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Bush Advisers On Energy Report Ties To Industry
The New York Times, 06/03/01

Watt Price Ideology?
The New York Times, 06/03/01

The Nation THE ENERGY CRISIS Watchdogs Take a Hit in State's Power Ills 
Energy: Ex-federal officials say oversight of California's deregulation 
suffered due to a push for free-market competition.
Los Angeles Times, 06/03/01

Saudi Arabia Sets Pacts With 9 Oil Firms
Dow Jones Business News, 06/03/01

INDIA: INTERVIEW-India to respect international contracts - Prabhu.
Reuters English News Service, 06/03/01

Saudi Arabia signs landmark agreement with major oil companies
Associated Press Newswires, 06/03/01

India struggles to keep foreign investors
Agence France-Presse, 06/03/01

`Expert knowledge' and Dabhol
Business Standard, 06/03/01

California energy czar vows to get L.A.'s excess power
Associated Press Newswires, 06/02/01

SAUDI ARABIA: U.S. Marathon to replace Enron in Saudi gas deal.
Reuters English News Service, 06/02/01

Enron chief worried power plant may be in jeopardy
National Post, 06/02/01

Enron: prime time soap opera
Business Standard, 06/02/01

White House staff's investments detailed / Holdings include energy stocks, 
Enron
Houston Chronicle, 06/02/01

Enron backs out of Saudi Arabian natural gas plan
Houston Chronicle, 06/02/01

IRRIGATION SYSTEM HAD ELECTRICAL FIRE
Portland Oregonian, 06/02/01

THE NATION Bush Staff Well Invested in Energy Politics: Financial records of 
White House officials show past ties to industry. Several have since divested.
Los Angeles Times, 06/02/01

Davis' energy boss took thousands from power titans in run for office
The San Francisco Chronicle, 06/02/01

Bush Aides Disclose Finances; Several Tied to Enron; Speaking Fees Boost 
Matalin Income
The Washington Post, 06/02/01




National Desk; Section 1
Bush Advisers On Energy Report Ties To Industry
By JOSEPH KAHN

06/03/2001
The New York Times
Page 30, Column 4
c. 2001 New York Times Company

WASHINGTON, June 2 -- At least three top White House advisers involved in 
drafting President Bush's energy strategy held stock in the Enron Corporation 
or earned fees from the large Texas-based energy trading company, which 
lobbied aggressively to shape the administration's approach to energy issues. 
Karl Rove, Mr. Bush's chief political strategist; Lawrence B. Lindsey, the 
top economic coordinator; and I. Lewis Libby, Vice President Dick Cheney's 
chief of staff, all said in financial disclosure statement released on Friday 
that they already had or intended to divest themselves of holdings in Enron, 
the nation's leading trader and marketer of electricity and natural gas, as 
well as holdings in other energy companies.
Mr. Lindsey received $50,000 last year from Enron for consulting. Mr. Rove's 
statement said he intended to sell stock holdings in Enron valued at $100,000 
to $250,000, though the statement does not make clear if he has completed the 
sale. Mr. Libby sold his stake in the company. 
The financial disclosures for senior White House aides show that many of Mr. 
Bush's top advisers are millionaires. Among the wealthiest are Mr. Rove, Mr. 
Lindsey, Mr. Libby and Andrew H. Card Jr., the chief of staff, who earned 
$479,138.77 as chief lobbyist for General Motors and reported assets of 
$810,000 to $2.1 million. 
Mary Matalin, Mr. Cheney's senior counselor and a former political 
commentator, reported income of more than $1.5 million last year from 
speaking fees and television appearances. Her husband, James Carville, a 
Democratic commentator and political adviser, made $2.1 million last year on 
the speaking circuit, Ms. Matalin's financial disclosure shows. 
Enron was one of the largest contributors to Mr. Bush's presidential 
campaign. Kenneth L. Lay, the chairman, has close ties to Mr. Bush, as he did 
to Mr. Bush's father, and he has had considerable access to the Bush White 
House. 
The administration's energy strategy issued last month recommended opening 
protected lands to oil and gas drillers, building hundreds of power plants 
and easing some environmental controls, measures strongly favored by the 
industry. It suggested that the federal government exercise more power over 
electricity transmission networks, a longtime Enron goal. 
Mr. Lay and other Enron officials interviewed several candidates to fill 
vacancies on the Federal Energy Regulatory Commission, which regulates Enron
's main markets. Mr. Bush selected two people for the panel who were favored 
by Enron and some other energy companies. 
White House officials have said that Enron's views were not crucial to their 
selections. ''The energy task force had a singular goal to present a plan 
that best addressed America's energy needs,'' a White House spokeswoman said. 
''Any decisions made as part of that process were made with that one goal in 
mind.'' The spokeswoman said the White House counsel's office had worked with 
all officials to ensure they met the highest ethical standards. 
Administration links to energy companies are wide ranging. Condoleezza Rice, 
the national security adviser, had stock holdings of $250,000 to $500,000 in 
the Chevron Corporation and earned $60,000 as a director of the company in 
the last year. She resigned her position and sold her shares. 
Clay Johnson, director of presidential personnel, reported holding a stake in 
El Paso Energy Partners valued at $100,000 to $250,000. El Paso is a Houston 
oil and natural gas company. As part of his White House duties, Mr. Johnson 
has been involved in selecting people to fill vacancies at the energy 
regulatory commission, which oversees the natural gas market. 
There was no indication in his disclosure statement that Mr. Johnson intended 
to sell his stake in El Paso. 
The stakes in Enron held by Mr. Rove and Mr. Libby were part of diversified 
stock portfolios. Mr. Rove also reported investments in BP Amoco and Royal 
Dutch Shell, as well as several leading pharmaceutical, technology and 
financial companies. Mr. Libby, a lawyer, sold tens of thousands of dollars' 
worth of energy stocks. They included Texaco, Exxon Mobil and Chesapeake 
Energy as well as Enron. 
Mr. Lindsey, the director of the National Economic Council, reported the most 
ties to major American and international companies. His Washington consulting 
firm, Economic Strategies Inc., advised 67 leading American, European and 
Japanese banks and businesses, including American Express and Citibank. Mr. 
Lindsey was paid an annual salary of $918,785. He also reported $50,000 in 
consulting fees from Crow Family Holdings, a Dallas real estate concern, and 
Moore Capital, a leading hedge fund, as well as Enron.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Editorial Desk; Section 4
Reckonings
Watt Price Ideology?
By PAUL KRUGMAN

06/03/2001
The New York Times
Page 17, Column 1
c. 2001 New York Times Company

I once had a math teacher who responded to student errors by saying ''Save 
that answer -- I may ask that question someday.'' I thought of him after 
George W. Bush's apparently pointless trip to California.
During that trip, Gov. Gray Davis asked for a temporary cap on wholesale 
electricity prices -- a request that gained extra force because it was backed 
by economists with strong pro-market credentials, including Alfred Kahn, who 
oversaw the deregulation of airlines, trucking and other industries in the 
1970's. Mr. Bush, however, was unmoved. Again and again he declared that a 
price cap would do nothing either to increase supply or to reduce demand. 
Save that answer, Mr. Bush. We might ask that question someday. 
Actually, Mr. Bush's assertion may have been wrong even on its own terms. 
I'll come back to that in a minute. But the most striking thing about his 
declaration was that it had nothing to do with the actual problem. 
For the issue facing California right now is not how to increase supply and 
reduce demand. It's too late for that; summer is almost upon us, and it is 
simply a fact of life that there will be power shortages in the months ahead. 
It is important that the state build power plants as quickly as possible, so 
that this shortage is only temporary. But not to worry: power plants are 
being built at a furious rate, in California and in the nation at large. 
Indeed, last week the credit agency Standard & Poor's expressed concern that 
electric generating capacity is being added so quickly that the industry will 
soon face a glut. 
Meanwhile, however, the temporary lack of capacity has led to incredibly high 
wholesale electricity prices, which are a huge financial burden on the state, 
over and above any disruption that may be caused by physical shortages of 
power. Nobody knows exactly how much California will pay for power this year, 
but reasonable estimates suggest that it will pay at least $50 billion more 
than two years ago -- an increase of more than $1,500 for every resident. The 
great bulk of that represents not an increased cost of production but 
windfall profits for a handful of generating companies. 
The main purpose of a temporary price cap would be to reduce -- though by no 
means eliminate -- this transfer of wealth away from California residents. 
That is, we're talking about dollars, not megawatts. And Mr. Bush's response 
is therefore almost surrealistically beside the point. 
You could argue that any financial benefit from price caps would be more than 
offset by a worsened physical shortage. But that's a hard case to make. 
Nobody has proposed capping prices at a level that would prevent power 
producers from making extraordinarily high profits; why should this reduce 
the supply of power? 
It's true that Econ 101 teaches that price controls tend to produce 
shortages. But this would be a minor effect in this case, since neither 
production nor consumption would be much affected. And anyway, students who 
go beyond Econ 101 learn that strictly speaking the standard argument against 
price controls applies only to a competitive industry. A price ceiling 
imposed on a monopolist need not cause a shortage, if it is set high enough; 
indeed, price controls on a monopolist can actually lead to higher output. 
That's not an argument you want to use too often, but given the extraordinary 
prices now being charged for electricity, and the considerable evidence that 
producers are exercising monopoly power, if ever there was a case for a 
temporary price ceiling, California's electricity market is the place. 
I am actually somewhat surprised by Mr. Bush's obtuseness on this whole 
subject. No doubt his determination to answer the wrong question is 
deliberate: misrepresenting policy issues is, after all, standard operating 
procedure for this administration. But even on a cynical political 
calculation, Mr. Bush's remarks seem to be foolish, only reinforcing the 
sense that he neither understands nor cares about California's problems. 
Maybe Mr. Bush's advisers are knee-jerk ideologues who believe that the 
market is always right, even when textbook economics says it is wrong. Or 
maybe they are so close personally to energy industry executives that they 
believe that whatever is good for Enron is good for America. 
Whatever the real story, it's clear that this administration not only has no 
answers for California, it won't even listen to the question.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


National Desk
The Nation THE ENERGY CRISIS Watchdogs Take a Hit in State's Power Ills 
Energy: Ex-federal officials say oversight of California's deregulation 
suffered due to a push for free-market competition.
JUDY PASTERNAK; ALAN C. MILLER
TIMES STAFF WRITERS

06/03/2001
Los Angeles Times
Home Edition
A-1
Copyright 2001 / The Times Mirror Company

