $249 per uni= t ?-- Utility bill savings: $48 per year ?WATER HEATERS?-- Energy usage cut= : 5 to 9 percent ?-- Price increase: up to $100 per unit ?-- Utility bill s= avings: up to $182 per year ?AIR CONDITIONERS?-- Energy usage cut: 20 perce= nt ?-- Price increase: $213 per unit ?-- Utility bill savings: $21 per year= ?HEAT PUMPS?-- Energy usage cut: 20 percent ?-- Price increase: $144 per u= nit ?-- Utility bill savings: N/A ?Source: Chronicle News Services ?The Ass= ociated Press contributed to this story. ?,2001 San Francisco Chronicle ? P= age?A - 4 ?----------------------------------------------------------------= --------------?------------------------------------------------------------= ---------?Power of Micro Vs. Macro ?Some firms crushed by energy crisis ?Sa= m Zuckerman, Chronicle Economics Writer?Sunday, April 15, 2001 ?,2001 San F= rancisco Chronicle ?URL: ?http://www.sfgate.com/cgi-bin/article.cgi?file=3D= /chronicle/archive/2001/04/15/B?U152654.DTL&type=3Dnews ?When Bernard Marsz= alek talks about economists who say California's energy ?crisis is no big d= eal, you can almost see the smoke rising from his ears. ?Marszalek, marketi= ng manager for Inkworks Press, a Berkeley printer, has seen ?his company's = cost of natural gas go up about 60 percent. Now he's facing the ?prospect o= f a 40 percent increase in the cost of electricity, which powers ?Inkworks'= two presses. The potential hit: $3,600 a year, no small sum for a ?busines= s that grosses $2 million annually. ?"Economists are people in their ivory = towers, looking at figures," said ?Marszalek. "You talk to individual busin= esses and they're hurting." ?One of the most striking paradoxes of the powe= r crisis has been the vast gulf ?between the cries of pain of California's = business community and the bland ?reassurances coming from the economics pr= ofession. ?Businesspeople say rising costs and power disruptions have them = on the ropes. ?"We are absolutely getting hammered," said Mike Betts, co-ow= ner of Betts ?Spring Co., a San Leandro manufacturer of industrial springs.= But economists ?insist that overall damage to business in the state will b= e relatively ?slight. ?So, what gives? Are businesspeople overreacting, or = are economists out of ?touch with reality? ?In their own separate ways, it = seems, they may both be right. What's going on ?here is a classic illustrat= ion of the difference between macro and micro, the ?big picture and the ind= ividual portrait. ?"In a large macroeconomy, labor and other costs are more= important than ?energy," said Mary Daly, an economist with the Federal Res= erve Bank of San ?Francisco. "Our economy is going to be affected (by the p= ower crisis), but it ?is not as large as it might sound when you talk with = a manufacturer who uses ?a lot of electricity." ?Daly pointed to the Asian = financial crisis of 1997 and 1998, which ended up ?doing little harm to the= U.S. economy as a whole but walloped some sectors of ?U.S. business. "Appl= e growers in Washington were devastated" when Japan and ?other Asian countr= ies cut back fruit imports, she noted. ?Ross DeVol, director of regional st= udies at the Milken Institute in Santa ?Monica, estimates that the energy c= runch will cut the state's economic growth ?rate between 0.25 and 0.4 perce= ntage points during the next five years, a ?relatively small amount. ?The l= imited economic damage reflects the fact that California has a higher ?prop= ortion of white-collar businesses than most states, and they tend to be ?lo= w energy consumers. "If you're an advertising agency, you probably won't ?c= are much about about energy costs," DeVol said. ?In California, which produ= ces $1.25 trillion in goods and services annually, ?businesses that are big= gas and electricity users -- manufacturers, dairy ?farmers, restaurants an= d the like -- may not dominate. But there are tens of ?thousands of them, a= nd they say it's scant comfort to think of the big ?picture when they're fi= ghting for survival. ?"We're focused on small- and mid-size manufacturers,"= said Leila Mozaffari, ?vice president of the California Manufacturing Tech= nology Center, a nonprofit ?consulting firm in Los Angeles. "What we see on= a micro level is that the ?energy crisis is hurting them in a bad way. The= smaller companies -- their ?backs are against the wall." ?Take Foote Axle = & Forge in Los Angeles. The company, which uses large amounts ?of energy to= forge auto parts, has seen its monthly gas bill go from $8,000 ?to $23,000= . That prompted owner Mike Denton to shut down his second shift ?earlier th= is month and fire six workers. Now he's reselling axles made in ?Asia in pl= ace of axles made in his own factory. ?"I had to let everybody (on the shif= t) go. I couldn't afford to run it ?anymore," he said. "It's now cheaper fo= r me to buy products this company has ?been making since 1936. If things do= n't change, this will become a ?warehouse." ?Higher gas and electricity pri= ces are hitting at the same time that big jumps ?in health insurance and wo= rkers' compensation premiums are taking hold, noted ?Betts. "We've had four= strikes against us this year," he said. ?Contrast those stories with the c= onclusion of a recent report from the ?University of California at Los Ange= les. The financial effects of the ?electricity crunch "will likely have a r= elatively small impact on the ?long-run health of the state's economy," wro= te economist Christopher ?Thornberg, a visiting professor at the university= 's business school. ?Thornberg based his conclusion on an estimate that the= state government might ?have to pay as much as $30 billion for electricity= and infrastructure. That, ?he pointed out, is just 2.5 percent of the valu= e of goods and services sold ?in California annually. ?When Thornberg prese= nted his findings at UCLA earlier this month, he was ?confronted by an angr= y business representative who accused him of having his ?head in the sand. = ?Asked about the incident, the UCLA economist conceded that the energy crun= ch ?is hurting some businesses. ?"I understand that businessmen are going t= hrough a tough time right now, but ?I wonder how much of that is the power = crisis and how much is due to the fact ?that we are slipping into a recessi= on," Thornberg said in an e-mail. "When ?sales drop, businesspeople tend to= point at the first available target -- ?in this case, power. They may be l= osing sight of the forest for the tree." ?Thornberg's critics were particul= arly galled by comments in his report that ?power blackouts will probably h= ave scant effect on California's productivity. ?"An hour without power can = be viewed as an extended coffee break for most ?businesses," he wrote. ?Mar= k Roth, president of El Burrito Mexican Food Products in City of Industry ?= near Los Angeles, took vehement exception. ?"One of my vendors that makes p= lastic cups. They were three hours into their ?workday when their power got= cut off," he said. "The plastic in the ?(extruding) tubes all turned solid= ," ruining a full day's production. ?ANECDOTAL EVIDENCE?Of course, not all = economists play down the plight of California businesses. ?"The business co= mmunity's voice hasn't been heard," said Jack Kyser, chief ?economist for t= he Los Angeles County Economic Development Corp. "A lot of ?smaller busines= ses are looking into shutting down or laying people off." ?Still, Kyser sai= d, he sympathizes with economists who don't yet have the data ?to support t= he business point of view: "If you're an academic economist, it's ?very har= d. All the evidence is anecdotal." ?California businesspeople aren't inclin= ed to be as understanding. They feel ?offended and slighted when they hear = economists say the state's economy will ?shrug off the power crunch. ?E-mai= l Sam Zuckerman at szuckerman@sfchronicle.com. ?,2001 San Francisco Chronic= le ? Page?B - 1 ?----------------------------------------------------------= --------------------?