WASHINGTON -- California was the first test, and right from the start 
economists at the Federal Energy Regulatory Commission saw trouble coming. 
Their bosses were worried too. In hindsight, some admit they could have done 
better. 
But five years ago, when California officials were rushing to deregulate 
electricity, the federal watchdog charged by law with overseeing the process 
and guarding against runaway prices decided not to bark.
In their zeal for free-market competition and their ideological commitment to 
shifting authority away from Washington to the states, FERC's commissioners 
brushed aside their qualms and let the process roll forward. 
"There were a lot of issues that got swept under the rug," said economist 
Carolyn A. Berry, who headed FERC's analysis of the California plan. "We were 
trying to point out the ugly warts, but it wasn't our job to set policy." 
Former FERC Chairman James J. Hoecker, who presided over the approval, said 
the agency "should have been far less deferential." John Rozsa, a state 
legislative analyst who played a key role in the deregulation law, laughed 
when he heard that. "FERC wanted it badly," he said. 
Today, FERC stands accused of failing to exercise its oversight, enforcement 
and political muscle just when they were needed most. The agency, critics on 
the inside and outside agree, helped launch a radical economics experiment 
without sufficient preparation, adequate staff or a clear sense of how to 
carry out its mission. 
With fully half the states considering deregulation, the story of what a 
previously obscure federal agency did not do has become more than a case 
study in regulatory shortcomings. It has become a warning shot across the bow 
of the whole country. 
FERC has approved deregulation plans in New England, New York and the 
mid-Atlantic states. At stake is a reliable supply of a commodity that fuels 
virtually every home and workplace in America. California's example is hardly 
encouraging: months of blackouts and an electric bill that has rocketed from 
$7 billion in 1999 to as much as $50 billion this year. 
Now the commission is caught in what some see as an identity crisis, divided 
and uncertain as politicians in California and Washington call for mutually 
contradictory action. 
"I think the commission needs to decide what it wants to do when it grows 
up," said Hoecker, who headed the agency during a critical period ending in 
January. His own leadership, he concedes, was not always all it might have 
been. 
Without question, there is ample blame for everyone, not just FERC. Certainly 
in California, state officials devised a flawed deregulation scheme and then 
insisted on carrying it out. Some power company executives have extracted 
windfall profits. Politicians have wilted when things went awry. 
And, as FERC officials continually point out, its authority is limited to 
wholesale markets. State officials are responsible for the local utilities 
and other retailers selling power to consumers. 
Nonetheless, it is FERC that Congress charged with overseeing electricity 
markets and assuring "just and reasonable" prices. 
How did FERC choose the course it took? What factors influenced its 
decisions? 
Certainly energy companies, consumer advocates, lawmakers and others lobbied 
the agency. 
Yet even FERC critics say such influence was not dominant. FERC is not 
insulated from lobbying, but David Nemtzow, president of the Alliance to Save 
Energy, a coalition of business, consumer and environmental leaders, said: 
"They are less sensitive to those forces than a lot of other players." 
Rather, this seems to have been a case of government decisions driven by 
ideology. The commissioners, both Republicans and Democrats, were wedded to 
the idea that deregulation at the wholesale level would lead to lower retail 
bills. The market, they believed, would inexorably produce greater 
competition, greater efficiency and falling prices. 
To Mark Cooper of the Consumer Federation of America, the primary problem was 
"their excessive faith in the market." 
Even after price spikes occurred across the Midwest and in California as 
early as 1998, FERC officials dismissed suggestions the surges might reflect 
market instability or manipulation. 
And as California's situation worsened, FERC's response was shaped by a 
continuing commitment to market forces with a minimum of government 
intervention--witness its April order allowing temporary price caps but only 
in narrowly defined emergencies. 
In the last few months, under enormous pressure, FERC has ordered a dozen 
companies to justify high prices or refund $124.5 million to California 
utilities for January and February. It won an $8-million settlement from 
Williams Cos. of Tulsa, Okla., which it had accused of shutting power plants 
last spring to drive up prices. Williams did not admit guilt. 
Detractors, including California officials, howl that FERC's actions are too 
little too late. They have called for a range of solutions, from flat-out 
price caps, as in the old days of full regulation, to much higher rebates 
from generators caught price-gouging, to retractions of individual firms' 
permission to charge market-based rates. 
If the agency chose to wield all of its authority, it also could force 
witnesses to testify under oath and subpoena tapes of phone calls among power 
traders, and even force the state to change the way the market operates. 
Curtis L. Hebert Jr., the free-market champion who succeeded Hoecker as 
chairman, insisted "FERC is being vigilant in its efforts to ensure just and 
reasonable rates, while at the same time ensuring" that it fosters new energy 
supplies. 
"I would vehemently disagree with anyone who says otherwise," he added, 
noting he transferred 75 attorneys--half of the agency's litigators--into 
market oversight. 
Still, a consensus that it's time for aggressive action seems to be forming 
among commissioners, including two nominees confirmed by the Senate last 
month: Patrick H. Wood III and Nora M. Brownell. 
Wood, a Texas utility regulator nominated by Bush and probably FERC's next 
chairman, said the agency needs to evolve into a "market cop with a great big 
old stick," adding: "There is a role that only the federal government can 
take. . . . The free market ain't a free and full market yet." 
Already named FERC's special liaison for California, Wood remains dedicated 
to market principles but vows to take a fresh look. 
Commissioner Linda Breathitt, a Democrat, also talks of change. And 
commissioner William L. Massey describes agency officials as naive in their 
past actions, in contrast to what he calls the "very sophisticated players" 
on the industry side. 
If some commissioners are starting to sound more like watchdogs, that's 
partly because they feel the tug of two conflicting ideas in their mandate to 
open markets while assuring fair prices. 
Americans have always loved the way capitalism gives opportunities to the 
shrewd and energetic. At the same time, the country has repeatedly turned to 
government regulation when it thought particular industries, such as the 
railroads, waxed too powerful. 
How well FERC deals with this intrinsic conflict and meets its challenges may 
have a sizable effect on the country's energy future. 
Frightened by events on the West Coast, some states have slowed their 
progress toward deregulation. Others have decided not to try at all, at least 
for now. 
"If the commission wants to have competitive markets," Hoecker said, "it's 
going to have to pull the bacon out of the fire." 
Though it traces roots back to the Federal Power Commission and development 
of hydroelectric power in the 1920s, FERC began its present incarnation in 
the 1980s, with the Reagan administration's deregulation campaign. 
FERC undertook to deregulate natural gas, then, spurred by a Democratic 
Congress and the first President Bush, it moved on to electricity. 
The problem is that electricity and its markets differ significantly from 
natural gas. Electric power cannot be stored to meet future shortages, as gas 
can. Its markets are more volatile. And the effect of shortages or price 
spikes cascades through the economy much faster. 
Without anyone quite realizing it, FERC was sailing into uncharted waters. 
Moreover, as FERC's staff took up the original California deregulation plan, 
it faced a significant constraint: The commissioners had made a conscious 
call to let the state have its way most of the time. 
As state officials saw it, so much power was available for the Western 
electrical grid that prices would surely come down. FERC economists, on the 
other hand, saw myriad problems. 
For example, the state's scheme called for generators to submit blind bids 
with a separate quote for each hour of the coming day. With any power plant, 
the unit cost is highest when a generator is started up and declines as it 
runs. So the price charged for later hours should be lower than for the 
first--but only if the operator can sell both the beginning and the later 
hours. 
Under the California blueprint, though, bidders could not be sure which hours 
the purchaser might buy. That meant bidders would have to load the higher 
start-up costs into each hour throughout the cycle to make sure those costs 
were recovered. By contrast, the mid-Atlantic market requires the power 
purchaser to add separate payments to cover start-up costs. 
Other issues were deferred rather than solved before FERC granted approval, 
including such questions as how to manage congestion on the grid and what the 
transmission rights should be for municipalities that generated and sold 
power. 
State legislative aide Rozsa argues that such matters were not crucial and 
that the biggest flaw in the plan--the insistence that the system operator 
not have any generators of its own--was conceived with FERC guidance. Both 
FERC and the state, he said, had "an exaggerated sense of their knowledge and 
ability." 
As the California launch, originally scheduled for January 1998, drew near, 
FERC's nervousness increased. As late as the Christmas holidays, the state 
was still tinkering. The agency ordered the state to provide two weeks' 
written notice before taking the final step, even though FERC had already 
approved the plan. 
When California finally "went to market," FERC analysts snickered at the 
timing: The first electricity auction was held March 31 for power to be 
delivered the next day--April Fool's Day. 
As for the commissioners, "We were somewhat naive," Massey said. "The 
commission believed there was so much inefficiency built into the 
old-fashioned . . . regime that any new market would be better." 
With the nation's largest state deregulating, FERC began blessing plans on 
the East Coast. Hundreds of companies lined up for permission to charge 
market rates in various open trade zones. 
FERC, according to its rules, was supposed to reject any firm that held a big 
enough share in a market--generally defined as about 20%--to influence prices 
for a sustained period. But doing the necessary market analyses proved 
impractical. 
For one thing, the rising workload was overwhelming the staff, which had 
shrunk by more than 25% from its 1980 high of 1,600 employees. The agency, as 
critics see it, simply buckled. 
"Once it got going, it took over," Berry said of the momentum behind 
deregulation. "FERC was handing out [permission] to anybody who walked in." 
FERC economist Steven A. Stoft was infuriated. He wanted to start cautiously, 
opening one small market, testing before expanding nationally. 
"To put in markets everywhere, to affect a lot of people, to just wait and 
see how it turns out, that's completely irresponsible," said Stoft, who now 
lives in California and is writing a book for regulators about how to design 
markets. 
At first, the staff Cassandras seemed wrong. Prices generally headed down. 
But during the summer of 1998, prices spiked twice--once in the Midwest, once 
in California. 
In the Midwest, several aging nuclear plants shut down for maintenance just 
as a heat wave sent air conditioners into overdrive. Wholesale electricity 
rose past $7,000 per megawatt-hour, 100 times normal. Consumers and 
politicians screamed. 
The weather cooled and new supply came in fast. Prices ebbed. 
To consumer groups and several FERC economists, the sudden increase suggested 
the worst can happen. Hoecker and FERC member Vicky Bailey drew a different 
lesson, as did a staff investigation: The market worked to correct an unusual 
confluence of events that was unlikely to recur. 
About the same time, a strange thing happened in California's reserve market, 
where the state's independent system operator pays generators with extra 
capacity to stand ready to meet unexpected surges in demand. 
So few companies offered to sign such contracts that the ISO sometimes had 
little choice but to accept whatever bid came in. It was just a matter of 
time before someone took advantage. One day in that summer of 1998 someone 
did: The only offer to provide reserve power was an astronomical $9,999 per 
megawatt-hour. 
To some, it was proof that the California market could--and would--be 
manipulated. "I was horrified," Berry said. 
FERC quickly granted California's request for permission to cap prices in the 
reserve. The authority quietly expired in November. There was no outcry about 
this spike because reserve costs are spread around to the states' utilities, 
thus diffusing their effect. 
"Of course, it should have been a warning that the sellers were several steps 
ahead of us," commissioner Massey says. 
In a memo last June, Ron Rattey, a senior FERC economist who has been with 
FERC since 1975, complained that the staff was "impotent in our ability to 
monitor, foster and ensure competitive electric power markets." He added in 
an interview: "FERC doesn't want todiscover that the policy changes it's 
making aren't working." 
Commissioners at the quasi-judicial agency are forbidden by law from 
privately discussing pending cases. So companies and Congress must officially 
content themselves with filing briefs, writing letters and testifying at 
hearings. 
No such restraints apply to the issue of who sits on the commission. There, 
the jockeying for influence can be intense. 
Commissioners are appointed by the president and confirmed by the Senate to 
staggered five-year terms, with a limit of three members of a political party 
on the panel. The president can also designate at any time which commissioner 
serves as chairman, a position that bestows broad authority over the FERC's 
agenda and staff. 
When Bush took office, he picked Hebert, then the lone Republican on the 
commission, to the chairmanship and named his choices for the two vacancies. 
It was unclear whether Hebert would keep the chair once Bush's nominees were 
confirmed. 
Soon afterward, Hebert talked by telephone with Kenneth L. Lay, who heads 
Enron Corp., a Houston-based energy marketing giant that recently saw its 
profits triple in a year. FERC policy decisions could have a huge influence 
on its future. 
Enron spokesman Mark Palmer says Lay, whose friendship with Bush is well 
known, was returning a call from Hebert. Palmer says Hebert wanted Lay's 
support for remaining chairman. 
Hebert told a FERC official, who heard the new chairman's end of the 
conversation, that Lay offered support but only if the chairman changed his 
views in ways that would aid Enron. The official says he heard Hebert decline 
and characterizes him as offended. The discussion was first reported in the 
New York Times. 
Lay has never been shy about offering advice, nor about courting political 
access. He golfed with President Clinton, and Palmer wrote a letter to 
Clinton's personnel chief touting Hoecker for chairman. The Enron executive's 
ties with Bush bind especially tight; Lay raised and donated hundreds of 
thousands of dollars to Bush's campaigns and related efforts. 
Power companies also scouted candidates for the two slots. Enron went so far 
as to send the White House a list of a dozen people Lay considered qualified 
(the two new commissioners were on it). 
In the end, however, the evidence suggests that such lobbying mattered less 
than the faith in free markets and less federal intervention shared by two 
presidents and just about every recent FERC member. "FERC is filled with true 
believers," Rozsa said. 
The agency's recent California orders underline the point. In December, FERC 
concluded the market was dysfunctional and ordered a limited version of the 
price caps that free marketers abhor. 
Still, prices remained above $300 a megawatt-hour--10 times the pre-crisis 
average. So in April, FERC concluded it had to take further action. 
But the new version of price caps, approved 2 to 1, actually narrowed the 
circumstances under which they could be imposed, though it gave the state 
more flexibility. Even temporarily, the commission would not abandon its 
market principles. 
"I was reluctant to stop in my tracks," said Breathitt, the swing vote. She 
didn't want "to go back to a form of regulation that this commission and I 
had departed from five or six years ago." 
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC) 
FERC at a Glance 
1920: The Federal Power Commission created to oversee development of 
hydroelectric power. 
1977: Power Commission replaced by the Federal Energy Regulatory Commission 
to oversee interstate transmission of natural gas, oil and electricity and 
regulate wholesale electric rates. 
1992: Congress gives FERC authority on electricity, opens door to full-scale 
deregulation. 
1996: FERC approves California deregulation plan. 
1998: Prices spike briefly; FERC puts temporary price caps on California's 
emergency reserve. 
2000: FERC orders staff investigation of market conditions nationwide, 
declares California market seriously flawed in November; in December, a form 
of price caps introduced. 
2001: Rolling blackouts hit California. FERC orders $124.5 million in refunds 
from power companies alleged to have overcharged utilities. Agency says 
California price caps can apply in narrowly defined circumstances 
* 
Source: Federal Energy Regulatory Commission; Times reports (BEGIN TEXT OF 
INFOBOX / INFOGRAPHIC) 
Federal Energy Regulatory Commission 
FERC Members Chosen by Bush 
* 
Patrick H. Wood III, GOP 
Nominated by Bush, March 27; confirmed by Senate May 31. 
Age: 38 
Term: Expires June 30, 2005 
Career: Chairman of the Public Utility Commission of Texas, 1995-2001. 
Attorney for the law firm Baker & Botts in Washington, 1989-1991. Legal 
advisor to FERC member Jerry Langdon, 1991 to 1993. 
Personal: Native of Port Arthur, Texas. 
Education: Texas A&M University, B.S., 1985. Harvard Law School, J.D., 1989. 
* 
* 
Nora M. Brownell, GOP 
Nominated by Bush, March 27; confirmed by Senate May 31. 
Age: 53 
Term: Expires June 30, 2006 
Career: Pennsylvania Public Utility Commission, 1997 to 2001. Senior vice 
president at Meridian Bancorp, 1992-1996. Current president of the National 
Assn. of Regulatory Utility Commissioners. 
Personal: Native of Erie, Pa. 
Education: Attended Syracuse University, 1966-1969. 
* 
FERC Members Chosen by Clinton 
Curtis L. Hebert Jr., GOP 
Nominated by Clinton, 1997. Named chairman by Bush in January. 
Age: 38 
Term: Expires June 30, 2004 
Professional career: Chairman of the Southern District of the Mississippi 
Public Service Commission, 1994 to 1996. Member of the Mississippi House of 
Representatives, 1988-1992. 
Personal: Native of Pascagoula, Miss. 
Education: University of Southern Mississippi, B.S., 1985; Mississippi 
College School of Law, J.D., 1990. 
* 
Linda Breathitt, Democrat 
Nominated by Clinton, 1997. 
Age: 49 
Term: Expires June 30, 2002 
Professional career: Chairwoman of the Kentucky Public Service Commission, 
1995-1997. Past president of the Southeastern Assn. of Regulatory Utility 
Commissioners. Executive director of Kentucky's Washington office, 1980-1993. 
Personal: Native of Lexington, Ky. 
Education: University of Kentucky, B.A., 1975. 
* 
William L. Massey, Democrat 
Nominated by Clinton, 1993, 1998 
Age: 52 
Term: Expires June 30, 2003 
Career: Practiced law in Washington, 1989 to 1993. Served on the presidential 
transition team for the Department of Energy, December 1992. Served as chief 
counsel to Sen. Dale Bumpers (D-Ark.), 1981 to 1989. 
Personal: Native of Little Rock, Ark. 
Education: University of Arkansas School of Law, JD, 1973; Georgetown 
University Law Center, master of laws, 1985. 
*Compiled by SUNNY KAPLAN/Los Angeles Times 
Q&A 
Differences in the approaches of the three most senior members of the Federal 
Energy Regulatory Commission were apparent during recent interviews with The 
Times. Following are excerpts: 
* 
How do you define FERC's role as a regulator of wholesale electricity? 
HEBERT: "What the commission has attempted to do here since I've been 
chairman is to provide a balance--making certain that we have just and 
reasonable rates and, at the same time, making certain that we have given 
proper opportunity to build out infrastructure and to add much-needed supply 
so as to correct the flawed market that California has put in place." 
BREATHITT: "It is being an effective referee. It's being a cop on the beat. 
It's being a nurturer of competition. It's being an arbiter of disputes. And 
it's overseeing a level playing field. And, also, its role--more than we've 
seen in the past--is going to be a place to listen to the energy consumer." 
* 
Is FERC effectively monitoring wholesale electric markets and enforcing "just 
and reasonable" rates? 
HEBERT: "I think FERC is using any and all tools available to it to 
adequately monitor the markets, continue to look 24 hours, seven days a week 
for market manipulation, and ensure just and reasonable rates. I would 
vehemently disagree with anyone who says otherwise." 
MASSEY: "We need more people dealing with the monitoring function. The 
monitoring function requires skills that are precise. I think we need more 
people involved in hard-nosed investigation work . . . everyone here realizes 
we still have to do better in that regard." 
BREATHITT: "This is new to us. We've been monitoring markets in an old way. 
We have to get better at monitoring markets within the current framework." 
* 
Should FERC revise the test it uses to determine whether a power generator 
has "market power"? 
HEBERT: "Obviously, if I thought we needed to change it, we would have." 
MASSEY: "We have this old horse-and-buggy methodology for determining whether 
generators have market power. Everybody passes, nobody ever fails. If we've 
learned nothing else, it's that the screen is not sensitive enough to pick up 
the exercise of market power in California. . . . I don't know how you can 
say you see no reason for change." 
* 
Have wholesale power generators exercised market power to manipulate rates in 
California? 
HEBERT: "I know there are several people in the state of California that 
continually make remarks, some of them that are completely unnecessary [about 
manipulation of markets]. If they have information and real evidence, this 
commission wants to know about it . . . But this anecdotal evidence that they 
bring forward and is not real is not helpful." 
MASSEY: "In a capacity-short market where they need all the generation, even 
a small company can exercise market power. I'm not talking about some kind of 
conspiracy. I'm talking about the kind of conduct you would expect from a 
tough, hard-nosed, profit-maximizing company that owns generation." 
* 
Did FERC's April 26 order imposing price caps in California during emergency 
hours go far enough? 
HEBERT: "I embrace the order; I think it will make a real difference. And I 
wish there was some way to take California through the experience without the 
price mitigation and show the proof that the price mitigation is going to 
bear in trying to level out prices while at the same time giving signals to 
build out infrastructure and needed supply." 
MASSEY: "I don't think we've moved quickly enough. Generally, our solutions 
have been too little too late. We've been hoping the market will settle down, 
and it just hasn't . . . we should have imposed a timeout . . . on that 
market to cool it off." 
BREATHITT: "I wanted it to mitigate against high prices. I wanted it to have 
a market orientation. And I wanted it to be effective in controlling what I 
thought would be high prices this summer. . . . We did control prices on 
April 26." 
* 
Has FERC resolved the question of "just and reasonable" rates in California? 
HEBERT: "When it comes to just and reasonable rates, you cannot just pick a 
price at which no one should pay over, or be allowed to pay over, because you 
have to give the proper opportunity for infrastructure and supply. . . . We 
are addressing it and we will fully address all the legal arguments on it in 
these rehearings pending on recent California orders." 
BREATHITT: "This order, I think, will produce just and reasonable rates given 
the shortage of supply in California." 
MASSEY: "We haven't really defined it. I would define it as cost-of-service 
regulation or price disciplined by a well-functioning market. We don't have 
either of those." 
* 
MORE INSIDE 
Jury still out: No smoking gun yet in natural gas rate hearing. A23