------------------------------------------------------= ---------?????PG&E sent hard-nosed proposal to Davis demanding no regulatio= n ?Posted at 6:13 a.m. PDT Monday, April 16, 2001 ?SAN FRANCISCO (AP) -- Pa= cific Gas and Electric Co. officials demanded the ?utility be cut free from= state regulation and be allowed to push huge rate ?increases onto its cust= omers, two weeks before negotiations with Gov. Gray ?Davis broke off, the S= an Francisco Chronicle reported. ?``Perhaps we misjudged their primary conc= ern,'' said Steve Maviglio, the ?governor's spokesman. ``It wasn't resolvin= g their credit issue. It was ?extracting vengeance on the PUC.'' ?In additi= on to insisting that it be released from the state Public Utilities ?Commis= sion's regulatory grip, PG&E demanded it be allowed to buy back its ?power = lines without competitive offers if the state ever decided to sell. In ?add= ition, it wanted to continue profiting from any telecommunications lines ?o= r antennas linked to the system, according to a Feb. 28 eight-page proposal= ?obtained by the Chronicle and published Sunday. ?PG&E denies the document= influenced the outcome between the utility and the ?state. ?``It is ludicr= ous to suggest that this document caused the negotiations to ?break down,''= said PG&E spokesman Ron Low. ``There were negotiations that ?occurred late= r and other documents that followed.'' ?At the time of the utility's bankru= ptcy filing April 6, PG&E Corp. Chairman ?Robert Glynn said no talks had be= en held for three weeks. PG&E's proposal had ?been delivered about two week= s before talks ceased. ?PG&E has said it's entitled to recoup $9 billion it= paid for wholesale power ?because of PUC-regulated rate caps, which kept t= he utility from passing high ?costs onto customers. ?The proposal said this= money ``will be fully recovered in retail rates ?without further CPUC revi= ew for prudence or any other purpose,'' the ?Chronicle reported. ?The docum= ent went on to demand the PUC drop all proceedings concerning PG&E, ?includ= ing an investigation into whether the utility violated California law ?by t= ransferring millions to parent company PG&E Corp. prior to filing ?bankrupt= cy. ?``They took a position on regulatory matters that was out of touch wit= h ?reality,'' Maviglio said. ?PG&E Corp. spokesman Shawn Cooper declined to= comment on the proposal. ?``That document is confidential,'' he said. ?Rat= epayer advocates say they're baffled by PG&E's demands. ?``It's like the Ja= panese insisting that we surrender Hawaii after we beat ?them in World War = II,'' said Harvey Rosenfield, consumer advocate for the ?Foundation for Tax= payer and Consumer Rights.??-----------------------------------------------= -------------------------------?-------------------------------------------= ----------------------------?????Conservation drive fuels move to `Cool Roo= fs' ?At first, it sounds like an off-the-wall idea: resurface the roof of y= our ?business with white or light-colored coating or material, and you'll s= ave a ?fortune on air conditioning costs. ?But as the state races to launch= energy-saving efforts before the summer heat ?wave hits, ``Cool Roofs'' ar= e suddenly one of the hottest conservation ideas ?around, and roofing contr= actors are spreading the word to their clients. ?Technology companies such = as IBM, Solectron and Apple Computer Inc. have ?already added the roofs to = some of their buildings. Gov. Gray Davis just ?signed legislation that will= funnel an additional $30 million to the state's ?Cool Roofs program, which= gives businesses rebates for installing the ?reflective and light-colored = roofs. ?Research has shown the roofs reflect the scorching heat of the sun = and lower ?building temperatures. In turn, the need to crank up air conditi= oning is ?greatly reduced. ?``While Cool Roofs do not generally cost more t= han dark roofs, they have been ?shown to lower cooling costs by 20 percent,= '' said California Energy ?Commissioner Art Rosenfeld. ``This simple change= will eventually save ?California thousands of megawatts of power.'' ?In Fl= orida and Arizona, whitewashed roofs are common. But in California, most ?c= ommercial and residential roofs are black or dark in color. ?When Solectron= , the Milpitas-based electronics manufacturing services ?company, recently = purchased a new building in Fremont, the company knew the ?176,000-square-f= oot flat roof on Building 16 had to be replaced. ?