PHOTO: Patrick H. Wood III; ; PHOTO: Nora M. Brownell; ; PHOTO: Curtis L. 
Hebert Jr.; ; PHOTO: Linda Breathitt; ; PHOTO: William L. Massey; 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



Saudi Arabia Sets Pacts With 9 Oil Firms

06/03/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Associated Press 
JEDDAH, Saudi Arabia -- Saudi Arabia signed agreements with nine oil 
companies Sunday, a move that marks the first major foreign investment in its 
energy sector since the industry was nationalized in the 1970s.
The expected deal, valued at $25 billion at least, involves the development 
of three natural-gas fields in the kingdom, as well as a number of related 
power plants, transmission pipelines and water-desalinization projects. 
Exxon Mobil Corp. (XOM), the world's largest publicly traded oil company, is 
the lead manager on two of the projects, including the $15 billion Ghawar 
Core Venture 1 project. It also will lead the Red Sea Coast Core Venture 2 
project. Royal Dutch/Shell Group (RD, SC) was chosen to lead the Shaybah Core 
Venture 3 project. 
The Western companies will help Saudi Arabia convert its utilities from oil 
burning to natural gas, which would free up more of the kingdom's crude oil 
for export. 
The other companies selected were BP PLC (BP), TotalFinaElf SA (TOT), Conoco 
Inc. (COCA, COCB), Phillips Petroleum Co. (P), Occidental Petroleum Corp. 
(OXY), Enron Corp. (ENE) and Marathon Oil Canada Inc. (MRO). 
Saudi Arabia's state-owned energy company, Saudi Aramco, will be an equity 
owner in the projects. 
Saudi Arabia nationalized its oil fields in 1975 after tension caused by the 
Arab oil embargo against the West that began two years earlier, and it closed 
its energy exploration and production sectors to foreign investment. 
Although locked out of the production of energy, Exxon Mobil has $5 billion 
in refining and petrochemical joint ventures in the country, and it said it 
is also the largest foreign purchaser of crude oil and other hydrocarbons 
from Saudi Aramco. 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIA: INTERVIEW-India to respect international contracts - Prabhu.
By Clarence Fernandez

06/03/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, June 4 (Reuters) - India is in favour of ensuring international 
contracts are respected, Power Minister Suresh Prabhu told Reuters as 
investors' fears grow over a squabble between U.S. energy giant Enron Corp 
and a local utility. 
The row was sparked late last year when the utility in India's western state 
of Maharashtra defaulted on payments of $48 million to Dabhol Power Company, 
65 percent owned by Houston-based Enron.
Prabhu said it was obvious investors saw some question marks over Enron's 
$2.9 billion power plant, which is India's largest private foreign 
investment. 
Enron is building the plant but the dispute with the local utility, 
Maharashtra State Electricity Board, has threatened to derail the 2,184 MW 
power project. 
"We have to address those concerns adequately because the government of India 
is always in favour of making sure that international contracts are respected 
in the process of assuring all the foreign investors that there is no need 
for concern," Prabhu said in an interview late on Sunday. 
Signs emerged last week that investors are souring on India. 
Global rating agency Fitch last Thursday revised India's sovereign rating 
outlook to negative from stable, citing concerns over fiscal policy, 
privatisation and deterioration in the country's foreign investment climate. 
Competing agency Moody's said on Friday it has seen slippage in the Indian 
government's reform effort, but declined to say whether a ratings change 
could be expected, while Standard & Poor's (S&P) said it was worried about 
the size of the budget deficit. 
Asked if he felt the Enron row had deterred investors, Prabhu said, "This is 
one single issue. We must deal with it in the manner in which it is possible 
in a given situation. 
"There is a negotiation going on. The central government has a representative 
on the negotiating committee and I am sure that the only way in which 
commercial disputes can be settled is through negotiations." 
Prabhu was referring to a panel formed last month by the Maharashtra state 
government to renegotiate the tariffs charged by the 2,184-MW Dabhol power 
project. 
The Maharashtra State Electricity Board (MSEB), which agreed in 1995 to buy 
the plant's entire output, says the power is too costly and has defaulted on 
$48 million in power payments. 
Dabhol issued a notice last month to cancel its power purchase deal, a move 
many investors fear could be the first step towards getting out of the 
project entirely. 
"The phase in which we are right now ... is the phase in which some 
independent power producers have already contracted certain obligations which 
we will definitely like to uphold, which should be honoured," Prabhu added. 
"Because in India contracts are very important. Sanctity of contracts should 
be kept."

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Saudi Arabia signs landmark agreement with major oil companies
By WARD PINCUS
Associated Press Writer

06/03/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

JIDDAH, Saudi Arabia (AP) - Saudi Arabia and nine major international oil 
companies signed a landmark agreement Sunday that marks the first major 
foreign investment in the Saudi energy sector since the industry was 
nationalized in the mid 1970s. 
The deal, worth at least dlrs 25 billion, involves the development of three 
natural gas fields in the kingdom, and a number of related power plants, 
transmission pipelines and water desalinization projects.
Irving, Texas-based Exxon Mobil, the world's largest publicly traded oil 
company, will lead management position for two of the projects, including the 
dlrs 12-16 billion Ghawar Core Venture 1 project. It also will lead the Red 
Sea Coast Core Venture 2 project. Shell was chosen to lead the Shaybah Core 
Venture 3 project. The last two projects have a value of dlrs 7-10 billion 
each, Prince Saud al-Faisal told reporters. 
The Western companies will help Saudi Arabia convert its utilities from 
oil-burning to natural gas, which would free up more of the kingdom's crude 
oil for export. 
Saudi Oil Minister Ali al-Naimi said the companies are expected to profit on 
returns from the exploration and development of gas fields with more than 15 
percent of the investment cost. 
The other companies selected were BP, TotalFinaElf SA, Conoco Inc., Phillips 
Petroleum Co., Occidental Petroleum Corp., Enron Corp. and Marathon. 
King Fahd, who rarely appears before foreign visitors, attended the signing 
and shook hands at the conclusion of the deal with the presidents of the 
companies. 
Also present was Crown Prince Abdullah, Defense Minister Prince Sultan and 
Prince al-Faisal, who signed the agreements on behalf of the kingdom. 
The signing was rich in pomp as members of the royal family sat along the 
back wall, with Fahd at the center. Oil company executives sat along one side 
and other Saudi officials, including al-Naimi, sat on the other. The 
executives took turns signing the memorandum of understandings. At the 
conclusion of the signing, they took turns shaking Fahd's hand. Each could be 
heard saying "Thank you very much" to Fahd. 
Saudi Arabia's state-owned energy company, Saudi Aramco, will be an equity 
owner in the projects. 
Saudi Arabia nationalized its oil fields in 1975 after tension caused by the 
Arab oil embargo against the West that began two years earlier, and closed 
its energy exploration and production sectors to foreign investment. 
Al-Faisal said in case the companies discover oil, they will be compensated 
and the fields will be repossessed by Saudi Arabia. 
Although locked out of the production of energy, Exxon Mobil has invested 
dlrs 5 billion in refining and petrochemical joint ventures in the country 
and said it is also the largest foreign purchaser of crude oil and other 
hydrocarbons from Saudi Aramco. 
wp-ti-hhr

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


India struggles to keep foreign investors
Uttara Choudhury

06/03/2001
Agence France-Presse
(Copyright 2001)

NEW DELHI, June 3 (AFP) - Foreign investors are beginning to leave India for 
emerging economies like China, as they run smack into a cobweb of rules, 
regulations and intervention at the state level. 
The list of companies leaving India, after moving in en masse during the 
early 1990s when the government unleashed sweeping free- market reforms, 
include major European, American and Asian groups.
"A slew of foreign firms have packed their bags. It is a wake up call for New 
Delhi to cut red tape and pursue much more investor- friendly policies," said 
Gautam Mahajan, president of the Indo- American Chamber of Commerce. 
Four foreign power companies, including Europe's largest, Electricite de 
France (EDF), have pulled out of Indian power projects worth three billion 
dollars, citing long delays and the slow pace of reforms. 
EDF walked out of a proposed 1,000-megawatt power project in the western 
Indian state of Maharashtra following years of hurdles and hold-ups. 
Ramesh Narayan, chief of EDF's subsidiary in India, told AFP that 
"inordinately long" delays forced it to pull out of the 1.1 billion dollar 
joint venture, which also includes France's Alstom. 
"We gave it a long, hard try for seven years... The coal-pricing and risk 
issues finally made the project unviable. Recent regulatory changes also made 
the project's tariff unacceptable," said Narayan. 
While EDF struggled to get off the ground in India it added 34,000 megawatts 
of power in countries such as Germany and China. 
The pull out of EDF followed the withdrawal in January last year of US-based 
Cogentrix Energy Inc., from a 1.3 billion dollar, 1,000- megawatt power 
project in the southern state of Karnataka. 
Now another US energy giant, Enron Corp., has moved closer to pulling the 
plug on its Indian plant. 
On May 19, Enron subsidiary Dabhol Power Company (DPC) issued a preliminary 
notice to terminate its contract to sell power to India's Maharashtra state. 
The move followed months of wrangling between Enron and Maharashtra state 
over payment defaults by the state utility, Maharashtra State Electricity 
Borad, and is likely to further tarnish India's business image. 
"It will have an impact on how people look at India and that is very 
unfortunate because we do see India as a potentially good market," Peter de 
Wit, director of Shell International Gas told reporters. 
"The sort of circumstance they (Enron) are faced with now doesn't give a lot 
of confidence to people who want to consider long-term contracts in India." 
Shell plans to spend 19.5 billion rupees (415 million dollars) to build a 
five million ton-a-year liquefied natural gas (LNG) terminal at Hazira, a 
port in the western state of Gujarat. 
The Dabhol project is the single largest US investment in India and was seen 
as a litmus test of India's commitment to economic reforms and globalisation. 
Australian telecoms group United Holdings and its Korean supplier Mocomo Inc 
announced last month the closure of an electronic parts production facility 
in northern India, sacking at least 200 people, to relocate to China. 
Foreign firms also said it took them longer to start operations in India. 
France's leading liquor company Groupe Pernod Ricard took roughly four years 
to launch its first brand in India. 
"I started Pernod's operations from scratch in Japan and Korea. I came to 
India with the clear intention of quickly launching our first brand," said 
Albert Algressi, former Delhi head of Groupe Pernod Ricard, before leaving 
India. 
"But a few weeks became some months then years. Very frustrating," he added. 
An executive with U.S consultancy firm McKinsey and Company said 
multinational companies tried to duplicate "tried and tested models in India, 
but India was a model of its own". 
"A bureaucrat will say 'very good' and then not clear the project. The local 
partner says 'no problem' and this could be the beginning of all your 
problems," said the consultant. 
India said foreign direct investment (FDI) in 2000 jumped by 15 percent to 
193.4 billion rupees (4.2 billion dollars) from the previous year. 
However, a commerce ministry report stated that in the first decade of its 
economic liberalisation India only managed to attract FDI worth 23.7 billion 
dollars, a little more than what China receives in six months. 
uc/gh/pw