``We thought it would be = advantageous for us to put in a Cool Roof,'' said ?Bob Kula, a Solectron sp= okesman. ``It's worth the investment, and we wanted ?to do it because it's = a very important conservation move.'' ?Cooling foam??On a hot summer day, t= he surface temperature of Building 16's roof can climb ?to 160 degrees. But= earlier this week, contractors were busy spraying a ?light-colored polyure= thane foam onto the roof's surface. Doing so both drops ?the temperature of= the roof by more than 50 degrees and adds extra ?insulation, which enables= Solectron to slash its energy costs. ?The coating also extends the roof's = life expectancy, which makes it ?cost-effective in the long run. ?Because t= he systems usually include additional insulation, there shouldn't be ?an in= creased heating cost during the winter, according to Cool Roofs ?advocates.= ?The cost of Solectron's Cool Roof is $750,000, but the company projects i= t ?will pay for itself in five years because of the energy savings. The com= pany ?will also receive a state rebate of about $15,000 -- or 10 cents a sq= uare ?foot -- for the cost of the project. ?Though many commercial business= es have begun to embrace the idea, it will be ?awhile before Cool Roofs cat= ch on in residential neighborhoods. ?Installing a Cool Roof requires using = the right kinds of coatings or ?single-ply materials: A homeowner can't jus= t slap a coat of white paint on ?top of asphalt shingles. Furthermore, many= homeowners associations do not ?approve of white roofs for cosmetic reason= s. ?``Because of architectural issues with residential homes, it's much mor= e ?difficult for this to be used to the extent that it can in industrial ?b= uildings,'' said Bob Law of BUR Services, a Pleasanton company that is ?ins= talling Solectron's Cool Roof. ?Homeowners need not apply??So far, there is= no state rebate for homeowners who install Cool Roofs. ?Others hope the We= st's energy crisis will change that. Rosenfeld has ?researched Cool Roofs f= or decades. He worked at the Lawrence Berkeley ?National Laboratory for yea= rs, and became interested in energy-efficient ?building design during the e= nergy crisis of the 1970s. ?``I would love to see a residential housing dev= eloper say they'd like to do ?the whole neighborhood with Cool Roofs,'' Ros= enfeld said. ``We want everybody ?to do it. The Greeks and everyone else wh= o has lived around the Mediterranean ?Sea has understood this for 2,000 yea= rs.'' ?Besides Cool Roofs, Rosenfeld and researchers at the Heat Island Gro= up at the ?lab are pushing the larger idea of ``Cool Communities.'' By help= ing to reduce ?the overall temperatures in cities, Cool Roofs also cut smog= . ?Planting shade trees on the south and west sides of a house or commercia= l ?building also helps to cool temperatures. The sun blazes the strongest i= n the ?late afternoon, when it begins to set. Deciduous trees that lose the= ir leaves ?in the winter provide much-needed natural shade to buildings in = the summer, ?cutting down on the need for air conditioning. ?Heat island sy= ndrome??``With so much asphalt, many communities are becoming heat islands = that are a ?few degrees warmer than usual,'' said Hashem Akbari, group lead= er of the Heat ?Island Group at the lab. ``Cool Roofs, light-colored paveme= nt, and urban ?vegetation can reduce the temperature, and dramatically impr= ove air quality. ?It saves energy. It's like creating an oasis.'' ?--------= ----------------------------------------------------------------------?----= --------------------------------------------------------------------------?= ---------------------????????Monday, April 16, 2001 ????PUC president outli= nes the crisis ?California should make it through the summer electricity cr= isis in pretty ?good shape, Loretta Lynch, president of the Public Utilitie= s Commission, told ?the Register editorial board in a meeting on Thursday. = After Gov. Gray Davis, ?she probably is the second most powerful person in = trying to solve the ?electricity crisis. ?She defended the price hikes her = commission called for last month of up to 46 ?percent (depending on what th= e Legislature does when it comes back into ?session next week). She said th= e hikes, combined with Gov. Davis' ?conservation efforts, "could be enough"= to get the state through the high ?demand in the summer months without a c= risis. ?The Independent System Operator is predicting about 30 blackout day= s this ?summer based on last summer's usage and this summer's projected pow= er supply. ?She didn't rule out blackouts, but believes conservation and ot= her measures ?will minimize the damage. It will be a close call. We'll soon= see whether Ms. ?Lynch's assessment proves too optimistic. ?Although some = have criticized her for not being up to speed on the issues, ?she seemed to= us a "quick read" on a difficult crisis in which almost ?everybody is scra= mbling for knowledge. And although we disagree with her ?emphasis on increa= sing government to solve the problem short- and long-term, ?she was open to= our suggestions of looking into free-market solutions. ?Here are discussio= n highlights: ?Freezing prices. Ms. Lynch wants the Federal Energy Regulato= ry Commission to ?freeze the prices that power generators charge for electr= icity, which would ?give a break to ratepayers and utilities. We objected t= hat price controls ?would put a damper on production, which in the long run= could worsen the ?crisis. She countered that, when California still had pr= ice controls in 1999, ?"we still had 16 applications" to build new power pl= ants. ?Cost-plus pricing. She also said it was a "necessity" to go back to = cost-plus ?pricing, the system in place before "deregulation," in which uti= lities were ?allowed a specified percentage profit above their costs. ?We p= ointed out that such a system notoriously produced waste by the utilities ?= and such contracts are considered poor business practice because they offer= ?no incentive to economize. She countered that better regulation would pre= vent ?such waste and that, in any case, power surely was cheaper under that= system. ?Power rotation. We offered an idea that local businesses have exp= ressed to ?us: Rotating power shutdowns during peak periods, such as one co= mpany ?shutting down for a week, with guarantees of power at other times. "= That is a ?great idea," she responded. "The question is implementation. We = need to move ?there. We need business coordination with the ISO and the PUC= ." ?Basic view. Perhaps her basic view could be summarized in her criticism= that ?the existing "system is for the market, not for the public interest.= " By that ?she meant the system in which power generators take advantage of= the supply ?shortage to charge extremely high prices, which led to the ban= kruptcy of PG&E ?and rate increases. ?We pointed out that markets are in th= e public interest, but that what we have ?now is not a true free market, bu= t a botched "deregulation." She countered ?that, because of the unique natu= re of the electricity market - the constant ?demand and difficulty of stora= ge - some regulation is necessary. ?We agreed that, under the current crisi= s, instituting a real free market is ?very difficult. But we also believe t= hat all moves to solve this crisis ?should be in the direction of a free ma= rket and away from government control ?and ownership. That once the immedia= te crisis subsides, the shape of the ?permanent recovery should be about a = healthy market, not the government. ??-------------------------------------= -----------------------------------------?---------------------------------= ---------------------------------------------?--------------------??[B] FUL= L/ Sierra Pacific to suspend quarterly dividend --Sierra Pacific cites ?ene= rgy crisis uncertainty??????--Sierra Pacific reduces hiring, cuts exec bonu= ses????New York, April 13 (BridgeNews) - Sierra Pacific Resources Holding C= o. will?not pay dividend for the first quarter due to continued uncertainty= over the?energy crisis faced by its Nevada unit. The company will continue= cost control?programs, reduce hiring and eliminate executive bonus.???