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


`Expert knowledge' and Dabhol
A V Rajwade

06/03/2001
Business Standard
10
Copyright (c) Business Standard

It has now been a few weeks since the appointment of a committee under Mr 
Godbole to renegotiate the tariffs payable to the Dabhol Power Company Ltd by 
Maharashtra State Electricity Board (MSEB). There has been hardly any 
tangible progress in the negotiations. Legal notices issued by either side 
have been flying around but the problem remains intractable. 
At present neither DPC, nor its parent Enron, has any incentive whatsoever to 
hold serious negotiations. It is sitting pretty on an agreement that one can 
be sure has been drafted by some very clever lawyers. And given that all 
obligations of MSEB are guaranteed by the Government of India, it probably is 
not too worried about the safety of its money. It also knows that, in the 
interest of its international reputation, the Indian authorities cannot 
afford to take a cavalier attitude to the subject.
In the circumstances, if progress is to be achieved, some way will have to be 
found to get Enron worried about the legal enforceability of its agreements. 
Only if this happens will Enron be persuaded to start a serious renegotiation 
of the tariffs. In an earlier article in this newspaper (see Business 
Standard May 22, 2001), I had referred to the now famous Procter & Gamble vs 
Bankers Trust Company case in the United States. While I have not been able 
to get hold of the P&G plaint despite an extensive search on the Web, I have 
managed to get hold of a copy of the judgement in the case. This has 
limitations because the substance of the dispute was settled out of court. 
And yet the judgement does make a few useful points. 
The bulk of the judgement discusses arcane points of law, in particular the 
applicability of various legislations in the United States to the case. On 
most of these points the judge has rejected the contentions of Procter & 
Gamble, and granted summary judgement in favour of Bankers Trust. However, 
the judge goes on to argue that: "This does not mean, however, that there are 
no duties and obligations in their swaps transactions. Plaintiff alleges that 
in the negotiation of the two swaps and in their execution, defendants failed 
to disclose vital information and made material misrepresentations to it_ 
"New York case law establishes an implied contractual duty to disclose in 
business negotiations. Such a duty may arise where 1) a party has superior 
knowledge of certain information; 2) that information is not readily 
available to the other party; and 3) the first party knows that the second 
party is acting on the basis of mistaken knowledge_ 
"Additional cases which explicate the duty to disclose indicate that a duty 
may arise when one party to a contract has superior knowledge which is not 
available to both parties_" 
"Even though a fiduciary duty may not exist between the parties, this duty to 
disclose can arise independently because of superior knowledge_" 
"The duty to deal fairly and in good faith requires affirmative action even 
though not expressly provided for by the agreement_" 
"I conclude that defendants had a duty to disclose material information to 
plaintiff both before the parties entered into the swap transactions and in 
their performance, and also a duty to deal fairly and in good faith during 
the performance of the swap transactions_" 
The judge has cited a number of court cases in support of these points which 
seem to be based more on case law and common law principles than on any 
specific legislation. As such, one would imagine that the enunciated 
principles would have wider application than narrow infringements of specific 
laws. 
In the May 22 article, I had referred to the discount factor of 17 per cent 
per annum which seems to have been used to calculate the present value of the 
fixed cost payable by MSEB to DPC. The discount rate is an inferred one from 
the available data; it seems that the actual rate of discount used is not 
available in any of the documents. This is surprising; one obvious reason 
could be that, for what are effectively dollar payments, a 17 per cent 
discount rate is absurd and it was obviously better not to bring it on 
record. Can its non-disclosure in the negotiation or in the agreement come 
under the various points made in the P&G vs BTC case? 
Again, an old Business Week report on the case quotes from the P&G complaint 
that it "was bound by a pricing model which (Bankers Trust) did not disclose 
to the very party that it asserted was bound by such model...". An exact 
parallel to the MSEB/DPC dispute? 
A couple of other points occur to me. The Godbole Committee Report thanks 
IDFC for the excellent work done as the Committee's secretariat. Having put 
in a considerable degree of analytical input, as is evident from the report, 
perhaps the analysts may like to try out one other exercise. This is the 
projection of DPC's balance sheet at the end of the power purchase agreement, 
on the following assumptions: 
l No dividend payment and current tax rates; 
l Dollar appreciation against the rupee of 6 per cent per annum, which is the 
actual rate of the last five years. 
l Interest on rupee surplus funds at 11 per cent per cent, and domestic 
inflation, say, 8 per cent 
per annum 
The exercise would give a final value of DPC's net worth and readily permit 
the calculation of the internal rate of return on the capital invested. How 
does that compare with the returns in dollar terms assured by government 
policy? If the return turns out to be absurdly high, as it well might, this 
could be another example of "superior knowledge" available to the investor 
but not made known to MSEB. 
This apart, in its own affidavit in one of the court cases, MSEB has argued 
why the competitive bidding process was not followed: 
"The competitive bid requires expert knowledge and experience for evaluating 
the competitive bids, which at present is still not sufficiently up to the 
mark. For evaluation of such specialised projects, it is also necessary to 
have knowledge of risk identification and allocation, which is not 
sufficiently developed." 
As if this "expert knowledge" is not needed in bilateral negotiations!

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


California energy czar vows to get L.A.'s excess power
By DANNY POLLOCK
Associated Press Writer

06/02/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

LOS ANGELES (AP) - California's top energy adviser vowed Saturday that the 
state will get a guarantee from its biggest municipal supplier to provide 
power through the summer. 
"We will get (a contract) in the next few days, one way or another" from the 
Los Angeles Department of Water and Power, S. David Freeman told an energy 
summit in Studio City.
"We want a contract for all its surplus over the summer," he said. 
Freeman, former head of the DWP, did not provide details. But his remark 
follows recent warnings by Gov. Gray Davis that he was prepared to use 
executive authority, if necessary, to obtain power from municipal utilities 
and other providers at lower rates. 
The governor has accused city utilities of gouging the state. 
Freeman said the DWP, the state's largest municipal utility, has made $300 
million in profits by selling its excess power to the state's energy grid. 
During a panel discussion, DWP Assistant General Manager Henry Martinez said 
the agency is continuing contract negotiations with the state. 
"We're willing to negotiate ... to make excess power available, but we have 
to make sure the city is taken care of first," Martinez said. 
Los Angeles wants to ensure it won't face blackouts or big rate increases if 
it makes a long-term deal to sell some of its power, he added. 
Californians are facing rolling blackouts this summer, even though Davis has 
expedited the building of more than a dozen new power plants. 
Freeman said new plants would ease the energy crunch, and California should 
be able to meet its demand by next year. The state could begin producing 
surplus power within two years, he added. 
"By 2003, we will have the problem behind us," Freeman said. "We are not 
fighting the war on drugs. We are breaking the back of the problem one power 
plant, one efficient refrigerator and one wind plant at a time." 
There were no power alerts Saturday as electricity reserves stayed above 7 
percent due to lower temperatures and more power plants back on line. 
A nuclear reactor at the San Onofre Nuclear Generating Station that was shut 
down in the wake of a February fire was restarted on Friday. The reactor was 
expected to be running at full capacity by Sunday, cranking out enough power 
for 840,000 homes. 
Freeman, in his keynote speech to the summit, praised Californians for 
conserving energy, noting that they used 9 percent less electricity in May 
than they did during the same month last year. 
"Our huge weapon is the market power of the people of California cutting 
back," Freeman said. 
He also took aim at President Bush's energy plan, which calls for oil 
drilling in Alaska but offers little in the way of short-term help for 
California. 
"We do not need to drill in the Arctic or slash and burn what's left of 
America the beautiful," Freeman told the 300 people attending the summit, 
which was sponsored by Los Angeles radio station KFWB-AM. 
The summit also featured Stephen Frank, chairman and CEO of Southern 
California Edison, and John Stout, senior vice president of Reliant Energy. 
Reliant, a Houston-based power generator, outraged state government officials 
last month when it charged California $1,900 per megawatt hour of 
electricity. 
Another generator, Duke Energy Co. of North Carolina, confirmed Friday that 
it sold electricity in California for as much as $3,880 per megawatt hour. 
During the panel discussion, Stout blamed high costs on a reduction of as 
much as 25 percent in hydroelectric power from the Pacific Northwest because 
of a drought, and a seven-fold rise in the past year for natural gas, which 
fuels generating plants. 
Meanwhile, the San Francisco Chronicle reported Saturday that energy-related 
companies, unions, trade groups and executives gave about $95,000 in 
contributions to Freeman's unsuccessful primary campaign for a state Assembly 
seat last year. 
The contributions included $25,000 from Roger W. Sant, chairman of AES. The 
governor recently requested federal regulators ban AES from selling wholesale 
power in California, alleging the company illegally manipulated the market. 
Freeman also got $9,000 from Texas Energy, $8,000 from Edison International, 
parent of Southern California Edison, and $7,500 from Kenneth Lay, CEO of 
Texas-based energy producer Enron. Pacific Gas & Electric Co. contributed 
$5,500. 
Freeman could not immediately be reached for comment after leaving the energy 
summit, but a spokesman for Davis defended the governor's appointee. 
"That was then, and this is now," Steve Maviglio told the Chronicle. "If you 
look at David's statements and actions since he's been on board, he's been 
harshly critical of those who gave him contributions."

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


SAUDI ARABIA: U.S. Marathon to replace Enron in Saudi gas deal.

06/02/2001
Reuters English News Service
(C) Reuters Limited 2001.

JEDDAH, June 2 (Reuters) - U.S. Marathon is set to replace Enron Corp in a 
just-formed consortium to develop a $5 billion gas project in Saudi Arabia, 
industry sources said on Saturday. 
"This is part of Enron's global restructuring," an industry source told 
Reuters.
Saudi Arabia on May 18 awarded U.S. Enron, Occidental and ExxonMobil with 
stakes in the Red Sea gas package - one of three projects on offer under the 
kingdom's $25 billion gas development opening. 
ExxonMobil will retain the lead role, with 60 percent, while Marathon and 
Occidental will each hold 20 percent stakes, the industry sources said. 
Enron Corp last month bowed out of Dolphin Energy Ltd, majority owned by the 
government of the United Arab Emirates, which is embarking on a $3.5 billion 
project to route Qatari gas to the UAE. 
An Enron official has said that the U.S. firm had sold its stake in the 
project to UAE's Offsets Group (UOG) for an undisclosed sum. 
The kingdom has awarded eight major oil companies with stakes in three 
so-called core venture projects - marking a reopening of Saudi Arabia's 
upstream petroleum industry 25 years after nationalisation.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Financial Post: Canada
Enron chief worried power plant may be in jeopardy
Scott Anderson
Reuters

06/02/2001
National Post
National
D05
(c) National Post 2001. All Rights Reserved.

TORONTO - A planned $200-million power plant for Southwestern Ontario may be 
in jeopardy if the provincial government continues to drag its feet on 
deregulating the province's electricity market, the head of Enron Corp.'s 
Canadian unit said yesterday. 
Enron, the Texas-based energy firm, is slated to build the 400-megawatt Moore 
project near Sarnia, Ont. However, construction of the plant is contingent on 
the government's date for opening the market to competition and time may be 
running out, Rob Milnthorp, president of Enron Canada, said from Calgary.
"I think we are really looking for a fall date as an optimum time for us to 
align our interests with Ontario," Mr. Milnthorp said. 
"If it's put off until spring, I do believe that the project is somewhat in 
jeopardy and would need to be assessed from an operational standpoint against 
all other opportunities that Enron has on its plate." 
Ontario said in April that deregulation would be brought into effect by the 
late spring of 2002, but was accused of raising market uncertainty by not 
setting a specific target date. 
The government may have a better idea of its timetable in September, after a 
key study by the Independent Electricity Market Operator (IMO) and the 
Ontario Energy Board (OEB) is finalized. The two have set up a joint task 
force to prepare for an opening in the wholesale and retail electricity 
market. 
Mr. Milnthorp said Enron still holds out hope the province will give a target 
date soon after the September study is released. 
Although he said Enron is "still committed to Ontario," he said the company 
will not invest any further until there is greater certainty. 
"We're on hold at this point," he said.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


The Weekend
Enron: prime time soap opera
Tamal Bandyopadhyay & S Ravindran

06/02/2001
Business Standard
1
Copyright (c) Business Standard

It has been an eyeball-to-eyeball confrontation. But are both sides beginning 
to blink as they stare deep into each others eyes? Until three days ago, it 
looked pretty certain that the US utility giant Enron would pull out of the 
$3 billion 2,184 mw Dabhol power project. But suddenly there are a few 
tell-tale signs that suggest that both sides are looking for a way out of the 
imbroglio. 
Enron made the first move. After weeks of insisting that its agreement was 
sacrosanct, Cline announced that DPC might be willing to cut tariffs and pare 
their rate of returns. And that was even before any negotiations had even 
begun.
The second move came from the institutions which are desperate to prevent the 
project from falling through. The lenders indicated that they would also be 
willing to cut interest rates (which will help bring down the cost of 
tariffs, albeit marginally) and increase the moratorium on loan repayments. 
What's more, they would also stretch the maturity period of loans from nine 
years to 12 years and even convert the foreign exchange loan into rupee loans 
at a later stage. 
There has also been action behind-the-scenes in New Delhi where the Central 
Government has suddenly decided that it must resolve the crisis. For months 
the government had avoided action and insisted that the problem should be 
solved at the state level. Now, Union Energy Minister Suresh Prabhu is 
swinging into action and holding one meeting after another. So is the shadow 
boxing about to end? Or, are they feints that disguise the real intentions of 
the participants? 
The truth is that even the lenders don't seem very sure. And DPC and the 
Maharashtra State Electricity Board aren't giving any straight answers. Some 
cynics say that none of the parties have a game plan and they are just being 
borne along by the tide of events. 
Certainly, there has never been another project like it. The Dabhol power 
project _ touted as the showpiece of India's liberalisation programme _ 
easily beats any soap opera for the sheer level of controversy that it has 
generated. 
Consider the twists and turns that have taken place during the last few 
weeks. Only recently, three members of the Madhav Godbole panel set up to 
renegotiate the project, abruptly resigned. The three included former power 
secretary at the Centre E A S Sarma, Tata Energy Research Institute chairman 
R K Pachouri and Kirit Parikh, former director of the Indira Gandhi Institute 
of Developmental Research (IGIDR). 
That was a pretty inauspicious start for the panel. But on May 23,Godbole 
himself resigned because he was peeved at remarks made by the former 
Maharashtra chief minister, Sharad Pawar. A few hours later, Godbole did an 
about turn and withdrew his resignation. Barely a week later, the Maharashtra 
Electricity Regulatory Commission (MERC) restrained DPC from proceeding with 
the arbitration process till June 14. 
Godbole and MERC are only peripheral players in the entire drama even though 
they wield enormous clout and can influence the future course of events. The 
two main protagonists Enron (which holds 65 per cent ) and MSEB ( 15 per 
cent) in DPC have been trading charges every day. Until this week, it seemed 
there was little chance of the the two sides patching up the row. 
Will Enron finally exit from DPC? Is MSEB hell-bent on throwing out the US 
energy major _ which controls 51 power plants and other energy projects in 15 
countries spread over four continents into the Arabian Sea? Is the war of 
words only a ploy to get a psychological advantage? 
Caught in the cross-fire, the Indian lenders are too eager to play the role 
of a facilitator. And the fact is that they don't have any choice. At stake 
is over Rs 6,000 crore. If the project sinks, it will knock the bottoms out 
of the three Indian financial intermediaries Industrial Development Bank of 
India, State Bank of India and ICICI. 
Theoretically, they have nothing to worry as all the shares of the company 
are pledged with them and the assets are mortgaged. But there is a sense of 
urgency. The overseas export agencies US-Exim, J-Exim, Miti and OND can 
invoke the accelerable guarantee given by the Indian lenders which will force 
IDBI, SBI and ICICI cough up over Rs 2,000 crore. 
Unlike foreign banks, the Indian financial intermediaries are not covered by 
the Centre's counter-guarantee for phase one. They can only fall back on MSEB 
which is not exactly in the best of health. "We want the project to be 
completed first. If that calls for some sacrifice on our part, we are ready 
to do that. The period of uncertainty must come to an end. We don't know how 
serious is Enron about pulling out of the project. Or, for that matter, what 
is the stance of MSEB," says a senior executive of a financial intermediary. 
What's wrong with the project? Ask MSEB this question. Pat comes the reply: 
an exorbitantly high tariff. The DPC retort is that power offtake is low and 
this has exacerbated the situation. The MSEB is not in a position to lift the 
power and it is not in a position to pay for the power. 
An Enron sympathiser cites an analogy, "MSEB cannot lift the power and hence 
it has to pay a higher price. It's like a situation where you hire a taxi for 
an entire day but you don't go out sight seeing. The taxi driver will still 
charge you even though you are not going out for a ride." Counters an MSEB 
official, "If the driver charges for the taxi that's fine. But in this case, 
Enron factors in the cost of flying a helicopter while fixing the daily rate 
for the taxi. No one can accept that." 
This might be a very simplistic way of looking at the entire controversy. But 
the consensus across all camps is that the weak link in the project is the 
offtake of power. Once that is settled, all the other issues will fall in 
place. Tariffs can always be negotiated. In fact, DPC has already hinted to 
the lenders that it is willing to cut tariffs by 10 per cent. 
That would make a huge difference to the project and everyone knows it. 
Consider this fact. The cost per unit which is currently pegged at Rs 4.50 at 
90 per cent plant load factor (PLF) will come down to Rs 3.50 when the fuel 
base shifts from naphtha to liquefied natural gas (LNG). A 10 per cent cut on 
top of it translates into Rs 3.35 per unit. This is competitive by Indian 
standards. But the $3 billion question is who will lift the power? 
A tailor-made solution could have been to allow the National Thermal Power 
Corporation (NTPC) to lift power from DPC. The Centre has rejected that 
outright but the latest directive issued by the power ministry to the Central 
Electricity Authority for discussions with states that are short of power may 
show a ray of light at the end of the tunnel for DPC. The DPC tariff at this 
point hinges on a host of factors including import duty on fuel, cost of 
fuel, PLF and the rupee/dollar exchange rate. The first phase of the 740 mw 
of the project which is operational uses naphtha, a crude oil derivative, as 
fuel. Every time the price of crude goes up, naphtha prices too increase. For 
instance, when the plant was commissioned in May 1999, crude prices were 
pegged at $15 per barrel. By September 2000, it had gone up to $33 per 
barrel. According to the DPC fact sheet, this pushed up its per unit energy 
cost from Rs 1.44 to Rs 3.18. 
Now consider the PLF. As per the agreement with DPC, MSEB had assured an 
offtake of 90 per cent of the total power capacity at an optimum rate of Rs 
1.88 per unit. But in the 17-month period till October 2000, MSEB was only 
able to life 60 per cent. 
This, along with the depreciation of the rupee and increase in crude prices, 
saw tariff jump to Rs 4.94 per unit on an average. In that period, the power 
tariff per unit touched a high of Rs 7.80 in July 2000 when MSEB was only 
drawing 33 per cent of Dabhol's PLF. Tariffs touched a low of Rs 2.98 in 
August, 1999 when it lifted 60 per cent. 
The Godbole panel's terms of reference include reduction in power tariff and 
delinking the setting up of a five million tonne LNG facility from the power 
project as the project requires only 2.1 million tonne as fuel. At the 
initial stages, DPC cried foul over the terms of reference but later changed 
tack and attended two meetings last month. The second Godole panel meeting on 
May 29 was also attended by the Centre's nominee AV Gokak. 
But if there are a few positive signs there are also a score of other 
negative ones. DPC has packed its senior executives off Singapore. It is 
scouting for buyers for its corporate office at Wockhardt House in 
Bandra-Kurla Complex, a Mumbai suburb. DPC is believed to have sacked 
executives of Metropolitan Gas, an Enron promoted company that was supposed 
to set up the five-million tonne LNG project. Confusion and suspense still 
envelop the fate of the power project. 
The Enron soap opera began in the early nineties when the Congress (I) led 
Sharad Pawar government in Maharashtra signed an agreement for setting up a 
2000mw project. The opposition BJP-Shiv Sena cried foul and alleged kickbacks 
in the deal. After coming to power, the BJP-Sena combine scrapped the project 
almost immediately. But it changed tack soon and set up a committee to review 
the project. 
Enron also initiated arbitration proceedings in London. Based on the 
recommendations of the committee, the Sena -BJP alliance entered into a fresh 
contract with DPC. The project was split into two a 740 mw first phase and 
the 1,444 mw second phase. The first phase was to be naphtha fired, switching 
over to LNG in the second phase. In late 1999, a change of guard in 
Maharashtra saw the Congress-National Congress Party alliance come to power. 
This also brought back Enron to centre-stage. 
Act two of the Enron drama began in November 2000. On the eve of the winter 
legislature session at Nagpur, Maharashtra chief minister Vilasrao Deshmukh 
threw a bombshell and declared that the state wouldn't be able to buy power 
from DPC's 1,444 mw second phase. "MSEB would go bankrupt," he said. Under 
the terms of the PPA, the commissioning of phase II would entail MSEB paying 
a minimum of Rs 500 crore per month to DPC as fixed charges alone. MSEB's 
average revenue per month stood at Rs 800 crore. 
Deshmukh's stand was corroborated by Godbole who said that even if 
transmission and distribution losses are reduced drastically, and realisation 
from the subsidised agricultural consumers doubles, the MSEB will not be in a 
position to buy this power. 
Does that mean that MSEB will try to scuttle the project any which way? It 
has already defaulted on payment of power bills, slapped a penalty on DPC for 
delay in power generation and made some payments under protests. Will DPC 
actually mothball the project as has been indicated by Cline to the lenders? 
The Cassandras have started writing the epitaph for the project situated in 
the lush green Ratnagiri district in the Konkan belt. The coming fortnight 
will be crucial. 
First, the lenders are planning to force the promoters (read DPC) to lay all 
its cards on the table at their Singapore meeting on June 5-6. They want to 
know where they stand and are unlikely to allow DPC to continue with its 
ambiguous stance of slapping DPC on May 19 with a preliminary termination 
notice (PTN). 
Enron is also singing two tunes. It has threatened to put the project in cold 
storage on one hand and indicated that it is willing to cut tariffs on the 
other. MERC's stay on the DPC arbitration proceedings will also come to an 
end on June 14. The only thing that is certain about DPC is that the 
uncertainty will continue for a while. The prime time soap opera may get at 
least a 26-episode extension.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


A
White House staff's investments detailed / Holdings include energy stocks, 
Enron
Los Angeles Times

06/02/2001
Houston Chronicle
3 STAR
10
(Copyright 2001)