--E.= Gopakumar, BridgeNews?????* * *?????The followin= g is the text of today's announcement, with emphasis added by?BridgeNews. B= ridgeStation links to company data have been inserted at the end:?????Sierr= a Pacific to Not Pay Quarterly Dividend?????LAS VEGAS, APRIL 13 -- CITING = CONTINUED UNCERTAINTY OVER HOW??NEVADA WILL RESOLVE ITS ENERGY CRISIS, THE = BOARD OF DIRECTORS OF SIERRA??PACIFIC RESOURCES (NYSE: SRP) TODAY ANNOUNCED= IT WILL NOT BE PAYING THE?DIVIDEND HISTORICALLY PAID ON MAY 1ST. THE BOAR= D WILL ADDRESS THE COMPANY'S?DIVIDEND AND DIVIDEND POLICY AT THE BOARD MEET= ING SCHEDULED FOR MAY 21, IN?CONJUNCTION WITH THE ANNUAL SHAREHOLDERS' MEET= ING.???"THE DIVIDEND IS VITALLY IMPORTANT IN RETAINING INVESTOR CONFIDENCE = IN?NEVADA AT A TIME WHEN NEW ENERGY INFRASTRUCTURE IS SO CRITICAL TO PROTEC= TING?CONSUMERS FROM THIS CRISIS," SAID WALT HIGGINS, PRESIDENT AND CEO. = ?"HOWEVER,?IT IS EQUALLY IMPORTANT THAT OUR DIVIDEND REFLECT OUR CURRENT FI= NANCIAL?CONDITION AND THE CONTINUED UNCERTAINTY ABOUT THE ENERGY CRISIS."??= ?"We recognize that this decision is painful to shareholders who have?alrea= dy suffered an unprecedented drop in the value of their investment," ?said= ?Higgins. "However, it is really the only decision that can be made until= we?can get a more definitive view of how and when this crisis can be resol= ved."???THE BOARD ALSO DIRECTED THE COMPANY TO CONTINUE A RANGE OF COST CON= TROL?PROGRAMS THAT HAVE BEEN UNDERTAKEN TO REDUCE ALL EXPENSES OTHER THAN T= HOSE?ASSOCIATED WITH SAFETY AND CUSTOMER SERVICE. THE REDUCTIONS HAVE FOCU= SED ON?NON-CRITICAL ACTIVITIES AND HAVE INCLUDED A SLOWDOWN IN HIRING, REDU= CED?ADMINISTRATIVE EXPENSES, AND ELIMINATION OF INCENTIVE PAY THIS YEAR FOR= ?EXECUTIVE STAFF.???Headquartered in Reno, Nev., Sierra Pacific Resources i= s a holding company?whose principal subsidiaries are Nevada Power Co., the = electric utility for?southern Nevada, and Sierra Pacific Power Co., the ele= ctric utility for most??of northern Nevada and the Lake Tahoe area of Calif= ornia, and a natural gas??and water distributor in the Reno-Sparks area. O= ther subsidiaries include the?Tuscarora Gas Pipeline Co., which owns 50 per= cent interest in an interstate?natural gas transmission partnership and Sie= rra Pacific Communications, a?telecommunications company.????This press rel= ease contains forward-looking statements regarding the??future performance = of Sierra Pacific Resources. These statements are subject?to a variety of = risks and uncertainties that could cause actual results to?differ materiall= y from current expectations. These risks and uncertainties?include, in add= ition to those discussed herein, all of the factors discussed??in the compa= ny's Annual Report on Form 10-K for the year ended Dec. 31, 2000.?This repo= rt has been filed with the Securities and Exchange Commission and is?availa= ble without charge through the EDGAR system at its Web site,??www.sec.gov.?= ??SOURCE Sierra Pacific Resources???/CONTACT: analysts, Rich Atkinson, 77= 5-834-5300, or media, Faye I.Andersen,?775-834-4822, both of Sierra Pacific= Resources/???End?---------------------------------------------------------= ---------------------?-----------------------------------------------------= -------------------------?------------------??Monday, April 16, 2001????By = Kathleen McFall ?kmcfall@ftenergy.com ??It's springtime and thoughts that m= ight have typically turned to fancy are, ?in this extraordinary gas market,= already looking ahead to the refill season. ?National storage levels barel= y held out through this heating season, and the ?looming hurdle of restocki= ng now takes center stage.??"With storage levels nearing record lows, the i= ndustry has its work cut out ?in terms of restoring supplies by November 1,= the traditional start to the ?heating season," said Ronald Barone in a rec= ent UBS Warburg research note. ??"Storage volumes of natural gas are low, a= nd replacement of gas in storage ?will contribute to strong