WASHINGTON - Members of the White House staff held sizable amounts of stock 
in energy companies, including at least $100,000 worth of shares in Enron 
Corp., a Houston-based energy marketing company owned by presidential adviser 
Karl Rove, the Bush administration said Friday. 
Based on the advice of the Office of Government Ethics, the staff members are 
preparing to sell their investments, have already done so or have recused 
themselves from policy discussions involving companies they have invested in, 
said a spokesman for the White House.
Financial disclosure forms released by the administration show that several 
of the officials had significant income and assets. 
Among them is National security adviser Condoleezza Rice, the president's 
national security adviser, who held at least $250,000 in Chevron Corp. stock 
and had income last year of more than $555,000. 
Lawrence Lindsey, Bush's chief economic adviser, last year had a salary of 
about $920,000 as managing director of the New York firm Economic Strategies. 
The documents provided the first look at the finances of the senior staff 
working closely with President Bush as the administration continues to set 
course. 
The spokesman for an organization that studies the role of money in politics, 
Steven Weiss of the Center for Responsive Politics, said that although the 
White House staff members appear to be meeting legal requirements, their 
investments in the energy industry "help explain the very close relationship 
the Bush administration has with energy companies overall." 
Rove said he plans to sell his shares, as well as his wife's holdings, but 
was told by the Office of Government Ethics to take no action until he 
receives the office's certificate of divestiture. 
Others with energy holdings include Lewis Libby, Vice President Dick Cheney's 
chief of staff, who said he sold Texaco stock valued between $15,001 and 
$50,000, and lesser holdings in Enron, Schlumberger Ltd., Chesapeake Energy 
Corp., and Exxon Mobil Corp. 
Karen Hughes, the president's counselor, listed oil and gas royalty interests 
in Pecos County of between $15,000 and $50,000.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


BUSINESS
Enron backs out of Saudi Arabian natural gas plan
TOM FOWLER
Staff

06/02/2001
Houston Chronicle
3 STAR
1
(Copyright 2001)

Enron Corp. has withdrawn from a $25 billion Saudi Arabian natural gas 
venture, leaving its stake in the project to Occidental Petroleum. 
Occidental and six other companies - including Houston-based Conoco - are 
scheduled to sign agreements Sunday to drill for gas and finance and build 
power plants, water desalination plants and other facilities that will use 
the gas.
The venture is divided into three pro-jects that will open the Saudi Arabia's 
natural gas industry to international companies for the first time in two 
decades. 
"If we have a continued association with this project, it will be to provide 
services under a separate contract directly with Occidental," Enron spokesman 
Alex Parsons told Bloomberg. Enron may provide financing or other services to 
Occidental relating to the project later. 
Enron officials would not say why they chose to drop out just two weeks after 
being named to the project. The company has backed off from other large 
infrastructure projects in the recent past, however, and has focused on its 
commodity trading businesses. 
Enron withdrew from a $2 billion pipeline project to export natural gas from 
Qatar last month, while other international projects have proved to be 
difficult. A power-generation project in India has run into trouble because 
of disagreements between Enron and the Indian government over electricity 
prices, and on Friday Enron officials said a $130 million power plant project 
in Ontario may be jeopardy because of the provincial government's 
foot-dragging over electricity deregulation. 
Enron appears to be focusing on its rapidly growing commodity trading 
business, which includes trading natural gas, electricity, broadband Internet 
capacity and even such items as broadcast advertising time. 
While the natural gas project would have been a low-risk operation for Enron, 
and may even have given it an inside track on future projects as the Saudis 
open up their economy to foreign companies, it did not appear to be 
exceptionally profitable. 
Much of Saudi Arabia's gas reserves are well known and relatively easy to tap 
into, but energy analysts have said that the return on investment for the 
project appeared to be less than 15 percent. That is the bare minimum that 
most companies expect for major drilling and infrastructure pro-jects. In 
recent years those margins have more often been above 20 percent. 
If Enron had stayed with the project, it also would have had a minor part in 
the smallest one of the three projects. Enron, Exxon Mobil Corp. and 
Occidental were chosen for the $4 billion Red Sea project, also known as Core 
Venture 2. Exxon was chosen as the lead for the project. 
Royal Dutch/Shell Group, Conoco and Total Fina Elf were picked for the $5 
billion Shaybah natural gas project, also known as Core Venture 3. Conoco 
Chairman Archie Dunham said last month that he would be "very disappointed" 
if Conoco was not named the lead operator for Core Venture 3, but The Wall 
Street Journal reported Friday that Shell appeared to be poised to lead that 
project. 
Exxon, Shell, BP and Phillips Petroleum Co. won the rights to the most 
coveted project, the $15 billion South Ghawar project, or Core Venture 1. 
Exxon is expected to take the lead there. 
Houston-based Marathon Oil Corp. was one of three companies that bid on the 
projects but did not make the final cut.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


LOCAL STORIES
IRRIGATION SYSTEM HAD ELECTRICAL FIRE
STEVEN AMICK of the Oregonian Staff

06/02/2001
Portland Oregonian
SUNRISE
D03
(Copyright (c) The Oregonian 2001)

Summary: A man and his dog are electrocuted after touching an irrigation pipe 
An irrigation system that apparently electrocuted a man and his dog Thursday 
evening had been shut down recently by a fire in an electrical line, 
according to the property owner.
William Jay Bowman, 38, was walking along the Molalla River with his dog to 
meet a friend to go fishing when the accident occurred. Apparently both 
Bowman and the dog died after touching an irrigation pipe leading out of the 
Molalla River, Brian Carkner, a Clackamas County Sheriff's deputy, said 
Friday. 
Edward Montecucco, who owns the land near Molalla River State Park where the 
accident occurred, told Carkner that the irrigation system had operated 
without problems since the early 1980s, but that during the Memorial Day 
weekend a fire in the overhead wires had shut down the pumps. 
Portland General Electric sent someone out this week to repair the damage and 
the pumps were turned back on, Montecucco told police. 
Jeff Mayer, a county deputy medical examiner, said an autopsy verified that 
Bowman was electrocuted. 
Bowman's neighbor Jim Newby told Carkner that Bowman left ahead of him on a 
trip Thursday to their usual fishing spot. When Newby arrived, he heard his 
brother-in-law, Michael Riggs, yelling for him to call 9-1-1. 
Another angler, Rick Gatchell, told Carkner he was standing in the river 
downstream from the irrigation pumps when he heard a "bang" from a power pole 
near the pipes and saw the pole shaking. 
Mayer, who was at the farm with PGE representatives on Friday, said he was 
investigating further to try to determine more precisely how Bowman's death 
occurred. 
Mayer said electrocutions involving irrigating system are rare but not 
unheard of. Mayer said he investigated a similar incident last year on a farm 
in Monitor, in which a woman died. 
Mayer said that the deaths should serve as warnings of the danger such 
equipment can pose.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


National Desk
THE NATION Bush Staff Well Invested in Energy Politics: Financial records of 
White House officials show past ties to industry. Several have since divested.
JAMES GERSTENZANG; EDMUND SANDERS
TIMES STAFF WRITERS

06/02/2001
Los Angeles Times
Home Edition
A-11
Copyright 2001 / The Times Mirror Company

WASHINGTON -- Members of the White House staff held sizable amounts of stock 
in energy companies, including at least $100,000 worth of shares in Enron 
Corp., the giant energy marketing firm, owned by top presidential advisor 
Karl Rove, the Bush administration said Friday. 
Based on the advice of the Office of Government Ethics, the staff members are 
preparing to sell their investments, have already done so or have recused 
themselves from policy discussions involving companies they have invested in, 
the White House said.
Financial disclosure forms released by the administration show that several 
of the officials had significant income and assets. Among them was 
Condoleezza Rice, the president's national security advisor, who held at 
least $250,000 in Chevron Corp. stock and had an income last year of more 
than $555,000, and Lawrence Lindsey, President Bush's chief economic advisor, 
whose income last year included a salary of about $920,000 as managing 
director of the New York firm Economic Strategies. 
The documents provided the first look at the finances of the senior staff 
working closely with Bush as the new administration sets course. 
The White House said the officials had either sold holdings in specific 
companies or recused themselves from discussions that could have an effect on 
their holdings while in the process of shedding the stocks. 
However, a spokesman for the Center for Responsive Politics, which studies 
the role of money in politics, said that while the White House staff may be 
meeting legal requirements, the investment in the energy industry "helps 
explain the very close relationship the Bush administration has with energy 
companies overall. 
"I doubt that President Bush is unaware of Karl Rove's position on the issues 
affecting energy companies," spokesman Steven Weiss said. 
Among those filing statements, Lewis Libby, Vice President Dick Cheney's 
chief of staff, said he kept at least $500,000 in checking and savings 
accounts at the Bank of America. 
The statements require senior officials to list assets and income in a broad 
range of figures, from $1,001 to $15,000, for example, or from $250,001 to 
$500,000. Thus, precise amounts cannot be determined. 
While the forms show substantial wealth on the part of some Bush aides, not 
all exceeded $1 million. And significant wealth in the top tier of 
presidential administrations is far from unusual. Similar forms filed by 
President Clinton's staff, for instance, showed a number of top aides were 
millionaires. 
Bush and Cheney filed financial disclosure forms several weeks ago. Bush's 
net worth was at least $9.9 million and Cheney's was at least $10 
million--including at least $1 million in a joint checking account in the 
Northern Trust Bank. 
In addition to stock valued between $100,001 and $250,000 in Enron, Rove, who 
is Bush's chief political strategist, held similar amounts in American 
Express, General Electric Co., Pfizer Inc., Boeing Co., Johnson & Johnson, 
Cisco Systems Inc., Wells Fargo and Intel Corp. 
In an interview, Rove said he had followed the advice of the White House 
counsel's office "on recusing ourselves from anything that would specifically 
or materially affect our financial holdings." 
"I took part in no discussions that would specifically impact my holdings," 
he said, adding that he had avoided such discussions "on several occasions." 
Rove said he plans to sell his shares, as well as his wife's holdings, but 
was told by the ethics office to take no action until he receives the 
office's certificate of divestiture. 
"I have to receive a certificate of divestiture in advance of sale or pay 
capital gains taxes," he said, adding that he has been waiting to receive the 
paperwork. 
He signed his disclosure form on Dec. 30, 2000, three weeks before Bush was 
inaugurated and five days before Bush announced he was appointing Rove to the 
job as his strategist. 
Anne Womack, an assistant White House press secretary, said that some 
officials, although members of Bush's senior staff, were not expected to 
divest themselves of their holdings because their work has no effect on 
policy. Among them are Clay Johnson, Bush's personnel chief, and Albert 
Hawkins, the Cabinet secretary. 
"The White House counsel's office worked with each of the filers to help them 
meet the highest ethical standard," Womack said. "Some have divested 
themselves, some have been advised to recuse themselves from certain issues, 
and in some cases, no changes were necessary because the nature of their work 
will in no way affect their financial situation." 
Rice, for example, said she had sold her Chevron stock and nearly all her 
other stocks. 
Others with energy holdings included Libby, the Cheney aide, who reported 
that he had sold Texaco Inc. stock valued between $15,001 and $50,000 and 
lesser holdings in Enron Corp., Schlumberger Ltd., Chesapeake Energy Corp. 
and Exxon Mobil Corp. 
Karen Hughes, the president's counselor, listed oil and gas royalty interests 
in Pecos County, Texas, worth between $15,000 and $50,000. 
Johnson, whose job involves filling political positions across the 
administration, holds at least $100,000 in El Paso Energy Partners and at 
least $65,000 in oil royalties, and at least $50,000 in separate bonds from 
Texas Muni Power and Duke Power. 
Nicholas Calio, the White House director of legislative affairs--Bush's 
representative to Congress--holds stocks with values of at least $15,000 in 
each of three energy-related companies: Exxon Mobil, General Electric and 
Texaco. 
Andrew H. Card Jr., Bush's chief of staff, was a vice president of General 
Motors Corp., heading its office of global government relations, for which he 
was paid $479,000 last year. His assets ranged from $800,000 to $1.75 
million, including a family home in Holbrook, Mass., and an IRA account, 
mutual funds and municipal bonds. 
Stephen J. Hadley, Bush's deputy national security advisor, had assets 
between $900,000 and $2.1 million; Margaret La Montagne, director of the 
domestic policy council, held between $100,000 and $200,000 in stock. 
* 
Times staff writers Edwin Chen and Robert L. Jackson contributed to this 
story.