summer 2001 dem= and and higher gas prices that will ?make storage for next winter costly," = said Beth Campbell of the Energy ?Information Administration (EIA) in testi= mony before a congressional ?subcommittee. ??Perhaps more interesting in th= is unfolding situation, however, is the ?longer-term influence of fundament= al shifts in storage facility operations on ?gas markets and individual com= panies. Do these changes potentially render the ?sharp boundaries of the he= ating-refill season obsolete? ??"The increasing influence of high-deliverab= ility storage may change the ?meaning of the inventory levels," wrote James= Tobin and James Thompson, ?authors of the EIA report Natural Gas Storage i= n the United States 2001. ??Is past prologue? ?The return of colder tempera= tures across much of the country resulted in a ?net withdrawal of 49 billio= n cubic feet (Bcf) from underground storage during ?the week ended March 30= , 2001, according to American Gas Association (AGA) ?estimates. Based on th= ese trends, the expectation is that national natural ?gas storage will end = this heating season at around 718 Bcf. That is 40 Bcf ?less than the previo= us record low set in 1996. ????Factors beyond surging demand influenced thi= s record low. For instance, at ?the beginning of the heating season, natura= l gas-storage volumes were already ?at their lowest since 1976. Partly, thi= s is attributable to the high natural ?gas prices during the first half of = 2000. During this time, gas was sold ?rather than injected to take advantag= e of what was perceived to be a ?temporary price spike. On top of that, Nov= ember temperatures were atypically ?low resulting in supply constraints. No= w, getting storage levels back up to ?comfortable levels will require injec= tion rates that are significantly higher ?than historical rates. ??As summa= rized by Barone, an injection rate of 70 Bcf per week will be ?required to = reach the 2,800 Bcf mark (or 85% full) by November. This compares ?with the= 54 Bcf average weekly injection rate during 2000 and the 61 Bcf ?average r= ates over the past six years. "Even with demand elasticity, this ?will be a= tall order," said Barone. ??According to Tobin and Thompson, the resulting= heightened competition for ?supplies will push up prices. "Prices, though = dropping, are expected to ?exceed the average price level of the 2000 refil= l season." In other words, ?get ready for another thrilling refill season i= n terms of price volatility. ??Rethinking the meaning of inventory levels?T= his season, however, historical clues alone may be inadequate in predicting= ?the refill season thrill ride. The situation may be moderated somewhat by= ?changes in storage management over the past decade as a result of natural= ?gas-market restructuring. ??"Many storage gas owners (marketers and other= third parties) are minimizing ?inventories in an attempt to synchronize th= eir buying and selling activities ?more effectively with market needs while= minimizing their business costs," ?said Tobin and Thompson. ??In the Unite= d States, there are three principal types of underground storage: ?depleted= reservoirs in oil and gas fields, aquifers and salt cavern ?formations. Sa= lt caverns are characterized by high withdrawal and injection ?rates and ca= n usually complete several full cycles per year. This is ?typically referre= d to as high-deliverability, multi-cycle (HDMC) storage. ??Nationwide, ther= e are a total of 415 underground storage sites of which 27 ?are salt cavern= s and 348 are depleted oil or gas fields. The remainder are ?aquifers. All = together, the storage capacity is 3,899 Bcf (including working ?gas) with a= daily deliverability of 77,734 million cubic feet (mmcf) per day. ?The 27 = salt cavern sites provide 11,416 mmcf of the daily deliverability, ?about 1= 5% of the total. ??"Reflecting the change in focus within the natural gas-s= torage industry ?during recent years, the largest growth in daily withdrawa= l capability has ?been from high-deliverability storage sites, which are ma= inly salt cavern ?storage reservoirs," said the authors of the EIA study. ?