PHOTO: Bush advisor Karl Rove says he followed the advice of the White House 
counsel's office.; ; PHOTOGRAPHER: Associated Press 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


NEWS
Davis' energy boss took thousands from power titans in run for office
Carla Marinucci
Chronicle Political Writer

06/02/2001
The San Francisco Chronicle
FINAL
A.1
(Copyright 2001)

Barely more than a year before S. David Freeman was named by Gov. Gray Davis 
to be the state's power czar, he was showered with campaign cash from some of 
the same energy giants the governor has lambasted as profit-hungry "pirates" 
robbing California consumers. 
Freeman received roughly $95,000 in more than 50 contributions from energy 
companies, executives, unions and political action committees as a Democratic 
candidate in the March 2000 primary for a state Assembly seat.
In April 2001, Davis named Freeman -- the former head of the Los Angeles 
Department of Water and Power -- his chief energy adviser, charged with 
representing consumer interests and pushing conservation. 
"These guys have us by the throat, and still do," said Freeman earlier this 
week in an interview with The Chronicle. "We're in a war with generators and 
we're going to try and protect ourselves." 
But campaign contribution records show that Freeman's lifelong contacts in 
the energy business served him well as a political candidate in the 41st 
Assembly District contest in the San Fernando Valley. 
In his unsuccessful campaign, Freeman received a $7,500 check from Kenneth 
Lay, who heads the Texas energy giant, Enron -- one of the Texas energy 
"pirates" whom the governor has accused of fleecing California consumers. 
And state records show a $25,000 campaign check from Roger W. Sant, chairman 
of the energy giant AES -- the same firm that Davis recently requested 
federal regulators ban from selling wholesale power in California. The 
governor charged that AES has illegally manipulated the market. 
"For citizens of California, this information should raise eyebrows," said 
Chuck Lewis, who heads the Center for Public Integrity, a campaign finance 
watchdog in Washington, D.C. "I can't call it an auspicious sign." 
Indeed, state documents show a "who's who" of big energy firms contributed 
last year to Freeman's losing Assembly campaign: El Paso Energy, Pacific Gas 
and Electric Co., Calpine, Sempra Energy, Edison International and Sunlaw 
Energy, among others. 
Energy-related political action committees also contributed, including the 
Independent Energy Producers PAC and the Texas Energy Group. 
There were also checks from at least two officials with the Independent 
System Operator, which manages California's power grid, including CEO Terry 
M. Winter and CIO Kellan Fluckinger. 
Freeman couldn't be reached for comment yesterday, but Davis' spokesman 
defended Freeman as a tough consumer advocate and highly respected energy 
expert. 
"That was then, and this is now," said Steve Maviglio, Davis' spokesman, of 
the campaign contributions. "If you look at David's statements and actions 
since he's been on board, he's been harshly critical of those who gave him 
contributions." 
Noting that Freeman was on national television yesterday lambasting energy 
firms, Maviglio said, "David is one of the most prominent people in the 
energy business in the U.S. It's natural people in the energy business would 
contribute to his campaign, but I don't think it's affected his rhetoric or 
his actions." 
Freeman, 76, a Tennessee native, served four presidents as an energy adviser, 
dating to the Kennedy administration when he was a member of the Federal 
Power Commission. He was chosen by President Jimmy Carter to lead the 
Tennessee Valley Authority, the largest public power agency in the country. 
CONFLICT QUESTIONS RAISED 
But critics say checks from energy giants to Freeman's Assembly campaign 
raise questions of a conflict of interest -- and underscore troubling issues 
of campaign finances. 
"It certainly brings into question the independence of the people who are 
advising (Davis)," said Steve Weiss, who heads the Washington, D.C., Center 
for Responsive Politics, a watchdog group. "It would be difficult to envision 
a scenario where (a candidate) getting huge amounts of money from an industry 
is going to completely ignore that industry when policies affecting it come 
up." 
Lewis said Freeman's contributions dramatize his reputation as "a 
well-connected fellow." 
"He knows the titans of the industry, and the sitting governor of 
California," Lewis said. "So financially and politically, he's wired. Energy 
companies understand he's a player, and they want to influence him and 
impress him." 
But Freeman's largesse from energy firms is hardly shocking. 
DONORS ARE SAVVY 
"The energy companies are probably as smart about the campaign checks they 
write as they are about business decisions that result in huge profits," 
Weiss said. "Campaign contributions are an investment. They give to (someone) 
they feel can help them out at a later date." 
And they have no partisan loyalty: Lay ranked as one of President Bush's 
biggest contributors, while Enron was the largest energy contributor to GOP 
causes. 
Still, Republicans seized on the revelations, saying they underscore Davis' 
inability to solve the energy crisis. 
"This is one more piece of evidence suggesting the hypocrisy of this whole 
sordid affair," said GOP strategist Mark Bogetich. "You have the governor 
trying to demonize state energy companies" while Los Angeles water and power 
tries to make the same profits. "Then the governor names the head of that 
agency to be his energy czar." 
Freeman had lived just two years in the 41st Assembly District when he 
campaigned last year to represent the area. At the time, he was on leave from 
his job heading the Los Angeles power agency. 
Freeman, in press accounts of the campaign, said the strong support he 
received from big out-of-state companies wasn't relevant. 
STANDING ON RECORD 
"I think what people like about me is my life's work -- 25 years of 
protecting the environment and saving taxpayers money," he said at the time. 
Davis selected Freeman, a lifelong advocate of conservation, in January to 
negotiate long-term electricity contracts when the state began buying power 
on behalf of the cash-strapped utilities. In April, Davis announced Freeman's 
role as the state's top energy adviser. 
----------------------------------------------------------------- 
Energy contributorsSome energy industry contributors to S. David Freeman's 
unsuccessful campaign for the Assembly: 
-- Roger W. Sant, AES Corp. chairman: $25,000 
-- Texas Energy: $9,000 
-- Edison International: $8,000 
-- Kenneth Lay, Enron CEO: $7,500 
-- Pacific Gas and Electric Co.: $5,500 
-- Calpine: $1,000 
-- El Paso Energy Service: $1,000 
Source: Campaign finance reports, Secretary of State's office


PHOTO; Caption: S. David Freeman 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


A Section
Bush Aides Disclose Finances; Several Tied to Enron; Speaking Fees Boost 
Matalin Income
Susan Schmidt and John Mintz
Washington Post Staff Writers

06/02/2001
The Washington Post
FINAL
A05
Copyright 2001, The Washington Post Co. All Rights Reserved

The odd couple of American politics, White House aide Mary Matalin and 
Democratic strategist James Carville, racked up $3.4 million in speaking fees 
last year, according to financial disclosure forms released yesterday. 
Matalin, a senior adviser to Vice President Cheney, was required to stop her 
lucrative appearances when she joined the Bush administration in January. She 
appears to be one of the wealthiest White House aides, with investments 
valued at between $3.9 million and $9.7 million. Besides her speaking fees, 
she reported $244,581 in income last year from hosting the CNN television 
show "Crossfire."
Karl Rove, a senior political adviser to President Bush, reported assets 
totaling between $2.3 million and $5.5 million. Cheney's chief of staff, 
lawyer I. Lewis Libby, reported holdings of $2.4 million to $5.4 million. 
The disclosure forms for 18 top White House officials, released by the 
administration in response to requests from news organizations, show that a 
number of senior aides have financial ties to the Texas energy firm Enron, 
either as owners of its stock or as paid consultants to the company. 
Bush economic adviser Lawrence B. Lindsey received $50,000 last year for 
consulting with an Enron advisory board, and Rove owned Enron shares worth up 
to $250,000. Rove's disclosure document noted he planned to sell all stock in 
individual companies, which included holdings of similar size in such firms 
as General Electric and Pfizer. 
Enron was one of the biggest contributors to Bush's campaign, and its 
chairman, Kenneth Lay, has been close to the president and his father for 
many years. Lay has wielded considerable influence in shaping the president's 
recently announced energy plan. 
Lindsey reported an annual salary of $918,785 from his consulting firm, 
Economic Strategies Inc., where he has worked since 1997 advising financial 
companies and large international firms. In addition, he reported a $50,000 
consulting fee from Crow Family Holdings, a real estate investment business 
in Dallas; another of the same size from the Moore Capital hedge fund; and 
$62,228 in salary from the conservative American Enterprise Institute. 
Lindsey reported an investment portfolio of between $586,000 and $1,340,000. 
That sum may have been held down by his decision several years ago to sell 
off his stock market holdings because he was convinced that the economy was 
headed for trouble and, in his own words, "so I can sleep at night." 
Lindsey's remaining portfolio is heavy in bonds -- he owned up to $500,000 in 
a Fidelity bond fund, and up to $100,000 in high-yield corporate "junk" bonds 
-- as well as U.S. Treasury inflation-indexed bonds and some gold mine 
investments. 
Several other Bush aides revealed substantial income during previous jobs in 
the private sector. White House Chief of Staff Andrew H. Card Jr. reported 
making $479,138 last year as General Motors Corp.'s vice president for 
government relations and chief lobbyist. His deputy, Joseph W. Hagin, made 
$368,660 as vice president for corporate affairs at Chiquita Brands, the 
politically wired banana company. 
Nicholas Calio, Bush's director of legislative affairs, reported making 
$947,671 last year from his lobbying firm, O'Brian Calio. He added that he 
divested his share in the partnership last month and expects to receive a 
lump sum next year. 
National Security Adviser Condoleezza Rice reported selling her stock 
holdings in Chevron Corp., on whose board she served; they had been worth 
between $250,000 and $500,000. She received director's fees of $60,000 from 
Chevron and made $243,000 as Stanford University's provost. 
Although the White House released the disclosure statements for 18 top aides, 
about 100 senior employees had to submit the forms, revealing their exact 
income but listing their assets and liabilities only in broad ranges. Those 
who own stock in companies with business before the government must recuse 
themselves or sell down their stock to less than $5,000 worth. 
According to the form filed by Matalin, she made $1.35 million for speaking 
appearances last year and Carville made $2.1 million. In many cases, they 
appeared together -- earning fees of $16,000 each, for example, for speeches 
to such companies as Philip Morris, GE Capital, Microsoft, Seagram's, Time 
Inc. and Chase Manhattan. 
Carville may find it difficult to step up his pace to make up for the loss of 
his wife's hefty income. He was on the road constantly last year, making 154 
appearances around the country.


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