= ?Since 1993, when access to interstate underground natural gas storage beca= me ?completely open, daily withdrawal capability from high-deliverability s= torage ?facilities has grown by 62% and the number of sites has increased f= rom 21 to ?27. During this period, the average cycling rate at these facili= ties has ?increased from 1.66 to 2.10. ??"Because gas can be rapidly inject= ed/withdrawn from these ?[high-deliverability storage] sites, how full they= are on November 1 has less ?significance than inventory levels for deplete= d or aquifer storage, which are ?designed to cycle (deplete) inventories on= ce a heating season," Tobin and ?Thompson said. For example, a high deliver= ability facility with a working gas ?capacity of 1 Bcf could possibly cycle= 12 Bcf during the calendar year. ?Consequently, the storage operations are= not dictated by the need for ?seasonal backup but rather are a function of= customers needs. ??Storage assets grow in volume and value?While undergrou= nd natural gas storage inventories can provide the means to ?meet peak requ= irements quickly, this can only work up to a point because ?there is not en= ough known salt dome storage in the country to accommodate a ?total change = in strategy. Nevertheless, the storage industry is responding to ?these cha= nges in demand profiles by acquiring, expanding and retrofitting. ??Falcon = Gas Storage Co. recently acquired the Hill-Lake natural gas-storage ?facili= ty 100 miles west of Dallas/Ft. Worth in Eastland County from TXU Lone ?Sta= r Pipeline Co. The Hill-Lake facility has operated as a single-cycle ?natur= al gas-storage facility since the early 1960s. Falcon plans to add more ?co= mpression, retrofit surface facilities and drill horizontal ?injection/with= drawal wells in order to convert the Hill-Lake facility into an ?HDMC facil= ity capable of four to six annual inventory cycles with peak ?withdrawal ca= pacity in excess of 300,000 million British thermal units ?(mmBtu) per day.= ??"We are very fortunate to have had the unique opportunity to purchase an= ?operating single-cycle gas storage facility that not only can be retrofit= ted ?for HDMC service at an acceptable cost, but also is in such a strategi= c ?location," said John M. Hopper, Falcon Gas Storage Co. president. ??Albe= rta Energy Co. Ltd. said recently it may increase its Wild Goose ?undergrou= nd storage facility near Gridley in northern California from 14 to ?38 Bcf.= Withdrawal capability could rise to 650 mmcf a day from 200 mmcf a ?day. ?= ?"We have had numerous discussions with power generators, marketers and ?in= dustrial users of natural gas who have told us they'd be very interested in= ?seeing another open season at Wild Goose," Ben Ledene, Wild Goose vice ?p= resident, said in a statement. ??In March, Aquila, a wholesale gas and powe= r marketer, agreed to buy a salt ?cavern storage project from SG Resources = of Houston. The storage facility ?will become operational in 2002. By 2004,= the facility will have 12 Bcf of ?capacity. The facility is designed so th= at 100% of its inventory can be ?delivered in 10 days. ??Market Hub Partner= s LP (MHP), a division of Duke Energy Gas Transmission, ?filed with the Fed= eral Energy Regulatory Commission for authorization to ?begin a $9 million = expansion of its salt cavern storage facility in Egan, La. ?The company pla= ns to incrementally expand from 12 to 16 Bcf, reaching 16 Bcf ?of working s= torage capacity by 2005. MHP also has plans to expand the HDMC ?services in= Copiah, Miss. from 3 Bcf to 9 Bcf. ??"The development of the Copiah facili= ty will greatly enhance our ability to ?meet the time-sensitive injection a= nd withdrawal requirements of today's ?storage customers," said Gregory Riz= zo, president of MHP. ??With the continued growth in natural gas-fired gene= ration, Rizzo's comment ?may encapsulate the sentiment that demonstrates a = slow but certain shift in ?injection-withdrawal patterns, at least for HDMC= assets. As end-use needs ?shift, the concept of a refill and heating seaso= n may follow suit. ???